Island Sells Netherland Assets to Delta Hydrocarbons

Island Oil & Gas PLC announced that its wholly owned subsidiary, Island Oil & Gas BV ("IOGBV"), has signed a Term Sheet with Delta Hydrocarbons B.V. ("Delta") for the sale of the entire issued share capital of Island Netherlands BV ("INBV") to Delta, subject to execution of the fully termed sale and purchase agreement.

The assets being disposed of include INBV's 83.33% interest in the Q13a Production License, which contains the undeveloped Amstel Oil Field, and its 100% interest in the recently awarded Q13b Exploration License, covering the shallow part of the License and including the undeveloped Zaan oil field and several appraisal and exploration prospects.

The consideration for the Transaction will be US$ 25,000,000 payable immediately on completion. In addition, Delta will advance to Island US$ 10,000,000. It is intended that the Advance will be repaid from an Overriding Royalty Interest ("ORI") granted to IOGBV of 2.5% of the gross export production from the Amstel Oil Field; and 2% and 1.5% respectively of the gross export production from the Zaan oil field and any tie-backs via the future Amstel facilities or any other operated tie-backs resulting from any of the license areas that are the subject of the Transaction. In the event that the ORI does not cover the full amount of the Advance any remaining would be repayable in cash or at Delta's discretion can be converted into Island shares at the average weighted 20 day trading price prior to conversion.

Proceeds from the sale of the Assets will be used by Island to provide an injection of fresh working capital to further advance the evaluation of its diverse portfolio of domestic and international assets and to reduce its current level of corporate debt. The funds will be used to bring forward the opportunity to create value for shareholders through license farm out, asset sale and/or active exploration.

Island retains the belief that there is considerable potential for adding value through acquiring new licenses in the Netherlands and is therefore actively considering new ground floor opportunities.

The Transaction enables Island to repay the existing STG 12,000,000 RMB loan facility in full. RMB have also agreed to provide Island with a new loan facility of STG 5,000,000 for an initial period of 12 months. The combined RMB loan facility and Delta Advance will further strengthen Island's short to medium term working capital position.

Paul Griffiths, Chief Executive commented, "Island is delighted to have secured this deal with Delta Hydrocarbons. We have achieved a significant uplift in value through the process of acquisition, development and subsequent sale. The assets were acquired on ground floor terms and Island invested over two years in maturing the assets to a point where a significant return for shareholders has now been realized. Additionally we retain the potential for future cash flow from production through our royalty arrangements with Delta and Encore. We are confident that Delta Hydrocarbons bring the necessary technical expertise and financial strength to accelerate the development of this important asset in order to provide cash flow at the earliest opportunity.

Island will now focus on maturing our wider portfolio of projects to a stage where we can create both short and long term value for our shareholders."