Progress to Date

Geodynamics' early focus was on field exploration and site selection, economic modeling studies and the preparation of its Initial Public Offering (IPO). Its independently verified studies selected the optimal site for development within the Cooper Basin (South Australia), calculated expected output and estimated the economics of the demonstration plant, as well as the benefits of a full-scale commercial development.

The company successfully raised $11.5 million via an IPO in 2002, as well as further funds totalling $142 million for the 5 years to December 2007. Origin Energy Limited has also provided a significant financial boost to the company through its previously mentioned farm-in deal worth $105.6 million.

Purchase of Rig 100
In a significant move, Geodynamics purchased the Le Tourneau 'Lightning Rig' in 2007, using funds raised through a $50 million rights issue. The advanced 3000hp rig features great mobility and the capacity to operate at extreme depths, in this case up to 6000 m. The rig began drilling its first production-scale well - Habanero 3 - in August 2007.

Rig 200 expected in October 2010
In order to scale up to 500 MW by 2020, and eventually thousands of MWe, the Cooper Basin Project will require multiple rigs drilling in tandem.  In order to maintain control over its drilling program, the Innamincka Joint Venture (between Geodynamics and Origin Energy) has purchased an additional drilling rig - a National Oilwell Varco.  This rig is expected in country in October 2010 and will be incorporated into the Innamincka 'Deeps' Joint Venture's drilling program from November 2010.

Drilling activity
To date, the company has drilled five wells - Habanero 1, Habanero 2, Habanero 3, Jolokia 1 and Savina 1. Of these, Habanero 1 and 2 are not of commercial scale, while Habanero 2 is not sufficiently connected to the reservoir because of lost equipment in the hole.  Habanero 3, was the first well to be drilled using the 'Lightning Rig' to a depth of 4,221 m (13,850 ft), January 22, 2008. The completion of drilling in Habanero 3 was a significant milestone in the development of Geodynamics, making it the largest well of this depth ever drilled onshore in Australia and the first commercial scale Hot Fractured Rock production well to be drilled. Jolokia 1 was drilled to 4879 m and Savina 1 was drilled to 3871 m.

Proof of concept achieved
In March 2009, Geodynamics announced that it had successfully proven its ability to extract heat from hydraulically stimulated hot fractured rock to create power. The achievement of 'Proof of Concept' is one of the major milestones for Geodynamics since its inception nine years ago and marked the completion of Stage 1 of its business plan.

Habanero 3 well control incident
On the 24 April 2009, Geodynamics experienced a well control incident at Habanero 3. With assistance from Origin Energy, Santos and international experts, Cudd Well Control the flow of steam and water from the well head was controlled and the well was secured. Geodynamics engaged Sinclair Knight Mertz to independently assess the events that caused the flow at Habanero 3. A detailed investigation found that the casing material had cracked due to hydrogen embrittlement, which was caused by dissolved gases in the reservoir fluid.

GeothermEx confirmed the Company's Proof of Concept program, the results of the testing and the positive conclusion remain valid.

Federal Government support and funding
During November 2009, Geodynamics was pleased to be awarded $90 million funding by the Federal Government under the Renewable Energy Development Program to further the development of the Cooper Basin 25 MW Commercial Demonstration Plant. During December 2009, the Federal Government also awarded an additional $7 million in funding under Round 2 of the Geothermal Drilling Program for the development of the Company's Hunter Valley geothermal project.

Temperature is King
Geodynamics' South Australian tenements  have been shown to contain more than 400,000 petajoules of high-grade thermal energy. This confidence is based on the fact that:

		The size of the resource is clear - the large bodies of granite have been clearly delineated and proven to exist through drilling;
		The quality and potential of the resource is proven - temperatures have been measured up to 250 degrees Centigrade;
		The world's largest enhanced underground heat exchanger has been developed and initial flow tests have produced the first hot fluids to the surface.
		Project studies, including long-term production modelling, have shown that these resources have the potential to support generating capacity of more than 10,000 MW.

Next Steps - 2010 and beyond

Geodynamics and its joint venture partner Origin Energy remain committed to bringing the vast Cooper Basin geothermal resource to market. The Habanero 3 incident and the global financial environment has brought into focus the need to re-evaluate the forward work program and during April 2010, Geodynamics announced a revision to its forward work program.

Forward work program
The key driver of the work program between now and early 2013 is to get the joint venture to a position where it can take the investment decision to procure and construct a commercial sized demonstration power plant. The work program can be summarized as follows:

1. Completion of Jolokia 1 and the creation of an underground heat exchanger will demonstrate our ability to create fracture zones across our tenement area.
    
2. Following completion of Jolokia 1, Rig 100 will be released from the ‘Deeps’ work program in August. Origin Energy will operate Rig 100 and commence exploration activities for the Innamincka ‘Shallows’ Joint Venture, in which Geodynamics has a 50% interest.
    
3. Rig 200, a heavier duty rig, is due to arrive in Australia in October and will commence drilling Habanero 4 in November, followed immediately by Habanero 5. We expect Rig 200 to have superior performance to Rig 100.
    
4. The Innamincka 1 MW Power Plant will be powered by the Habanero 4 and 5 well doublet. The commissioning of the 1 MW Power Plant is now expected by early 2012. In addition to providing electricity for our operations and Innamincka, the plant will provide long term flow testing information that we need to make a decision about the commercial demonstration plant.
    
5. Following the completion of Habanero 5, Rig 200 will return to Jolokia in early 2012 to drill Jolokia 2, connecting with Jolokia 1 to create a second doublet. The next step at Jolokia will be flow testing.
    
6. We expect to be in a position to make a final investment decision on the commercial demonstration plant after 12 months of successful operation of the Habanero closed loop (incorporating the1 MW Power Plant) by early 2013.

Each of these steps will be subject to decision gates and satisfactorily meeting objectives of the steps.

During 2010, Geodynamics will conduct work to complete Jolokia 1 that was designed to the same specification as Habanero 3. The design of the future wells in the forward program will be undertaken in light of the Habanero 3 incident findings.

Commercial Demonstration Plant
The company plans to finalise its preferred design for a commercial demonstration plant in 2010. Once operational, the 25 MW power plant, which will be for commercial operation and produce zero emissions with zero water requirements, will produce enough electricity to power approximately 25,000 households on a continuous basis.

Transmission infrastructure
Geodynamics has conducted concept studies to define options for transmitting power from the Cooper Basin to major load centres such as Brisbane, Adelaide and Sydney. Significant traction was gained during 2009 and continues in 2010 on raising the awareness of the need for extension to the existing transmission network to cater for the expected growth in renewable energy development driven by the federal government's Renewable Energy Target legislation.

The Australian Energy Markets Commission (AEMC) has suggested the introduction of Network Extensions for Remote Generation (NERGs) where the market funds large connection assets from renewable hubs into the existing transmission system with end users ultimately bearing the risk of under-utilisation of the assets. Geodynamics see the NERG solution as a significant development and a positive step in ultimately connecting the Cooper Basin geothermal resource into the existing market.

More detailed information can be found in the 2009 Annual Report.
For up to date material information, visit our ASX Announcements section.