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18 March 2014

MADAGASCAR OIL LIMITED

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

Operational Update and Development Planning Progress

Madagascar Oil is pleased to provide an update on its operations and latest Tsimiroro Field Development Planning activities.

The Tsimiroro Oil Field, the Company's flagship asset, is a giant heavy oil field in western Madagascar with independently audited contingent resources of 1.7 billion barrels (P50) Stock Tank Oil Originally In Place ("STOOIP"). The objective of the ongoing Steam Flood Pilot ("SFP") is to deliver the required data to support a decision on field commerciality. The Company is working towards the submission of a Field Declaration of Commerciality ("DOC") and a Full Field Development Plan ("FFDP"), under the terms of the Production Sharing Contract ("PSC"), the latter will be subject to Madagascar Governmental and our partner, OMNIS (L'Office des Mines Nationales et des Industries Strategiques),approvals.

Highlights:

Operations Update

Oil Production and Steam Injection

Cumulative oil production from the SFP, as at yesterday's date, which commenced on 28 April 2013, was 63,436 barrels on 16 March 2014 and 35,180 barrels of oil were stored in the Tsimiroro Field Storage Tanks. The remainder of the oil has been used for fuel for steam generation during SFP operations and recent experience since mid-January 2014 has demonstrated that the steam generators run effectively on 100% Tsimiroro crude. Previously, Tsimiroro crude was blended with up to 10% diesel for use in the steam generators.

Oil production rates are continuing to increase, averaging 425 BOPD in February 2014, as compared to 330 BOPD in January and 222 BOPD in December 2013. Production in December suffered from steam generation downtime as a result of injection well shut-ins during the observation well drilling operations and existing steam generator repairs.

The SFP achieved its highest instantaneous peak daily production rate to date of 650 BOPD on 17 February 2014. This increase is due to some significant cyclic production peak oil rates from wells PSF-13, PSF-14 and PSF-15 during the most recent production period. PSF-13 enjoyed a peak oil rate of 192 BOPD on 8 January 2014 and PSF-15 recorded a rate of 187 BOPD on 2 January 2014. It should be noted that Cyclic Steam Stimulation ("CSS") thermal recovery results in peaks and troughs of oil rate depending upon where individual wells are in the cycle. As is normal for a project of this nature, peak rates are not indicative of the long term average production performance on a well by well basis.

Steam injection continues into both continuous injection wells and CSS wells. Five wells have been on continuous injection (ISF-1, ISF-2, ISF-7, ISF-8 and ISF-9) and these wells are not available for CSS production, being designed to deliver the long-term steam flood response. The low steam injection rates initially experienced in the SFP have been improved through a combination of higher injection pressures and well clean-ups through the early cyclic phases.

Higher steam injection rates have been achieved following the successful commissioning of the third steam generator on 9 January 2014. The two existing commissioned steam generators achieved an average uptime of 83% in the six month period from 1 July to 31 December 2013. Reliability of the steam generation facilities remains an issue and it is planned to commission the fourth steam generator as a back-up spare in the coming weeks to improve steam generation availability. Three steam generators should allow the continuous steam injection and cyclic requirements of the SFP wells to be met during 2014. Average steam generator availability for the three commissioned units has been 89% for January and February 2014.

Shallow casing leaks have been experienced in three wells ISF-4, ISF-6 and PSF-9, requiring these wells to be shut-in pending remedial action. This has reduced the total active well-count available for both CSS and continuous injection to 22 from the original 25 wells. A remedial rig operation to re-instate these wells is planned for the second quarter of 2014.

Other Operational Matters

Independent confirmation has recently been received over the capability of Tsimiroro crude to meet the heavy fuel oil ("HFO") feed-stock specifications for Madagascar power generation plants, following successful third party blending trials with gasoil (diesel). Studies by independent local and international specialists have also confirmed that Tsimiroro crude, which has an API gravity of 15° from a recently completed refinery-assay, will be acceptable both as a refinery feedstock and for blending into HFO for local and international sales.

Plans for six months continuous test sales of the Tsimiroro crude in 2014, to meet local Madagascar power generation specifications and other local industrial energy needs, are progressing. Discussions are in progress over allowing test sales to commence during the dry season, subject to partner, Government and regulatory approvals. This would be the first ever market test of crude oil produced within Madagascar.

Trucking routes for early transportation of crude to the local market have been assessed with road upgrade options for all year round volume traffic currently being studied.

Declaration of Commerciality and Field Development Planning Update

Work proceeds on evaluation of the response of the Tsimiroro reservoir to thermal recovery techniques, which has improved during January and February 2014 requiring a further review of production forecasts and other development planning information. A new Tsimiroro Full Field interpretation is nearing completion that will provide updated STOOIP figures for the field, which is required under the PSC terms concurrent with any declaration of commerciality.

The Company will consider at the end of this quarter or during the course of the second quarter of 2014, whether there is sufficient information from the SFP results and the development planning work carried out to date to enable it to make a decision on proceeding with a commerciality declaration or whether further information is required and a further announcement will be made at that time.

Definition of the Tsimiroro Full Field Development and the Initial Development Area, centred on the existing SFP wells and facilities, is progressing with ground surveying ongoing in March 2014.

Exploration Licences

A prospect and lead listing of all three of Madagascar Oil's exploration licenses has been generated and notional infill 2D seismic line programmes have been drawn up to further define structural closures. This allows seismic acquisition planning to take place which is necessary to mature the leads to drillable prospects in future years.

The 3105/3106/3107 License Farm-out campaign continues with interested parties active in the data-room during the first quarter of 2014. Further updates will be provided in due course on the progress achieved from the farm-out campaign.

Stewart Ahmed, Chief Operating Officer & Madagascar General Manager, commented:

"We are encouraged by the recent results from the Steam Flood Pilot, which point to the positive response of the reservoir to thermal recovery techniques and the prospect of commercial viability of a Tsimiroro Full Field Development. We have already passed some significant milestones in 2014, including the commissioning of the third steam generator, completion of trials demonstrating the ability for the steam generators to run on 100% Tsimiroro crude, passing 60,000 Barrels total oil production and continuing our zero Lost Time Incident record from 2013. Legacy well completion issues have resulted in three wells being shut-in due to shallow casing leaks, however this has not detracted from the positive thermal responses of the SFP wells and from the reservoir. We are working towards the goal of a commercial Tsimiroro development and will continue to work closely with the Madagascar authorities and OMNIS as we prepare to move towards the Full Field Development Plan submission later in 2014."

Contact Information:

www.madagascaroil.com