Press Release

27th February 2007

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

PRE CLOSE OPERATIONAL UPDATE

Dana Petroleum, the independent oil and gas exploration and production company, focused on growth through international exploration and the development of low risk North Sea production, intends to announce its preliminary results for the year ending 31 December 2006 on 30 April 2007. Prior to entering the close period ahead of these results, Dana is pleased to provide the following operational update and outlook.

Highlights:

- Record average oil and gas production of approximately 22,300 boepd delivered in 2006

- Production capacity increased strongly during 2006 to a new high of 30,000 boepd at year-end

- Currently producing from 13 North Sea oil and gas fields

- Agreed multi-asset deals with Gaz de France across the UK, Egypt, Mauritania and Norway

- Net funds of approximately £110 million at end 2006

- Maximising oil revenues by remaining completely un-hedged

- Proven and probable reserves increased to 130 million barrels of oil equivalent at end 2006, representing a reserves replacement ratio of around 330%

- Secured several new oil and gas licence interests in Egypt and Morocco with major partners

Outlook:

- Exciting period ahead with rising production and extensive drilling programme

- Group production for 2007 expected to average between 31,000 and 34,000 boepd

- On target to achieve production capacity of 40,000 boepd by the end of 2007

- New developments will lead to a producing portfolio of 15 fields in the North Sea by mid 2007, 16 fields on-stream in total

- 31 exploration and appraisal wells planned during next two years, targeting potential reserves of over one billion barrels of oil equivalent net to Dana

- Awarded 16 new blocks by UK Government in 24th Offshore Licensing Round

- Achieved strategic entry into Norway, with drilling already underway on first well

- Plan to invest around £140 million across existing fields and licences in 2007

Chief Executive, Tom Cross commented:

"Dana delivered record production in 2006 and is on target for further growth in 2007 with new fields coming on-stream and a very active drilling and development programme across existing properties.

By mid 2007, the Company expects to be producing from 15 North Sea fields, providing a strong and balanced base of quality assets. Dana remains debt free and continues to be completely un-hedged with respect to oil price, thus maximising the benefits from continuing commodity price strength.

With a healthy financial position and a range of attractive opportunities, the Company will continue its intensive drilling programme throughout the next two years, with up to 31 wells currently being planned."

27 February 2007

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

 

DETAILED STATEMENT

1. Production and Development

During 2006, the Goosander oil field was brought on-stream and Dana completed the acquisition of stakes in the Johnston and Anglia gas fields. The Company closed the year producing from a total of 13 North Sea fields which delivered an annualised average output of approximately 20,700 boepd. Together with a contribution of around 1,600 boepd from the South Vat Yoganskoye oil field in Russia, average Group production in 2006, subject to final reconciliation, is expected to show 13% growth to a new record high of approximately 22,300 boepd.

As a result of the addition of new fields, infill drilling and workover activity on existing fields, Group production capacity increased strongly during 2006 to reach approximately 30,000 boepd at year end. A good performance was achieved in particular at the Hudson field, where Dana, as operator, has driven forward a programme of improvements. Production is now at levels significantly above those being delivered when Dana increased its interest and took over operatorship in 2005. There was also increased production in the Greater Kittiwake Area ("GKA") with peak production rates in GKA reaching record levels of 32,000 boepd in the second half of 2006.

Production from GKA has recently been impacted by severe weather affecting the tanker based offloading system. This ongoing problem of weather downtime will be solved by the construction of a new 10 inch oil export pipeline linking GKA to BP's Forties Pipeline System. Uptime in the GKA should increase from around 85% to greater than 99%, with the pipeline also leading to an extended life for the GKA fields and additional oil reserves of approximately 2 million barrels net to Dana. The new pipeline is currently being manufactured and is scheduled to be installed during the fourth quarter of 2007. Dana has agreed to the construction of this pipeline but is not exposed to any of the capital costs. Instead, Dana will pay a tariff to export oil through the pipeline which reduces the Company's capital requirements, removes exposure to any cost pressures in the construction project, and protects against any future field underperformance. The pipeline will also underpin future development decisions and improve the economic return for new tie-backs in the area, including the Grouse oil field where development studies are well advanced.

Further production gains are expected in 2007 with the start of production from the Cavendish gas field and Enoch oil field both scheduled in the first half of the year. In addition, infill drilling on fields already in production will again be an important factor in 2007, with drilling activity currently being considered on the Otter, Hudson, Banff, Johnston, Anglia, Claymore and F16-E fields. This programme continues Dana's drive to maximise reserves and cash flow from its existing portfolio.

The Enoch and Cavendish field developments are progressing well. Enoch is at an advanced stage with the focus of remaining work being on the Brae platform topsides, where the field will tie-in. First oil is expected in Q2 2007. At Cavendish, drilling is underway on the second production well, the platform is installed, the export pipeline completed, the sub-sea pigging skid commissioned and work is advancing on the host Murdoch platform. First gas is expected in Q2 2007.

As a result of this intense offshore activity, Dana remains on target to increase its production capacity to 40,000 boepd by the end of 2007. It is currently estimated that Group production for 2007 will average between 31,000 and 34,000 boepd, with the actual figure depending on existing field performance and uptime, the precise timing of production start-up of the new fields under development, and the UK gas price which affects the economics of gas production and therefore export nominations and production levels.

Development planning, including detailed geoscience and engineering work, is underway on a number of fields which will come on-stream after 2007. At the Barbara gas field in the Central North Sea, Dana is acting as operator for the development studies which will allow the field owners to reach a project sanction decision during the second half of 2007. Significant progress has been made in the last six months on aligning the five 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.

Additional gas was discovered in the Babbage field in 2006, flow testing at 10.7 million cubic feet of gas per day. Following this positive well result, the Group is now pursuing fast-track development plans. A number of development scenarios and evacuation routes are currently being considered with first gas targeted at end 2008. Also in the southern North Sea, a production licence application has been made in respect of the gas discovered to date on block A15 in the Netherlands.

2. Exploration and Appraisal

Continuing an active and balanced programme of drilling for new reserves is central to Dana's business strategy. During 2006, the Company participated in six exploration and appraisal wells and successfully operated and completed two challenging deepwater wells offshore West Africa. Most importantly, through extensive seismic acquisitions and commercial activity, the Dana Group has positioned itself with a substantial portfolio of drilling targets for the next two years.

Offshore Mauritania, the Aigrette-1 exploration well in Block 7 discovered oil in the targeted Cretaceous sandstones, approximately 43 km northwest of the Pelican-1 gas discovery. Significant sands were also encountered in a deeper section, however, these were not found to be oil bearing at this location. The Flamant-1 exploration well in Block 8, offshore Mauritania, discovered the prognosed extensive carbonate section, but did not encounter commercial quantities of hydrocarbons. However, there were indications of gas whilst drilling the approximately 1,150 m thick carbonate primary target. In addition, gas bearing intervals were encountered during the drilling of a shallower section of the well, which indicates there is mature hydrocarbon source rock in this area. Prior to drilling Flamant-1, Dana increased its interest in Block 8 by 5% and hence now owns a 26% stake in this vast licence area.

Dana has therefore discovered hydrocarbons in each of the first four wells it has drilled offshore Mauritania, in Blocks 1, 7 and 8. This provides encouragement for further drilling and Dana is currently undertaking detailed technical analysis to determine the optimal forward work programme. Offshore activities in 2007 will include a well in the Woodside operated Block 2 and the potential for seismic acquisition to examine a large structure which spans the border of Block 1 and the neighbouring St Louis block, offshore Senegal, where Dana also holds an interest.

In Egypt, an aggressive work programme is being pursued by Dana and Gaz de France in the West El Burullus concession, offshore Nile Delta. There is outstanding prospectivity across this region with major fields on-stream and BP and RWE Dea recently making a significant gas discovery in the neighbouring block. The West El Burullus co-venturers are currently out to tender for a rig with plans to drill before the end of 2007.

In the North Sea, Dana drilled three exploration and appraisal wells in 2006, all were successful. Additional gas was proved in the Babbage field and oil was discovered in the East Causeway well, which flowed at the highly encouraging rate of 14,500 barrels of oil per day. The E18-6 exploration well in the Dutch sector discovered a new gas accumulation, close to Dana's producing F16-E field, and has resulted in a follow-up well being planned for the first half of 2007.

Drilling on the Pomboo structure offshore Kenya was completed in January 2007. Significant reservoir quality sands were encountered, however, there were no indications of hydrocarbons. Therefore the joint-venture group decided not to drill the Sokwe South prospect immediately but to take the necessary time to fully interpret the results of Pomboo before deciding on the most appropriate forward plan for the area.

In February 2007, Dana was awarded 16 offshore blocks in the UK Government's 24th Offshore Licensing Round. This was an excellent result following many months of technical work, with fourteen of these blocks situated in the prospective West of Shetland region. These new licences complement the Company's awards in the UK's previous offshore licensing round, where positive electro-magnetic survey results have recently been obtained, and Dana's stake in Faroe Petroleum plc where it is the largest shareholder. In addition, Dana was awarded a 50% interest and operatorship in Block 21/17a in the Greater Kittiwake Area, which includes the Wagtail and Whinchat oil discoveries. The UK 24th round also saw Dana awarded 100% of Block 16/18c which is in the eastern part of the Central North Sea, adjacent to the Enoch oil field. Faroe Petroleum has also recently been highly successful in Licensing rounds, with the award of 5 licences in the UK 24th Round and a further 6 licence interests in the recent APA 2006 round offshore Norway.

Dana has committed to a drilling slot on a heavy duty jack-up rig for use in the UK Southern North Sea, during the second half of 2007, with the option to take up further slots. The Company is also actively discussing opportunities for drilling rigs for the Central and Northern North Sea and expects to secure further options to drill.

In anticipation of appropriate rig availability, Dana is progressing plans for three operated exploration and appraisal wells in the North Sea for 2007. These are the Kerloch oil prospect in the Northern North Sea, a Monkwell area gas appraisal well and a Colden Parva area gas target, both in the Southern North Sea. In addition, Dana expects to participate in a further four North Sea exploration and appraisal wells in 2007, namely two wells in the Causeway area of the Northern North Sea, a Grouse field appraisal well in the GKA and a further well in Block E18a in the Netherlands following the success in that area in 2006. In addition, Dana expects to participate in two wells offshore Norway.

3. Commercial Activity

Dana continues to undertake 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 most significant commercial transactions over the last year have been the multi-asset deals with Gaz de France. These have increased Dana's interest in the Johnston gas field to 49%, delivered a 25% interest in the Anglia gas field and an initial 30% equity in the West El Burullus concession, offshore Nile delta, Egypt. This activity has also covered most of Dana's drilling costs for its last three deep-water wells offshore Mauritania, where Dana has retained operatorship. In addition, Dana has agreed the acquisition of three additional assets from Gaz de France, being a further 20% interest in West El Burullus (taking Dana up to 50%), a 25% interest in the Cavendish gas development in the UK (also taking Dana to 50%), and interests in two exploration licences offshore Norway. Each of these transactions is subject to standard regulatory approval. Each asset provides excellent near term opportunities for Dana with drilling in Norway, first gas on Cavendish expected during the next quarter, and drilling in West El Burullus in late 2007.

Dana has made a strategic entry into Norway, having carefully considered how it could apply its exploration led business model to the significant remaining potential in the country. As part of the Gaz de France transactions, Dana has secured interests in the PL311 licence in the Norwegian North Sea, and in PL329 in the Norwegian Sea off mid Norway, subject to standard regulatory approval. A first well spudded in PL329 in February 2007 and drilling is planned on PL311 later in the year. Further opportunities to grow Dana's interests in Norway are actively under evaluation.

Dana has increased its interests in the GKA through the acquisition of a 50% interest in block 21/12b, which includes the Christian discovery, and a 25% interest in block 21/12a, which includes the Bligh discovery. Dana will now work with its co-venturers in these blocks to progress development. Subject to third party approval, Dana has agreed terms to increase its interest in the Melville oil discovery and surrounding exploration acreage in the Northern North Sea, which is adjacent to the Dana operated Hudson field. Dana has put itself forward to become operator of Melville and will be in a strong position to actively progress exploration and development of this area alongside Hudson.

In Morocco, Dana has signed two deals to acquire new interests. Firstly, Dana exchanged a 3% interest in Blocks L5 and L7, offshore Kenya, for a 15% interest in the Tanger-Larache concession, offshore Morocco. This exchange deal is subject to Kenyan government approval. Secondly, Dana acquired a 50% interest and operatorship in the Bouanane block, onshore eastern Morocco, adjacent to the border with Algeria. Some seismic has already been acquired and drilling could take place in both these areas as early as 2008.

In Egypt, Dana completed a transaction with Compania Espanola de Petroleos S.A. (CEPSA) to acquire a 20% interest in the South Feiran Concession, located offshore in the Gulf of Suez. A 3D seismic survey has already been shot and the current plan is to drill a well late 2007 or early 2008. Dana has also signed an agreement with BP Exploration (Delta) Limited to acquire a 25% interest in the exploration Contract Area A in the North Ghara Concession, located in the Gulf of Suez, close to existing production infrastructure.

During the last two years, Dana has built a significant position in both Morocco and Egypt through a number of low cost transactions. Each of these countries is delivering attractive exploration opportunities. This commercial activity is likely to continue in the coming year with a number of further deals already under discussion.

As a result of exploration and appraisal wells, ongoing activity in existing fields and commercial transactions, the Group expects to have a significant increase in net reserves at end 2006, from approximately 111 million barrels of oil equivalent to approximately 130 million barrels of oil equivalent. Looking at 2006 production, this represents a reserves replacement ratio of some 330%.

Dana continues to operate prudently and maintain a healthy financial position. Strong cash flows are augmented by the careful management of capital expenditure, which has been demonstrated by the Company's disciplined farming-out of expenditure on deep-water exploration wells. At the 2006 year end, the Group had net funds of approximately £110 million and zero gearing. During 2007, Dana expects to invest some £140 million within its existing fields and exploration licences. Approximately £65 million of this will be spent on North Sea development activity and around £75 million on Dana's exploration and appraisal programme. Approximately £60 million will be applied to completing, and driving forward the immediate work on, recently acquired assets. Such as the Cavendish gas field in the UK, the West El Burullus concession in Egypt and Dana's new assets in Norway.

4. Outlook

Over recent years, Dana has built a substantial oil and gas asset portfolio. As a result of earlier successes, the Company now has a stream of developments which will ensure its growth continues.
By the middle of 2007, Dana expects to be producing from 16 fields, with 15 of these in the North Sea, providing a strong and well balanced cash flow engine. The Company remains on course to meet its two-year target to double its 2005 production levels by the end of 2007. Dana's strong balance sheet has allowed it to remain completely un-hedged with respect to oil price, thus maximising the benefits to the Company from continuing commodity price strength.
Over and above Dana's production growth, the Group is currently planning the drilling of up to 31 exploration and appraisal wells over the next two years, targeting a total reserves potential of over one billion barrels net to Dana, on an unrisked basis.
In addition to its intense drilling and development programme, Dana is confident of maintaining a high level of commercial asset trading activity, notwithstanding 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.

27 February 2007