Madagascar Oil Resolves Dispute over Tsimiroro Block; Updates Ops

Madagascar Oil announced that the dispute with the Government of Madagascar in connection with the Tsimiroro Block has now been resolved. The Company also highlighted certain key operational highlights prior to its Full Year Results due to be announced on June 30, 2011.

Highlights

  • Tsimiroro (Block 3104):
    • Uncertainty over the status of the Tsimiroro PSC has ended and validity of the PSC has been acknowledged by the Government of Madagascar
    • The 2011-2012 work program and budget have been approved
    • The right for MOIL to exercise its option for a two year extension to the PSC in August 2012 has been acknowledged, allowing certainty in extending the contract term to August 2014
    • OMNIS has acknowledged a delay due to the force majeure event that would be addressed at the end of the contract term if necessary
    • Significant operational progress was made in 2010, including 18 successful wells out of 24 new wells drilled and the completion of 430km of Electrical Resitivity Tomography
    • Activity for the installation of the Tsimiroro steam flood pilot facility will be ramped up immediately to progress to a start date expected in 3Q 2012
    • Netherland, Sewell & Associates Inc. is currently revising the 965 million barrels Contingent Original Oil-in-Place estimate to take into account the updated data acquired in 2010. The updated report is expected in July 2011
  • Bemolanga (Block 3102):
    • The 2010 drilling program at Bemolanga completed 86 core wells and continued to support the estimate that the MOIL share of the gross mine resources is 470 million barrels Contingent Petroleum-initially-in-Place
    • Mining project postponed as current economics do not justify proceeding with this project at the present time.
    • Shift in work program focus to pursuit of conventional hydrocarbon potential on the Bemolanga block
    • MOIL and partner Total granted one year extension of the current PSC exploration phase, with provision for further two years
    • The amount of MOIL's carried interest reduced to $80MM from $100MM (gross) in revised JOA with $10 million remaining
  • Exploration (Blocks 3105, 3106, 3107):
    • Discussions with the Government of Madagascar regarding the approval of the 2011-2012 work programs for exploration blocks and resolution of outstanding issues on these blocks are set to continue early July 2011
    • GORE micro-seepage survey collected across 880km²on the Exploration Blocks is currently under detailed analysis and will lead to further analysis of at least three drilling leads
  • Corporate / Financial
    • Trading in Madagascar Oil's shares to resume 27 June 2011
    • MOIL has $59 million cash on hand to deliver the approved work plan designed to increase resources and prove commerciality of the Tsimiroro asset through a steam flood pilot, and for the additional work required to develop drillable prospects on the three Exploration Blocks

Commenting on the announcement, Laurie Hunter, Chief Executive Officer, said, "We are pleased to have resolved the issues that have led to the suspension in trading of our shares. The last six months have highlighted risks associated with operating in frontier petroleum provinces, but we believe that our recent constructive dialogue with the Government of Madagascar has served to reaffirm our historical compliance under our contracts, the amount of work that we have already completed to date, and our clear and well funded plans for future development to bring online the country's first commercial oil production."

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