Lakes Oil's Wombat-5 gas well faces a September perforation test, with funding still short of target

Lakes Oil NL (ASX: LKO), which trades as Lakes Blue Energy, has scheduled a propellant-enhanced perforation program at its Wombat-5 well in Victoria's Gippsland Basin. Perforation, stimulation and flow testing are due to start in September 2026, subject to regulatory approval.

Why it matters

Wombat is the company's main asset. Lakes holds 100% of the licence (PRL 2), and the field carries contingent gas resources of 258 to 628 billion cubic feet (bcf), with a best estimate of 329 bcf. Contingent means the gas has been found but is not yet shown to be commercially recoverable. The well is the company's route to proving that it is.

Production testing began in January 2026, and gas flowed from all three principal sand packages. The well is now suspended with a bridge plug at 1,100 m. The next step is to perforate about 156 m of the well using inhibited fluid. If the program succeeds, it could give Lakes the flow data it needs to make the case for development.

What has slipped

• Wombat-5 perforation and testing were previously expected sooner and have moved to September 2026.
• The Portland Energy Project in the Otway Basin, where Lakes holds 100%, was targeted for up to two proof-of-concept wells in the second half of 2026. Drilling has since moved to the first half of 2027, subject to approvals.

Portland's prospective gas has a best estimate of 11,469 bcf but only a 15% chance of success, so it is a high-risk target.

Funding and governance

Lakes is raising about $8.7 million at $0.30 per share, with a free $0.36 option attached to each new share. The raising combines a $4.0 million placement with a $4.7 million entitlement offer. The price is well below the $1.15 placement of 2025.

The entitlement offer closed having raised $1.9 million of the $4.69 million offered, and underwriters cover a further $0.8 million. About $2.0 million of the shortfall is unplaced. The placement has raised $3.3 million, and a further $0.7 million needs shareholder approval on 23 September. On those figures the total would reach roughly $6.7 million, short of the target.

Chairman Roland Sleeman retired on 30 June. Director Boyd White has resigned and Hugh Robertson has joined the board.

Longer-term, unconfirmed

Lakes is in preliminary talks with Victorian Government departments about Wombat supplying gas. Its own conceptual study models an NPV10 of about A$605 million, a 58% internal rate of return, first gas in the first quarter of 2029 and about A$169 million of initial capital. No government commitment or funding exists.