Highlights

• Lakes Blue Energy shares rose 6.25% to AUD 0.51 during the morning session on 2 July 2026.

• The company outlined preliminary commercial modelling for the Wombat Gas Project in Victoria.

• Lakes said the project could support a post-tax NPV10 of about A$605 million and a post-tax IRR of around 58%.

• First gas is targeted for Q1 2029 under the company’s reference case assumptions.

• The company cautioned that the study remains conceptual and depends on approvals, funding, development execution and reservoir performance.

Lakes Blue Energy NL (ASX:LKO) shares moved higher during the morning session on 2 July 2026 after the company released a commercial update on its Wombat Gas Project in Victoria. The stock rose 6.25% to AUD 0.51, adding AUD 0.030 for the session. Despite the day’s gain, the stock remains down 34.62% over the past year, reflecting the longer-term pressure still visible in its share price performance.

The update can be viewed as favourable in terms of project positioning because Lakes outlined potential economic outcomes for the Wombat Gas Project, including a post-tax NPV10 of approximately A$605 million and a post-tax internal rate of return of around 58% under its reference case. However, the company also made clear that the study remains conceptual, that no final investment decision has been made, and that the project is still subject to material regulatory, funding, technical, market and development risks.

Lakes Blue Energy is an Australian energy company focused on gas assets, with the Wombat Gas Project forming a key part of its development plans. The latest update places the project within the context of Victoria’s future energy supply needs, regional development priorities and possible firm energy demand from artificial intelligence and data infrastructure.

Wombat Gas Project Linked to Victoria’s Future Energy Needs

The latest announcement focused on Lakes’ engagement with several Victorian Government departments regarding the potential role of the Wombat Gas Project in supporting the state’s future energy requirements.

The discussions have centred on several themes, including domestic gas supply security, firm energy needs linked to artificial intelligence and data centre developments, regional development in Gippsland, Victoria’s renewable energy transition objectives and future industrial, digital and energy infrastructure requirements.

As part of this engagement, Lakes prepared two briefing papers. One paper considered potential Victorian gas supply shortfalls and how future production from Wombat may contribute to domestic gas availability. The second paper was prepared at the request of Development Victoria and examined whether the Wombat Project could support future AI-linked infrastructure opportunities, including possible integrated energy and data infrastructure projects in Gippsland.

While the discussions appear to have highlighted a potential market opportunity for Wombat gas, Lakes stressed that the discussions remain preliminary. The company stated that they do not represent any agreement, commitment, endorsement, funding arrangement or development approval from the Victorian Government, Development Victoria or any other government agency.

Conceptual Study Points to Potential Project Value

A key reason for investor attention was the company’s internal conceptual development study for the Wombat Project. Based on reference case assumptions, Lakes modelled a post-tax NPV10 of approximately A$605 million and a post-tax IRR of around 58%.

The same reference case also indicated a payback period of approximately 1.4 years from first gas. Peak annual revenue was modelled at about A$265 million in 2040, based on a 3% escalation assumption.

The study assumes first gas in Q1 2029 and a production life of around 17 years. Total production is modelled at approximately 250 PJ, equivalent to 240 Bcf of the current 329 Bcf 2C Contingent Resource at the Wombat Field.

Peak production is assumed at up to 55 TJ per day. The development scenario includes eight initial development wells targeted between 2027 and 2029, followed by 12 infill wells targeted between 2029 and 2036 after first gas.

The reference case assumes initial development capital of approximately A$169 million. Infill well capital is estimated at A$84 million, while abandonment capital is estimated at approximately A$38 million. Both infill and abandonment costs are expected to be funded from future revenue under the company’s model.

Gas Supply Context Supports Project Relevance

Lakes connected the Wombat Project to Victoria’s broader energy outlook, referring to forecasts from the Australian Energy Market Operator that indicate declining Victorian domestic gas production and increasing reliance on imported gas supplies over the coming decade.

Against that backdrop, the company believes that commercial production from Wombat, if ultimately achieved, could contribute to future domestic gas supply requirements.

The company also noted the possible role of local gas supply in supporting firm energy generation linked to future data centre and AI-related infrastructure projects. Lakes said it is discussing with the Victorian Government how the Wombat Gas Field may support that firm generation requirement.

This link between gas supply, energy security and digital infrastructure appears to be a key element of the company’s commercial positioning for Wombat.

Key Assumptions Behind the Development Case

The conceptual study is based on several important assumptions. One major assumption is the successful remediation of Wombat-5. The reference case assumes the planned Wombat-5 workover and remediation program is completed successfully and restores the well to a condition suitable for flow testing and production.

The study also assumes future development wells perform in line with type-curve and rate assumptions drawn from previous independent production studies. Reservoir pressure and permeability are assumed to be consistent with existing well, log and test data.

Another important assumption is that the eight initial wells and 12 infill wells are drilled successfully and encounter reservoir conditions consistent with the geological model. Lakes plans to conduct a 3D seismic survey over the full Wombat structure before development drilling.

The model also assumes timely access to pipeline infrastructure required to deliver gas to market. Lakes considers this assumption reasonable due to the project’s proximity to existing infrastructure and initial discussions with pipeline operators.

Other assumptions include availability of drilling rigs, contractors, equipment and services at the timing and cost levels used in the model, along with no material adverse changes in economic, commodity market, fiscal or regulatory conditions over the development and production period.

Reference Case Built Around A$12/GJ Gas Price

The company’s reference case uses a gas price of A$12/GJ and a discount rate of 10%. It also assumes plant availability of 96%, royalties of approximately 22%, including government and Lakes Royalty Trust royalties, and a corporate tax rate of 30%.

Lakes holds a 100% working interest in PRL 2 under the reference case. The study is based on the current 329 Bcf 2C Contingent Resource at the Wombat Field and assumes recovery of approximately 240 Bcf.

However, Lakes made clear that the project’s economics are particularly sensitive to future gas production rates. The assumed peak production rate of up to 55 TJ/day is based on historical production studies, and actual production may differ materially from the conceptual model.

Lower production rates would be expected to reduce revenue, net present value, internal rate of return, annual cash flows and payback outcomes. They may also affect development timing and future capital requirements.

Risks Remain Central to the Investment Case

Although the commercial update contains favourable modelling outcomes, Lakes provided extensive caution around the conceptual nature of the study.

The company said it will need multiple regulatory consents, approvals and renewals before first gas can be achieved. If these are not secured, or if they are granted on terms not contemplated in the study, the project’s development pathway and economics may be affected.

Funding is another important risk. Lakes said it will need to raise funds for the project, with initial development capital estimated at A$169 million in the conceptual model. There is no certainty that sufficient funding will be secured through debt, equity or other sources. Additional equity funding may also dilute existing shareholders.

Development and execution risks are also material. The project requires drilling, processing facilities, commissioning and integration with existing infrastructure. Cost overruns, schedule delays, technical issues, contractor availability and failure to achieve design throughput could all affect the reference case.

Reservoir performance is another key uncertainty. The model depends on assumptions around deliverability, pressure, porosity, permeability and recovery. If actual flow rates, decline rates, water production or recoverable volumes differ from the model, project value could be lower than forecast.

Contingent Resources Not Yet Reserves

Lakes also highlighted that it has not yet established Petroleum Reserves for the Wombat Project. The production targets and forecast financial information in the announcement are based on Contingent Resources, not Reserves.

The company stated that there is no certainty further appraisal work, well remediation, testing or development activity will convert Contingent Resources into Reserves. There is also no certainty that the development scenarios considered in the conceptual study will be realised.

Lakes said it believes it has reasonable grounds for the production targets and forecast financial information, citing the existing certified 2C Contingent Resources, previous independent production studies, historical well and reservoir data, Wombat-5 drilling and testing results, current remediation planning, internal conceptual development studies and management’s assessment of the project’s technical and commercial potential.

At the same time, the company cautioned that the targets remain subject to technical, commercial, regulatory and funding risks.

What This Means for Investors?

The Wombat Gas Project update appears to have supported the rise in Lakes Blue Energy’s share price because it provided a clearer view of the potential commercial scale of the asset. The headline figures, including an estimated A$605 million post-tax NPV10, 58% post-tax IRR and targeted Q1 2029 first gas, give investors a framework to assess the project’s possible value. However, the company’s own caution is important. The study remains conceptual, the project is based on Contingent Resources rather than Reserves, sustained commercial production has not yet been demonstrated, and development depends on approvals, funding, infrastructure access and reservoir performance.

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