Interim Management Statement

23 April 2013

Dragon Oil plc

(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 January 2013 to date. The financial, production and drilling results data are for the period from 1 January 2013 to 31 March 2013. All other information, including details on operations, is up-to-date as at 22 April 2013.

Key highlights

·; The average gross production rate in 1Q 2013 was approximately 71,800 barrels of oil per day ("bopd");

·; March average gross production was approximately 74,000 bopd with the month's exit rate at about 76,400 bopd;

·; Two new development wells were put into production during the first quarter of 2013;

·; Installation of the Dzhygaybeg (Zhdanov) A platform is in progress;

·; Tendering process for the construction of the Gas Treatment Plant has commenced;

·; Capital expenditure on infrastructure and drilling was approximately US$57 million in 1Q 2013;

·; The Group reached an agreement to secure a reliable marketing route for all its anticipated export entitlement production from the Cheleken Contract Area until 31 December 2014; and

·; The drilling of the Hammamet West-3 exploration well commenced in early April 2013 offshore Tunisia in the Bargou Exploration Permit.

Dr Abdul Jaleel Al Khalifa, CEO, commented:

"In the first quarter of this year, we maintained average gross production at a strong level of 71,800 bopd and exited the quarter at 76,400 bopd. With two wells completed in 1Q 2013, we are seeing solid performance from the contract area. Drilling activity is expected to pick up in the second half of the year with the arrival of the two platform rigs secured for drilling in the Dzhygalybeg (Zhdanov) field and the Caspian Driller jack-up rig.

"On the new ventures front, drilling in the Bargou Exploration Permit offshore Tunisia commenced in early April and we anticipate the initial results towards the end of 2Q 2013 with more detailed analysis to follow. In Iraqi Block 9, the joint management committee and the partners agreed to conduct the necessary work to enable the drilling of an early well - this reflects the confidence in the existing geological data for the block."

INTERIM MANAGEMENT STATEMENT

OPERATIONAL UPDATE

Turkmenistan

Production and entitlement

Gross field production for 1Q 2013 averaged approximately 71,800 bopd (1Q 2012: 70,600 bopd). This represents a 2% increase compared to the level of gross production in the first quarter of last year and a 6% increase over the 2012 average production, measured at observed temperature. Two new development wells with good results were put into production in 1Q 2013.

The entitlement production for 1Q 2013 was approximately 43% (1Q 2012: 44%) 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 entitlement barrels in 1Q 2013 arose from operation of the fiscal terms of the Production Sharing Agreement and are due primarily to lower development expenditure despite lower realised crude oil prices.

Marketing

Early in January 2013, Dragon Oil reached an agreement to secure a reliable export route for all its anticipated export entitlement production until 31 December 2014, FOB (free-on-board) the Aladja Jetty.

In 1Q 2013, Dragon Oil sold 2.4 (1Q 2012: 3.6) million barrels of crude oil, which is 33% lower than the volume sold during the corresponding period last year. Lower sales in 1Q 2013 are primarily due to change in lifting position as compared to the corresponding period last year. The Group was in an underlift position of approximately 0.2 million barrels at the end of 1Q 2013 (31 December 2012: overlift of 0.1 million barrels). In 1Q 2013, Dragon Oil exported all (1Q 2012: 100%) of its crude oil production through Baku, Azerbaijan

Drilling

During 1Q 2013, Dragon Oil completed two wells in the Dzheitune (Lam) field.

The Dzheitune (Lam) 28/178 well was completed as a single producer to a depth of 2,010 metres and tested in February 2013. The well tested at an initial production rate of 1,653 bopd. This well was stabilised and was producing at a rate of 2,065 bopd as reported in the quarterly drilling and production update on 2 April 2013.

The Dzheitune (Lam) 28/179 well was also completed as a single producer in March 2013. The depth of the well was 1,885 metres and the well tested for initial production of 1,975 bopd. This well was producing at a rate of 2,218 bopd as reported in the quarterly drilling and production update on 2 April 2013.

Since the beginning of the second quarter, the platform rig has completed the Dzheitune (Lam) 28/182 development well, which is currently being tested and the rig is now side-tracking the Dzheitune (Lam) 28/151A well.

After the scheduled maintenance, the jack-up rig is drilling the Dzheitune (Lam) 21/180 and 21/181 development wells in a batch drilling mode.

Two drilling rigs - the jack-up and the platform rigs - are currently operational in the Cheleken Contract Area. The contract to continue using the jack-up rig has been extended until May 2015 and the contract for the use of the leased platform rig has been extended to cover the completion of additional wells.

In the second half of 2013, we anticipate the delivery of three more drilling rigs; this will significantly increase our drilling capacity. Two platform rigs are scheduled to commence drilling in the Dzhygalybeg (Zhdanov) field in 2H 2013; while the arrival of the Caspian Driller jack-up rig is expected in mid-2013.

Water injection project

In 2011, a preliminary water injection study using a dynamic simulation model was completed for the Dzheitune (Lam) 75 area. Subsequently, based on the simulation results, an injectivity test was conducted in June 2011. We have converted one of the wells in the target Dzheitune (Lam) 75 area into an injector-type well and constant injection of water is expected to start in May 2013. Intermittent injection of water is being undertaken in the Dzheitune (Lam) 13 area in one of the wells. Results of the pilot project on these two platforms and a new dynamic model will be used to assess feasibility of further extensions of the waterflood project.

Infrastructure and facilities

The Dzhygalybeg (Zhdanov) A platform is currently being installed and expected to be ready for drilling in 2H 2013. The Dzhygalybeg (Zhdanov) B platform is being fabricated in Dragon Oil's yard in the harbour area in Hazar, Turkmenistan near our operations, and is scheduled for installation and to be ready for drilling in 2H 2013.

We expect to award contracts to build and install up to five wellhead and production platforms in the Dzheitune (Lam) field and associated pipelines in the near future. These platforms are expected to be constructed and installed in 2015 - 16. Contracts to construct and install the Dzheitune (Lam) D and E platforms are expected to be awarded in the coming three months. In the meantime, we have built and will continue to increase an inventory of additional slots available for drilling and side-tracking of existing wells from the existing platforms in the Dzheitune (Lam) and Dzhygalybeg (Zhdanov) fields.

The Group has amended its plans and now intends to quadruple its crude oil storage capacity at the Central Processing Facility in anticipation of reaching the 100,000 bopd target in 2015. We expect the award of the contract in 2H 2013 and the construction phase to take two years.

The Group plans to increase the processing capacity of the Central Processing Facility to accommodate the production growth over the coming years. Preparation of the basic design for few additional items has been awarded to the contractor who performed the Front End Engineering Design study for this project and the tendering process to select an engineering, procurement, installation and commissioning contractor is to take place in 2H 2013.

Gas monetisation

We have commenced the tendering process for an engineering, procurement, installation and construction project for the Gas Treatment Plant. The processing capacity of the plant is expected to be 360 mmscfd of gas, which, according to our estimates, which are to be verified at a later stage, should allow us in the future to strip around 3,600 barrels (annual average) of oil equivalent per day of condensate (depending on the final gas composition) and blend our share of condensate with our entitlement share of crude oil. The split of the produced condensate is subject to the same terms under the Production Sharing Agreement as crude oil.

We anticipate the construction phase to take two to three years after the contract is awarded.

Tunisia

The drilling of the Hammamet West-3 well in the Hammamet West Oil Field in the Bargou Exploration Permit commenced in early April 2013 and we anticipate the initial results towards the end of 2Q 2013 with more detailed analysis to follow.

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). If the well cost exceeds US$26.6 million, costs in excess of this amount will be shared among the joint venture partners pro rata to their participating interest. The well plan consists of a pilot hole followed by a horizontal section to intersect the open fractures within the Abiod formation thereby testing the flow potential of the reservoir.

Iraq

The formal contract between the Iraqi Ministry of Oil and the consortium was signed in January 2013. The work commitment on the block within the initial five-year exploration period will include de-mining, seismic acquisition and interpretation and drilling of an exploration well. The first meeting of the joint management committee took place in March and the partners (Kuwait Energy 70% and operator and Dragon Oil 30%) agreed to conduct all the necessary work to enable the drilling of an early well.

Afghanistan

The consortium of companies comprising Dragon Oil, Kuwait Energy, Turkiye Petrolleri A.O. (TPAO) and the Ghazanfar Group continues to negotiate terms with the Afghanistan Ministry of Mines for the exploration and production sharing contracts for two blocks, Sanduqli and Mazar-i-Sharif.

FINANCIAL UPDATE

Realised prices

With Brent averaging about US$112.6 per barrel during 1Q 2013, the average provisional realised crude oil price during the quarter was approximately US$92/bbl (1Q 2012: US$107/bbl), which was 14% lower compared to the corresponding period last year and at an 18% (2012: 10%) discount to Brent.

The marketing discount is applied to determine the realised price and is an absolute number. The realised price under the current marketing arrangement is impacted by volatility of Brent during the pricing period, part of which is outside the calendar quarter. The realised price remains provisional until its determination at the end of the pricing period.

Cash and cash equivalents 

The cash and cash equivalents and term deposits at 31 March 2013 were approximately US$1,579 million (31 December 2012: US$1,737 million), excluding the funds set aside for abandonment and decommissioning activities.

Capital expenditure

Capital expenditure for 1Q 2013 was around US$57 million (1Q 2012: US$84 million). Of this capital expenditure, approximately 64% was attributable to drilling, including exploration expenditure with the balance spent on infrastructure. The infrastructure spend during 1Q 2013 included work on the construction of the two new platforms and work related to upgrading existing platforms.

MATERIAL EVENTS

Final dividend for 2012

The Board of Directors of Dragon Oil recommended the payment of a final dividend of 15 US cents per share. Together with the interim dividend of 15 US cents, the total dividend for the year ended 31 December 2012 is 30 US cents. The final dividend of 15 US cents is subject to shareholder approval at the Annual General Meeting to be held in London, UK on 30 April 2013. If approved, the final dividend of 15 US cents is expected to be paid on 3 May 2013 to shareholders on the register as of 5 April 2013.

The following is the dividend timetable for the shareholders' information:

12 February 2013: Declaration of final dividend

3 April 2013: Ex-Dividend Date

5 April 2013: Record Date

30 April 2013: AGM

3 May 2013: Dividend Payment Date.

Board and management appointments

In March 2013, Mr McCue resigned from the Board of Directors of the Company having served on the Board of the Company for more than 10 years. He brought substantial business expertise gained from many years of working in the petroleum industry in senior roles at international oil and gas companies, as well as his financial knowledge to the Company's Board.

Thor Haugnaess has temporarily assumed the role of Senior Independent Non-executive Director. The Board has commenced a search for an additional Independent Director.

OUTLOOK

For 2013, we expect to grow production at the lower end of the medium-term guidance of 10%-15% on average per year. The production growth plan for this year calls for completion of 13 to 15 wells and two workovers based on the current and expected availability of drilling rigs. Drilling activity will be weighted towards the second half of the year after the awarded drilling rigs are delivered to the Cheleken Contract Area.

The details of the drilling and workover programme till the end of the year are as follows:

·; The leased platform rig is currently side-tracking the Dzheitune (Lam) 28/151A well having completed three wells since the beginning of the year and will complete up to two more wells in 2013;

·; The jack-up rig is currently drilling the Dzheitune (Lam) 21/180 and 21/181 development wells in a batch drilling mode; then it is due to complete two more wells in the Dzheitune (Lam) area before the end of the year;

·; The first platform rig is due to commence drilling from the newly installed Dzhygalybeg (Zhdanov) A platform in 2H 2013 and we expect to be able to complete two wells from this platform;

·; The second platform rig is expected to start drilling from an upgraded Dzheitune (Lam) platform or the next installed Dzhygalybeg (Zhdanov) B platform in 2H 2013 and we expect to be able to spud and drill one well using this rig in 2013; and

·; The delivery of the Caspian Driller is anticipated in mid-2013 and we plan to complete up to two wells using this rig in the second half of the year.

Over the 2013-15 period, we expect to maintain an average production growth of 10% to 15% per annum, 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 thereafter.

The infrastructure spend in 2013 is expected to amount to approximately US$200mn with about US$300mn to be spent on drilling.

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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.