Directors' Remuneration/Related Party Transaction

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE

UNITED STATES, AUSTRALIA, CANADA OR JAPAN

9 December 2014

MADAGASCAR OIL LIMITED

("Madagascar Oil" or the "Company")

Directors' Remuneration / Related Party Transaction

Madagascar Oil (AIM:MOIL) today announces that the board of the Company (the "Board"), advised by the remuneration committee, has authorised the award of retention and incentivisation remuneration to certain directors and senior management team members, including independent non-executive directors, Iain Patrick and Richard Laing (the "INED Award"), and executive director and Chief Financial Officer, Gordon Stein (the "ED Award").

The INED Award has been made in recognition of the significant work undertaken by Iain Patrick and Richard Laing, over and above that envisaged in their letters of appointment, particularly over the last eighteen months and during the period when the Board lacked any executive directors. The INED Award consists of a combination of cash and share options.

The ED Award has been made in recognition of the significant work undertaken by Mr Stein in stabilising and improving the Company's financial position, significantly improving the Company's financial controls and in preparing the Tsimiroro Development Plan, the Company having declared the Tsimiroro Block (Block 3104) commercial in accordance with the terms of the production sharing contract earlier this year. This was achieved despite the absence of a CEO, or any other executive directors, since July 2013. The ED Award consists of a combination of cash, share options and an extension of the notice period in Mr Stein's contract from 6 months to 12 months.

As part of the INED Award and ED Award, the following share options have been awarded pursuant to the Madagascar Oil Limited Unapproved UK Incentive Plan (the "Award Options"), with immediate effect:

The Board would note that the Award Options have been issued with an exercise price matching that of the Placing and Open Offer, announced on 24 September 2014, being a 20.6% premium to the share price at the close of business on 8 December 2014, being the most recent practicable date prior to this announcement, of 8.50p.

Pursuant to the AIM Rules, the potential value of the INED Award and ED Award have been aggregated, resulting in a combined value of approximately £0.6 million (based on the value of the cash element of the INED Award and ED Award, a Black Scholes valuation of the Award Options, and the value of the notice period extension to Mr Stein). As a result, the INED Award and ED Award, when aggregated, are deemed to be a related party transaction under the AIM Rules. No beneficiary of the INED Award or the ED Award participated in the Board's deliberations or voting in respect of their own remuneration.

Accordingly, the independent directors of the Board, for these purposes being Andrew Morris and Steve Hope, consider, having consulted with Strand Hanson Limited, the Company's Nominated Adviser, that the terms of the INED Award and the ED Award are fair and reasonable insofar as the Company's shareholders are concerned.

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