Recommended Acquisition of Island Oil & Gas plc by San Leon Energy plc to be effected by means of a Scheme of Arrangement

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The Boards of Island Oil & Gas plc ("Island") and San Leon Energy plc ("San Leon") are pleased  to announce that they have reached agreement on the terms of a recommended  share for share acquisition ("Acquisition"). The Acquisition is for the entire  issued and to be issued share capital of Island  and will be implemented by San Leon by means of a scheme of arrangement, as  detailed under Section 201 of the Companies Act, 1963.

The key terms of the Acquisition include:

• the Acquisition will be  effected by a scheme of arrangement between Island and Island Shareholders  which will result in the acquisition by San Leon of the entire issued and to be  issued ordinary share capital of Island;
• Island Shareholders will be  entitled to receive 1 New San Leon  Share for every 2.3 Island Shares they hold. Fractions of New San Leon Shares  will not be issued to Island Shareholders and any fractional entitlement to New  San Leon Shares will be rounded down to the nearest whole number;
• the Acquisition values the entire  issued share capital of Island at £13.3 million (based on the Closing Price of  a San Leon Share of 22.5 pence on [22] February 2010, being the last Business  Day prior to the date of this announcement);
• the Acquisition  represents a premium of approximately 53.3 per cent. to the Closing Price of 6.38  pence per Island Share on [22] February 2010, being the last Business Day prior  to the date of this announcement, and a premium of 28.3 per cent. to the  Closing Price of 7.625 pence per Island Share price on 14 October 2009, being the last  Business Day prior to the commencement of the Offer Period;
• the Island Directors,  who have been so advised by Davy Corporate Finance, consider the terms of the  Acquisition and the Scheme to be fair and reasonable and unanimously recommend  that Island Shareholders vote in favour of the Acquisition at the Court Meeting  and the Extraordinary General Meeting.   In providing its advice to the Island Board, Davy Corporate Finance has  taken into account the commercial assessments of the Island Directors;
• San Leon has received irrevocable  undertakings from the Island Directors and their related parties, who are  together interested in a total of [6,174,729] Island Shares, representing  approximately [4.54] per cent. of the existing issued share capital of Island, to vote (or procure the vote of) such Island  Shares in favour of the Acquisition and the Scheme at the Court Meeting and the  Extraordinary General Meeting. All such irrevocable undertakings will remain  binding even if a higher competing offer is made for Island;
• San Leon has also received  irrevocable undertakings from certain other Island Shareholders, in respect of  a total of [40,250,000] Island Shares, representing approximately [29.61] per  cent. of the existing issued share capital of Island,  to vote (or procure the vote of) their Island Shares in favour of the  Acquisition and the Scheme at the Court Meeting and the Extraordinary General  Meeting;
• San Leon or parties acting in  concert with San Leon own 21,000 Island Shares, representing approximately 0.02  per cent. of the existing issued share capital of Island;  and
• accordingly, San Leon and parties  acting in concert with San Leon own or have received irrevocable undertakings  in respect of, in aggregate, [46,445,729] Island Shares, representing, in  aggregate, approximately [34.17] per cent. of Island's  existing issued share capital to vote (or procure the vote of) such Island  Shares in favour of the Acquisition and the Scheme at the Scheme Meeting and  the Extraordinary General Meeting.

Commenting on the  Acquisition, Oisín Fanning, the Chairman of San Leon, said:

"San Leon's acquisition of Island will create the leading Irish-based oil and gas  exploration and development business.   The unparalleled strategic fit of the two companies' complementary  assets and resources is particularly compelling.  San Leon looks forward to growing the  combined businesses for the benefit of its stakeholders."

Bryan Benitz, the Chairman  of Island, said:

"Unlocking the full  potential value of Island's diverse and  attractive portfolio of assets is more likely to be realised as a result of  this acquisition. The agreement between San Leon and PGS Ventures provides the  financial ability to progress the evaluation of Island's  substantial portfolio of Atlantic Margin licences and accelerate the  monetisation thereof. In addition the Enlarged Group's greater scale and assets  should be a more attractive proposition for investors. The Island Board is thus  of the view that the best way forward in generating future value for Island  Shareholders would be to pool our interests with San Leon."

This summary should be read in conjunction with, and  is subject to, the full text of this announcement and the Appendices to this  announcement. The Scheme will be subject to the conditions and further terms  set out in Appendix I to this announcement and to the further terms to be set  out in the Scheme Document. Terms  used in this summary shall have the same meaning given to them in the full  announcement. All times referred to are London  times unless otherwise stated.

The full terms and conditions of the Acquisition and  the Scheme will be set out in the Scheme Document. In deciding whether or not  to vote in favour of the Resolutions, Island Shareholders must rely solely on  the terms and conditions of the Acquisition and the Scheme and the information  contained, and the procedures described, in the Scheme Document and the Forms  of Proxy. Island Shareholders are advised to read carefully the Scheme Document  and the Forms of Proxy once these have been despatched. The Scheme Document  will contain a section on risk factors and Island Shareholders are encouraged  to read this section carefully. It is anticipated that the Scheme Document and  the Forms of Proxy will be despatched to Island Shareholders as soon as  practicable but in any event within 28 days of the date of this announcement.

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