Dana Petroleum

Press Release

28 February 2008

DANA PETROLEUM PLC

OPERATIONAL UPDATE

Dana Petroleum, the independent oil and gas exploration and production company focused on growth through international exploration and the development of production in the North Sea and Egypt, is pleased to provide the following operational update and outlook.

The Group's 2007 full year results are scheduled for release at the end of April 2008. The information contained herein has not been audited and so may be subject to further change and review.

Highlights

OPERATIONAL UPDATE

Record average oil and gas production of approximately 30,500 boepd delivered in 2007
Production capacity increased strongly during 2007, with a year end exit rate in excess of 45,000 boepd
Currently producing from 30 oil and gas fields, spanning the UK, Egypt, Norway and the Netherlands
Successful acquisitions of Devon Energy’s Egyptian business and Ener Petroleum A/S in Norway
Proven and probable reserves increased to 165.8 mmboe at end of 2007, representing a reserves replacement of 316%
Significantly increased financial capability following successful issue of £141.5 million convertible bond and new $400 million debt facility

Outlook

Exciting period ahead with rising production and extensive drilling programme
Group production for 2008 expected to average between 40,000 and 45,000 boepd representing more than a 30% growth year-on-year. 2008 production to date has averaged approximately 48,000 boepd.
A total of 17 exploration wells expected in 2008. Rigs for 14 of these already secured.
Pre-qualified as an operator in Norway and awarded 7 blocks offshore Norway in the 2007 APA licensing round
Preparing for forthcoming licence rounds in UK and Egypt
Planned 2008 capital investment of approximately £200 million across existing fields and licences

Chief Executive, Tom Cross commented:

“Dana delivered record production in 2007 and is on target for significant further growth in 2008 with the full year effect of new fields and the strategic acquisitions in Norway and Egypt. The Group is now producing from 30 oil and gas fields, progressing 3 new developments which are due onstream in 2009, and working on a further 15 potential development projects.

2008 will be the most active year for exploration in Dana’s history. A total of 17 wells are planned for this year, focused on the UK, Norway and Egypt.

The Company is in a very healthy financial position, with a broad portfolio of growth opportunities and the proven ability to deliver further commercial transactions.”

For further information please contact:

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

DETAILED STATEMENT

1. Production and Development

During 2007 the Enoch oil field and Cavendish gas field, where Dana increased its interest to 50% prior to first gas, were both brought on stream. Dana completed the acquisition of Ener Petroleum in Norway in July and of Devon Energy’s Egyptian assets in October. Dana closed the year producing from a total of 30 fields, comprising 14 fields in the UK, one in the Netherlands, one in Norway and 14 in Egypt. Average Group production in 2007, subject to final reconciliation, is expected to show 37% growth to a new record high of approximately 30,500 boepd. As a result of the new fields and activity in existing fields, Group production capacity increased strongly during 2007 achieving a peak daily production record of over 50,000 boped in early December, with a year end exit rate of over 45,000 boepd, significantly exceeding the Company’s target set at the end of 2005.

This record production has also coincided with record oil prices, to which the company is completely unhedged. Revenue from gas sales has also been strong as prices have been significantly higher than expected over the winter months. The benefit of a stronger gas price is now much greater to Dana due to the effect of the new Cavendish field gas stream.

The Company continued a high level of activity in its existing fields. The Greater Kittiwake Area was successfully tied-back to the Forties pipeline system in November, although delays in the project resulted in a longer than planned shutdown on the Kittiwake platform and thus reduced annual average production. With the pipeline operational, uptime from the GKA should now be higher and be free from the previous weather related shutdowns. 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 now well advanced.

The Johnston J5 well came onstream just before the year end. This new well accesses a previously undrained area of the field and significantly increases production capacity. Modifications on the Ravenspurn platform should also allow increased production from the existing Johnston wells.

Project work is progressing well on the Babbage field with a development sanction decision expected during Q2 2008, drilling starting late 2008 and first gas targeted for late 2009. This project will be very significant for Dana and strengthen the Company’s position in the UK Southern North Sea.

At the Barbara gas field in the Central North Sea, Dana continues to act as operator for the pre-sanction phase. Significant progress has been made in the last six months on subsurface and facilities study work, discussions with infrastructure hosts and aligning the five Barbara equity owners for a potential combined development with the neighbouring Phyllis gas field. Dana’s sizeable stakes in Barbara and Babbage make them two of the key growth areas for the Company in the next 2 years. Positive sanction decisions would mean that Dana is participating in two of the most substantial remaining gas developments in the UK North Sea.

Project sanction is also expected Q1 2008 for the E18 gas development in the Netherlands following further successful drilling in 2007. This development will be across the existing F16-E field in which Dana also has an equity interest.

The Egyptian fields have performed well since completion of the Devon transaction. Production is expected to increase in 2008 through further drilling and workover activity in the Dana operated East Zeit field and significant development activity in each of the non-operated concessions.

In common with the difficulties seen by other oil and gas industry international ventures in Russia, Dana has experienced challenges to its rights to continue to operate and manage the South Vat-Yoganskoye field in Siberia. This culminated in a series of court actions brought by field licence holder and minority shareholder OOO LUKoil-West Siberia (“Lukoil”) seeking termination of the commercial contract pursuant to which Dana’s subsidiary, Yoganoil managed and operated the South Vat-Yoganskoye field (the “General Contract”).

Yoganoil successfully defended legal proceedings on three separate occasions; however a further action initiated by Lukoil was decided in Lukoil’s favour in September 2007, from which date Dana ceased to recognise production from South Vat-Yoganskoye. Following negotiations between Yoganoil and Lukoil, prior to the hearing of a further appeal by Yoganoil, the General Contract was replaced by a service agreement (the “Service Agreement”), in terms of which Yoganoil would operate the South Vat-Yoganskoye field for Lukoil on a service fee basis.

Going forward, an extension of the Service Agreement into 2008 is being progressed between Yoganoil and Lukoil. In parallel, Dana and Lukoil are in commercial discussions regarding the potential sale of the Group’s stake in YoganOil, and the associated oil field facilities, which Lukoil has expressed an interest in acquiring as part of a regional consolidation plan.

After 10 years of successfully operating the field in co-operation with Lukoil, the continued investment proposition of Russian domestic oil price return no longer competes with the opportunities afforded elsewhere in the Dana portfolio. As a result of the implementation of the Service Agreement, Dana has written-down the remaining reserves and will take an impairment charge in the Group’s 2007 Accounts to reflect this change of operating mode.

2. Exploration and Appraisal

An active and balanced programme of drilling for new reserves is central to Dana's business strategy. This has been achieved by continuously applying for licences in bid rounds, concluding asset swaps and commercial transactions to offset risk where appropriate, and acquiring interests in licences which balance the portfolio.

In 2007, the Company had some notable successes with its exploration and appraisal wells. In the Dutch North Sea, the E18-7 well was drilled and flow tested at a rate of approximately 36 million standard cubic feet of gas per day. Together with the E18-6 discovery in 2006, the group is now progressing a development involving a tie-back across the F16-E platform.

The Grouse appraisal well in the Greater Kittiwake Area (“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 oil producer and Grouse will be developed as a subsea tieback to the Kittiwake platform utilising the Goosander production riser which was installed in 2006. Planning for a fast track development is underway with first oil expected during 2009. Long lead items have been ordered to accelerate project delivery time, following a sanction decision.

Dana’s first well in Norway, following the acquisition of Ener Petroleum, was 15/12-18A targeting the Storskrymten prospect, in the neighbourhood of the Sleipner field. The well discovered a 23 metre column in the Palaeocene Ty formation and, following sidetracking of the original well, further oil bearing sands in the Heimdal formation. The operator’s estimates of recoverable volumes are between 9 and 44 million barrels of oil and the partnership group is 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 discovered an oil column of some 116 feet in the Ness Formation and a number of oil samples were taken. The crude oil gravity here is around 32 degrees API with 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 already contains an earlier oil discovery.

The Company has already participated in 3 exploration wells in the early part of 2008. Following completion of the Kerloch well, the Sedco-704 rig was transferred to Noble Energy to drill the Morgan prospect in the GKA and in which Dana has a 35% interest. This well discovered oil bearing sands at the Forties level but, as the reservoir was thinner than prognosed, the discovery is currently considered to be sub-commercial. The Dana operated Scolty well, in the UK Southern North Sea, spudded in January 2008. Unfortunately, there were serious problems with the Ensco-100 drilling rig and the decision was taken to stop operations and plug and abandon the well after drilling only the top hole section. Dana is currently considering options for drilling the Scolty prospect later in 2008. In Norway, the Bjorn well operated by Marathon, to the west of the giant Troll field, was water bearing at each reservoir level. The partnership is currently working up plans for drilling further prospects in the same area.

In March 2008 drilling is expected to start on the attractive KES-CC1 prospect in the West El-Burullus concession, offshore Nile Delta. Drilling is planned to start on the large Rinnes prospect in the UK Northern North Sea in April 2008.

Dana has continued to actively build its portfolio of oil and gas licences. 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 Greater Kittiwake Area. In February 2008, Dana pre-qualified as an operator in Norway and was awarded interests in 7 blocks, including 2 operated blocks in the 2007 APA Round. During 2008, Dana expects to build its exploration portfolio through applying for licences in the UK Government's 25th Offshore Licensing Round, the Norwegian 20th Round and 2008 APA Round, and the three proposed Egyptian rounds.

Faroe Petroleum (“FP”) has also been highly successful in licensing rounds, with the award of 5 licences in the UK 24th Round, 6 licence interests in the APA 2006 round offshore Norway and a further 5 licence interests in the APA 2007 awards. In November 2007, FP announced a series of further commercial transactions building its exploration, development and production business. Consequently, Dana supported FP’s share placing in December 2007 and maintained the Group’s position as the largest shareholder in FP at just above 17%. In February 2008, Dana further increased its interest in FP to 24.2% by acquiring shares on the open market. The Company views its position in FP as a shareholding in a company with a complementary strategy and geographic spread.

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, and by undertaking selected company transformational acquisitions. The two most significant transactions in 2007 were the acquisition of Devon Energy Corporation’s Egyptian assets, completed in October, and the acquisition of the Norwegian company Ener Petroleum A/S (now Dana Petroleum Norway A/S) in July.

Dana has worked hard over the last six months to fully resource the Egypt operations with a combination of local and expatriate staff and the Company is now in an excellent position to deliver an extensive work programme in 2008. Dana will drill 2 development wells in the operated East Zeit field in the coming months using the IO3 rig, followed by 2 exploration wells in the South October concession using the same rig. The Company has committed to 3D seismic and an exploration well in the onshore North Qarun concession, and an exploration well in the North Zeit Bay, onshore Gulf of Suez concession. In addition, Dana will participate in the important KES-CC1 exploration well in the offshore Nile Delta, 4 further exploration wells in the Western Desert, the West Gihan well in the Gulf of Suez and drill up to 12 development wells in non-operated concessions. Within a year of signing the Sale and Purchase Agreement with Devon, Egypt will represent a significant proportion of the Group activities and capital investment programme and will continue to be core to the growth aspirations of the Company in the coming years.

In Norway, Dana has a strong team focused on identifying new opportunities through licence rounds and business development initiatives. Further activity is also being planned in the Jotun area.

In addition to these two large strategic deals, Dana has continued to undertake a number of smaller transactions which each add short term activity and value. The Company increased its interest to 64.85% and operatorship in Block 210/24a in the Northern North Sea. The Company will drill the Rinnes exploration well in this block during 2008 and will follow this up with assessment of the potential of the Melville oil discovery. The Company also completed a farm-in to acquire a 25% interest in Blocks 48/3a and 48/4. A decision on drilling will be made in the middle of 2008 following evaluation of seismic. Dana also equalised equities across Blocks 211/8a and 211/13a in the Northern North Sea through a number of small transactions. Subsurface study work is underway to identify drilling targets in these blocks.

Dana consolidated its position in the GKA by acquiring an additional 9.8% equity in Block 21/20a, including the Bligh discovery, where Dana now holds a 30.5% interest. Bligh was discovered in 1995 by the 21/20a-5 well where a drill stem test flowed at 2,750 bopd of 45.6 degrees API condensate and 15.4 million cubic feet of gas per day. Recent detailed technical work has increased the expected recoverable volumes to around 30 million barrels of oil equivalent gross. Planning is underway to develop the field as a tie-back to the Kittiwake platform. The development of Bligh will extend the life of the platform by several years and create additional value for the GKA partners.

During 2H 2007, Dana completed the divestment of its 14% interest in Blocks 211/22a SE and 211/23d, including the Causeway discovery. This equity was considered to be non-material and the consideration of around $40 million was significantly in excess of Dana’s carrying value for the block, generating a significant pre-tax gain on disposal.

This pre-tax gain substantially mitigates the aforementioned Russian impairment and the write-off of certain exploration expenditures which, following completion of technical evaluation work, the Group now believes are unlikely to result in commercial reserves. This principally relates to costs in Block 8 Mauritania, Kenya L5, and two licences in the Northern North Sea. Taken together, the overall net charge to 2007 pre-tax profits from these one-off items is expected to be in the order of £10-15 million.

Dana continues to operate prudently and maintain a healthy financial position. Strong cash flows are augmented by the careful management of capital expenditure. At the 2007 year end, the Group had repaid $75 million of the bank debt drawn to complete the Devon acquisition in October 2007, leaving $150 million of bank debt outstanding. Together with the Convertible debt and the Group’s cash balances, this results in a net debt position of approximately £100 million. During 2008, Dana expects to invest some £200 million within its existing fields and exploration licences. Approximately £70 million will be spent on production and development activity, £80 million on the North Sea exploration and appraisal programme, and £50 million on international exploration. This capital expenditure programme can be funded from existing facilities, cash resources and projected cash flow through 2008.

As a result of commercial transactions, ongoing field activity and exploration and appraisal drilling, the Group expects to have a significant increase in net reserves at the end of 2007, rising to 165.8 mmboe from 130.6 mmboe at end of 2006. On the basis of 2007 production, this represents a reserves replacement ratio of 316%.

4. Outlook

Over recent years, Dana has built a substantial and balanced oil and gas asset portfolio. The Company now has a considerable stream of exploration wells and developments which will ensure its growth continues.

Dana has already drilled 3 wells in 2008 and will shortly spud wells in the UK and offshore Nile Delta, Egypt. In total 17 wells are expected to be drilled in 2008. These represent a broad portfolio of opportunities, in a range of geological settings across Dana’s three key investment areas, namely the UK, Norway and Egypt. The Group will continue to develop its exploration portfolio through licence round applications focused on the UK, Norway and Egypt and through commercial transactions.

In addition to exploration drilling, Dana is also progressing developments in the Babbage and Barbara gas fields and the Grouse oil field in the UK, 12 infill wells in Egypt and enhancement to many of its existing fields. This ongoing activity is already increasing the production capacity of the Group well beyond the record levels achieved in 2007.

Over the last year Dana has demonstrated an ability to maintain a high level of commercial activity in a tight market. This optimises the exploration programme through farm-outs, provides new opportunities and delivers Company transforming deals, such as those in Egypt and Norway. The Group is confident that it can continue to build on the solid foundation provided by its growing portfolio of assets.

28 February 2008