DGO.L Regulatory News (DGO)

16 June 2010

DRAGON OIL PLC

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

New marketing contract through Baku, Azerbaijan

Dragon Oil plc (Ticker: DGO), an international oil and gas exploration and production company, today issued the following update on its crude oil marketing arrangements.

Since the commencement of its Cheleken PSA, Dragon Oil has marketed most of its entitlement barrels through a crude oil swap agreement with a subsidiary of the National Iranian Oil Company, Naftiran Company Limited ('NICO'), the "southern route". This swap agreement expired on 31 March 2010 and Dragon Oil subsequently entered into a three month swap contract with NICO which will expire in July, 2010. The swap will then be halted until further negotiations are concluded.

Dragon Oil has entered into a contract with Socar Trading SA for the sale of the Company's entitlement barrels, FOB the Aladja Jetty, through Baku, Azerbaijan, the "western route". Socar Trading, the trading arm of the State Oil Company of Azerbaijan Republic, will make use of the BP-operated BTC (Baku-Tbilisi-Ceyhan) pipeline for exporting the crude oil. Dragon Oil has had previous contracts with Socar Trading for the sale of its crude oil through the western route which have operated successfully.

Dragon Oil plans to sell a substantial proportion of its entitlement production through the western route over the next 12 months. It is expected that the realised net crude oil prices will be less favourable than the historic netback prices generated through the southern route swap arrangement with NICO. For the year to 31 December 2010, discounts were favourable during the early part of the year, and over the entire year, Dragon Oil expects to achieve an average realised price in the range of a US$6-8 discount per barrel to Brent. Discounts in future years may vary depending on the renewal of the swap agreement or availability of alternatives.

Dragon Oil is satisfied that this new marketing arrangement will provide a secure and reliable export route for its entitlement production with sufficient capacity to satisfy its current anticipated needs. Nonetheless, to gain further access to international markets and maintain flexibility in operations, Dragon Oil will continue to review alternative routes for exporting its crude oil, while a return to the southern route remains an option should terms become more favourable.

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

"Dragon Oil's primary marketing and sales objective is to ensure the safe and uninterrupted sale and delivery of its entitlement barrels to international markets, and to achieve best available market prices, subject to logistical considerations and market conditions. I am pleased that Dragon Oil has entered into this contract with Socar Trading, which has proven to be a reliable business partner in previous years, as this will ensure our continued secure access to world markets."

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For further information please contact:

Media enquiries:

Citigate Dewe Rogerson (+44 20 7638 9571)

Martin Jackson

Investor and analyst enquiries:

Dragon Oil plc (+ 44 20 7647 7804)

Sally Marshak, Investor Relations

About Dragon Oil

Dragon Oil Plc is an innovative international oil and gas 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 a 100% interest in, and is the operator of, the Production Sharing Agreement for the Cheleken Contract Area. Operational focus is on the re-development of two oil producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

www.dragonoil.com