Buru Energy has reached a major company milestone after declaring the start of commercial production at the Ungani oil field in Western Australia’s onshore Canning Basin.

Production at Ungani, which is a 50:50 joint venture (JV) between Buru and Japan’s Mitsubishi, is at an initial rate of 1,250 barrels of oil per day (bbl/d), with an initial increased target of 2,500 bbl/d, rising to 3,000 bbl/d.

Buru said Ungani production would generate positive cash flow for the JV with the prospect of increased margins from the cost reduction program and increases in production volumes.

“The cash flow from Ungani marks the next chapter in Buru Energy’s growth,” Buru executive chairman Eric Streitberg said. “Combined with our strong cash position, we have the financial strength to fund our aggressive exploration program and create further growth for shareholders.”

Ungani is the first commercial oil production in the Canning Basin since the original Blina discovery in 1981.

The Perth-based company, which is the largest acreage holder in the Canning Basin, confirmed Ungani’s conventional potential in 2011. The first load out of Ungani crude oil from Port of Wyndham was made in early 2014.

The Ungani oil field received the green light to begin production earlier this month following the execution of Native Title Agreements between the Buru Energy-Mitsubishi joint venture and the Nyikina Mangala, Karajarri Yanji and Yawaru people. This was followed by the formal grant of Ungani’s production licenses.

Buru and Mitsubishi are also undertaking an aggressive program to increase oil reserves in the Canning Basin.

As part of this, Praslin 1, the second well in the 2015 conventional oil exploration program, has just been spudded. Praslin is an Ungani-style target 15 km from the existing Ungani Field and lies in the Jackaroo 3-D seismic data grid.

Streitberg said he was delighted to be kicking off its 2015 exploration campaign on the Ungani trend with the Praslin 1 well.

“Praslin 1 is the first of at least four wells planned to be drilled in the Ungani trend targeting conventional hydrocarbons and we are very much looking forward to success in this program,” he said.

Investors welcomed the news, lifting Buru’s share price by 3.6% to 42.5 cents.