THE North Sea minnow that won backing from US billionaire Warren Buffett in the summer has suffered a drilling setback but underlined its confidence in the potential of the area.

Independent Oil & Gas won a huge vote of confidence from Mr Buffett’s CalEnergy which took a half share in a £700m scheme IOG is developing to bring North Sea finds left undeveloped by other firms into production.

North Sea minnow wins backing from billionaire Buffett

However, shares in Independent Oil & Gas fell seven per cent yesterday after the company published the results of a well to appraise a separate North Sea find.

The company said the Harvey well found a small pocket of gas which appeared to contain sub-commercial volumes at the target level.

Analyst Jonathan Wright at finnCap said it was unclear whether CalEnergy would exercise its option to buy in to the find.

Describing the well result as mixed, IOG noted the drilling indicated that another find in the area, Redwell, could be bigger than expected. Redwell may have commercial potential.

The company will do further work to assess the potential for a development in the Redwell-Harvey area.

“The Harvey well has provided us with an invaluable data set and enhanced geological knowledge of the area which may unlock a new development opportunity for IOG,” said chief executive Andrew Hockey.

However, with IOG shares closing down 1.12p at 15.25p investors appeared disappointed by the well result.

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Meanwhile shares in North Sea-focused Serica Energy rose 6% after it was awarded more acreage in the area where it has expanded rapidly through acquisition.

Serica transformed itself from being a relative minnow into a leading North Sea player through the acquisition of interests in three big fields off Shetland from BP last year.

The deal gave Serica control over the Bruce and Keith fields and a 50 per cent interest in the Rhum gas field, which came with political complications.

As the national oil company of Iran has a 50% stake in Rhum, there were fears the field could be ensnared in the sanctions Donald Trump decided to impose on the country.

Serica had to invest lots of effort to win a licence from US authorities to ensure Rhum operations and production from the field could continue unaffected.

Oil and gas firm navigates Iran sanctions challenge

The firm revealed yesterday that it has been awarded a licence adjacent to Rhum that contains two gas prospects.

It thinks finds in the area could be tied back to the Bruce platform acquired from BP, increasing the chances they could be commercially viable.

The award could help Serica in its efforts to maximise the potential of assets that the giant BP had lost interest in.

Serica’s chief executive Mitch Flegg said: “Since we completed our acquisition of the Bruce, Keith and Rhum assets just over a year ago, our strategy has been to optimise economic returns through a hub strategy that includes operating efficiencies, investment and securing new third-party business in the BKR catchment area.”

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He added: “Not only is this award an important step in our BKR hub strategy, it reinforces exploration as a material part of Serica’s upstream business.”

A range of majors have sold North Sea assets amid the fallout from the crude price plunge from 2014.

BP and Shell are focusing on big new fields in areas such as West of Shetland.

US giants such as Chevron are shifting investment to the shale fields of their home country.

Serica shares closed up 7.6p at 129p.

IOG's Mr Hockey noted the potential to link a development in the Harvey area to production facilities that IOG and CalEnergy plan to install to support the development of a cluster containing other finds.

CalEnergy acquired a 50 per cent stake in the acreage containing the cluster in the deal struck with IOG in July.

While the firms indicated then that they saw potential to develop other finds in the North Sea, the core project is not dependent on Harvey going ahead.

Mr Hockey has held out the prospect that IOG could generate £500m free cash flow from the core project, without having to include any other fields.