This follows a disappointing campaign by the company in the Cooper Basin to date, where two exploration wells identified by its patented airborne geochemical survey technology failed to produce commercial results.

Red Sky had also previously flown 2147km of geochemical surveys over Empire’s EP 44 permit, in the onshore Carnarvon Basin, and had the right to drill one well at its own cost, to earn a 50% stake in the permit.

“An interpretation of all the available seismic and well data in the [EP444] permit carried out in the June 2007 quarter – 50 percent paid for by Red Sky – was recently re-evaluated and did locate some drillable prospects,” the company said.

But the company told the market yesterday it had decided not to exercise its farm-in option, as it wanted to focus on the Cooper-Eromanga and Darling basins.