"We are extremely satisfied with the drilling results and data obtained at the Elk-2 well," said InterOil chief executive Phil Mulacek.

"The total drilled thickness of the Puri limestone reservoir is 1929 feet (588m), the total drilled section of the Mendi limestone reservoir is 942 feet."

The company said this was thicker than pre-drill estimates.

Mulacek said he was encouraged by the evidence of heavier gas and oil shows in the well which increased the possibility of an oil leg.

He said he was confident the Elk structure had enough gas to underpin the first train of Liquid Niugini Gas' planned liquefied natural gas plant.

"Our forward plan is now to drill to total depth, log and complete and test the well," he said.

"We will then sidetrack the well to intersect the potential oil leg structurally higher in the porous Mendi limestone section."

The company added Elk-2 had confirmed the indicated hydrocarbon column in the Elk structure was about 1358m from the highest known gas in Elk-1 to the lowest indicated hydrocarbons in Elk-2.

Meanwhile, the company posted a net loss of $US3.3 million ($A3.9m) for the second quarter of this year.

This compares with the net loss of $US17.8m it incurred in the 2006 second quarter.

"InterOil's second quarter performance reinforces the improvements the company has made over the past year in the midstream business segment," Mulacek said.

"The refinery operations continued to benefit from the optimisation efforts completed last year, although weakness in diesel and gasoline prices during this quarter had a modest negative impact."

Production of the refinery's highest-value products, middle distillates, reached 64% of total throughput, up from 58% in the second quarter of 2006.

Throughput was also up by 36% to 1.56 million barrels.