On Sunday, a second 47 minute drill stem test in the 1875.5-1885.0 metre interval flowed 24 barrels of light oil estimated to be API 38-40 degrees. The first drill stem test over the lower 1892-1902.5m interval indicated only minor gas shows and salty water.

Mosaic said the well, which is located in PL 119 (Mosaic-83.33%) is being currently cased and suspended and will be production tested as soon as possible.

Mosaic told the market the discovery of light oil at Downlands-3 is further justification of its focus on the Permian Tinowon sandstone in the Surat/Roma area, and has increased the company's prospects of continuing to discover both oil and gas in the region.

Mosaic boss, Dr Howard Brady said there are further Tinowon sandstone prospects on trend with Downlands, including Downlands South, Jones Creek and Jones Creek North.

"The technology being used by Mosaic indicates that the spectral signature of oil first noted at Spring Grove is present over a number of structures in the region," Dr Brady said.

"This is giving the company added confidence that it is gradually unravelling a new oil province in the Surat area of Queensland."