Tax Dispute

Hartford, CT: (Feb-07- 08) The Australian Taxation Office (ATO) brought charges against Magellan Petroleum Corporation and its wholly owned subsidiary, Magellan Petroleum Australia Limited (MPAL), over an ongoing tax dispute. The recent ATO audit focused on certain income tax deductions claimed by Paroo Petroleum Pty. Ltd., a wholly owned subsidiary of MPAL, related to the write-off of outstanding loans made by PPPL to other entities within the MPAL group of companies. As a result of this audit, in August 2007, the ATO issued position papers to MPAL which stated ATO's opinions that these previous deductions should be disallowed, resulting in additional income taxes being payable by MPAL and its subsidiaries. In the position papers, the ATO set out its legal basis for its conclusions. In its position papers, the ATO indicated that the amended tax liabilities arising from its proposed positions would be (Aus) $13,392,460 (US $12,003,930), plus possible interest and penalties, which could have exceeded the amount of the amended tax liabilities asserted by the ATO.

Sources stated that the parties reached a settlement in the matter, where Magellan Petroleum Australia Limited agreed to pay the ATO $14.6 million (US $13.1 million) to resolve the dispute. Company spokespersons stated that the settlement avoids a protracted and costly legal battle with the ATO. The Board of Directors of the Company, in consultation with its advisors and the MPAL Board, concluded that the settlement let them clear the way for progress and was, therefore, in the best interest of the Company and its shareholders. [PR NEWSWIRE: TAX DISPUTE]

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Published on Feb-8-08