DNO PROVIDES MARKET UPDATE

Commences cash sales to Kurdistan local market

DNO International ASA has redirected nearly one third of its crude oil production in the Kurdistan Region of Iraq to sales to the domestic market in a move that will improve predictability and stability of its revenue stream. The Company recently signed contracts with three buyers for delivery of around 675,000 barrels of oil from the Tawke and Bastora fields at prices ranging between USD 50-55 per barrel. Daily deliveries into these contracts are averaging 10,000 barrels a day. Payments are received in advance of deliveries and accrue fully to DNO's account.

"We are very pleased to have been given the green light by the authorities to commence cash sales to the local market and at a price twice last year's levels," stated Helge Eide, President and Managing Director. "At current rates, DNO's local sales bring another USD 15 million in payments to the Company on a monthly basis which allows our operations to be self funding across our portfolio," he added.

The Company expects to continue its domestic sales on an on-going basis, though future volumes and prices will be contingent on market conditions. Exports meanwhile have declined due to continuing technical glitches in the northern Iraq pipeline system and now average around 25,000 barrels per day.

The first test on the Summail-1 exploration well on the Dohuk license has been completed and the lowermost Triassic zone was found to be water bearing. This is the first of several tests to be undertaken in the well over the coming weeks.


Terminates related party arrangements with former chairman

Meanwhile, DNO has completed the process begun earlier this fall, and previously disclosed in September in connection with its planned merger, to end all related party relationships with its former chairman Berge Gerdt Larsen as these were deemed by the board and management to have no continuing business purpose for DNO. Several weeks ago, DNO sold its shareholding in, and ended a consulting contract in favour of, a Larsen-related company, Petrolia ASA. Separately, the Company terminated a long-standing retainer of around NOK 4 million per annum with a second Larsen-related company, IOR Ltd, for business development advice.

Additionally, DNO has terminated leasing arrangements involving properties owned by Larsen-related companies and ended payment of legal bills on behalf of Larsen-related companies for certain administrative and court proceedings.

Over the past dozen years, nearly NOK 100 million have been paid by DNO to Larsen-related companies in such consulting fees, leases, administrative services, legal bills and other payments. DNO has previously invoiced and will continue to seek reimbursement for all legal costs incurred by the Company and its shareholders on behalf of Larsen-related companies.

Following decisions taken by the board last summer, DNO has also terminated its involvement in three cases pursued by Norwegian tax and police authorities against Larsen and Larsen-related companies and the Company has agreed to cooperate fully with the authorities in their investigations in the interest of transparency and best corporate practice.

In a further step towards enhanced governance, DNO has recruited for the first time an in-house general counsel, Bjørn Dale, to provide legal oversight across the Company's activities. Mr. Dale joined DNO in this new role in September from his position as General Counsel, Nordic Financial Services Group, and will continue as Lecturer, Examiner and Supervisor, Faculty of Law, University of Oslo.

Oslo, 17 October 2011

DNO International ASA
Corporate Communications

For more information:

Media:
Communication Director Tom Bratlie
Phone: +47 905 21 904

Financial market:
CFO Haakon Sandborg
Phone: +47 23 23 84 80