Phase 1 LNG Gas Sales Agreement & Issue of Equity

29 July 2021

Sound Energy plc

("Sound Energy" or the "Company")

Phase 1 Development LNG Sale & Purchase Agreement and Equity Subscription

Sound Energy, the Moroccan focused upstream gas company, is delighted to provide the following update in relation to the Company's micro liquified natural gas ("mLNG") phase 1 development plan for the TE-5 Horst development (the "Phase 1 Development") at the Tendrara Production Concession (the "Concession").

Highlights

·    Ten (10) year take or pay LNG sale and purchase agreement entered into with Afriquia Gaz

·    £2 million equity placing with Afriquia Gaz cementing the strategic alignment with Sound Energy PLC

·    Improved envisaged Afriquia Gaz loan note financing terms

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

"We are delighted to announce the signature of a binding ten year LNG sales agreement for the Phase 1 development covering the sale of not less than 100 million cubic metres of gas in a liquified form per year.  In addition, the execution of the previously announced equity subscription agreement and the £2 million equity placing cements the strategic alignment  between Sound Energy and Afriquia Gaz. This is a key milestone in moving forward towards the final investment decision and notice to proceed for the Tendrara Phase 1 Development.

In recognition of the alignment between Sound Energy and Afriquia Gaz, I am also pleased that we announce today that the parties are working towards improved terms in relation to the Afriquia Gaz loan note upon which the LNG sale and purchase agreement is, inter alia, conditional. We plan to conclude this loan note ahead of finalising the contract to construct the plant.

By establishing clear paths both to market for our gas and to our financing of Phase 1 Development, today's announcement together with the recently announced Schlumberger Silk Route Service acquisition not only mark critical milestones for the Company but underscore our commitment to Sound Energy Shareholders to deliver upon our objectives and to create value through innovative commercial arrangements."

Execution of LNG Sale and Purchase Agreement

The Company is pleased to announce that Sound Energy Morocco East Limited ("SEMEL"), its wholly owned subsidiary, has entered into a binding and fully termed conditional LNG sale and purchase agreement with Afriquia Gaz S.A. ("Afriquia"), pursuant to which SEMEL will sell not less than 171,000 cubic metres of LNG per year (approximately 100 million cubic metres a year of gas to be produced and liquefied from the Phase 1 Development) on behalf of the Concession joint venture (the "LNG SPA").

Under the LNG SPA, SEMEL will commit, for 360 days of each year over a period of 10 years from first gas, to provide to Afriquia a daily quantity of between 475 and 546 cubic metres of LNG, and Afriquia will commit to an annual minimum "Take or Pay" quantity of 475 cubic metres per day of LNG.

Pricing under the LNG SPA will be within a range, the floor price being US $6 per mmBTU and the ceiling price commencing at $8 per mmBTU and increasing during the course of the LNG SPA to $8.346 per mmBTU and will be determined using an indexed formula which applies a combination of the European Title Transfer Facility and United States Henry Hub benchmark indices. The point of sale to Afriquia will be at the Tendrara (TE-5) field location following processing and liquefaction, with Afriquia having responsibility for transportation and delivery to its downstream customers.

The LNG SPA is conditional upon fulfilment of certain conditions precedent including:

·    The approval of the LNG SPA by the Concession joint venture;

·    The execution of a loan note agreement between the Company (as borrower) and Afriquia (as lender) setting out the terms of an US$ 18 million secured loan with a 6% annual coupon and a 12 year term;

·    The execution of a project contract with Italfluid Geoenergy S.r.l (Italfluid) for the provision of a gas processing and liquefaction facility relating to the Phase 1 Development;

·    Receipt by Afriquia of regulatory approvals for the transportation of LNG by tankers and the sale of LNG; and

·    Afriquia having secured in principle agreement from downstream buyers to purchase not less than 60% of the Annual Take or Pay Quantity under the LNG SPA

such conditions to be satisfied by 29 October 2021.

Execution of Equity Subscription Agreement

In addition, the Company is pleased to also announce, subsequent to its announcement on 29 June 2020, that it has entered in an equity subscription agreement with Afriquia pursuant to which Afriquia has made a £2.0m subscription to the Company in consideration for which the Company has today issued for 159,731,651 new ordinary shares in Sound Energy at a price of 1.2521 pence per new ordinary share to Afriquia.

Application will be made for the 159,731,651 new ordinary shares, which will rank pari passu with the Company's existing ordinary shares, to be admitted to trading on AIM ("Admission'). Dealings in the new ordinary shares are expected to commence on or around 8:00a.m. on 4  August  2021.

Total Voting Rights

On Admission the Company will have 1,628,282,948 ordinary shares in issue. No ordinary shares are held in treasury. The figure of 1,628,282,948 may be used by the Company's shareholders as the denominator in the calculations by which they will determine if they are required to notify their interest in, or change to their interest in, the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

For further information please contact:

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

mmBTU means million British thermal units