PETRATHERM LIMITED ABN

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1 ASX Release PETRATHERM LIMITED ABN Technical Summary of the Paralana Project for the Australian Geothermal Energy Conference Petratherm s Exploration Manager, Peter Reid will later today present to the annual Australian Geothermal Energy Conference in Adelaide. The attached conference paper and power point presentation provides a detailed technical summary of the Paralana Project to date. The paper and presentation highlight evidence for the presence of natural high pressured brine fluid at depth. The brines are contained in fractures and faults which occur below a thick highly competent quartzite from approximately 3670m depth. The quartzite unit may be considered to act as a top seal to the fractured over-pressured units below. The planned fracture stimulation programme aims to create a fracture network which will connect to and enhance the existing natural fractures encountered. Post the main water stimulation, tests will be performed to determine the injectivity flow rates. This will be followed by production testing if the well allows, to aid characterization of reservoir performance. 18 November 2010 Yours faithfully ASX Code: PTR ABN Level 1, 129 Greenhill Road Unley SA 5061 T: F: W: E: admin@petratherm.com.au Terry Kallis Managing Director MEDIA CONTACTS: Terry Kallis Petratherm Ltd Kieran Hall / Tim Hughes Hughes Public Relations The information in this report relating to geothermal exploration results is based on information compiled by P.W. Reid, a full time Petratherm employee. Mr Reid has sufficient experience in the style of geothermal play under consideration to qualify as a Competent Person under the Australian Code for Reporting of Exploration Results, Geothermal Resources and Geothermal Reserves (2008) edition. Mr Reid consents to the inclusion of the material herein in the form and context in which it appears.

2 Australian Geothermal Conference 2010 Status of the Paralana 2 Hydraulic Stimulation Program Reid P.W.*, McAllister, L.* and Messeiller, M.* *Petratherm Limited, 129 Greenhill Rd, Unley 5061, South Australia The Paralana Engineered Geothermal Project is located 600km north of the city of Adelaide in South Australia (Figure 1). The project is testing for viable geothermal resources, within a sedimentary basin that lies immediately east of known high heat producing Mesoproterozoic basement rocks of the Mt Painter Region. In this area, 2D reflection seismic survey data and potential field geophysical (aeromagnetic, magneto-telluric and gravity) data delineate a major half graben informally termed the Poontana basin. Based on the interpreted geophysical data, Petratherm postulates that the high heat producing basement rocks observed in outcrop, continue under the insulating cover material, with the maximum thickness of the sedimentary cover in sections of the Poontana Sub-basin being modeled at greater than five kilometres. This favourable arrangement of thick sediments overlying anomalously radiogenic basement suggests that the Paralana area is an ideal location to test the development of an Engineered Geothermal System. Paralana 2 was designed as an injector with the advantage of simplifying the well design and allowing learning from this well to be incorporated into the well design and planning of the production well (Paralana 3) to maximize the chances of achieving a commercial flow rate. During drilling of the lower 8 ½ section several fractures were encountered below 3400 m. High torques, drilling breaks, an increase in well-bore deviation followed by inflow of geothermal over pressurized brines provide strong indications for the presence of a natural and permeable fracture system between depths of about 3690 m and 3864 m. Increased rates of penetration during drilling through the fractured zones indicate a change in rock strength possibly related to open fractures. Shut in pressures indicated an overpressure of approximately 3,300 psi and the mud system required weighting up to 13.2 ppg to stop the inflow, and allow drilling to continue safely. Petratherm Limited in joint venture with a major oil and gas (Beach Energy) and power industry energy utilities (TRUenergy) are initially seeking to build a 7.5 MWe commercial power development to supply a local mine. In the second half of 2009 a deep geothermal well (Paralana 2) was drilled to 4012m. The well was designed as an injector, the first of an initial two well program to prove circulation between wells. An innovative strategy for development of the EGS reservoir is planned, involving massive hydraulic stimulation of multiple target zones within the sedimentary overburden. Multiple zone stimulation increases the chance of achieving a commercial flow rate which is the key commercial barrier for EGS developments around the world. Keywords: EGS, Drilling, Fracture Stimulation Paralana 2 Well Completion The planned multizone stimulation of Paralana 2 involved the well being fully cased and cemented to allow better control on what intervals in the well would be stimulated in a cost effective manner. In the past, open hole hydraulic stimulations resulted in the main frac developing at the zone of least resistance which is usually at the base of the casing shoe (lowest pressure point) or a locations where large natural fractures already occur. This in effect leaves much of the open hole unaffected by the stimulation program. Being the first well, Figure 1: Regional Locality Map and extent of SAHFA (SAHFA modified from Neumann et. al. 2000) Due to wellbore stability problems the characterization of this zone was limited to logging while drilling measurements down to 3740 m depth. The final 7 casing string was run to a depth of 3725 m as below this depth the well was too unstable to be able to set casing and cement in place (Figure 2). 1

3 Australian Geothermal Conference 2010 Paralana 2 Geology The litho- stratigraphic and structural environment of the Paralana Project area is complex and weakly constrained. The interpretation of the stratigraphic succession and lithology of the overlying Phanerozoic sequences and their contact with the underlying Adelaidean strata at Paralana-2 is based on the results of drilling Paralana-1B, drilled 1.5km to west of Paralana-2. The Cambrian-Adelaidean unconformity is interpreted at 1115m and the sequence begins with the Amberoona Fm. The Tapley Hill Formation was entered at 1612m in Paralana2 and its contact with the underlying Sturtian Glacials has been interpreted at about 1803m. At 2855m, a 500meters thick haematic metaquartzose with siliceous cement underlies the tillite and grades to a litharenite with depth. Its age is ambiguous, but the metasediment is still considered as Adelaidean, within the Sturtian Tillite or the Callanna Beds. At 3397m, a major change of lithology was observed during the drilling, associated with a key unconformity. It is related to a strong reflector observed on the seismic. Below the contact, the lithologies are mainly composed of dolomitic siltstones and sandstones, interbedded with numerous intervals of felsic tuffs. Several dolerite horizons are intercalated in the package, from a depth of 3450m to the bottom of the hole. Zircons extracted from the volcanic tuff returned a 207 Pb/ 208 Pb age of 1585±11Ma using a LA-ICPMS technique at the University of Adelaide. At 3910m, Paralana 2 entered a felsic intrusive, confirming high heat production rate of the basement of approximately 10 to 12µWm -3, and showing a similar Mesoproterozoic age of 1580±10Ma. Numerous intervals of fractures were encountered in the lower zone of the well based on interpretation of the logs and experienced during the drilling operation. A more complex tectonic history and the presence of dolerite in the sequence are indicated by a chaotic seismic signature below 3400m. The thick homogenous quartzite overlying the basal sequence is highly competent with rock strengths ranging between 16,000 (110MPa) and 29,000 psi (200MPa) as calculated from the sonic logs. This unit may be considered to act as a top seal to the fractured, overpressured unit below. MEQ array The Paralana Micro-seismic monitoring array has been operational since April 2008, recording the background seismicity at the Paralana Geothermal Project site. The array has recently be up-graded to a real-time monitoring network to enable Petratherm and the joint venture partners to actively record, analyse and locate microseismic events during the stimulation of the geothermal reservoir. The growth of the fracture network during fracture stimulation will be monitored by seismologists from the Institute of Earth Science and Engineering, Auckland, New Zealand. The array combines sensitive downhole sondes with surface seismometers to enable the interpretation of a wide spectrum of seismic events. All events will be analysed, with autopicking software, MIMO, developed by the Norwegian Seismic Array (NORSAR), providing data on the event location and magnitude. Figure 2: Paralana Well Completion and Geological log. Stimulation Program The initial stimulation program is to be undertaken in two stages. The Stage 1 Injectivity test involves perforation of the steel casing near the bottom of the Paralana 2 well and injection of a small volume of water to confirm fracture initiation and propagation. The test aims to derive information of the insitu stress regime, reservoir properties and determine if the well is already connected to fractures of the natural overpressured zone encountered during drilling. The Stage 2 fracture stimulation involves injection of larger volume of water at higher rates. The stimulation aims to create a fracture network and connect to and enhance the existing natural fracture network intersected lower in the well. The stimulation also aims to generate significant micro seismic events, measured by the MEQ array, greater than 500 metres from the well bore. The volume and rate of the stimulation will be dependent on the micro-seismic response and adjusted to meet the objectives. A series of stepped injection rate tests are planned during 2

4 Australian Geothermal Conference 2010 the stimulation to observe the development of the fracture network. Post the main water stimulation, tests will be performed to determine the injectivity flow rates. This will be followed by production testing if the well allows, to understand longer term reservoir performance. Acidizing and use of proppant with gel in the fracture stimulation is contingent on data obtained from the injectivity test. A second interval may be stimulated dependent on the results of the initial stimulation. References Neumann, N., Sandiford, M., & Foden, J. (2000) Regional geochemistry and continental heat flow: implications for the origin of the South Australian Heat Flow anomaly. Earth and Planetary Science Letters, 183, Competent Persons Statement The information in this report relating to geothermal exploration results is based on information compiled by P.W. Reid, a full time Petratherm employee. Mr Reid has sufficient experience in the style of geothermal play under consideration to qualify as a Competent Person under the Australian Code for Reporting of Exploration Results, Geothermal Resources and Geothermal Reserves (2008) edition. Mr Reid consents to the inclusion of the material herein in the form and context in which it appears. 3

5 Status of the Paralana 2 Hydraulic Stimulation Program by Reid P.W., McAllister L., and Messeiller M. AGEC Conference Nov 2010

6 Disclaimer and competent persons statement Disclaimer This presentation has been prepared by Petratherm Limited (Petratherm). The information contained in this presentation is a professional opinion only and is given in good faith. Certain information in this document has been derived from third parties and though Petratherm has no reason to believe that it is not accurate, reliable or complete, it may not have been independently audited or verified by Petratherm. Any forward-looking statements included in this document involve subjective judgment and analysis and are subject to uncertainties, risks and contingencies, many of which are outside the control of, and maybe unknown to, Petratherm. In particular, they speak only as of the date of this document, they assume the success of Petratherm s strategies and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from the forward looking statements and the assumptions on which the forward looking statements are based. Recipients of this document ( Recipients ) are cautioned not to place undue reliance on such forward-looking statements. Petratherm makes no representation or warranty as to the accuracy, reliability or completeness of information in this document and does not take responsibility for updating any information or correcting any error or omission which may become apparent after this document has been issued. To the extent permitted by law, Petratherm and its officers, employees, related bodies corporate and agents ( Agents ) disclaim all liability, direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of Petratherm and/or any of its Agents) for any loss or damage suffered by a Recipient or other persons arising out of, or in connection with, any use or reliance on this presentation or information. All amounts in Australian dollars (AUD) unless stated otherwise. Competent Persons Statement The information in this report relating to geothermal exploration results and geothermal resources is based on information compiled by P.W. Reid, a full-time Petratherm employee. Mr Reid has sufficient experience in the style of geothermal play under consideration to qualify as a Competent Person under the Australian Code for Reporting of Exploration Results, Geothermal Resources and Geothermal Reserves (2008 edition). Mr Reid consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

7 Petratherm overview MADRID & BARCELONA Direct use heat, EGS & hydrothermal Our company Leading Australian geothermal exploration and development company TENERIFE & GRAN CANARIA Conventional volcanic CHINA Exclusive exploration agreement Projects spanning Australia, Spain and China PARALANA & EAST GIPPSLAND EGS & HSA Projects across the spectrum of geothermal technology Flagship project Paralana in SA s northern Flinders Ranges

8 Paralana Project Commercial Plan Small off grid market (5-30MWe) (Heathgate) followed by potential large on grid development (260 MWe+) Expenditure well leveraged for proof of concept, then potentially fully funded to initial commercial demonstration scale 30MWe plant Funding and expertise from JV Partners, Beach Energy (up to 36 per cent for $30m) and TRUenergy (up to 30 per cent for $57m) Strong Federal Government grant support - $7 million geothermal drilling fund and $62.8 million REDP grant

9 Paralana Project Regional Picture *Please note Competent Persons Statement near beginning of presentation

10 Paralana Project Basin Geology *Please note Competent Persons Statement near beginning of presentation

11 2D seismic line SPG 84, showing well traces, interpreted reflectors and principal faults (Seismic Line 84 SPG) *Please note Competent Persons Statement near beginning of presentation

12 2D seismic line SPG 84, showing well geology, interpreted reflectors and principal faults *Please note Competent Persons Statement near beginning of presentation

13 2D seismic interpretation suggests faults and fractures may be regionally extensive below a thick quartzite sequence (Seismic Line 84 SPG) *Please note Competent Persons Statement near beginning of presentation

14 Paralana 2 Well Summary Depth 4003m (G.L. AHD) Slow ROP due to hard formations Well cased and cemented to 3720m Measured Temp. = 176 o C at 3672 m; Extrapolated bottom hole temp. is 190 ± 2 o C at 4000m depth. *Please note Competent Persons Statement near beginning of presentation

15 Paralana 2 Below 3400m Section Brine Intersected High torque, intervals of high ROP s, drilling breaks and increased in well bore deviation Followed by inflow of over pressured geothermal Brines between 3670 and 3864 m Shut in pressure indicated approx. 3,300 psi, of overpressure and mud system weighted up to 13.2ppg to stop flow. Well bore stability problems limited wire line logging to logging while drilling measurements to 3725 m Numerous large Fractures/Faults Intersected! *Please note Competent Persons statement near beginning of presentation

16 Paralana 2 - Lower Statigraphy Quartzite Interpreted Adelaidean Age (~ 800 Ma) Highly Competent -110 MPa to 200 MPa Major Unconformity at 3397m May be a natural partial seal Mesoproterzoic Meta-Sediment 3400m time equivalent to Benagerie Ridge/Mt Painter Basement Inter-bedded meta-siltstone/sandstone, dolomitic in part, with felsic tuffs and with numerous thick dolerite dykes 207 Pb/ 206 Pb age 1585 ± 11 Ma *Please note Competent Persons Statement near beginning of presentation Mesoproterzoic Basement Heat production µw/m 3, 207 Pb/ 206 Pb age 1580 ± 10Ma

17 Passive seismic array IESE (Institute of Earth Science and Engineering NZ) one deep borehole sonde at 1790m in Paralana 1b six borehole sondes at 200m eight surface seismometers two accelerometers MEQ - Array Managed by IESE *Please note Competent Persons Statement near beginning of presentation

18 Regional community consultation May 10-13, 2010 Petratherm and PIRSA Nepabunna Port Augusta, Leigh Creek, Hawker, Nepabunna, Arkaroola and Quorn Update on project and outline of next work stage fracture stimulation Consultation well received by community Mike Malavazos PIRSA Common questions Employment and economic development opportunities Access to, and use of water Questions and Answers posted on PTR website

19 MEQ Real time monitoring

20 Regional and Local Seismic Events Results from April 2008 to Sept *Please note Competent Persons Statement near beginning of presentation

21 Pre-stimulation Seismic Events April 2008-Sept.2010 Relatively small local events detected Largest event 0ML Correlates with faults within the Poontana Fracture Zone *Please note Competent Persons Statement near beginning of presentation

22 Total magnetic pseudocolour image of Paralana Area showing pre-stimulation seismic events Event period - April 2008 Sept 2010 Some Seismic events may correlate with faults observed in the aeromagnetic data *Please note Competent Persons Statement near beginning of presentation

23 Fracture stimulation programme next stage of work Stage 1 - Injectivity / Minifrac test at base of well bore Inject small volume of water to confirm fracture initiation and propagation Derive information on insitu stress regime, reservoir properties, test see if already connected to overpressured zone. Rose plot of maximum horizontal stress azimuth implied by borehole breakouts and drilling induced tensile fractures from Paralana 2. Data interpretation provided by JRS Petroleum Research, *Please note Competent Persons Statement near beginning of presentation

24 Stage 1 Injection / Mini Frac Test August Work Period Pressure Test OK Soft Tags from 2900m to 3200m then hit hard tag Follow up slick-line survey 3 weeks later found no obstructions Well casing integrity confirmed End November Period Coil Tubing unit to replace heavy brine with water Casing Perforation *Please note Competent Persons Statement near beginning of presentation Diagnostic Flow Injection Test (DFIT) Photo: Paralana Pressure Test, August 2010

25 Fracture stimulation programme next stage of work Fracture stimulation Inject larger volume of water at higher rates Volumes and stepped injection rates dependent on micro-seismic response Aims to create and activate natural fracture network intersected in the well. Targeting MEQ activity >500m radius from the well Injectivity flow rates, and production testing if well allows Provision for a second stimulation interval dependent on results *Please note Competent Persons Statement near beginning of presentation

26 Outlook for 2011 and beyond Paralana JV project milestones 1 st Qtr 2011: Main fracture stimulation 2 nd half 2011: drilling of the Paralana 3 deep producer well 2 nd half 2011: Circulation Test Proof of Concept 2012: Commission first stage 3.75 MW power plant

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