Island Completes Equity Placing

Island Oil & Gas plc has completed a placing to raise approximately Stg£13.7 million, before expenses, through the issue of 35,253,365 new ordinary shares of €0.01 each at a price of Stg£0.39 per share ("the Placing"). The Placing, which was arranged by Davy and Bridgewell, was supported by a number of existing and new institutional and private investors, including RMB Resources with whom the company has entered into discussions for the purpose of restructuring its current Stg£7.5 million short-term debt facility into a larger secured medium-term debt facility.

In addition to the Placing, 8,813,340 warrants have been issued to the new shareholders, on the basis of 1 warrant for every 4 Placing Shares, at an exercise price of £0.45 per Ordinary Share ("New Warrants"). These New Warrants will expire on 16 July 2007.

The funds will be used by Island to support its drilling and contingent testing program. This commenced on 16 May 2007 with the spudding of gas appraisal well 49/23-2 at the Old Head of Kinsale gas field, in the Celtic Sea offshore Ireland, which will be followed immediately afterwards by gas appraisal well 57/ 2-3 at the nearby Schull gas field, subject to approval of the Irish Minister for Communications, Marine and Natural Resources.

Application has been made to the London Stock Exchange for the 35,253,365 new Ordinary Shares to be admitted to trading on AIM. Dealing is expected to commence in these shares on 25 May 2007. These new shares will rank pari passu in all respects with the existing issued share capital. Following admission of the Placing Shares, there will be 110,394,365 Ordinary Shares in issue.

Island Oil & Gas plc has interests in 11 Irish offshore licenses, as well as licenses in the Netherlands and Morocco. Island is involved in an exploration and appraisal program that in 2006 saw successful Celtic Sea gas wells at the Old Head of Kinsale and the Seven Heads Sub-Area. The Company has again secured the Petrolia rig for its 2007 Celtic Sea drilling program. This commenced in the second quarter of 2007 with an appraisal well at the Old Head of Kinsale gas field, which is to be followed by an appraisal well at the Schull gas field.

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