Interim Results

Island Oil and Gas PLC
23 April 2008



Island Oil & Gas plc
'Island' or 'The Company'


Interim Results for the period ended 31 January 2008



Financial Highlights


O       Turnover: Stg£0.92m from gas sales (2007: Stg£1.2m)

O       Operating profit: Stg£0.904m (2007: Stg£5.39m loss)

O       Profit before tax: Stg£0.418m (2007: Stg£5.34m loss)

O       Extended debt facility with RMB Resources

O       Cash balance: Stg£1.523m (2007: Stg£2.367m)

O       Earnings per share: Stg£0.0015 (2007: Stg(£0.0713))

O       Bluewater Group investment: 3.75 million shares in Island at Stg£0.60
        each, representing 3.22% of the Company's issued share capital



Operational Highlights



O       Considerable progress in Celtic Sea:

        o       Successful test from Schull appraisal well: potential producer of
                natural gas

        o       Front end engineering contracts awarded for Old Head of Kinsale 
                and Schull

O       Positive movement on Atlantic Margins:

        o       OMV joins project after asset swap deal

        o       Second significant gas prospect identified on the Killala Licence

O       South East Europe: new horizons:

        o       Asset swap with OMV facilitates entry into Albania

        o       Exclusive option to acquire upstream and downstream assets in 
                Moldova and participate on a 50/50 basis for opportunities in 
                the Former Soviet Union with Valiexchimp

o       Acquisition of 50% of Durresi Block, offshore Albania, from Lundin
        Petroleum

O       Moroccan Potential:

o       Island signs a Petroleum Agreement relating to seven Exploration
        Permits in the Tarfaya Basin, onshore Morocco. The Company is the designated
        operator in the Tarfaya Permit with 40% equity

O       Appointment of Karl Prenderville as Commercial Director


Paul Griffiths, CEO of Island Oil & Gas plc Commented



'This has been a period of considerable progress, driven by the exploitation of
our key differentiator; the ability to operate upstream projects, which has in
turn created significant value for our shareholders.



We are delighted to have attracted inward investment from major industry
players. The ability of the management to attract partners such as OMV and
Bluewater sets us apart in the market and will facilitate faster progress
towards the monetisation of our prospects and assets.



By diversifying our portfolio, with strategic entry into South Eastern Europe
and Morocco, we have both spread our risk profile, and opened up new upside
potential. Both regions are proven petroleum provinces, that we believe hold
exciting exploration and development options.



These interim results, with strong profit before tax and  EPS demonstrate
Island's ability to add value in tight market conditions. With predicted long
term high oil and gas prices and a portfolio of projects across the value chain
we remain highly confident for our future prospects.'







                                                                   23 April 2008

Further information:



Island Oil & Gas plc
Paul Griffiths
Karl Prenderville                              Tel: [phone]
www.islandoilandgas.com



Davy (NOMAD and broker)
Anthony Farrell                                Tel: [phone]



Landsbanki (UK broker)
Simon Robinson                                 Tel: [phone]



College Hill (Financial PR)
Paddy Blewer                                   Tel: [phone]
Nick Elwes






Chairman's Statement



The six months ended 31 January 2008 has been a period of consolidation for
Island during which the Company has made progress towards realising the value of
its field developments whilst further enhancing the international portfolio.



At the beginning of the period we tested the 57/2-3 gas appraisal well at Schull
which was the culmination of a second successful drilling campaign in the Celtic
Sea. We are now concentrating on development options for the Old Head of Kinsale
and Schull gas fields with a view to creating value to shareholders as quickly
as market conditions dictate.



The Company has clearly proved itself as a capable operator which is now
creating opportunities in other areas such as the Netherlands, Morocco, Albania
and Moldova.



In the Atlantic Margin the Bluewater Group, one of the world's leading providers
of Floating Production Storage and Offloading ('FPSO') facilities, purchased
additional equity in the Connemara Licence further underlining the potential of
the oil field and the exploration prospects on the Licence. Several wells are
scheduled to be drilled by other operators in this prospective area over the
next two years and Island is likely to see a significant uplift in its acreage
valuation with any drilling success.



Following completion of reservoir engineering studies on the Amstel field,
offshore the Netherlands, we expect to see an improvement in the range of
potential resources which will increase the potential value of this project.
Post 31 January 2008, we have been awarded the Q13b Licence which surrounds the
Amstel field, thereby creating the potential to develop the Zaan oil discovery
as a satellite tie-back to the Amstel facilities.



Island has further enhanced its international portfolio with a second licence
award in Morocco as operator and we have signed a Memorandum of Understanding ('
MOU') with Valiexchimp giving Island the exclusive right to acquire producing
assets in Moldova and participate in any future opportunities in the Former
Soviet Union on ground floor terms. Offshore Albania the Company acquired
Lundin's 50% equity in the Durresi Block and immediately reached agreement with
Beach Petroleum on a farm-in for 25% equity initially and subsequently up to 45%
equity in the Licence.



The Company continues to actively pursue significant farmout transactions that
will progress our near term development projects in order to reach our goal of
generating cash flow from production and to provide the financial capability to
accelerate our highly prospective exploration portfolio.



The Board was further strengthened with the appointment of Karl Prenderville as
Commercial Director in August 2007. Our loan facility through RMB Resources was
increased to Stg£12 million in December 2007 to reflect the increase in activity
related to our near-development projects and has been further extended until at
least May 2008. We believe our strategy will significantly enhance shareholder
value over the coming months through advancing our near term developments and
managing the portfolio to reduce financial exposure whilst adding partners with
the potential to progress our projects.


FINANCIAL RESULTS



The Company recorded a profit before taxation and finance income and finance
expense of Stg£0.9 million for the half year period compared to a loss of
Stg£5.4 million in the previous comparable period. The profit relates mainly to
the sale of a 10% interest in the Amstel field development in the Netherlands.
There were no major write offs during the period.



Turnover from our interest in the Seven Heads Gas Field was Stg£0.9 million
compared to Stg£1.2 million in the previous comparable period, reflecting a
small reduction in gas produced Stg£(0.2 million) combined with lower gas prices
(Stg£0.1 million).



Cost of sales for the half year of Stg£0.7 million were in line with budget and
mainly related to pipeline maintenance during the period. Administration costs
for the half year were Stg£0.8 million compared to Stg£0.7 million in the
previous comparable period.



In October 2007, Island secured an additional Stg£4.5 million short term loan
facility ('facility') from RMB Resources ('RMB') increasing the overall facility
to Stg£12 million.  In December 2007 RMB extended the loan repayment date and at
the same time surrendered their right to 5,759,631 warrants at an exercise price
of Stg£0.7813 per ordinary share in exchange for 1,000,000 fully paid up shares.
The retained earnings reserve was increased by Stg£0.261 million to reflect the
net effect of surrendering the warrants and issuing the fully paid up shares.



Cash balances at the period ended amounted to Stg£1.5 million. It is anticipated
that farmout and asset sale transactions will result in further cash payments to
the Company over the next few months.



The financial results for the half year have been prepared in accordance with
International Financial Reporting Standards ('IFRS'). In accordance with IFRS6,
'Exploration for and Evaluation of Mineral Resources', costs incurred prior to
the award of exploration licences have not been capitalised. Stg£0.1 million in
the current period and Stg£0.2 million relating to prior year expenditure has
been written off through reserves following the adoption of IFRS6.



Also in accordance with International Accounting Standards ('IAS') 23 'Borrowing
Costs', borrowing costs directly attributable to the acquisition and
construction of qualifying assets have been added to the cost of these assets.
This amounted to Stg£0.4 million in the current period.  Stg£0.3 million
relating to the prior year has been capitalised and adjusted through reserves.





Gas Production Revenue



Gas sales revenues for the interim period amounted to Stg£0.92 million compared
with Stg£1.182 million for the same period last year. This reflects a reduction
in both production volumes and average price received in respect of gas produced
by the Seven Heads gas field which produced at gross rates ranging from 10.5 -
12 Million Standard Cubic Feet per Day ('mmscf'). It is expected that production
rates will be maintained at 10.5 mmscf per day until the end of September 2008.



Estimated gross remaining reserves from 1 January 2008 have been revised upwards
to 9.3 billion cubic feet ('bcf') or 1.163 bcf net to Island up from 8.6 bcf or
1.075 bcf net to Island according to Marathon's latest estimates.






Portfolio Management



The Company concluded its asset swap agreement with OMV whereby it swapped 50%
equity in Atlantic Margin Licence 3/05, offshore Ireland, for 50% equity and
operatorship of the Durresi Block, offshore Albania. Island subsequently
acquired the remaining 50% equity in Durresi from Lundin Petroleum and has
already agreed terms with Beach Petroleum to farm out up to 45% equity.



Island has signed an MOU with Valiexchimp S.R.L. giving it the right to acquire
both upstream and downstream assets in Moldova and to participate in
opportunities in the Former Soviet Union on a 50/50 basis.



Onshore Morocco, Island signed a Petroleum Agreement giving it 40% equity and
operatorship of seven Exploration Permits in the Tarfaya Basin.



In Atlantic Margin Licence 1/04, containing the undeveloped Connemara oil field,
the Bluewater Group exercised its option to acquire 10% equity by acquiring 3.75
million shares in Island at a purchase price of Stg£0.60 per share. Bluewater
had a second option to acquire a further 10% equity in the Licence for a cash
payment of Stg£2.25 million, which was subsequently exercised after the end of
the current period in February 2008.





Celtic Sea Assets



At the beginning of the current period Island completed its 2007 drilling
campaign with a successful test of gas appraisal well 57/2-3 at Schull. The well
flowed at a rate of 21 million standard cubic feet per day and was suspended as
a potential producer.



Technical and commercial evaluation of the Old Head of Kinsale and Schull gas
fields is ongoing aimed at a joint development of both fields through the
Kinsale facilities. Pegasus International is currently performing front-end
engineering studies.



The issue of security of gas supply for Ireland has become increasingly
important and the Irish Authorities are undergoing a consultation process to
decide on the best options for a strategic national gas reserve. Island is
participating in this process and is also looking at the potential for a gas
storage project with Schull or Old Head of Kinsale.





Atlantic Margin



Island continues to attract high calibre partners to its Atlantic Margin acreage
and the successful sale of equity to the Bluewater Group in respect of the
Connemara Licence enhances the partnership with expertise relating to FPSO oil
field developments. It is planned to carry out a feasibility study for a
potential pilot development option for the Connemara oil field over the next few
months.  The Licence also contains several significant exploration prospects.



In the Rockall Basin, the addition of OMV as a 50% partner underlines the
potential of the large Killala gas prospect in Licence 3/05.  Seismic
reinterpretation has identified a second significant gas prospect in the
Licence: the Kingfisher Prospect. 3D seismic will be acquired subject to vessel
availability, contract terms and a revaluation of the survey area following the
addition of the new Kingfisher Prospect.



Geological and geophysical studies have identified a large oil prospect in the
Southern Slyne Trough (Licence 4/06 'Inishmore') where Lundin Petroleum AB is a
50% partner. A 3D seismic acquisition programme over the Licence will be
coordinated with the survey planned for the Killala Licence.



Several exploration wells are scheduled to be drilled in the Atlantic Margin
over the next couple of years by a number of operators. The value of Island's
acreage would be significantly enhanced should any of the drilling be
successful.



Information gathered from the Inishbeg well drilled in 2006 is assisting with
technical evaluation of the 'Inishowen' Licence in the Donegal Basin (Licence 3/
06). A 2D seismic acquisition programme is planned for 2009 to further
investigate prospectivity in the acreage.



Island and the Bluewater Group have jointly applied for 3 blocks in the
Porcupine Basin Licensing Round. After the current period Island and the
Bluewater Group were successfully awarded this prospective acreage which
contains at least one significant exploration prospect. Island will operate the
new licence and hold 50% equity.



The above portfolio of Atlantic Margin prospects is the subject of an intense
farmout promotion and several oil majors are currently reviewing the
opportunity.





International Portfolio



In the Netherlands, Horizon Energy Partners are close to finalising a reservoir
engineering study for the Amstel oil field. It is anticipated the results will
show a potential increase in the range of prospective resources and it is
envisaged that a Field Development Plan will be submitted in the second quarter
of 2008 with first oil planned for 2010. Post 31 January 2008, Island has been
awarded the Q13b Exploration Licence offshore the Netherlands which surrounds
the Amstel field. The acreage contains the Zaan discovery, which could
potentially be tied back through Amstel facilities, and several other prospects.



A Memorandum of Understanding ('MOU') was signed with Valiexchimp S.R.L. giving
Island the right to acquire 50% of the Valeni Oil Field, Victorovka Gas Field,
Comrat refinery and five land rigs all situated in Moldova. It is expected this
transaction will be completed in the second quarter of 2008 resulting in the
Company's first oil production. Current production rate from the Valeni Field is
around 700 bbls per day. On completion of the deal Island will have the
exclusive right to participate on a 50/50 basis with Valiexchimp in new
opportunities in the Former Soviet Union.



The Company was awarded 40% equity and operatorship of seven Exploration Permits
in the Tarfaya Basin onshore Morocco. The 'Tarfaya Permit' is valid for up to
eight years and a work programme has been committed to during the initial two
years and six months phase of the Permit comprising seismic reprocessing and
acquisition plus geochemical modelling. A drill or drop decision will be made at
the end of this initial phase of the Permit.



In the Durresi Block offshore Albania, Island acquired the remaining 50% equity
interest from Lundin Albania BV and has, in addition, agreed farm out terms with
Australian company Beach Petroleum Limited ('Beach'). The farmout will result in
Beach acquiring an initial 25% equity interest in the Durresi Block for back
costs. Island has granted Beach an option to increase its equity to 45% by
contributing 55% of the dry hole cost of one well at a location to be mutually
agreed between both parties. The Durresi Block covers an area of 4,200 square
kilometres along the Adriatic coast of Albania. It contains the unappraised
A4-1X gas/condensate discovery drilled by Chevron and Agip in 1993 at a time of
lower oil and gas prices. Several undrilled oil and gas prospects and leads
exist in the Block along the northern edge of the Apulia Platform. This trend is
currently the focus of renewed exploration and licence activity in the adjacent
Italian offshore blocks.





OUTLOOK & PROSPECTS



Following completion of the Celtic Sea drilling programme Island and its
partners are evaluating development options for the Old Head of Kinsale and
Schull gas fields. These fields have the potential to create significant value
given their close proximity to the Kinsale infrastructure resulting in lower
development costs and the benefit of shared operating costs. They also have the
potential to provide Ireland's strategic gas reserve and/or to be used for
commercial gas storage.



The Atlantic Margin, offshore Ireland, will see a significant increase in
drilling activity over the next two years and Island's acreage position means
that we are in a strong position to take advantage of any drilling success. The
Company is actively seeking additional partners for its Atlantic Margin acreage.



In the Netherlands the recent award of the Q13b Exploration Licence will further
enhance the value of the Amstel field. The Company will continue to progress the
development of the Amstel Field in order to target production and therefore cash
flow by 2010.



Island's operating capability continues to generate opportunities as
demonstrated by the MOU signed with Valiexchimp in Moldova and the award of the
Tarfaya Permit in Morocco. We believe this strategy will add significant value
in the future, particularly in relation to oil field rehabilitation projects,
and we will continue to pursue further low cost opportunities where the Company
sees it has a competitive advantage.



The coming months will see further progress towards developing the Old Head of
Kinsale, Schull and Amstel fields aimed at generating early cash flow to take
advantage of predicted continuing high energy prices. The Company will continue
to manage the portfolio and seek to acquire, farmout, sell or swap assets where
the Board feels it is prudent to do so.



I look forward to reporting further progress on our field developments and the
successful delivery of our strategy to you soon.







Bryan Benitz

Chairman



23 April 2008






Group Income Statement
Interim to 31 January 2008
(unaudited)

                                                            6 Months Ended     6 Months Ended         Year Ended
                                                               31 Jan 2008        31 Jan 2007       31 July 2007
                                                                  Stg£'000           Stg£'000           Stg£'000
                                                                                (As restated)      (As restated)

Revenue                                                               920              1,182              1,762
Cost of sales                                                        (686)              (376)              (902)

Gross profit                                                          234                806                860

Other income                                                            -                  -                401
Administration expenses                                              (830)              (696)            (1,174)
Exploration costs written off                                           -             (5,500)            (4,537)
Disposal of licence                                                 1,500                  -                  -


Operating profit/(loss)                                               904             (5,390)            (4,450)
Finance income                                                         48                 61                181
Finance expense                                                      (534)               (15)              (729)

Profit/(loss) before taxation                                         418             (5,344)            (4,998)

Income tax expense                                                  (250)                  -                  -

Profit/(loss) for the period attributable to                          168             (5,344)            (4,998)
equity holders of the parent

Earnings per share (Stg£)
Basic                                                                .0015            (.0713)            (.0613)
Diluted                                                              .0014            (.0713)            (.0613)





Group Balance Sheet
At 31 January 2008
(unaudited)


                                                             31 Jan 2008       31 Jan 2007        31 July 2007
                                                                Stg£'000          Stg£'000            Stg£'000
                                                                             (As restated)       (As restated)
Assets

Non current assets
Intangible exploration and evaluation assets                     60,752            35,390              55,096
Property, plant and equipment                                     1,557             1,943               1,761

                                                                 62,309            37,333              56,857
Current assets
Other receivables                                                   576             1,842               2,612
Cash and cash equivalents                                         1,523             2,367              11,602

                                                                  2,099             4,209              14,214

Total assets                                                      64,408           41,542              71,071

Equity and liabilities

Equity attributable to equity holders of the parent

Called up share capital                                             798               515                 762
Share premium                                                    51,167            35,175              48,571
Share warrants reserve                                                -               259                 447
Share based payment reserve                                         756               340                 655
Unrealised revenue reserve                                           47                47                  47
Retained earnings                                                (5,540)           (6,317)             (5,971)

Total equity                                                     47,228            30,019              44,511

Non current liabilities
Provisions                                                          689               661                 675

Current liabilities
Trade and other payables                                          4,241             4,321              18,385
Interest bearing loans and borrowings                            12,000             6,541               7,500
Current Tax Liabilities                                             250                 -                   -

                                                                 16,491            10,862              25,885

Total liabilities                                                17,180            11,523              26,560

Total equity and liabilities                                     64,408            41,542              71,071





Consolidated Cashflow Statement
Interim to 31 January 2008
(unaudited)
                                                           6 Months Ended      6 Months Ended      Year Ended
                                                              31 Jan 2008         31 Jan 2007    31 July 2007
                                                                 Stg£'000            Stg£'000        Stg£'000
                                                                                (As restated)   (As restated)
Cash flows from operating activities

Profit/(loss) before taxation                                        418              (5,344)         (4,998)
Finance income                                                       (48)                (61)           (181)
Finance expense                                                      534                  15             729

Operating profit/(loss)                                              904              (5,390)         (4,450)

Adjusted for:
Depreciation                                                         205                 198             396
Gain on disposal of licence                                       (1,500)                  -               -
Exploration costs written off                                          -               5,500           4,537
Cost of share awards                                                 101                   -             315
Foreign exchange loss                                                (22)                (47)            (44)
                                                                    (312)                261             754

Decrease/(increase) in trade and other receivables                 2,036                  26            (156)
Increase in trade and other payables                                  37               2,407             307

Net cash from operating activities                                 1,761               2,694             905

Cash flows from investing activities

Disposal of oil and gas assets                                     1,513                   -           3,617
Expenditure on intangible exploration and evaluation             (21,147)            (20,892)        (41,366)
assets
Contribution from partners for exploration and                       951               2,138          16,742
evaluation assets
Purchase of property, plant and equipment                              -                  (5)            (10)
Finance income                                                        48                  61             181

Net cash used in investing activities                            (18,635)            (18,698)        (20,836)

Cash flows from financing activities

Net proceeds from issue of share capital                           2,631               5,800          19,142
Debt arrangement fees                                               (237)                  -            (590)
Drawdown of bank loans                                             4,500               6,500           7,500
Finance expenses                                                     (99)                  -            (590)

Net cash generated by financing activities                         6,795              12,300          25,462

Net (decrease)/increase in cash and cash equivalents             (10,079)             (3,704)          5,531


Cash and cash equivalents at beginning of period                  11,602               6,071           6,071


Cash and cash equivalents at end of period                         1,523               2,367          11,602




Notes to the interim financial information


1.       The results presented in the Interim Statement are unaudited.


2.       The accounting policies adopted on transition from Irish Generally
Accepted Accounting Policies ('GAAP') as previously adopted, to International
Financial Reporting Standards ('IFRS') as adopted by the EU with effect from the
transition date of 1 August 2006 are set out below in the provisional statement
of accounting policies. These policies have been applied consistently to all
periods presented in these consolidated unaudited interim financial information.



3.       The only impacts on transition arose from the adoption of IFRS 6 '
Exploration for and Evaluation of Mineral Resources' and the adoption of an
accounting policy for the capitalisation of interest in accordance with
International Accounting Standards ('IAS') 23 'Borrowing Costs'. Explanations of
how the transition to IFRS has affected the previously reported financial
position and results in the periods ended 31 July 2007 and 31 January 2007 under
Irish GAAP are shown below:



(a)    Under IFRS 6 'Exploration for and Evaluation of Mineral Resources'
expenditures on non-licensed oil and gas interests are expensed as incurred. For
the period ended 31 January 2007, the adjustment in the income statement is
Stg£Nil and the adjustment to the income statement for the year ended 31 July
2007 is a loss of Stg£0.2 million. The corresponding adjustment on the balance
sheet was to reduce intangible exploration and evaluation assets.



(b)    Under IAS 23 'Borrowing Costs' interest that relates to expenditure on
intangible assets has been capitalised.  For the period ended 31 January 2007
and the year ended 31 July 2007, Stg£Nil and Stg£0.3 million respectively has
been capitalised as intangible exploration and evaluation assets in respect of
borrowing costs and equivalent reductions were made to the finance expense in
the income statement.



4.       The calculation of the basic earnings per share is based on the profit
for the financial period of Stg£0.168 million (2007: Stg£5.344 million loss)
divided by the weighted average number of ordinary shares in issue during the
period ended 31 January 2008 of 112,881,853 and during the period ended 31
January 2007 of 74,930,617.  The calculation of diluted earnings per share is
based on the weighted number of ordinary shares outstanding, adjusted for the
effects of all dilutive potential ordinary shares which comprise share options
granted to employees.  The dilutive weighted average number of ordinary shares
in issued for the period ended 31 January 2008 was 117,120,241 (2007:
76,930,617)





PROVISIONAL STATEMENT OF ACCOUNTING POLICIES



Basis of preparation



The rules of the Alternative Investment Market (AIM) of the London Stock
Exchange require and European Union (EU) Law permits the next annual
consolidated financial statements of the Group for the year ended 31 July 2008
to be prepared in accordance with International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB) and adopted
for use in the EU.




This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
adopted for use in the EU and effective (or available for early adoption) at 31
July 2008 or are expected to be adopted and effective (or available for early
adoption) at 31 July 2008, the Group's first annual reporting date at which it
is required to use IFRS adopted for use by the EU. Based on these recognition
and measurement requirements management has made assumptions about the
accounting policies expected to be applied when the first annual financial
statements are prepared in accordance with IFRS adopted by the EU for the year
ended 31 July 2008.



The IFRS adopted for use in the EU that will be effective (or available for
early adoption) in the annual financial statements for the year ended 31 July
2008 are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ended 31 July 2008.





FUNCTIONAL AND PRESENTATION CURRENCY



The interim consolidated financial information is presented in Sterling, rounded
to the nearest thousand (Stg£'000) except when otherwise indicated.  Sterling is
the functional currency of the Company and all of the Group's subsidiaries.





Basis of MEASUREMENT



The interim consolidated financial information is prepared on a historical cost
basis except for the measurement of share options and warrants which are stated
at fair value at grant date.





USE OF ESTIMATES AND JUDGEMENTS



The preparation of financial information requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.  Estimates and underlying assumptions are
reviewed on an ongoing basis.  Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future periods
affected.



In particular, significant areas of estimation uncertainty and critical
judgements in applying accounting policies that have the most significant effect
on the amount recognised in the financial statements are in the following areas:



•        Measurement of the recoverable amounts of intangible assets

•        Utilisation of tax losses

•        Measurement of share-based payments





Basis of consolidation



The consolidated interim financial information includes the financial
information of Island Oil & Gas plc and its subsidiaries.



Subsidiaries are entities controlled by the Group. Control exists when the Group
has the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, potential voting
rights that presently are exercisable are taken into account. The financial
statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
Intra-group balances and any income and expenses and unrealised gains arising
from intra-group transactions are eliminated in preparing the consolidated
interim financial information. Unrealised losses are eliminated in the same way
as unrealised gains but only to the extent that there is no evidence of
impairment.





REVENUE RECOGNITION



Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group, that it can be reliably measured, that the
product passes out of the ownership of the Group to external customers pursuant
to enforceable sales contracts and that the significant risks and rewards of
ownership of gas have passed to the buyer. Revenue comprises the invoiced value
of gas supplied by the Operator of a gas field which is a jointly controlled
asset and excludes trade discounts and value added tax.





PENSIONS



The Group contributes to a defined contribution pension scheme for certain
employees. Pension scheme costs are accounted for on an accruals basis.





SHARE BASED PAYMENTS



The Group issues equity settled share options as an incentive to certain key
management and staff (including directors). The fair value of share options
granted to directors and employees under the Company's option schemes is
recognised as an expense with a corresponding credit to the share based payments
reserve. The fair value is measured at grant date and spread over the period
during which the awards vest. The fair value is measured using a binomial
lattice model, taking into account the terms and conditions upon which the
options were granted.



The options issued by the Group are subject only to service related vesting
conditions. Service related vesting conditions are not taken into account when
estimating the fair value of awards as at grant date; such conditions are taken
into account through adjusting the number of equity instruments that are
expected to vest.



In certain instances, the Group issues share warrants to third parties in
relation to the settlement of underwriting service fees.  The value of these
share based payments is determined by reference to the fair value of the
services received and is recorded as a cost in the income statement with a
corresponding credit to share warrants reserve.



The proceeds received net of any directly attributable transactions costs will
be credited to share capital (nominal value) and share premium when options or
share warrants are converted into ordinary shares.






FOREIGN CURRENCY



Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the exchange rate
at that date.  The foreign currency gain or loss on monetary items is the
difference between amortised cost in the functional currency at the beginning of
the period, adjusted for effective interest and payments during the period
translated at the rates on the dates they occur, and the amortised cost in
functional currency translated at the exchange rate at the end of the period.
Foreign currency differences arising on retranslation are recognised in profit
or loss.





TAXATION



Income tax expense comprises current and deferred tax. Income tax expense is
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.



Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of goodwill, the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they probably will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.



A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.





CONVERTIBLE LOAN NOTES



Where the Group issued convertible loan notes, the terms of the loan notes are
assessed to determine whether they should be presented as debt or equity. Where
the manner of settlement of the convertible loan notes is only by issue of a
fixed number of shares, the shares to be issued are shown in equity as soon as
the proceeds are receivable. Where warrants are issued concurrently with the
debt, the proceeds received are apportioned between the shares to be issued and
the warrants to the extent that there is value inherent in the warrants.






EARNINGS PER SHARE



The Group presents basic and diluted earnings per share ('EPS') data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise convertible notes and
share options granted to employees.





LEASE PAYMENTS



Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease. Lease incentives received are
recognised as an integral part of the total lease expense, over the term of the
lease.





EXPLORATION, EVALUATION AND PRODUCTION ASSETs



The Group adopts the successful efforts method of accounting for exploration and
evaluation costs. All licence acquisition, exploration and evaluation costs are
initially capitalised in cost centres by well, field or exploration area, as
appropriate.  Directly attributable administration costs and interest payable
are capitalised insofar as they relate to specific development activities.
Pre-licence costs are expensed in the period in which they are incurred.
Exploration and evaluation assets are not amortised but are assessed for
impairment in accordance with the Group's Depletion, Amortisation and Impairment
Policy.



Exploration and evaluation assets will be transferred to production assets
within intangible assets when the technical feasibility and commercial viability
of extracting oil or gas are demonstrable. Subsequent expenditure is capitalised
only where it either enhances the economic benefits of the production assets or
replaces part of the existing production asset. Any costs associated with the
replacement of assets are expensed to the income statement. Production assets
are amortised in accordance with the Group's Depletion, Amortisation and
Impairment accounting policy.





COMMERCIAL RESERVES



Commercial reserves are proven and probable oil and gas reserves, which are
defined as the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a
specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible.  There should be a
50 per cent statistical probability that the actual quantity of recoverable
reserves will be more than the amount estimated as a proven and probable reserve
and a 50 per cent statistical probability that it will be less.





DEPLETION, AMORTISATION and impairment



Impairment reviews on exploration and evaluation assets are carried out on each
cash-generating unit identified in accordance with IAS36 'Impairment of Assets'.
The Group's cash-generating units are those assets which generate largely
independent cash flows and are normally, but not always, single development
areas or fields.



Exploration and evaluation assets are assessed for impairment in certain
circumstances including:



(i) the period for which the Group has the right to explore in the specific area
has expired or will expire in the near future and is not expected to be renewed



(ii) substantive expenditure on further exploration for and evaluation of
resources in a specific area is neither budgeted nor planned



(iii) the Group has decided to discontinue exploration and evaluation activities
in a specific area as commercially viable quantities of oil or gas have not been
discovered



(iv) the carrying amount of an exploration and evaluation asset is unlikely to
be recovered in full from successful development or sale



Any such impairment is recognised in the income statement.



Where there has been a charge for impairment in an earlier period, that charge
will be reversed in a later period where there has been a change in
circumstances to the extent that the discounted future net cash flows are higher
than the net book value at the time. In reversing impairment losses, the
carrying amount of the asset will be increased to the lower of its original
carrying value or the carrying value that would have been determined (net of
depletion) had no impairment loss been recognised in prior periods.



In relation to production assets, all expenditure carried within each field is
amortised from the commencement of production on a unit of production basis,
which is the ratio of oil and gas production in the period to the estimated
quantities of commercial reserves at the end of the period plus the production
in the period, generally on a field-by-field basis. Costs used in the unit of
production calculation comprise the net book value of capitalised costs plus the
estimated future field development costs. Changes in the estimates of commercial
reserves or future field development costs are dealt with prospectively.





DECOMMISSIONING



Provision is made for the decommissioning of oil and gas wells and other
oilfield facilities. The cost of decommissioning is determined through
discounting the amounts expected to be payable to their present value at the
date the provision is recorded and is reassessed at each balance sheet date.
This amount is regarded as part of the total investment to gain access to future
economic benefit and consequently is capitalised as part of the cost of the
asset and the liability is included in provisions.  Such cost is depleted over
the life of the asset and charged to the income statement. The unwinding of the
discount is reflected as a finance cost in the income statement over the
remaining life of the well.





PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment is stated in the Balance Sheet at cost less
accumulated depreciation and any recognised impairment loss. Depreciation on
property, plant and equipment is provided at rates calculated to write off the
cost less estimated residual value of each asset on a straight-line basis over
its expected useful economic life as follows:


•         Equipment 33% per annum

•         Oil and Gas infrastructure 16.7% per annum



NON-DERIVATIVE FINANCIAL INSTRUMENTS



Non-derivative financial instruments comprise trade and other receivables, cash
and cash equivalents, loans and borrowings, and trade and other payables.





Trade and other receivables



Trade and other receivables are carried at amortised cost less provisions for
impairment.





Cash and cash equivalents



Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.



Loans and borrowings



Interest bearing loans and borrowings after initial recognition are carried at
amortised cost using the effective interest rate method. Arrangement fees and
issue costs of debt are deducted from the debt proceeds on initial recognition
of the liability and are amortised to the income statement as a finance expense
over the term of the debt.





Trade and other payables



Trade and other payables are carried at amortised cost.



JOINTly CONTROLLED ASSETS OR OPERATIONS



Jointly controlled assets and operations arise from an arrangement that is a
joint venture carried on with assets that are controlled jointly (whether or not
owned jointly), but not through a separate entity. The consolidated financial
information includes the Group's share of a jointly controlled asset being an
interest in a gas field, the Group's share of expenses incurred by the operator
of the rig and the Group's share of income from the sale of gas from the
facility.





ISSUE EXPENSES AND SHARE PREMIUM ACCOUNT



Issue expenses of new shares are written off against the premium arising on the
issue of share capital.





Borrowing Costs



Borrowing costs based on the effective interest rate directly attributable to
intangible exploration and evaluation assets are added to the cost of those
assets, until such time as the assets become production assets or are available
for sale.




                      This information is provided by RNS
            The company news service from the London Stock Exchange END

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