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Red Sky Energy fifth largest with 3P gas reserves of 114PJ among non majors

With domestic power suppliers in eastern Australia having difficulty sourcing gas, being in the top five companies on a 3P reserves basis is a win for Red Sky. Managing director Rohan Gillespie told Proactive Investors today Red Sky is one of few companies in eastern Australia that is sitting on gas reserves with expectations of proving up more.

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Red Sky Energy (ASX: ROG) is now the fifth largest non-major company with gas in eastern Australia with 3P reserves of 114 petajoules in the Clarence Moreton Basin in northeast New South Wales.

Managing director Rohan Gillespie told Proactive Investors today this is good news for the company as domestic power companies are finding it difficult to source gas for supply.

“It means because we have reserves in eastern Australia they have a significant scarcity value, because the LNG projects in Gladstone that are going ahead are pretty much soaking up all the available gas in eastern Australia,” he said.

“The majors probably account for in excess of 95% of the gas in eastern Australia and so that’s creating a scarcity value, and on top of that domestic power companies are looking for gas to put into domestic power generation and they’re finding there’s not a lot of it around.

“All of this is good news for Red Sky because we’re one of the few companies in eastern Australia that is sitting on gas reserves with expectations of proving up more.”

Red Sky ranks above Dart Energy’s (ASX: DTE) 102 petajoules and below Senex Energy's (ASX: SXY) 249 petajoules reserves position. 

With the recent takeover of Eastern Star Gas (ASX: ESG) by Santos (ASX: STO) and Arrow Energy’s proposed takeover of Bow Energy (ASX: BOW), there are now only a small number of independent companies in the gas sector with 3P gas reserves in eastern Australia.



Clarence Moreton Basin Prospectivity

The Clarence Moreton Basin has shown to have gas at a number of intervals from a depth of about 3000 metres to surface. Red Sky is targeting the shallow gas resource as well as the Walloon coals.

The top non-major company with gas in eastern Australia, Metgasco (ASX: MEL), has been operating in the basin for pretty close to 10 years and is targeting the Walloon coals and deeper intervals.

“I think what both of us [Red Sky and Metgasco] have shown is that the basin is very prospective for gas and we’re both driving towards getting into production in the near-term,” Gillespie said.

Metgasco took out the number one spot with 2,542 petajoules of 3P gas reserves, followed by Molopo Energy (ASX: MPO) with 817 petajoules and Westside Corporation (ASX: WCL) with 369 petajoules.

 

Forward Plans

Red Sky is currently planning to drill the Talma pilot well within PEL 457 in the prospective Kangaroo Creek Sandstone gas resource, also in the Clarence Moreton Basin.

The aim of the pilot production well is to perform a long term production test to determine the magnitude and deliverability of the resource.

Red Sky announced a significant new discovery within PEL 457 earlier in the year.

“It was quite an exciting discovery, it hadn’t been discovered before in the basin, we got quite good gas flows to surface when we put it under test and did quite a comprehensive technical study based on the findings from that well,” Gillespie said.

“So we want to go back and put it under a long term test, it’s called a pilot well, with the expectation of proving up some reserves and looking to get that power into local power generation and getting to market as soon as possible.”

Gillespie said Red Sky believes it can reach an investment decision on a small power station within two years.

The company recently submitted an application for regulatory approval of the Talma pilot well and, once regulatory approval has been granted, it will seek a suitable drilling rig to undertake the pilot.

Red Sky’s proposed drilling programs are targeted at significantly increasing its reserves position and demonstrating the producibility of its gas resources, to become a major gas supply source.



Cash Position

At the end of June the company had A$1.3 million in cash, and in the September quarter Red Sky secured a $3 million funding facility with U.S. investment fund YA Global Master SPV in exchange for the issue of shares. 

With the facility, Red Sky has sufficient cash reserves to fund the proposed Talma pilot test.

Quick facts: Red Sky Energy Limited

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ASX:ROG
Market: ASX
Market Cap: $4.7 m
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