Regulatory Approval Pending: Will Red Sky’s KN2 Drilling Stay on Track?
Red Sky Energy has mobilised drilling equipment to the KN2 well site at Killanoola, with regulatory approvals advancing smoothly and drilling expected to begin soon.
- Drilling rig and equipment mobilised to KN2 well site
- Water monitoring programme approved by South Australian DEM
- Final drilling programme submitted for regulatory approval
- Drilling expected to take nine days to case and suspend the well
- Offtake agreement with Viva Energy and discussions with Santos ongoing
Drilling Preparations Reach Advanced Stage
Red Sky Energy (ASX, ROG) has taken a significant step forward at its Killanoola Oil Project in South Australia’s Penola Trough, with the mobilisation of the drilling rig and ancillary equipment to the KN2 well site. This move signals the company’s readiness to commence drilling operations pending final regulatory approval.
The South Australian Department for Energy and Mining (DEM) has conducted a site inspection without raising any concerns, and notably approved the company’s water monitoring programme. This approval, coupled with the drilling of associated water bores, represents a critical operational milestone ahead of the drilling programme’s final sign-off.
Finalising Design and Regulatory Steps
Red Sky has now finalised the Basis of Design (BOD) and drilling programme in collaboration with all relevant parties. The completed programme has been submitted to DEM for final approval, which is the last regulatory hurdle before drilling can commence. The company anticipates the drilling phase to take approximately nine days to drill, case, and suspend the KN2 well.
Following this, a separate workover rig will be mobilised to complete the KN2 well and undertake the DW1 workover, further advancing the project’s development.
Strategic Importance of KN2 and Killanoola
The KN2 well targets a previously undrilled structural high identified through Red Sky’s 3D seismic programme completed in 2023, which notably increased the field’s best estimate Petroleum Initially In Place (PIIP) to 135.5 million barrels. This uplift underscores the potential scale of the Killanoola Oil Project and its capacity to contribute materially to Red Sky’s production profile.
Killanoola already benefits from a conditional offtake agreement with Viva Energy Australia Limited and is engaged in ongoing discussions with Santos Limited regarding alternative offtake and processing arrangements at the Port Bonython facility. These commercial negotiations are crucial for securing the infrastructure needed to bring production to market efficiently.
Looking Ahead
Managing Director Andrew Knox emphasised the company’s strong engagement with regulators and readiness to deliver this key operational milestone. The smooth progress of approvals and mobilisation positions Red Sky well to unlock value from the Killanoola asset in the near term.
While the final drilling programme approval is pending, the company’s clear forward plan includes commencing drilling shortly after approval and advancing completion and workover activities. Investors will be watching closely as these developments unfold, given their potential to significantly impact Red Sky’s production and revenue trajectory.
Bottom Line?
With drilling imminent, Red Sky Energy stands on the cusp of unlocking Killanoola’s full potential; regulatory green lights will be the next critical signal.
Questions in the middle?
- When exactly will the Department for Energy and Mining grant final drilling approval?
- What are the prospects and timelines for finalising offtake and processing agreements with Santos?
- How will the results from KN2 influence Red Sky’s production forecasts and project valuation?
