Farm-out agreements to help develop group’s offshore interests

ISLAND Oil & Gas plc has announced it has concluded two farm-out agreements to help develop its Irish offshore interests.

The first deal could see gas coming ashore from the group’s Old Head of Kinsale field in the last quarter of 2008, the company said yesterday.

It involves a farm out agreement with Valhalla Oil and Gas, which involves the group taking a 20% interest in Island’s Old Head of Kinsale gas field in the Celtic Sea.

Drilling of appraisal well 49/23-2 is due to commence during May this year using the Petrolia rig.

Island and Valhalla have also agreement to give the Netherlands-based Oyster Energy, a subsidiary of Horizon Energy Partners, the option to farm in for a 10% interest in Island’s Frontier Exploration Licence 1/04 in the Porcupine Basin off the west coast of Ireland.

In the case of the Old Head Island is to give Valhalla a 20% interest in the well, reducing its own stake to 80% in the process in return for a cash consideration of £2 million plus a 7.5% royalty, which will be determined by a number of factors.