Dune Energy Begins Production on Welder Ranch Property

Dune Energy has initiated production from its Welder Ranch lease with the tie-in of the Rob Welder #1 well. As announced on July 14, 2004, the well flow tested at 1.25 mmcf/d. Up to 4 wells are planned for drilling the proved undeveloped (PUD) locations relating to the discovery of this new field.

On August 27, 2004, Dune expanded its leasehold position by exercising its option to lease 6,300 acres on its Welder Ranch property. The lease for the additional acreage is effective as of August 19, 2004. In addition, management is in discussion to further increase its lease position on lands currently controlled by Welder interests.

Commenting on the recent activity, Alan Gaines, Dune's Chairman and CEO, stated, "We are very pleased to expand our leased acreage position, and look forward to an aggressive drilling program on the Welder Ranch property commencing during the fourth quarter of 2004."

Dune Energy, Inc. is a diversified energy company with operations presently focused in South Texas.