Exploration group Island Oil and Gas has raised £8.3 million (€12.3 million) through a share sale to fund drilling for gas off the coast of Ireland. The group plans to start drilling three wells at the beginning of April.

The company, based in Bennettsbridge, Co Kilkenny, sold almost 12 million new shares to existing and new investors at a price of 70 pence each.

It also issued almost six million warrants, which if exercised will raise a further £4.15 million. This fundraising comes on top of £8.4 million raised by the company last November.

Finance director Jack McKinney said the group was very pleased with the placing and now had sufficient funds to start drilling. He said the group was in talks with several other players about partnering it on the project.

Island Oil and Gas in October signed an agreement with Petrolia Drilling to drill three wells back to back. Two of the sites are in the Celtic Sea and the third, where drilling is due to commence in June, is off the Donegal coast. The third well is a higher risk project than the other two, though the potential for upside is "massive", according to Mr McKinney. The company will use infrastructure already built by another group, Ramco.

If the drillings are successful, Mr McKinney said he hoped to start producing gas for consumer use by the winter of 2007. All of the gas will stay within Ireland.