Shareholders will meet at the Intercontinental Hotel in Melbourne on September 9 to consider Armour's resolutions to ditch Annells and non-executive director Barney Berold - but there is a twist.

Armour wants former Eastern Star Gas and AGL Energy executive and its own independent director Roland Sleeman to join the incumbent Hancock directors, Professor Ian Plimer and Kyle Wightman, taking on the role of chief executive officer.

But Hancock has plans of its own, and wants Andrew Davis and Chris Tonkin to be added to the board of the Victorian-focused oiler.

Armour-nominated directors Nick Mather and Bill Stubbs have dug their heels in and want Hancock's attempt to expand its influence on the board stopped.

Annells has served on the Lakes board since 1984, while Berold has been in the harness since 2007.

Annells says he has guided Lakes through many challenges in pursuit of a commercial discovery of oil and gas, to the point where he considers it is on the cusp commerciality in both the east and west of Victoria.

He says the company's woes are all down to the Victorian government's paralysing ban on onshore oil field operations, which have already cost Lakes a $50 million joint venture with Beach Energy over the Wombat tight oil and gas field and have stopped it drilling two proof of concept wells in the Portland energy project aimed at proving the overlooked Eumeralla Formation will flow at commercial rates.

"At this time I believe the company needs my steady strategic direction to guide it through the current governmental inquiry and requires continual communication with government departments, the media and the public," he said.

And he reminded shareholders that he has successfully negotiated two letters of intent for gas contracts with Dow Chemicals and Simplot Foods for gas sales.

Mather and Stubbs say it is time for a change, and they want to stop the erosion of shareholder value and turn around a culture of poor corporate governance.

"Lakes' stagnant share price and the lack of any concrete progress in the progress of any of its tenements is, in Armour's opinion, largely as the result of poor leadership from the Lakes Board, and in particular that of its executive chairman Mr Annells, and non-executive director Mr Berold," Armour wrote.

They claim there has been a lack of transparency and timely disclosure of potentially market sensitive information, including a number of independent reports related to the Portland project permits (PEP 175 and PEP 167) that are apparently in possession of Lakes, but which despite a request by Armour to do so, have not been made public

Armour claims Lakes' cash burn is unsustainable and will leave the company penniless in less than two years, so it wants to downsize the office, trim staff and bring in new partners.

Armour also claims continual criticism by Annells of the drilling ban is ineffective, and its two Queensland leases, on the northwest flank of the Cooper Basin, are highly speculative.

"Armour continues to believe in the potential of the Victorian permits in the Otway and Gippsland Basins respectively. Accordingly, pursuing these expensive and speculative tenures in Queensland is not in our view in Lakes shareholders best interests," Armour said.

They also criticised a systemic, protracted and unhealthy pattern of capital management which sees money raised to cover overheads, and which has led to Lakes issued share capital has grown to a current fully-diluted level of over 13 billion shares, if the current notes on issue are converted.

Removing Annells and Berold will "allow corrective actions to be implemented at Lakes to re-align the company with shareholder interests and stop the ongoing cycle of capital dilution and the erosion of shareholder wealth", Armour said.

Armour has invested $12 million so far, including $4.7 million in share placements and $7 million in drilling two joint venture wells.

Annells rejects Armour's claims, says the company has meet all of its legally required disclosure obligations and says Sleeman being appointed as Lakes CEO would be contrary to good corporate governance principles.

Berold wrote that Annells is a "tireless servant" of Lakes, who continually challenges conventional thinking, and who has led Lakes to become among the first movers and early adopters of horizontal drilling, nitrogen drilling, well-stimulation, and other technologies.

He said it would be detrimental to Lakes to lose both Annell's services and his contacts in the US oil patch.

Mather says his experience with Bow Energy and Arrow Energy, and his 30 years' experience as a geologist, has led him to become "exasperated" by the conduct of Lakes

Plimer, who represents Hancock's interests, said Annells has surrounded himself by an extremely competent technical team and, as a result, has created new opportunities in the Gippsland Basin in parts of the sequence that have been traditionally regarded as barren

"They are not, as the Wombat wells have shown. These Gippsland areas contain an old land surface wherein the rocks are naturally fractured, these fractures hold gas as do the sandstone pores and this gas derives from deeper in the sequence. This is a new concept," he wrote.

He also praised Annells for identifying the Portland project in the onshore Otway Basin.

Annells is Lakes' third largest shareholder, having purchased all of his shares on market, Plimer said.

"In my opinion this action by Armour Energy to seek the removal of two directors and the appointment of a third director of its own can be considered as an attempt to control Lakes Oil without paying a control premium," Plimer said.

He and Wightman are concerned about the control Armour would exert with three of five board positions, however he is not concerned if Hancock appointees make up the majority of the board.

Hancock's nominees include Davis, a barrister and former chairman of Gosford Quarries and small US oiler Territorial Resources, with experience with CSG in NSW.

Tonkin is a financier who is an executive director of Catalyst Capital Solutions and Capital Advisory Services.

Mather and Stubbs said both men's ties to Hancock make them inappropriate, expanding its control of the board to four of six directors, however Plimer said they were independent of Hancock.

Plimer said they were being nominated due to concerns that the Lakes board may become dominated by a majority of nominees from a shareholder and JV partner.