Island Oil loss widens as costs rise

ISLAND Oil & Gas incurred losses before tax of £400,000 (€591,900) for the year to the end of July, up from £100,000 (€149,000) the previous year, as increased exploration costs swamped earnings from gas sales.

Turnover more than doubled to £1.1m (€1.62m), boosted by gas sales and higher prices from the Seven Heads field, off Kinsale, where the group has a 12% stake.

The group operates two gas wells in the Celtic Sea off the south-west coast of Ireland and chief executive Paul Griffiths yesterday said the group plans a steady build up of its oil and gas portfolio in the years ahead.

It is involved in high and low-risk areas of exploration offshore Ireland with potential major finds in the Atlantic Margin near Rockall in the north Atlantic and off Donegal.

Mr Griffiths confirmed that the group will determine the level of investment required to explore those areas over the next few months.

By then it hopes to have an operator in place and its funding requirements identified.

Drilling a well in the Atlantic Margin would cost up to £40m, but the group can lower costs by farming out ownership of wells, as it has done previously, he said.

Talks have been initiated with three potential exploration groups with a view to progressing those high-risk drilling options currently owned by the group, he said.

At the end of the process the group hopes to have estimated its future funding requirements and to have an operator in place.

At present the group has cash of over £6m to hand with £5.5m available in convertible loans plus the £2.2m secured earlier this month though the farm in an agreement with EnCore Oil.

Overall Mr Griffiths believes the group is well positioned to top attract investment for its near-production projects in the Celtic Sea, on the Atlantic margin and in Holland.

“We will seek finance through joint venture partnerships and the investment community,” he said.

Exploration is targeted to start in the Atlantic Margin by 2009, provided rigs can be secured, given the high level of demand for them internationally at present.

On future oil prices Mr Griffiths said the price per barrel could fall to close to $50 in the coming months as market investors take a more measured view of future supplies.

However, any glitch in global security and increased geopolitical tensions could shove prices significantly higher, he said.

Last year the group raised over €8m to fund its drilling and productions programmes in Ireland and is also heavily backed by its major shareholder Platinum which pumped £10m into the company last year.

A further £11m is in the offing which would increase the group’s stake in Island further, when finance is drawn down.

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