UK explorer Cove Energy said it can't commercially exploit an oil find off Mozambique though it would undertake tests to see if other parts of the geological structure could produce sellable oil.
Cove said it believes the discovery is the first documented occurrence of oil in deepwater off the coast of East Africa, a region which is fast becoming a new focal point for exploration, attracting the attention of oil majors.
Cove's statement today confirmed and added details to what its partner in the licence Anadarko said yesterday.
Panmure Gordon analyst Peter Hitchens said the fact that a large fan system which contains oil had been found was exciting.
"The company will therefore analyse the data obtained in this well and look for a better site to drill in the future given that reservoir quality tends to vary over the structure, and hopefully prove the discovery to be commercial," he said to Reuters.
The well on the Ironclad prospect penetrated a 38 metre column of oil and gas saturated sands Cove, which has an 8.5% stake in the licence.
The companies would now move to carry out analysis to identify reservoirs with porosity and permeability which might be able to support commercial exploitation.
Shares in Cove climbed 14% yesterday on a Mozambican press report before reversing their gains to close down 12% on concerns that Anadarko and its licence partners would not be able to extract and sell oil from the find.
Shares in Cove were up 2.5% to 62.5 pence at 0802 GMT.
"The presence of oil and its associated petroleum system in Ironclad is significant for our extensive deepwater blocks in both Mozambique and Kenya," said Cove's chief executive John Craven.
Interest in offshore East Africa, which is much less explored than West Africa, has picked up since the discovery of natural gas by Anadarko and Cove at the Windjammer prospect on the same licence in February.
Petronas of Malaysia, Norway's Norsk Hydro and Italy's Eni are all exploring in the Rovuma basin off Mozambique, where the discovery in question was made.
Elsewhere in East Africa, oil major ExxonMobil farmed into Statoil's block off the coast of Tanzania in March, followed two months later by UK's BG Group which farmed-in to three blocks also offshore Tanzania.
In June, West Africa-focused Afren bought East African explorer Black Marlin.