Update on Status of Licences

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

 8th February, 2011 For immediate release

 MADAGASCAR OIL LIMITED

("Madagascar Oil" or the "Company")

UPDATE ON STATUS OF LICENCES

Madagascar Oil has been actively attempting to resolve the issues that led to its announcement on 17 December 2010 and the suspension of trading in its shares on AIM and wishes to update investors on these efforts.

The Company announced on 17 December 2010 that the Ministry of Mines and Hydrocarbons ("MMH") had indicated at a meeting held the previous day between Madagascar Oil and the MMH that it was interested in acquiring from the Company all of its production sharing contracts excluding Bemolanga, being blocks 3104, 3105, 3106 and 3107 ("PSCs"). As a result, the Company had requested that trading in its shares on AIM be suspended with immediate effect. Since this date, Madagascar Oil has been seeking to resolve this issue with the government of Madagascar and also to complete the process of approving the 2011 work programmes and budgets.

On 26 January 2011, Madagascar Oil met with the MMH to further discuss and clarify the situation regarding the status of its PSCs with the government of Madagascar. This meeting follows several written requests for clarification of the uncertainty created during the meeting held on 16 December 2010.

The meeting held on the 26 January 2011 was preceded on 13 January 2011 by notification from OMNIS (the Office of National Mines and Strategic Industries), the regulatory agency that manages Madagascar's oil and gas resources, that an audit of the Company's Tsimiroro block would be undertaken by the MMH. This audit is being carried out in line with the terms of the PSC and the Company is co-operating with the audit process, and is working with OMNIS to ensure that the audit is being conducted in accordance with the parameters set forth in the PSC.

During the 26 January 2011 meeting, the Minister advised Madagascar Oil that the MMH audit was "not a cause for concern" and that the Company should be able to return to discuss the results of the audit in approximately one month's time. Despite this assurance from the Minister about the eventual outcome of the audit, management remains extremely concerned by the delays that have been incurred since the initial 16 December 2010 meeting.

In light of the current situation, with the exception of some essential care and maintenance of the assets, operations have been curtailed, but could be restored quickly.

"The inevitable consequence of the MMH's prior actions, and now the added effect of the announced audit, is a further delay in our ability to proceed with the significant work planned for 2011" stated Mr. Mark Weller, the group's Chief Operating Officer in response to the meeting.

The Company's management is confident that the MMH audit of Tsimiroro, or any of its other blocks, will demonstrate that the Company remains in full compliance with the PSCs and that its historical work programmes have vastly exceeded the minimum work requirements of such PSCs.

Madagascar Oil's management were encouraged to hear the Minister acknowledge that two blocks in which Madagascar Oil has an interest, namely Bemolanga, (Block 3102) and Tsimiroro (Block 3104), are among the blocks in the country where meaningful work has been performed. The Company used the meeting as an opportunity to remind the MMH that it has invested more than US$210 million towards advancing the exploration on all of its blocks, including Tsimiroro, since obtaining its PSCs in 2004. The combined effect of the uncertainty created by the MMH's statements, the interruption in the process of approving the 2011 work programmes and budgets and the audit is hindering the ability of the Company to progress work on its blocks. The Company's management is monitoring the impact of this combined effect on the ability of the Company to achieve its commercial objectives within the timeframe of the PSCs, and remains ready to exercise the Company's rights under the PSCs to preserve the time necessary to complete its work in a timely manner. In the interim, the Board believes that it is in the best interests of shareholders for trading in the Company's shares to remain suspended.

Madagascar Oil remains dedicated to resolving the current situation in the best interest of shareholders and will continue to explore every opportunity to resume its work programme.

The Company will provide further updates in due course.

Contact Information:

Madagascar Oil Limited +1 713 357 4820

Laurie Hunter, Chairman and CEO

Mark Weller, Chief Operating Officer

Pelham Bell Pottinger +44 (0)20 7861 3232

James Henderson

Mark Antelme

Strand Hanson Limited +44 (0)20 7409 3494

Simon Raggett

Angela Peace

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