Longreach Oil is moving into milk formula, after doing a deal to buy Kiwi dairy group Happy Valley Milk.

The former Queensland oil and gas explorer has been suspended from the bourse since last May but is hopeful a pivot to diary will lead to its reinstatement.

Happy Valley Milk has no facility as yet, but has the land use permits to establish and operate a milk processing, blending and packaging plant near Hamilton in the country’s North Island.

It says the location is in one of New Zealand’s largest catchment areas for A2, organic and pasture fed milk herds.

As part of the agreement, Happy Valley will raise $2.5 million to fund its development in the time leading up to re-admission on the ASX, at which point Longreach Oil (ASX:LGO) will raise a further $3 million.

The proposed site of Happy Valley Milk's plant.
The proposed site of Happy Valley Milk’s plant.

Longreach Oil was suspended back in May last year for having an insufficient level of operations at its Surat Basin petroleum lease in Queensland.

Initially, it had planned to invest in a US telco, but has opted instead to jump on the milk formula bandwagon.

They aren’t the first energy provider to do so.

JAT Energy (ASX:JAT) skyrocketed in December when it sent its first shipment of milk powder to China in an exit from coal.

If all goes to plan, Happy Valley’s $230 million plant will be built in 12 months starting from March 2019, and commissioning starts three months after that.

It says it will be a pharmaceutical grade integrated plant, including an 8 tonne per hour milk dryer.

It is forecasting re-admission for October this year.