An open hole test of a 49 metre zone of the lower, secondary High Cliff Sandstone target yielded the 1220 psi gas flow, with no water encountered, through a ¾ inch choke.

Arc said the well will be deepened until economic basement is reached where further logging and testing will be carried out.

Arc shares were lifted after the announcement after being suspended for five days and had dropped around 5 cents to be trading between 46 and 47c.

Arc MD Eric Streitberg could not put a figure on the size of the discovery or its value but said it was clearly significant in that it was the first discovery of gas in that particular combination of reserve and structural setting and opened up new exploration possibilities within Arc's acreage in the Perth Basin.

Testing the oil discovery found in the Hovea-1 well will occur after the High Cliff zone has been fully analysed and tested. Arc said that the high side (3P) reserves case of 24 million barrels outlined in the independent expert's report was now unlikely, given that water was found in the Dongara Sandstone formation in the second well bore.