Equity Placing

Island Oil and Gas PLC
17 May 2007



17 May 2007


                              ISLAND OIL & GAS PLC
                                        
                        EQUITY PLACING AND DEBT FUNDING
                                        

Island Oil & Gas plc ('Island' or the 'Company') today announces that the
Company's joint brokers, J&E Davy ('Davy') and Bridgewell Limited
('Bridgewell'), are in the process of finalising a placing to fund the cost of
the drilling programme, which commenced with the spudding of well 49/23-2 on
Exploration Licence 4/05 (the Old Head of Kinsale) in the Celtic Sea, offshore
Ireland on 16 May 2007.


The placing of new ordinary shares (the 'Placing 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. ('New Warrants'). 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 finalised.


Enquiries:


Paul Griffiths
Chief Executive
Island Oil & Gas plc
Tel: [phone]


Lisa J Newman MCIPR MIRS
Newman Consulting
Tel: [phone]


Anthony Farrell
Davy
+ 353 1 679 6363


Andrew Matharu
Bridgewell Limited
+ 44 (0) 207 003 3105


Notes to editors:


Island was founded in 2003 and listed on AIM in December 2004 (LSE:IOG).  The
Company has interests in eleven Irish offshore licences, as well as licences in
the Netherlands and Morocco.   Island is involved in an exploration and
appraisal programme which 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 programme. 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.


Licence Interests, Old Head of Kinsale - Island operator with 65%*; EnCore 15%
(*with option to acquire an additional 5%); Valhalla Oil and Gas Limited 20%.


Licence 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.


Further information on Island can be found on the Company's website at 
http://www.islandoilandgas.com.








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