Dana Reports Preliminary Results for 2005

Dana Petroleum plans to announce its preliminary results for the year ending December 31, 2005, at the end of March 2006. Prior to entering the closed period ahead of these results, Dana is pleased to provide the following operational update and outlook. Figures quoted in this update are preliminary and subject to audit.

1. Production and Development

Both production and development activities are progressing strongly in all areas of the North Sea. With the addition of the Gadwall oil field and the Johnston and F16-E gas fields in 2005, Dana closed the year producing from a total of 12 oil and gas fields, 11 of which were in the North Sea. Average Group production in 2005, subject to final reconciliation, is expected to be over 19,650 boepd, slightly above the Company's last forecast outturn for 2005

Following the addition of new fields in 2005, and an intense program of infill drilling and workover activity on existing fields throughout the year, Group production capacity has now increased to around 28,000 boepd. Three notable contributions to this increase have come from the reactivation of the Mallard oil field in the central North Sea, where a new water injection well has been added, the successful appraisal and development of an extension to the Johnston gas field in the southern North Sea and the Otter oil field well workover campaign in the northern North Sea.

Further production gains are expected in 2006. The completion of the exchange agreement with Gaz de France will see Dana acquire an interest in the Anglia gas field and an additional interest in the Johnston gas field. In addition, three new developments are in progress and the start of production from these, the Cavendish gas field and the Enoch and Goosander oil fields, is expected during the second half of 2006. A fourth, potential fast-track, development plan is also being considered for the Monkwell gas field.

In addition, infill drilling on fields already in production will again be an important factor in 2006. Drilling rigs are currently deployed on the Gadwall, Anglia, Claymore and F16-E fields and, subject to rig availability, further work is planned on the Hudson, Otter, Mallard, Banff and Johnston fields later in the year.

As a result of all this activity, including appropriate closed in periods for well work, it is currently estimated that Group production for 2006 will average between 25,000 and 30,000 boepd. The actual figure will depend on existing field performance, the completion of the Gaz de France transaction and the exact timing of production start-up of the three new fields currently under development. Dana is well positioned to benefit from this growth in production during 2006 as the Company is currently completely unhedged with respect to oil price.

2. Exploration and Appraisal

Dana completed six exploration and appraisal wells in 2005. Potentially the most important of these was the Faucon-1 well, drilled in Block 1 offshore Mauritania. This well found 46 feet of net hydrocarbon bearing Cretaceous sandstone in two intervals above a further 270 feet of potential sandstone reservoir. Hydrocarbon fluid samples recovered from the well are currently undergoing laboratory analysis.

Preliminary results, together with an in-depth analysis of log data obtained from the well, currently suggests that Faucon has discovered a gas reservoir overlying a thin oil zone, with gas in place volumes in the region of 200 billion cubic feet. As previously reported, although the volumes of gas and oil encountered in this first well are unlikely to justify near term development on a stand alone basis, this discovery is very important because it means Faucon has proven a working petroleum system in this vastly under-explored region of southern Mauritania. The Cretaceous sands encountered have also demonstrated that significant potential reservoir sand can be present to create much larger discoveries. It therefore provides enormous encouragement for the additional prospects already identified in Block 1, such as Petrel, and also for the future exploration of Dana's neighboring license interests, namely Block 2 immediately to the north and the St. Louis Block in Senegal which adjoins Block 1 to the south.

Dana has made good progress in driving ahead its next drilling activity offshore Mauritania. Agreements have now been executed to contract the Atwood Hunter drilling rig to drill two wells in 2006 on competitive terms. The first of these is currently expected to commence in July and will be drilled to test the very large 'Flamant' prospect in Block 8 in northern Mauritania. Detailed interpretation of 3D seismic indicates that Flamant has a potential gas in place exceeding 6 trillion cubic feet. This will be followed by a further well in Block 7, which will utilize the additional 3D seismic data acquired up-dip and inshore of the Pelican gas discovery already made by Dana with its first Block 7 well. Subject to completion of the exchange agreement with Gaz de France signed in late 2005, Dana will be free-carried on all costs through both of these wells.

Further along the West African coast, offshore Morocco, the acquisition of a 2,150 square kilometer 3D seismic survey over the North-West Safi exploration license has been brought forward and is now approximately 75% complete. This survey aims to define specific drilling targets on a number of prospects identified from a 2D survey carried out in 2004, with a view to commencing exploration drilling in 2007.

Preparations continue for drilling operations in Blocks L5 and L7 offshore Kenya, where a number of very large prospects have been identified. Due to the continued tight market for suitable deepwater drilling rigs, no rig has yet been contracted so the operator and co-venturers continue to pursue all potential rig options. Dana holds an attractive commercial position in L5 and L7, with two thirds of the costs associated with its 30% interest being carried by operator Woodside Energy.

The Company expects to establish a material new business in Egypt during 2006. Subject to regulatory approval and partner and Government consent to the agreements recently signed with Gaz de France and CEPSA, Dana will enter the West El Burullus Concession offshore the Nile Delta and the South Feiran Concession in the Gulf of Suez respectively. Both Egyptian permits are located in highly prospective regions with established production infrastructure. Significant 3D seismic surveys are planned on both areas with a view to 2007 exploration drilling. Dana also expects to be an active participant in bid groups for the forthcoming Egyptian Licensing Round.

Dana's commercial and legal teams are working hard to progress completion of the wide-ranging, cross border deal with Gaz de France, announced in November. Given its complexity, there are necessarily areas beyond Dana's direct control, such as receipt of the appropriate approvals from co-venturers, host governments and their respective regulators, which are required to ensure a timely and successful completion. The target for completion is currently during Q2 2006.

In the North Sea, Dana drilled five exploration and appraisal wells in 2005. Of the successes, the Johnston field extension well has been sidetracked to become the J4 production well and is now on stream; the Barbara appraisal well proved an eastern extension of the field into Block 23/16b and allowed Dana to earn an interest in Block 23/16b through farm-in; and a potential development of the Melville oil discovery is now under review as an integral part of considering infill options for the neighboring Hudson field. Although two sub-commercial wells were drilled, these had been pre-identified as being of higher risk and Dana successfully offset its costs on these wells through farm-out ahead of drilling.

Dana expects to participate in up to eight further North Sea exploration and appraisal wells in 2006, subject to completion of commercial agreements reached in 2005 and rig availability. In the Southern North Sea, the Marne appraisal well is currently being drilled from the Anglia subsea template and will be directly followed by a well to appraise the potentially significant Babbage gas field. An exploration well to test the DF prospect in Netherlands Block E18a, directly to the west of the F16-E field, is also planned in the second quarter of 2006.

In the Central North Sea, further appraisal of the now expanded area of the Barbara field will probably be required before finalizing the development plan. In the Northern North Sea wells are currently planned in 2006 to test a prospect on the Osprey Ridge, located to the South of the Clachnaben well in Block 211/22, and a potential satellite to the Magnus field in Block 211/11. Lastly, as the largest shareholder in Faroe Petroleum plc, Dana will benefit from any success it has when drilling its planned wells to test a prospect in the Halibut Horst area, to the north of the Claymore field, and the Brugdan prospect in Faroese waters West of Shetland.

3. Finance

Dana's record operating performance during 2005 generated significant cash flow, which, at the year end resulted in the Group having net funds of circa 90 million. This includes the proceeds of the successful placing in November 2005.

Overall in 2006, Dana expects to invest some 140 million within its existing fields and exploration licenses. Approximately 100 million of this investment program will be spent on North Sea development activity to maximize oil and gas production. Some 40 million is planned for Dana's international exploration and appraisal drilling activities which will target adding new reserves to the Group. With strong cashflow continuing during 2006 and a healthy net cash position, Dana can comfortably afford to execute its planned work program.

International Accounting Standards

In accordance with European legislation, Dana has adopted International Financial Reporting Standards (IFRS) as the basis for preparation of its financial statements from 1 January 2005, with a date of transition to IFRS of 1 January 2004. Interim results to 30 June 2005 and associated audited restated financial information were prepared and issued on this revised basis during 2005. These financial documents highlighted that the Group was continuing to apply its existing full cost accounting policy for oil and gas assets to both exploration and appraisal activity and in the development and production phase. It was also noted however, that these were subject to ongoing review and endorsement by the EU and possible future amendment by interpretative guidance from the International Financial Reporting Interpretations Committee (IFRIC) Agenda Committee and the accounting profession.

Following the subsequent publication of IFRIC guidance in November 2005, which noted the limited scope of IFRS 6 "Exploration for and Evaluation of Mineral Resources", Dana has revisited its oil and gas accounting policy and will, from the date of transition, apply a successful efforts based accounting policy to its development and production activity, whilst continuing with full cost accounting for Exploration and Appraisal activity as permitted under IFRS 6.

This work is ongoing and subject to further audit with the 2005 full year results. A revised audited restatement document showing the impact on previously reported comparatives will be issued with the 2005 results in March 2006.

These accounting changes will have no impact on any of the fundamentals of the business including strategy, economic value or cash flow. Cash from operations will be unaffected although there is a potential impact on the Income Statement and Balance Sheet as a result of these changes.

4. Outlook

Dana now has a continuous development program which will maintain strong growth regardless of further exploration success or asset trading. By the end of 2006, Dana expects to be producing from 16 fields, with 15 of these in the North Sea.

The Company is on target to double its 2005 production levels by the end of 2007. Dana's strong balance sheet has also allowed it to remain completely unhedged to date with respect to oil price, thus maximizing the gains from continuing commodity price strength.

Superimposed on this growth, the Group is currently planning the drilling of up to 35 exploration and appraisal wells over the next two years, targeting cumulative reserves of 1.4 billion barrels net to Dana on an unrisked basis. Around one third of these wells are being focused on large international prospects, any one of which, if successful, could become a transforming event for the Company.

Alongside its very active drilling and development program, Dana will continue its high level of commercial asset trading activity. In particular, the Company will pursue its proven strategy of using exploration success as leverage in commercial transactions to strengthen the asset base and accelerate growth. Overall, Dana concluded 15 such commercial transactions in 2005 and is already working on value-adding deals for 2006.


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