EUROPE

PRODUCTION & DEVELOPMENT

During 2007, the Enoch oil field (Dana 8.8%) and the Cavendish gas field, where Dana increased its interest to 50% prior to first gas, were both brought on stream. With the addition of properties in Egypt and Norway, the Company ended the year producing from a total of 30 oil and gas fields. Average Group production in 2007 was 30,514 boepd of which approximately 89% emanated from the North Sea. As a result of adding new fields and significant enhancement work in existing fields, Group production capacity increased strongly during 2007. The year end exit rate of approximately 45,000 boepd significantly exceeded the Company’s twoyear target set at the end of 2005.

Dana continued a high level of activity in its existing fields. The Greater Kittiwake Area (“GKA”) (Dana 50%) was successfully tied-back via a new pipeline to the Forties Pipeline System in November, replacing the previous tanker loading system. Accordingly, uptime from the GKA has considerably improved. The new pipeline will also underpin future development decisions and improve the economic return for new project tie-backs in the area, including the Grouse oil field where development is now being progressed rapidly following the very successful well drilled in 2007. The Johnston J5 well came on stream just before the year end (Dana 49.89%). This new well accesses a previously undrained area of the field and significantly increases gas production capacity. Modifications on the Ravenspurn host platform should also facilitate increased output from the existing Johnston wells.

Work is also advancing at pace on the Babbage field development (Dana 40%), with drilling expected to commence in late 2008 and first gas targeted for early 2010. This project will be very significant for Dana and will strengthen the company’s position in the UK Southern North Sea. Good progress is being made at the Barbara gas field in the Central North Sea. Dana, as operator, has undertaken comprehensive subsurface geoscience and surface facilities study work. Discussions are well advanced with infrastructure hosts and to align the five Barbara equity owners for a combined development with the neighbouring Phyllis gas field.

Dana’s significant stakes in Barbara and Babbage represent two of the key growth areas for the Company in the coming years and mean that the Group is participating
in two of the more substantial remaining gas developments in the UK North Sea. In addition, project sanction has been achieved for the E18 gas development (Dana 5%) in the Netherlands following further successful drilling in 2007. E18 gas will flow across the existing F16-E field in which Dana also has an equity interest.

EXPLORATION & APPRAISAL

During 2007, the Company had some notable successes with the drillbit.

In the Dutch North Sea, the E18-7 exploration well was successfully drilled and flow tested at a rate of approximately 36 million standard cubic feet of gas per day, leading to sanction of the E18 development.

The Grouse appraisal well in the GKA in the UK Central North Sea tested at stabilised flow rates in excess of the pre-drill expectations. The well flowed at rates of over 10,600 boepd, through a 32/64” choke, with a tubing head pressure of around 2,700 psi, but this flow rate was limited by the throughput capacity of the test equipment. The well was suspended for use as a future producer and Grouse will be developed as a subsea tieback to the Kittiwake platform utilising the Goosander production riser which was installed in 2006. A fast track development is now underway with first oil expected early in 2009.

Dana’s first well in Norway was 15/12-18A targeting the Storskrymten prospect (Dana 25%), in the neighbourhood of the Sleipner field. The well discovered an oil column in the Palaeocene Ty formation and following sidetracking of the original well, it found further oil bearing sands in the Heimdal formation. The operator estimates recoverable volumes of between 9 and 44 million barrels of oil and the co-venturers are considering a further well in the area before progressing with a development.

The Dana operated Kerloch well, 211/22a-10 in the UK Northern North Sea, was drilled to a total depth of 12,282 feet and encountered a full Brent reservoir sequence, as predicted prior to drilling. The well intersected an oil column of some 116 feet in the Ness Formation.

The crude oil was of good quality, with a gravity around 32 degrees API and a gas/oil ratio in line with other discoveries in the area. The Kerloch well was suspended to allow potential re-entry and future use. Dana holds a 50% stake in the Kerloch oil discovery and throughout Block 211/22a NW, which also contains an earlier oil discovery.

In February 2007, Dana was awarded 16 offshore blocks in the UK Government's 24th Offshore Licensing Round, predominantly in the prospective West of Shetland region and in the GKA. In February 2008, Dana pre-qualified as an operator in Norway and was awarded interests in seven blocks, including three operated blocks in the 2007 APA Rounds. During 2008, Dana expects to build its exploration portfolio further through applying for licences in the UK Government's 25th Offshore Licensing Round, the Norwegian 20th Round and the 2008 APA Round.

Faroe Petroleum plc (“FP”) has also been highly successful in licensing rounds, with the award of five licences in the UK 24th Round, six licence interests in the APA 2006 Round offshore Norway and a further five licence interests in the APA 2007 awards. In November 2007, FP announced a series of further commercial transactions building upon its exploration, development and production asset base. Dana supported FP’s share placing in December 2007 and maintained the Group’s position as the largest shareholder in FP at just over 17%. During the first quarter of 2008, Dana further increased its interest in FP to 27.5% by acquiring shares on the open market. The Company views its position in FP as a strategic holding in a smaller independent company with a complementary strategy and geographic spread.

In March and April 2008, Dana drilled the West and East Rinnes prospects located five miles from the Dana operated Hudson oil field (Dana 47.5%) in the UK Northern North Sea targeting two separate Brent reservoir fault blocks. The first well, 210/24a-11, into the West Rinnes structure was drilled to a total measured depth of 6,470 feet (5,870 true vertical depth subsea) and encountered a full Brent reservoir sequence with excellent quality sands throughout. The Company successfully completed a drill-stem test of West Rinnes, which flowed at rates of up to 7,800 barrels of oil per day with the flowrate being restricted by the test equipment on the drilling rig. The fluid produced was 100% clean oil of good quality with a gravity of approximately 32 degrees API. The Rinnes oil is of very similar quality to that being produced by Dana at the nearby Hudson field. The East Rinnes well, 210/24a-11z, was drilled as a sidetrack into a separate fault block adjacent to West Rinnes, to a total measured depth of 6,935 feet (6,144 true vertical depth subsea) and encountered a full Brent reservoir sequence. The well found excellent quality sands in the Lower Brent reservoir sequence with the Upper Brent less well developed. Given the similarity in reservoir quality and oil characteristics to West Rinnes, the well was not drill stem tested as the Company had already gathered sufficient data to fully evaluate the discovery. Following completion of the drilling at East Rinnes, Dana has commenced a complete review of the data gathered, and will re-interpret the seismic data utilizing the new well information and remap the two structures and examine the additional prospects for further drilling. Development studies for the Rinnes discoveries and the nearby Melville oil field will also be initiated.