Lakes told the market casing has been set in the well to the current depth of 258m.

The more powerful rig is due to arrive in the next six to eight weeks, and will drill the Alberton-1 well to 1000m before moving on to the Napier-1 well site.

Lakes said it was still unsure of the significance of oil shows encountered over a 73m net interval of sand and gravel, impregnated with what appeared to be biodegraded oil.

“As we have already advised, microscopic examination has shown that the sands are coated with a thin oily film surrounding individual quartz grains,” Lakes said.

“Results of the core and fluids which have been sent to laboratories are inconclusive as fluids of this type have rarely been seen in Australia.

“Testing is continuing and will be reported to the market when available.”

Lakes chairman Robert Annells welcomed news that ExxonMobil planned a comprehensive formation evaluation study to look into the untested deeper basin gas potential under their fields in the Gippsland Basin.

“Lakes Oil congratulates ExxonMobil on their initiative, which would be significant for Victoria,” he said.

“Results that Lakes Oil have encountered onshore Gippsland indicate that there is the potential for both gas and oil at deeper horizons.

“Recent recovery of mature shale capable of producing both oil and gas in the lower Strzelecki Formation has focused the search for deeper accumulations.”