Island Announces Equity Placing and Debt Funding

Island Oil & Gas plc on Thursday said that its joint brokers, J&# Davy and Bridgewell Limited, are in the process of finalizing a placing to fund the cost of the drilling program, which commenced with the spudding of well 49/23-2 on Exploration License 4/05 (the Old Head of Kinsale) in the Celtic Sea, offshore Ireland on 16 May 2007.

The placing of new ordinary shares is being arranged with new and existing institutional investors at a price of Stg£0.39 per Placing Share to raise gross proceeds of not less than Stg£12.5 million (the "Placing"). The Placing Shares will rank pari passu in all respects with the Company's existing issued Ordinary Shares.

Investors subscribing for shares under the Placing will be entitled to 1 new warrant for every 4 Placing Shares subscribed for, at an exercise price of Stg£0.45 per Ordinary Share. The New Warrants will expire on 16 July 2007.

The implementation of the Placing, which is not underwritten, is conditional, inter alia, on Davy, Bridgewell and the Company entering into a placing agreement (the "Placing Agreement"); on a warrant instrument being executed; and on admission of the Placing Shares to trading on the AIM market of the London Stock Exchange.

In addition to the Placing described above, the Company has entered into discussions with RMB Resources ("RMBR") with the intention of refinancing the existing short term loan facility of Stg£7.5 million arranged by RMBR with a larger secured, medium term debt facility to provide sufficient finance for the Company's drilling and other activities in 2007 and into 2008. Further details of the new debt facility will be provided once it is finalized.

Island was founded in 2003 and listed on AIM in December 2004. The Company has interests in eleven 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. License Interests, Schull gas field - The current interests in the Schull gas field are: Island 62.5%; EnCore Oil plc 12.5%*; Valhalla 25%. * EnCore is also granted an option to acquire an additional 7.5% interest, subject to certain conditions.

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