Rockhopper Exploration said it has discovered oil in its Sea Lion prospect in the North Falkland Basin.
This is the first time a company has found oil in the Falkland Basin, which had earlier been drilled by companies including Shell and Amerada Hess with no result.
Rockhopper said well 14 / 10-2 on the Sea Lion prospect has reached a depth of 2,744m and initial data collected shows that this well is an oil discovery.
Rockhopper added that it is too soon to assess how much oil exists in the reservoir, which lies about 137 miles off the north coast of the islands.
Wireline logs and logging data shows well 14 / 10-2 encountered a 150m gross interval of sand and shales.
Geologists also estimate that up to 60 billion barrels of oil and gas equivalent could lie in the Atlantic waters, which would put the region on a par with the North Sea.
This is the second well drilled by the company in a multi-client campaign off the Falklands using the semi-submersible Ocean Guardian.
Argentina has said it rejects the illegal offshore oil exploration of the UK-controlled Falkland Islands, over which the two countries went to war in 1982.