from the horses mouth

Hi all,

Sent the "company" an email (info@redsky) approx. 11 days
ago asking specific questions surrounding the current term
sheet with ERM Gas. Zero reply after 10 days was just not
good enough. Took up HS's kind offer, upped the anti, and
flick'd Mr RG a personal note questioning the lack of
response. Was enough to make him put down his Saturday
morning cuppa and reply... Yes, Saturday!

Main focus of my email questioned how the current deal
added 'shareholder value'. Also asked whether the Talma
pilot would be included via ERM's two wells in PEL 457.

Given the sentiment surrounding the deal here on HC, I
felt a responsibility to pass on RG's reply:
------------------------------------------------------

"Thank you for your email.

Given the state of the financial markets, it has become
very difficult for ASX microcap companies to raise
capital. It has been this way for 18 months. You may
recall we announced initial reserves certification in Nov
2011 when our share price was 2.4cps and by the time we
announced a significant upgrade in reserves in March 2011
our share price had fallen to 0.8cps.

Without access to capital, we would not have been able to
continue with our exploration activities.

The regulatory environment for coal seam gas has worsened
considerably over the last 18 months, with significant new
requirements that add time and cost to our activities.
This, as well as the film Gaslands and community concerns,
has also contributed to the poor market sentiment for coal
seam gas.

We have also been held back by the performance of
Metgasco, who also holds a significant position in the
Clarence Moreton Basin.

The ERM deal was the best deal we could have done in the
current market conditions.

The ERM transaction adds significant value to Red Sky;

? Cash position: The decline in turnover generally
in the ASX microcap sector and specifically with Red Sky
significantly adversely affected the Company’s ability to
use the YA Global equity facility. The placement and
milestone cash payments from ERM are expected to obviate
the need for further near term capital raising.
? New major shareholder: With the placement, ERM
will take an approximately 9.5% shareholding in Red Sky.
This is a vote of confidence in the Company and
Management, and ERM is expected to continue to support Red
Sky’s business going forward.
? Buy-out option: ERM has the option to buy out Red
Sky’s residual interest in permits PEL 457 and 479 for
$5million each at any time over the next 38 months. This
represents 0.63cps of the 1.58billion ROG shares
outstanding after the ERM placement.
? Retained scope for further value-add: The
transaction only applies to the Clarence Moreton acreage.
Red Sky still retains its interest in the highly
prospective permits in Queensland; ATP 840 in the Surat
Basin and ATP 946 in the Eromanga Basin.


regards
Rohan Gillespie
Managing Director
Red Sky Energy Limited
Phone 61 (0) 438 722 443

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Note the lack of content regarding Talma, "no comment"
seems the reply. Guess if the company is prepared to hand
over the PEL, it has no further interest....

Also, seems they were counting on riding on the back of
MEL and blames their performance for ROG's. Sure that one
will flare nostrils.

Anyways, over to you to dissect and ponder.

Gaspew ;)