Interim Management Statement

22 April 2010

(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 and production company, today issues the Interim Management Statement in accordance with the EU Transparency Directive. The statement covers the period from 1 January 2010 to date. The financial and production data are for the period from 1 January 2010 to 31 March 2010. All other information, including details on operations, is up-to-date as at 22 April 2010.

This statement is solely for the purpose of providing information to the market and it should not be relied upon for any other purpose.

Key highlights

- The average daily production rate reached 47,654 barrels of oil per day ("bopd") in Q1 2010, an increase of 9% over the comparable period in 2009 (Q1 2009: 43,787 bopd);

- Three development wells came on stream at combined rates of 2,103 bopd, 2,168 bopd and 1,895 bopd;

- Capital expenditure on infrastructure and drilling was approximately US$67 million for Q1 2010 (Q1 2009: US$81 million);

- Financial position of the Group with a cash balance of US$1,104 million at the end of Q1 2010 and with no debt remains strong.

Dr Abdul Jaleel Al Khalifa, CEO, commented:

"Dragon Oil continues to increase production. In Q1 2010 we achieved a 9% increase in gross production compared to Q1 2009. This year we have added workovers and sidetracks to our drilling programme in addition to the objective of completing 11 development wells by year end. The infrastructure development programme for the year is well underway along with the award of two production platforms Dzheitune (Lam) C and Dzhygalybeg (Zhdanov) A. We continue to drive our gas monetization and diversification strategies."

MATERIAL EVENTS AND TRANSACTIONS

Production

The gross production for Q1 2010 averaged 47,654 bopd. This represents a 9% increase over the comparable period in 2009 when the average daily production rate was 43,787 bopd. The entitlement production for Q1 2010 was approximately 50% of the gross production compared to 65% for the comparable period in 2009. The entitlement barrels are dependant amongst other factors on operating and development expenditure in the period and the realised crude oil price. In Q1 2010, higher oil prices and lower capital expenditure than in the comparable period in 2009 resulted in lower entitlement barrels. The entitlement is expected to increase as the expenditure on infrastructure is weighted towards the second half of the year.

Marketing

Dragon Oil sold 2 million barrels of crude oil in Q1 2010, which is 20% lower than the volume sold during the corresponding period last year (Q1 2009: 2.5 million barrels). During Q1 2010, 86% of crude oil was exported via Neka, Iran. Since the commencement of the PSA, Dragon Oil has been marketing the majority of its entitlement barrels through a crude oil swap agreement with a subsidiary of the National Iranian Oil Company, Naftiran Company (NICO) Limited. The term of the swap agreement was for 10 years and that expired on March 31, 2010. Whilst Dragon Oil is currently in the process of negotiating a new long term swap agreement, the Group has concluded an agreement for a short term on a rollover basis on revised terms.

Exports through the western route will increase in volume until more favourable long term swap agreement terms are negotiated. Dragon Oil is satisfied that there is sufficient capacity in existing marketing routes to satisfy current production. The realised prices are expected to be impacted by the change in the marketing arrangements. Dragon Oil continues to assess additional routes to market its crude oil.

Drilling

Iran Khazar rig completed the Dzheitune (Lam) A/142 well in Q1 2010, which was drilled to a depth of 3,961 metres. The well tested at a combined rate of 2,103 bopd with the short string contributing 1,180 bopd and the long string contributing 923 bopd. Subsequently, as part of the workover programme, the Iran Khazar rig completed a work-over of the well Dzheitune (Lam) A/125 yielding an incremental production of 562 bopd. The Iran Khazar rig is preparing to commence sidetrack of well Dzheitune (Lam) A/129 that is expected to be completed by June 2010.

Rig 40 completed the Dzheitune (Lam) 13/143 well in Q1 2010, which was drilled to a depth of 3,450 metres. The well tested at a combined rate of 2,168 bopd with the short string and the long string contributing 1,144 bopd and 1,024 bopd respectively. Rig 40 has since been skidded to the next slot on the Dzheitune (Lam) 13 platform where it has commenced drilling the Dzheitune (Lam) 13/144 well.

The Astra rig has completed the Dzheitune (Lam) B/141 well which was drilled to a depth of 4,502 meters. The well tested at a combined rate of 1,895 bopd with the short string and long string contributing 761 bopd and 1,134 bopd respectively. Future wells in this platform are expected to have better performance, as they will target a more prolific area of the field. The Astra rig has since spudded the Dzheitune (Lam) B/145 well.

Corporate restructuring

On 7 April 2010, the Board of Dragon Oil announced that it had decided not to proceed with a proposed corporate restructuring of the Company which had been announced by the Company in 2009. This announcement was made following an extensive review of the options for, and implications of, a corporate restructuring together with a period of shareholder consultation. Dragon Oil currently has a primary listing on the Irish Stock Exchange and since 6 April 2010, in accordance with recent changes to the UK listing Regime, has been designated as a premium listing on the London Stock Exchange.

FINANCIAL UPDATE

Cash and cash equivalents and term deposits 

The cash and cash equivalents and term deposits at 31 March 2010 were approximately US$1,104 million (31 December 2009: US$1,138 million), including US$140 million (31 December 2009: US$126 million) set aside for abandonment and decommissioning activities.

Capital expenditure

Capital expenditure for Q1 2010 was around US$67 million (Q1 2009: US$81 million). Of the total capital expenditure, approximately 31% was attributable to infrastructure with the balance spent on drilling. The infrastructure spend during the first three months of the year included upgrading the processing facility and installation of the Dzheitune (Lam) B platform and in-field pipelines. Infrastructure expenditure for 2010 is expected to be weighted towards the second half of the year, subject to approvals. The Group expects to spend around US$ 250 million this year on infrastructure with the award of two production platforms Dzheitune (Lam) C and Dzhygalybeg (Zhdanov) A and US$600-700 million on infrastructure projects in the planning period of 2010-12.

Realised prices

The average realised crude oil price during Q1 2010 was approximately US$75 per barrel which was 70% higher compared to the corresponding period last year (Q1 2009: US$44/bbl). The Group's realised crude oil prices achieved a discount of about 1% to Brent during the first three months of the year.

CURRENT OPERATIONS AND OUTLOOK

Rig 40 is due to complete the Dzheitune (Lam) 13/144 well in May 2010 and is then planned to sidetrack potentially up to 2 existing wells on the same platform before the year-end to enhance production. The Iran Khazar rig is scheduled to complete the sidetrack of well Dzheitune (Lam) A/129 and complete a further 2 wells by the year-end. The Astra jack-up rig which is operating on a six month basis is expected to complete the current well on Dzheitune (Lam) B before demobilizing in May 2010. The platform-based NIS rig has been contracted for two years. Ongoing mobilisation of the NIS rig to Dzheitune (Lam) 28 platform has been subject to delays but it is still expected to complete 4 wells by the year end.

Dragon Oil is working towards completing 11 new development wells and up to 3 sidetracks in 2010. The Group expects to be able to achieve an average production growth of 10% to 15% per annum over the three year period of 2010-12.

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For further information please contact:

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Dragon Oil plc

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About Dragon Oil

Dragon Oil plc is an innovative international oil and gas 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. Operational focus is on the re-development of two oil producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

www.dragonoil.com

Disclaimer

This statement 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 the 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.