Commenting on the Option Agreement, Chief Executive Paul Griffiths said, “Island recognises additional low risk gas potential along the Old Head Trend in an area close to existing infrastructure at Kinsale. Our studies in Old Head have significantly reduced exploration risk and have indicated that this part of the Celtic Sea Basin has the potential to contain material gas resources that, with synergies created by the development of infrastructure at Old Head, may lead to early development and increased near-term cash flow if successfully drilled.”

Island Oil & Gas plc has executed an Option Agreement with Lansdowne Celtic Sea Limited (LCS) to farm into an area of Standard Exploration Licence 4/07 covering part blocks 49/11(p), 49/12(p), 49/13(p), 49/17(p) and 49/18(p) in the Celtic Sea offshore Ireland. The Option, if exercised, would be subject to the approval from the Irish Minister for Communications, Energy and Natural Resources.

Under the Option Agreement Island will acquire a seismic survey over the Area and will have the right to carry out the drilling and testing of a farm-in well (in the Area. The Option extends to the 31 December 2008 and, if exercised, the Well would commence before 31 July 2010, depending on rig availability.

The Well, subject to the exercise of the Option, will be drilled and will test potentially the same reservoirs that are gas-bearing in the 49/23-1, 49/23-2 and 49/23-2z wells drilled by Island in the Old Head gas field immediately to the south of the Area.

Upon exercise of the Option, Island will acquire a 58.34% equity interest in the Option Area and assume operatorship.

Island’s Joint Venture Partners, Valhalla Oil and Gas Limited and EnCore Oil plc, in Standard Exploration Licence 4/05 (the “Old Head of Kinsale”) covering part blocks 49/17(p), 49/22(p) & 49/23(p) will be offered their pro-rata share of the Option Agreement. Island’s net interest in the Area would reduce to 37.92%, post an exercise of the Option, if the Old Head Joint Venture Partners elected to participate pro-rata in the Option.

Following comprehensive seismic, geological and reservoir engineering studies in the area of the Old Head gas field, Island now believes that there is additional potential for low risk gas prospects along the Old Head Trend in an area of the Celtic Sea that was formerly under-explored until the Old Head gas discovery was made by Island in 2006.

Tags: Lansdowne Celtic Sea Limited