Red Sky Energy Advances Innamincka Drilling Campaign with $5.1 Million Capital Raise

Innamincka Dome Drilling Campaign Moves Into Field Operations

Red Sky Energy (ASX:ROG) has begun site preparation at the Yarrow gas field in South Australia’s Innamincka Dome, marking a significant step toward its upcoming Santos-operated drilling campaign. The program includes two development wells at Yarrow (Yarrow 4 and Yarrow 5) drilled directionally from a single dual-well pad, alongside the Willowie appraisal well. Drilling is slated to start in August 2026, subject to final scheduling and weather conditions.

The dual-well pad approach aims to reduce surface impact and capital costs, leveraging existing Santos infrastructure and the Moomba processing facility for a capital-efficient pathway to production. Red Sky holds a 20% working interest in the relevant licences, with Santos as operator and majority stakeholder.

Production Receipts Reflect Early Success at Yarrow

During the June quarter, Red Sky reported gross production receipts of $1.045 million, predominantly from gas sales (82%), supplemented by LPG and condensate. The Yarrow 1 well, commissioned in November 2025, has outperformed initial expectations with early production rates reaching approximately 2.4 MMscf/d, surpassing the AFE P50 forecast of 1.6 MMscf/d. Alongside Yarrow 3, these wells continue to feed gas into the Santos-operated gathering system, underpinning Red Sky's near-term cash flow.

Since production commenced in August 2023, Yarrow has generated total cash receipts of $7.635 million, with 85% attributable to gas and the remainder to associated liquids. This steady revenue stream supports the company’s strategy of pursuing infrastructure-backed, short-cycle development projects.

Capital Raising Secures $5.1 Million for Development and Working Capital

Red Sky completed a fully underwritten rights issue and a placement during the quarter, raising approximately $5.1 million before costs. The rights issue raised about $4.1 million, fully underwritten by CPS Capital Group and sub-underwritten by entities linked to directors Andrew Knox and Adrien Wing. The placement contributed an additional $1.0 million.

Proceeds from these capital raisings are earmarked for participation in the Santos-operated drilling program at Innamincka, workover and completion activities at the Killanoola Oil Project, and general working capital. The company’s cash reserves stood at $6.17 million as of 30 June 2026, bolstered by these recent financings.

Killanoola Oil Project Under Technical Review Post-KN2 Drilling

Following the completion of the KN2 appraisal well in December 2025, Red Sky continues evaluating completion and stimulation options. KN2 intersected hydrocarbon-bearing zones but showed low reservoir permeability in its unstimulated state. The well remains cased and suspended with production tubing installed, preserving it as a potential future producer.

Workover and testing plans for KN2 and the DW1 well are progressing, subject to funding and scheduling. Killanoola’s 3D seismic data from 2023 increased the field’s Best Estimate Petroleum Initially In Place by 46% to 135.5 million barrels, underscoring the project’s potential despite ongoing technical challenges.

Block 6/24 Offshore Angola at Preparatory Stage

Red Sky retains a 35% interest in Block 6/24 offshore Angola, alongside operator Sonangol (50%) and ACREP (15%). The block includes the Cegonha oil field with a Net 2C Contingent Resource of 5.1 million barrels and three prospects contributing an additional 11 million barrels in Net 2U Prospective Resources.

The joint venture remains focused on preparatory activities, including finalising documentation and planning geological and geophysical studies. The block’s early-stage status means commercial development is contingent on future appraisal and regulatory approvals.

Cost Management and Shareholder Initiatives

Red Sky has maintained a cost-reduction program, including a 25% temporary reduction in director fees and salary, staff reductions, and operating cost reviews to preserve capital. Additionally, a Small Shareholding Sale Facility was introduced to enable shareholders with holdings valued under $500 to sell shares without brokerage, reducing administrative costs for the company.