Flooding Delays Yarrow 1 Gas Flow; Can Red Sky Sustain Momentum?

Innamincka Projects Deliver Consistent Cash Flow

Red Sky Energy’s Innamincka Dome assets continue to underpin the company’s revenue stream, with the Yarrow 3 well generating $1.54 million in gross production receipts year-to-date. The majority of this revenue is derived from natural gas sales, supplemented by LPG and condensate, reflecting a robust and steady production profile since August 2023. This consistent cash flow is a critical foundation as the company advances its development plans.

Meanwhile, the Yarrow 1 well, which underwent hydraulic fracturing earlier this year, has faced delays due to flooding that impacted flowline construction. The company now targets first gas production from Yarrow 1 in the fourth quarter of 2025. Once operational, Yarrow 1 is expected to significantly enhance cash flow in 2026, complementing ongoing revenues from Yarrow 3 and supporting Red Sky’s long-term value creation strategy at Innamincka.

Killanoola Project Progresses with Drilling Milestone

At the Killanoola Oil Project in South Australia, Red Sky has achieved a key operational milestone with the completion of the KN2 well pad construction and commencement of drilling operations. The KN2 well was spudded on 24 October 2025, following regulatory approvals and site preparations that included cultural monitoring and environmental safeguards.

Importantly, a farm-in agreement with Condor Energy Services and partners funds 75% of the drilling and completion costs for KN2, reducing Red Sky’s capital exposure while accelerating project execution. The well targets a structural high identified through proprietary 3D seismic data, aiming to unlock additional production and near-term cash flow. The company also plans to mobilise a workover rig to complete KN2 and perform workover operations on the existing DW1 well, further enhancing production potential.

Strategic Expansion into Offshore Angola

In a significant international development, Red Sky formalised the signing of the Risk Service Contract for Block 6/24 offshore Angola, securing a 35% interest alongside operator Sonangol (50%) and ACREP (15%). This block, located in the prolific Kwanza Basin, includes the Cegonha oil field with net 2C contingent resources estimated at 5.1 million barrels and prospective resources of 11 million barrels.

The agreement enables the joint venture to advance into the execution phase, including finalising the Joint Venture Operating Agreement and initiating geological and geophysical studies. Preparations for seismic reprocessing and potential drilling are underway, positioning Red Sky to tap into significant resource potential and diversify its portfolio beyond Australian onshore assets.

Financial Position and Outlook

As of 30 September 2025, Red Sky Energy holds cash reserves of $1.8 million, reflecting a cautious but stable financial footing amid ongoing operational activities. The company continues to evaluate further acquisition opportunities to complement its growth trajectory.

Looking ahead, Red Sky anticipates steady cash flows from Innamincka through the remainder of 2025, with enhanced production expected in 2026 from Yarrow 1 and additional development wells. Killanoola is poised to contribute meaningful near-term production growth, supported by ongoing offtake discussions and infrastructure development. Offshore Angola represents a longer-term growth avenue, with exploration and appraisal activities set to unlock substantial resource value.