The hot-rocks explorer reports its Habanero 4 well was spudded in the Cooper Basin, the first work at the Innamincka Deeps venture since a blowout stymied the Habanero 3 hole in April 2009.
Habanero 4 aims to circumvent the stricken hole and reconnect the reservoir. Hot-rock energy involves pushing water down one hole to a depth of 4km, across fractured rocks and up another hole as heated water or steam. Pop a power plant on top and you've got limitless base-load power.
The catch is the concept is commercially untested here.
A quirk of the out-of-favour hot rocker is that it has owned its drilling rigs, which ties up funds better spent on drilling. Geodynamics last week sold its in-situ rig for $16.8 million, netting about $9.8m (joint-venture partner Origin Energy owns one-third). A second rig, which is in Canada, is expected to fetch about $20m.
Geodynamics bought the rigs at the height of the boom in 2006-07 for more than $100m, when -- as chief executive Geoff Ward notes -- there was a "real urgency about speed to market". The assets have been written down already.
Geodynamics also has the benefit of a $7.6m insurance from the well blowout and $90m of plant funding from the feds on a dollar-for-dollar basis (the company plans a 1-megawatt pilot plant).
While Innamincka Deeps is in the middle of nowhere, Ward cites BHP Billiton's energy-hungry Olympic Dam or Santos's Cooper Basin operations as potential customers. Criterion has adjudged Geodynamics to be overvalued in the past, but given the stock is well off its $1.75 peak in 2008 we'll revert to a speculative buy.
