Junior partner Aurora Oil & Gas told the Australian Stock Exchange that while the results were encouraging, there was a risk the zone may not flow at commercial rates.

Its commercial significance will be determined by flow testing, which would only take place once the well has reached a planned total depth of 21,000 feet (6400m), expected in mid-November.

On Friday, the well was at a depth of 14,480 feet (4413 metres), where a 9-5/8 inch intermediate casing was being run before drilling restarted in a 8-1/2inch diameter hole to the primary target, expected between 17,000 feet (5182 metres) and proposed total depth of 21,000 feet (6,400 metres).

There is a further secondary target in carbonate rocks between present depth and just above the primary target.

Assuming trouble-free drilling, the primary Hosston Formation target, which has the potential to contain about 800 billion cubic feet (Bcf) of gas, with upside potential of several trillion cubic feet, is expected to be reached in mid to late October.

Seismic interpretation suggests the top of the Hosston will be intersected at a depth of 17,000ft. The potential also exists for several different sandstones to be developed over a gross 4000ft thickness.

Sugarloaf-1 partners are Texas Crude Energy (operator with a 41.5% stake), Aurora (20%), Adelphi Energy (20%), Eureka Energy (12.5%) and Empyrean Energy (6%).