In a statement, AJ Lucas said the partners had spent the last quarter progressing the expanded Phase 2 Gloucester Basin appraisal program, comprising the Stratford production pilot and the Gloucester Basin exploration drilling program.

The five-well Stratford production pilot and the current exploration drilling program – comprising four part-cored and nine stratigraphic chip holes – were designed to establish reserves across the Gloucester Basin and to ascertain production capabilities prior to a development decision.

Dewatering operations are well underway at the LMG03 production test well, which was re-completed with a new progressive cavity pump, AJ Lucas said.

"In previous tests the unstabilised gas flow rates of 666,900 cubic feet per day from this well demonstrated the production potential of the Stratford pilot area," the company said.

By early September, drilling had begun on the first of four new production test wells on the Stratford pilot.

Two additional wells, Stratford 4 and Stratford 8, will be drilled before the start of a fracture stimulation program in November.

Pilot production will be gathered at a central location for early production, depending on whether the results match the "encouraging performance" of the earlier pilot production in LMG03, AJ Lucas said.

The partners expect to place the new pilot production wells on production test during November and December this year.

The PEL 285 permit is about 100km north of Newcastle, where gas prices are expected to exceed other major east coast markets such as Sydney and Brisbane, Molopo said.

The permit covers an area of 1050 square kilometres, with over 200sq.km of prospective coal measure sequence.

Lucas Energy, a subsidiary of AJ Lucas, holds a 70% stake in the permit and is operator; Molopo holds the remaining 30%.