Omega Oil & Gas (ASX:OMA) has commenced drilling operations at Canyon-3, marking the start of the company's largest drilling campaign to date and a significant step toward confirming the Taroom Trough in Queensland as a nationally important new source of oil and gas.

The Taroom Trough forms part of the broader Bowen-Surat Basin system, which already hosts major coal seam gas operations supplying both Australia's domestic market and LNG export terminals at Gladstone. Omega's targets, however, lie in deep Permian-aged reservoirs that represent a fundamentally different and previously untested unconventional play for the region.

Canyon-3 is the first well in Omega's 2026/27 appraisal program, which utilises the H&P FlexRig 648. The campaign comprises four vertical appraisal wells, followed by one or two horizontal wells extending up to 2,000 metres. Additional rig contract options are available if further drilling is required.

CEO and Managing Director Trevor Brown said the program is designed to further de-risk the highly attractive Permian unconventional play, demonstrate resource scale, establish repeatable commercial flow rates, and mature Omega's resource base. He told shareholders that the data gathered will reduce geological uncertainty and define the key technical parameters needed to support future commercial development.

"The commencement of drilling at Canyon-3 marks an important milestone for Omega as the first well in our exciting 2026/27 appraisal program, designed to demonstrate the scale and quality of oil and gas-bearing reservoirs at multiple levels across our highly attractive Taroom Trough acreage area," Mr Brown said.

The campaign follows Omega's 2024/25 program, during which the company demonstrated that strong flow rates of oil and gas could be achieved from deep reservoirs within the Taroom Trough using horizontal drilling and fracture stimulation technology. The "play-opening" Canyon-1H horizontal well produced robust flow rates of oil and gas from the Canyon Sandstone reservoir interval. While horizontal drilling and hydraulic fracturing are well-established techniques in Queensland's CSG sector, their application to these deep Permian targets represents a newer technical frontier.

"Our 2026/27 campaign aims to take the next step, by proving that oil and gas bearing reservoirs of similar quality are widespread across our acreage area, and by providing evidence of the enormous scale of the oil and gas resources within the eastern Taroom Trough," Mr Brown said.

"We are excited to commence our play-defining, 2026/27 appraisal program with the drilling of the Canyon-3 well and to continue progressing our assets towards commercial development. Over the course of our program our clear goal is to demonstrate that the deep reservoirs within Queensland's Taroom Trough can make a major contribution to Australia's future prosperity and energy security."

Australia ranks among the world's largest LNG exporters, and east coast gas supply adequacy has been a persistent policy concern, with federal and state governments seeking new gas reserves to address forecast supply gaps. New conventional and unconventional resource discoveries in Queensland could be relevant to that broader supply outlook, though commercialisation would require further appraisal, regulatory approvals, and infrastructure investment.

According to modelling by oilfield services company SLB, a single 2,000-metre horizontal development well drilled at 1,000-metre well spacing into the Canyon Sandstone reservoir layer could deliver a 10-year estimated ultimate recovery (EUR) of 0.95 million barrels of oil equivalent (MBOE), or 5.72 billion cubic feet (BCF) of gas equivalent.

Results from the four vertical wells will be used to optimise horizontal well placement and provide the technical data required to assess the resource base and commercial potential.

Omega stated it remains fully funded to execute the appraisal campaign, which the company expects will provide a pipeline of value catalysts over the next 12 months.

OMA shares rose 4.63% to 56.5 cents, bringing the company's market capitalisation to $291.8 million.