Sound Energy Regulatory News (SOU)

18 October 2012

Sound Oil plc

("Sound Oil" or "the Company")

Sale of Interest in Citarum PSC

Sound Oil, the upstream oil and gas company with assets in Italy and Indonesia, is pleased to announce that it has agreed to sell its interest in the Citarum Production Sharing Contract ("PSC"), onshore Java, Indonesia.

The transaction involves Sound Oil selling its 20% working interest in the PSC to Pan Orient Energy (Citarum) PTE Limited ("POE"), the operator. In consideration for the working interest, POE have committed to Sound Oil to:

·; waive a total of US$2.4 million of cash calls;

·; pay Sound Oil US$10 million in cash contingent on revenues from the first discovery; and

·; pay Sound Oil a further US$6 million in cash contingent on revenues from the second discovery.

All payments are guaranteed by the ultimate parent of the purchaser, Pan Orient Energy Corp, and are structured as 100% royalties on revenues from the discovery, capped at the agreed contingent consideration.

As with all Indonesian transactions of this nature, completion requires the approval of the local regulatory bodies. The working interest will be held in trust by the Company on behalf of POE until such approval occurs.

The current Citarum drilling campaign involves three commitment wells. The first well (Cataka) was abandoned by the operator following significant delays and overspends and did not reach its target depth. The second well (Jatayu) also suffered significant delays and overspends and, despite some uphole gas shows, is yet to reach its target depth. Drilling of the third well (Geulis) is ongoing. To complete the PSC commitments, Cataka, and possibly Jatayu, will need re-drilling in what have proven to be very challenging geological conditions.

James Parsons, Sound Oil's Chief Executive Officer commented:

"The drilling programme in Citarum has been extremely problematic and had the potential to jeopardise the Company's funding position.

The Company estimates that its share of the remaining cash spend on Citarum would have exceeded US$5 million. This transaction converts an unsustainable cash burn outside of our control into effectively a carried position, with continued exposure to up to US$16 million of upside. Therefore this transaction secures Sound Oil's existing cash balance for our operated Nervesa and Rapagnano projects in Italy.

This transaction is the first step towards reshaping the Company's portfolio."

For further information please contact:

Additional information

Sound Oil's Indonesian subsidiary, Mitra Energia Citarum Limited, which holds the Company's interest in Citarum made a loss of approximately US$39,000 in the year ended 31 December 2011 and had total assets of approximately US$8.2 million at that date. Sound Oil's investment in Citarum was carried in the consolidated balance sheet of the Company at 30 June 2012 at a book value of approximately £13.5 million. It is intended that the net proceeds of the sale, if any, will be redeployed by the Company in progressing its Italian operations and for working capital purposes.