HURRICANE Energy has said recent drilling results have underlined the potential of an under-explored area West of Shetland which it believes could contain huge reserves, as Aberdeen-based Eland Oil & Gas faces security complications in Nigeria.

Aim-listed Hurricane said it had enjoyed an exciting first half during which the company started drilling a well that provided a fillip for the hard-pressed North Sea oil and gas industry.

The results of the well on the Lancaster find boosted Hurricane’s hopes that it has found a significant new source of oil and gas in the granite ‘basement’ deep beneath the seabed West of Shetland.

Chief executive Robert Trice noted the initial results suggest Lancaster could hold significantly more than the original estimate of 200 million barrels oil.

They increased the company's confidence that Lancaster may be big enough to justify the hefty investment required to bring it onstream although the industry is braced for a long period of low oil prices.

Yesterday Mr Trice said of the Lancaster well: “We see no reason why similar results should not be replicated on our Lincoln, Warwick and Typhoon prospects and Whirlwind discovery.”

Surrey-based Hurricane is targeting a layer below the sandstone reservoirs that have formed the basis for the majority of North Sea exploration.

The company has started drilling another well on Lancaster. The results will be used to help update estimates of the amount of oil that could be recovered from the field.

Hurricane expects to decide in the first half of 2017 whether to develop Hurricane.

Based on recent work it expects to be able to produce oil at an average $26 per barrel, compared with $35/bbl previously.

Brent crude fetched around $47.60 per barrel yesterday, against $115/bbl in June 2015.

Mr Trice said Hurricane plans to resume the hunt for farm-in partners to help shoulder the cost of work on Hurricane in the fourth quarter.

The company put talks on hold in June, after raising £52 million from investors including the Kerogen private equity firm in May.

The fund-raising indicated some financiers believe the downturn in the North Sea industry triggered by the fall in oil prices since 2014 has created opportunities to invest in firms and assets at attractive valuations.

Kerogen provided funding at 15p per share. Shares in Hurricane closed down 1.5p at 39.25p yesterday. They surged 55 per cent on the day the initial Lancaster well results were announced earlier this month.

Hurricane cut first half losses to £1.8m from £3.2m. Employment costs fell to £2.5m from £3m, following a reduction in full time staff numbers to 14 from 17.

Eland Oil & Gas saw revenues plunge to $1.1m in the six months to 30 June, from $9.9m (£7.6m) in the same period last year.

The company noted the terminal it uses to handle crude production from the Opuama field onshore has been closed since February due to sabotage to the oil export line.

Eland restarted production from Opuama in 2014, eight years after the field was shut in by Shell amid security concerns.

Led by chief executive George Maxwell, Eland is working on plans to develop two alternative export routes and to bring more fields in Nigeria into production.

The company revamped a third well on the Opuama field during the first half.

Mr Maxwell said yesterday: “Although sales have been impacted by the Forcados terminal being shut-in since mid-February, we expect production and revenue generated cash-flow will reach an all-time high upon terminal operations resuming.”

Eland expects the terminal to reopen shortly.

Eland lost $9.5m before tax in the six months to 30 June compared with $11.7m last time.

It raised £12.7m from investors in April at 34p per share.

Eland Oil & Gas shares closed up 0.75p at 34.75p yesterday on the Aim market.