DNO Management Clarifies May 2011 Report

Management of DNO International ASA wishes to correct the misuse and
mischaracterization of an internal management report prepared in May 2011
providing a preliminary valuation of RAK Petroleum PCL's oil and gas assets
which are now the target of a merger transaction.

The report was prepared based on presentations made by RAK Petroleum, and was
intended as input to the initial negotiations with RAK. This report must be
considered as an initiative in a negotiation process.

As part of a campaign of misinformation, disinformation and factual distortion,
opponents of the proposed transaction have circulated part or all of this
internal report to the press. The May report was based on a very cursory and
preliminary review of RAK Petroleum's portfolio. To circulate this report
without providing background and context does a disservice to shareholders who
are faced with a decision on November 1st on whether or not to endorse a
transaction strongly endorsed by DNO's management and its independent Norwegian
directors.

To provide proper background and context, after presenting the May report to the
board under its then chairman, Berge Gerdt Larsen, the board instructed
management to undertake further work and obtain an independent review and
appraisal of the RAK Petroleum assets from DeGolyer and MacNaughton, an
internationally recognized petroleum evaluation firm. Before this work could
commence, RAK Petroleum withdrew its offer to proceed with a transaction and
discussions between the two companies were only resumed in June 2011 at the
initiative of DNO's independent Norwegian directors and a Heads of Agreement
signed by the parties that set forth an outline of a possible transaction and a
roadmap for completion of a comprehensive valuation of both companies' oil and
gas holdings.

DeGolyer and MacNaughton was re-engaged by RAK and given full access to all RAK
Petroleum technical, contractual, fiscal and operational data. With the benefit
of the work of the independent experts, DNO management and its advisors
proceeded to exhaustively review and improve our understanding of the target
assets and their future financial commitments.

The findings of this due diligence process have been incorporated in a 408 page
prospectus equivalent document prepared, reviewed and approved in accordance
with all applicable laws and regulations, including the Norwegian Securities
Trading Act, and which has been made available to shareholders and the market
through our website (www.dno.no). We invite all interested parties to review
this material.

Since the prospectus was made available, several investment banks that closely
follow DNO have carefully and extensively reviewed the proposed merger terms and
conditions and each one has endorsed the transaction. These third party reports
are available from Arctic Securities ASA, ABG Sundal Collier and First
Securities AS.

Each one has produced a Buy recommendation for DNO shares and each one has
concluded that the RAK Petroleum assets are accretive to DNO.

First Securities, October 26, 2011: "There are two main reasons why we think
investors should support the merger: Firstly, a merger will create a wider
portfolio with lower political risk and better geographical diversification.
Secondly, a merged asset base will most likely provide a more stable operational
cash flow as the company's operational cash flows have been volatile in periods
with exports from Kurdistan."

ABG Sundal Collier, October 11, 2011: "On the back of the release of the DNO/RAK
Petroleum merger prospectus we raise our recommendation to BUY (from SELL) and
our target price to NOK 7.5 (from 5.0). We believe the merger will offer
substantial downside protection and view the enlarged regional footprint
following the merger as adding value for the current shareholders.."

Arctic Securities ASA, October 21, 2011: "DNO/RAK merger creates significant
MENA E&P Player. The merger is in line with DNO's strategy to grow assets and
production in the Middle East and North Africa, while providing diversification
regarding political and technical risk. The new board headed by Bijan Mossavar-
Rahmani will strengthen DNO significantly both strategically and regarding
corporate governance. RAK Petroleum's investor base and governmental relations
in the Middle East will also strengthen DNO International in business
development and contractual negotiations in the region..."

To further place the May report in context, we can add that given our limited
time and access to information we did not fully appreciate the discretionary
nature of RAK Petroleum's investment program or the manner and speed with which
capital costs were recovered.

The RAK Petroleum working interest share of Block 8 drilling expenditure is
estimated at approximately $64 million over a 12-month period. We did not fully
appreciate at the time of the May report that these drilling costs are quickly
recovered immediately as cost oil from revenue received from existing production
with no time delay and would not pose a financial exposure for DNO post merger.

Also the capital cost exposure for the development licenses in the May report
was not factoring in the staged development concept. As we have reported to the
market the first well in the re-development plan is currently ongoing (Saleh-5)
with a current estimated costs of USD 40 million. Further investments will be
discussed and decided upon when the results from this well becomes available.

RAK Petroleum also holds an interest in five exploration licenses in Oman, the
UAE and Tunisia. The portfolio contains a significant number of leads and
prospects for which a cumulative drilling cost was estimated in May. Most of RAK
Petroleum's exploration expenditure is in fact discretionary and DNO has
considerable flexibility to review and prioritize the exploration portfolio
following the merger. We now understand that none of the licenses has any
financial commitments for exploration wells that have not been met in the
current license terms.

DNO management underscores that the May report was a first step in what became
an exhaustive due diligence process involving preparation of an independent
Competent Persons Report.

DNO management reiterates its support of the proposed merger with RAK Petroleum
on the proposed terms.

Oslo, 26 October 2011

DNO International ASA
Corporate Communications


This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)







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Source: DNO International ASA via Thomson Reuters ONE

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