5 August 2014

DRAGON OIL PLC

(the "Company" or together with its subsidiaries "Dragon Oil" or the "Group")

2014 Interim Results

Dragon Oil plc (Ticker: DGO), an international oil and gas exploration, development and production company, today announces its interim financial and operational results for the period ended 30 June 2014. These results are prepared in accordance with International Accounting Standard 34, "Interim financial reporting" ("IAS 34") as adopted by the European Union.

Financial highlights

Operational performance

· Average gross production rate of approximately 73,440 barrels of oil per day ("bopd") in 1H 2014 compared to 73,600 bopd in 1H 2013;

· Average gross production for June 2014 was 76,100 bopd (June 2013: 75,800 bopd);

· Seven wells, including two sidetracks, completed from 1 January 2014 to-date;

· Drilling from the Dzhygalybeg (Zhdanov) A platform expected to commence in August;

· Water injection pilot project ongoing at the Dzheitune (Lam) 75 area;

· Revenue was higher by 11% primarily due to higher realised crude oil price of US$93/barrel.

Exploration assets

· Contract for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, signed;

· Baragatan-1A exploration well in SC 63, offshore the Philippines, did not discover commercial hydrocarbons. A provision for impairment of US$18.1mn was recognised in 1H 2014;

· Exploration well in Iraqi Block 9 reached the first target; drilling continues.

Corporate developments

· Interim dividend of 20 US cents per share announced - an increase of 33%over the 2013 interim dividend of 15 US cents.

Outlook for 2H 2014

· Production growth target for 2014 re-iterated in the range of 5% to 10%;

· Further seven to nine wells expected to be completed by the year-end;

· Target an exit rate of 87,000 - 90,000 bopd;

· Work is ongoing to relocate the Dzhygalybeg (Zhdanov) B platform to the Dzheitune (Lam) field.

Outlook for 2015-16

· Achieve a target of average annual production growth of 10-15% in 2015;

· Reach an exit rate of 100,000 bopd at the end of 2015 and maintain an average gross production rate of 100,000 bopd for a minimum of five years thereafter;

· Actively screen development and exploration opportunities to expand the assets portfolio.

Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, commented:

"I am pleased to report that revenues increased by 11% in 1H 2014 supported by better realised crude oil prices and higher sales volumes for our entitlement share of crude oil production from the Cheleken Contract Area in Turkmenistan. Sales volumes grew on the account of improved entitlement, which was 52% for the period compared to 44% a year ago. This change was primarily driven by a pick-up in capital expenditure in the Cheleken Contract Area, which more than doubled from the level seen in the first half of last year.

"Average gross production in 1H 2014 was supported by two successful sidetracks and effective management of the existing production. Having recently put on stream a successful Dzheitune (Lam) A/189 development well, which is now flowing at above 2,000 bopd, as well as the Dzheitune (Lam) A/190 well, as of the beginning of August we are producing at around 81,000 bopd.

"With regard to the exploration assets, we had a disappointing result in the Philippines: the Baragatan-1A well did not discover hydrocarbons. We are assessing our future interest in this block. In Iraq, the first target of the exploration well currently being drilled has been reached and drilling is continuing towards the second target. The consortium plans to evaluate both targets in 2H 2014. We also signed the contract for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, our first 100%-operatorship block outside of Turkmenistan.

"The Board is pleased to announce an increased interim dividend of 20 US cents. The Board continues to focus on the diversification opportunities for the Group, ongoing capital requirements for all our assets and a strong balance sheet."

Analyst conference call details

A conference call for analysts will take place today at 9.00a.m. BST. For details, please contact Shabnam Bashir at Citigate Dewe Rogerson on +44 (0)20 7282 2822 or at shabnam.bashir@citigatedr.co.uk.

A replay of the call will be available from around 12.00pm today for one week on the following telephone number:

For further information please contact:

About Dragon Oil

Dragon Oil plc is an international oil and gas exploration, development and production company, quoted on the London and Irish Stock exchanges (Ticker symbol: DGO). Its principal producing asset is in the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan.

Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil plc, holds 100% interest in, and is the operator of, the Production Sharing Agreement for the Cheleken Contract Area. The operational focus is on the re-development of two oil and gas producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

The Group has exploration blocks in Tunisia, Iraq, Afghanistan, Egypt and the Philippines. Dragon Oil's diversification strategy is to add exploration and production assets within Africa, parts of Asia and the Middle East in order to create a diversified and balanced portfolio of assets for the Group.

www.dragonoil.com 

Disclaimer

This news release may contain forward-looking statements concerning the financial condition and results of operations of Dragon Oil. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. No assurances can be given as to future results, levels of activity and achievements and actual results, levels of activity and achievements may differ materially from those expressed or implied by any forward-looking statements contained in this report. Dragon Oil does not undertake any obligation to update publicly or revise any forward-looking statement as a result of new information, future events or other information.

2014 Interim Results

Chief Executive Officer's Statement

OVERVIEW

Revenues in the first half of the year were US$547mn, 11% higher than during the same period in 2013, primarily on account of better realised crude oil prices at US$93 per barrel and higher sales volumes. Higher realised crude oil prices were a result of the marginally higher average Brent prices and improved pricing under the current marketing agreement re-negotiated at the beginning of the year. We also sold higher volumes of our entitlement share of the crude oil production in the period. 

Average gross production in 1H 2014 was similar to the level reached during the same period last year in the Cheleken Contract Area. Since the beginning of the year, Dragon OiI completed seven wells, including two successful sidetracks and one unsuccessful appraisal well; three of the seven wells were completed early in 3Q 2014 and thus did not contribute to the production in 1H 2014. We are in the process of procuring jet pumps for up to 14 wells and will commence installation later this year. The pilot water injection project is ongoing in the Dzheitune (Lam) 75 area and we plan to roll out water injection programmes at two more platforms.

Capital expenditure in the Cheleken Contract Area has increased significantly to US$279mn, compared to US$124mn in 1H 2013. The drilling programme for the remainder of the year comprises between eight and 10 wells. Work has commenced on the new wellhead and production platform Dzheitune (Lam) E and jackets of the Dzheitune (Lam) F platform, the former Dzhygalybeg (Zhdanov) B platform, are being transported offshore for installation. At the same time we are strengthening the existing platforms to add slots in order to reach targets from these existing platforms and accelerate production from these areas.

Delays with tendering processes to award contracts for the construction of the Gas Treatment Plant and another 30-inch oil and gas trunkline continue; this is partly due to the limited number of quality suppliers in the region. However, the Dragon Oil teams are working hard on evaluating the bids and the award of contracts is anticipated later this year.

We expect the arrival of the Caspian Driller in 2H 2014. Additional steps are being planned and undertaken to mobilise the rig in 3Q 2014 with expected spud of the first well in 4Q 2014.

We are pleased to report that the contract for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, was signed between the Petroleum Ministry represented by Ganoub El Wadi Petroleum Holding Company (GANOPE) and Dragon Oil on 19 May 2014. This is our first 100%-operatorship exploration block. We are setting up operations in the capital and look forward to working on the block.

The drilling of the exploration well in Iraq is ongoing with the first target having been reached, coring operation is taking place. Whilst the initial results have been very encouraging, drilling will continue until we reach the second target and the consortium will then evaluate the well. In Afghanistan, tendering processes to select contractors to perform the acquisition of 2D seismic data, airborne gravity and magnetic data in 2H 2014 in the Sanduqli and Mazar-i-Sharif blocks are ongoing. In Tunisia, the partners are working on securing a rig to perform Sidetrack-2 of the Hammamet West-3 well in 2015. In the Philippines we did not discover hydrocarbons having drilled a commitment well Baragatan-1A and we are evaluating the data obtained and our future interest in the block.

Our diversification strategy remains to screen, evaluate and acquire development and exploration targets that fit our criteria within Africa, parts of Asia and the Middle East, in order to create a diversified and balanced portfolio of assets for the Group.

The Board is announcing an interim dividend of 20 US cents, which is 33% higher than the interim dividend in 2013. Supported by our Board, we continue to focus primarily on the development of the Cheleken Contract Area, exploration activities and diversification opportunities.

OPERATIONAL OVERVIEW

DEVELOPMENT

Turkmenistan

Production and Entitlement

In 1H 2014, the gross average field production was 73,440 bopd (1H 2013: 73,600 bopd). Seven wells, including two sidetracks, were completed since the beginning of 2014.

The entitlement production for 1H 2014 was approximately 52% (1H 2013: 44%) of the gross production. Entitlement barrels are finalised in arrears and are dependent on, amongst other factors, fiscal terms of the Production Sharing Agreement, operating and development expenditure in the period and the realised crude oil price. Entitlement barrels in 1H 2014 are higher primarily due to higher development spend, despite slightly higher realised crude oil prices.

Marketing

Dragon Oil sold 5.9 million barrels of crude oil in 1H 2014 (1H 2013: 5.7 million barrels). The sales volumes increased by 4% over the comparable period's level as a result of higher entitlement despite changes in the lifting position.

In 1H 2014, Dragon Oil exported 100% (1H 2013: 100%) of its crude oil production through Baku, Azerbaijan.

The average realised crude oil price during the first half of 2014 was approximately US$93/bbl (1H 2013: US$86/bbl), at a discount of 15% (1H 2013: a provisional discount of 20%) to Brent. At the beginning of 2014, Dragon Oil renegotiated marketing arrangements to secure a relatively better discount resulting from a closer correlation between realised oil prices and monthly average Brent prices. The discount is expected to be in the range of a 14%-17% discount to Brent in 2014.

The current arrangement will continue to the end of 2014 and we continue to examine future options, which range from the renewal of existing arrangements to the development of alternatives via Kazakhstan or Russia, or other routes.

The Group was in an underlift position of approximately 0.6mn barrels of crude oil as of 30 June 2014 (31 December 2013: overlift position of 0.1mn barrels of crude oil).

Drilling

Since the beginning of 2014, Dragon Oil has completed seven wells, including two sidetracks, in the Dzheitune (Lam) and Dzhgalybeg (Zhdanov) fields. The following table summarises the results of this drilling programme:

The sidetrack drilled from the Dzheitune (Lam) 4 platform to appraise a location for a future platform encountered water and will be side-tracked in the future. We anticipate that recoverable reserves previously attributed to this area will be downgraded. However, it is expected that this will be balanced by the potential addition of reserves from appraisal drilling, results we are seeing in the A-sands, artificial lift application and water injection projects.

An appraisal well Zhdanov 21/101 was drilled to a depth of 3,447 metres, but due to difficulties only the top of the reservoir was tested and flowed at 425 bopd with a high water content. The bottom section of the reservoir was not tested, but has further potential. It has been decided to suspend the well and sidetrack it in the future. The Dzhygalybeg (Zhdanov) field contains an estimated 15% of oil and condensate 2P reserves and will be appraised further for development.

The development well Dzheitune (Lam) A/188 was drilled to a depth of 3,276 metres but due to equipment failure has been temporarily suspended and is scheduled for sidetracking later this year.

We are currently employing two jack-up and two platform-based rigs and expect the arrival of the Caspian Driller in 2H 2014.

The Elima jack-up rig has completed Dzheitune (Lam) A/190 well and is to drill the Dzheitune (Lam) 28/192 well next.

The second jack-up rig, Neptune, is available for nine months and will then be released. In its place, we expect to take delivery of the Mercury jack-up drilling rig, which is scheduled to arrive into the Caspian Sea in 4Q 2014 and will be available for the remainder of the three-year contract term. The Neptune rig is currently drilling the Dzheitune (Lam) C/191 development well.

The Caspian Driller jack-up rig is expected to arrive into the Cheleken Contract Area in 2H 2014. Upon delivery, the lease and management contract is expected to commence for an initial duration of five years, with an option to extend it for a further period of up to two years. Additional steps are being undertaken to mobilise it in late 3Q 2014 and spud a well using this rig in 4Q 2014.

Land Rig 1 has skidded to the next slot and is to spud the Dzheitune (Lam) 22/193; the rig is due to complete two more wells on the Dzheitune (Lam) 22 platform, including the Lam 22/193 well, before it is released.

The platform-based rig ("Land Rig 2") contracted for drilling on the Dzhygalybeg (Zhdanov) A platform is preparing to spud the Dzhygalybeg (Zhdanov) A/102 well soon. It is expected to be used on the Dzhygalybeg (Zhdanov) A platform until it completes eight slots allocated for drilling with a land rig.

Water Injection project and artificial lift

The water injection pilot project is ongoing in the pilot Dzheitune (Lam) 75 area. We see a continued improvement in the reservoir pressure in the pilot area. The tendering process to acquire water injection facilities to be installed at the Dzheitune (Lam) 10 and 13 platforms is progressing. The aim of the water injection programme is to maintain pressure, sustain production rates and increase reserves recovery.

A tender for the procurement of the jet pumping systems for up to 14 wells is progressing, which we expect to install and commission in 2H 2014 - 1Q 2015. The first few wells to be equipped with jet pumping systems by the end of the year will be at the Dzheitune (Lam) 10 and 13 platforms. The objective of this artificial lift application is to increase production and enhance recovery.

Infrastructure

In February 2014, Dragon Oil awarded a contract for the construction and installation of the wellhead and production platform Dzheitune (Lam) E and associated pipelines. Design and detailed engineering work has commenced. Construction and installation are expected to take two years with the platform being ready in 1H 2016. The platform will have eight fitted slots with space for another four slots to be fitted later, and suitable for a jack-up drilling rig use.

Work is ongoing to relocate the Dzhygalybeg (Zhdanov) B platform to the Dzheitune (Lam) field, location Lam F. Modification work and subsequent installation are expected to be completed in 4Q 2014.

Structural strengthening is being performed at a number of platforms in the Dzheitune (Lam) field, which would allow us to add a number of new slots for drilling from these platforms. The Dzheitune (Lam) C, 4, 10, 28 and B platforms are to be strengthened within the existing structures during 2014.

The project to quadruple our crude oil storage capacity at the Central Processing Facility is progressing as planned. The tank farm is anticipated to be completed in 1Q 2016 with three tanks built and commissioned on a priority basis in 2Q 2015.

The tendering process to select a contractor to build another 30-inch trunkline from the Dzheitune (Lam) field to the Central Processing Facility is in the tendering stage. Construction is expected to take two years after the contract is awarded.

Within the first phase of its strategy for plugging, abandonment and decommissioning of the old non-producing wells and non-producing platforms in the Cheleken Contract Area, Dragon Oil has plugged and abandoned another four non-producing old wells, bringing the total of plugged and abandoned wells to nine. Up to four non-producing old wells are scheduled to be plugged and abandoned in 2H 2014. The execution of this strategy is part of the abandonment and decommissioning activities the Group plans to undertake to fulfil its obligations under the Production Sharing Agreement. A number of non-producing wells are to be evaluated for future plug and abandon activities. The cost of these activities is to be financed from the abandonment and decommissioning funds.

Gas Treatment Plant

The bids for an engineering, procurement, installation and construction project of the Gas Treatment Plant are in the evaluation stage. We anticipate the construction phase to take two to three years after the contract is awarded.

The processing capacity of the plant is expected to be 360 mmscfd of gas, which, according to our estimates, to be verified at a later stage, should allow us in the future to strip around 3,600 barrels (annual average) of condensate (depending on the final gas composition) and blend our share of condensate with our entitlement share of crude oil. The split of the produced condensate is subject to the same terms under the Production Sharing Agreement as crude oil.

EXPLORATION

Tunisia

The joint venture partners (Dragon Oil, 55%; Cooper Energy, 30% and operator; and Jacka Resources Ltd, 15%) are working on securing a drilling rig to perform Sidetrack-2 of the Hammamet West-3 well in 2015. The estimated cost of Sidetrack-2 is approximately US$35 million of which Dragon Oil will contribute based on working interest in the block (Dragon Oil, 55%).

Iraq

In Iraq, the consortium of Dragon Oil (30%) and Kuwait Energy Corporation (70% and operator) is drilling an exploration well. The well is targeting two prospective reservoirs, which, in case of a discovery, are expected to be tested in 2H 2014. The first target has been reached, coring operation is ongoing. Concurrently, the consortium has completed an environmental impact assessment and environmental baseline studies, as part of the consortium's contractual obligations, in preparation for de-mining work and seismic acquisition. De-mining activities commenced in early June 2014. 3D seismic acquisition activities are planned for 1H 2015.The work commitment on the block within the initial five-year exploration period will include de-mining, seismic acquisition and interpretation and drilling of an exploration well.

Afghanistan

In Afghanistan, seismic acquisition and aeromagnetic survey have been approved by the Ministry of Mines and Petroleum of Afghanistan. The consortium, comprising Dragon Oil (40%, operator of Sanduqli block), TP Afghanistan Ltd. (TPAL, 40% and operator of Mazar-i-Sharif block) and the Ghazanfar Group (20%), is conducting a tendering process to select a contractor to perform the acquisition of 1,270 kilometres of 2D seismic data, as well as airborne gravity and magnetic data in 2H 2014 in the Sanduqli block. Similar activities are ongoing for the Mazar-i-Sharif block.

Egypt

The contract for Block 19 East Zeit Bay, offshore the Gulf of Suez, Egypt, was signed between the Petroleum Ministry represented by Ganoub El Wadi Petroleum Holding Company (GANOPE) and Dragon Oil on 19 May 2014. We have hired a country manager and are setting up an office in Cairo and starting the work programme as per the Exploration Production Sharing Agreement.

The Philippines

On 7 July 2014, Nido Petroleum Limited (ASX: NDO) on behalf of SC 63 Joint Venture partners PNOC-EC and Dragon Oil (Philippines SC 63) Limited advised that the Baragatan-1A well did not discover commercial hydrocarbons. The Baragatan-1A well has been plugged and abandoned. The partners plan to integrate information and data obtained from the well into current geological models and Dragon Oil will then assess its future interest in the block.

MATERIAL EVENTS

Interim dividend

The Board is pleased to announce an increased interim dividend of 20 US cents per share. This represents a growth of 5 US cents per share, or 33%, on the interim dividend in 2013. The final dividend in respect of 2014 will be announced at the time of publication of the 2014 full-year results in February 2015. The interim dividend is not subject to shareholder approval.

The following is the dividend timetable for the shareholders' information:

5 August 2014: Declaration of interim dividend

13 August 2014: Ex-Dividend Date

15 August 2014: Record Date

15 September 2014: Dividend Payment Date.

2014 Principal risks and uncertainties

In accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, a description of the principal risks and uncertainties facing the Group in the six months to 31 December 2014 is set out below:

§ Oil prices

The Group's primary business is the production of hydrocarbons from the Cheleken Contract Area in the Caspian Sea, Turkmenistan. The financial performance of the Group and its ability to fund its exploration and development plans may, therefore, be negatively affected by adverse movements in the price of oil. The Group actively monitors its exposure to oil prices and retains flexibility in sizing its development programme.

§ Export routes

Current available export routes to sell crude oil from the Caspian Sea region to international markets are via Azerbaijan, Russia and Kazakhstan. The Group currently exports all of its crude oil via Azerbaijan. Opportunities to continue using this marketing arrangement are constantly evaluated over the longer term.  At the same time, we are also evaluating alternative export routes.

§ Other

Other medium to long-term principal risks and uncertainties facing the Group are as disclosed in the 2013 Annual Report, available on Dragon Oil's website at www.dragonoil.com. These include, among other risks and uncertainties, the following:

-     Strategic risks related to limited export routes for our entitlement share of crude oil production, reliance on a sole producing asset and political and country context;

-     Operational risks related to ability to attract and retain skilled and talented human capital; unexpected loss/unavailability of drilling rigs in Turkmenistan; quality of contractors to undertake projects; risks related to Health, Safety and Environment hazards, incidents and liability; impairment of production due to integrity of assets in Turkmenistan;

-  Financial risks related to prolonged or sharp decline in oil price; failure to replace, acquire and develop additional reserves; economics under the PSA in Turkmenistan; the gas development project in Turkmenistan; security of cash balances;

-     Compliance risks related to difficulties in securing approval processes, licences and visas; impact from sanctions against Iran.

FINANCIAL OVERVIEW

Income Statement

Revenue

In the first half of 2014, the Group's revenue increased by 11% to US$547.0mn (1H 2013: US$491.6mn) including an adjustment of US$5.1mn from provisionally priced sales of 2013. The Group sold 5.9mn barrels of crude oil (1H 2013: 5.7mn barrels) at a realised price of US$93/bbl (1H 2013: US$86/bbl). Of the overall revenue increase, 67% was attributed to a higher realised crude oil price with the balance due to increase in the volume sold.

Operating profit

Cost of sales decreased by US$31.2mn to US$120.6mn (1H 2013: US$151.8mn). Cost of sales includes operating and production costs and depletion charges. The decrease in the operating and production costs is primarily attributed to changes in the lifting position despite increase in the depletion charge. The depletion charge of US$133.2mn (1H 2013: US$101.9mn) was higher by 31% than the charge in the corresponding period in 2013 due to increased entitlement barrels during the period andan upward revision in the estimated long-term oil price.

The Group generated an operating profit of US$388.5mn in 1H 2014 (1H 2013: US$324.1mn), which was higher by 20% over the comparable period. The increase in operating profit of US$64.4mn was primarily on account of higher revenue and lower cost of sales. Administrative expenses (net of other income) at US$19.9mn (1H 2013: US$15.7mn) were higher by 27% due to an increase in corporate costs. A provision for impairment of US$18.1mn (1H 2013: nil) was recognised towards the exploration and evaluation costs of the Baragatan-1A well, offshore the Philippines. The exploration well did not discover commercial hydrocarbons and has been plugged and abandoned. The future interest in the block remains to be assessed.

Profit for the period

The profit for the first six months of 2014, at US$289.0mn (1H 2013: US$241.4mn), includes a taxation charge of US$105mn (1H 2013: US$88.4mn), and finance income of US$5.5mn (1H 2013: US$5.7mn). The taxation charge was higher during the period on account of higher profits. The finance income was marginally lower due to lower interest yields achieved despite higher average cash balance on deposit during the first six months of the year in a weak interest rate environment. 

Basic EPS of 58.79 US cents in the first half of this year were 19% higher than the basic EPS in the same period last year (1H 2014: 49.25 US cents) primarily due to higher net profit despite a marginal increase in the number of shares in issue during the period.

Balance Sheet

Net book value of property, plant and equipment increased by US$145.4mn due to capital expenditure of US$278.7mn incurred (1H 2013: US$123.7mn) offset by the depletion and depreciation charge of US$133.3mn (1H 2013: US$101.9mn) during the period. Of the total capital expenditure, US$134.8mn (1H 2013: US$76.5mn) was attributable to development and appraisal drilling with the balance spent on infrastructure in Turkmenistan. The infrastructure spend during the period included re-location of the Dzhygalybeg (Zhdanov) B platform, construction of the tank farm and additional slots on the Dzheitune (Lam) C, 28 and 10 platforms.

The net book value of intangible assets increased by US$16.2mn net of a provision for impairment of US$18.1mn towards the Baragatan-1A well exploration and evaluation costs and is primarily attributable to spend on exploration and evaluation assets.

Current Assets and Liabilities

Current assets increased by US$112.7mn, primarily due to higher trade and other receivables and cash and cash equivalents offset by lower term deposits, as compared to 2013 year-end. The trade and other receivables increased by US$111.7mn primarilyon account of the underlift receivable position at the period end and increased sales volumes and crude oil price realised during the period.

Cash and cash equivalents and term deposits as at 30 June 2014 were US$2,471.4mn (31 December 2013: US$2,472.5mn), including US$612.6mn (31 December 2013: US$549mn) set aside for abandonment and decommissioning activities.

Current liabilities increased by US$55.2mn due to an increase of US$85mn in trade and other payablespartly offset by a lower current income tax liability at the period end. 

Cash flows

Net cash generated from operating activities in 1H 2014 of US$364.4mn was 66% higher than net cash generated in the same period last year (1H 2013: US$219.9mn), with the increase primarily attributed to a higher revenue during the period and movement in working capital, partly offset by lower tax paid.

Net cash used in investing activities in 1H 2014 was US$243.8mn (1H 2013: US$398.1mn) comprising of capital expenditure of US$284.5mn offset by withdrawal from term deposits of US$35.2mn and  interest income of US$5.5mn received during the period.

Net cash used in financing activities in 1H 2014 was US$86.5mn (1H 2013: US$63.0mn) primarily due to the payment of 2013 final dividends of US$88.5mn partly offset by an inflow of US$2.2mn on issue of new shares following the exercise of share options. 

OUTLOOK

In 2014, we expect to drill between 14 and 16 wells, including a number of sidetracks. Of this total number of wells, seven wells, including two sidetracks, have already been competed to-date with another seven to nine wells to be put into production by the end of the year. The remaining wells will be drilled by Land Rig 1 (two wells), the Elima jack-up rig (three wells), Neptune jack-up rig (three wells), Land Rig 2 (one well).

We expect the average gross production growth from the Cheleken Contract Area to be in the range of 5% to 10% in 2014 with a year-end exit rate of 87,000-90,000 bopd. We maintain our guidance for an exit rate of 100,000 bopd in 2015 and plans to sustain the 100,000 bopd average gross production for a minimum of five years thereafter.

Our capital expenditure on infrastructure and drilling in the Cheleken Contract Area for 2014 is estimated at US$500mn. Capex for exploration assets is expected to be under US$100mn in 2014. For 2014-16 the estimated capital expenditure for infrastructure and drilling in the Cheleken Contract Area remains US$1.5 billion without including the capital expenditure for the Gas Treatment Plant and for exploration assets in the range of $200mn to $300mn over three years.

Dr Abdul Jaleel Al Khalifa

Chief Executive Officer 

Dragon Oil plc

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