Drilling was forced to stop at the PEP 166 well in late June after the drill string became stuck.

Lakes said it blamed the mishap on Century Energy Resources for allegedly allowing the mud pumps to run out of fuel, preventing proper circulation of drilling mud for several hours.

"Lakes Oil's claim against Century is that, in allowing fuel to run out, Century's conduct was in breach of its contractual obligations to provide drilling services in a prudent and diligent manner and was in breach of its duty of care owed in tort to provide services with the skill and care which would reasonably be expected from a skilled and experienced contractor," the company said.

The company will also defend a $244,000 counterclaim made by Century for its services at Boola Boola-2.

"Lakes Oil claims that, in the circumstances, Century is not entitled to these amounts and in any event they should be set off against the loss and damage suffered by Lakes Oil as a result of Century's conduct referred to above," the company said.

There was no word on whether Lakes planned to re-enter the well. If this happens, Lakes has said it might divert around the area blocked by drill equipment and into the proposed geothermal targets.