Fund Manager Summary
The fund managers believe that Lakes Blue Energy NL presents a significant investment opportunity due to its strategic focus on the Wombat Gas Field in Victoria's Gippsland Basin. In their opinion, the commencement of drilling at Wombat-5 marks a pivotal moment, especially with rising gas prices and looming gas shortfalls in Victoria. The field's potential to produce up to 20 petajoules per year enhances its commercial viability, particularly given the current market conditions. The secured $6.5 million funding will facilitate essential activities through mid-2026, while a successful outcome at Wombat-5 could position Lakes as a key supplier for 10% of Victoria's gas needs over the next two decades. However, they acknowledge the inherent risks, emphasizing that a commercial result is crucial for a substantial stock re-rating.
Source: Trading View
Commentary From The Managers
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SG Hiscock & Company
31 July 2025
$1.18
Summary
- SG Hiscock & Company has initiated a position in Lakes Blue Energy (ASX: LKO), focusing on its Wombat Gas Field in Victoria’s Gippsland Basin.
- The company has overcome over a decade of political and regulatory delays and has commenced drilling Wombat-5, a low-risk appraisal well.
- Rising gas prices and projected Victorian gas shortfalls from 2026 enhance the strategic importance of the Wombat field.
- Wombat Gas is high-quality and impurity-free, requiring minimal processing, with the potential to produce up to 20 petajoules (PJ) annually.
- At current market prices, the independently certified contingent resource could represent a value exceeding $3 billion.
- Funding for drilling and testing has been secured through a $6.5 million placement, supported by major shareholders.
- A long-term gas price assumption suggests significant upside potential from current levels, even at lower production rates.
- The upcoming gas flow test is a critical near-term catalyst for the company’s valuation.
- Lakes Blue Energy operates with a lean cost base, maintaining minimal expenses during the Victorian government moratorium.
- Beyond Wombat, the company possesses additional assets, although these are secondary to the immediate focus on the gas field.
- A successful Wombat-5 result could position Lakes as a near-term producer, significantly impacting stock valuation.
- Conversely, failure would necessitate a strategic rethink, yet the company would retain value in its other projects.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
SG Hiscock & Company
31 July 2025
$1.18
- SG Hiscock & Company has initiated a position in Lakes Blue Energy (ASX: LKO), focusing on its Wombat Gas Field in Victoria’s Gippsland Basin.
- The company has overcome over a decade of political and regulatory delays and has commenced drilling Wombat-5, a low-risk appraisal well.
- Rising gas prices and projected Victorian gas shortfalls from 2026 enhance the strategic importance of the Wombat field.
- Wombat Gas is high-quality and impurity-free, requiring minimal processing, with the potential to produce up to 20 petajoules (PJ) annually.
- At current market prices, the independently certified contingent resource could represent a value exceeding $3 billion.
- Funding for drilling and testing has been secured through a $6.5 million placement, supported by major shareholders.
- A long-term gas price assumption suggests significant upside potential from current levels, even at lower production rates.
- The upcoming gas flow test is a critical near-term catalyst for the company’s valuation.
- Lakes Blue Energy operates with a lean cost base, maintaining minimal expenses during the Victorian government moratorium.
- Beyond Wombat, the company possesses additional assets, although these are secondary to the immediate focus on the gas field.
- A successful Wombat-5 result could position Lakes as a near-term producer, significantly impacting stock valuation.
- Conversely, failure would necessitate a strategic rethink, yet the company would retain value in its other projects.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"With Wombat-5 drilling underway, Lakes Blue Energy appears poised to capitalize on a tightening gas market. Success could redefine its trajectory, potentially supplying 10% of Victoria's gas needs. Yet, as always, the stakes are high—transformative upside or a call for strategic reassessment are both on the table."
Last Updated: 31 Jul 2025
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Frequently Asked Questions
Who is investing in Lakes Blue Energy NL (ASX:LKO)?
Fund managers including SG Hiscock & Company have invested in Lakes Blue Energy NL (ASX:LKO).
Why do fund managers invest in Lakes Blue Energy NL?
Fund managers are investing in Lakes Blue Energy NL due to its strategic focus on the Wombat Gas Field, which is poised for development amid rising gas prices and looming supply shortfalls in Victoria. The company has secured funding for drilling and testing, with the potential to produce significant gas volumes at competitive costs. The project is backed by independent resource certifications and proximity to existing infrastructure, making it a low-risk investment. Successful outcomes from the upcoming drilling could position Lakes as a key gas supplier in a tight market, offering substantial upside for investors.
What happened to Lakes Blue Energy NL (ASX:LKO)?
Fund managers are investing in Lakes Blue Energy NL due to its strategic focus on the Wombat Gas Field in Victoria's Gippsland Basin, which is poised for low-risk appraisal drilling. With rising gas prices and a looming supply shortfall in Victoria, the field's potential to produce significant gas volumes at competitive rates is attractive. The company has secured funding for drilling and has a lean operational cost structure, enhancing its viability. A successful outcome from the Wombat-5 well could position Lakes as a key gas supplier in the region, offering substantial upside for investors.