The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

9 August 2022

Sound Energy plc

("Sound Energy" or the "Company")

Update re Phase 2 Development Financing and Launch of Farm-Out Process

Exploration and Appraisal Portfolio

Sound Energy, the transition energy company, is pleased to provide an update on the Phase 2 development financing of its Tendrara Production Concession, an update on the Company's exploration and appraisal activities and the launch of a farm-out process for the Tendrara Production Concession and the surrounding Greater Tendrara and Anoual exploration permits.

Phase 2 Development Financing and Farm-Out Update

As announced on 23 June 2022, the Company mandated Attijariwafa bank, a Moroccan multinational bank and one of the leading banks in Morocco, to arrange a long-term project senior debt facility of up to c.US$250 million for the partial financing (the "Phase 2 Senior Debt") of the currently estimated approximately US$330 million Phase 2 development costs (gross, 100%) of the Tendrara Production Concession.  Progress continues to be made with a number of external banking advisers and data review and, as previously announced, the parties are seeking to negotiate binding terms for the Phase 2 Senior Debt within 120 days under the 8 month exclusivity.

In addition, the Company is continuing to mature industry and alternative financing solutions for the remaining Phase 2 development costs of approximately US$60 million net to Sound's 75% working interest in the Tendrara Production Concession. A number of industry counterparties capable of providing the required financing have expressed interest in pursuing discussions in respect of both of the Company's Tendrara Production Concession and surrounding Greater Tendrara and Anoual exploration permits.

As a result, the Company announces that it has initiated a formal farm-out process for the Tendrara Production Concession and the surrounding Greater Tendrara and Anoual exploration permits and has appointed Gneiss Energy Limited, a leading energy corporate finance advisory firm, to manage the farm-out process.

The objective of the area-wide farm-out is to seek a co-investing partner in each licence to both fund the expected balance of Phase 2 development costs and also to progress an exploration and appraisal drilling programme in the Greater Tendrara and Anoual exploration permit areas.

Exploration Update

Following the Company's announcement on 14 April 2022, the Company has continued to re-evaluate the extensive exploration portfolio within the Greater Tendrara and Anoual exploration permits surrounding the Tendrara Production Concession.  The Company had high graded several potential near term subsalt drilling opportunities within the Trias Argilo-Gréseux Inférieur ("TAGI") gas reservoir, the proven reservoir of the TE-5 Horst gas accumulation within the Tendrara Production Concession.

These drilling opportunities include the exploration prospect 'M5' located on the  Anoual exploration permit, together with the SBK-1 and TE-4 structures previously drilled on the Greater Tendrara exploration permit.

The Company has published an updated presentation detailing the Company's planned exploration and appraisal activities which can be accessed on our corporate website, https://www.soundenergyplc.com/.

Both SBK-1 and TE-4, drilled in 2000 and 2006 respectively, encountered gas shows in the TAGI reservoir. SBK-1 flowed gas to surface during testing in 2000 at a peak rate of 4.41 mmscf/d post acidification, but was not tested with mechanical stimulation. TE-4 was tested in 2006 but did not flow gas to the surface. Mechanical stimulation has proven to be a key technology to commercially unlock the potential of the TAGI gas reservoir in the TE-5 Horst gas accumulation and, accordingly, the Company believes this offers potential to unlock commerciality elsewhere in the basin. 

Commercial discoveries in the Greater Tendrara and Anoual exploration permits would have the potential to be commercialised through the proposed development infrastructure centred on the TE-5 Horst, with sufficient capacity in the planned Tendrara Export Pipeline or as standalone projects.

The Company is pleased to announce the exploration potential in these three planned drilling targets. The table below summarises the exploration potential, expressed as Gas Initially-in-Place.

The Company cautions that notwithstanding its internal estimates for the exploration potential of the three planned exploration drilling targets, further exploration activity, including drilling, will be required to substantiate the estimated exploration potential and that general exploration in the oil and gas industry contains an element of risk and there can be no guarantee that the Company's current estimates of volumes of gas originally in place will be substantiated by exploration drilling or that any volumes encountered would actually be available for extraction.

Graham Lyon, Sound Energy's Executive Chairman, commented:

"We are making good progress on the senior debt facility for the Tendrara project, which is planned to fund the majority of the Phase 2 development costs.

In parallel, we have now commenced a farm-out process to secure partner participation in both the development of the Tendrara Production Concession and exploration and appraisal in the surrounding exploration permits.

Our re-evaluation of the potential of the Greater Tendrara and Anoual exploration permits has high-graded three drilling targets, two of which have previously encountered gas shows.  We believe mechanical stimulation is the key to unlocking the potential of the TAGI gas reservoir, as we have done at the TE-5 Horst discovery.  Importantly, future discoveries in this area have the potential to be commercialised through the planned infrastructure that will be built at the TE-5 Horst development.

We look forward to updating shareholders on progress as we move forward."

For further information please contact:

The information contained in this announcement has been reviewed by Sound Energy's Vice President, Geoscience, Dr John Argent, who is a Chartered Geologist, a Fellow of the Geological Society of London and a Member of the Petroleum Exploration Society of Great Britain, with 25 years of experience in petroleum geology and management and who is the qualified person as defined in the guidance note for mining, oil and gas companies issued by the London Stock Exchange in respect of AIM companies.

Bcf means billion standard cubic feet of gas; Tcf means trillion standard cubic feet of gas; and best case, high case and low case estimates are consistent with SPE (The Society of Petroleum Engineers) 2018 PRMS (Petroleum Resource Management System) guidelines.

Petroleum is defined as a naturally occurring mixture consisting of, but not limited to, hydrocarbons in the gaseous, liquid, or solid phase. Petroleum may also contain non-hydrocarbon compounds, common examples of which are carbon dioxide, nitrogen, hydrogen sulfide, and sulfur.

Reservoir is a subsurface rock formation that contains an individual and separate natural accumulation of petroleum that is confined by impermeable barriers, pressure systems, or fluid regimes (conventional reservoirs), or is confined by hydraulic fracture barriers or fluid regimes (unconventional reservoirs).

Resources are all quantities of petroleum (recoverable and unrecoverable) naturally occurring on or within the earth's crust, discovered and undiscovered, plus those quantities already produced.

Gas Initially-in-Place (GIIP) is the total quantity of gaseous petroleum that is estimated to exist originally in naturally occurring reservoirs, as of a given date.

Forward looking statements

Certain statements in this announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. Generally, the words 'will', 'may', 'should', 'continue', 'believes', 'targets', 'plans', 'expects', 'aims', 'intends', 'anticipates' or similar expressions or negatives thereof identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that would cause actual results or events to differ from current expectations, intentions or projections might include, amongst other things, changes in oil prices, changes in equity markets, failure to establish estimated petroleum reserves, political risks, changes to regulations affecting the Company's activities, delays in obtaining or failure to obtain any required regulatory approval, failure of equipment, uncertainties relating to the availability and costs of financing needed in the future, the uncertainties involved in interpreting drilling results and other geological, geophysical and engineering data, delays in obtaining geological results and other risks associated with exploration, development and production. Given these risks and uncertainties, readers should not place undue reliance on forward-looking statements.