Risks Remain as Red Sky Starts Drilling at High-Stakes Killanoola-2
Red Sky Energy has officially begun drilling at its Killanoola-2 well in South Australia, marking a significant step in advancing its oil project with promising resource potential and commercial partnerships.
- Killanoola-2 well spudded and surface casing installed
- Drilling progressing towards 1050m production hole depth
- 46% uplift in petroleum initially in place from 3D seismic data
- Conditional offtake agreement with Viva Energy in place
- Ongoing discussions with Santos Limited for processing options
Drilling Commences at Killanoola-2
Red Sky Energy (ASX – ROG) has officially commenced drilling operations at its Killanoola-2 (KN2) well, located within Petroleum Retention Licence 13 in South Australia's Otway Basin. The well was spudded on the evening of 24 October 2025, with the initial 12-1/4" surface hole drilled to approximately 365 metres measured depth (MD), followed by casing and cementing to secure the wellbore.
Current activities are focused on preparing the blowout preventer (BOP) equipment and swapping out the bottom hole assembly to proceed with drilling the 8-1/2" production hole, targeting a depth of around 1050 metres MD. This phase is critical as it aims to reach the reservoir zones identified by prior seismic studies.
Significance of the Killanoola Project
The Killanoola Oil Project has been a focal point for Red Sky since its 3D seismic program in 2023 revealed a substantial 46% increase in the field’s Best Estimate Petroleum Initially In Place (PIIP), now estimated at 135.5 million barrels. KN2 targets a previously undrilled structural high, offering the potential to unlock significant new reserves within the Penola Trough.
Managing Director Andrew Knox highlighted the milestone, noting the smooth transition from planning to execution and expressing confidence in the Condor Rig 01 team's operational efficiency. The successful drilling of KN2 could materially enhance Red Sky’s production profile and revenue prospects in the near term.
Commercial Partnerships and Future Outlook
On the commercial front, Red Sky has secured a conditional offtake agreement with Viva Energy Australia Limited, providing a pathway for future production sales. Additionally, the company is in discussions with Santos Limited, the operator of the South Australian Cooper Basin Joint Venture, regarding alternative offtake and processing arrangements at the Port Bonython facility. These partnerships are crucial for ensuring market access and optimizing project economics.
While the drilling progress is encouraging, the company remains cautious, acknowledging the inherent risks of exploration activities. Investors are advised to monitor forthcoming updates on drilling results and any formalization of commercial agreements that will shape the project's trajectory.
Bottom Line?
As drilling advances at Killanoola-2, Red Sky Energy positions itself for a potential production uplift, but key results and agreements remain to be seen.
Questions in the middle?
- Will the KN2 well confirm the anticipated reservoir quality and volumes?
- How soon can Red Sky finalize offtake and processing agreements with Santos Limited?
- What are the projected timelines for bringing Killanoola production infrastructure online?
