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Dana Petroleum plc Report and Accounts

31 December 2011

Registered No: 03456891

Dana Petroleum plc

1

Directors, Advisers and other information

Directors

Seong Hoon Kim

Eugene Synn

Marcus T Richards

David A Crawford

Sang Geun Han

Kyung-Luck Sohn

Group Headquarters

17 Carden Place

Aberdeen

AB10 1UR

Secretary and Registered Office

Jill Reid

Pellipar House

9 Cloak Lane

London

EC4R 2RU

Auditors

Ernst & Young LLP

Blenheim House

Fountainhall Road

Aberdeen

AB15 4DT

Bankers

Lloyds TSB

City Office

PO Box 72

Bailey Drive

Gillingham Business Park

Gillingham

Kent

ME8 0LS

Solicitors

McGrigors LLP

52-54 Rose Street

Aberdeen

AB10 1UD

Allen & Overy LLP

One Bishop’s Square

London

E1 6AO

Dana Petroleum plc

Directors’ report

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The Directors present their report and audited financial statements for the year ended 31 December 2011.

RESULTS AND DIVIDENDS

The Group made a profit during the year after tax of £182,501,000 (2010 Restated: Loss £5,436,000). Dividends of

£119,806,000 were received during the year (2010: £nil). Dividends of £101,146,000 (USD 160,000,000) were paid during the

year (2010: £42,460,000) and the retained profit has been taken to reserves.

PRINCIPAL ACTIVITIES

The principal activities of the Group and its subsidiaries are oil and gas exploration and production. The Group has a number

of participation interests in exploration and production licences in the UK, Netherlands, Norway, Egypt and Africa.

REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS

2011 was a year of considerable change for the Group following the acquisition by Korea National Oil Corporation (KNOC)

on 24 September 2010. Against this backdrop, the Directors are pleased to present a strong set of results for the Group.

During the year, the financing for the Group’s on-going corporate requirements was provided by a syndicated loan facility

initially fronted by Royal Bank of Canada. At the start of the year, the available credit was USD 680 million. However,

effective 18 March 2011, two new banks joined an amended Bank facility syndicate increasing the total facility to USD 870

million. The revised facility syndicate is now fronted by BNP Paribas (BNP) and comprises a four year term loan of USD 178

million and a five year USD 692 million revolving credit facility.

In January 2011, the Group received a capital injection from KNOC. This agreement saw KNOC and the Company entering

into a subscription agreement where KNOC agreed to subscribe for the sterling equivalent of USD 500 million shares in the

Company. This funding was then used to repay part of the loans from external lenders.

On 24 March 2011, the UK Government announced that the rate of the UK supplementary tax was to be increased from 20% to

32%. During 2011 the UK deferred tax position was re-valued in line with this change in rate. The impact of this rate change

was an increase in the deferred tax liability of £45,289,000 (Note 9).

On 31 March 2011, the Group (through its subsidiary Dana Petroleum (E&P) Limited) completed the acquisition of the Triton

Area and Scott assets from Petro-Canada UK Limited, a wholly owned subsidiary of Suncor Energy Inc, a Toronto Stock

Exchange listed oil and gas exploration and production group of companies. Adjusted consideration for the transaction was

£90.4 million. The transaction added a further 6 new offshore fields to the Group and approximately 35 mmboe of 2P reserves

at the date of completion.

On 1 October 2011, the Company acquired the shares in Korea Captain Company Limited (KCCL), a fellow subsidiary of

KNOC. KCCL held KNOC’s existing UK operations prior to the acquisition of the Dana Group in 2010. KCCL holds a 15%

interest in the Chevron operated Captain field. This was a share for share transaction (see note 28 c) and as such was cash free.

The transaction fell within the scope exemption of IFRS 3R for common control business combinations, and has been

accounted for using the pooling of interests method. Accordingly, the 2010 comparatives within these group accounts have

been restated to reflect KCCL as part of the Dana Group from 1 October 2010, the date KNOC acquired the Dana Group and

from which KCCL and the Dana Group were under common control (see note 28 c).

PRODUCTION

The overall production for the Group increased to 61,970 boepd in 2011 from 41,125 boepd in 2010. The 2010 figure has been

restated to include production from the Captain asset from 24 September 2010. The increase reflects a full year of production

from the Dutch assets purchased in August 2010, a full year of production from the Captain asset and production from the

assets acquired from Petro-Canada UK in March 2011. The most significant contributions in terms of production are associated

with participation in the fields of Greater Kittiwake area (GKA), Greater Guillemot area (GGA), Babbage, Cavendish, Captain,

Hudson, Ettrick, Jotun, East Zeit, Hanze and De Ruyter. The Group will continue to grow production and expects to produce

approximately 64,000 boepd in 2012.

Dana Petroleum plc

Directors’ report

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In total, 25 production related wells were drilled during the year (18 production and 7 injection/disposal). The most significant

successes in this programme were:

Calum-1x and Omar-1x in the North Zeit Bay PSC, Egypt and

Goosander, Chestnut and Captain in the UK.

EXPLORATION

A substantial and balanced portfolio of drilling for new reserves continues to be central to Dana’s business model. This

programme has been achieved by applying extensively for licenses in government bid rounds as well as undertaking

commercial transactions and asset trades to leverage into additional drilling opportunities.

Dana embarked on an active drilling programme in 2011 with a total of 12 exploration and appraisal wells completed in the

year. This resulted in the following most significant discoveries:

Gas discovery at Tolmount in the UK Southern North Sea;

Van Ghent East in the Netherlands; and

Matr-1xST and WON c-1x in Egypt.

Of the remaining wells drilled in the year, there were unsuccessful exploration wells at Whitethroat in the UK, Van Ghalen in

the Netherlands, Deep Thon and Merou in Morocco and Zonda and Lorcan 2 (a follow up well to the 2010 discovery) in

Egypt.

The results of the Cormoran-1 well in Mauritania, which was tested in late December 2010 at stabilised rates of up to 24

MMscfpd, were very encouraging. Considerable effort has been made during the year to evaluate the results and re-assess

hydrocarbon volumes in the four gas-bearing intervals encountered in the well (Upper and Lower Pelican Groups, Cormoran

channel and Petronia). Progress was also made towards entry into Cameroon, with a licence application for the Bakassi West

Block. In contrast, results from the Tanger Larache licence, offshore Morocco, were very disappointing, as both the Deep

Thon-1 and Merou-1 wells were dry. However, an application has been made for a Reconnaissance Licence to retain the

acreage to determine if development of the 2009 Anchois gas discovery is commercially viable. In Guinea, severe operational

problems were experienced on the Sabu-1 exploration well, resulting in substantial cost over-runs. A large 3D (4,000 km2)

survey was acquired to pursue the deep marine stratigraphic play recently proved by the Mercury and Venus discoveries to the

south.

The Group also continued to build its exploration portfolio through licence round applications and commercial transactions

throughout the year and will continue to do so in future years.

DEVELOPMENT

During 2011, the Company has been progressing a number of developments in the UK, Netherlands and Egypt.

Dana, as operator, has received UK Government approval of the Environmental Statement for the Arran development in the

UK Central North Sea, following the issue of a draft Field Development Plan (FDP) in 2010. The Arran field is to be

developed as a three well subsea tie back to a new Bridge Linked Platform (BLP) installed adjacent to the BG operated

Lomond platform. Arran is a gas condensate field with mid case recoverable reserves of approximately 230 bcf of gas plus

associated condensate. Pre-sanction technical work is nearing completion on each of the key areas, including wells, BLP

design, host platform modifications and subsea infrastructure. The development is targeting Project Sanction in 2012.

Dana, as operator, has submitted an Environmental Statement and a draft FDP to the UK Government for the Western Isles

development in the UK Northern North Sea. The Western Isles development is to be developed as a nine well project tied back

to a Floating Production, Storage and Offloading Vessel (FPSO). Western Isles is an oil development with mid case

recoverable reserves of approximately 40mmbbls. Engineering studies continued through 2011 in each of the key areas,

subsurface, wells, subsea and FPSO. The development is targeting Project Sanction quarter 3 2012.

On the back of successful discoveries in 2010, first oil was produced from the Lorcan and Fin oil fields in North Zeit Bay

(NZB), Egypt, through Petro Kareem, a new joint venture between Dana and the Egyptian General Petroleum Corporation. A

third well, Matr-1xST, obtained development lease approval during the year with first oil achieved through the Lorcan

Dana Petroleum plc

Directors’ report

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Processing Facility early in January 2012. The NZB Production Sharing Contract area, in which Dana holds a 100% interest,

has the potential to add a further three wells, pending development lease approval.

The Medway project in the Netherlands covers the development of the Van Nes gas discovery and the Van Ghent oil and gas

discovery. The integrated oil and gas project will utilise the existing De Ruyter facilities. Project sanction was given at the end

of 2010 and Phase 1 of the project culminated with first oil from the Van Ghent field produced on 11 January 2012. Phase 2 of

the project is expected to be completed by April 2012. The Medway infrastructure has being designed to accommodate the tie-

in of future fields.

PRINCIPAL RISKS AND UNCERTAINTIES

The management of the business and the execution of the Group’s strategy are subject to a numbers of risks set out in the table

below and in the notes to the financial statements. The Company and its subsidiaries have adopted the standards in accordance

with KNOC’s group requirements, for the evaluation and management of industrial and environmental risks. This includes

reviewing annually the Company’s system of risk assessment for the specific risks faced by the Company. These risks are

considered typical for an upstream company of Dana’s size, as illustrated in the table below. Further discussion of the

financial risks and uncertainties is contained in note 22 of the financial statements. With Dana’s growing involvement in

operated developments, the profile of a number of these risks have naturally assumed an increased focus within the

organisation.

MEDIUM PROBABILITY HIGH PROBABILITY

Taxation – legislation changes

Material movements in oil and

gas price HIGH IMPACT

Significant cost over-runs on major development projects

Inability to finance work programme

HS&E incidents

Loss of key employees

Inability to deliver key projects

Failure of third party services

Commercial misalignment with co-venturers

Exploration well failure MEDIUM IMPACT

Poor reservoir performance

Default of co-venturer

Lack of operational resources

Country risk associated with Guinea

Unfulfilled PSC work obligations

KEY PERFORMANCE INDICATORS

Key performance indicators are established each year in a business plan which covers a number of strategic, operational,

health, safety and environmental performance and finance objectives for the operations of the Group. The business plan is

approved at KNOC group level, and the key performance indicators of the KNOC group are disclosed in the KNOC annual

report which is publicly available. The key performance indicators for the Dana Petroleum plc Group are considered to be

production and reserve increases, successful health, safety and environmental performance and positive financial performance

of the Group. The evaluation of the key performance indicators for the Dana Petroleum plc Group for the year ended 31

December 2011 have been considered in other sections within the Director’s Report.

Dana Petroleum plc

Directors’ report

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HEALTH, SAFETY, SECURITY AND ENVIRONMENTAL PERFORMANCE

HSSE is considered a critical business function. Responsibility for HSSE is delegated to Country Managers and Asset

Managers, who are supported by local and Group HSSE Personnel.

Our HSSE policy

As an integral part of business, management of HSSE aspects contributes directly to the commercial success of the Group

through implementation of the Group’s HSSE Management System, setting of continual improvement goals and objectives and

ensuring HSSE competence and adequate resources. The Group strives to achieve the following ideals:

No harm to people

No undesirable releases or emissions

No damage to property

HSSE matters managed as any other critical business activity

Promoting a positive safety culture

All activities undertaken with legal compliance

Continual improvement in HSSE is driven by commitment to compliance and commitment to achieve the Group’s ideals and

annual goals and objectives. Goals are identified at Group, Company and country office level to ensure all aspects of the

business are captured and where required, regional challenges can be highlighted and actioned appropriately.

Reviews of Group, Company and country office goals are undertaken on an annual basis.

FINANCIAL PERFORMANCE

The Company’s key financial indicators during the year were as follows:

Restated 2011 2010 Change

£’000 £’000 %

Turnover 1,087,570 624,410 74.2

Profit on ordinary activities before interest and tax 467,482 94,423 395.1

Profit/(Loss) for the financial year 182,501 (5,436) (3,457.4)

Shareholders’ funds 1,318,920 896,283 47.2

The increase in turnover is mainly due to the increase in realised oil prices from £40.40/boe to £52.87/boe and an increase in

production to 61,970 boepd from 41,125 boepd in 2010. Turnover also increased by £144,044,000 as a result of the acquisition

of Petro Canada UK assets on 31 March 2011.

The increase in operating profit is mainly due to:

- The full year contribution from the acquisition of Petro Canada Netherlands B.V.

- The full year contribution from the KCCL business combination.

- The Negative Goodwill recognised on the acquisition of Petro Canada UK assets of £54,824,000.

- Net Exploration and Evaluation Expenditure in the income statement moved from an expense of £84,881,000 in 2010 to

£49,138,000 in 2011. The 2011 expense mainly relates to expensed Exploration and Evaluation activity for Whitethroat,

Blackbird, P1373/P1374 blocks (UK), PL027D block (Norway), Huygens and Van Galen (Netherlands) and South East

July (Egypt) that are now considered unlikely to deliver future commercial reserves.

- A reduction in administration expenses from £58,696,000 to £22,348,000 in 2011. This was mainly due to the defence

costs (£19,898,000) incurred in 2010 as a result of the KNOC takeover.

- The increase in turnover as noted above.

The increase in operating profit above is partially offset by:

- An increase in depreciation from £138,302,000 in 2010 to £326,704,000 in 2011. The significant increase in the

depreciation charge resulted from the change in accounting estimates applied from 1 January 2011, as described further in

note 2.

- A movement in foreign exchange from a gain of £330,000 to a loss of £7,756,000.

Dana Petroleum plc

Directors’ report

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The profit for the financial year was £182,501,000 compared to a restated loss for the financial year in the prior year of

£5,436,000. The movement is mainly due to:

- Interest payable and similar charges decreasing increasing to £30,516,000 in 2011 from £52,687,000 in 2010 due to the

interest expense recognised on the redemption of the convertible bonds and also significant bank arrangement fees for the

bank facility incurred in 2010, as discussed in note 19.

- The effective tax rate decreased from 107.7% in 2010 to 57.7% in 2011 mainly due to an exceptionally high effective tax

rate in 2010 due to non-tax deductible costs associated with the take over by KNOC. The 2011 rate is broadly in line with

the UK statutory rate of 59.27% which is reflective of the fact that the UK is the largest part of our business. Whilst the

2011 results included a one off deferred tax charge of £45,289,000 in respect of the revaluation of the UK deferred tax

from 50% to 62% as a result of the increase in the UK rate of supplementary charge from 20% to 32% with effect from 24

March 2011 the impact of this is negated by the £30,445,000 non-taxable goodwill credit which arose as a result of the

acquisition of UKCS assets from Petro-Canada UK and the £10,040,000 prior year adjustment tax credit which arose as a

result of the true up of the 2010 provision to the 2010 submitted tax computations.

Shareholders’ funds increased in the year by 47.2%. The increase in shareholders’ funds is mainly due to:

- Shares issued in the year in respect of the capital injection from KNOC (see note 24), increasing shareholders’ funds by

£314,387,000.

- Foreign exchange gain on consolidation for the year was £5,417,000.

- Increase in the value of the equity share of the investment in associate of £12,221,000.

- Increased shareholders’ funds were partially offset by a dividend paid by Dana Petroleum plc of $100,000,000 and the

dividend paid by KCCL of $60,000,000 bringing the total dividends paid to KNOC to $160,000,000 (£101,146,000)

during the year (see note 10).

CHARITABLE CONTRIBUTIONS

As part of the group’s commitment to the communities in which it operates, contributions totalling £111,000 (2010: £126,000)

were made during the year to local charities and projects focused on communities and areas close to areas of operations.

GOING CONCERN

The directors are satisfied that the Group has adequate resources to continue to operate for the foreseeable future. The Group’s

forecasts and projections, taking account of reasonably possible changes in the underlying assumptions, confirm that the Group

can undertake its planned work programmes for the period of 5 years from the current reporting date. A number of these

planned activities have yet to be formally committed, providing further flexibility to the Group in managing its future

cashflows. The Group received a capital injection from KNOC during January 2011. This was used to repay some of the

Group’s external borrowings and gives the Group further security over their available resources used for funding operations.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable

future and continue to adopt the going concern basis of accounting in preparing the annual financial statements.

EVENTS SINCE THE BALANCE SHEET DATE

On 23 February 2012, the Company reached an agreement with Hess Corporation (Hess) to acquire Hess’ 28.3% interest in the

Bittern field, increasing Dana’s share to 33%. As a result of the transaction, Hess will resign the affiliated operatorship of the

Triton floating production, storage and offloading (FPSO) vessel and Dana has indicated its desire to operate the facility. The

acquisition of this additional equity in the Bittern asset is estimated to add an additional 5,500 boepd of net oil production to

the Group in 2012.

On 14 March 2012, the Company proposed and paid a dividend on its ordinary shares, to its immediate parent company,

KNOC. The total dividend paid on ordinary shares amounted to $100,000,000 (£63,820,000).

A number of key changes to the rates of tax affecting oil companies were announced in the March 2012 budget. Details of

these key changes and the impacts on the Group have been disclosed in note 9.

Dana Petroleum plc

Directors’ report

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DIRECTORS

The current Directors at the date of signing this report are shown on page 1. The following changes have been made to

Directors and officials during the year ended 31 December 2011 and since the year end:

Marcus T Richards was appointed as a director on 2 March 2011

Stuart Paton resigned as a director on 21 March 2011

David MacFarlane resigned as a director on 21 March 2011

John Arnton resigned as Company Secretary on 21 March 2011

David A Crawford was appointed as a director and Company Secretary on 21 March 2011 and resigned as Company Secretary

on 7 December 2011

Jill Reid was appointed as Company Secretary on 7 December 2011

Since the year end the following changes have been made to Directors and officials

Sang Geun Han was appointed as a director on 13 January 2012

Kyung-Luck Sohn was appointed as a director on 13 January 2012

Jin Seok Yi resigned as a director on 23 January 2012

Chang Koo Kang resigned as a director on 23 January 2012

CREDITOR PAYMENT POLICY

The Company and Group policy is to agree payment terms with individual suppliers and to abide by these terms. The

Company does not have any trade creditors.

DISCLOSURE OF INFORMATION TO THE AUDITORS

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information,

being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made

enquiries of fellow directors and the Company’s auditor, each director has taken all the steps that he is obliged to take as

director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that

information

AUDITORS

Ernst & Young LLP will be re-appointed as the Company’s auditor in accordance with the elective resolution passed by the

Company under Section 485 of the Companies Act 2006.

By order of the Board:

David A Crawford

Director

18 May 2012

Dana Petroleum plc

Statement of Directors’ responsibilities

8

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law

and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have

prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by

the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted

Accounting Practice (United Kingdom Accounting Standards and applicable law). In preparing the group financial statements,

the directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board (IASB). Under

company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view

of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these

financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and accounting estimates that are reasonable and prudent;

state whether IFRSs as adopted by the European Union and IFRSs issued by IASB and applicable UK Accounting

Standards have been followed, subject to any material departures disclosed and explained in the group and parent

company financial statements respectively;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will

continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s

transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure

that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the

company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Dana Petroleum plc

Independent Auditors’ report to the Members’ of Dana Petroleum plc

9

We have audited the group financial statements of Dana Petroleum plc for the year ended 31 December 2011 which comprise the

Group Income Statement, the Group Balance Sheet, the Group Statement of Comprehensive Income, the Group Cash Flow

Statement, the Group Statement of Changes in Equity and the related notes 1 to 35. The financial reporting framework that has been

applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European

Union.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them

in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to

anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have

formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors are responsible for the

preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit

and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing

(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable

assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an

assessment of: whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and

adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the

financial statements. In addition, we read all the financial and non-financial information in the report and accounts to identify material

inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies

we consider the implications for our report.

Opinion on financial statements

In our opinion the group financial statements:

give a true and fair view of the state of the group’s affairs as at 31 December 2011 and of its profit for the year then ended;

have been properly prepared in accordance with IFRSs as adopted by the European Union; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the group financial statements are

prepared is consistent with the group financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our

opinion:

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Other matter

We have reported separately on the parent company financial statements of Dana Petroleum plc for the year ended

31 December 2011.

Moira Ann Lawrence (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Aberdeen

21 May 2012

Notes:

1. The maintenance and integrity of the Dana Petroleum plc website is the responsibility of the Directors: the work carried out by

the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes

that may have occurred to the financial statements since they were presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from

legislation in other jurisdictions

Dana Petroleum plc

Group Income Statement for the year ended 31 December 2011

10

Restated*

Note

2011 2010

£’000 £’000

Revenue 3 1,087,570 624,410

Cost of Sales (595,670) (386,740)

Gross Profit 491,900 237,670

Exploration & Evaluation Expense 5 (49,138) (84,881)

Administrative Expenses (22,348) (58,696)

Foreign Exchange (7,756) 330

Negative Goodwill 28 a 54,824 -

Profit on Ordinary Activities before Interest and Taxation 5 467,482 94,423

Interest Income 3 1,792 525

Finance Costs 7 (30,516) (52,687)

Profit on Ordinary Activities before Taxation 438,758 42,261

Taxation 9 (262,075) (45,503)

Profit/(Loss) for the Financial Year before Share of Post Tax Losses of the

Associate

176,683 (3,242)

Share of Post Tax Profits/(Losses) of the Associate 13 5,818 (2,194)

Profit/(Loss) for the Financial Year Attributable to the Equity Holders of the Company 182,501 (5,436)

The results above are entirely derived from continuing operations.

* See note 28 c for details of restatement.

Dana Petroleum plc

Group Statement of Comprehensive Income for the year ended 31 December 2011

11

Restated

Note

2011 2010

£’000 £’000

Profit/(Loss) for the Financial Year 182,501 (5,436)

Currency Translation Adjustments 6,765 20,901

Fair Value Movements on Available-for-Sale Financial Assets 13 384 4,331

Taxation thereon 9 (252) (1,213)

Unrealised gains/(losses) on cash flow hedges 21,315 -

Taxation on cash flow hedges 9 (12,190) -

Associate:

Net Asset Movement Recognised Directly in Equity 13 12,221 (832)

Other Comprehensive Income for the Year, Net of Tax 28,243 23,187

Total Comprehensive Income for the Year, Net of Tax Attributable to Equity

Holders of the Parent 210,744 17,751

Dana Petroleum plc

Group Balance Sheet as at 31 December 2011

12

Restated

Note

2011 2010

£’000 £’000

Non-Current Assets

Intangible Assets 11 792,628 743,657

Property, Plant and Equipment 12 1,255,844 946,987

Deferred PRT/NPI 9 21,096 12,978

Investments 13 90,174 72,149

2,159,742 1,775,771

Current Assets

Inventories 14 25,155 13,276

Trade and Other Receivables 15 274,771 158,621

Derivative Financial Instruments 23 25,304 -

Cash and Cash Equivalents 16 208,478 141,764

533,708 313,661

Total Assets 2,693,450 2,089,432

Current Liabilities

Trade and Other Payables 17 193,978 174,692

Current Tax 18 76,647 67,394

270,625 242,086

Non-current Liabilities

Trade and Other Payables 17 3,434 3,431

Borrowings and Financial Liabilities 19 114,757 337,128

Provision for Deferred Taxation 9 545,924 383,282

Provision for Liabilities and Charges 21 439,790 227,222

1,103,905 951,063

Net Assets 1,318,920 896,283

Equity Attributable to Equity Holders

Called-up Share Capital 24 18,425 15,805

Share Premium 595,841 284,074

Other Reserves 210,433 238,506

Cash Flow Hedging Reserve 9,125 -

Cumulative Translation Reserve 86,376 79,611

Retained Earnings 398,720 278,287

Total Equity 1,318,920 896,283

The financial statements were approved by the Board of Directors on 18 May 2012 and signed on its behalf by:

David A Crawford

Director

Registered No. 03456891

Dana Petroleum plc

Group Statement of Changes in Equity for the year ended 31 December 2011

13

Share

Capital

Share

Premium

Other

Reserves

Cash flow

hedging

reserve

Cumulative

Translation

Reserve

Retained

Earnings Total Equity

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Equity at 1 January 2010 13,801 136,519 128,949 - 58,710 319,129 657,108

Loss for the Financial Year - Restated - - - - - (5,436) (5,436)

Other Comprehensive (Loss)/Income -

Restated - - 3,118 - 20,901 (832) 23,187

Total Comprehensive (Loss)/Income -

Restated - - 3,118 - 20,901 (6,268) 17,752

Employee Share Scheme Credits - - - - - 381 381

Taxation thereon - - - - - 7,505 7,505

New Shares Issued 2,004 143,166 - - - - 145,170

Business combination with KCCL

(pooling of interests method) (note 28 c) - 4,389 106,439 - - - 110,828

Dividends paid by KCCL (note 10) - - - - - (42,460) (42,460)

Equity at 31 December 2010 Restated 15,805 284,074 238,506 - 79,611 278,287 896,283

Profit for the Financial Year - - - - - 182,501 182,501

Other Comprehensive Income/(Loss) - - 132 9,125 6,765 12,221 28,243

Total Comprehensive Income/(Loss) - - 132 9,125 6,765 194,722 210,744

Employee Share Scheme Credits

taxation thereon - - - - - (1,348) (1,348)

New Shares Issued 2,620 311,767 - - - - 314,387

Dividends paid (note 10) - - - - - (64,610) (64,610)

Dividends paid by KCCL (note 10) - - - - - (36,536) (36,536)

Reclassification of other reserves - - (28,205) - - 28,205 -

Equity at 31 December 2011 18,425 595,841 210,433 9,125 86,376 398,720 1,318,920

At 31 December 2011 equity attributable to equity holders of the parent company is £1,318,920,000 (2010 Restated:

£896,283,000).

Dana Petroleum plc

Group Cash Flow Statement for the year ended 31 December 2011

14

Restated

2011 2010

Note £’000 £’000

Operating Activities

Cash Generated from Operations 27 714,423 359,614

Taxation Paid (211,303) (44,706)

Interest Received 1,773 516

Interest Paid (11,335) (16,358)

Hedging settlements (39,957) -

Net Cash from Operating Activities 453,601 299,066

Investing Activities

Expenditure on Intangible and Property, Plant and Equipment Assets (283,346) (222,589)

Payments to Acquire Subsidiaries 28 a & b (90,438) (260,778)

Net settlement of working capital balances on acquired subsidiary (5,569) 11,548

Payments to acquire Shares in Associate Undertaking 13 - (19,221)

Cash acquired on deemed acquistion of subsidiary 28 c - 70,196

Net Cash Invested in Investing Activities (379,353) (420,844)

Financing Activities

Issue of Ordinary Share Capital (net of costs) 314,386 3,670

Cash settled options - (7,307)

Drawdown of Borrowings - 260,710

Repayment of Borrowings (220,345) (14,840)

Interest Paid on Convertible Bonds - (4,104)

Dividends paid 10 (101,146) (42,460)

Net Cash (used in)/from Financing Activities (7,105) 195,669

Currency Translation Differences 29 (429) 323

Net Increase in Cash and Cash Equivalents 66,714 74,214

Cash and Cash Equivalents at the Beginning of the Year 141,764 67,550

Cash and Cash Equivalents at the End of the Year 16 208,478 141,764

Dana Petroleum plc

Notes to the Group Financial Statements

15

1 Authorisation of financial statements and statement of compliance with IFRS

The Group’s financial statements of Dana Petroleum plc for the year ended 31 December 2011 were authorised for issue by the

Board of Directors on 30 March 2012 and the balance sheet was signed on the Board’s behalf by David A Crawford. Dana

Petroleum plc is a public limited company incorporated in England and Wales and domiciled in Scotland.

The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as

adopted by the EU as they apply to the financial statements of the Group for the year ended 31 December 2011. The Group’s

financial statements are also consistent with IFRS as issued by the International Accounting Standards Board. The principal

accounting policies adopted by the Group are set out in note 2.

On 1 October 2011, the Group acquired the entire share capital of Korea Captain Company Limited (KCCL) from the ultimate

parent of the Group, KNOC. The transaction fell within the scope exemption from IFSR 3R for common control business

combinations and has been accounted for by the pooling of interests method of accounting. See note 28 c).

2 Accounting policies for the Group financial statements

The following accounting policies are applied consistently in dealing with items which are considered material in relation to

the Group’s financial statements.

Basis of accounting

The financial information has been prepared using accounting policies consistent with IFRS and IFRIC Interpretations adopted

by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The

financial statements have been prepared under the historical cost convention, except for certain fair value adjustments required

by those accounting policies.

Accounting estimates

The Group’s accounting policies make use of estimates and judgements in the following areas; Goodwill, Impairment,

Depreciation, Decommissioning, Investment in Associates, Derivative Financial Instruments and Share-based Payments. These

are described in more detail in the relevant accounting policy and related notes to the Financial Statements.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and each of its subsidiary undertakings

having eliminated all inter-company transactions and balances.

Acquisitions

Business combinations are dealt with on the basis of the purchase method of accounting. The cost of an acquisition is

measured as the fair value of the assets acquired (or assets given up in the case of swap transactions), equity instruments issued

and liabilities incurred or assumed at the date of completion of the acquisition, plus costs directly attributable to the

acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date irrespective of the extent of any minority interest. The excess of the

cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the

cost of the acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference

is recognised directly in the income statement.

The results of subsidiaries acquired or disposed of are included/excluded in the consolidated income statement from the date

on which control legally passes.

Business combinations of entities under common control are dealt with on the pooling of interest method of accounting. The

assets and liabilities of the combining entities are reflected at their carrying amounts, with any adjustments made to the

acquired entities accounts to harmonise accounting policies. There is no new goodwill recognised as a result of the

combinations, any difference between the consideration paid/transferred and the equity acquired is reflected within equity.

The income statement and comparatives are presented as if the entities had always been combined.

Dana Petroleum plc


16

Joint Ventures

The Group is engaged in oil and gas exploration, development and production through unincorporated joint ventures and

production sharing contracts (together “Joint Ventures”). The Group accounts for its share of the results and net assets of these

Joint Ventures as jointly controlled assets. In addition, where Dana acts as operator to the Joint Venture, the gross liabilities

and receivables (including amounts due to or from non-operating partners) of the Joint Venture are included in the Group

balance sheet. The Group’s current Joint Venture interests are detailed in note 53.

Revenue

Revenue reflects actual sales value, net of VAT, in respect of liftings sold. Due to the fact that the Group follows the

entitlement basis, adjustments in respect of overlift (liftings greater than production entitlement) and underlift (production

entitlement greater than liftings) are recorded in/against cost of sales at market value. Where appropriate, entitlement revenue

also includes an allowance for the gross up for tax paid on the Company’s behalf by host governments.

Interest income is recognised on an accruals basis and is disclosed separately on the face of the income statement.

Foreign currencies

The functional currency for material subsidiaries is either Pounds Sterling, Euro, Norwegian Kroner or US Dollar.

Transactions in foreign currencies during the year are recorded in the functional currency at the rate of exchange ruling at the

date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional

currency at the rates ruling at the balance sheet date.

Exchange differences resulting from the translation of assets and liabilities of foreign currency denominated subsidiaries into

pounds sterling at year-end rates of exchange, together with those differences resulting from the restatement of profits and

losses from average to year-end rates, are taken directly to the cumulative translation reserve. All other exchange differences

are taken to the income statement.

Transactions denominated in local currencies are re-measured into the functional currency at the rate ruling on the date that

they arose.

Oil and gas expenditure

The Group accounts for oil and gas expenditure as follows:

Intangible assets – Exploration and Evaluation assets

Capitalisation

Certain costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are

charged directly to the income statement. All costs incurred after the rights to explore an area have been obtained, such as

geological and geophysical costs and other direct costs of exploration (drilling, trenching, sampling and technical feasibility

and commercial viability activities) and appraisal are accumulated and capitalised as intangible exploration and evaluation

(E&E) assets.

E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities if technical

feasibility is demonstrated and commercial reserves are discovered, then, following development sanction, the carrying value

of the relevant E&E asset will be reclassified as a development and production asset, but only after the carrying value of the

relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If after completion of

appraisal activities in an area, it is not possible to determine technical feasibility and commercial viability or if the legal right

to explore expires or if the Company decides not to continue exploration and evaluation activity, then the costs of such

unsuccessful exploration and evaluation is written off to the income statement in the period the relevant events occur.

Dana Petroleum plc


17

Impairment

If and when facts and circumstances indicate that the carrying value of an E&E asset may exceed its recoverable amount an

impairment review is performed.

For E&E assets when there are such indications, an impairment test is carried out by grouping the E&E assets with the

development & production assets belonging to the same geographic segment to form the Cash Generating Unit (“CGU”) for

impairment testing. The equivalent combined carrying value of the CGU is compared against the CGU’s recoverable amount

and any resulting impairment loss is written off to the income statement. The recoverable amount of the CGU is determined as

the higher of its fair value less costs to sell and its value in use.

Property, plant and equipment – Development and Production assets

Capitalisation

Development and production (D&P) assets are accumulated into single field cost centres and represent the cost of developing

the commercial reserves and bringing them into production together with the E&E expenditures incurred in finding

commercial reserves previously transferred from E&E assets as outlined in the policy above.

Depreciation

Costs relating to each single field cost centre are depleted on a unit of production method. In 2010 this calculation was based

on the commercial proven and probable reserves (2P) for that cost centre. Effective 1 January 2011, the basis of this

calculation was revised to be on proven reserves (1P) only. In addition, whereas previously the amortisation calculation took

into account the estimated future costs of development of the recognised probable reserves, from 1 January 2011 these

estimated future costs are no longer taken into account. Changes in reserve quantities continue to be recognised prospectively

from the relevant reporting date (see Change in Accounting Estimate below).

Development assets are not depreciated until production commences.

Currently there are no significant items of property, plant and equipment deemed to have different useful lives.

Impairment

A review is performed for any indication that the value of the Group’s D&P assets may be impaired.

For D&P assets when there are such indications, an impairment test is carried out on the CGU. Each CGU is identified in

accordance with IAS 36. Dana’s CGUs are those assets which generate largely independent cash flows and are normally, but

not always, single development or production areas. If necessary, additional depletion is charged through the income statement

if the capitalised costs of the CGU exceed the associated estimated future discounted cash flows of the related commercial oil

and gas reserves.

Asset purchases and disposals

When a commercial transaction involves the purchase of a D&P asset in exchange for an E&E asset, the transaction is

accounted for at fair value with the difference between fair value and cost being taken to the income statement.

When a commercial transaction involves the exchange of E&E assets of similar size and characteristics, no fair value

calculation is performed. The capitalised costs of the asset being sold are transferred to the asset being acquired. However,

where the size and characteristics of the E&E assets significantly differ, the transaction is accounted for at fair value with the

difference between fair value and cost being taken to the income statement.

Proceeds from the entire disposal of an E&E asset are deducted from the capitalised costs of the asset with any surplus/deficit

taken to the income statement as a gain or loss on sale. Proceeds from a part disposal of an E&E asset are deducted from the

capitalised cost of the asset with any surplus taken to the income statement as a gain on sale.

Proceeds from the entire disposal of a D&P asset, or any part thereof, are taken to the income statement together with the

requisite proportional net book value of the asset, or part thereof, being sold.

Dana Petroleum plc


18

Goodwill

Goodwill arising on consolidation, representing the excess of the cost of acquisition over the fair value of the Group’s share of

the identifiable assets, liabilities and contingent liabilities acquired, is capitalised in the balance sheet. Following initial

recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually

or more frequently if events or changes in circumstances indicate the carrying value may be impaired. Goodwill is allocated to

the appropriate CGU for the purpose of impairment testing.

Decommissioning

The Group recognises the full discounted cost of decommissioning when the obligation to rectify environmental damage arises,

principally on development sanction. The amount recognised is the present value of the estimated future expenditure

determined in accordance with local conditions and requirements. A corresponding D&P asset of an amount equivalent to the

provision is also created. This is subsequently depreciated as part of the capital costs of the D&P asset. Any change in the

present value of the estimated expenditure is reflected as an adjustment to the provision and the D&P asset. The unwinding of

the discount on the decommissioning provision is included as a finance cost.

Property, plant and equipment other than D&P assets

Property, plant and equipment other than D&P assets are stated in the balance sheet at cost less accumulated depreciation.

Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line

basis at the following annual rates:

Equipment 10% - 25%

Computer equipment 33%

Finance costs and debt

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that

necessarily take a substantial period of time to get ready for the intended use or sale, are added to the cost of those assets, until

such time as the assets are substantially ready for their intended use of sale.

Finance costs of debt are allocated to periods over the term of the related debt at a constant rate on the carrying amount.

Arrangement fees and issue costs are amortised and charged to the income statement as finance costs over the term of the debt.

Investment in associates

The Group’s interest in its associate, being that entity over which it is deemed to have significant influence and which is

neither a subsidiary nor a joint venture, is accounted for using the equity method of accounting. Under the equity method, the

investment in its associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets

of the associate. The Group’s statement of change in equity reflects the Group’s share of the fair value of the associate’s net

assets value on initial recognition and any subsequent movement in the fair value of the net assets of the associate required to

be recognised directly in equity.

Financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments

are made to bring the accounting policies used into line with those of the Group; to take into account movement in the fair

values assigned at the date of the acquisition and to reflect impairment losses where appropriate.

Available-for-sale financial assets

The Group determines the classification of its available-for-sale financial assets at initial recognition and re-evaluates this

designation at each financial year end. When available-for-sale financial assets are recognised initially, they are measured at

fair value, being the transaction price plus directly attributable transaction costs.

After initial recognition available-for-sale financial assets are measured at fair value with gains or losses being recognised as a

separate component of equity until the investment is derecognised or until the investment is determined to be impaired at

which time the cumulative gain or loss previously reported in equity is included in the income statement.

Dana Petroleum plc


19

Inventories

Inventories comprise materials and equipment, which are stated at the lower of cost and net realisable value. Cost includes all

costs incurred in bringing the materials and equipment to its present condition and location.

Trade and other receivables

Trade receivables are recognised and carried at the original invoiced amount. Other receivables, excluding underlifted

amounts, are measured at nominal value. Underlifted amounts are measured at market value in accordance with industry

practice.

Trade and other payables

Trade and other payables, excluding overlifted amounts, are measured at cost. Overlifted amounts are measured at market

value in accordance with industry practice.

Convertible bonds

The net proceeds received from the issue of convertible bonds are split between a liability element and an equity component at

the date of issue. The fair value of the liability component is estimated using the prevailing market interest rate for similar non-

convertible debt. The difference between the proceeds of issue of the convertible bonds and the fair value assigned to the

liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity

and is not remeasured. The liability component is carried at amortised cost.

Issue costs are apportioned between the liability and equity components of the convertible bonds based on their relative

carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-

convertible debt to the liability component of the instrument. The difference between this amount and the interest paid is added

to the carrying amount of the convertible bonds.

Share issue expenses and share premium account

Costs of share issues are written off against the premium arising on the issue of share capital.

Taxation

Current tax

Current tax is recognised as a liability to the extent unpaid or if the amount paid exceeds the amount due it is recognised as an

asset. Current tax assets and liabilities are measured at the amount expected to be paid/recovered from the taxation authorities,

using tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax

Deferred income tax is recognised on temporary differences arising between the tax base of assets and liabilities and their

carrying amounts in the Group financial statements.

Deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction (other

than a business combination), that at the time of the transaction affects neither, accounting nor taxable profit or loss.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting

date.

Deferred income tax assets are recognised to the extent that it is probable that future income tax profit will be available against

which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates,

except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the

temporary difference will not reverse in the foreseeable future.

Dana Petroleum plc


20

PRT and NPI tax

UK PRT and Norwegian NPI tax are treated as income taxes and deferred PRT and deferred NPI tax is calculated and provided

for. Current UK PRT and Norwegian NPI tax are charged as tax expenses on the chargeable field profits included in the

income statement and are deductible for UK and Norwegian corporation tax respectively.

Pensions

The Group contributes to the personal pension arrangements of Executive Directors and employees up to a specified

percentage of salary in lieu of a formal corporate scheme. Contributions in lieu of pensions are charged to the income

statement as incurred.

Derivative financial instruments and hedging

The Group uses derivative financial instruments to manage its exposure to fluctuations in foreign exchange rates, interest rates

and movements in oil and gas prices.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are remeasured at their fair

value at each subsequent reporting date.

Derivatives embedded in other financial instruments or non-derivative host contracts are treated as separate derivatives when

their risks and characteristics are not closely related to those host contracts and the host contracts are not carried at fair value

with unrealised gains or losses reported in the income statement.

Fair value estimation of financial instruments traded in active markets (such as available-for-sale securities) is based on quoted

market prices at the reporting date. The fair value of foreign exchange contracts is determined using forward exchange market

rates at the balance sheet date. Other financial instruments are valued using standard pricing models or discounted cash flow

techniques.

For the purposes of hedge accounting, hedging relationships may be of three types: fair value hedges are hedges of particular

risks that may change the fair value of the recognised asset or liability; cash flow hedges are hedges of particular risks that

might change the amount or timing of future cash flows; and hedges of net investment in a foreign entity are hedges of

particular risks that may change the carrying value of the net assets or a foreign entity. Currently the group only has cash flow

hedge relationships.

To qualify for hedge accounting the hedging relationship must meet several strict conditions on documentation, probability of

occurrence, hedge effectiveness and reliability of measurement. If these conditions are not met, then the relationship does not

qualify for hedge accounting.

For qualifying cash flow hedges, the hedging instrument is recorded at fair value. The portion of any change in fair value that

is an effective hedge is included in equity, and any remaining ineffective portion is reported in the income statement. Hedge

accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised without replacement or

rollover, no longer qualifies for hedge accounting or the Group revokes the designation.

Financial assets at fair value through Income Statement

Financial assets at fair value through income statement include financial assets held for trading and financial assets designated

upon initial recognition at fair value through the income statement. Financial assets are classified as held for trading if they are

acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the

Group that are not designated as hedging instruments in hedge relationships. As at 31 December 2011 no financial assets have

been designated as at fair value through the Income Statement (2010: £nil).

Operating leases

Rentals under operating leases are charged to the income statement on a straight line basis over the period of the lease.

Dana Petroleum plc


21

Maintenance expenditure

Expenditure on major maintenance, refits or repairs is capitalised where it enhances the life or performance of an asset above

its originally assessed standard of performance; replaces an asset or part of an asset which was separately depreciated and

which is then written off, or restores the economic benefits of an asset which has been fully depreciated. All other maintenance

expenditure is charged to the income statement as incurred.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments

with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current

liabilities on the balance sheet.

Share based payments

The Group has applied the requirements of IFRS 2 Share Based Payment to all grants of equity instruments after 7 November

2002 that had not vested as of 1 January 2005.

The Group issued both equity-settled and cash-settled share based payments as an incentive to certain key management and

staff. Equity-settled share based payments were measured at fair value at the date of grant. The fair value determined at the

grant date of the equity-settled share based payments was expensed on a straight-line basis over the vesting period, based on

the Group’s estimate of the number of shares that would eventually vest.

Fair value was measured by use of a Monte Carlo model. The expected life used in the model was adjusted, based on

management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

For cash-settled share based payments, a liability was recognised based on the current fair value determined at each reporting

date and that portion of the employees’ services to which the payment relates that has been received by the reporting date.

Change in accounting estimate

In 2011 there was a change in accounting estimate applied to the Group’s policy relating to depreciation of assets. This change

was applied to bring the Group in line with the policies followed by the wider KNOC group and was applied prospectively

from 1 January 2011.

In 2010 assets relating to each single field costs centre were depleted on a unit of production method based of the commercial

proven and probable reserves (2P reserves) for that cost centre. In addition, the amortisation calculation took into account the

estimated future costs of development of 2P reserves based on current price levels. The Group has changed the reserves basis

of calculating its unit of production depletion charge to commercial proven reserves (1P) only. Estimated future costs of

probable development are not now included in amortisation calculation. Under IAS 8 “Accounting Policies, Changes in

Accounting Estimates and Errors” the Company has determined that this change represents a change in accounting estimate

and not a change in accounting policy. The effect of this change on the depletion expense in the current year was an increase of

£154,000,000. It is not practicable to estimate the effect on future years.

New standards and interpretations

The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2011:

IAS 24 Related Party Disclosures (amendment), IFRS 3 Business Combinations – measurement options available for non-

controlling interest, IFRS 7 Financial Instruments: Disclosures – collateral and qualitative disclosures and IAS 1

Presentation of Financial Statements – analysis of comprehensive income.

The following standards and interpretations which have been adopted are relevant to the Group but have had no material

impact on these financial statements:

IAS 32 (amendments) ‘Financial instruments: presentation – classification of rights issues’.

IFRIC 19 ‘Extinguishing financial liabilities with equity instruments’.

IFRS 3 ‘Business combinations (Contingent consideration arising from business combination prior to adaptation of IFRS 3

(as revised 2008)’.

Dana Petroleum plc


22

IFRS 3 ‘Business combinations (Un-replaced and voluntarily replaced share-based payment awards)’.

IAS 27 ‘Consolidated and Separate Financial Statements’.

IAS 34 ‘Interim financial statements’.

The following standards and amendments and interpretations to existing standards have been published and are mandatory for

the Group’s accounting period beginning on or after 1 January 2012 or later periods, but the Group has not early adopted them:

IFRS 10 ‘Consolidated financial statements’

IFRS 11 ‘Joint arrangements’

IFRS 12 ‘Disclosure of Interests in Other Entities’

IFRS 13 ‘Fair value measurement’.

IFRS 1 (amendment) ‘First-time adoption of International Financial Reporting Standards – Sever Hyperinflation and

removal of fixed dates for first time adopters.

IFRS 7 (amendments) – ‘New (enhanced) disclosure requirements for derecognition of financial assets’.

IAS 12 (amendments) –‘Deferred taxes – recovery of underlying assets’.

It is not anticipated that the application of these standards and amendments will have any material impact on the Group’s

financial statements. The Group plans to adopt the amendments to these standards when they become effective.

3 Revenue

Revenue disclosed in the income statement is analysed as follows:

Restated

2011 2010

£’000 £’000

Oil, gas and condensate sales 1,111,890 606,409

Other revenues 24,797 18,001

Oil cash flow hedge settlement losses (49,117) -

Revenue 1,087,570 624,410

Bank interest (financial assets not at fair value through profit and loss) 1,792 525

Total revenue 1,089,362 624,935

No revenue was derived from the exchange of goods and services (2010: £nil).

Other revenue includes amounts receivable in respect of third party tariff income.

Dana Petroleum plc


23

4 Segment information

The following disclosures are in accordance with IFRS 8, Operating Segments. For management purposes, the Group is

organised into business units based on their geographic location and value-chain activity. The Group has four reportable

operating segments as follows:

UK and Other Europe – The Group is currently involved in the exploration, development and production of hydrocarbons in

this geographic location.

Netherlands – The Group is currently involved in the exploration, development and production of hydrocarbon in this

geographic location. This was a new segment in 2010 due to the acquisition of Petro Canada Netherlands B.V. as detailed in

note 28 b).

Egypt – The Group is currently involved in the exploration, development and production of hydrocarbons in this geographic

location.

Other International – The Group is currently only involved in the exploration of hydrocarbons.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource

allocation and performance assessment. Segment performance is evaluated based on the economic evaluation of the reserve

and resource potential and growth in each segment. Group financing (including finance costs and interest income), foreign

exchange and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties.

Segment revenues and results

The following tables present revenue and profit/(loss) information regarding the Group’s operating segments for the year

ended 31 December 2011 and 31 December 2010 respectively.

Year ended 31 December 2011

UK and Other

Europe Netherlands

Egypt

Other

International Total

£’000 £’000

£’000 £’000 £’000

Revenue(1)

828,323 173,841

85,406 - 1,087,570

Results

Segment result 393,380

(2)

56,885 31,360 (569) 481,056

Foreign Exchange

(7,756)

Interest Income

1,792

Finance Costs

(30,516)

Taxation

(262,075)

Profit for the year

182,501

Year ended 31 December 2010 Restated

Revenue(1)

500,099 66,405

57,906 - 624,410

Results

Segment result 89,012

(2)

23,812 (22,048) 1,123 91,899

Foreign Exchange

330

Interest Income

525

Finance Costs

(52,687)

Taxation

(45,503)

Loss for the year

(5,436)

(1) Revenue includes settlement of oil cash flow hedges settlement losses £49,117,000 (2010: £nil). All revenue (excluding oil

cash flow hedges) was derived from third party sales. (2)

Included within UK and Other Europe profit is the share of post tax profits of the associate £5,818,000 (2010: Losses

£2,194,000)

Dana Petroleum plc


24

Segment assets

The following table presents segment assets of the Group’s operating segments as at 31 December 2011 and 31 December

2010:

UK and

Other

Europe Netherlands Egypt

Other

international

Adjustments

and

eliminations Total

£’000

£’000 £’000 £’000 £’000 £’000

At 31 December 2011 1,398,425 (1)

470,230 383,149 136,508 305,138 (2)

2,693,450

At 31 December 2010

Restated

994,733 (1)

502,937 335,048 102,183 154,742 (2)

2,089,643

(1)

Included within UK and Other Europe assets is the investment in associate £73,330,000 (2010: £55,291,000).

(2)

Segment assets do not include deferred PRT/NPI £21,096,000 (2010: £12,978,000) or cash and cash equivalents

£208,478,000 (2010 Restated: £141,764,000).

Segment liabilities

The following table presents segment liabilities of the Group’s operating segments as at 31 December 2011 and 31 December

2010:

UK and

Other

Europe Netherlands Egypt

Other

international

Adjustments

and

eliminations Total

£’000 £’000 £’000 £’000 £’000 £’000

At 31 December 2011 457,884 91,458 20,473 67,391 737,324 (1)

1,374,530

At 31 December 2010

Restated

207,058 99,541 21,409 77,337 787,804 (1)

1,193,149

(1)

Segment liabilities do not include current tax £76,647,000 (2010 Restated: £67,394,000), borrowings and financial liabilities

£114,757,000 (2010: £337,128,000) and provision for deferred taxation £545,920,000 (2010 Restated: £383,282,000).

Other Segment information

Depreciation

Exploration and evaluation

expense

Additions to non-current

assets

Restated Restated

2011 2010 2011 2010 2011 2010

£’000 £’000 £’000 £’000 £’000 £’000

UK and Other Europe 221,137 88,036 21,814 75,847 596,071 148,225

Netherlands 79,213 23,504 11,927 144 66,352 303,549

Egypt 26,354 26,762 14,957 8,890 50,471 60,457

Other International - - 440 - 34,136 51,565

326,704 138,302 49,138 84,881 747,029 563,797

In addition to the depreciation reported above, an impairment loss of £2,374,000 (2010: £37,216,000) was recognised in

respect of property, plant and equipment. This is attributable to the UK and Other Europe £2,374,000 (2010: £11,670,000) and

Egypt £nil (2010: £22,546,000).

Dana Petroleum plc


25

Revenues from major products and services

The Group’s revenues from its major products and services were as follows:

Restated

2011 2010

£’000 £’000

Oil 992,138 530,815

Gas 127,050 73,806

Condensate 3,390 1,788

Oil cash flow hedges settlement losses (49,117) -

Tariff income 14,109 18,001

Consolidated revenue (excluding investment revenue) 1,087,570 624,410

Geographical information

The Group’s revenue from external customers and information about its segment assets (non-current assets excluding deferred

tax assets and other financial assets) by geographical location are detailed below:

Revenue Non-current assets

Restated Restated

2011 2010 2011 2010

£’000 £’000 £’000 £’000

UK 771,498 450,658 1,174,844 1,006,212

Netherlands 173,841 66,405 434,684 466,033

Egypt 85,406 57,906 304,877 124,583

Norway 56,825 49,441 76,691 51,591

Other - - 130,680 97,516

1,087,570 624,410 2,121,776 1,745,935

Information about Major Customers

Included in revenues arising from the UK and Netherlands are revenues of approximately £372,941,000 (2010: £311,107,000)

and £nil (2010: £71,291,000) respectively which arose from sales to the Group’s two (2010: three) largest customers. In the

UK, the Group typically re-tenders its hydrocarbon sales contracts on an annual basis.

5 Profit on operating activities before interest and taxation

Profit on operating activities before interest and taxation is stated after charging/(crediting):

Restated

2011 2010

£’000 £’000

Depreciation (note12) 326,704 138,302

Asset impairment (note12) 2,374 37,216

Inventory consumed 2,186 1,968

Net over/(under) lifted production movement (12,255) 10,699

Net foreign exchange differences (7,756) 330

Egypt tax-in-kind (20,987) (8,763)

Operating lease rentals 1,973 1,434

Exploration and Evaluation Expense

- Costs of licences expired/relinquished - 614

- Wells declared non commercial 51,684 82,063

- Pre licence expenditure 1,904 2,204

- Reduction in farm in obligations (4,450) -

49,138 84,881

Dana Petroleum plc


26

6 Auditors’ remuneration

Restated

2011 2010

£’000 £’000

Audit of the Group accounts 151 180

Audit of the Company's accounts 38 36

189 216

Other fees to auditors:

- Audit of the Company's subsidiaries pursuant to legislation 277 242

- Other services pursuant to legislation 32 30

- Taxation services 25 196

- Corporate finance services: transaction costs - 252

334 720

7 Finance costs

Restated

2011 2010

£’000 £’000

Bank and other loans (financial liabilities not at fair value through profit and loss) 7,711 20,002

Convertible bonds (note 20) - 23,765

Unwinding of decommissioning discount (note 21) 22,805 8,920

30,516 52,687

8 Employment costs

(a) Staff costs

Restated

2011 2010

£’000 £’000

Wages and salaries 27,197 34,617

Pension costs 2,188 1,085

Social security costs 3,241 9,164

32,626 44,866

Included in wages and salaries is a total net expense of share based payments of £nil (2010: £9,781,000) of which £nil (2010:

£8,631,000) arises from transactions accounted for as equity-settled share based payment transactions. All liabilities relating to

the cash-settled share based payments were fully unwound during 2010.

Dana Petroleum plc


27

The weighted average number of employees (including Executive Directors) during the year was:

Restated

2011 2010

Management 13 17

Technical and administration 210 134

223 151

Russian subsidiary - 4

223 155

Excluded from the above totals are 283 employees (2010: 273), being the weighted average number employed by Zeitco, a

Joint Venture owned by the Group and Egyptian General Petroleum Corporation.

(b) Directors’ remuneration

2011 2010

£’000 £’000

Aggregate remuneration in respect of qualifying services 1,019 9,711

Company contributions to money purchase pension scheme 202 282

Aggregate amounts receivable under long term incentive plans - 21,692

2011 2010

Number of directors who received shares in respect of qualifying services - 3

Number of directors who exercised share options - 3

2011 2010

£’000 £’000

In respect of the highest paid director:

Aggregate remuneration (including amounts receivable under long term incentive

plans) 282

18,205

The highest paid director in 2010 exercised share options during 2010 and also received shares under the group’s long term

incentive scheme.

During 2011 £nil (2010:£6,294,000) was payable to no (2010: seven) Directors as compensation for loss of office, including

Non-executive Directors.

No employees other than the Directors are determined to be Key Management Personnel. The compensation of key

management personnel is set out above along with the information concerning their share options and retirement benefits.

There are no personnel, other than directors, who have the authority and responsibility for planning, directing and controlling

the activities, directly or indirectly, of the Group. The directors do not believe that any other employees meet the definition of

key management personnel under IAS 24 Related party disclosures.

Dana Petroleum plc


28

9 Taxation

Restated

a) Analysis of Tax on profit on ordinary activities

2011 2010

£’000 £’000

Current Taxation

PRT/NPI 31,906 7,247

Corporation tax 231,456 81,918

Current tax charge 263,362 89,165

Amounts (over)/under provided in previous years (20,969) 2,240

Total current tax charge 242,393 91,405

Deferred Taxation

Deferred corporation tax 16,871 (42,271)

Deferred PRT/NPI (8,118) (5,383)

Current deferred tax charge/(credit) 8,753 (47,654)

Amounts under provided in previous years 10,929 1,752

Total deferred tax charge/(credit) 19,682 (45,902)

Total tax charge in the income statement 262,075 45,503

Tax on profit from operating activities may be analysed as follows:

Current tax charge

UK 186,474 74,754

Overseas 55,919 16,651

242,393 91,405

Deferred tax charge/(credit)

UK 36,820 (2,630)

Overseas (17,138) (43,272)

19,682 (45,902)

Total tax charge/(credit)

UK 223,294 72,124

Overseas 38,781 (26,621)

262,075 45,503

Tax relating to items charged or credited to equity

Restated

2011 2010

£’000 £’000

Current tax:

Current tax charge/(credit) on share option awards 1,348 (8,757)

Deferred tax:

Unrealised loss on available-for-sale financial assets 252 1,213

Hedging 12,190 -

Charge for deferred tax on share option awards - 1,252

Total deferred tax charge 12,442 2,465

Total tax charge/(credit) in the Group statement of changes in equity 13,790 (6,292)

Dana Petroleum plc


29

b) Reconciliation of the total tax charge

The tax charge for the year is higher than the weighted average rate for the year. The difference is explained below:

Restated

2011 2010

£’000 £’000

Profit on ordinary activities before tax 438,758 42,261

Tax at weighted average rate of corporation tax at 56.90% (2010:

65.40%)

249,664

27,607

Disallowed expenses and non-taxable income (30,445) 5,790

Supplementary charge differences on finance income and costs 1,429 3,746

Tax losses utilised not previously recognised (186) (409)

Unprovided deferred tax asset - 5,334

PRT 11,332 6,560

Allowable deduction for PRT (2,737) (4,011)

Foreign tax calculation differences 2,502 (3,340)

Adjustment in respect of prior years (10,040) 3,992

Non qualifying depreciation 2,588 (1,098)

Impact of rate change 45,289 -

Other (7,321) 1,332

Total tax expense reported in the income statement 262,075 45,503

The weighted average rate of corporation tax 56.90% (2010 Restated: 65.40%) is calculated using the following methodology.

Tax charges are calculated by applying the statutory tax rate in each tax jurisdiction to the profit before tax for each entity. The

sum of the tax charges for each entity is then divided by the Group accounting profit before tax to derive the weighted average

rate of corporation tax for the year.

The weighted average rate of corporation tax has changed from the previous accounting period due to differences in the

weighted average mix of profits in each tax jurisdiction.

On 24 March 2011 the UK Government announced that the rate of the UK supplementary tax was to be increased from 20% to

32%. During 2011 the UK deferred tax position has been revalued in line with this change in rate. The impact of this rate

change was an increase in the deferred tax liability of £45,289,000.

c) Unrecognised tax losses

The Group has unrecognised tax losses which arose in Egypt of £16,209,000 (2010: £36,812,000) in respect of exploration

activities outside the ‘ring-fence’, that are available indefinitely for offset against future taxable profits of the companies in

which the losses arose. Deferred tax assets have not been recognised as it is not probable that the asset is recoverable. The asset

is recoverable if there were future suitable taxable profits from which the future reversal of the underlying temporary

differences can be deducted.

d) Temporary differences associated with Group investments

At 31 December 2011, no deferred tax liability (2010: nil) has been recognised in respect of taxes that would be payable on the

unremitted earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed profits of its

subsidiaries will not be distributed in the near future.

The temporary differences associated with investments in subsidiaries for which deferred tax has not been recognised

aggregated to £nil (2010: £nil) as a result of the application of legislation which largely exempts dividends from UK tax.

Dana Petroleum plc


30

e) Deferred taxation

Deferred tax included in the Group balance sheet is as follows:

Restated

2011 2010

£’000 £’000

Deferred tax liability

Accelerated capital allowances 670,847 494,182

PRT/NPI 14,923 8,184

Decommissioning (117,609) (71,104)

Other temporary differences 40,060 31,212

Tax losses (62,297) (79,192)

545,924 383,282

Deferred tax asset

PRT/NPI 21,096 12,978

21,096 12,978

The deferred tax included in the Group income statement is as follows:

Deferred tax in the income statement

Accelerated capital allowances 58,602 (42,386)

Share based payment - 6,859

Decommissioning (47,767) -

PRT/NPI (6,549) (5,150)

Other temporary differences (1,508) (4,974)

Tax losses 16,904 (251)

Deferred tax charge/(credit) 19,682 (45,902)

The following announcements were confirmed in the UK 2012 Budget and will apply with effect from 1 April 2012:

1) the rate of UK corporation tax (CT) for non UK oil and gas activities is to decrease by 2% to 24% with effect from 1 April

2012 (the CT rate for UK oil and gas activities remained at 30%). In accordance with the company’s accounting policy on the

recognition of deferred tax (note 2), the effect of this change has not been recognised in the accounts as it was not enacted, or

substantially enacted, at the balance sheet date. The estimated effect of this change on the Group is to decrease its deferred UK

corporation tax liability at 31 December 2011 by £802,000. In addition, it is the Government's intention to continue to reduce

the rate of CT for non UK oil and gas activities by 1% per year until it is reduced to 22% in 2014. The estimated effect of this

proposed additional rate changes on the Group is to decrease its deferred UK corporation tax liability at 31 December 2011 by

£1,604,000.

2) the rate of SCT decommissioning relief is to be restricted to 20% with effect from 1 April 2012. In accordance with the

company’s accounting policy on the recognition of deferred tax (note 2), the effect of this change has not been recognised in

the accounts as it was not enacted, or substantially enacted, at the balance sheet date. The estimated effect of this change on

the Group is to increase its deferred UK corporation tax liability at 31 December 2011 by £15,835,000.

Dana Petroleum plc


31

10 Dividends paid and proposed

Restated

2011

2010

£’000 £’000

Declared and paid during during the year:

Interim dividend current period 64,610

-

Declared and paid during the year by subsidiary company:

Interim dividend current period(1)

36,536 42,460

Total dividends paid in the year 101,146

42,460

Restated

2011

2010

Dividend per ordinary share: £

£

Dana Petroleum plc 532

-

Subsidiary Company 365,364

424,600

(1)

Prior to Korea Captain Company Limited transferring in to the Dana Petroleum plc Group on 1 October 2011, as explained

in note 28 c), a dividend was paid to the group’s ultimate parent company KNOC. As the functional currency of Korea

Captain Company Limited is USD the dividend was proposed and paid in USD (2011 $60,000,000 and 2010 $68,000,000).

All dividends proposed during the year and since the year end have been paid in full.

Dana Petroleum plc


32

11 Intangible assets

The movements during the year were as follows:

Goodwill

Exploration and

Evaluation Total

£’000 £’000 £’000

Cost and net book value:

At 1 January 2010 159,244 334,025 493,269

Transfers and reclassifications - (18,754) (18,754)

Exchange adjustments 11,594 2,478 14,072

Additions - 163,406 163,406

Disposals - (3,093) (3,093)

Acquisitions (note 28 b) 157,562 19,872 177,434

Unsuccessful exploration and evaluation - (82,677) (82,677)

At 31 December 2010 328,400 415,257 743,657

Transfers and reclassifications - (40,619) (40,619)

Exchange adjustments (4,052) (1,430) (5,482)

Additions - 146,756 146,756

Unsuccessful exploration and evaluation - (51,684) (51,684)

At 31 December 2011 324,348 468,280 792,628

Exploration and Evaluation

Additions to exploration and evaluation assets represent the ongoing execution of the underlying work programmes and the

fulfillment of individual licence requirements.

During the year, following completion of geotechnical evaluation activity, certain licences were either relinquished or are in

the process of being relinquished, and were declared unsuccessful. Accordingly the related licence expenditures were

expensed. During 2011, the principal exploration write-offs were UK – Whitethroat, Blackbird and P1373/P1374 blocks,

Norway – PL027D, Netherlands – Huygens and Van Galen and Egypt – South East July (2010: UK - Anne Maire and

Christian and Bligh, Norway – Jetta and Storkollen, Egypt – Ras Abu Darag).

Goodwill

Goodwill arising on acquisition in 2010 is described more fully in note 28 Acquisition of Subsidiaries.

The Group has four reportable segments – UK and Other Europe, Netherlands, Egypt and Other International. No goodwill has

been allocated to Other International and therefore UK and Other Europe, Netherlands and Egypt are used as cash generating

units for the purpose of assessing the carrying value of goodwill arising on business combinations on an annual basis as they

are currently the lowest level that goodwill is reviewed by the Board.

Carrying amount of goodwill of each cash generating unit

31 December 31 December

2011 2010

£’000 £’000

UK and Other Europe 101,176 103,030

Netherlands 160,751 164,899

Egypt 62,421 60,471

324,348 328,400

Dana Petroleum plc


33

Value in use: key assumptions

The recoverable amount of each cash generating unit (“CGU”) is determined by value in use calculations which measure the

net present value at the reporting date of the anticipated cash flow projections from each individual asset which comprise the

portfolio underpinning the CGU. Life of field cash flow projections are used for development and producing assets, applying

generally accepted market assumptions for commodity price and future inflation. For exploration assets a risked valuation is

used which combines an assessment of the expected chance of commercial success and likely development cost. Value

attributable to exploration from the Group’s extensive exploration portfolio, is derived from two sources; one, being the market

value of existing discoveries which have established the presence of hydrocarbons, but where further appraisal activity is

required, and the other, being the economic monetary value of the future drilling portfolio taking account of geological risking

less the expected pre-tax exploration cost; in both cases, using valuation multiples in line with precedent transactions.

The risk adjusted cash flows are then discounted at 12% (Note that Egypt assets are discounted at 8% as pre-tax and post-tax

cash flows are the same).

Review for Impairment

A detailed review of each CGU was performed at the end of the year.

The estimates of the headroom at 31 December 2011 are based on the recoverable amounts of the D&P and E&E assets and

carrying amounts at 31 December 2011. The headroom at 31 December 2011 is £2,774.0m for UK and Other Europe, £222.5m

for Netherlands and £36.2m for Egypt. No impairment charge is required.

The recoverable amounts calculations use pre-tax cash flow projections based on the Group's internal Board-approved five-

year business plans. The Group's business plans are based on past experience, and adjusted to reflect market trends, economic

conditions, key risks, the implementation of strategic objectives and changes in commodity prices, as appropriate. Commodity

prices used in the planning process are based, in part, on observable market data and in part on internal estimates.

Life of field production profiles were estimated for each individual asset within the Group development and production

portfolio by the technical management team.

Operating costs and capital costs were estimated using information from either the operator for non-operated assets or the

technical management team for operated assets.

Sensitivity to changes in assumptions

There are possible changes to the key assumptions above which might be considered reasonably likely and cause the carrying

value of the CGU to exceed its recoverable amount. These are discussed below:

UK and Other Europe

Given the extent of the headroom in the UK and Other Europe CGU, reasonably possible changes in the key assumptions

would not cause the recoverable amount of the goodwill to be equal or less than the carrying amount.

Netherlands and Egypt

Commodity price – the Board considered the possibility of lower than planned oil and gas prices. It is estimated that a

reduction in oil price of approximately 15% for the Egypt CGU and 70% for the Netherlands CGU would be required

before value in use, as defined above, was reduced to a value equal to its carrying amount.

Production volumes – the Board recognised that production profiles may be adjusted at each future reserves estimate

review. An “across-the-board” reduction of 13% for the Egypt CGU and 33% for the Netherlands CGU in production

would be required before value in use, as defined above, was reduced to a value equal to its carrying amount.

Exchange rates – the Board considered the possibility of a significant movement in exchange rates between GBP and local

functional currency. For the Egypt CGU, an exchange rate of $1.83/£1 would be required before value in use, as defined

above, was reduced to a value equal to its carrying amount. For the Netherlands CGU, the euro/GBP rate would have to

increase beyond what would be considered reasonably possible.

Dana Petroleum plc


34

12 Property, plant and equipment


Development and

Production assets Other Total

£’000 £’000 £’000

Cost:

At 1 January 2010 1,040,367 5,527 1,045,894

Transfers and reclassifications 18,754 - 18,754

Exchange adjustments - Restated 30,365 140 30,505

Additions - Restated 86,067 1,382 87,449

Acquisitions (note 28 b) 272,519 791 273,310

Disposals (243) - (243)

Acquired under business combination (note 28 c) 111,910 124 112,034

At 31 December 2010 Restated 1,559,739 7,964 1,567,703

Transfers and reclassifications 40,619 - 40,619

Exchange adjustments (1,958) 539 (1,419)

Additions 175,505 3,026 178,531

Acquisitions (note 28 a) 421,742 - 421,742

At 31 December 2011 2,195,647 11,529 2,207,176

Depletion and depreciation:

At 1 January 2010 434,708 3,708 438,416

Exchange adjustments - Restated 6,390 392 6,782

Impairment of Assets (note 5) 37,216 - 37,216

Provided in year (note 5) - Restated 137,048 1,254 138,302

At 31 December 2010 Restated 615,362 5,354 620,716

Exchange adjustments 1,568 (30) 1,538

Impairment of Assets (note 5) 2,374 - 2,374

Provided in year (note 5) 324,537 2,167 326,704

At 31 December 2011 943,841 7,491 951,332

Net book value

At 31 December 2011 1,251,806 4,038 1,255,844

At 31 December 2010 Restated 944,377 2,610 946,987

At 1 January 2010 605,659 1,819 607,478

A review of the field reserves for the development and producing assets indicated that an impairment review was required on

certain assets and as a result of this review, the depletion and depreciation charge for 2011 for development and production

assets, includes an amount of £2,374,000 in respect of impairment provisions for the UK Scott asset. A review of the field

reserves in 2010 for the development and producing assets also indicated that an impairment review was required on certain

assets and as a result of this review in 2010, the depletion and depreciation charge for development and producing assets,

included an amount of £37,216,000 in respect of an impairment provision for the Norway Jotun, Netherlands E18/F16 and the

Egypt East Beni Suef assets. The value in use calculations used to determine the recoverable value of the assets, is detailed in

note 11.

The net book value of development and production assets at 31 December 2011 includes an amount of £75,451,000 (2010:

£34,379,000) in respect of assets under the course of construction. No interest was capitalised in in relation to these assets.

Dana Petroleum plc


35

13 Investments

Summary

2011 2010

£’000 £’000

Investment in associate

73,330 55,291


16,844 16,858

90,174 72,149

Investment in associate

2011 2010

£’000 £’000

At 1 January

55,291 39,096

Additions

- 19,221

Share of estimated post-tax associate profit/(loss)(1)

5,818 (6,593)

Gain on deemed disposal (1)

- 4,399

Net asset movement recognised directly in equity

12,221 (832)

At 31 December

73,330 55,291

(1)

The aggregation of these two amounts represents the combined share of post tax profits/(losses) of the Associate which has

been recognised in the Group Income Statement.

The Group holds 22.63% (2010: 22.63%) of the ordinary share capital of the AIM listed company, Faroe Petroleum plc

(“Faroes”), whose nature of business is oil & gas exploration & production. In May 2010, the Company took up its rights in

relation to the Faroe Petroleum Rights Issue at a total cost of £19,221,000, this had no effect on the Company’s equity interest.

In November 2010, Faroe Petroleum issued further shares through a placing which the Company did not participate in. The

Company’s equity interest share was reduced from 27.53% to 22.63%.

The following table provides further analysis of the Group’s investment in Faroes:

2011 2010

£’000 £’000

Share of the associate's balance sheet

Non-current assets 69,165 46,485

Current assets 30,557 28,118

Non-current liabilities (16,404) (10,385)

Current liabilities (9,988) (8,927)

Share of net assets 73,330 55,291

Share of associate's results

Revenue 9,076 3,671

Profit/(Loss) for the year 8,777 (6,593)

The fair value of the Group’s share of the associate based on Faroes’ share price at 31 December 2011 is £74,486,529

(2010: £86,500,485).

Based on both independent research and the Group’s own assessment of the value in use of Faroes, no impairment was

considered necessary.

Dana Petroleum plc


36


2011 2010

£’000 £’000

At 1 January 16,858 11,299

Foreign exchange (398) 1,228

Fair value adjustments 384 4,331

At 31 December 16,844 16,858

As a result of the Bow Valley acquisition in 2009, the Group acquired an investment in third party non-bank sponsored asset

backed papers (‘ABCP’) with a face value of C$40,340,000. These notes should have been repaid prior to the Group’s

acquisition of Bow Valley, however, they were not repaid due to liquidity issues experienced in the Canadian ABCP market.

As a consequence, these notes were restructured and were replaced with new longer term floating rate notes. Under the

restructuring the Group now owns Class A, Class B and Class C notes. On acquisition, no reliable quoted market values for

ABCP investments were available due to the current market disruption and as a result, the Group determined the fair value of

its ABCP investment on acquisition to be £9,448,000 using available information regarding the proposed ABCP restructuring,

market conditions and other factors. These values represented an indicative value of the underlying assets in a liquidation

scenario at that date. During 2011 the liquidity in the market for the notes had greatly increased during the first half of the

year, however during late 2011 there was a fall in the market price which resulted in an overall very small movement in the fair

value during the year. The Group has received indicative trading valuations and has increased the fair value of the notes as a

result to C$26,657,000, which is a discount of 34% of the face value of the notes.

14 Inventories

2011 2010

£’000 £’000

Materials and equipment 25,155 13,276

15 Trade and other receivables

Restated

2011 2010

£’000 £’000

Trade receivables (note 22) 83,092 102,173

Other receivables and prepayments 191,679 56,448

274,771 158,621

Restated

2011 2010

£’000 £’000

Ageing analysis of trade receivables

- within 30 days 47,028 78,811

- 31 to 60 days 8,891 7,122

- greater than 61 days (past due but not impaired) 27,173 16,240

83,092 102,173

No bad debts exist at the year end (2010: £nil).

Dana Petroleum plc


37

16 Cash and cash equivalents

Restated

2011 2010

£’000 £’000

Cash at bank and in hand 41,692 56,750

Short-term deposits 166,786 85,014

208,478 141,764

Cash at bank earns interest at floating rates based on a discount to USD/GBP LIBOR. Short-term deposits are made for

varying periods of between one day and three months depending on the future cash requirements of the Group, and earn

interest at the respective short-term fixed deposit rates. The fair value of cash and cash equivalents is £208,478,000 (2010

Restated: £141,764,000).

17 Trade and other payables

Restated

a) Current liabilities

2011 2010

£’000 £’000

Trade payables 22,352 51,465

Accruals and other payables 171,626 123,227

193,978 174,692

b) Non-current liabilities

2011 2010

£’000 £’000

Future asset acquisition payments and deferred income 3,434 3,431

18 Current tax

Restated

2011 2010

£’000 £’000

PRT/NPI 4,545 1,650

Corporation tax 72,102 65,744

76,647 67,394

Dana Petroleum plc


38

19 Borrowings and financial liabilities

2011 2010

£’000 £’000

Bank loan 114,757 337,128

a) The maturity of the borrowing liabilities disclosed above is as follows:

Amounts falling due

2011 2010

£’000 £’000 - in more than two years but not more than five years

114,757 337,128

b) At 31 December 2011 there were borrowings of £114,757,000 under the Group’s facility agreement (2010: £337,128,000)

and Letter of Credit utilisation of £6,378,000 (2010: £nil).

At 31 December 2011, the Group held a USD 870 million facility with a syndicate of bank, comprising a USD 178 million

term loan and a USD 692 million revolving credit facility. This facility was secured by fixing and floating charges over the

assets of the parent company and the shares and assets of its principal subsidiary undertakings. Interest is currently chargeable

at LIBOR, NIBOR or EURIBOR plus a margin of 1.75-2.25% depending on the amounts and currency drawn.

This facility was secured in March 2011, amending and replacing the existing facility fronted by Royal Bank of Canada (RBC)

which was secured during 2010. As a result of the acquisition by KNOC during 2010 the option to exit the facility was taken

by some of the lenders that formed part of the syndicate with RBC, this formed the reason for an amended facility to be entered

in to. The amended facility is fronted by BNP Paribas.

Dana Petroleum plc


39

20 Convertible bonds

In July 2007, the Group issued £141,500,000 of Guaranteed convertible bonds due in 2014. The bonds had a conversion

premium of 50%, representing a conversion price of £16.45 per Dana share, with a coupon of 2.9% payable semi-annually.

The bonds had a seven year term and included an investor put on the fifth anniversary of the issue date. At the initial

conversion price of £16.45 per share, there were 8,601,824 ordinary shares of the Company underlying the bonds.

As part of the take over by KNOC all of the bonds were acquired from the bond holders. In November 2010, KNOC elected to

convert the bonds into equity, and all of the bonds were converted into redeemable preference shares in Dana Petroleum

(Jersey) Limited. These preference shares were immediately exchanged for new ordinary shares issued by the Company. In

September 2011, Dana Petroleum (Jersey) Limited redeemed their preference shares in full.

£’000

Total liability component as at 1 January 2010 121,838

Interest charged (note 7) 23,765

Interest paid (4,104)

Conversion of bonds (141,499)

Total liability component as at 31 December 2010 -

Interest charged (note 7) -

Interest paid -

Conversion of bonds -

Total liability component as at 31 December 2011 -

The interest up to the date of conversion was calculated by applying an effective interest rate of 6.60% to the liability

component for the period since the bonds were issued. A further interest charge of £16,305,000 was recognized in 2010 as a

result of the conversion.

21 Provisions for liabilities and charges

Decommissioning provision

£’000

At 1 January 2011 Restated 227,222

New provisions and changes in estimates 45,036

Acquisitions (note 28a) 150,678

Unwinding of discount (note 7) 22,805

Exchange adjustments (2,751)

Expenditure incurred (3,200)

At 31 December 2011 439,790

The decommissioning provision of £439,790,000 relates primarily to the Group’s production and development facilities.

These costs are expected to be incurred at various intervals over the next 22 years. The provision has been estimated using

existing technology at current prices, escalated at 2.5%, and discounted at 7%. The economic life and the timing of the

decommissioning liabilities are dependent on Government legislation, commodity price and the future production profiles of

the respective production and development facilities. In addition, the costs of decommissioning are subject to

inflationary/deflationary pressures in the cost of third party service provision.

Dana Petroleum plc


40

22 Financial instruments

An outline of the objectives, policies and strategies pursued by the Group in relation to financial instruments is set out in the

Directors Report and in note 2 of this report.

Nature and extent of risk associated with financial instruments

Market risk

As an upstream oil & gas company, the Company is subject to many risks, at both the macro and micro level, including

currency, interest and credit risk, arising in the normal course of the Group’s business. The Directors’ Report describes these

risks in more detail, but also provides the Company’s view of the principal risks facing the Company that potentially have a

medium to high impact on the Company. In particular, this highlights a number of risks which have emerged as a result of the

deterioration of the global economy into recession and the liquidity and credit crises in the world banking markets. Risks such

as inability to finance work programmes, or potential default of co-venturers and suppliers are all now higher profile risks

facing the sector and the Company. During 2011, the Company signed an amendment to their existing bank facility (which

was secured in 2010) securing bank funding for the next four to five years and continues to generally partner with larger, well-

established upstream companies, so believes it has substantially mitigated these risks.

The Group has a geographically diverse portfolio of assets and remained unhedged at the year end with respect to interest rates

and currency fluctuations. However, due to the increase in oil prices at the beginning of 2011, oil swap agreements were

entered into and hedge accounting has been applied. In 2011 production of 5,460,000 bbls was hedged for 2011 and 4,900,000

bbls was hedged for 2012. No further agreements have been entered into for 2013. Specific financial instrument risks are

therefore deemed to be of low probability in nature and of low impact in quantum relative to the macro risks highlighted

above. It is against this backdrop and context that the following disclosure on the nature and extent of risks from financial

instruments is provided.

Financial assets and liabilities: credit risk

The financial assets of the Group are subject to floating charges provided to the debt provider for the new debt facility secured

during the year (note 19). As such the financial assets are subject to certain terms and conditions (further explained below)

which help preserve the credit worthiness of the assets to the debt providers.


Unless agreed otherwise, all such cash and short term investments must be maintained with institutions party to the debt

facility. Short term investments comprise time deposits and money market funds.

Trade and other receivables

The Group’s exposure to credit risk in trade receivables is minimal. The Group does not have a trading arm, but sells produced

hydrocarbons only to recognised and creditworthy parties, typically the trading arm of large, international oil & gas companies.

European crudes sales are primarily sold under an annual contract at agreed premia or discounts to Brent, depending upon

crude quality. Sales are typically generated on a monthly entitlement basis rather than “crude liftings” to facilitate regular

cashflow.

Sales of gas are either sold under long-term contracts with built-in escalation mechanisms or under annual contracts at “day

ahead” pricing.

European credit terms normally require settlement within 15 days of invoicing and accordingly impairment exposure is

minimal, a fact supported by track record.

In recent years, the ageing profile of trade and other receivables has been extended due to the operations in Egypt. Egyptian

crude is sold predominantly to government organisations but also to large international trading companies. Country practice is

for much extended credit terms of up to 120 days, but particularly with the government organisations there is also an

established practice of “offsetting” liabilities due to the counterparty, which facilitates the management of such receivables.

Management of this extended credit exposure is one of the key objectives of the Egyptian business unit management team.

Also in Egypt, the Group’s operations in the East Zeit field, provides infrastructure access and logistics support services to

third parties operating in the same locale. These other receivables occasionally prove problematic to collect and require active

pursuit by management. Past practice would also indicate that any impairment exposure is not material in the context of the

Egyptian business.

Dana Petroleum plc


41

As of 10 April 2012 78% of receivables outstanding at the year end have been collected.

An ageing analysis of trade receivables is disclosed in note 15.

The maximum credit risk exposure relating to financial assets and liabilities is represented by their carrying value as at the

balance sheet date as set out in the summary table at the end of this note.

Financial assets and liabilities: Liquidity risk

The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due.

This is a core management activity and is regularly reviewed by Directors. Operational, capital and regulatory requirements

are amongst the matters considered in the management of liquidity risk, in conjunction with the Group’s short and long-term

forecast information. In addition, and as part of the information undertakings under the debt facilities, the Group has to

demonstrate covenant compliance at six monthly intervals including projected compliance for a further 3 year rolling period.


As at 31 December 2011, the Group had cash and cash equivalents of £208,478,000 (2010 Restated: £141,764,000).

Borrowings and financial liabilities

The Group’s interests are predominantly non-operated in nature and payments to suppliers occur only after goods and or

services have been received. For operated activity, material or long-term contracts will generally only be awarded after a

tender process, where supplier creditworthiness will be evaluated. Also, where a drilling management contractor has been

engaged, specific contractual arrangements have been put in place to govern and control the disbursement of funds by the

intermediary.

During the year, the financing for the Group’s on-going corporate requirements was provided by a syndicated loan facility

initially fronted by Royal Bank of Canada. At the start of the year, the available credit was USD 680 million however,

effective 18 March 2011, two new banks joined an amended Bank facility syndicate increasing the total facility to USD 870

million. The revised facility syndicate is now fronted by BNP Paribas (BNP) and comprises a four year term loan of USD 178

million and a five year USD 692 million revolving credit facility.

The Group continued to service the coupon on the 2014 Guaranteed Convertible Bond until November 2010 when the Bond

was fully converted for shares by KNOC (note 20).

An analysis of the maturity profile of the Group’s borrowing financial liabilities is shown in note 19(a) and details of the

underlying facilities are detailed in note 19(b). The undiscounted cash flows associated with the maturity profile of non-

current borrowings and financial liabilities is noted on the following table

2011 2010

£’000 £’000 Amounts falling due

- in one year or less or on demand

3,506 8,940 - in more than one year but not more than two years

3,180 8,940 - in more than two years but not more than five years

117,222 359,411

123,908 377,291

Dana Petroleum plc


42

Financial assets and liabilities: Interest rate risk

Details of the Group’s interest rate risk profile on financial assets and liabilities is set out below.

Until conversion in 2010, the fixed rate and competitive nature of the Convertible debt coupon of 2.9% per annum, provided

excellent protection against the risk of changes in market interest rates and complemented the variable interest rate applicable

to the Bank debt. USD and GBP LIBOR , EURIBOR and NIBOR rates underpin the Bank debt and remain low as

governments continue to use interest rates to fight recessionary pressures. Accordingly in 2011, the Group continued to enjoy

an extremely low cost of finance and profits provided adequate interest cover.

Financial assets

Fixed rate

financial assets <

1 Year

Floating rate

financial assets <

1 Year Total

£’000 £’000 £’000

2011

Cash and cash equivalents 166,786 41,692 208,478

2010 Restated

Cash and cash equivalents 85,014 56,750 141,764

Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise cash at bank and other

short-term deposits and liquid investments that are readily convertible to a known amount of cash and which are subject to an

insignificant risk of change in value.

At 31 December 2011, short-term deposits and liquid investments were earning interest at a weighted average fixed deposit

rate of 0.46% (2010 Restated: 0.39%). Cash at bank earns interest at floating rates based on a discount to USD and GBP

LIBOR, EURIBOR and NIBOR.

Financial liabilities

Fixed rate

financial liabilities

> 1 Year

Floating rate

financial liabilities

> 1 Year Total

£’000 £’000 £’000

2011

Bank Loan - 114,757 114,757

2010

Bank Loan - 337,128 337,128

The fixed rate liability in the prior year related to the convertible bonds issued which bore an interest coupon of 2.9% per

annum until the maturity of the bonds in 2014 or on the exercise of the investor put on the fifth anniversary of the issue date

(July 2012). As detailed in note 20 the convertible bonds were converted in full during 2010.

The other financial instruments of the Group that are not included in the above tables are non-interest bearing and are therefore

not subject to interest rate risk.

The Group’s earnings are sensitive to changes in interest rates on its financial liabilities. If the interest rates for the year were

to have changed by +/- 1% in 2011, with all other variables held constant, it is estimated that the Group’s profit before tax for

2011 would have increased by £1,446,000/decreased by £1,446,000 (2010: increased by £8,640,000/decreased £6,875,000).

There would be no impact on equity.

Dana Petroleum plc


43

Financial assets and liabilities: Currency risk

The predominant functional currency within the Group is sterling but due to the Group’s USD denominated oil production

revenue and USD denominated debt facility, the Group does remain exposed to fluctuations in the USD currency, the primary

area of currency risk. The group takes the view that such exposures are not so significant that they are required to hedge

against the currency risk by using financial instruments.

Whilst this approach may give rise to currency exchange gains and losses, given the historic inverse correlation between

movements in the price of oil and movements in the USD, the risk is in effect largely offset by corresponding gains and losses

in the value of the unhedged crude oil sales.

Egyptian activities are undertaken by USD reporting entities given that this is the main currency of the underlying operations,

with only a relatively minor exposure to Egyptian pounds. This creates exposure to currency translation risks which is

mitigated by the USD bank debt drawn by the UK subsidiary which acquired these entities. Once again this may give rise to

currency gains and losses, but these will be offset by corresponding gains and losses in the underlying financial results of the

Egyptian subsidiaries.

Dana Petroleum Norway AS has a functional currency of NOK, the predominant source currency of the Company’s cost base.

Revenues, being generated from crude sales are however, USD denominated.

Dana Petroleum Netherlands B.V. has a functional currency of Euro, the predominant source currency of the Company’s cost

base. Revenues, being generated from crude sales are however, USD denominated. Due to the size of operations of

Netherlands B.V. the Group has become exposed to fluctuations in the Euro currency, and it is therefore another primary area

of currency risk faced by the Group. Again, such exposures can be hedged against using financial instruments but the Group

takes the view that this risk is not so significant that a financial instrument would be required.

In cash terms the Group is short GBP, Euro and NOK, and long USD. The Group is however, able to make deposits of USD,

on a dual or tri-currency basis, where in return for pre-agreed exchange rates, and interest yields significantly ahead of vanilla

USD deposit rates, the Group grants the counterparty the right to return the original deposit, in the nominated currency of their

choice, namely USD, GBP NOK or Euro. Using this mechanism the Group has been able to achieve deposit yields much

higher than those available on vanilla USD deposits.

The following table demonstrates the sensitivity to a reasonably possible change in the USD and Euro exchange rates, with all

other variables held constant, on the Group’s profit before tax and the Group’s equity.

Increase/decrease

in exchange rate

Effect on profit

before tax Effect on equity

£’000 £’000 £’000

2011 (+ or -) 10% 3,331 -

2010 Restated (+ or -) 10% 15,858 -

Details of the Group’s current exposure to USD in its financial assets and liabilities, is set out in the following summary table.

Fair values of financial assets and financial liabilities: Summary

Set out below is a comparison by category of carrying amounts and foreign currency exposure of all of the Group’s financial

assets and liabilities as at 31 December. The fair values of the financial assets and liabilities generally approximate to the

carrying values.

Dana Petroleum plc


44

2011

Source

Currency

Cash and

receivables

Available-for-

sale financial

Assets

Held at fair

value through

profit or loss

Other financial

assets and

liabilities at

amortised cost

£’000 £’000 £’000 £’000

Financial assets

Cash and cash equivalents GBP/Other

105,194 - - -

USD

100,396 - - -

Euro

2,888 - - -

208,478 - - -

Available-for-sale financial assets GBP/Other

- 16,844 - -

- 16,844 - -

Trade receivables GBP/Other

169 - - -

USD

74,751 - - -

Euro

8,172 - - -

83,092 - - -

Derivative financial instruments USD

- - 25,304 -

- - 25,304 -


Trade and other payables(1)

GBP/Other - - - 89,324

USD

- - - 83,841

Euro

- - - 24,246

- - - 197,411

Bank loan USD

- - - 114,757

- - - 114,757

2010 Restated

Financial assets

Cash and cash equivalents GBP/Other

45,401 - - -

USD

92,996 - - -

Euro

3,367 - - -

141,764 - - -

Available-for-sale financial assets GBP/Other

- 16,858 - -

- 16,858 - -

Trade receivables GBP/Other

3,621 - - -

USD

86,843 - - -

Euro

11,709 - - -

102,173 - - -


Trade and other payables(1)

GBP/Other - - - 114,408

USD

- - - 39,038

Euro

- - - 24,677

- - - 178,123

Bank loan GBP/Other

- - - 31,485

USD

- - - 284,222

Euro

- - - 21,421

- - - 337,128

(1) Current and non-current

The assets and liabilities noted above, which are measured at fair value use level 1 inputs (quoted prices (unadjusted) in active

markets for identical assets and liabilities) as the source in determining their fair value as at 31 December 2011 and 2010.

Dana Petroleum plc


45

The following significant exchange rates were applied during the reporting periods:

Average rate Year end spot rate

2011 2010 2011 2010

£ £ £ £

USD 1.6037 1.5456 1.5541 1.5657

NOK 8.9853 9.3401 9.2748 9.1003

EUR 1.1525 1.1791 1.1972 1.1671

LE 9.5099 8.6824 9.3246 9.0497

The fair value of the available-for-sale financial assets is detailed in note 13.

23 Derivative financial instruments

The Group is exposed to the impact of changes in oil prices on its revenues and profits generated from sales of crude oil. The

Group hedged this risk in the year ending 31 December 2011. The objective of the hedge instruments is to hedge the risk

related to changes in the cash flows from the sale of produced volumes of crude oil. In 2011 the Group entered into various

fixed price for floating swaps of Platt's Brent to hedge cash flows from highly probable anticipated sales of crude oil in that

period. There were no hedging agreements entered into in 2010.

The effectiveness of the hedging relationship is tested prospectively and retrospectively.

At 31 December 2011 the Group had 5.46 million barrels of Dated Brent oil hedges at an average price of $113.20 per bbl

settling on a quarterly basis. At 31 December 2011 the Group's oil hedge position was

Current Assets Current Liabilities

2011 2010 2011 2010

£’000 £’000 £’000 £’000

Cash flow hedges 25,304 - - -

The changes in the fair value of hedges which are required to be recognised immediately in the income statement for the year

were:

2011 2010

£’000 £’000

Loss on hedging instruments:

Cash flow hedges 49,117 -

Dana Petroleum plc


46

24 Called-up share capital

Number of 15p

Ordinary

'000' £’000

Authorised ordinary shares

At 1 January 2011 and at 31 December 2011 160,000 24,000

Number of 15p

Ordinary

'000' £’000

Allotted, called up and fully paid ordinary shares

At 1 January 2010 92,006 13,801

Issued and fully paid for share option scheme exercises 2,235 335

Issued for Convertible Bond 11,124 1,669

At 31 December 2010 105,365 15,805

Issued and fully paid 17,466 2,620

At 31 December 2011 122,831 18,425

In January 2011 a capital injection of USD 500 million (£314,387,000) was received from KNOC. In return for this capital

injection 17,465,906 ordinary shares of 15p each were issued to KNOC.

On 1 October 2011 2 ordinary shares were issued to KNOC in exchange for the investment in their subsidiary company Korea

Captain Company Limited, as explained in note 28 c).

During the year a total of nil (2010: 2,234,868) ordinary shares of 15p each were issued to various Directors and employees,

pursuant to the exercise of share options and the maturity of share save scheme awards.

When the Convertible Bonds (‘Bonds’) were issued in 2007 by Dana Petroleum (Jersey) Limited, a wholly owned subsidiary,

the Group provided an unconditional and irrevocable guarantee, the details of which are contained in note 20. In accordance

with the terms and conditions of the conversion of the bond, preference shares were issued by the issuer and then immediately

exchanged for ordinary shares in the Company as guarantor. During 2010, 11,124,123 ordinary shares of 15p each were issued

relating to the Convertible bonds.

At 31 December 2011 the issued share capital of the Group was represented by 122,830,669 ordinary shares of 15p each

(2010: 105,364,761).

Dana Petroleum plc


47

Capital Structure

The Group’s management remains committed to delivering and enhancing shareholder value, and building upon the progress

made during recent years. The Board continues to believe that this can best be achieved by investing in the existing asset

portfolio and through the acquisition of new commercial opportunities as they arise, in light of the Group’s ongoing

commitment to an extensive forward work programme and the continuing tight market conditions.

The Group seeks to optimise the return on investment, by managing the capital structure to achieve capital efficiency via the

appropriate level of access to the debt markets at attractive cost levels. Notes 19 and 20 to the financial statements provide

further details of the Group’s financing activity.

Capital for the Group is equity attributable to the equity holders of the Parent company, and is detailed in the Group Statement

of Changes in Equity.

Restated

2011 2010

£'000 £'000

Borrowings and financial liabilities 114,757 337,128

Less Cash and cash equivalents (208,478) (141,764)

Net (funds)/debt (93,721) 195,364

Capital 1,318,920 896,283

Gearing ratio -7% 22%

25 Share-based payments

Prior to the takeover of the group by KNOC in 2010, Dana Group had various equity settled and cash settled share based

payments in place as an incentive to certain key management and staff. As at the date of change of control, all share based

payment scheme options vested and after the options were exercised, the schemes were wound up. The weighted average

share price at exercise for all schemes was £18.00.

The 2006 Long-Term Incentive Plan

These awards were due to vest three years from the exercise date, which ranged from 2010 to 2013. On change of control, all

remaining awards under this scheme vested and the options were exercised at £18.00. The number of LTIP’s granted in 2011

were nil (2010: 1,421,173).

The LTIP was an “equity settled” share based payment arrangement. The Company recognised a total expense during the year

of £nil (2010:£8,069,000).

The Share Option Scheme

The Dana Petroleum 1999 Share Option Scheme was closed to new awards in December 2004. As at 1 January 2010, 735,892

shares were exercisable under the scheme with an average exercise price of £4.14. All of these options were exercised in 2010

(a few individuals chose to net settle) and the scheme was wound up in 2010.

The Share Save Scheme

The Share Save Scheme was in place prior to the Share Incentive Plan noted below and was eligible to all employees,

excluding the Executive Directors. Options were granted over Company shares at a discount of up to 20% to the market value

on the date of grant, which subject to the satisfaction of conditions could be exercised after either three or five years. The final

awards vested in March 2010 (6,926 shares were issued on exercise at an exercise price of £3.34) and the scheme was wound

up in 2010.

The Share Incentive Plan

The Dana Petroleum plc Share Incentive Plan consists of Partnership Shares which are ordinary shares of the Company

purchased by the Executive Directors and employees, and matching and free shares which are ordinary shares which are

released on the third anniversary of their date of award, subject to continued employment and in the case of Matching Shares

also to the retention of the associated Partnership shares. Due to the change of control in 2010 all 38,317 shares were released

to the employees and Executive Directors.

Dana Petroleum plc


48

The Share Option Scheme, Share Save Scheme and Share Incentive Plans were considered to be “equity-settled” transactions,

and for all awards post 7 November 2002, require to be fair valued at the date of award. Based on the results of this actuarial

review, the Share Save Scheme and Share Incentive Plans were demonstrated to be immaterial and accordingly the

requirements of IFRS 2 – Share Based Payment, were not applied to these arrangements.

The “Phantom” Option Scheme

Prior to the introduction of the LTIP, senior managers (excluding Directors), participated in this arrangement, which mirrored

the terms and conditionality of the Share Option Scheme, except that on exercise they were “cash-settled” transactions. As

such, these transactions also required to be fair valued, at each reporting date using the Company’s share price, with changes in

value recognized in the income statement. All awards were fully vested at the beginning of the prior year (1 January 2010) and

the 280,000 options existing at the beginning of the prior year (1 January 2010) were exercised, at a weighted average exercise

price of £5.325, during 2010 and the scheme was wound up in 2010.

Deferred Share Payments A and B

The deferred share awards to Mr T P Cross formerly a director of the Company, were due to vest on 26 September 2011 or

upon termination of the employment contract of Mr T P Cross. Upon acquisition by KNOC in 2010 the 297,310 shares which

were awarded to Mr T P Cross vested at £18.00 per share.

The carrying amount of the liability relating to the cash-settled options at 31 December 2011 is £nil (2010: £nil). The net

expense recognised for the share based payments above in respect of employee services during the year to 31 December 2011

is £nil (2010: £9,781,000). The portion of that expense arising from equity-settled share based payment transactions is £nil

(2010: £8,631,000).

26 Reconciliation of movements in equity

The reconciliation of movements in equity is detailed in the Group Statement of Changes in Equity on page 13. The following

is a description of the nature and purpose of each reserve:

Share capital

The balance classified as share capital is the nominal value on issue of the Group’s equity share capital, comprising

15p ordinary shares.

Share premium

The balance classified as share premium is the premium on issue of the Group’s equity share capital, comprising 15p ordinary

shares less any costs of issuing the shares.

Cumulative translation reserve

The cumulative translation reserve is used to record exchange differences arising from the translation of the financial

statements of foreign subsidiaries.

Other reserves

Other reserves records the fair value changes on available-for-sale financial assets, reserves relating to the Group’s transition to

a UK listing from an Irish listing in 1997, and the equity component of the convertible bond issue (see note 20) until it was

transferred to retained earnings in 2011.

In addition other reserves records the excess value of the assets and liabilities acquired in KCCL in exchange for the two shares

issued to KNOC. This also includes the Capital Redemption Reserve of KCCL which is not distributable by the Group.

Cash flow hedging reserve

The cash flow hedging reserve comprises fair value movements on instruments designated as cash flow hedges under the

requirements of IAS 39. Note 23 provides further details on cash flow hedging.

Dana Petroleum plc


49

27 Net cash flows from operating activities

Restated

2011 2010

£’000 £’000

Profit/(Loss) for the Financial Year 182,501 (5,436)

Depreciation 326,704 138,302

Asset Impairments 2,374 37,216

Interest Income (1,792) (525)

Interest Expense 26,195 38,547

Finance Fees 4,321 14,140

Taxation 262,075 45,503

Egypt tax-in-kind (20,987) (8,763)

Employee share scheme charge - 8,631

Exchange difference 7,756 (330)

Net exploration and evaluation 49,138 84,881

Release of abandonment provision on disposal of asset - (323)

Loss on disposal of asset - 272

Fair value movement in derivatives 49,117 -

Share of (profit)/loss in associate (5,818) 2,194

Negative goodwill (54,824) -

Movements in working capital:

Inventory movement (11,879) 2,364

Receivables movement (115,634) (32,786)

Payables movement 15,176 35,727

Cash Generated from Operating Activities 714,423 359,614

Dana Petroleum plc


50

28 Acquisitions

a) Petro Canada UK Limited (Petro Canada UK)

On 31 March 2011, the Group completed the acquisition of the assets of the Triton Area and Scott assets from Petro Canada

UK Limited (“Petro Canada UK”), a wholly owned subsidiary of Suncor Energy Inc. (“Suncor”) for a net cash consideration of

£90,438,000. The cash consideration was then adjusted for various working capital balances.

The acquisition of Petro Canada UK is directly in line with the Group’s successful strategy of growing reserves and production

in its core operating areas through both exploration and acquisition. The acquisition has provided significant growth for Dana

and a complementary asset base in the North Sea, bringing further operated assets and two new non-operated interests to

Dana’s producing fields. These assets comprise the operated fields, Guillemot West, Guillemot Northwest, Clapham, Pict and

Saxon and the non-operated interest in the Scott and Bittern fields. Along with the additional assets the acquisition brought an

additional seven employees into the Group.

The transaction has been accounted for by the purchase method of accounting with an effective date of 31 March 2011, being

the completion date of the acquisition. The Group has consolidated the results of the Petro Canada UK assets from the date of

acquisition.

The fair value allocation to the identifiable assets and liabilities is detailed below. To the extent that the aggregate fair value of

the identifiable assets and liabilities exceeds the purchase consideration of the Petro Canada UK assets, the negative goodwill

on the acquisition has been recognised and recorded in the Income Statement for the year.

Acquisition Book

Value

Acquisition Fair

Value

£’000 £’000

Property, plant and equipment

90,438 421,742

Current assets (excluding cash and cash equivalents)

3,409 3,409


(8,978) (8,978)

Deferred tax provision

- (120,233)

Provision for liabilities and charges

- (150,678)

Net Assets

84,869 145,262

Goodwill arising on acquisition

(54,824)

Total consideration satisfied by cash(1)

90,438

Net cash outflow arising on acquisition

Cash and cash equivalents acquired

-

Cash paid

90,438

90,438

(1)

This includes acquisition costs of £5,446,000. These acquisition costs have been recognised as an expense within

administrative expenses in the Group Income Statement.

The Petro Canada UK assets contributed revenue of £144,044,000 and a profit of £27,576,000 for the year to the results of the

Group, excluding the negative goodwill recognised in the Income Statement. If the combination had taken place on the first

day of the year the Group’s revenue from operations would have increased to £1,112,899,000.

Dana Petroleum plc


51

b) Petro Canada Netherlands B.V. (Petro Canada Netherlands)

On 13 August 2010, the Group completed the acquisition of the entire share capital of Petro Canada Netherlands B.V., from

Petro Canada (International Holdings) B.V., a wholly owned subsidiary of Suncor Energy Inc, a Toronto Stock Exchange-

listed oil and gas exploration and production group of companies.

The acquisition of Petro Canada Netherlands is directly in line with the Group’s successful strategy of growing reserves and

production in its core operating areas through both exploration and acquisition. The acquisition has provided significant

growth for Dana and a complementary asset base in the North Sea, bringing a further 15 new offshore fields and 3 new onshore

fields to Dana’s number of producing fields. Along with the additional assets the acquisition brings an experienced Dutch

management team, with significant regional North Sea operating experience, based in the Hague, into the Group. These

factors support the goodwill arising on acquisition.

The transaction has been accounted for by the purchase method of accounting with an effective date of 13 August 2010, being

the completion date of the acquisition. The Group has consolidated the results of Petro Canada Netherlands from the date of

acquisition.

The fair value allocation to the identifiable assets and liabilities is detailed below. To the extent that the purchase consideration

exceeds the aggregate of the fair value of the identifiable assets and liabilities of Petro Canada Netherlands, then goodwill has

been recognised and recorded on the acquisition.

Acquisition Book

Value

Acquisition Fair

Value

£’000 £’000

Intangible exploration and evaluation assets

19,872 19,872


288,173 273,310

Investments

9 9


29,221 29,575


(24,881) (28,771)


(134,972) (124,229)


(61,063) (66,550)

Net Assets

116,359 103,216

Goodwill arising on acquisition

157,562

Total consideration satisfied by cash(1)

260,778

Net cash outflow arising on acquisition


-

Cash paid

260,778

260,778

(1)

This includes acquisition costs of £2,319,000. These acquisition costs have been recognised as an expense within

administrative expenses in the Group Income Statement.

Petro Canada Netherlands contributed revenue of £62,710,000 and a profit of £5,036,000 for the year to the results of the

Group in 2010. If the combination had taken place on the first day of the year in 2010, the Group’s loss in 2010 attributable to

the equity holders of the Company from operations would have decreased, and instead would have recognised a profit of

£16,819,000 restated and Group revenue from operations in 2010 would have increased to £724,806,000 restated.

Dana Petroleum plc


52

c) Korea Captain Company Limited (KCCL)

On 1 October 2011, the Group acquired the entire share capital of Korea Captain Company Limited (KCCL) from the ultimate

parent of the Group, KNOC. Prior to KNOC purchasing the Dana Group, KNOC had an interest in the Chevron operated Captain field in the North Sea

through its 100% subsidiary KCCL. Following the acquisition of the Dana Group, KNOC performed a review of its group

structure and decided to transfer KCCL to Dana Petroleum plc in a share for share transaction resulting in all North Sea

producing assets being managed by the Dana Group. 100% of the shares in KCCL were acquired in exchange for the issuance

of two shares in the Company. The transaction fell within the scope exemption from IFRS3 R for common control business combinations and has been

accounted for by the pooling of interests method of accounting. The assets and liabilities of KCCL have been included at their

previous pre-combination carrying amounts. No goodwill has been recognised as a result of the combination, the difference

between the consideration paid/transferred and the net assets of KCCL has been reflected in share premium and other reserves. The Group has consolidated the results of KCCL from 1 October 2010, being the date that both entities were under common

control. This has resulted in the comparative figures in the Group Income Statement, the Group Statement of Comprehensive

Income, the Group Statement of Changes in Equity and the Group Cash Flow statement being restated to include KCCL for the

three month period to 31 December 2010. The comparatives in the Group Balance Sheet consolidate the KCCL Balance Sheet

at 31 December 2010.

The book value of the identifiable assets and liabilities acquired on the deemed business combination date (1 October 2010) is

detailed below.

Business

Combination Book

Value

£’000


112,034


11,852

Cash and Cash equivalents

70,196


(19,588)


(22,027)


(41,639)

Net Assets

110,828

Excess of assets acquired over consideration paid - taken to equity

110,828

Total consideration satisfied by cash

-

Net cash outflow arising on business combination


70,196

Cash paid

-

70,196

Dana Petroleum plc


53

The following table sets out the impact of consolidating KCCL from 1 October 2010 on the prior year financial statements.

Per 2010 Financial

Statements as

previously reported

Profits of KCCL for

the period 1 October

2010 to 31 December

2010

Restated 2010

Financial Statements

£’000 £’000 £’000

Group Income Statement

Revenue 598,272 26,138 624,410

Cost of Sales (377,221) (9,519) (386,740)

Administrative Expense (58,325) (371) (58,696)

Foreign Exchange 482 (152) 330

Interest Income 475 50 525

Finance Costs (52,429) (258) (52,687)

Taxation (38,191) (7,312) (45,503)

Group Statement of Comprehensive Income

Loss for the Financial Year (14,012) 8,576 (5,436)

Currency Translation Adjustment 20,877 24 20,901

Per 2010 Financial

Statements as

previously reported

KCCL Balance Sheet

Position at 31

December 2010

Restated 2010

Financial Statements

£’000 £’000 £’000

Group Balance Sheet

Property, Plant & Equipment 838,802 108,185 946,987

Trade and Other Receivables 141,912 16,709 158,621

Cash and Cash Equivalents 109,959 31,805 141,764

Trade and Other Payables (170,451) (4,241) (174,692)

Current Tax (52,318) (15,076) (67,394)

Provision for Deferred Taxation (364,710) (18,571) (383,281)

Provision for Liabilities and Charges (185,380) (41,842) (227,222)

Share Premium 279,685 4,389 284,074

Other Reserves 132,067 106,439 238,506

Cumulative Translation Reserve 79,587 24 79,611

Retained Earnings 312,171 (33,884) 278,287

Dana Petroleum plc


54

29 Analysis of net debt

2011

At 1 January Cash Flows

Exchange

Differences Other

At 31

December

£’000 £’000 £’000 £’000 £’000

Cash at bank and in hand 56,750 (9,978) (5,080) -

41,692

Short term deposits 85,014 77,121 4,651 -

166,786

Cash and cash equivalents 141,764 67,143 (429) -

208,478

Borrowing financial liabilities due after one year

Bank debt (337,128) 220,345 2,026 -

(114,757)

Net (Debt)/Funds (195,364) 287,488 1,597 -

93,721

2010 Restated

At 1 January Cash Flows

Exchange

Differences Other

At 31

December

£’000 £’000 £’000 £’000 £’000

Cash at bank and in hand 16,794 39,000 795 161 (1)

56,750

Short term deposits 50,756 (35,305) (472) 70,035 (1)

85,014

Cash and cash equivalents 67,550 3,695 323 70,196

141,764

Borrowing financial liabilities due after one year

Bank debt (91,516) (245,870) 258 -

(337,128)

Convertible bonds (119,788) 4,105 - 115,683

-

Net (Debt) (143,754) (238,070) 581 185,879

(195,364) (1)

cash acquired upon business combination of KCCL as described in note 28 c).

30 Capital commitments

Exploration and Approved Development Commitments

The Group has commitments for future capital expenditure of £438,712,000 (2010 Restated: £334,393,000), of which

£160,000,000 relates to intangible assets (2010: £140,000,000) and represents the Group’s share of obligations under existing

Sale and Purchase contracts and Joint Venture arrangements.

31 Obligations under operating leases

Minimum lease payments under operating leases are as follows:

Restated

Land and

Buildings

Land and

Buildings

2011 2010

£’000 £’000

Amounts payable on leases due:

within one year 2,370 1,756

in two to five years 5,712 4,855

after five years 6,701 446

Rentals due under operating leases are charged against income on a straight line basis over the term of the lease.

Dana Petroleum plc


55

32 Related party transactions

a) Key Management Personnel

The Group defines key management personnel as the Directors of the Company. There are no transactions with Directors,

other than their remuneration as disclosed in the Directors’ Remuneration note (see note 8 (b)).

b) Other Related Parties

During 2010 a lease was entered in to with Tilestamp Limited (Tilestamp), an associated company of Mr T P Cross, the Chief

Executive Officer of the Group at the time. Mr Cross resigned as Chief Executive Officer of the Group on 8 November 2010

and Tilestamp ceased to be a related party from that date onwards. The rental payments made during 2010 to Tilestamp as a

related party were £43,000. There is no related party balance outstanding as at 31 December 2011 (2010: £nil).

In January 2011 the Group received a capital injection from KNOC, the Group’s ultimate parent. This agreement saw KNOC

agreeing to subscribe for the sterling equivalent of USD 500 million in shares of the company. In December 2011 Dana

Petroleum plc paid a dividend to KNOC of £64,610,000. KCCL paid a dividend to KNOC of £36,536,000 (2010:

£42,460,000).

Service and management fees of £633,000 were paid by the Group to KNOC (2010: £nil). All fees were on an arms-length

basis.

At 31 December 2011 £nil was owed to or from the Group from or to KNOC.

During the year the Group did not enter into any related party transactions with the associate (2010:£nil).

33 Pensions

The Group contributes to the personal pension arrangements of Executive Directors and employees up to a specified

percentage of salary in lieu of a formal corporate scheme. Total pension contributions in lieu amounted to £2,188,000

(2010 Restated: £1,085,000) for the year ended 31 December 2011.

A defined benefit scheme exists within a Group subsidiary but on the grounds of materiality this has not been disclosed.

34 Events after the reporting period

On 23 February 2012, the Company entered in to an agreement with Hess Corporation (Hess) to acquire 28.3% interest in the

Bittern field, which will increase Dana’s share to 33%. As a result of the transaction Hess will resign the affiliated

operatorship of the Triton floating production, storage and offloading (FPSO) vessel and Dana has indicated its desire to

operate the facility.

The transaction will add a further 2 mmboe per year to Dana’s UK production, with 5,500 boepd expected in 2012.

On 14 March 2012, the Company proposed and paid a dividend on its ordinary shares, to its immediate parent company,

KNOC. The total dividend paid on ordinary shares amounted to $100,000,000 (£63,820,000).

A number of key changes to the rates of tax affecting oil companies were announced in the March 2012 budget. Details of

these key changes and the impact on the Group have been disclosed in note 9.

Dana Petroleum plc


56

35 Ultimate parent undertaking

The directors regard Korea National Oil Corporation (KNOC), a company incorporated in Korea, as the immediate and

ultimate parent company and ultimate controlling party. Copies of the consolidated financial statements of KNOC can be

obtained from KNOC, 1588-14, Gwanyang-dong, Dongan-gu, Anyang-si, Gyeonggi-do, Korea, 431-711.

Dana Petroleum plc

57

Company Financial Statements 2011

Dana Petroleum plc

Independent auditor’s report to the members of Dana Petroleum plc

58

We have audited the parent company financial statements of Dana Petroleum plc for the year ended 31 December 2011 which

comprise the Company Balance Sheet, the Statement of Total Recognised Gains and Losses and the related notes 37 to 52.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting

Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies

Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required

to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this

report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors are responsible for the

preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our

responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law

and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices

Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give

reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This

includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have

been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the

directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial

information in the report and accounts to identify material inconsistencies with the audited financial statements. If we become

aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the parent company financial statements:

give a true and fair view of the state of the company’s affairs as at 31 December 2011;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are

prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in

our opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not

been received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Dana Petroleum plc

Independent auditor’s report to the members of Dana Petroleum plc

59

Other matter

We have reported separately on the group financial statements of Dana Petroleum plc for the year ended 31 December 2011.

Moira Ann Lawrence (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Aberdeen

21 May 2012

Dana Petroleum plc

Company Balance Sheet as at 31 December 2011

60

Restated

Note 2011 2010

£’000 £’000

Fixed Assets

Property, Plant and equipment 40 86 32

Investment in Subsidiaries 41 356,108 247,937

Investment in Associates 42 54,037 54,037

Deferred Tax Asset 43 1,561 4,389

411,792 306,395

Current Assets

Debtors 44 326,742 59,825

Cash at Bank and in Hand 1,533 9,612

328,275 69,437

Creditors: Amounts Falling Due Within One Year 45 (14,704) (5,086)

Net Current Assets 313,571 64,351

Total Net Assets 725,363 370,746

Capital and Reserves

Called-up-Share Capital 47 18,425 15,805

Share Premium Account 48 595,841 279,685

Other Reserves 48 - 28,205

Profit and Loss Account 48 111,097 47,051

Total Shareholders funds 725,363 370,746

The financial statements were approved by the Board of Directors on 18 May 2012 and signed on its behalf by:

David A Crawford

Director

Registered No. 03456891

Dana Petroleum plc

Company Statement of Total Recognised Gains and Losses for the year ended 31

December 2011

61

Restated

Note 2011 2010

£’000 £’000

Profit/(Loss) for the financial period 100,451 (39,618)

Total recognised gains and losses relating to the period 100,451 (39,618)

Prior year adjustment 38 4,316

Total gains and losses recognised since last annual report 104,767

Dana Petroleum plc

Notes to the Company Financial Statements

62

37 Accounting policies

These financial statements have been prepared in pounds sterling under the historical cost convention, as modified by the

revaluation of certain Investments and Financial Instruments in accordance with the Companies Act 2006 and applicable

accounting standards.

The principal accounting policies adopted by the Company are set out below together with an explanation of where changes

have been made to previous policies on the adoption of new accounting standards in the year.

The following accounting policies are applied consistently in dealing with items which are considered material in relation to

the Company’s financial statements.

Dividends

Dividends received are included in the accounts in the period the related dividends are actually received.

Property, plant & equipment (PP&E)

PP&E assets are stated in the balance sheet at cost less accumulated depreciation.

Depreciation is provided on PP&E assets to write off the cost less estimated residual value of each asset over its expected

useful economic life on a straight-line basis at the following annual rates:

Equipment 10% - 25%

Computer equipment 33%

Investments in associates and subsidiaries

Fixed asset investments in subsidiaries and associates are included in the financial statements at cost less provisions for

impairment.

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date

where transactions or events have occurred at that date that will result in an obligation to pay more (or a right to pay less or to

receive more) tax, with the following exceptions:

provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and

gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance

sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the

basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over

into replacement assets and charged to tax only where the replacement assets are sold;

provision is made for tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates and

joint ventures only to the extent that, at the balance sheet date, dividends have been accrued as receivable;

deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will

be suitable taxable profits from which future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at tax rates that are expected to apply in the periods in which timing

differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Issue expenses and share premium account

Cost of share issues are written off against the premium arising on the issue of share capital.

Foreign currencies

The functional currency for the Company is pounds sterling.

Transactions in foreign currencies during the year are recorded in the functional currency at the rate of exchange ruling at the

date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional

currency at the rates ruling at the balance sheet date.

Pensions

The Company contributes to the personal pension arrangements of Executive Directors and employees up to a specified

percentage of salary in lieu of a formal corporate scheme. Contributions in lieu of pensions are charged to the profit and loss

account as incurred.

Dana Petroleum plc


63

Operating leases

Rentals under operating leases are charged to the profit and loss account as incurred.

Share based payments

The Company issued both equity-settled and cash-settled share based payments as an incentive to certain key management and

staff. Equity-settled share based payments were measured at fair value at the date of grant. The fair value determined at the

grant date of the equity-settled share based payments was expensed on a straight-line basis over the vesting period, based on

the Company’s estimate of the number of shares that would eventually vest.

Fair value was measured by use of a Monte Carlo model. The expected life used in the model was adjusted, based on

management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.

38 Prior year adjustment

In 2010, the Company’s subsidiary, Dana Petroleum (Jersey) Limited, recognised a deferred tax asset on losses realised as a

result of the tax deduction taken for the finance costs released to the 2010 Profit and Loss Account following the conversion of

the Convertible Bond. A subsequent review of the tax treatment of these costs was undertaken and it was identified that, as

such amounts would not have arisen had it not been for the guarantee offered over the bonds by Dana Petroleum plc, the

amounts were considered to be excessive under Transfer Pricing legislation (specifically s153 TIOPA 2010) and hence no tax

deduction could be taken for these costs within Dana Petroleum (Jersey) Limited. Instead a deduction was claimed within this

Company as guarantor (in accordance with s192 TIOPA 2010). As a result of this review the 2010 tax position requires to be

restated to reflect this revised tax treatment. Specifically the restatement is required to recognise a deferred tax asset of

£4,316,220 previously recognised within Dana Petroleum (Jersey) Limited.

Per 2010 financial

statements

Correction arising

on review of tax

treatment

Restated 2010

financial statements

£’000 £’000 £’000

Profit and Loss Account

Taxation (79) (4,316) (4,395)

Balance Sheet

Deferred tax within debtors 73 4,316 4,389

Profit and Loss Account - Opening Balance 42,735 4,316 47,051

Dana Petroleum plc


64

39 Employment costs

2011 2010

£’000 £’000

Wages and salaries 8,591 22,862

Pension costs 497 544

Social security costs 1,709 7,351

10,797 30,757

Included in wages and salaries is a total net expense of share based payments of £nil (2010: £9,317,000) of which £nil (2010:

£8,166,000) arises from transactions accounted for as equity-settled share based payment transactions. The carrying amount of

the liability at the end of the year for cash-settled share based payment transactions is £nil (2010: £nil).

The weighted average number of employees (including Executive Directors) during the year was:

2011 2010

Management 15 9

Technical and administration 33 29

48 38

40 Property, plant and equipment


Total

£’000

Cost:

At 1 January 2011 1,669

Additions 63

At 31 December 2011 1,732

Depletion and depreciation:

At 1 January 2011 1,637

Provided in year 9

At 31 December 2011 1,646

Net book value

At 31 December 2011 86

At 31 December 2010 32

Dana Petroleum plc


65

41 Investment in subsidiaries

£’000

At 1 January 2011 247,937

Additions 4,389

Disposals (141,500)

Transferred from subsidiary undertakings 266,909

Provision for impairment of subsidiary undertakings (21,627)

At 31 December 2011 356,108

The additions above of £4,389,000 relate to the investment in Korea Captain Company Limited (see note 28 c).

During the year the investments in Dana Petroleum (Holdings) B.V. (£241,645,000) and Dana Petroleum (BVUK) Limited

(£25,263,000) were transferred to the Company from Dana Petroleum (E&P) Limited. No cash was paid in exchange for these

investments.

In October 2011 the Company’s subsidiary Dana Petroleum (Jersey) Limited redeemed their preference shares in full, therefore

the investment in these shares of £141,500,000 was disposed of.

A provision for impairment was recognised of £21,627,000 (2010: £58,722,000) on the Company’s investments in Dana

Petroleum Norway AS (£2,641,000) and Dana Petroleum (Jersey) Limited (£18,986,000) due to the fact that the net asset

values of these companies were below the investment carrying values held by the Company.

Dana Petroleum plc


66

At 31 December 2011, the principal subsidiary undertakings of the Company were:

Name of Company

Country of

Incorporation/Operation

Main Activity

Dana Petroleum (E&P) Limited UK Oil & gas exploration and production

Dana Petroleum (North Sea) Limited* UK Oil & gas exploration and production

Dana Petroleum (BVUK) Limited UK Oil & gas exploration and production

Dana Petroleum (Algeria) Limited* UK Non Trading

Dana Petroleum (Russia) Limited UK Non Trading

Dana Petroleum (Jersey) Limited Jersey Non Trading

Dana Petroleum Limited Guernsey Technical and Management Services

Dana Petroleum (Ghana) Limited Guernsey Oil & gas exploration and production

Dana Petroleum Norway AS Norway Oil & gas exploration and production

Dana Petroleum (Cyprus) Limited* Cyprus In liquidation

Dana Petroleum East Zeit Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroleum East Beni Suef Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroleum Qarun Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroelum WAG Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroelum North Zeit Bay Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroelum Ras Abu Darag Limited* Cayman Islands/Egypt Oil & gas exploration and production

Dana Petroelum North Qarun Limited* Bahamas/Egypt Oil & gas exploration and production

Dana Petroelum South October Limited* Bahamas/Egypt Oil & gas exploration and production

Dana Petroleum (Holdings) B.V. The Netherlands Holding Company

Dana Petroleum Netherlands B.V.* The Netherlands Oil & gas exploration and production

Dana Petroleum Manzala B.V.* The Netherlands Oil & gas exploration and production

Dana Petroleum Egypt B.V.* The Netherlands Non Trading

Korea Captain Company Limited UK Oil & gas exploration and production

* Held by subsidiary undertaking

The Cayman, Jersey and Guernsey subsidiaries are managed and controlled from the UK and have UK tax residency.

All of the above companies are wholly owned. Further details of subsidiary undertakings are available at the headquarters of

Dana Petroleum plc.

42 Investment in associate

£’000

At 1 January and 31 December 2011 54,037

The Company owns 22.63% of the ordinary share capital of Faroe Petroleum plc, whose nature of business is oil & gas

exploration & production.

Dana Petroleum plc


67

43 Deferred tax asset

Restated

2011 2010

£’000 £’000

At 1 January 4,389 152

Change in estimate (2,828) 4,237

At 31 December 1,561 4,389

Deferred tax included in the balance sheet is as follows:

Restated

2011 2010

£’000 £’000

Deferred tax asset

Accelerated capital allowances 48 63

Other temporary differences 4 10

Tax losses 1,509 4,316

1,561 4,389

44 Debtors

2011 2010

£’000 £’000

Other debtors and prepayments 2,929 625

Due from subsidiary undertakings 323,813 59,200

326,742 59,825

45 Creditors: amounts falling due within one year

2011 2010

£’000 £’000

Amounts owed to subsidiary undertakings 3,385 1,891

Accruals and other payables 11,319 3,195

14,704 5,086

46 Financial instruments

An outline of the objectives, policies and strategies pursued by the Group and Company in relation to financial instruments is

set out in the Director’s report and in note 2 of this report.

Dana Petroleum plc


68

47 Called-up share capital

See note 24 for details of the share capital of the Company.

In January 2011 the Company issued 17,465,906 ordinary shares to KNOC in exchange for a capital injection of USD 500

million (£314,387,000).

In October 2011 the Company issued a further 2 ordinary shares to KNOC in exchange for the investment in their subsidiary

company Korea Captain Company Limited, as explained in note 28 c).

During 2010 the Convertible Bonds (‘Bonds’) issued in 2007 by Dana Petroleum (Jersey) Limited, a wholly owned subsidiary,

were converted into preference shares of the issuer and were then immediately exchanged for ordinary shares in the Company.

This was in accordance with the unconditional and irrevocable guarantee provided by the Company. Details of the Bonds are

contained in note 20.

48 Reserves

Share

Premium

Account

Profit and Loss

Account Other Reserves

Note £’000 £’000 £’000

At 1 January 2011 as previously stated 279,685 42,735 28,205

Prior year adjustment 38 - 4,316 -

At 1 January 2011 restated 279,685 47,051 28,205

Retained profit for the year - 100,451 -

Dividend paid - (64,610) -

Reclassification of other reserves - 28,205 (28,205)

New shares issued 316,156 - -

At 31 December 2011 595,841 111,097 -

49 Pensions

The Company contributes to the personal pension arrangements of Executive Directors and employees up to a specified

percentage of salary in lieu of a formal corporate scheme. Total pension contributions in lieu amounted to £497,000

(2010: £544,000) for the year ended 31 December 2011.

50 Company profit and loss account

In accordance with the provisions of the Companies Act 2006, the Company has not presented a profit and loss account. A

profit for the year of £100,451,000 (2010 Restated: Loss £39,618,000) has been taken to the profit and loss account reserve of

the company.

Dana Petroleum plc


69

51 Obligations under operating leases

Annual commitments under operating leases are as follows:

Land and

Buildings

Land and

Buildings

2011 2010

£’000 £’000

Payable on leases which expire:

in two to five years 343 255

after five years 574 72

Rentals due under operating leases are charged against income on a straight line basis over the term of the lease.

52 Ultimate parent undertaking

The directors regard Korea National Oil Corporation (KNOC), a company incorporated in Korea, as the immediate and

ultimate parent company and ultimate controlling party. Copies of the consolidated financial statements of KNOC can be

obtained from KNOC, 1588-14, Gwanyang-dong, Dongan-gu, Anyang-si, Gyeonggi-do, Korea, 431-711.

Dana Petroleum plc

Notes to the Financial Statements

70

53 Group exploration and production interests as at 31 December 2011

COUNTRY LICENCE/BLOCK DESIGNATION FIELD/DISCOVERY NAME OPERATOR

DANA

NET %

INTEREST

Fields in Production & Under Development

UK Lic. 128/Block 48/18b, 48/19b & P1011

48/19e

Anglia GDF Suez 25.00

UK Lic. P.456/Block 48/2a Babbage Eon Ruhrgas 40.00

UK Lic. P.224/Blocks 29/2a ALL, 29/2d

ALL, 29/2h ALL

Banff CNR 13.54

UK Lic. P.361/Block 29/01b Bittern Shell 4.67

UK Lic. P.111/Block 30/3a Blane Talisman 15.24

UK Lic. P324/Block13/22 Captain Chevron 15.00

UK Lic. P.607/Block 43/19a Cavendish RWE 50.00

UK Lic. P.354/Block 22/2a Chestnut Centrica 15.13

UK P21 Block 21/24a Clapham Dana 100.00

UK Lic. P249/Block 14/19 Claymore Talisman 7.52

UK Lic. P.219/Block 16/13a Enoch Talisman 20.80

UK Lic. P.317/Block 20/2a & P273 20/3a Ettrick Nexen 12.00

UK Lic. P.073/Block 21/12a Goosander Centrica 50.00

UK Lic. P.013/Blocks 21/24, 21/25,

21/29a,21/29b(N) and 21/30

Guillemot West/ North West Dana 90.00

UK Lic. P.351/Block 21/18a Kittiwake Centrica 50.00

UK Lic. P.238/Block 21/19 ALL Mallard, Grouse, Gadwall Centrica 50.00

UK P353 Block21/23b Pict Dana 100.00

UK P353 Block 21/23b Saxon Dana 100.00

UK Lic. P218/Block 15/21a Scott Nexen 43.33

UK Lic. P1190/Block204/13a & Lic

P1262/Block204/14b

Tornado OMV 30.00

UK Lic. P.472/Block 210/24a, b Hudson Dana 47.50

UK Lic. P.686/Block 43/27a & P380 43/26a Johnston Eon Ruhrgas 57.78

UK Lic. P.748/Block 29/2c Kyle CNR 14.29

UK Lic. P.1021/Block 210/20d Otter Total 19.00

UK Lic. P.025/Block 49/22a & P033 49/17 Victor ConocoPhillips 10.00

Netherlands Prod. Licences F16-E, E15a, F13a F16-E Wintershall 1.18

Netherlands Prod. Licences E18/A E18-A Wintershall 5.22

Netherlands Prod. Licences F02a (Oil) F02a Dana 45.00

Netherlands Prod. Licences F02a (Gas) F02a Dana 27.00

Netherlands Prod. Licences P10a P10a Dana 60.00

Netherlands Prod. Licences P10b P10b Dana 60.00

Netherlands Prod. Licences P11b Van Nes, Van Ghent Dana 50.00

Netherlands Prod. Licences P11b/10a De Ruyter Dana 54.07

Netherlands Prod. Licences P14a P14a Dana 40.00

Netherlands Alkmaar – Taqa 12.00

Netherlands Bergen II – Taqa 12.00

Netherlands Prod. Licences K18b Shallow K18b Wintershall 37.00

Netherlands Prod. Licences L05b L05b Wintershall 30.00

Netherlands Prod. Licences L005c L05c Wintershall 30.00



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Netherlands Prod. Licences L08b - P3/P4 Unit – Wintershall 26.69

Netherlands Prod. Licences L16a L16a Wintershall 50.00

Netherlands Prod. Licences P15ab L15ab Taqa 14.81

Netherlands Prod. Licences P15c P15c Taqa 8.56

Netherlands Prod. Licences P15-E Unit (P15-P18) P15-P18 Taqa 6.29

Netherlands Prod. Licences P15-D (P15-P18)

Common Facilities

P15-P18 Taqa 6.46

Netherlands Prod. Licences P18c P18c Taqa 3.75

Netherlands Prod. Licences P18a-P18c Unit P18a-P18c Taqa 0.68

Norway PL027B Jotun ExxonMobil 45.00

Egypt East Zeit East Zeit East Zeit Petroleum

Co (Dana/EGPC)

100.00

Egypt Qarun Qarun, North Qarun, SW Qarun,

Sakr, North Harun, Wadi Rayan

Qarun Petroleum Co

(Apache/EGPC)

25.00

Egypt East Beni Suef and East Beni Suef

Extension

East Beni Suef, El Azhar,

Gharibon, Lahun, Yusif, Tarif,

Sohba, Won

East Beni Suef

Petroleum Co

(Apache/EGPC)

50.00

Egypt West Abu Gharadig Raml, Raml SW Agiba Petroleum Co

(Eni/EGPC)

30.00

Egypt North Zeit Bay PSC Abydos-1x, Abydos-2x, Matr Dana 100.00

European Exploration Acreage and Discoveries

UK Lic. P. 1610 Block 13/23a Wester Ross Dana 45.00

UK Lic. P.225 Block 16/27a Rest of Block

(Contract Area 2) Part A

– Dana 70.00

UK Lic. P.273 Block 20/3a ALL Blackbird Nexen 12.00

UK Lic. P. 1047 Block 20/3c ALL Marten Nexen 25.00

UK Lic. P.1580 Block 20/3f ALL – Nexen 12.00

UK Lic. P.1415/Block 21/17a ALL Wagtail, Whinchat Dana 50.00

UK Lic. P.238/Block 21/19 ALL – Centrica 50.00

UK Lic. P.185 Block 21/20f ALL Morgan Dana 35.00

UK Lic. P.1561 Block 21/20c ALL Bligh Extn, Gower, Maynard Dana 50.00

UK Lic. P.1584 Block 21/20e ALL - Dana 50.00

UK Lic. P1726 43/17a,18a - RWE 50.00

UK Lic. 1742 47/10c & 48/6c 47/10-8 Dana 50.00

UK Lic. 1766/13/22d – Dana 50.00

UK Lic. 1786/21/12d - Dana 50.00

UK Lic. 1854/208,1,2,3 & 217/27,28 - OMV 30.00

UK Lic. P.224/Block 29/2a (Shallow & Deep

Banff Area), 29/2d ALL, 29/2h ALL

– CNR 13.50

UK Lic. P.1330/Blocks 42/28d & 29b ALL Mongour, Tolmount Eon Ruhrgas 50.00

UK Lic. P.1566 Block 47/4d & 5d ALL - Dana 50.00

UK Lic. P.1242 Block 48/1a ALL + 47/5b Platypus Dana 45.00

UK Lic. P.1594 Block 48/1c ALL – Dana 40.00

UK Lic. P. 1595 Blocks 48/2b & 3b, ALL Babbage East Eon Ruhrgas 50.00

UK Lic. P.1596 Blocks 205/3 ALL, 205/4a

ALL

- Nexen 30.00

UK Lic. P.1454/Blocks 208/11 ALL,208/16

ALL, 214/15 ALL

- DONG 30.00

UK Lic. P.1484/Blocks 214/4b,

214/5b,214/9b & 214/14a

- OMV 35.00

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UK Lic. P.1598 Blocks 208/12, 13b, 17 ALL,

18b & 19b

Tamdhu DONG 30.00

UK Lic. P.1599 Blocks 208/20b, 22,23, 24,

25, 27, 28, 209/16 & 17 ALL

– DONG 30.00

UK Lic. P.226/Block 210/15a ALL Otter Total 19.00

UK Lic. P.1571 Blocks 210/23a ALL,

210/28a ALL & 210/29b ALL

– Dana 100.00

UK Lic. P.201/Block 211/22a (North-west

Area)

Kerloch Dana 50.00

UK P1833 204/14d - OMV 50.00

UK P1849 214/5c, 214/9d, 214/10b - OMV 35.00

UK P1836 205/2b - Nexen 30.00

UK P1837 205/5b - Nexen 30.00

UK Lic. P.090/Block 3/25a (Deep) 3/25a-2 Total 15.00

UK Lic. P. 257 Block 14/25a ALL - Talisman 30.00

UK Lic. P.219/Block 16/13e J1 Talisman 26.00

UK Lic. P.1051/Block 23/11a ALL – Dana 100.00

UK Lic. P0354 22/2a – Premier Oil 30.25

UK Lic. P.1720 Blocks 23/16c & d ALL Arran Dana 50.00

UK Lic. P.359 Block 23/16b Barbara

Extension

Arran North Shell 40.00

UK Lic. P.1668 Blocks 43/26b & 43/27b Johnston NW Extra Eon Ruhrgas 50.00

UK Lic. P.472/Block 210/24a Western Isles Dana 64.83

UK Lic. P.570/Block 210/24b – Dana 47.50

Norway PL027B Block 25/8 – ExxonMobil 50.00

Norway PL027D Block 25/8 Jetta, Eitri ExxonMobil 30.00

Norway PL035B Blocks 30/11 – StatoilHydro 10.00

Norway PL337 Block 16/10a Storskrymten Det norske

oljeselskap

25.00

Norway PL362, Blocks 25/1, and 25/2 Fulla StatoilHydro 10.00

Norway PL440s Block 2/8 – Det norske

oljeselskap

20.00

Norway PL450 Block 7/12 – Det norske

oljeselskap

25.00

Norway PL484 Block 6608/10 – Noreco 30.00

Norway PL494 Block 2/9 – Dana 40.00

Norway PL494B Block 2/6, and 2/9 – Dana 40.00

Norway PL494C Block 2/9 – Dana 40.00

Norway PL497 Blocks 7/7, 7/8 and 7/11 – Det norske

oljeselskap

25.00

Norway PL497B Blocks 7/8, and 7/11 – Det norske

oljeselskap

25.00

Norway PL504 Block 25/7 Jetta Det norske

oljeselskap

30.00

Norway PL504 BS Block 25/7 – Det norske

oljeselskap

30.00

Norway PL513 Blocks 6506/6, 6507/1 and 6507/4 – Maersk 50.00

Norway PL513B Blocks 6506/6, 6507/1 and

6507/4

– Maersk 50.00

Norway PL523 Blocks 6605/11 and 12 – EON Ruhrgas 20.00

Norway PL526 Blocks 6608/8 and 9, 6609/4 – North Energy 20.00

Norway PL539 Block 3/7 – Premier 20.00

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Norway PL548S Block 24/9, and 25/7 – Det norske

oljeselskap

30.00


oljeselskap

20.00

Norway PL562 Block 6609/5, 6609/6, and 6609/8 – EON Ruhrgas 20.00

Norway PL565 Block 1/9 – Premier 40.00


oljeselskap

20.00

Norway PL581 Block 6203/7, 8, 9, 10, 11, and 12 – Dana 70.00

Norway PL597 Block 6506/5 – VNG 30.00

Norway PL597B Block 6506/8, and 6506/9 – VNG 30.00

Norway PL600 Block 6607/1, and 6607/2 – Dana 70.00

Norway PL649 Block 6506/2, 3, 6, and 6507/1 – VNG 30.00

Norway PL651 Block 6610/8, 9, 11, and 12 – EON Ruhrgas 25.00

Netherlands Exploration Acreage and Discoveries

Netherlands Expl. Licence A15a A15-3 Wintershall 9.00

Netherlands Expl. Licence B17a B17a-6 Wintershall 22.36

Netherlands Expl. Licence F06b F06b Dana 36.00

Netherlands Expl. Licence P08c P08c Dana 60.00

Netherlands Zuid-Friesland III – NAM 17.39

Netherlands Expl. Licence L06a L06a Wintershall 30.00

Egyptian Exploration Acreage and Discoveries

Egypt North Ghara PSC – BP 25.00

Egypt South Feiran PSC – Eni 22.20

Egypt West El Burullus PSC KES-CC1 Gaz de France 50.00

Egypt South October PSC Akhenaton-1, GG85-1, WFA-1 Dana 65.00

Egypt Ras Abu Darag PSC – Dana 100.00

Egypt East Beni Suef PSC and East Beni Suef

Extension PSC

– Apache 50.00

Egypt South-East July PSC – Dana 40.00

International Exploration Acreage and Discoveries

Mauritania Block 1 PSC Faucon Dana 36.00

Mauritania Block 2 PSC – Tullow 10.73

Mauritania Block 7 PSC Pelican, Aigrette, Cormoran Dana 36.00

Morocco Tanger-Larache – Repsol 15.00

Senegal St. Louis PSC – Tullow 30.00

Guinea Offshore Guinea PSC – Hyperdynamics 23.00

For PSC’s in Egypt with development leases, Dana’s equity is the Company’s equity pursuant to the PSC. The operator is the

operating company pursuant to the PSC which is a Joint Venture between the Contractor and EGPC.

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