Valhalla > Investor Relations

Press release – 5th June 2009

VALHALLA OIL AND GAS LIMITED

Celtic Sea Gas Assets - Operational Update

Highlights

Significant improvement in operators assessment of Celtic Sea gas in place
North & Central Schull prospects suggest considerable exploration upside

Gas in Place Estimates

Valhalla Oil and Gas Limited announces that following the interpretation of new seismic data acquired in 2008 by the operator Island Oil and Gas Plc (“Island”), the analysis of production data from the Seven Heads gas field during the past three years by Island and the completion of Island’s technical programme to evaluate the probabilistic range of gas in place estimates for the Old Head of Kinsale and Schull gas fields (the “Fields”), the operator has significantly increased Proven plus Probable gas in place estimates for the two fields relative to previous estimates announced in Island’s Resource Update in November 2007 as follows: Gas Storage Studies

Independent Competent Persons Report (November 2007)
Gas in place estimates (BCF) 100% Equity	P90(proven)	P50 (proven & probable)	P10 (proven + probable + possible)
Old Head	23	41	92
Schull	25	42	51
Total	48	83	143

Source Fugro Robertson Limited

Island Oil & Gas Estimates (June 2009)*
Gas in place estimates (BCF) 100% Equity	P90 (proven)	P50 (proven & probable)	P10 (proven + probable + possible)
Old Head	49	57	64
Schull	52	60	69
Total	101	117	133

* [Risked / Unrisked?]
Source: Island Oil & Gas plc

Island has commenced a scoping reservoir engineering study, using an independent consultant with specific gas storage experience (Humbly Grove gas storage project – now owned by Star Energy / Petronas), to evaluate injection and withdrawal rates for conversion of the Old Head gas field to a gas storage facility early in the future production life of the field. Pegasus Engineering has been commissioned to carry out a scoping gas storage engineering and facilities study based on two possible development options: tie-back to the Kinsale platform facilities or, the construction of new infrastructure to tie-back direct to shore from the Old Head of Kinsale gas field.

Subject to the results of the engineering and facilities study described above, Island will also investigate the potential conversion of the Schull gas field to a gas storage facility.

The potential gas storage projects outlined above, unlike many proposed and active projects in NW Europe, do not rely upon purchasing expensive cushion gas, required to provide pressure support in the reservoir for storage operations, to re-charge depleted gas fields. The Old Head of Kinsale and Schull projects will have valuable cushion gas in place to support any future gas storage operations. The potential development of the Old Head of Kinsale and Schull gas fields will be subject to the approval of partners and the approval by the Minister for Communications, Marine and Natural Resources of Ireland.

Commercial Discussions

Island has initiated preliminary discussions with financial institutions, gas and electric utility companies regarding the financing of the Old Head of Kinsale and Schull gas field developments and the marketing of the potential future gas production from the fields and the associated gas storage capacity.

Island Oil & Gas Estimates (June 2009)*
Gas in place estimates (BCF) 100% Equity	P90 (proven)	P50 (proven & probable)	P10 (proven + probable + possible)
Old Head	25	45	74
Schull	23	37	57
Total	48	82	131

*Unrisked
Source: Island Oil & Gas plc

Gas Storage Studies

Subject to the results of the engineering and facilities study described above, Island will also investigate the potential conversion of the Schull gas field to a gas storage facility.

Commercial Discussions

Glossary of technical terms:

Bcf - Billions of cubic feet of gas
P10 - Proven, Probable and Possible reserves
P50 - Proven and Probable Reserves

Proven Reserves - Those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. Proved reserves can be categorized as developed or undeveloped. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.

Probable Reserves - Those unproved reserves which analysis of geological and engineering data suggests are more likely than not to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated Proved plus Probable reserves.

Possible Reserves - Those unproved reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves. In this context, when probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will equal or exceed the sum of estimated Proved plus Probable plus Possible reserves.