Santos and Carnarvon Petroleum say they have confirmed the discovery of a “major oil and gas resource” off the coast of Western Australia.
The Dorado-2 appraisal well, drilled two 2km from the Dorado-1 well that struck oil last July, hit high-quality oil at 4km and what is believed to be gas at a deeper level.
Wireline pressure testing has confirmed that both wells hit the same reservoir, the companies said on Thursday.
“This is a great result which indicates the Dorado discovery is larger than anticipated and which significantly de-risks a future development,” Santos chief executive Kevin Gallagher said.
“The value of the discovery is greatly enhanced by the high quality reservoirs and fluids and the shallow-water setting, which should facilitate a cost-competitive development.”
A new 3D seismic survey is in progress to find more opportunities for drilling, Mr Gallagher said.
Dorado is located in Australian waters about 160 km north of Port Hedland.
Santos owns 80 per cent of the rights to the exploration area and operator Carnarvon owns 20 per cent.
At 1035 AEST Santos shares were up 10 cents, or 1.5 per cent, to $6.75 on a day when most other oil companies were down.
Carnarvon shares were up 7.5 cents, or 13.89 per cent, to 61.5 cents.
Carnarvon managing director Adrian Cook said the well has the potential to make the ASX300 company a “significant producer in the future. This highly successful result makes this a very tangible reality.”
Mr Cook called Dorado a “world class resource, located in an ideal jurisdiction and operated by a quality partner,” and said he was “incredibly excited for the future of our company”.
The exploration well will now be plugged and abandoned, as planned, and the Noble Tom Prosser rig will move on to drill a third exploration well, Dorado-3.
Santos executives have said Dorado is a key part of their plan to increase production to over 100 million barrels of oil by 2025, with a final decision on how to develop it set for next year.