Shares in Faroe Petroleum jumped by a third yesterday, adding £20m to the company's market value after an encouraging drilling update from the oil and gas independent.

Shares in Faroe Petroleum jumped by a third yesterday, adding £20m to the company's market value after an encouraging drilling update from the oil and gas independent.

Aberdeen-based Faroe said a well on the West Breagh field in the southern North Sea had confirmed the presence of a significant area of sands of the type that bear oil and gas.

The latest well was drilled in the same location as an appraisal well which tested at rates of up to 17.6 million cubic feet of gas per day in 2007. Drilled horizontally, the well found sand extending for 1200ft.

The operator of the field, Sterling Resources, will shortly complete flow testing that will give an indication of the extent of the reserves. This will give Faroe a better idea of the potential value which might attach to its 10% holding.

Graham Stewart, chief executive of Faroe, welcomed confirmation of the presence of "significant" sands.

"The Breagh gas field has been a great success for the partnership (with Sterling), having proved substantial resources on both West Breagh and East Breagh."

Investors appeared to like the look of the field, marking shares in Faroe up by 16.5p to 72.25p.

This gave the company a market capitalisation of £78m, compared with £58m at Monday's close.

Faroe may have benefited from increased enthusiasm for the exploration and production sector following the rise in oil prices over the Christmas holiday period, amid concern over the geopolitical outlook in the Middle East.

Unlike some oil and gas firms that appear to be becalmed on the Alternative Investment Market because they do not have the resources needed to develop their acreage, Faroe has funding in place for an active drilling programme. This will include wells in the North Sea and the waters off the Faroe Islands. It also has cash-generating production.

Werner Riding, oil and gas analyst at brokerage Ambrian, wrote: "This is a positive start to the year for Faroe, and as a fully-funded exploration and development company with exposure to a multiple well- drilling programme, we feel they are well placed to not only survive 2009 but also to offer investors the opportunity for capital growth.

"We retain our buy recommendation."