Red Sky Energy Secures Funding to Unlock New Oil Zone at Killanoola
Red Sky Energy has partnered with Condor Energy and associates to fund the drilling of the KN2 well at Killanoola, targeting a promising new reservoir zone identified by advanced seismic data. This move aims to boost production and accelerate cash flow from the South Australian oil project.
- Binding Farmin Agreement with Condor Energy and partners to fund 75% of KN2 well drilling
- Farminees earn 45% interest in KN2 well; Red Sky retains 55% and full operatorship
- KN2 targets a new structural high identified by 3D seismic, aiming to increase petroleum reserves
- Drilling expected late this quarter alongside DW1 well workover to optimise production
- Killanoola’s Petroleum Initially In Place estimate increased by 45.7% to 135.5 million barrels
Strategic Partnership Advances Killanoola Drilling
Red Sky Energy has taken a significant step forward in developing its Killanoola Oil Project in South Australia by executing a binding Farmin Agreement with Condor Energy Services Limited, Chawla Group Pty Ltd, and VB Energy Pty Ltd. This partnership will see the farminees fund 75% of the costs to drill and complete the high-impact KN2 well, earning a 45% interest in that well. Red Sky retains a majority 55% stake and full operatorship of the licence, maintaining control over the project’s direction.
Targeting a New Reservoir Zone with 3D Seismic Insights
The KN2 well is designed as a vertical well targeting a previously undrilled structural high identified through Red Sky’s proprietary 3D seismic survey completed in 2023. This new zone offers the potential to access a materially larger portion of the petroleum initially in place, which was recently revised upward by 45.7% to 135.5 million barrels. This seismic-driven approach reflects a growing trend in the industry to leverage advanced imaging techniques to unlock hidden reserves.
Operational Efficiency and Cost Management
To optimise costs and operational efficiency, the same drilling rig will be used consecutively for the KN2 well and a workover of the existing DW1 well, which includes changing out the bottom hole pump. This back-to-back scheduling reduces mobilisation expenses and operational risks, underscoring Red Sky’s focus on capital efficiency as it seeks to accelerate production growth and cash flow generation.
Commercial and Infrastructure Positioning
Killanoola benefits from existing production infrastructure and a conditional offtake agreement with Viva Energy Australia Limited. Additionally, Red Sky is in discussions with Santos Limited regarding alternative processing and sales options at the Port Bonython facility, aiming to maximise commercial flexibility and pricing outcomes. Condor Energy Services also secures a right of first refusal to provide wellsite services across the broader licence area for two years, further cementing the partnership’s operational collaboration.
Looking Ahead
With rig planning advanced and regulatory approvals underway, Red Sky anticipates spudding the KN2 well late in the current quarter. This milestone could mark a turning point for Killanoola, potentially unlocking new production zones and driving material revenue growth. The company’s strategic approach balances technical innovation, partnership funding, and operational discipline to enhance shareholder value in the near term.
Bottom Line?
As drilling at KN2 looms, all eyes will be on whether this seismic-led gamble translates into tangible production gains.
Questions in the middle?
- Will the KN2 well confirm the promising reservoir potential indicated by 3D seismic data?
- How will the evolving offtake and processing negotiations impact Killanoola’s commercial returns?
- What are the contingency plans if rig availability or regulatory approvals delay drilling commencement?
