Interim Management Statement

23 October 2012

(the "Company" or together with its subsidiaries "Dragon Oil" or the "Group")

Interim Management Statement

Dragon Oil plc (Ticker: DGO), an international oil and gas exploration, development and production company, issues its Interim Management Statement in accordance with the EU Transparency Directive. The statement covers the period from 1 July 2012 to-date. The financial and production data are for the period from 1 July 2012 to 30 September 2012. All other information, including details on operations, is up-to-date as at 23 October 2012.

Key highlights

- Two platform-based rigs contracted for a period of two years commencing in 2013, adding to offshore drilling capacity;

- Three new wells and a sidetrack put into production in 3Q 2012;

- Average daily gross production reached 69,600 barrels of oil per day ("bopd") in 3Q 2012;

- Capital expenditure on infrastructure and drilling amounted to approximately US$91 million for 3Q 2012;

- US$200 million share buyback programme is ongoing.

Dr Abdul Jaleel Al Khalifa, CEO, commented:

"I am pleased to say that with today's announcement on having secured two platform-based rigs to add to our drilling rig fleet, we have gained more certainty on the drilling programme for 2013. The rigs are to be mobilised shortly after the Dzhygalybeg (Zhdanov) A and B platforms are ready for drilling in 1Q and 2Q 2013, respectively.

"In the third quarter of this year we achieved a 13% increase in the gross production compared to the same period last year. The sanding issues were put under control allowing us to restore the gross production to above 70,000 bopd in mid-August and we have been maintaining the production above this level since then. The gross production growth for 2012 is expected to be 10%, a solid result given constrained production in the second quarter of this year.

"The US$200 million share buyback programme is ongoing with almost 90% completed. Before the end of the year, we anticipate being able to update the market on the marketing arrangements for exporting our share of the crude oil production and commencement of installation of the Dzhygalybeg (Zhdanov) A platform, among other projects."

INTERIM MANAGEMENT STATEMENT

MATERIAL EVENTS AND TRANSACTIONS

Turkmenistan

Production

Gross field production for 3Q 2012 averaged 69,600 bopd (3Q 2011: 61,500 bopd). This represents a 13% increase over the level reached during the corresponding period in 2011. Three wells and a sidetrack were put into production in 3Q 2012.

The entitlement production for 3Q 2012 was approximately 46% (3Q 2011: 53%) of the gross production. The entitlement barrels are finalised in arrears and are dependent on, amongst other factors, operating and development expenditure in the period and the realised crude oil price. Lower proportion of entitlement barrels in 3Q 2012 is due primarily to lower development expenditure during the quarter and the workings of the Production Sharing Agreement.

Marketing

Dragon Oil sold 2.8 million barrels of crude oil in 3Q 2012 (3Q 2011: 2.7 million barrels), which is 4% higher than the volume sold during the corresponding period last year. In 3Q 2012, Dragon Oil exported 100% (3Q 2011: approximately 95%) of its crude oil production through Azerbaijan.

We are currently in negotiations on marketing arrangements to export our share of the crude oil production from the Cheleken Contract Area and will update the market in due course.

Drilling

In 3Q 2012, Dragon Oil put into production three wells and a sidetrack. The Dzheitune (Lam) A/176 development well is currently being tested and we expect the results in the coming weeks. This brings the total number of wells completed to-date to 14. The following table summarises the drilling activity in 3Q 2012:

The jack-up rig has spudded the next development well Dzheitune (Lam) A/177 on the Dzheitune (Lam) A platform. The leased land rig is currently skidding over the new slot to spud the Dzheitune (Lam) 28/178 development well following the completion of its scheduled maintenance and addition of three extra slots on the Dzheitune (Lam) 28 platform. Our own rig is currently stacked pending the evaluation of options for its further use.

Having awarded the contracts for two platform-based rigs we have added offshore drilling capacity to commence drilling in the Dzhygalybeg (Zhdanov) field in 2013. This takes the total number of drilling rigs, already secured and some available for the full and some for a part of the year, to four in 2013.

The leased Caspian Driller jack-up rig is expected to be moved to the Cheleken Contract Area in spring after the construction is completed. The anticipated delivery time is mid-2013. Our drilling plans for 1H 2013 will be adjusted to ensure continuous drilling during this time.

The tendering process to secure a third jack-up rig is ongoing. We anticipate being able to award this contract in 2013 and mobilise the rig in late-2013.

Infrastructure

The Dzhygalybeg (Zhdanov) A platform is due for delivery by the end of this year and we expect it to be ready for drilling in 1Q 2013. The Dzhygalybeg (Zhdanov) B platform is scheduled to be delivered and ready for drilling in 2Q 2013. Both platforms have 16 slots each: eight for drilling with a jack-up rig and eight for drilling using a land rig.

The Dzhygalybeg (Zhdanov) Block-4 gathering platform including the associated in-field pipelines has been completed. The commissioning of the block will take place once the first well is completed from the Dzhygalybeg (Zhdanov) A platform in 2013. Block-4 will act as a gathering station for the production from new wellhead and production platforms in the Dzhygalybeg (Zhdanov) field.

We are evaluating the bids from contractors to build and install the Dzheitune (Lam) D and E platforms and associated pipelines and anticipate the contracts to be awarded in early January 2013. We anticipate that the construction will take up to two years once the contracts are awarded. These platforms will be suitable for drilling with a jack-up rig with eight slots each initially.

We have commenced the tendering processes to award contracts for the construction and installation of another two platforms in the Dzheitune (Lam) field and associated pipelines. Subject to the timing of the tendering process, we envisage being able to award contracts for the construction of these platforms in 1H 2013. The tendering processes to construct and install a further two new platforms in the Dzheitune (Lam) field and a third new platform in the Dzhygalybeg (Zhdanov) field as well as perform structural extensions on a number of platforms in both fields are scheduled to start some time in 2013.

Geophysical and geotechnical surveys to evaluate 10 sites for future platforms and gathering stations have been completed. Another five locations have been added for ongoing survey.

The Group has commenced the tendering process to select an engineering, procurement, installation and construction contractor to increase the Group's crude oil storage capacity at the Central Processing Facility. The construction phase is likely to take two years with a number of tanks built on a priority basis after the contract is expected to be awarded some time in 1H 2013.

Dragon Oil has commenced the first phase of its strategy for plugging, abandonment and decommissioning of the old non-producing wells and non-producing platforms in the Cheleken Contract Area. The execution of this strategy is part of the abandonment and decommissioning activities the Group is to undertake under the Production Sharing Agreement. We have identified groups of wells based on their status and age. In the first phase, up to 15 non-producing wells are expected to be tested for productivity before being completely plugged and abandoned. The Group has awarded a contract to a company specialising in offshore operation for the plugging and abandonment of wells. The cost of the project is to be covered from the abandonment and decommissioning funds.

Tunisia

The Bargou Joint Venture, comprising Dragon Oil (55%), Cooper Energy (30%) and Jacka Resources (15%), has secured a drilling rig from Grup Servicii Petroliere SA ("GSP") and well management services by AGR Petroleum (ME) Ltd - Dubai for drilling an exploration well in the Bargou Exploration Permit, offshore Tunisia. Drilling is scheduled to commence between December 2012 and March 2013 depending on when the rig is released from previous commitments. The drilling of the well will be managed by Cooper Energy.

Dragon Oil is to contribute 75% of the cost to drill the Hammamet West-3 well, according to an agreed well plan scope, up to a cost cap of US$26.6 million (on a 100% basis). The well plan consists of a pilot hole followed by a slanted or horizontal section to intersect the fractures within the Abiod formation thereby increasing the flow potential of the reservoir.

Afghanistan

Dragon Oil has been pre-qualified to participate in a bidding round in the upcoming tender for the Afghan-Tajik oil and gas blocks in Afghanistan. The tender has been postponed by the Afghanistan Ministry of Mines to November 2012. The tender process is expected to be completed with the award of contracts to the winning bidders in early 2013.

FINANCIAL UPDATE

Realised prices

The average realised crude oil price during 3Q 2012 was approximately US$98/bbl (3Q 2011: US$103/bbl), which was 5% lower compared to the corresponding period last year. During the third quarter of this year, the Group's average realised crude oil prices were at a discount of approximately 11% (3Q 2011: approximately 9%) to Brent. For the year to 31 December 2012, Dragon Oil expects to achieve an average realised price at about 10-11% discount to Brent.

Cash and cash equivalents

Cash and cash equivalents and term deposits at 30 September 2012 were approximately US$1,593 million (30 June 2012: US$1,667 million), excluding the funds set aside for abandonment and decommissioning activities.

Capital expenditure

Capital expenditure for 3Q 2012 was approximately US$91 million (3Q 2011: US$99 million). Of this capital expenditure, approximately 57% was attributable to infrastructure with the balance spent on drilling. The infrastructure spend during the period included construction of the Dzhygalybeg (Zhdanov) A and B platforms, Dzhygalybeg (Zhdanov) Block-4 gathering platform and infield pipelines, among other projects.

Total capital expenditure on infrastructure in 2012 is expected to amount to approximately US$250 million.

OUTLOOK

Until the end of the year, the jack-up rig will be drilling the Dzheitune (Lam) A/177 well and the leased land rig is expected to spud the Dzheitune (Lam) 28/178 well shortly. We expected one of these wells to come on stream by the end of this year and the other one to be completed in early-January. The Dzheitune (Lam) A/176 well has been completed and is being tested for initial production flow. In total for 2012, 16 wells will have been drilled with 15 wells completed, up from the originally planned 13 wells.

Given the sanding issues earlier this year, we now expect to achieve gross production growth of 10% in 2012. Given the available drilling rigs today (one jack-up rig and three leased land rigs), the production growth in 2013 is likely to be on the lower end of the medium-term guidance of 10%-15% on average per year. More details on the drilling programme and capital expenditure for 2013 will be provided in the Trading Statement to be published in January 2013.

Over the 2012-15 period, we re-iterate our guidance of an average production growth rate of 10%-15% per annum with anticipated fluctuations of annual growth rates, taking our gross field production to a level of 100,000 bopd in 2015 with the aim of maintaining this level for a minimum period of five years from 2016.

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For further information please contact:

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Dragon Oil plc (+44 (0)20 7647 7804)

Anna Gavrilova

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Citigate Dewe Rogerson (+44 (0)20 7638 9571)

Grant Ringshaw

Priscilla Garcia

About Dragon Oil

Dragon Oil plc is an international oil and gas exploration, development and production company, quoted on the London and Irish Stock exchanges (Ticker symbol: DGO). Its principal producing asset is in the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan.

Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil plc, holds 100% interest in and is the operator of the Production Sharing Agreement for the Cheleken Contract Area. The operational focus is on the re-development of two oil-producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

www.dragonoil.com

Disclaimer

This news release may contain forward-looking statements concerning the financial condition and results of operations of Dragon Oil. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. No assurances can be given as to future results, levels of activity and achievements and actual results, levels of activity and achievements may differ materially from those expressed or implied by any forward-looking statements contained in this report. Dragon Oil does not undertake any obligation to update publicly or revise any forward-looking statement as a result of new information, future events or other information.