22 October 2009

Dragon Oil plc

(the "Company" or together with its subsidiaries "Dragon Oil" or the "Group")

Interim Management Statement

Dragon Oil plc (Ticker: DGO), an international oil and gas exploration and production company, issues its Interim Management Statement in accordance with the EU Transparency Directive. The statement covers the period from 1 July 2009 to date. The financial and production data are for the period from 1 July 2009 to 30 September 2009. All other information, including details on operations, is up-to-date as at the date of publication.

Key highlights

- Four wells were put into production in the period from 1 July 2009 to date;

- The average daily production rate was 46,060 barrels of oil per day ("bopd") in Q3 2009, an increase of 9%

over the comparable period in 2008 (Q3 2008: 42,320 bopd);

- Capital expenditure on infrastructure and drilling was approximately US$56 million for Q3 2009 (Q3 2008:

US$4 5 million);

- The Group's financial position further strengthened and it maintained its unleveraged balance sheet at the

end of Q3 2009.

Dr Abdul Jaleel Al Khalifa, CEO, commented:

"During 2009, we have made considerable progress on development planning and sourcing additional rigs in the challenging environment of the Caspian Sea region . We have contracted the Astra jack-up rig for six months and expect to award shortly a two-year contract for a platform-based rig. We will continue to achieve production growth in 2010 - 11 and beyond ."

MATERIAL EVENTS AND TRANSACTIONS

Production

G ross field production for Q3 2009 averaged 46,060 bopd. This represents a 9% increase over the comparable period in 2008 when the average gross field daily production rate was 42,320 bopd. Currently Dragon Oil produces from 58 wells on 12 offshore platforms.

The entitlement production for Q3 2009 was approximately 54% (Q3 2008: 54%) of the gross production. T he entitlement barrels for the first nine months of 2009 were 58% against 54% for the comparable period of 2008. The entitlement barrels are finalis ed in arrears and are dependant , amongst other factors , on fiscal terms of the PSA, operating and development expenditure in the period and the realised crude oil price.

Marketing

Dragon Oil sold 3.1 million barrels of crude oil in Q3 2009 (Q3 2008: 1.4 million barrels), which is 121% higher than the volume sold during the corresponding period last year . Dragon Oil exported about 90% of its crude oil via Neka , Iran with the remaining balance going through Baku , Azerbaijan .

The Group's underlift position of approximately 0.5 million barrels at 30 June 2009 has changed to an overlift position of approximately 0.4 million barrels as of 30 September 2009. The crude oil overlifts and underlifts arise on difference in quantities between the Group's entitlement production and the production either exported or held as inventory.

Dragon Oil continues to assess additional routes to market, including Makhachkala in Russia, the Baku-Batumi corridor and the BP-operated BTC (Baku-Tbilisi-Ceyhan) pipeline.

Drilling

Dragon Oil expects to finalise the award of a two-year contract for lease and management of a platform-based rig in the Cheleken Cont r act Area. The Group plans to mobili s e this rig to the Dzheitune (Lam) 28 platform. The Astra jack-up rig is expected to commence its work for Dragon Oil in November this year.

Since the beginning of the second half of 2009, Dragon Oil has completed four wells and two additional wells are currently being drilled with the aim to have these wells on stream by the end of the year. In total, w e expect to have drill ed and complete d eight wells in 2009.

The following table summarises the four wells completed by Dragon Oil since 1 July 2009 to date:

The Iran Khazar rig has been mobili s ed to the Dzheitune (Lam) A platform where it has spud ded the Dzheitune (Lam) A/139 well. The well is expected to com m e nce production before the end of the year. Rig 40 is currently drilling the Dzheitune (Lam) 13/140 well, which is also expected to com mence production before the end of this year.

Infrastructure

The Dzheitune (Lam) B platform is currently being installed in the Dzheitune (Lam) field. Dragon Oil has commenced the tendering process for two additional wellhead and production platforms that we expect to be built and installed in the next two to three years.

P rogress on the construction of the 30" 40 km trunkline and Phase 2 expansion of the Central Processing Facility has been slower than expected due to delays in project execution. Limited availability of qualified contractors in the Caspian Sea region remains one of the key risks to Dragon Oil's and our contractors' operations. We are committed to mobilising internal and external resources to deal with the se delays; however, we anticipate further delay s in completing these projects. The existing infrastructure is sufficient to accommodate the production growth in 2010.

N ew business opportunities and Yemen participation

Dragon Oil's New Ventures Team is actively reviewing opportunities in North Africa, Middle East and Central Asia (former Soviet Union Republics). Diversification of our portfolio may be achieved through joint ventures, corporate acquisitions or project farm-ins. It is our objective to participate in projects, which have the potential to offer both immediate and near-term production and reserves, with the upside of longer-term growth through exploration.

The exploration programme in Yemen on Blocks 35 is ongoing and additional activity in Block 49 is under discussion. An extension of Block 35 for another two years is under negotiation, which will allow for additional exploration work. The work programme for Block 35 includes an Electromagnetic Survey, the acquisition of additional 2D Seismic data and a contingent exploration well.

Preliminary approach

On 4 June 2009, it was announced that Emirates National Oil Company Limited (ENOC) L.L.C. ( " ENOC " ) had made an approach in relation to a possible offer for the entire issued and to be issued share capital of Dragon Oi l that it does not currently own. A n I ndependent C ommittee of the board of the Company was formed to evaluate the approach by ENOC and Davy Corporate Finance and HSBC Bank Plc are acting as joint financial advisers to the Independent Committee . The Independent Committee and its advisers are continuing to engage with ENOC and their advisers in relation to the a pproach. T here can be no certainty that any offer will be made or as to the terms of any such offer. A further announcement will be made as appropriate .

FINANCIAL UPDATE

Realised prices

The average realised crude oil price during Q3 2009 was approximately US$69/bbl (Q3 2008: US$114/bbl), which was 39% lower compared to the corresponding period last year. The Group's realised crude oil prices achieved a premium of 0.8% to Brent (Q3 2008: 0.7 % discount) during Q3 2009.

Cash and cash equivalents

The cash and cash equivalents and term deposits at 30 September 2009 were approximately US$962 million (31 December 2008: US$876 million), including US$114 million (31 December 2008: US$92 million) set aside for abandonment and decommissioning activities.

Capital expenditure

Capital expenditure for Q3 2009 was around US$56 million (Q3 2008: US$4 5 million). Of the total capital expenditure, approximately 37% was attributable to infrastructure with the balance spent on drilling. The infrastructure spend during Q3 2009 included work on the installation of the Dzheitune (Lam) B platform, adding slots on the Dzheitune (Lam) platforms as well as progressing the construction of the trunkline and Phase 2 expansion of the Central Processing Facility.

Given the delays in the construction of the trunkline and Phase 2 expansion of the Central Processing Facility, the combined capital expenditure on infrastructure and drilling is likely to be a pproximately US$400 million in 2009 . The t otal capital spend on infrastructure for 2009-11 is expected to remain in the range of $700-800 million based on the planned construction of two additional platforms and re-phasing of the spend on the trunkline project and the expansion of the Central Processing Facility.

OUTLOOK

The outlook for the remainder of 2009 is positive on the back of the oil price recovery. B y the end of 2009 , w e expect to complete two additional wells, award a two-year contract for a platform-based rig and have the Dzheitune (Lam) B platform installed and ready for drilling .

Dragon Oil has seen good rates from the six wells completed so far this year. Based on our estimates for the drilling programme and production forecasts for the rest of the year, w e expect to achieve a n increase in average gross field production of about 10% in 2009 . At the end of 2009, we expect to have two platfor m-based rigs and one jack-up rig on a full-time basis, alongside the Astra jack-up rig on a short-term contract, operating in the Cheleken Contract Area. This will set the stage for achieving higher production growth targets in the next two years, 2010-11.