Australia-listed Key Petroleum has encountered oil shows at its well in EP437 at the onshore Perth basin in Australia.

The Dunnart-2 probe has found 5 metres of good quality reservoir sands inside the well.

Preliminary interpretations of the wireline logging indicated this reservoir at the top of the Bookara sequence, which is thought to be oil-bearing.

Oil shows were observed over a 20-metre interval down into the granitic basement.

The joint venture has now decided to production test the well, subject to an approval of the budget and other government approvals.

They will now work to contract a workover rig.

Key said encouraging results from the well supported talks for further exploration and development activities.

The company said it was in talks with parties for more development activities, including drilling of up to three prospects. These could include the Conder South, Wye Know and other areas in the north of the permit.

Re-mapping of EP437 is now taking place in light of the success of the Dunnart-2 well to rank prospects by size and risk.

Key said preliminary interpretations have indicated that there was a likely invasion of drilling fluid during the testing operation of the Dunnart-2, which occurred in the top Bookara sandstones where oil shows were intersected.

It said the invasion of fluid resulted in a mixed recovery of mud filtrate, formation water and oil emulsion during wireline sampling operations.

The well spud earlier this year, targeting a prospective 2-million-barrel best estimate potential resource.