DNO Issues Update on Yemen Ops

As previously reported the Godah # 3 appraisal well in Block 32 was drilled at a location approximately 1,100 meters to the west/southwest of Godah # 1. Godah # 3 was production tested from a five meter interval at a stabilized rate of 1,511 barrels of oil per day and 122 thousand cubic feet per day of gas (maximum test pump capacity).

Following the drilling of Godah # 3 the well Godah # 4 well was drilled approximately 3 kms east/northeast of Godah #1 (1 km north/northeast of Godah # 2). Godah # 4 was drilled to a total depth of 1,771 m. The well encountered the S-1A reservoir 19 meters structurally lower than Godah # 2, below the oil/water contact for the Godah field. The well was cased and suspended as a potential water injector.

The drilling rig will now be moved to Tasour # 24, a development well on the western area of the Tasour field in Block 32.

A second, larger, drilling rig commenced drilling an exploration well at Tasour # 23 on September 5. Tasour #23 is targeting a fractured basement prospect south of the Tasour field. Drilling and evaluation of Tasour #23 is expected to be completed in November.

Production equipment has now been installed to produce Godah # 2 and # 3. Godah # 2 commenced production on October 27th and is currently producing an initial gross pumping rate of approximately 1,000 BOPD. Production from Godah # 3 is expected to commence during the next week, and as previously reported it is expected that the combined gross production from the two wells will gradually increase to 2,000 to 4,000 Bopd.

The Godah production facility is pipeline connected to the existing oil sales export line which passes through the Godah Field. Produced water will be trucked to the Tasour Central Production Facility ("CPF") for treatment and disposal until the first quarter of 2007 when a 23 km pipeline to the Tasour CPF should be operational. The Godah development will be undertaken in stages and it is expected that it will be fully developed over the next two years.

After the Tasour # 22ST Qishn oil well was brought on stream at the end of August, the Tasour field averaged at 15,500 Bopd (gross) in September. It is expected that the gross production from the Tasour field will average at approximately 12,000 Bopd for the balance of 2006.

As previously reported Bayoot SW # 2 in Block 53 was drilled and tested at a structure located on a very prospective basement trend between the Suna field in Block 14 some 14 km to the south east, and the Kahrir field in Block 10 some 15 km to the south west. The Suna and Kahrir fields have proven to be the most successful basement producing fields in Yemen to date.

Early transport of oil from Bayoot SW # 2 commenced by trucking to the Sharyoof central processing facilities some 10 km from the well, at daily gross volumes of ca. 200 - 300 BOPD. Further work will is considered to be undertaken with this well, with the view to further increase the production, and contingent on the outcome of this work a pipeline and other facilities will be installed to connect the Bayoot oil production to the Sharyoof facilities on permanent basis.

The exploration well, Hekma # 1 in Block 53 has also been drilled some 5 km from Bayoot SW # 2. The well was drilled to a depth of 3,715 meters. The well was suspended and the drilling rig moved to drill the Bayoot South 1A located 4,7 km Northwest of Hekma # 1 . Bayoot South 1A will be drilled to test the Madbi carbonates at a down flank location on the Bayoot structure.

The forward plan is to test the Hekma # 1 with a smaller drilling rig, which is currently drilling a Sharyoof infill well (Sharyoof # 23). Three tests are planned to be undertaken in Hekma # 1: One test in the basement, one test in the Intra Madbi Sandstones and one test in the Madbi Carbonates.