Dragon Oil Reaches New Daily Production Record at Cheleken Field

Hussain M. Sultan, Chairman and CEO of Dragon said: 'I am pleased that our production is continuing to grow and we are achieving this through our continuous drilling program. We are now working towards making further improvements before the year-end, which will be driven by the use of two rigs to drill and complete two further development wells by then.

I am particularly pleased that we have reached a peak production of over 25,000 bopd for the Cheleken Contract Area as a whole, which is a milestone for the Company. Going forward, the Company will push on to hit higher targets and to sustain production at those levels.

However, I am disappointed that the wells drilled from the LAM 10 platform have tested and produced less than expected. We have now moved on to new wells which we hope will perform better. The results of the 3D seismic survey should enable us to select better locations for drilling.'

Production update

Dragon announces that its average daily production from the Cheleken Contract Area for the period from July 1, 2006 to October 16, 2006 is 21,113 bopd, which is 14% higher than the average gross production of 18,576 bopd for 1H 2006.

Furthermore, Dragon has recently achieved a new daily peak production record of 25,471 bopd.

Drilling update details

Dragon announces that well 10/115, drilled from the refurbished LAM 10 platform, has been completed and is in production. The well tested at a combined rate of 1,370 bopd from reservoir zones 4, 5 and 6. Operations are being undertaken to increase the production from the well.

The Astra jackup is currently drilling a new development well, 13/116, from the LAM 13 platform, and has reached a depth of 1,576 meters. The target depth for this well is 3,519 m.

The Iran Khazar jackup is currently drilling a new development well, 21/117, from the LAM 21 platform, and has reached a current depth of 1,677 meters. The target depth for this well is 4,410 m.

Workovers using wireline operations have continued with the successful workover of well 13/96, from the LAM 13 platform. This additional workover has generated an incremental increase in production of 550 bopd. The company will continue to undertake workovers using wireline operations, with a view to maximizing returns from existing wells.

The workover being undertaken on well 22/22 is ongoing using the hydraulic workover on the LAM 22 platform.

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