Lakes Blue Energy NL (ASX:LKO) is a junior energy explorer, listed on the ASX since December 1985 with assets across southern and eastern Australia (and PNG). As part of its return-to-trading conditions the company has recently completed the drilling of the Wellesley-2 prospect, which was unfortunately plugged and abandoned as an unsuccessful well. The focus of activity will move to the company’s Victorian opportunities, most critically the drilling of the Wombat Gas Project (Wombat-5) and Otway-1 conventional wells. The success cases have the capacity to materially change the structure and value base of the company on short development lead times and low capital costs. Wombat-5, in particular, could be considered as relatively low-risk…this is a proof-of-concept well, finding gas will not be an issue. We continue to see a role for gas in the energy transition and highlight the supportive gas price environment. Crystallising the inherent value is dependent on successful drilling outcomes and the company’s capacity to continue to secure financing, but certainly the opportunity set looks attractive with a number of potential event drivers through 2022.
