Share Price Movement and Operational Update

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MADAGASCAR OIL LIMITED

("Madagascar Oil" or the "Company")

 10 September 2012

Statement re Share Price Movement and Operational Update

The Board of Madagascar Oil notes the recent movement in the Company's share price and confirms that it is not aware of any reason for this share price movement.

The Company is also pleased to announce that first oil ("cold" production) has been recovered from the multi-billion barrel Tsimiroro heavy oil field in line with expectations. This is an important milestone prior to the imminent introduction of steam to the reservoir. The installation of the steam equipment at the Tsimiroro steam flood pilot is substantially complete and the initiation of cyclic steam (also referred to as "Huff and Puff") is proceeding with first steam injection expected in Q4 2012. In addition, the Company anticipates receiving the final results for the Airborne Gravity Graviometry (AGG) survey over the Tsimiroro field shortly.

Although the capital cost of the steam flood pilot has exceeded initial projections, the remaining work is either prepaid or relatively predictable. The Company currently has approximately US$25 million in cash and prepayments and is funded into 2013. The Board is confident that further funding will be available to move the project forward into full field development.

In accordance with the AIM Rules, the Company is currently intending to release its interim report for the six months to 30 June 2012 ("Interim Report") by 30 September 2012. The Interim Report will provide a detailed financial and operational analysis of the pilot project as well as an update on its conventional opportunities.

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