Coal Seam Gas company Santos says it is not drilling in the Coonabarabran area.
Santos has responded to rumours on social media it is planning drilling activities in the Coonabarabran district.
The concerns have been raised on a Facebook page saying the company has set up 15 kilometres north of the town on the Newell Highway.
Santos has exclusively owned the rights to explore in the area since 2008 and no other company can drill there.
The company says it is currently focussing attention on its exploration program in the Pilliga State Forest around Narrabri, and says it is not drilling or buying land in the Coonabarabran district.
It says the work is being undertaken near Narrabri is in an area designated by the state government for the development of natural gas.
Depending on assessment and approvals, if the company does establish an extraction project in Narrabri a pipline to the south of the development would be required, but Santos will consult with communities before a route is finalised.