The small-cap explorer’s stock climbed more than 5pc this morning to just under 65p, after Faroe confirmed the discovery from its Brasse exploration well.

The North Sea-focused company will now begin drilling to determine the size of the reserves, which are jointly owned by Faroe and project partner Point Resources.

“We are very pleased to announce the oil and gas discovery at the Brasse prospect and await the results of the [drilling]. This discovery in one of our core areas builds on Faroe’s already significant position in the Norwegian North Sea via a low cost exploration well,” said Graham Stewart, chief executive of Faroe.

The new reserves will help to offset the loss of oil production from Faroe’s Njord field, where it has suspended operations. Faroe is widely expected to expand its assets in the coming months by buying up further North Sea oil and gas fields.

The independent explorer avoided saddling itself with debt before the oil market crash by focusing exclusively on low-cost North Sea reserves.

The cash-rich company is understood to be in talks to take on a number of assets up for sale in the area. Many of its peers and larger producers are heavily indebted and are selling off assets in a bid to strengthen their balance sheets.

Earlier this year, Mr Stewart said the North Sea still offered attractive, low-cost reserves for smaller oil explorers. He said his company expects to complete one acquisition by the end of the year.

“People have the impression that the North Sea is on its last legs – ‘It’s so old and decrepit and expensive. It’s just a matter of time before they turn the lights out’. That’s not the case,” he said.

“There’s a lot of life left in the North Sea, some of it will be decommissioned but I think there are some green shoots coming out of the downturn. I would not give up on the North Sea.”