Taxation Settlement with Madagascan Authorities

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

7 November 2013

MADAGASCAR OIL LIMITED

("Madagascar Oil" or the "Company")

Taxation Settlement with Madagascan Tax Authorities

Madagascar Oil announces that its wholly owned subsidiary Madagascar Oil S.A. has reached an administrative settlement with the Tax Authorities in Madagascar (the "Settlement") which resolves all outstanding tax claims made by the Tax Authorities against the Company's Group for the fiscal years 2007-2011.

The Settlement addresses all tax demands arising from audits undertaken by the Tax Authorities for those fiscal years with the immediate payment to the Tax Authorities of 10.026 billion Ariary (equivalent to nearly $4.5 million). This settles all tax demands arising from audits undertaken by the Tax Authorities to date.

The Company has previously reported that, in July 2010, assessments were received for additional taxes of approximately US$9 million relating to the years 2007 and 2008, mainly related to VAT on foreign services. The Company also believed that it would be subject to similar tax assessments, for 2009-2011 and beyond, until the government and the upstream oil and gas industry reaches a consensus on how to treat this issue. The Company followed market practice in declaring the VAT due and the VAT paid on these services, but the tax assessments were raised on a different basis. Further discussion of the issue is included in the Company's 2012 Annual Report (which is available on the Company's website), in which a provision was made. The Company is pleased to confirm that the Settlement is within the parameters used by the Company in assessing that provision.

Operationally, the Company still expects to submit a Declaration of Commerciality to the Madagascar authorities for the Tsimiroro field in Q1 2014 followed by a Field Development Plan in accordance with the PSC terms, in 2014, in consultation with OMNIS. Settlement of this historical tax dispute will allow the Company to move forward with its plans for 2014 with greater confidence and clarity.

After payment of the amount due under the Settlement on 7 November 2013, the Company has a cash balance in hand of approximately US$29.7million (including approximately US$1.1m of restricted cash).

The Company's Chairman, Andrew Morris, commented:

"We are very pleased to have reached a settlement with the Madagascar Tax Authorities which closes the tax disputes for all of the fiscal years which have been subject to audit. Bringing closure to these past issues creates a more stable platform and increased visibility on which we can plan for the future. We would like to thank the tax authorities for the professionalism they showed throughout the negotiations and look forward to continuing the petroleum industry initiative which is underway to seek an exemption from Foreign Services VAT in Madagascar for all upstream oil and gas exploration and development companies".

Contact Information:

www.madagascaroil.com