UK Oil & Gas Investments (Ukog) has been granted a one-year extension to its offshore exploration licence off the Isle of Wight.
The group said the Oil and Gas Authority approved of the extension to its subsidiary Ukog Solent's P1916 licence to 31 January 2018.
Shares in the company were up 3.21 per cent to 1.57p in morning trading.
The area contains an undrilled Portland limestone conventional oil prospect, which the group says is a look-alike to the nearby Arreton Portland oil discovery located in its PEDL331 onshore licence.
Ukog said a Triassic sandstone prospect lies beneath the Portland target in P1916.
The company plans to submit a planning application to drill one or more prospects in the Isle of Wight during the coming year.
Stephen Sanderson, Ukog's executive chairman, said the drilling is "intended to cause zero hazards to any groundwater" by using the same practices as the water supply industry to drill drinking-water wells.
This drilling technology is intended to include the use of modern biodegradable drilling fluids, manufactured from 100 per cent natural plant starches, which are approved for use under the UK's water supply regulations.
Ukog, which is known for its "Gatwick Gusher" wells, said its planned Isle of Wight operations are aimed at extracting oil from conventional naturally-fractured limestone and sandstone reservoirs, not shale, and therefore will not utilise massive hydraulic fracturing.