Jefferies analyst Julien Dumoulin-Smith has upgraded Fervo Energy from Hold to Buy, citing a revised outlook. The firm simultaneously lowered the price target to $34 from the previous $41.

Rating and Price Target Changes

The adjustment reflects a shift in the firm's perspective on the stock's potential. While the rating moves to a more bullish stance, the price target has been reduced.

Fervo Energy has drilled Sawtooth 7, the ninth well using its 3.0 well design at Cape Station Phase II, from spud to total depth (TD) in 21 days. The well reached a measured depth of 19,448 feet with a 7,500-foot lateral in a 460 degrees Fahrenheit resource, setting a new company record for drilling pace on its most complex design to date. This achievement reinforces Fervo’s strategic thesis that incremental learnings will drive productivity gains and cost reductions over time.

In February 2024, Fervo announced its fastest well to date for Cape Station Phase I was drilled in 21 days, representing a 70% reduction in drilling time compared to its first commercial horizontal well at Project Red in 2022. With Sawtooth 7, the company has maintained this 70% reduction in drilling time while drilling a well that is substantially deeper, hotter, and longer than the 2.0 design used in Phase I.

Fervo drilled its first commercial well at Project Red in 2022, reaching a depth of 11,220 feet in 70 days using its 1.0 well design. This design utilized 3,250-foot laterals with 5" casing at 350 degrees Fahrenheit. Cape Phase I, which is fully drilled and on track to deliver first power to the grid later this year, leveraged Fervo’s 2.0 well design, utilizing 5,000-foot laterals with 7" casing at 400 degrees Fahrenheit.

Sawtooth 7 is part of Cape Phase II, a 400 MW development set to deliver power in 2028, using the 3.0 well design with 7,500-foot laterals and 8 5/8" casing at 460 degrees Fahrenheit. Longer laterals, larger casing diameters, and higher temperatures are designed to significantly increase power output per well, supporting improved project economics.

"We have long believed that learning curves would enable Fervo to drill increasingly deeper, accessing higher-temperature rock without meaningfully increasing drilling costs," said Fervo CEO and co-founder Tim Latimer. "With this momentum from initial Phase II drilling, we expect Fervo’s 3.0 well design to produce substantially more megawatts per well and significantly improve the unit economics of future GeoBlocks. Based on our performance to date, we believe Cape Phase II is on track to deliver at $5,500 per kilowatt, and we remain firmly committed to our goal of achieving $3,000 per kilowatt."

Well Design Evolution

*Aggregated average of measured well depth across all Cape Phase I wells.