Explorer shepherds development

CSG explorer Red Sky Energy can begin development of its Clarence Moreton Basin project in northeastern NSW following the signing of a farm-in agreement with ERM Gas, a subsidiary of ERM Power. In addition to making payments of up to $2.7 million to Red Sky when certain milestones have been achieved, ERM Gas will fund up to nine wells across three “highly-prospective” Walloon coals permits in the Clarence Moreton Basin, according to a statement by Red Sky.
The project comprises PELs 457, 478 and 479 and PELA 135, onshore northeastern NSW.
ERM Power managing director and chief executive Philip St Baker said the contracts would be part of the company’s diversified gas investment strategy. “They provide ERM Power with direct exposure to existing gas reserves and a potential shallow conventional gas play, and the opportunity to consider local generation development,” he said.
According to Red Sky, the transaction would benefit the company, as “the placement and milestone cash payments from ERM are expected to obviate the need for further near-term capital raising”.
Red Sky previously had a farm-in agreement with Clarence Moreton Resources (CMR), which was terminated and replaced by a tripartite agreement with ERM Gas and CMR.
At present, the new partner has an 80 per cent interest in PEL 478, plus a 60 per cent interest in PELs 457 and 479.
During the next 38 months, ERM Gas has an option to purchase Red Sky’s 20 per cent interest in PELs 457 and 479 for $5 million each.
In a statement, Red Sky said ERM’s 9.5 percent shareholding was a reflection of its “particular interest” in Red Sky’s shallow conventional gas discovery.
Meanwhile, MHM Petroleum Consultants certified 2P reserves of 17 petajoules, 3P reserves of 380PJ and 2C resources of 629PJ for PELs 457 and 479.
Red Sky is an Australian gas exploration and development company with major project interests in the Walloon coals in the Clarence Moreton Basin.

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