Dragon Oil issues the following trading statement, which includes an operational update and financial highlights for the six months' period ended 30 June 2011. All information referred to in this update is unaudited and subject to further review. Dragon Oil expects to publish its 2011 Interim financial results on 10 August 2011.

Key operational highlights

■25% increase in average daily production rate at approximately 58,000 barrels of oil per day ("bopd") in 1H 2011 compared to 46,420 bopd in 1H 2010; ■Seven new development wells completed to date; ■2011 drilling programme updated to complete 12 wells, a sidetrack and a workover versus 11 wells previously targeted. Key financial highlights

■Capital expenditure on infrastructure and drilling amounted to US$151 million for 1H 2011 (1H 2010: US$174 million); ■The Group's cash balance net of abandonment and decommissioning funds at 30 June 2011 was US$1,256 million (31 December 2010: US$1,163 million); the Group remains debt-free. Dr Abdul Jaleel Al Khalifa, CEO, commented:

"We have achieved a significant production growth of 25% over the first half of last year, which puts us in a comfortable position to reiterate our guidance for gross production growth in 2011 of up to 20%. With three rigs currently operating full-time for Dragon Oil in the Cheleken Contract Area, we expect to drill and complete 12 wells, a sidetrack and a workover within the 2011 drilling programme.

"On the infrastructure front, we have seen encouraging progress in a number of projects and some delays in other projects. We have also recently awarded a contract for the construction of Block 4, a riser platform, together with the associated pipelines to cater for new wellhead and production platforms to be installed in the Dzhygalybeg (Zhdanov) field.

"With significant budget allocated for infrastructure development in 2011-13, we will be tendering out contracts for the construction of at least three new platforms with associated pipelines in the next 18 months alongside a number of other projects."

OPERATIONAL UPDATE

Production

The average daily production rate on a working interest basis was approximately 58,000 bopd for 1H 2011. The growth over the level of 46,420 bopd achieved during the comparable period in 2010 was 25%. Part of this increase is due to commissioning the new infrastructure at the end of 2010, including the 30-inch trunkline, associated 20-inch, 18-inch and 14-inch infield pipelines and the expanded Central Processing Facility. The balance of the production growth in 1H 2011 came from the six wells we put into production on the Dzheitune (Lam) 28 and B platforms. The Dzheitune (Lam) B platform area has not been very prolific. Nevertheless, it is worth assessing such areas and the information will be utilized to optimize future drilling plans.

Marketing

Dragon Oil sold 4.9 million barrels of crude oil in 1H 2011 (1H 2010: 3.7 million barrels), which is 32% higher than the volume sold during the corresponding period last year. This is mainly attributable to more entitlement barrels due to higher gross production during the period. The entitlement production for 1H 2011 was approximately 52% of the gross production compared to 55% for the comparable period in 2010.

Entitlement barrels are dependent, amongst other factors, on operating and development expenditure in the period and realised crude oil prices. Notably in 1H 2011, higher crude oil prices, production measurement factors and lower capital expenditure, resulted in slightly lower percentage of entitlement barrels.

We continue to export our share of the crude oil production FOB Aladja Jetty via Baku, Azerbaijan. Thus, in 1H 2011, 100% (1H 2010: approximately 25%) of crude oil was marketed via this route, primarily using the BP-operated Baku-Tbilisi-Ceyhan pipeline. In 1H 2010, a major portion of our crude oil was exported through Neka, Iran.

In line with our strategy to have a number of routes available to access international markets and maintain flexibility in operations, Dragon Oil continues to review alternate routes for marketing its crude oil, including via Iran if the terms become favourable.

The Group was in an underlift position of approximately 0.3 million (31 Dec 2010: overlift position of approximately 0.2 million) barrels of crude oil at the end of 1H 2011.

Drilling and current operations

During the first half and in July 2011, seven development wells were put into production: one well within the 2010 drilling programme and six wells within the 2011 drilling campaign. The following table summarises the results of the development wells drilled in the Dzheitune (Lam) field to date.

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