Royale Energy (ROYL) revealed on Friday a new natural gas discovery in the Sacramento Basin that has increased the company’s optimism over its growth potential.

The discovery and the additional drilling capabilities are expected to increase its production.

"With a strong balance sheet and an aggressive pace of exploration in Royale's core area, the company is confident in its outlook for growth," the company’s co-CEO Donald Hosmer said in a statement.

While the company was drilling to a depth of 7,150 feet, the well intersected natural gas filled sands in each of the targeted upper, middle and lower Mokulumne sands.

The lower zone has been completed and is flowing over one-million cubic feet a day on a restricted choke. The company said it will reserve the middle and upper zones to be completed following the production of the lower sands.

Shares of the company were down about 10% Friday morning despite the discovery.

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