Preliminary Results

Island Oil and Gas PLC
26 January 2006


26 January 2006

                              ISLAND OIL & GAS PLC
              PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005

Island Oil & Gas plc ('Island' or the 'Company'), today announces its
preliminary results for the year-ended 31 July 2005. These are the first set of
preliminary results since the Company's admission to AIM in December 2004.

FINANCIAL HIGHLIGHTS:

  * Turnover of Stg£484,000 from gas sales
  * Reduced loss before tax of Stg£127,000
  * Retained cash balances of Stg£8.366 million (excluding the Stg£8.31
    million proceeds of the December 2005 private placing)

HIGHLIGHTS

  * August 2004 - Island executed an option agreement with Marathon Oil
    Ireland Ltd giving the Company an exclusive option to explore the oil and
    gas bearing reservoirs underlying the Kinsale gas accumulation.

  * October 2004 - Island acquired Island Expro Ltd, adding Licensing Options
    03/4 (Old Head of Kinsale) and 04/2 (Schull Prospect) and the benefit of an
    August 2004 15% farm-out agreement with Petroceltic International plc over
    03/4.

  * November 2004 - Island raised Stg£8.24 million by way of a private placing
    at 40p per share.

  * December 2004 - Island completed its successful admission to AIM. Island
    also executed a sale and purchase agreement with Lundin Petroleum AB which
    was subsequently completed in June 2005.

  * January 2005 - Island executed a farm-in agreement with Ramco Donegal Ltd
    and Sunningdale Donegal Basin Ltd over Frontier Exploration Licence 1/05 in
    the Donegal Basin, gaining a 26% interest in the Licence

  * April 2005 - Island announced its interim results for the six months ended
    31 January 2005, reporting a loss before tax of Stg£545,000 and retained
    cash balances of Stg£8.472 million.

  * June 2005 - Island announced the completion of the Lundin Transaction,
    adding important acreage and commercial agreements related to the use of
    Celtic Sea infrastructure and gas sales agreements, as well as net
    production and revenue from Seven Heads after 1 October 2004. Also in June,
    Licence Extensions were granted for Licensing Options 03/5 and 03/6 both
    acquired as part of the Lundin Transaction.

Post year end:

  * August 2005 - Island was awarded Frontier Exploration Licence 3/05 in the
    Northeast Rockall Basin.

  * October 2005 - Island executed a rig contract with Petrolia Drilling
    Limited for the Petrolia semi-submersible drilling unit for a three-well
    programme offshore Ireland in 2006.

  * December 2005 - Island successfully raised Stg£8.31 million by way of a
    private placing at 70p per share, with a further Stg£4.15 million receivable
    in April 2006 if all the warrants associated with the placing are exercised.

We expect the Annual Report to be posted on 27 January 2006. This will be
sent to all shareholders whose names appear on the register at the date of
posting.

Commenting upon the results, Paul Griffiths, Island's Chief Executive, said:

'Over the past year, we have successfully developed a portfolio of Irish oil 
and gas interests that includes nine previous oil and gas discoveries and an
interest in a producing field. We operate and have large equity interests in
most of these projects.

'During the year we have matured three projects which are ready for drilling in
2006 and, most importantly, have secured a drilling rig and substantial funding
and support from the investment community in Ireland and the United Kingdom to
implement and execute a sustained drilling programme during the first half of
2006. This programme places the Company in an excellent position to enhance
shareholder returns during 2006.'

Enquiries:

Lisa J Newman
Newman Consulting
Tel: [phone]


                              ISLAND OIL & GAS PLC
              PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005

                              CHAIRMAN'S STATEMENT

We have spent the past year rapidly developing a portfolio of Irish oil and gas
interests that includes nine previous oil and gas discoveries and an interest 
in a producing field. We operate and have large equity interests in most of 
these projects.

During the year we have matured three projects which are ready for drilling in
2006 and, most importantly, have secured a drilling rig and substantial funding
and support from the investment community in Ireland and the United Kingdom to
implement and execute a sustained drilling programme during the first half of
2006. This programme places the Company in an excellent position to enhance
shareholder returns during 2006.

In the months preceding our successful AIM Admission, we added a number of
important projects to our portfolio. In August 2004, we executed an option
agreement with Marathon Oil Ireland Ltd giving us an exclusive option to explore
the oil and gas bearing reservoirs underlying the Kinsale gas accumulation. In
October 2004, Island acquired Island Expro Ltd, adding Licensing Options 03/4
(Old Head of Kinsale) and 04/2 (Schull Prospect), strategically adjacent to the
Seven Heads and Kinsale Head gas infrastructure, and also the Company acquired
the benefit of an August 2004 farm-out agreement with Petroceltic International
plc.

November 2004 saw Island successfully complete a private placing at 40p per
share, raising Stg£8.24 million ahead of its Admission to AIM in December 2004.
We believe that the AIM listing has been extremely important in the development
of the Company.

Following the AIM Admission, Island has continued to deliver upon its stated
strategy. In December 2004, we executed a sale and purchase agreement with
Lundin Petroleum AB ('Lundin') for a portfolio of offshore Irish assets. In
January 2005, the Company executed a farm-in agreement with Ramco Donegal Ltd 
and Sunningdale Donegal Basin Ltd for Frontier Exploration Licence 1/05 in the 
Donegal Basin, gaining a 26% interest in the Licence and adding important 
acreage in the under-explored but highly prospective Atlantic Margin.

In June 2005, Island reached an important milestone in the development of the
Company's project portfolio with the announcement of the completion of the
Lundin Transaction. The Transaction added important acreage, including a 12.5%
participating interest in the Seven Heads Petroleum Lease (Seven Heads gas) and
a 12.5% debt-free interest in the Seven Heads infrastructure; a 12.5% interest
in Licensing Option 03/5 covering Seven Heads oil; a 22% participating interest
in Licensing Option 03/6 (Roscarberry Licensing Option), and an Option, which 
Island exercised post year end, to acquire a further 5%groundfloor interest
in Frontier Exploration Licence 1/05 in the Donegal Basin. In June 2005, Licence
Extensions were granted for Licensing Options 03/5 and 03/6 both acquired as
part of the Lundin Transaction. The Transaction also gave us important
commercial agreements with Marathon Oil Ireland Limited ('Marathon') for access
to the Kinsale production facilities for the processing of our share of Seven 
Heads production, and with RWE Trading (Ireland) Limited ('RWE') to provide a 
sales outlet for gas production. In addition, it provided net production and 
revenue from Seven Heads gas from 1 October 2004.

Post year end, in August 2005, Island has been awarded Frontier Exploration
Licence 3/05 (the 'Killala Licence') in the Northeast Rockall Basin, adding
important acreage in the Atlantic Margin. The Company has a 100% interest and
operatorship in the Licence which is located approximately 70 kilometres off the
west coast of Ireland and approximately 35 kilometres north of the Corrib gas
field. The Licence contains one very significant exploration prospect covering 
an area of up to 80 square kilometres, together with a number of other 
prospects and leads.

In October 2005, we successfully executed a rig contract for a three-well
programme offshore Ireland in 2006 with Petrolia Drilling Limited despite a
highly competitive market for offshore drilling rigs. The drilling programme
will see us drill two Celtic Sea wells and one Donegal Basin well. It is planned
that the Celtic Sea wells will include a well on the Old Head of Kinsale
Prospect in Licensing Option 03/4, which can now be converted into an
Exploration Licence. The second Celtic Sea well, subject to government and
partner approvals, may be an appraisal well on the Seven Heads Petroleum Lease
close to existing infrastructure and designed to extend the area of proven
reserves and significantly increase Island's production revenues from 2007
onwards. Alternatively, a well may be drilled to test the Schull South Prospect
on Schull Licensing Option 04/2 which can now also be converted to an 
Exploration Licence. In the Atlantic Margin, we will be drilling a well on the 
Inishbeg Prospect in Frontier Exploration Licence 1/05 in the
Donegal Basin during 2006. The Inishbeg Prospect is in shallow water and any
production could either be exported to Northern Ireland, or via existing
pipelines to the United Kingdom mainland.

Outside Ireland, we have been pursuing strategic opportunities where the Company
and its key management can apply their technical skills and country experience.
These include an offshore exploration permit application in the Aquitane Basin
in southwest France for the Arcachon (formerly Cap Feret) Permit. Island is
competing for the exploration permit with Vermilion REP SAS ('Vermilion'), a
Canadian company and currently the largest oil producer in France. Island awaits
a response from the French Ministry on the timing of a potential award of the
exploration permit. The Company is also pursuing potential new projects in
Libya, the Netherlands and East Timor, all of which are at an early stage.

Financial Review

The funds required to facilitate the expansion of the Company, and the
realisation of our planned exploration programme, have been raised in two
tranches. In November 2004, prior to Island's Admission to AIM, a private
placing raised some Stg£8.24 million in new equity finance. These shares were
issued at 40p per share.

In December 2005, a further placing was arranged at a price of 70p per share to
raise Stg£8.31 million gross. A further Stg£4.15 million is receivable by the
Company in April 2006, if the warrants attached to the placing shares are
exercised.

Both of these placings expanded our shareholder base and brought in investment
from both existing and new institutional and private investors.

Meantime, the gross gas revenue from our interest in Seven Heads from the
effective date, 1 October 2004, through to the 31 July 2005 year end amounted to
some Stg£484,000. The profit arising from the gas sales has helped us achieve a
substantial reduction in the Stg£545,000 loss before tax as reported in our
interim accounts (for the six months ended 31 January 2005) down to the
Stg£127,000 loss before tax for the year ended 31 July 2005.

I am also pleased to report that our cash balances at the year end remained at a
healthy Stg£8.366 million (which of course excludes the Stg£8.31 million raised
via the December 2005 private placing). This compares favourably with the
Stg£8.472 million in our balance sheet at 31 January 2005 given the level of
expenditure on both exploration and corporate activity during the period.

Board Changes

During the year under review we outsourced most of our exploration and
administration requirements. Now with more projects and the development of our
2006 drilling programme, over a very short time scale, we are actively
recruiting more personnel, mostly on short-term contracts, to assist us to
successfully manage and operate our drilling programme. The acquisition of the
Seven Heads producing gas interest provides us with cashflow to help meet our
projected personnel and administrative expenses.

Post year end, we are expanding the Board with the appointment of Terry Jones as
Finance Director. Terry joins Island with a wealth of commercial and financial
experience and negotiating skills arising from his management under very
difficult circumstances of the Seven Heads Gas Sales Contract for Ramco Energy
plc. Our Acting Finance Director, Jack McKinney, will replace Phil Beck as
Commercial Director whilst Phil will move to take up the role of New Ventures
Director. These changes will end the temporary arrangements put in place on
listing the Company in 2004 and will result in the above individuals being able
to focus on those areas of the business to which their expertise is most suited.

We also are taking steps to appoint a further new Director with responsibility
for operations, including the 2006 drilling programme and the planning and
execution of a 2007 drilling programme, subject to rig availability, on our
Atlantic Margin licences.

Outlook

The year under review has seen Island successfully pursue our stated strategy;
adopting our synergy-based approach to appraisal and exploration, complemented
by strategic acquisitions.

We are optimistic about the future. After many years of low energy prices and
oversupply the market has stabilised with medium term forecasts being made of a
sustainable oil and gas price at a level significantly higher than those
prevailing when Island's portfolio of oil and gas discoveries were first made. 
Our increased production revenues from the Seven Heads gas field during the 
past year reflect this new energy pricing environment and have established 
Island's position as a producer of natural gas in Ireland.

Worldwide the oil and gas industry is in a growth phase with high energy prices
and there is now an increased interest in new oil and gas projects, particularly
those where previously non-commercial or technically challenging oil and gas
discoveries have been made but remain undeveloped. Economic thresholds for the
development of such discoveries have been adjusted to reflect higher energy
prices. Our experience over the last year demonstrates this with the Company
receiving a number of unsolicited approaches to review and evaluate its
portfolio of Irish oil and gas interests.

The investment market is also supportive of exploration and production
companies. Investment continues at a high level and many investors have seen
substantial returns from the sector in the last two years. This is supported by
the fact that post year end we successfully completed a private placing (at 70p
per share) within a very short timescale to raise Stg£8.31 million inclusive of
expenses and a further Stg£4.15 million if warrants are exercised by April 2006.

The 2006 drilling programme is focused on gas exploration and appraisal and is
designed to present a well-balanced profile of low to high risk prospects with
the potential to secure at the low end of the risk profile early cash flow,
through tie-back of new discoveries to existing
Celtic Sea infrastructure, and to secure at the high end of the risk profile,
through the Inishbeg Prospect in the Donegal Basin, the potential to transform
the Company through the discovery of a major new gas resource in shallow water.

Notwithstanding the above we are also beginning the process of planning, subject
to rig availability, our 2007 drilling programme which will focus on exploring
our deepwater Killala Prospect in the Rockall Basin which, if successful, has
the potential to be the largest
hydrocarbon discovery made to date in Irish waters as well as continuing
appraisal and development of our Connemara and Seven Heads oil discoveries.

We will continue to seek to expand the geographic spread of our oil and gas
interests during 2006 and we look forward as a first step in this process to the
possible award of an exploration permit in France.

The substantial progress made by the Company during the past year would not have
been possible without the dedication and total commitment shown by the Board of
Directors of the Company to deliver that which we set out to achieve in our AIM
admission document. We would also like to thank the Company's many professional
and technical advisors for their advice and assistance during what has been an 
extraordinarily active year for the Company

Bryan Benitz
Chairman


CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 July 2005

                                            Year ended      Period ended
                                            31 July         31 July
                                            2005            2004
                                            Stg£'000        Stg£'000

Turnover                                           484              -
Cost of sales                                     (263)             -
                                            ___________     __________
Gross profit                                       221              -

Profit on sale of interest in 
licence and sale of financial asset                104              -
Exploration and licence expenses                     -             (20)
Administration expenses                           (728)            (48)
                                            ____________    ___________

Operating loss - continuing operations            (403)            (68)
Interest receivable and similar income             276               3
                                            ____________    ____________

Loss on ordinary activities before taxation       (127)           (65)
Taxation on loss on ordinary activities            (21)            (1)
                                            ____________    ____________

Loss for the financial year                       (148)           (66)
Profit and loss account at beginning of year       (66)            (1)
Foreign exchange movement on reserves                -              1
                                            ____________    ____________

Profit and loss account at end of year            (214)            (66)
                                            ____________    ____________
                                            ____________    ____________   
                                 
Loss per share (pence)                         (0.0042)        (0.0083)
                                            ____________    ___________
                                            ____________    ___________


STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 July 2005

                                               Year ended     Period ended
                                               31 July         31 July
                                               2005            2004
                                               Stg£'000        Stg£'000

Loss for financial year                          (148)           (66)
Unrealised profit on disposal of                   47              -
intangible asset                             ____________    ____________

Total recognised gains and losses for the 
financial year                                   (101)            (66)
                                            _____________    ____________

CONSOLIDATED BALANCE SHEET
At 31 July 2005
                                            31 July         31 July
                                            2005            2004
                                            Stg£'000        Stg£'000
Fixed assets
Tangible assets                                 2,617               -
Intangible assets                               3,309              50
                                            _____________    ___________

                                                5,926              50
                                            _____________    ___________
Current assets
Bank and cash                                   8,366             974
Debtors                                           245               7
                                            _____________    ___________

                                                8,611             981

Creditors: amounts falling due within 
one year                                         (205)           (111)
                                            _____________    ____________

Net current assets                              8,406             870
                                            _____________    ____________

Total assets less current liabilities          14,332             920
Provision for liabilities and charges            (617)              -
                                            _____________    ____________

Net assets                                      13,715            920
                                            _____________    ____________
                                            _____________    ____________

Capital and reserves
Called up share capital                            326             75
Share premium                                   13,556            911
Unrealised reserve                                  47              -
Profit and loss account                           (214)           (66)
                                            _____________    _____________
                                            _____________    _____________

Shareholders' funds - equity                     13,715           920


CONSOLIDATED CASHFLOW STATEMENT
For the year ended 31 July 2005
                                              Year ended         Period ended
                                              31 July            31 July
                                              2005               2004
                                              Stg£'000           Stg£'000

Net cash (outflow)/inflow from operating 
activities                                         (416)            36

Returns on investments and servicing of finance     276              3
Corporation tax                                     (27)             -
Capital expenditure and financial investment       (343)           (50)

Acquisition of subsidiary undertakings              200              -
                                            ___________        _____________

Net cash outflow before financing                  (310)           (11)

Financing                                         7,702            985
                                            ____________        ____________

Increase in cash for the year                     7,392            974
                                            ____________        ____________
                                            ____________        ____________





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