Press Release

25 July 2007

DANA PETROLEUM PLC
("DANA", "THE COMPANY", OR "THE GROUP")

ANNUAL GENERAL MEETING STATEMENT

Dana Petroleum is pleased to report that at its Annual General Meeting held earlier today all resolutions were approved by shareholders. 

Commenting on the progress and activities of the Company, Chairman Colin Goodall released the following statement:

“Dana delivered another year of excellent performance in 2006, continuing its successful track record of year-on-year growth. Highlights included an outstanding reserves replacement ratio of 336%, record oil and gas production and strong financial results.

The Group completed the year in a very healthy position, with significant cash reserves, excellent cash flow and a portfolio of high quality growth opportunities.

Progress continues at pace in 2007. In addition to achieving the key milestones of first production from two new UK fields, Enoch and Cavendish, the first half of 2007 has also seen very significant steps with the acquisitions of Devon Energy’s Egyptian businesses and the Norwegian independent oil company Ener Petroleum. These strategic acquisitions provide material positions in both countries, which were previously identified as key growth areas for Dana. Both portfolios have a combination of current oil production and exploration upside, and represent important building blocks for further growth of the enlarged Group.

Dana has also worked hard to expand and balance its extensive exploration portfolio. The Company recently made another quality gas discovery in The Netherlands and confirmed an ambitious forward programme with a further 30 exploration and appraisal wells being planned for drilling by end 2008.

 

OPERATIONAL HIGHLIGHTS

Production and Development

In June 2007, the Enoch oil field started production in the Central North Sea as a sub-sea tie-back to the Marathon operated Brae platform and the field has been delivering above prognosis. In July 2007, the Cavendish gas field was successfully commissioned in the UK Southern North Sea. The first well has outperformed expectations and work is ongoing to deliver two further production wells during the coming months.

With Enoch and Cavendish now onstream, and with the recent completion of the Ener Norway deal, Dana is currently producing from a total of 17 fields an increase from 14 at the start of the year.

A number of the Company’s oil fields are performing better than expected, particularly the Dana operated Hudson field, and Goosander in the Greater Kittiwake Area (“GKA”). At the GKA, the tanker related downtime issues in the earlier part of the year have largely been resolved and production uptime has become more consistent. The pipeline project to permanently connect GKA to Forties, and thus replace tanker loading, is progressing well with the pipeline on track to be commissioned before the end of 2007. Recent work on the Otter field has also resulted in increased oil production from this reservoir.

Average production for the first half of 2007 was approximately 26,000 boepd, a 41% rise over the same period in 2006. Output has continued to climb with the addition of the Enoch, Cavendish and Jotun fields. It is currently estimated that Group production for the 2007 full year will average around 34,000 boepd and it is expected that Dana will exit the year with its production capacity having grown to between 45,000 and 50,000 boepd. The actual production out-turn average for 2007 will be determined by the timing of the completion of the Devon acquisition, existing field performance and uptime and the UK gas price, which affects the economics of gas production and therefore export nominations and production levels. The Company remains un-hedged with respect to its oil sales and hence is gaining the full benefit from ongoing strong oil prices.

Development work is forging ahead in a number of areas. In the Southern North Sea, following the success of the Johnston J4 production well drilled in 2005, a further well, J5 will be drilled later this year providing additional gas production from early 2008. At the Barbara gas field in the Central North Sea, Dana is acting as operator for the development studies which should allow the field owners to reach a project sanction decision later in 2007. Significant progress has been made on aligning the group of Barbara equity owners and agreeing a high level strategy for a potential combined development with the neighbouring Phyllis gas field. A Barbara/Phyllis combined project would become one of the most substantial remaining gas developments in the UK North Sea.

Detailed technical planning continues on Babbage gas field in the UK Southern North Sea and the Christian oil field in the GKA. The Grouse appraisal well in the GKA will be drilled during Q3 2007 with a view to development as soon as throughput capacity is available in the Kittiwake processing hub. In the Dutch gas sector, development consent has been applied for in area A15 and a spontaneous production licence in Block E15B.

Exploration and Appraisal

A substantial and balanced programme of drilling for new reserves is central to Dana's business model. This has been achieved by applying extensively for licences in government bid rounds, then undertaking commercial transactions or swaps where appropriate to leverage into additional drilling opportunities.

The Company’s latest exploration well E18-DF2 has discovered a significant gas accumulation in Dutch waters, close to Dana’s existing gas production at the F16-E field.  Flow testing has just been completed and the well delivered at an excellent rate of 36 million cubic feet per day from the Carboniferous reservoir primary objective.  Following this encouraging results the well is being suspended for use as a future producer.

The next period will see an increase in the Group’s drilling activities. Dana will be operating wells in the UK Northern North Sea using the Sedco-704 semi-submersible rig, firstly, on Kerloch (Dana 50%) and secondly on the Rinnes prospects (Dana 64.85%) which are in the same block as Dana’s Melville oil discovery. Rinnes contains 2 prospects, a primary objective of the main fault block followed by a planned sidetrack into an adjacent and equally prospective fault block. Both Kerloch and Rinnes are in a proven hydrocarbon province, in the proximity of major infrastructure and hence could be developed relatively quickly.

Dana will also operate the Scolty exploration well (Dana 100%) in the Cleeton area towards the end of 2007 using the Ensco-100 jack-up rig. This well targets a Rotliegend reservoir with tie-back to the Cleeton platform, potentially via Monkwell, in the success case.

Offshore Norway, Dana is participating in two exploration wells due to spud in August 2007. The first will test the Jurassic Bjorn prospect (Dana 25%), a Brent terrace, downthrown from the huge Troll Field to the east, using the Bredford Dolphin semi-submersible rig. A second well will test the Storskrymtem and underlying Grytkollen prospects (Dana 25%). A further well is planned in the exploration acreage adjacent to the Jotun field (Dana 50%) in the first half of 2008.

Dana’s first two wells in Egypt are due to be drilled in late 2007 or early 2008. The first well on the highly prospective West El Burullus concession in the Nile Delta (Dana 50%) is targeting a shallow structure which will be an important guide for a number of other prospects. The second well is in the South Feiran concession in the Gulf of Suez (Dana 20%). This exploration complements the drilling activity that Dana will be undertaking next year following the Devon acquisition.

More than 20 further wells are being considered for drilling during 2008 with about half of these in North West Europe and the remainder in Mauritania, Morocco and Egypt. Precise timing and number of wells depends on finalising technical evaluation and rig availability.

In addition to this intensive drilling programme, further seismic is scheduled offshore Mauritania and Senegal towards the end of 2007, and evaluation work is continuing on numerous UK licences which have been won in recent licencing rounds.

Commercial Activity

Dana continues a high level of commercial activity in line with its strategy of adding value through its front-end exploration work and then accelerating cash flow wherever possible through both development and asset trading.

The Company is well advanced toward completing the acquisition of Devon Energy’s Egyptian assets. The portfolio consists of eight Production Sharing Contracts, with 13 fields currently producing approximately 12,500 barrels of oil per day net to Dana and adds approximately 30 million barrels of proven and probable reserves also on a working interest basis. Seismic activity is planned on the North Qarun block in the Western Desert later in 2007, with an intensive drilling programme following in 2008, including infill production wells on the East Zeit field, and exploration drilling in at least three of the concessions.

Dana completed the acquisition of Norwegian independent oil company Ener Petroleum in July 2007. This transaction accelerates Dana’s growth in Norway following an earlier deal with Gaz de France. The Ener acquisition delivers around 5,000 boepd of production from the Jotun oil field and a 50% stake in its surrounding exploration prospects and, subject to regulatory approvals, interests in a further 4 exploration licences. Dana’s Norwegian team are currently focusing on evaluating opportunities in the forthcoming APA licensing round and further commercial deals.

In addition to these two large strategic deals, Dana has successfully completed a number of smaller commercial transactions which each add value and increased drilling opportunities.

In the Northern North Sea, the Company has increased its interest to 64.85% and become operator in Block 210/24a. This area is adjacent to Dana’s producing Hudson field and includes the undeveloped Melville oil field and Rinnes exploration prospects. Dana has also entered into two further transactions in the Northern North Sea where it will hold 50% of blocks 211/8a and 211/13a which contain prospects adjacent to the producing Penguins oil fields.

In the Southern North Sea, Dana has acquired a 25% interest in Blocks 48/3a and 48/4, which are adjacent to the Babbage and Johnston gas fields. Plans include drilling of the Morpheus prospect early in 2008.

Dana has also secured a 35% interest in Block 21/20f in the Central North Sea, this is immediately to the east of the GKA and hence any discovery could utilise the Dana owned infrastructure. The Morgan prospect will be drilled in 21/20f in the first half of 2008 using a rig slot secured by Dana on the Sedco-704 drilling unit.

Dana takes a disciplined approach to managing its asset portfolio and continues to optimise and high-grade its licence interests at every opportunity. As a result, it recently divested its 14% minority interest in UK Blocks 211/22a SE and 211/23d, including the Causeway discovery. The cash received was significantly in excess of Dana’s estimated risked value for its interest and the proceeds from the sale were immediately applied to purchase the Ener Petroleum oil producing company in Norway, thus accelerating production and cashflow for the Group.

 

FINANCE

To finance a large proportion of the Egyptian acquisition, in June 2007 the Group successfully placed an offering of senior Guaranteed Convertible Bonds, raising £141.5 million. The Bonds have a conversion premium of 50%, representing a conversion price of £16.45 per Dana share, with a coupon of 2.9% payable annually. The Bonds have a seven year term and include an investor put on the fifth anniversary of the issue date.

This fund raising has allowed the Group to re-size the previously announced bridge facility agreed with ABN Amro Bank. This facility is expected to be finalised during August 2007 at a size of around $400 million.

OUTLOOK

Through the Devon Egypt and Ener Norway acquisitions, in addition to successful new field developments, Dana has demonstrated its ability to continue strong growth. Infill drilling in existing fields, development activities, the exploration well programme and selective further acquisitions will deliver further value for shareholders. The Company’s sound strategy has led to both strength and balance being developed within its portfolio and this is now delivering tangible benefits with rising production capacity and a large exploration and appraisal drilling programme. The Company’s good working relationships with its co-venturers, major oil and gas companies and governments have led to valuable cooperation across different areas and regular deal flow.

By the middle of 2007, Dana was producing from 16 fields, with 15 of these in the North Sea, providing a strong and well balanced cash flow engine. Completion of the Ener acquisition added a further oil field, and completion of the Devon Egypt acquisition will add a further 13 fields, taking the total portfolio to 30 producing fields by the end of 2007. Dana's strong balance sheet has to date allowed it to remain completely un-hedged with respect to oil price, thus maximising the benefits to the Company from continuing commodity price strength.

It is particularly pleasing to report that the strategic goals of entry into Egypt, Morocco and Norway, highlighted to shareholders last year, have already been fulfilled. Each of these new business areas is now delivering a number of quality drilling opportunities for Dana in the near to medium term. 

In addition to its intense drilling and development programme, Dana is maintaining a high level of commercial asset trading activity. The Devon Egypt and Ener Norway acquisitions have demonstrated Dana’s ability to conclude deals at attractive prices even in the prevailing tight market conditions. The Company will continue to pursue its proven strategy of using exploration success as leverage in commercial transactions to strengthen the asset base and accelerate returns.

The year ahead will be the most exciting period for Dana to date. The Group will benefit significantly from the growth steps it has taken in Norway and Egypt and, alongside this, results will flow through from the extensive programme of exploration drilling and ongoing development activities.”

 

For further information please contact:

Tom Cross, Chief Executive	Dana Petroleum plc	01224 652400
David MacFarlane, Finance Director	Dana Petroleum plc	01224 652400
Stuart Paton, Technical & Commercial Director	Dana Petroleum plc	01224 652400
Nick Elwes / Paddy Blewer	College Hill Associates	020 7457 2020