The company had thought that Yarrow North could be part of a large accumulation encompassing the Flax-Juniper and Yanpurra oil finds.

Innamincka had been seeking oil in a fault trap in PEL 103 north of the Yarrow gas field and west of the Yanpurra-1 well, which was drilled in 1970 and recovered oil on test from the Tirrawarra Sandstone.

But instead Yarrow North-1 found about 6.5m of gas pay. However, Innamincka says there may be an oil leg further down the structure.

The company said initial wireline log evaluation made it clear that Yarrow North-1's entire Permian section was hydrocarbon saturated.

"Within most of the Permian section, elevated gas readings with an oily breakdown together with minor oil fluorescence were recorded. These positive shows support the potential for an oil leg being present further down-structure," Innamincka said.

"A drill stem test conducted over the basal Patchawarra-Tirrawarra interval produced gas at a low rate before the test was terminated by a packer seat failure. Whilst the limited results of the abbreviated drill stem test indicated low rate gas production, it is considered likely that well stimulation (fraccing) would be required for commercial production."

The rig is now moving to the Flax-7 development well site where drilling operations are scheduled to start next week.

The PEL 103 partners are Innamincka Petroleum (operator and 75%) and Seoul City Gas Australia (25%)