U.S. Geothermal drills well for expansion of Raft River geothermal power facility

U.S. Geothermal Inc. (NYSE MKT: HTM) announced June 13 that it has started drilling a second leg on existing production well RRG-2 at the Raft River project in Idaho.

This second production leg will be drilled out of the existing wellbore starting at about 3,500 feet below surface, to a planned final depth of around 5,600 feet. It is expected to intersect the primary production fracture zone between the original leg of Well RRG-2 and production well RRG-1. Once drilling is completed, the well will be tested and a new pump designed and installed for the new production characteristics. The total project is anticipated to cost $3 million, and the well is expected to be placed back into production during the third quarter of this year.

The Raft River Geothermal Power Plant is located in Southeast Idaho and has a design capacity of 13 net annual average MW. The project is currently operating at annual average of approximately 9.4 MW. Power from the facility is sold under a firm-price, 25-year contract with Idaho Power and allows for the full 13_MW output. Reservoir modeling indicates that the geothermal reservoir can support the full 13-MW contract. Additional production from this drilling could potentially increase plant output to its full contract limit.

U.S. Geothermal acquired from its project partner, Goldman Sachs, the majority of their cash flow interest in and ownership of the Raft River geothermal project in December 2015. US Geothermal now receives 95% of the cash flow from the project, along with all increased cash flow from project improvements. If successful, the increased production from well RRG-2 is anticipated to add between 1 MW and 3 MW, yielding between $500,000 and $1,500,000 of increased cash flow annually.

On May 23, the company entered into a $20 million debt facility with a fixed interest rate of 5.8% per annum with Prudential Capital Group. Under terms of that agreement, the company has the option, without obligation, to issue additional debt, up to $50 million in aggregate within the next two years. Funds from this financing are being used for the RRG-2 drilling program, to advance the development pipeline, and for any new merger or acquisition opportunities.

“Drilling of this well, which had been planned for many years, is expected to considerably improve the profitability and cash flow from our Raft River project,” said Dennis Gilles, CEO of U.S. Geothermal. “The acquisition from Goldman Sachs this past December unlocked the ability to consider capital upgrades like this one that should increase output from the facility and potentially reach its design capacity of 13 megawatts.”

U.S. Geothermal is currently operating geothermal power projects at Neal Hot Springs, Oregon; San Emidio, Nevada; and Raft River, Idaho, for a total power generation of approximately 45 MW. The company is also developing an additional estimated 90 MW of projects at: the Geysers, California; a second phase project at San Emidio, Nevada; at Crescent Valley, Nevada; and the El Ceibillo project located near Guatemala City, Guatemala. US Geothermal’s growth strategy is to reach 200 MW of generation by 2020 through a combination of internal development and strategic acquisitions.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.