Gippsland Offshore Petroleum is acquiring a part of Lakes’ interests in Vic/P40(V) and PEP 155, as well as 51% of the option held in Vic/P47 (The Gilbert Blocks),

These three areas have all been flown by the Falcon Airborne Gravity System which resulted in several leads being developed, together with seismically defined prospects already identified.

Gravity Capital, who flew the airborne gravity on Lakes’ behalf, has earned an interest in all three permits. These interests now reside in Stellar Resources, which resulted from Gravity Capital splitting its non-diamond assets into the new company.

Melbourne-based Gippsland Offshore Petroleum has lodged a prospectus with the ASX and ASIC for the issue of ordinary shares with accompanying options. Shareholders in Lakes Oil and Stellar Resources are to be offered a priority allocation to the issue.

Gippsland Offshore Petroleum plans to issue 50 million ordinary fully paid shares at 20 cents each, and 25 million options at no cost exercisable at 20 cents each on or before 30 November 2006.

It will have a right to accept over-subscription of a further 10 million ordinary fully paid shares at 20 cents each and 5 million options at no cost exercisable at 20 cents each on or before 30 November 2006.

The drilling of the Gilbert-1 well in Vic/P47 is conditional upon Lakes successfully sponsoring the formation of Gippsland Offshore Petroleum and raising A$8 million of new capital.

Participating interests subsequent to the drilling of Gilbert-1 are: Gippsland Offshore Petroleum 51%, Lakes Oil 26%, Stellar Resources 3%, Moby Oil Gas LTD 10%, Eagle Bay Resources LTD 10%.