The well reached 1246 metres and logging has begun.

The primary target G Sand reservoir was intersected on prognosis at 1176m after passing through the main field reservoir, the K Sand, at 1131m.

Both reservoirs have been fully cored for analysis and oil shows were observed in both sands. Following wireline logging, each reservoir is planned to be drill-stem tested.

A successful test of the G Sand is expected to add around 36 million barrels to the 101MMbbl field (2P) already defined in the K Sand.

RBC Capital Markets' Sydney-based analyst Ben Wilson said in a note that the identification of oil could be a potential positive catalyst to help boost AWE's share price.

"We currently include $0.25/share of value in our $1.08/sh valuation for AAL based on a 101MMbbl gross recoverable resource risked weighted at 50%," Wilson said.

"A higher resource could not only lead to an increase to our unrisked valuation but also give us more confidence in a development proceeding which could warrant further derisking of our AAL valuation contribution."

The well is being drilled in water depths of 72m using the Raniworo jack-up drilling rig within the Northwest Natuna PSC, offshore Indonesia.

The G Sand contains an estimated 289MMbbl, so unexpectedly good flow rates could see the sand surprise to the upside.

Santos says that the G Sand will feed into development plans for the resources, which will be developed using a floating production and offshore storage facility and wellhead platform.

The costs are yet to be finalised, but the initial costs were estimated at $800-$900 million development, however with service companies keen to secure work, that could fall to a more palatable $650 million with Santos and AWE on the hook for half each.

The development, if sanctioned within the next six months could be well timed to deliver into the expected oil price upswing.