Farm Out Agreements

Island Oil and Gas PLC
10 April 2007



10 April 2007


 ISLAND OIL & GAS CONCLUDES FARM OUT AGREEMENTS ON THE OLD HEAD OF KINSALE AND
                       CONNEMARA FIELDS, OFFSHORE IRELAND


Island Oil & Gas plc ('Island') (LSE:IOG) today announces that, in line with its
current strategy of bringing forward the value of its project portfolio, it has
concluded two farm out agreements.

•Island has concluded a farm out agreement with Valhalla Oil and Gas
Limited ('Valhalla') (OTC:VAOG) whereby Valhalla will acquire a 20% interest in
the Island-operated Exploration Licence 4/05 ('Old Head of Kinsale' gas field)
in the Celtic Sea, offshore Ireland. Drilling of appraisal well 49/23-2 is
expected to commence during May this year using the Petrolia rig.

•Island and Valhalla (its co-licensee), have concluded an agreement
whereby they will give Netherlands-based Oyster Energy ('Oyster'), a subsidiary
of Horizon Energy Partners ('Horizon') the option to farm in for a 10% interest
(pro-rata 6.15% and 3.85% respectively) in Island-operated Frontier Exploration
Licence 1/04 ('Connemara') in the Porcupine Basin on the Atlantic Margin,
offshore Ireland.

•Island is currently engaged in additional farm out discussions with
other third parties as part of its wider farm out strategy.


Old Head of Kinsale Farm Out Agreement

Under the terms of this agreement, Island will assign Valhalla a 20% interest in
the Old Head of Kinsale gas field, reducing Island's interest to 80%, in return
for a cash consideration of Stg£2 million plus a 7.5% royalty, which will be
determined by a number of factors including field performance.

Valhalla will immediately participate pro-rata in the upcoming appraisal well 49
/23-2. Assuming a successful test, the partners would look to complete and
tie-back both this well and the well 49/23-1 (successfully drilled in 2006) to
the Kinsale platform next year with a view to producing first gas in the fourth
quarter of 2008.


Connemara Farm Out Agreement Option

Under the terms of the Connemara farm out option, Oyster will have the exclusive
option to farm in to 10% of Frontier Exploration Licence 1/04, pro-rata from
Island and Valhalla, for a cash consideration. The option must be exercised
prior to 31 August 2007. On exercise, Island's equity would reduce from 61.5% to
55.35% and Valhalla's from 38.5% to 34.65%.

Frontier Exploration Licence 1/04 covers Block 26/28 and part Blocks 26/27, 35/2
and 35/3 on the Atlantic margin and contains the Connemara oil field and several
undrilled exploration prospects, 150 km offshore the west of Ireland in the
Porcupine Basin.

An integrated subsurface study is currently being conducted by Horizon Energy
Partners, which is key to determining the potential field performance and hence
commercial feasibility of developing the Connemara Field.


Both agreements are subject to approval from the Irish Minister for
Communications, Marine and Natural Resources.

Note: The option agreement with EnCore Oil plc to acquire up to 20% in the
Connemara Licence has been extended until 30 June 2007.

Paul Griffiths, Chief Executive of Island, commented:

'These farm out agreements underline our strategy of accelerating key
development projects through alliances with strategic industry partners. We look
forward to working with Valhalla on this year's programme at the Old Head of
Kinsale; an important step in developing our portfolio. We also hope to work in
close partnership with Horizon Energy Partners, which has a track record of
identifying innovative and cost-effective field development concepts, going
forward. We continue to pursue farm out opportunities which enhance the
development of our near term oil and gas projects.'

Enquiries:

Lisa J Newman MCIPR MIRS
Newman Consulting

Tel: [phone]


Notes to Editors:

About Island

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 is due to commence
in the second quarter of 2007 with an appraisal well at the Old Head of Kinsale
gas field, followed by an appraisal well at the Schull gas field.

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



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