San Leon has made a proposal to Island for the combination of the two companies with a view to building a strong Irish-based oil and gas exploration and development business. Island is considering this proposal. San Leon is keen to hold a constructive dialogue with Island with a view to working towards a recommended transaction.

Possible Offer San Leon has put forward an indicative non-binding offer for Island (the “Possible Offer”) on the following basis:

For every 2.3 Island Shares: 1 new San Leon Share

Based on the closing price per San Leon Share of 23.0p on 14 October 2009, the Possible Offer would value each Island Share at 10.0p and Island’s entire issued share capital at £13.6 million. The Possible Offer would represent a premium of approximately 31 per cent. over Island’s share price of 7.625p at the close of business on 14 October 2009.

Irrevocable undertaking San Leon has received an irrevocable undertaking from Platinum Petroleum Limited (“Platinum”), the largest shareholder in Island, that, if within three months of 14 October 2009 San Leon was to make an offer for Island on the above basis or upon terms which represent a greater number of San Leon shares per Island share or otherwise on improved terms, Platinum would accept or procure acceptance of such offer in respect of, in aggregate, 25,000,000 Island Shares representing approximately 18.4 per cent. of Island’s issued share capital.

The irrevocable undertaking will cease to be binding if an offer or proposed offer (a “Higher Competing Offer”) is made by someone other than San Leon for the entire issued share capital of Island, the making of which is not or has ceased to be subject to any pre-condition, and which represents an improvement of 30 per cent. or more on the value of the Possible Offer and San Leon has not made or announced a firm intention to make a revised offer on terms substantially equal to or better than those available under the Higher Competing Offer by the date 5 business days prior to the closing date of the Higher Competing Offer.

Strategic benefits of a combination San Leon believes that there is compelling strategic fit between San Leon and Island (together the “Combined Group”). San Leon already has extensive knowledge of certain of Island’s assets: its two Moroccan onshore assets (the Tarfaya area and Zag basin), its recently acquired Moroccan offshore assets at Sidi Moussa and Foum Draa and the Netherlands offshore Amstel Field in which each of San Leon and Island has a royalty interest. San Leon also has good working knowledge of a majority of Island’s Celtic Sea assets and Atlantic Margin assets and would undertake a strategic review of Island’s Albanian assets following a combination.

San Leon believes that the Possible Offer should provide Island Shareholders with an opportunity to share in what San Leon believes to be significant value upside in the Combined Group’s prospects.

Oisin Fanning, Chairman of San Leon, said,“We believe the combination of our two companies would create a strong Irish based oil and gas exploration and development business with the management skills and financial resources to develop the asset portfolio to its full potential and create value.

We believe the terms we are proposing represent a fair basis for a possible combination and look forward to engaging constructively with the Board of Island with a view to consummating a recommended transaction.”

Tags: Island Oil & Gas, San Leon Energy