Dragon Oil Nixes Rig Contract Renewal, Relocates Iran Khazar

Dragon Oil has decided not to renew the contract for the CIS # 1 platform-based rig. The management team concluded that a platform-based rig with higher performance specifications was more suitable for achieving the Company's stated production targets. Dragon Oil plans to drill higher slanted wells, thus achieving higher productivity. The tender process is underway and the estimated time for award of a contract is Q2 2009.

Dragon Oil's own rig, Rig 40 , was refurbished in 2008 and spud ded its first well in January 2009. Rig 40 is on schedule to spud five wells in total during the year, and four of the five wells are expected to be completed by the year-end.

The Iran Khazar rig is being relocated to begin drilling the first of four wells, three of which are expected to be completed by the year-end. The contract for the Iran Khazar rig is due to expire in H1 2009. The Company is exploring opportunities to either renew the contract or procure a replacement jackup rig.

Abdul Jaleel Al Khalifa, CEO, commented, "We have concluded that slanted wells will enhance productivity and put us in a better position to achieve our production targets. On that basis, Dragon Oil has decided to contract a higher specification platform-based rig. Our strategy remains on track; to develop the oil assets, monetize gas assets and diversify our portfolio geographically."

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