Fervo Energy Co. (FRVO) Earnings

Management highlights

- Safety Performance * Trailing 12-month total recordable incident rate of 0.34 in Q2, reflecting a strong culture of safety focused on health, environment and industry-leading programs like Safe7. - Pipeline and Development Progress * Moved 8 geoblocks (400 megawatts of capacity) from early development to advanced development, and 10.5 gigawatts across two new geoclusters from land holdings to early development. Expanded total geothermal mineral rights to over 650,000 acres. * The 10.5 gigawatt addition to early development more than doubles the 4 gigawatt total resource potential at the Cape Station geocluster, supporting Fervo's multi-gigawatt geocluster model that delivers economies of scale and lower costs. * Current contracted capacity is 658 megawatts across 35% utility buyers, 50% AI/hyperscaler data center buyers, and 15% non-hyperscaler industrial customers, with gigawatts of additional capacity in active negotiation. * Fervo is a founding signatory of the Geothermal Sustainable Development Pact, adhering to strict standards for community engagement, water conservation, induced seismicity monitoring, and emissions; all water-constrained site developments use air-cooled condensers to avoid strain on local water supplies. - Behind-the-Meter Development Strategy * Behind-the-meter EGS development enables faster delivery of power to customers that need capacity before long grid interconnection queues are completed, leveraging Fervo's modular 50-megawatt geoblock design that supports phased, seamless capacity growth. * EGS pairs well with solar and battery storage to deliver high 24/7 reliability, and is insulated from fuel supply disruptions; all behind-the-meter projects retain a long-term plan for future grid interconnection, creating a hybrid growth model that accelerates deployment. - Cape Station Execution * Cape Station Phase 1 (100 megawatts, 3 x 33 megawatt geoblocks) has achieved mechanical completion for Geoblocks 1 and 2, with commissioning underway; first power from Geoblock 1 is targeted for Q4 2026, with full production for all three geoblocks by early 2027. * Cape Station Phase 2 (400 megawatts, 8 x 50 megawatt geoblocks, targeted startup 2028) uses the new Fervo 3.0 well design with longer laterals, larger casing, and higher average temperatures. The ninth 3.0 well (Sawtooth 7) reached 19,500 feet depth and 460°F in only 21 days, a new company drilling pace record. Higher temperatures are expected to deliver 27% more power per well for roughly the same surface capital expenditure as Phase 1, putting an all-in cost target of $5,500 per kilowatt for Phase 2 within reach, with a long-term target of $3,000 per kilowatt still on track. * Added a third drilling rig to Cape Station, bringing total annual potential drilling capacity to over 400 megawatts at steady state. - Technology and Innovation * Fervo has iterated quickly on well design from the initial Project Red pilot to 2.0 and 3.0 designs, cutting drilling time from 70+ days for the first Project Red well to 21 days for the latest 3.0 well while increasing depth, temperature, and power output per well. 2.0 wells already deliver 3x the power output of original Project Red wells. * Longer laterals and hotter rock deliver higher stimulated reservoir volume per well and more energy per unit of flow, gradual production decline is a natural physical outcome that is mitigated by future makeup wells that benefit from cumulative learning, delivering higher productivity at lower cost than earlier wells.

Guidance

- Capital expenditure for the second half of 2026 is expected to total $850 to $900 million, in line with prior guidance. - Mid-single-digit revenue in Q4 2026 is still expected to be achievable, consistent with third-party analyst projections. - For 2027, Fervo provided preliminary expected revenue of $60 to $80 million (not formal formal guidance), with a wider-than-normal range due to potential external transmission curtailment risks unique to 2027. - Installed capacity by the end of 2030 is guided to be 1.1 gigawatts, an upward revision of 100 megawatts from the prior 1 gigawatt target, unlocked by successful validation of behind-the-meter projects as a viable commercial and technical option that accelerates time to market.

Segment performance

Fervo Energy is a single-segment developer of enhanced geothermal energy systems (EGS), so no separate product segment performance is reported. For Q2 2026, the firm reported an operating loss of $28.7 million and a net loss of $55.9 million. For the first half of 2026, net cash used in operating activities was $43.8 million. Q2 2026 capital expenditures were $226.5 million, up from $108 million in Q2 2025, driven by heavy construction activity at Cape Station and increased procurement for future 2028 geoblock deployment. As of Q2 end 2026, cash and cash equivalents totaled $2.1 billion, total debt stood at $228.4 million, and the contracted revenue backlog was $7.2 billion representing 658 megawatts of fully contracted capacity.

Risks & headwinds

- First-of-a-kind commercial commissioning of Cape Phase 1 Geoblock 1 may encounter small, correctable unforeseen issues, and completion of substation work and grid synchronization coordination with multiple counterparties is still required to hit Q4 2026 first power targets. - Fervo faces potential transmission curtailment risk in 2027 unrelated to its own production or geoblock performance, driven by third-party transmission network upgrades underway at the Cape Station interconnection point, which could reduce 2027 revenue. - Power plant construction labor markets are competitive, with high demand for skilled workers from other power generation and data center development projects, creating potential cost and schedule pressure. - Supply chains for electrical equipment are strained, which could create delivery delays for future projects if not pre-emptively addressed. - Geothermal EGS development faces public and market speculation around technical risks including thermal decline, water usage, and induced seismicity that could create permitting or social license to operate challenges.

Analyst Q&A

• Q: Has the extra capital raised in the IPO accelerated your pipeline growth timeline, and what are the targets for the upcoming appraisal drilling program?

  A: The pipeline is growing faster than originally anticipated because the larger-than-expected IPO proceeds allowed Fervo to secure more acreage (at a time of rising acreage costs) and launch the appraisal program earlier than planned. The appraisal program will drill test wells to confirm subsurface temperatures at depth for new prospects (primarily in Nevada and surrounding regions), which is the gold standard for de-risking geologic models and accelerating future development.

• Q: What is the source of the potential 2027 curtailment you referenced, and where will the incremental 100 megawatts added to the 2030 target come from?

  A: The curtailment risk is entirely related to third-party transmission grid upgrades being done by the transmission operator at Cape Station, which will temporarily limit the amount of power Fervo can send to customers in 2027; it has no connection to Fervo's own geoblock performance or construction. The incremental 100 megawatts will most likely come from the more advanced prospects the company holds in Nevada and Utah, with commercial pricing expected to fall in the existing range of $100 to $130 per megawatt-hour consistent with prior contracts.

• Q: How do PPA liquidated damages work for the Cape Phase 1 ramp, and what technology improvements are you working on now to cut costs further?

  A: Cape Phase 1 PPAs include an extended timeline to reach full capacity, so there is flexibility to adjust ramp timing, and liquidated damages for potential delays are not expected to be material to earnings. Management prioritizes long-term asset health and proper commissioning over rushing to meet an arbitrary early deadline. Fervo is adapting and testing multiple oil and gas technologies for geothermal's harder, hotter granite conditions, including high-pressure well stimulation equipment and rotary steerable drilling systems. These improvements are already increasing drilling speed and well success rates and will continue to drive cost reductions as they move from trial to routine use.

• Q: How do you address market concerns about EGS technical risks including thermal decline, and what is the economic impact of future makeup wells?

  A: The $421 million non-recourse project financing closed for Cape Phase 1 required extensive due diligence from independent experts and lenders, who concluded the technology is bankable, which validates Fervo's technical approach more than public speculation. Thermal decline is a natural physical outcome of heat extraction, but it is highly mitigable: future makeup wells will use improved well designs, deliver more power per well, and only require half the capital of a full new project (since existing surface power facilities are already in place). The incremental capital for makeup wells has a muted impact on project returns, and additional productive wells generally deliver high incremental returns under existing PPAs.