Raser Technologies announced that they’ve completed a $12.5M private placement to help with drilling expenses. Traders were thrilled by this news causing the stock to climb 30%, though there has been a slight retreat since. What does this mean? In addition to the $5.5M AMP returned to Raser, there is at least $18M of cash available to Raser to funding drilling, which is phenomenally expensive.

Our unsolicited advice to the Raser team is, if you’re serious about the geothermal business (and by all indications you are,) consider buying a drill rig. With fully burdened geothermal well costs approaching $1,500/meter and the scarcity of drill rigs, this could be a solid capital acquisition that permanently reduces drilling costs by as much as 50% over the useful 30 year life of the rig.

So what did this extra money cost? The latest SEC filing indicates that Raser has 50.7M common shares outstanding. The private placement adds 2.7M shares to that total at a purchase price of $4.65 per share and grants 945,000 of warrants, essentially the right to by future shares, at a strike price of $6.05 per share. The combination of the shares and warrants (assuming they are excercised) will result in just over 7% dilution for shareholders of record at the time of the announcement.


As stated in prior entries, this is the latest in a series of deals of this type, which appears to be in vogue for geothermal developers.

Disclosure: The author holds no shares in Raser Technologies.

This entry was posted on Thursday, April 5th, 2007 at 6:42 am and is filed under Business, Geothermal.