Resolution of Dispute

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN

24th June, 2011

MADAGASCAR OIL LIMITED

 ("Madagascar Oil", "MOIL" or the "Company")

Resolution of Dispute with the Government of Madagascar and

Corporate Update

Madagascar Oil is pleased to announce that the dispute with the Government of Madagascar in connection with the Tsimiroro Block has now been resolved. The Company is also today highlighting certain key operational highlights prior to its Full Year Results due to be announced on 30 June 2011.

Highlights

Tsimiroro (Block 3104):

Ø Uncertainty over the status of the Tsimiroro PSC has ended and validity of the PSC has been acknowledged by the Government of Madagascar

Ø The 2011-2012 work programme and budget have been approved

Ø The right for MOIL to exercise its option for a two year extension to the PSC in August 2012 has been acknowledged, allowing certainty in extending the contract term to August 2014

Ø OMNIS has acknowledged a delay due to the force majeure event that would be addressed at the end of the contract term if necessary

Ø Significant operational progress was made in 2010, including 18 successful wells out of 24 new wells drilled and the completion of 430km of Electrical Resitivity Tomography

Ø Activity for the installation of the Tsimiroro steam flood pilot facility will be ramped up immediately to progress to a start date expected in Q3 2012

Ø Netherland, Sewell & Associates Inc. is currently revising the 965 million barrels Contingent Original Oil-in-Place estimate to take into account the updated data acquired in 2010. The updated report is expected in July 2011

Bemolanga (Block 3102):

Ø The 2010 drilling programme at Bemolanga completed 86 core wells and continued to support the estimate that the MOIL share of the gross mine resources is 470 million barrels Contingent Petroleum-initially-in-Place

Ø Mining project postponed as current economics do not justify proceeding with this project at the present time.

Ø Shift in work program focus to pursuit of conventional hydrocarbon potential on the Bemolanga block

Ø MOIL and partner Total granted one year extension of the current PSC exploration phase, with provision for further two years

Ø The amount of MOIL's carried interest reduced to $80MM from $100MM (gross) in revised JOA with $10 million remaining

Exploration (Blocks 3105, 3106, 3107):

Ø Discussions with the Government of Madagascar regarding the approval of the 2011-2012 work programmes for exploration blocks and resolution of outstanding issues on these blocks are set to continue early July 2011

Ø GORE micro-seepage survey collected across 880km²on the Exploration Blocks is currently under detailed analysis and will lead to further analysis of at least three drilling leads

Corporate / Financial

Ø Trading in Madagascar Oil's shares to resume 27 June 2011

Ø MOIL has $59 million cash on hand to deliver the approved work plan designed to increase resources and prove commerciality of the Tsimiroro asset through a steam flood pilot, and for the additional work required to develop drillable prospects on the three Exploration Blocks 

Commenting on today's announcement, Laurie Hunter, Chief Executive Officer, said:

"We are pleased to have resolved the issues that have led to the suspension in trading of our shares. The last six months have highlighted risks associated with operating in frontier petroleum provinces, but we believe that our recent constructive dialogue with the Government of Madagascar has served to reaffirm our historical compliance under our contracts, the amount of work that we have already completed to date, and our clear and well funded plans for future development to bring online the country's first commercial oil production."

A presentation outlining the Company's current operations is available at www.madagascaroil.com

Contact Information:

Pelham Bell Pottinger +44 (0)20 7861 3232

Mark Antelme / Jenny Renton

Strand Hanson Limited +44 (0)20 7409 3494

Simon Raggett / Angela Peace

Tsimiroro

Madagascar Oil is pleased to anounce that the dispute with the Government of Madagascar in connection with the Tsimiroro Block has been resolved.

In March 2011, the Company had declared force majeure under the four production sharing contracts that it owns and operates and in late April of this year, the Company filed a request for arbitration for breach of contract by the Government of Madagascar and OMNIS, the state regulatory agency responsible for overseeing the country's oil and gas operations.

Since that time, the Company has been actively engaging with the Ministry of Mines and Hydrocarbons (MMH) and OMNIS.

As a part of its annual management committee meeting on 16 June, 2011 for the Tsimiroro Block, the 2011-2012 annual work programme and budget were approved and the Company obtained assurances from both the MMH and OMNIS that its Tsimiroro production sharing contract is valid and that its validity has never been questioned.

In addition, the MMH and OMNIS acknowledged that: (a) the Company had suffered a force majeure event that caused a six month delay in its operations that would be addressed at the end of the Tsimiroro contract term if the Company requires additional time to complete the multi-year work programme; (b) if necessary, the Company will exercise part or all of its option to extend the current contract term for an additional two years. The production sharing contract provides the Company with three years, based on the remainder of the existing term and the two-year optional extension, prior to reaching the decision point required to make a declaration for commercial development.

The MMH and OMNIS also assured the Company that that there are no technical issues outstanding under the Tsimiroro production sharing contract.

In respect of the Company's operational progress, based on the fact that from historic surface investigation and drilling, the definition of the shallow oil horizons were not conclusive utilizing a conventional seismic approach, the Company's geologic team has developed a program to test and subsequently utilize a surface process known as Electrical Resistivity Tomography (ERT). The results of the initial examination of the ERT results indicate it is very effective for identifying structural areas. Additional follow-up drilling locations have been identified for 2011 and ERT will be studied further for application in subsequent years.

The Tsimiroro nine pattern steam flood pilot project design phase is well underway. Engineering preparation and location work progressed in early 2011 and with approval of the proposed steam flood project confirmedfrom OMNIS installation of the Tsimiroro steam flood pilot facility is to be restarted immediately with first production now expected in Q3 2012.

Bemolanga

In June 2011 Total, the operator of the block, and Madagascar Oil received approval from OMNIS for a modification of the Bemolanga work plans to focus on deeper conventional plays on the block. An extension of one year was granted in June 2011 with the commitment to run airborne gravity surveys later this year over the entire block area to identify possible conventional hydrocarbon plays, with an option for a further two-year extension to drill a well. A mining project on the block will continue to be evaluated for potential improvements in extraction and upgrading technology.

The Bemolanga project spent approximately $28 million in 2010 and Madagascar Oil's 40% share of the costs was carried by Total as part of the farm-in transaction.Under the terms of the revised Joint Operating Agreement with Total, the Company is carried on the next $10 million of expenditures for the revised workprogram.

Exploration Blocks

OMNIS has scheduled a Management Committee Meeting for the Company's earlier stage exploration blocks (Blocks 3105, 3106 and 3107) for 6 July 2011 which will now focus on the full resolution of the budgets for work on these blocks. The Company intends to request an extension of the terms of these blocks to account for the delay experienced in 2011, which will provide it with the additional time required to conduct the assessment of prospective drilling locations. The Company will continue to engage the Government in finding a satisfactory resolution regarding its budgeted work programme and time commitments.

Resumption of trading

Based on these recent positive events, the Company believes that the threat of the Madagascar Government seeking to acquire the Tsimiroro asset no longer presents a material risk to the Company and accordingly is seeking re-commencement of trading in its common shares on the AIM Market of the London Stock Exchange on 27 June 2011.