Trading Statement

15 July 2014

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

Trading Statement

Dragon Oil plc (Ticker: DGO), an international oil and gas exploration, production and development company, today issues the following trading statement, which includes an operational update and financial highlights for the six months' period ended 30 June 2014. All information referred to in this update is unaudited and subject to further review. Dragon Oil expects to publish its 2014 interim financial results on 5 August 2014.

Key operational highlights

Key financial highlights

Dr Abdul Jaleel Al Khalifa, CEO, commented:

"In 1H 2014, managing existing production and completing two successful sidetracks allowed us to maintain the average gross production at above 73,000 bopd. The average gross production was above 76,000 bopd in June and has continued to increase in July. On 13 July 2014, the rate was 78,353 bopd. Between eight and 10 wells remain to be completed in the second half of the year and we expect to see rising gross production with an exit rate of 87,000 - 90,000 bopd at the end of the year.

"We are pleased to report that the contract has been signed for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, our first 100%-operatorship block outside of Turkmenistan. The drilling of an exploration well continues in Iraq with the first target expected to be reached in the near future."

OPERATIONAL UPDATE

DEVELOPMENT

Turkmenistan

Production and Entitlement

For 1H 2014, the gross field production averaged 73,440 bopd (1H 2013: 73,600 bopd). Six wells, including three sidetracks, were drilled and completed during the first half of 2014.

The entitlement production for 1H 2014 was approximately 52% (1H 2013: 44%) of the gross production. Entitlement barrels are finalised in arrears and are dependent on, amongst other factors, fiscal terms of the Production Sharing Agreement, operating and development expenditure in the period and the realised crude oil price. Entitlement barrels in 1H 2014 are higher due primarily to higher development spend, despite slightly higher realised crude oil prices.

Marketing

Dragon Oil sold 5.9 million barrels of crude oil in 1H 2014 (1H 2013: 5.7 million barrels). The 4% increase in the volume sold over the comparable period is due to higher entitlement despite changes in the lifting position.

In 1H 2014, Dragon Oil exported 100% (1H 2013: 100%) of its crude oil production through Baku, Azerbaijan.

At the beginning of 2014, Dragon Oil renegotiated marketing arrangements to secure a relatively better discount resulting from a closer correlation between realised oil prices and monthly average Brent prices. The discount is expected to be in the range of a 14%-17% discount to Brent in 2014.

The current arrangement will continue to the end of 2014 and we continue to examine future options, which range from the renewal of existing arrangements to the development of alternatives via Kazakhstan or Russia, or other routes.

Drilling

Since the beginning of the year, Dragon Oil has completed six wells, including three sidetracks, in the Dzheitune (Lam) and Dzhygalybeg (Zhdanov) fields. The following table summarises the results of the drilling programme:

The sidetrack drilled from the Dzheitune (Lam) 4 platform to appraise a location for a future platform encountered water and will be side-tracked in the future. We anticipate that recoverable reserves attributed to this area will be downgraded; however, we expect that this will be balanced by the addition of reserves from drilling results we are seeing in the A-sands in the Dzheitune (Lam) area and secondary recovery methods - jet pump application and the water injection pilot project.

The first new well in the Dzhygalybeg (Zhdanov) field, an appraisal well Zhdanov 21/101, was tested across limited reservoir intervals for initial production at 425 bopd with a high water content. Due to well bore stability issues we have suspended the well and will sidetrack it in the future.

The status of the drilling rigs in the Cheleken Contract Area is the following:

The contract has been awarded to procure jet pump systems for up to 14 more wells, which we expect to install gradually in 2H 2014 - 1Q 2015 with the first few jet pumps to be installed on the Dzheitune (Lam) 10 and 13 platforms before the end of the year. The objective of this artificial lift system is to increase production and enhance recovery.

The water injection pilot project is continuing in the pilot Dzheitune (Lam) 75 area. We continue to see a sustained trend of rising reservoir pressure in the pilot area. The tendering process to acquire water injection facilities to be installed at the Dzheitune (Lam) 10 and 13 platforms is also underway. The aim of the water injection programme is to maintain reservoir pressure, improve production rates and reserves recovery.

Infrastructure

In February 2014, Dragon Oil awarded a contract for the construction and installation of the wellhead and production platform Dzheitune (Lam) E and associated pipelines. Design and detailed engineering work is underway.

Work has commenced on relocation of the Dzhygalybeg (Zhdanov) B platform to the Dzheitune (Lam) field, location Lam F. Onshore modifications have been completed and platform jackets are being transported for installation at location Lam F.

Construction of the tank farm to quadruple our crude oil storage capacity at the Central Processing Facility is progressing according to the schedule with an anticipated completion date in 1Q 2016.

The Group plans to increase the processing capacity of the Central Processing Facility to accommodate the production growth over the coming years. Required equipment has been procured and installation is expected to take place in 2H 2014.

The tendering process to select a contractor to build another 30-inch trunkline from the Dzheitune (Lam) field to the Central Processing Facility is ongoing. Construction is expected to take two years after the contract is awarded.

Gas Treatment Plant

The bids for an engineering, procurement, installation and construction project of the Gas Treatment Plant are in the evaluation stage. We anticipate the construction phase to take two to three years after the contract is awarded.

EXPLORATION

Tunisia

The joint venture partners (Dragon Oil, 55%; Cooper Energy, 30% and operator; and Jacka Resources Ltd, 15%) are working on securing a drilling rig to perform Sidetrack-2 of the Hammamet West-3 well in 2015. The estimated cost of Sidetrack-2 is approximately US$35 million of which Dragon Oil will contribute based on working interest in the block.

Iraq

In Iraq, the consortium of Dragon Oil (30%) and Kuwait Energy Corporation (70% and operator) is drilling an exploration well. The well is targeting two prospective reservoirs, which, in case of a discovery, are expected to be tested in 2H 2014. Concurrently, the consortium has completed an environmental impact assessment and environmental baseline studies, as part of the consortium's contractual obligations, in preparation for de-mining work and seismic acquisition. De-mining activities commenced in early June 2014. 3D seismic acquisition activities are planned for 1H 2015.

Afghanistan

In Afghanistan, seismic acquisition and aeromagnetic survey have been approved by the Ministry of Mines and Petroleum of Afghanistan. The consortium, comprising Dragon Oil (40%, operator of Sanduqli block), TP Afghanistan Ltd. (TPAL, 40% and operator of Mazar-i-Sharif block) and the Ghazanfar Group (20%), is conducting a tendering process to select a contractor to perform the acquisition of 1,270 kilometres of 2D seismic data, as well as airborne gravity and magnetic data in 2H 2014 in the Sanduqli block. Similar activities are planned for the Mazar-i-Sharif block.

Egypt

The contract for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, was signed between the Petroleum Ministry represented by Ganoub El Wadi Petroleum Holding Company (GANOPE) and Dragon Oil on 19 May 2014. We have hired a country manager and are working on setting up an office in Cairo and starting the work programme as per the Production Sharing Agreement.

The Philippines

On 7 July 2014, Nido Petroleum Limited (ASX: NDO,) on behalf of SC 63 Joint Venture partners PNOC-EC and Dragon Oil (Philippines SC 63) Limited advised that the Baragatan-1A well did not discover commercial hydrocarbons. The Baragatan-1A well will be plugged and abandoned. The partners plan to integrate information and data obtained from the well into current geological models and Dragon Oil will assess its future interest in the block.

FINANCIAL UPDATE

Capital expenditure

Capital expenditure for 1H 2014 was approximately US$295 million (1H 2013: US$149 million). Of the total capital expenditure, approximately 49% (1H 2013: 37%) was attributable to infrastructure with 46% (1H 2013: 51%) spent on development and appraisal drilling, the balance was spent on exploration assets. In 1H 2014, the Group recognised a provision for impairment of US$18.1 million towards the Baragatan-1A well exploration and evaluation costs. The infrastructure spend during the period included re-location of the Dzhygalybeg (Zhdanov) B platform, construction of the tank farm and additional slots on the Dzheitune (Lam) C, 28 and 10 platforms.

Realised prices

The average realised crude oil price during the first half of 2014 was approximately US$93/bbl (1H 2013: US$86/bbl), at a discount of 15% (1H 2013: a provisional discount of 20%) to Brent.

OUTLOOK

In 2014, as advised in the gross production guidance update published on 25 June 2014, we expect the average gross production growth from the Cheleken Contract Area to be in the range of 5% to 10% in 2014. We re-iterate our drilling programme of between 14 and 16 wells, most of which will come into production in 2H 2014; we expect to exit at 87,000-90,000 bopd in 2014. We maintain our guidance for an exit rate of 100,000 bopd in 2015 and plans to sustain the 100,000 bopd average gross production for a minimum of five years thereafter.

The Group expects to report its 2014 interim financial results on 5 August 2014.

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For further information please contact:

Investor and analyst enquiries

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

Anna Gavrilova

Media enquiries

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

Martin Jackson

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 and gas producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

The Group has exploration blocks in Tunisia, Iraq, Afghanistan, Egypt and the Philippines. Dragon Oil's diversification strategy is to add exploration and production assets within Africa, parts of Asia and the Middle East in order to create a diversified and balanced portfolio of assets for the Group.

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.