Dragon Oil to Ramp Up Production

Dragon Oil issued its Interim Management Statement in accordance with the EU Transparency Directive. The statement covers the period from July 1, 2010 to date. The financial and production data are for the period from July 1, 2010 to September 30, 2010. All other information, including details on operations, is up-to-date as at the date of publication.

Key highlights

  • Four new wells were put into production and one well sidetracked in the period from July 1, 2010 to date;
  • The average daily production rate was 46,400 barrels of oil per day ("bopd") in Q3 2010;
  • Capital expenditure on infrastructure and drilling was approximately US $146 million for Q3 2010;
  • The trunkline and Phase 2 expansion of the Central Processing Facility ("CPF") are near completion; it is anticipated that shortly gas will be delivered onshore;
  • The Group's financial position further strengthened and it maintained its unleveraged balance sheet at the end of Q3 2010.

Dr. Abdul Jaleel Al Khalifa, CEO, commented, "We remain on track to complete 11 wells this year; the results from seven wells have already been reported, while the results from two more wells are expected shortly with two further wells expected to come on stream by the year-end.

In 2010, Dragon Oil will have completed more wells than we did last year as a result of more rigs being available for our drilling program. However, due to certain infrastructure bottlenecks experienced this year, we estimate average gross field production to increase only by approximately 5% in 2010. While this result is below our initial expectations, we are confident of resolving many of these issues with completion of the substantial infrastructure upgrade. This will provide a firm foundation for driving production growth in the years ahead. To this end, I am pleased to report that work on the trunkline, Phase 2 expansion of the CPF and associated in-field pipelines is nearing completion. By the year-end the trunkline and expanded CPF will be fully operational with the CPF set up to handle up to 100,000 barrels of liquids per day and up to 220 mmscfd of gas.

The outlook for 2011-13 envisages the drilling of upto 40 wells of which five will be appraisal wells. We expect two new platforms, the Dzheitune (Lam) C and Dzhygalybeg (Zhdanov) A, to be completed in Q4 2011 and Q1 2012, respectively. We are also looking to add more rigs to our current fleet in addition to the Super M2 jack-up rig on order for delivery in Q4 2011. All this will support our drilling campaign and drive future production growth.

Finally, we continue discussions on gas monetization and search for other strategic opportunities in line with our vision to diversify our portfolio and create additional value for our shareholders."