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Red Sky Energy (ASX:ROG) was ready to pop the champagne after being awarded 35% interest in a “transformative” Angola opportunity, offshore Block 6/24 in the Kwanza Basin, but investors were a little less convinced by the partnership.
The deal will see Red Sky work with Group Sonangol, which carries 50% of the interest, and Acrep, which holds the other 15%, in the 4,930kmsq block moving forward.
Red Sky was particularly interested because early assessments suggested there’s “a potential commercial discovery” still waiting to be found in the already partially worked Angola offshore block. Several oil discoveries, including the Cegonha hit from 1983, have already been made in the basin in the last 109 years.
“This strategic move positions Red Sky for sustained growth and stability by balancing our investment portfolio across different geographical regions and resource types,” Red Sky managing director Andrew Knox explained.
(Red Sky already carries two ongoing projects in South Australia, Innamincka and Killanoola, where the company has found gas and oil respectively.)
“The signing of the RSC Block 6/24 is a transformational milestone,” Mr Knox continued.
“Block 6/24 contains a potential commercial oil discovery that the joint venture partners plan to evaluate for early production and cash flow,” he added. “The block also has substantial resource potential based on the existing 2D and 3D seismic data.”
All in all, Red Sky is obviously very pleased with the Angola entry – it had been working toward something akin to this award for “the past few years.”
There’s a big problem though: Red Sky likes the deal, but investors aren’t as happy.
The Australian oil and gas explorer shaved more than 18.8% in market value through Friday’s morning trade after the Block 6/24 Angola contract was announced.
Considering Red Sky’s $51.5M market cap – and relatively cheap one-cent share price – moves like this are never overly surprising, but management may still be a little stunned that the company lost so much ground.
Red Sky is still up more than 80% YTD, though today’s red dive has hurt any long-term profits in the explorer. It’s also already lost 25% in value in the last month.
Lost share prices or not, Red Sky will move on to the next stage in its Angola expansion plan from today. Next up on the docket is approval from the Angola Parliament, which the company expects to see by March.
At 1pm Sydney time on Friday, ROG was selling at 0.9cps.
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