Gas Supply Crunch Looms: Lakes Blue Energy’s $6.5M Raise Faces Development and Regulatory Risks

Strategic Capital Raise Amid East Coast Gas Crunch

Lakes Blue Energy NL (ASX, LKO) has announced a fully underwritten $6.5 million equity placement to fund the drilling of the Wombat-5 gas well, a critical step in its strategy to capitalise on forecast gas supply shortfalls in Australia's east coast domestic market starting as early as 2026. The placement, priced at a 25% discount to the last traded share price before the company's trading suspension, will issue approximately 8.7 million new shares to professional and sophisticated investors.

The Gippsland Basin, where Lakes holds 100% ownership of the Wombat and Trifon-Gangell gas fields, is a region facing declining offshore gas production and increasing reliance on costly LNG imports. Lakes’ onshore Wombat Gas Field offers a timely, cost-effective solution with its proximity to existing pipeline infrastructure and high-quality, low-emission gas reserves.

Wombat-5 Well, A Near-Term Production Opportunity

The Wombat-5 well targets the upper, more permeable section of the Strzelecki Formation, with an independently verified initial gas flow potential of approximately 10 terajoules per day. Drilling is scheduled for the third quarter of 2025, with regulatory approvals expected imminently following the lifting of Victoria’s onshore gas exploration ban. The well is located on company-owned land, reducing stakeholder complexities and expediting project timelines.

Funds raised from the placement will fully fund the drilling and testing program, positioning Lakes to move swiftly towards commercialisation and cash flow generation. The company also benefits from a 6% royalty on net wellhead revenue from a recent sale of its interest in Petroleum Exploration Permit 169, further supporting its development activities.

Broader Portfolio and Market Context

Beyond Gippsland, Lakes is advancing its Nangwarry CO2 project in South Australia, targeting commercial gas sales by fiscal 2027, and exploring opportunities in Queensland and Papua New Guinea. The company’s diversified portfolio aligns with growing recognition that gas will remain essential to stabilising Australia’s renewables-dependent electricity grid.

Market observers highlight acute gas supply shortages and rising prices on the east coast, with offshore Victorian fields in decline and infrastructure bottlenecks limiting LNG imports from Queensland. Lakes’ onshore assets, with minimal processing requirements and strategic location, could play a pivotal role in bridging the supply gap.

Risks and Outlook

While the capital raise and drilling plans mark significant progress, investors should remain mindful of inherent risks including the need for further funding, development uncertainties, regulatory approvals, and volatile market conditions. The company’s shares have been suspended since October 2023, with reinstatement anticipated following completion of the placement and ministerial consent for drilling.

Lakes’ management team, with extensive experience in oil and gas and ESG sectors, is steering the company through this critical phase. The coming months will be pivotal as drilling results and market dynamics unfold.