Tsimiroro Licence approval of test sales

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UNITED STATES, AUSTRALIA, CANADA OR JAPAN

23 May 2014

MADAGASCAR OIL LIMITED

("Madagascar Oil" or the "Company")

Statement re Tsimiroro Licence approval of test sales by the Government of Madagascar

First marketing of Madagascar produced crude

Madagascar Oil is pleased to announce that the Company's wholly-owned subsidiary, Madagascar Oil S.A. ("Madagascar Oil SA"), has been advised, via a "Communique de Presse: Conseil des Ministres" (the "Communique"), that the decree approving test sales of Tsimiroro crude oil in the local market was approved at a meeting of the Council of Ministers on 21 May 2014.

The decree was presented by the Minister at the Presidency in charge of Strategic Resources and a copy of the decree, issued by the Secretary General of the Government, confirming the Communique is expected to be received by the Company within the next few weeks. It is intended that test sales of, in aggregate, between 55,000 and 73,000 barrels of Tsimiroro crude oil will commence in the second half of 2014 and will last for a period of up to six months under the terms of the current exploration licence.

This would be the first market test of crude oil produced within Madagascar, with sales due to commence after the conclusion of a tender process involving oil marketing companies currently operating in Madagascar. This test is designed to establish Tsimiroro crude as a blended heavy fuel oil substitute in the local market, mainly for power generation purposes. Currently stored oil volumes will initially be made available for blending. The test will also provide valuable input to development planning activities, which include sales to the local Madagascar market. A new purpose built facility for custody transfer, blending and truck loading has been built at the Tsimiroro Steam Flood Pilot ("SFP") by Madagascar Oil SA for this test period.

As at 20 May 2014, cumulative oil production from the SFP, which commenced on 28 April 2013, was 90,789 barrels of oil of which 51,870 barrels of oil are stored in the Tsimiroro SFP Storage Tanks. The remainder of the oil has been used for fuel for steam generation since the start-up of SFP operations. Oil production rates in 2014 from the SFP have averaged 395 barrels of oil per day to the end of April 2014.

On 12 May 2014, the Roads Authority at the Ministry of Public Work approved Madagascar Oil SA's project to upgrade the RN1Bis national road after the 2013/14 rainy season to allow truck transportation of the blended product from the SFP to markets in Antananarivo. Upgrade work has already commenced on the branch connecting the SFP to RN1Bis. Madagascar Oil SA has agreed to finance the essential road upgrade to allow early sales to commence. The estimated costs of this road upgrade are within the projected costs in the Company's existing budget and profits from the initial oil sales process will be applied towards meeting these costs.

On 12 May 2014, Madagascar Oil SA organised a joint press conference hosted by the Minister at the Presidency in charge of Strategic Resources, the General Manager of our partner OMNIS (Office des Mines Nationales et des Industries Stratégiques), the General Manager of the National Office for the Environment (ONE) and the General Manager of Madagascar Oil SA. This press conference provided the opportunity for all parties present to explain to local journalists the next steps following the declaration of commerciality on the Tsimiroro licence, and the reasons justifying local test sales of Tsimiroro crude.

Stewart Ahmed, Chief Operating Officer & Madagascar Oil S.A. General Manager commented:

"We are very pleased to have obtained approval for the sale of test crude from Tsimiroro into the domestic Madagascar market. Following the recent declaration of commerciality, this is another important step for the Company and is further evidence of the momentum building behind our project.

"Madagascar Oil is extremely grateful to the Government of Madagascar for their ongoing support. The comments made at the recent joint press conference involving the Minister of Strategic Resources, confirmed that our progress on the Tsimiroro Field appraisal has been achieved through a strong collaborative relationship with Government agencies. We look forward to continuing our open dialogue with the Government and other stakeholders in seeking approval for our Development Plan that the Company expects to issue in the coming months. It is clear that Tsimiroro is a project of national importance and we are honoured to be working to a common purpose with the Government and people of Madagascar."

Competent Person's Statement:

The information contained in this announcement has been reviewed and approved by Stewart Ahmed, Chief Operating Officer of the Company, who has over 29 years of relevant experience in the oil industry. Mr. Ahmed is a member of the Society of Petroleum Engineers (SPE).