The Perth-based company said the second well to be drilled so far in a seven-well program flowed about 155bbl over seven hours at a depth of 995 feet (303m) before it was shut-in.

Chairman Peter Briggs said the “very exciting” find at the Riddle-7 well represented a “significant step” towards becoming an established oil producer in Kentucky, with immediate revenue to fund further expansion in the state.

“Cash flow from current oil production although small, is expected to grow in excess of $1.5 million in 2007,” he said.

“This cash flow will allow the project to grow with an associated increase in production.”

Looking ahead, the company will try to achieve a stabilised flow rate before it starts drilling two more wells in the same lease within the next two to three weeks.

The first well in the program, Thomas-1, is still being flow tested after oil shows were seen at the bottom of the hole.

“Comparable wells in the area have taken some time to settle down before sustainable production occurs and the company will continue with this well in test mode over the next few weeks,” Briggs said.

The success at Riddle-7 has prompted Westralian to consider expanding its seven-well drilling program.

This time last year, Westralian bought a portfolio of five oil leases comprising 2000 acres (809 hectares) in Kentucky, near the city of Burkesville.

It is currently finalising a sixth acquisition and is on the hunt for others.