Island Successfully Tests First Well in Irish Drilling Program

Island Oil & Gas

Island Oil & Gas announces a successful gas testing from its first well as an independent Irish operator. Well 48/23-3 (the "Well") at the Seven Heads West Sub Area in the Celtic Sea successfully tested dry gas at a combined maximum rate of 13.2 mm cfpd through a 48/64" choke from two separate Upper Wealden reservoir horizons in the Lower Cretaceous and, in so doing, the Well has extended the limits of the Seven Heads gas field further west.

Island has been sufficiently encouraged by the initial results of the well to take the decision to suspend the Well as a potential gas producer pending further detailed technical and commercial evaluation of the Well data. It is expected that the Well data evaluation will be completed later this year at which stage a further announcement will be made.

In February 2006, Island concluded a Sub-Area Equity Interest Assignment Agreement for Seven Heads West with Marathon. Upon completion of drilling and testing of the Well, Island has now fully satisfied the terms of this Agreement and will increase its equity interest in the Seven Heads West Sub-Area from 12.5% to 55.75%. Well 48/23-3 was spudded on 4 May 2006 in a water depth of 341 feet and was drilled to its planned total depth of 3,237 feet TVDss. Island has operated the well during the drilling and testing period but operatorship will now revert back to Marathon.

Commenting on the well results, Paul Griffiths, Chief Executive of Island stated:

"The successful completion of the highly complex Seven Heads West drilling operations marks an important milestone for the Company in establishing it as a successful independent Irish operator. This well marks an exciting and promising initial step in the Company's two-year drilling program. The program will be the most diverse exploration program undertaken by any company for several years as it involves evaluating the hydrocarbon potential of four different sedimentary basins offshore Ireland.

"Following the successful testing of well 48/23-3, the Petrolia drilling rig will move shortly to the nearby Old Head of Kinsale gas prospect, southeast of the Kinsale gas field. Thereafter, the rig will move to the Inishbeg prospect in the Donegal Basin. Up to three wells are scheduled to be drilled by the Company along the exciting Atlantic Margin fairway in 2007. Island has secured the semi-submersible drilling unit, Petrolia (owned and operated by Petrolia Drilling Ltd) for both its 2006 and 2007 programs; a major achievement in today's rig markets. This drilling program reflects the Company's confidence and long term commitment to exploration offshore Ireland and our desired objective as an Irish operator of reducing Ireland's present high level of dependency on imported energy through discovering and developing new hydrocarbon resources."