The well is expected to be drilled next week to a total depth of 2400m targeting the upper and lower Monterey sand reservoir.

Any success can be developed rapidly as Sunset and its partners will have access to existing oil storage, sales facilities and a gas pipeline in the area.

Dry hole costs are estimated at $US1.5 million ($A1.58 million) while a successfully completed well is expected to cost about $US2.1 million.

Silverthread has potential P50 recoverable reserves of about 7 million barrels of oil and more than 15 billion cubic feet of gas.

Sunset said at current prices, its 20% stake in the project, which it is earning from Solimar, would be worth about $125 million.