Faroe, which has a 25% working interest in the prospect, said exploratory drilling had penetrated a hydrocarbon reservoir with about 135 miles of oil and 91 metres of gas.
Faroe, which is focused on exploration, appraisal and production opportunities in the Atlantic Margin, the North Sea and Norway, said the discovery built on its strong position in the Norwegian North Sea.
In addition to Pil, it is carrying out exploratory drilling and appraisals at the Solberg and Butch East wells, where it holds working interests of 20% and 15%.
Pil is located within tie-back distance (33km) of the Njord platform, where Faroe has a 7.5% working interest.
Chief executive Graham Stewart said: "We are very pleased to announce the oil and gas discovery at the Pil prospect and await the results of the production test. This discovery builds on Faroe's already significant position in this prolific part of the Norwegian Sea and we look forward to unlocking further potential on this licence."
Further to the discovery, Faroe will carry out drill stem testing to acquire fluid samples and establish commercial flow rates from the well. It will then drill an immediate side track well to appraise the discovery, if the results are positive.
Analyst Panmure Gordon said it anticipated a "material commercial find with follow-on potential", and raised its target price to 190p from 184p.
Shares in Faroe Petroleum closed up 12.25p at 119.5p.