Irish oil and gas exploration group Providence Resources, which is headed by Tony O'Reilly jnr, is believed to have built up a stake of 1.5 per cent in Island Oil & Gas.

Providence is believed to have bought its shares in May when Island, which is listed on London's Alternative Investment Market, completed a £13.7 million fund-raising from the placing of 35.25 million shares at 39 pence each. This was supported by existing and new private and institutional shareholders.

Providence is understood to have acquired about 1.6 million shares at a cost of almost €1 million.

The company is controlled by Sir Anthony O'Reilly and his family, who own 41 per cent of its equity. It increased its revenues last year to €1.99 million from €1.37 million in 2005.

Headed by Paul Griffiths, Island also issued 8.8 million warrants to investors in the placing, on the basis of one warrant for every four new shares acquired. These have an exercise price of 45 pence per share and expire on July 16th.

Island plans to use the funds for drilling its prospects at the Old Head of Kinsale off the south coast of Ireland. Providence also has operations in this area and it signed a deal earlier this year with Island to use one of its drilling rigs there this year.

Founded in 2003, Island has interests in 11 Irish offshore licences as well as licences in both the Netherlands and Morocco.

Earlier this week the company reported positive drilling for gas at the Old Head of Kinsale, where the company has a 65 per cent interest in the gas field. It is partnered there by Valhalla Oil and Gas and by EnCore Oil.

Providence's shares closed down 2 cent at 84 cent on the IEX in Dublin yesterday. Island's shares closed in London yesterday at 45 pence.