Island Reports First Celtic Sea Gas Find in 16 Years

Island Oil and Gas PLC

Island Oil & Gas plc said that, following the completion of logging and sampling operations, exploration well 49/23-1 at the Old Head of Kinsale in the Celtic Sea has successfully encountered a Lower Cretaceous reservoir sequence with a gross 100-foot gas column, determined from pressure data.

Initial indications are that the gas extends over an area in excess of 22 square kilometers and that potential volumes of gas in place in the structure are likely to be in the range of at least 90 to 120 bcf. The gas discovery is located only 25 kilometers from Marathon's production facilities at the Kinsale field (the Kinsale Alpha Production Platform), greatly enhancing the economics of the discovery.

Based on these encouraging results, Island has taken the decision to suspend the well with the intention of returning in 2007 to re-enter the well and carry out an extended gas well test. This will allow the company to determine well deliverability and maximum drainage area prior to the preparation and submission of any plan of development. In the interim period, work will continue to determine the technical and commercial feasibility of a potential subsea tie-back to the Kinsale Alpha Production Platform. These arrangements are subject to the consents and approvals of the Petroleum Affairs Division of the Department of Communications, Marine and Natural Resources.

Well 49/23-1, which was spudded on July 12, 2006, in a water depth of 296 feet, was drilled to its planned total depth of 4,133 feet TVD ss in just 16 days. The well is operated by Island (with 100% equity interest) and was drilled using the semi-submersible drilling unit, Petrolia, owned and operated by Petrolia Drilling Limited under contract to Island. The Petrolia rig will move shortly to the Donegal Basin where it will drill the Lundin-operated well 13/12-1 on the Inishbeg Prospect in which Island has a 31% equity interest.

"Following the successful testing of the Seven Heads West well 48/23-3, the company has now made the first new gas find in the Celtic Sea since 1990," said Paul Griffiths, Island's chief executive. "The company is naturally very pleased that its strategy of securing prospective license interests with potential reserves close to existing infrastructure has been rewarded with two successful back-to-back gas wells. The success of this strategy demonstrates our ability to generate higher returns for the company given the relatively lower cost of commercializing Celtic Sea discoveries adjacent to existing facilities."