Killanoola

The Killanoola Oil Project is Red Sky’s 100% owned Flagship located in South Australia’s onshore Otway Basin. It was acquired in February 2021 from Beach Energy. PRL-13 covers an area of 17.5 sq km and is located in southeastern South Australia close to the Jacaranda Ridge and Haselgrove Gas Fields and Katnook Gas Processing Facility in the Penola Trough of the onshore Otway Basin.

The Killanoola oilfield was discovered by the Killanoola-1 well in 1998 at a depth of 850 metres. The oil is a 34° API waxy crude. Previous flow tests of the well have recorded rates of up to 300 barrels of oil per day.

An independent petrophysical report commissioned by Red Sky on the Killanoola-1DW-1 well identified potentially 37 metres of additional oil bearing pay zones within the 149-metre-thick Sawpit Sandstone. This evaluation adds significantly to the currently perforated pay zone of 5 metres. Future geological and geophysical studies will integrate these findings into new reservoir and structure models.

These results follow the exceptional result of 16m of Net Pay for the Killanoola SE-1 well which was in stark contrast to the previous net pay estimates of 1.5m. Killanoola SE-1 was drilled in 2011 and also discovered oil. This well has not undergone a production test.

In August 2023, Red Sky finalised an agreement with Viva Energy Australia Pty Ltd (ASX:VEA) to purchase all crude from the Killanoola oil field project, subject to required quality specifications. Delivery will be made to Viva Energy’s Geelong refinery by road tanker, approximately four hours southeast of the project site.

In December, works to prepare the well for the extended production test commenced after Red Sky received approval from the Government of South Australia (SA) Department for Energy and Mining (DEM), and contractors were mobilised to the site.

However, operations at the DW1 well were suspended shortly after due to a downhole mechanical failure of the existing pump, which led to the well losing its capacity to lift fluid to the surface. Operations were halted pending the installation of a new pump, which will be part of the 2024 work programme.

Despite encountering mechanical issues, initial flow rates were promising. An initial rate of 62 bbl/day, on an increasing trend, was observed.

Initial plans were to contract a drilling rig for workover and drilling operations in 2024. The focus was to drill two new wells and perform a workover, including relocating one well based on seismic data interpretation and replacing the faulty pump.

The forward programme at Killanoola has been further revised as announced in May 2024. Initially, plans to replace the faulty pump at the DW1 well using a crane were reassessed due to potential well control risks and marginal cost savings. Instead, we have opted for a more conventional approach using a concentric workover unit, which will prove more cost effective and is expected to enhance operational efficiency and safety. An Activity Notification (AN) has been lodged with the Department for Energy and Mining (DEM) for this operation.

Additionally, the forward program for the KN2 and SE2 wells has been revised due to cost inflation associated with building new well pads and ongoing costs. Red Sky is now evaluating drilling these additional wells from the existing well pads at K1 DW1 and SE1 as deviated wells. This approach will significantly reduce costs and logistical challenges. Drilling from existing well pads also allows us to leverage existing infrastructure, thus avoiding the high expenses and complexities of constructing new well pads and ongoing costs from new lease agreements.

Discussions are ongoing to support the revised drilling plans regarding securing condensate supply for blending to ensure flow assurance and buyers for the crude. These discussions are crucial for optimising the production process and maintaining steady output. By drilling from existing well pads, we not only cut costs but also expedite the process. The SE2 site requires a deviation of 270 metres, and the KN2 site requires 470 metres, which are within industry standards.

The Company continues to engage with the DEM to secure the necessary approvals. Our revised approach aligns with our broader strategy to optimise resource utilisation, reduce operational risks, and enhance shareholder value through careful and calculated project management.

Recent developments include:

Table 1: Summary Discovered Petroleum Initially In Place (PIIP) Killanoola Oil Field

Near Top Reservoir Depth Map