Dragon Oil says the preliminary findings of the investigation being conducted by KPMG (Dubai) (KPMG) into certain irregularities within both its Marketing Department and Contracts Department.

On 26 February 2009, Dragon Oil announced that the Group’s Internal Audit Department had identified the irregularities. As a result of these findings, Dragon Oil appointed KPMG to undertake an investigation into improper conduct by certain former senior managers. The Board sought immediate advice from its lawyers and sponsors and has acted, and will continue to act, upon the information available to ensure that the matter is dealt with swiftly and that procurement policies and procedures continue to operate effectively.

Following a review of KPMG’s findings, Dragon Oil can confirm that these irregularities will have no material impact on the Group’s financial position.

Preliminary findings from the investigation indicate that improper conduct relating to procurement activities was confined to the Marketing Department and the Contracts Department. Although internal controls were in place, the individuals involved managed to override the various controls in the procurement process through collusion. These individuals appear to have obtained financial benefits for themselves by securing improper payments from certain contractors.

Since the identification of these irregularities Dragon Oil has contacted the contractors that may have been involved regarding this matter. The Company will make every effort to minimise any disruption to operations during this process.

Dr Abdul Jaleel Al-Khalifa, Chief Executive Officer, said, "The Board is greatly reassured by the preliminary findings from the investigation, which confirm our initial understanding that there will be no material impact on the Group’s financial position. I am also personally pleased that these irregularities were identified internally and that we commissioned the investigation promptly. We have already replaced the managers involved and appropriate steps have been taken following the identification of these irregularities. We will continue to execute Dragon Oil’s strategy of growth and diversification."

Tags: Dragon Oil Plc