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: [phone]

Financial market:
CFO Haakon Sandborg
Phone: [phone]







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Source: DNO International ASA via Thomson Reuters ONE

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