Sick-looking sheep (3) are sick sheep found near the Moss giants, south-east of Baxtorian Falls that must be prodded with the cattleprod to the sheep pen and fed the poisoned sheep feed during the Sheep Herder quest. Its wool is slightly bluish. Once killed, it drops the sheep bones (3).
After Mourning's Ends Part I, the sheep are of a darker blue as a result of the player dying them with a Fixed device loaded with a Blue toad. Once dyed, they can no longer be prodded or interacted with in any way. Luckily, players only need to dye one and all the sheep of the same colour turn dark. This is how players can tell they haven't missed the sheep during the quest.