Red Sky Energy Limited (ASX:ROG) is an Australian oil and gas company with a 20% working interest in Petroleum Retention Licence 17 (PRL 17) at the Innamincka area in South Australia, operated by Santos (ASX:STO). The company is advancing the Yarrow development program — a three-well gas development project within PRL 17 — in Partnership with Santos. Red Sky's performance is shaped by the progress of the Yarrow drilling program, gas pay results from individual wells, and the timeline for stimulation, completion, and connection of the development wells to Supply gas.

What the Company Does

Red Sky Energy holds a 20% working interest in PRL 17, with Santos holding the majority interest and acting as operator. The Yarrow development program is a three-well gas development effort targeting two primary formations: the Patchawarra Formation and the Tirrawarra Sandstone, both established gas-bearing geological intervals in the Cooper Basin region.

Development wells in the Yarrow program are drilled from dual-well pads, allowing two wells to be drilled from a single surface location to reduce environmental footprint and drilling costs. Once drilled and assessed, wells are expected to require hydraulic fracture stimulation (fraccing) to achieve commercial gas flow rates from the low permeability reservoirs.

The first well in the Yarrow program — Yarrow 4 — was drilled and cased and suspended ahead of the Yarrow 5 program. Red Sky executed a binding Authority for Expenditure (AFE) with Santos in April 2026 for the three-well Yarrow development program.

Financial and Operational Performance

According to Red Sky Energy's ASX announcement dated 15 September 2026, the Yarrow 5 development well in PRL 17 reached a total depth of 2,802 metres measured depth (mMD) on 13 September 2026 — ahead of the previously advised schedule. Spudding occurred on 8 September 2026 from the same dual-well pad as Yarrow 4.

Preliminary petrophysical interpretation of logging while drilling data by the operator indicates gas pay in both primary targets. The Patchawarra Formation contains 6.4 metres of low deliverability gas (LDG) pay, including 3.7 metres within the VC90 sand at good reservoir quality. The Tirrawarra Sandstone contains 2.0 metres of LDG pay.

Downhole pressure survey results indicate reservoir pressures of approximately 3,849 psi in the Patchawarra Formation and 3,618 psi in the Tirrawarra Sandstone. Santos has recommended that Yarrow 5 be cased and suspended for future hydraulic stimulation, completion, and connection as a future gas producer — the same outcome as Yarrow 4. The rig is scheduled to drill the third well in the program, Willowie 2, in late October 2026.

Key Factors Shaping the Business

The Yarrow development program is delivering results consistent with the operator's plan, with both Yarrow 4 and Yarrow 5 now cased and suspended as future gas producers. Two future producers on a single pad represents capital-efficient development of the gas resource, as both wells can be stimulated and connected in a coordinated fashion.

Fracture stimulation is the next critical step for the Yarrow wells. Low deliverability gas (LDG) pay designations indicate that the wells will require Hydraulic Fracturing to achieve commercial gas flow rates. The success and effectiveness of stimulation will ultimately determine the commercial productivity of the wells.

Willowie 2 — the third and final well of the Yarrow program, scheduled for October 2026 — will provide additional data on the broader gas resource within PRL 17. The results from all three wells, combined with fracture stimulation outcomes, will determine the scale of gas production achievable from the Yarrow program.

Risks and What to Watch

Low deliverability gas pay at both Yarrow wells means commercial production is contingent on successful fracture stimulation. Hydraulic fracturing programs in tight gas formations can vary significantly in their outcomes, and the deliverability of the wells post-stimulation will be the critical determinant of their commercial value.

Timeline risk exists for the stimulation, completion, and connection phase. Following the completion of drilling, the wells must be stimulated and connected to sales infrastructure before generating revenue. The timing of this phase will depend on the operator's scheduling, available stimulation equipment, and connection infrastructure.

As a 20% working interest holder, Red Sky's financial contribution to the development program is proportional to its interest. The total cost of the three-well program and subsequent stimulation and connection activities represents Capital expenditure for Red Sky. Cash position and access to capital will be relevant if additional expenditure beyond current budgets is required.

Key Takeaways

Red Sky Energy's Yarrow 5 well intersected gas pay in both the Patchawarra Formation (6.4 metres LDG pay) and Tirrawarra Sandstone (2.0 metres LDG pay) and will be cased and suspended as a future gas producer following Santos' recommendation. Together with Yarrow 4, two future producers have now been drilled from the same pad, ahead of fracture stimulation and connection. The third well of the Yarrow program — Willowie 2 — is scheduled for October 2026. Successful stimulation of Yarrow 4 and Yarrow 5 and Willowie 2 results are the key near-term milestones to watch.