Red Sky Energy (ASX: ROG) has entered into a binding sales agreement with petroleum midcap Beach Energy (ASX: BPT) to purchase the Innamincka Dome oil and gas project in South Australia, which was closed in 2015 due to a downturn in oil markets.
The project comprises a mix of well-maintained shut in wells and non-producing proven fields and sits in the onshore Cooper Basin – Australia’s largest and most prolific oil and gas province, which has produced significant volumes of oil, gas and condensate since the 1970s.
The purchase has been conducted with Beach subsidiary Acer Energy and comprises a portfolio of six highly-prospective petroleum tenements (PRLs) including the shut-in Flax oilfield (PRL14), the Yarrow gas field (PRL17), and the Juniper oilfield (PRL18).
It also includes a 75% interest in PRL182 which is held in joint venture with Bengal Energy (Australia), as well as existing production infrastructure, storage tanks, yards and camp facilities. The existing plant has a processing capacity of 1,000 barrels of oil per day and a storage capacity of 2,400 barrels.
Red Sky will fund the acquisition with a capital raising of up to A$2.2 million, comprising a A$1.6 million share placement and a A$600,000 non-renounceable rights issue, both at A$0.004per share.
Recovering oil price environment
Innamincka Dome provides Red Sky with an opportunity to quickly restart the proven Flax field in an environment of recovering oil prices.
Historically, the field has produced over 200 barrels of oil per day, and approximately 180,000 barrels of 54 API oil to-date.
The company will also evaluate the unexploited Yarrow and Juniper fields, as well as the project’s remaining highly-prospective tenements (PRL180 and PRL181).
Red Sky’s newly-appointed chief executive officer Andrew Knox said the Innamincka Dome assets are a neat fit with the company’s strategy of acquiring near-term producers with proven prospectivity.
He said the company will focus on resuming oil and gas production at Flax using existing infrastructure as soon as the acquisition is finalised.
By the end of trade, shares in Red Sky had spiked 66.67% to A$0.005.
Beach Energy’s share price was up 0.52% to A$1.92.