DRAGON OIL PLC 
By ?
16 January 2014
DRAGON OIL PLC
(the "Company" or together with its subsidiaries "Dragon Oil" or the "Group")
Farm-in into an offshore block in the Philippines
Dragon Oil plc (Ticker: DGO), an international oil and gas exploration, development and production company, announces that it has signed a farm-in agreement with Nido Petroleum Philippines Limited (ASX: NDO) ("Nido") for Service Contract 63 (SC 63) NW Palawan Basin, offshore the Philippines.
Under the terms of the agreement, the farm-in will be completed as a two-stage process, with Dragon Oil initially acquiring a 40% participating interest in SC 63 from Nido's current 50% participating interest in the Service Contract, and is subject to normal Philippine government approvals. The Philippine National Oil Company - Exploration Corporation (PNOC-EC) will continue to have a 50% participating interest.
The second stage is subject to certain conditions being met and additional Philippine government approvals being received. In this stage, Nido will seek to secure an additional net 10% participating interest in SC 63 from PNOC-EC on the same terms agreed between Nido and Dragon Oil. Nido will then have a 20% working interest in SC 63. Dragon Oil has the option to acquire an additional 10% participating interest from PNOC-EC on the same terms and conditions agreed between Nido and Dragon Oil.
Under the terms of the farm-in agreement, Dragon Oil would reimburse Nido US$2.18 million in consideration of past seismic costs and pay 56% of the costs of drilling the Baragatan-1 well to earn a 40% participating interest level. The carry on the well cost is capped at US$25 million (100% basis); well costs over and above this level will be shared by the parties in proportion to their participating interest. Should the various conditions and approvals required for the second phase be satisfied, and Dragon Oil exercises its option, Dragon Oil would pay a pro-rata higher amount to earn a further 10% interest.
SC 63 covers an area of 10,560 km² and is currently in Sub-Phase 2b of the exploration programme, in which there is a commitment to drill one well. 754 km² of 3D seismic were shot in a previous exploration phase, leading to the identification of the Baragatan prospect as the drilling target for the commitment well. This prospect lies in c. 50 metre water depth and is anticipated to be drilled to a depth of 3,390 metres. The primary reservoir objective for the Baragatan-1 exploration well is the sandstones of the Miocene Pagasa Formation.
During the Baragatan-1 drilling operations Nido will remain Technical Operator and Dragon Oil will second personnel to the drilling team and will be responsible for overall drilling management; PNOC-EC will continue to be Operator of the Service Contract. Following the drilling of the Baragatan-1 well, Dragon Oil will have the right to become Operator of the Service Contract.
Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, Dragon Oil plc, commented:
"I am pleased to announce a farm-in agreement with Nido for an offshore block Service Contract 63. We look forward to working with Nido and PNOC-EC in this exploration venture in the Philippines.
"We have been looking into exploration opportunities in South-East Asia for a while and with this farm-in agreement, yet another asset is added to our portfolio. We have the financial resources, technical expertise and management talent to deliver on our diversification strategy as we continue the search for the right-fit exploration and development assets."
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For further information please contact:
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Dragon Oil plc (+44 (0)20 7647 7804)
Anna Gavrilova
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Martin Jackson
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
About Nido
Nido Petroleum Limited is an ASX-listed (ASX: NDO), South East Asian focused oil and gas exploration and production company. The Company holds significant acreage in the highly prospective North-West Palawan Basin in the Philippines and the Penyu and West Netuna basins in Indonesia.
http://www.nido.com.au
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.
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