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The two companies have signed a memorandum of understanding to look at developing the large coal deposits with Sapex's St Vincent Basin caol exploration licences.
A joint venture would be formed once the parties decide to commercialise any suitable resources.
Managing director Andrew Andrejewskis said this was the company's first step in its strategy to seek out value-adding opportunities for coal.
The MOU follows the release of an independent report last month that just one of Sapex's licences could contain between 207 billion cubic feet and 1.1 trillion cubic feet of coal seam methane.
Linc Energy is completing its Chinchilla demonstration facility in Queensland, where it will complete a world-first demonstration to convert UCG gas into a clean diesel fuel.
