Dana Expands International Business into Algeria and Egypt

Dana Petroleum's subsidiary, Dana Petroleum (E&P) Limited, has signed two agreements with subsidiaries of Gaz de France ("GDF"), a leading European gas and LNG player. In the first of these, GDF has agreed to assign to Dana a 15% working interest in the production sharing contract for Blocks 352a and 353, located in the prolific Sbaa basin, onshore southwest Algeria, for a cash consideration of US$93 million. An estimated 2.6 trillion cubic feet of recoverable gas has been discovered on these blocks to date within seven main accumulations of which the largest, containing approximately half this volume, is the Oued Zine field. Although commerciality has not yet been formally declared, a development plan is under preparation with gas production scheduled to commence in 2010 at rates of 560 million standard cubic feet per day.

In parallel with this acquisition, Dana and GDF have executed an exchange agreement by which Dana will be assigned three significant assets in the UK and Egypt. Firstly, Dana will gain a 25% interest in the producing Anglia gas field and associated UK North Sea Blocks 48/18b, 48/19b and 48/19e. Secondly, the Company will receive an additional 22.113% interest in the producing Johnston gas field (together with a 30% interest in associated UK North Sea Block 43/27a), this will take the Group's total interest in Johnston gas production up to approximately 50%. Thirdly, Dana will gain a 30% interest in the recently awarded production sharing contract for the West El Burullus Concession in the Nile Delta, offshore Egypt. The Nile Delta has now emerged as a prolific hydrocarbon basin, where gas production and LNG infrastructure is well established and large discoveries continue to be made.

In exchange for the above assets, Dana has agreed to transfer to GDF a 24% interest in Block 1 offshore Mauritania, a 27.85% interest in Block 7 and a 17.5% interest in Block 8. Dana will thus retain a 36% interest in Blocks 1 and 7 and a 24% interest in Block 8. Dana will remain as operator of all three blocks. In addition, GDF will pay all of Dana's costs associated with the next three deep-water exploration wells offshore Mauritania, one well is planned on each of the blocks, up to a cumulative cap of US$30 million. The Company will pay for an additional 30% of costs associated with the first exploration well in the West El Burullus Concession up to a cap of three million US dollars.

On completion of the exchange transaction, Dana's North Sea gas production is expected to rise by approximately 18 million standard cubic feet per day (3,100 barrels of oil equivalent per day). At the effective date of the deal, 1st July 2005, Dana estimates the exchange will also add 43 billion cubic feet of North Sea proven and probable gas reserves to the Company (7.4 million barrels of oil equivalent).

On completion of the acquisition of the Algerian interest, Dana will add 390 billion cubic feet of contingent gas resources on a working interest basis (67 million barrels of oil equivalent). A proportion of these resources are expected to become proven and probable reserves in 2006 once commerciality is confirmed.

Final completion of the two transactions, which are subject to normal regulatory and partner approvals, is expected to take place in early 2006.

Tom Cross, Dana's Chief Executive, commented:

"This is an excellent deal for Dana. It delivers immediate production and cashflow from two UK fields and will add significant new reserves in both the near term and medium term in the Company's core areas of the North Sea and Africa. Dana also gains strategic entry into two world class hydrocarbon basins in Algeria and Egypt and will be well positioned holding high calibre assets in each, with the potential to grow further through drilling from late 2005 onwards.

These two transactions are directly in line with Dana's strategy of periodically crystallizing a part of the long term exploration value the Group is creating by swapping for proven and producing oil and gas assets which are closer to market and hence will achieve earlier returns.

By trading a minority of its current position in Mauritania, Dana has added two quality new areas with major upside potential to its international program and accelerated the growth of its North Sea gas business. The Group has also substantially improved the risk/reward profile of Mauritania exploration drilling for its shareholders, while maintaining sufficiently large stakes for any exploration success to be a Company transforming event. This deal locks in the value created to date in Mauritania and reduces capital requirements through the next phase of deepwater exploration drilling to a minimum.

Dana is delighted to be building upon its already successful UK relationship with Gaz de France, with whom it will now be working across four countries, Algeria, Egypt, Mauritania and the UK."


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