Sound Energy Regulatory News (SOU)

14 April 2022

Sound Energy plc

("Sound Energy" or the "Company")

Operational and Strategic Update

Sound Energy, the transition energy company, is pleased to provide the following operational and strategic update.

Tendrara Phase 1 mLNG Development

Following the Company's announcement on 15 February 2022 that Sound Energy Morocco East Limited ("SEMEL"), Sound Energy's wholly owned subsidiary, had issued a Notice to Proceed to Italfluid Geoenergy S.r.l. ("Italfluid") in respect of the Phase 1 mLNG development of the Tendrara Production Concession, the Company is pleased to provide the following update on project progress:

- mLNG equipment and services provider Italfluid, has confirmed the issuance of purchase orders for the gas processing and liquefaction packages together with the LNG storage tank;

- Site preparation activities by Italfluid and Sound Energy at the Tendrara site location have commenced and are ongoing;

- Italfluid is advancing engineering in line with project schedule;

- Selection, by SEMEL, of engineering contractors for flow assurance, flowlines and owner engineering nearing completion;

- Wellhead servicing scope finalised and contractor appointment progressing; and

- Contract awarded by SEMEL to Petroleum Equipment Supply Engineering Company Limited to undertake scheduled inspection and routine maintenance of the wellhead Christmas tree assemblies on TE-6 and TE-7, the wells to supply the raw gas to the mLNG facility, with planning now underway for inspection and maintenance.

Over the next 6 months, the following milestones are scheduled:

- Completion of site access road improvements;

- Placement of purchase orders for and execute flow assurance, flowlines and owners engineering scopes;

- Execution of TE-6 and TE-7 wellhead inspection and servicing;

- Flowline and associated equipment procurement process to commence; and

- Italfluid will undertake the following:

o Complete Preliminary Engineering and progress Detailed Design

o Place remaining purchase orders for equipment/packages and bulks

o Complete site preparation and commence civils (foundations) works

Tendrara Phase 2 Development Financing Update

Following the execution of the conditional binding 10-year gas sale and purchase agreement with ONEE announced on 30 November 2021 in respect of the proposed Tendrara Phase 2 gas development ("Tendrara Phase 2 Development"), the Company has been able to advance discussions with a broad range of financing partners.

Consequently, the Company has received non-binding terms sheets from a number of parties including banks and mezzanine financiers relating to potential capital provision for the proposed Tendrara Phase 2 Development. The Company is currently evaluating the term sheets and looks forward to providing further updates in due course.

In parallel, the Company is also progressing discussions with a number of international upstream service providers in relation to the potential provision of EPC services and vendor financing for the development of the proposed central processing facility ("CPF") and gas export pipeline, associated with the Tendrara Phase 2 Development. There has been strong interest from credible counterparties offering the potential to mature alternative or complementary financing to debt and/or mezzanine financing.

Eastern Morocco Exploration Update

Whilst the Company has strategically prioritised its gas monetisation strategy through the phased development of the TE-5 Horst (Tendrara Production Concession), the Company has also re-evaluated the extensive exploration portfolio within the Greater Tendrara and Anoual exploration permits surrounding the Tendrara Production Concession. By integrating the acquired data and learnings from previous drilling campaigns with acquired and reprocessed seismic datasets, the Company has 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.

These targets include the exploration prospect 'M5' located on the Anoual permits, together with the potential of the structures previously drilled on the Greater Tendrara permits, SBK-1 and TE-4. 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. 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.

The Company looks forward to providing further updates on these near term drilling opportunities as further evaluation and planning progresses.

Strategic Update

In 2020, Sound Energy announced that it was pivoting its monetisation strategy from predominantly high impact, frontier exploration towards a development-led commercialisation approach, as subsequently evidenced through progression of the phased development of the Tendrara Production Concession.

Since 2020, aside from the ongoing development of the Company's existing portfolio, the Company has been assessing a basket of opportunities to build out, diversify and grow Sound Energy both organically and inorganically. These assessments have included potential further gas related opportunities and potential renewable energy projects, including wind and solar power generation, leveraging the Company's skills, relationships and existing position in Morocco.

Consequently, the Company is pleased to announce that its wholly owned subsidiary, Sound Energy Sustainables Limited ("SESL"), is in discussions with a number of Moroccan industrial scale farmers proximate to the Company's Sidi Moktar exploration permits to evaluate the provision of 4.3MW of solar powered electricity (with realisable opportunities to scale beyond this area). Following completion of a feasibility study SESL now plans to further discussions with the farmers to seek to finalise a power supply contract(s) with a view to replacing carbon based, grid sourced electricity via the potential solar project. In parallel, the Company is maturing the capital funding alternatives to finance the modest solar development costs and further announcements in relation to this potential project will be announced, as appropriate, in due course.

SESL is also evaluating a number of additional renewables projects which may provide the opportunity to offer attractive returns to Sound Energy.

Whilst the Company is excited about the possibilities for growth in the renewables sector and believes that it is well-positioned to unlock such opportunities, Sound Energy remains committed to supporting the energy transition by continuing to develop its existing gas projects as well as additional gas opportunities. The recent strengthening of the global commodities market and the increased focus on energy security within Europe and North Africa has underscored the strategic rationale of developing gas resources and the attractiveness of the region. Consequently, the Company has developed a funnel of organic and inorganic opportunities within the gas sector, in Morocco and beyond. This includes gas storage and gas importation together with more conventional development of gas fields, all of which are characterised by offering the potential for immediate to near term cash generation. The Company looks forward to providing further updates on developments in this regard as the growth funnel matures.

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

"We are pleased to announce these updates today following a period of concerted focus on the future strategy of the Company. The updates highlight the significant progress that Sound Energy has been making to put the key elements in place to create sustained shareholder value through the development of a cash generative, self-financing business centred around society's aspirations, and Sound Energy's strategy to accelerate the energy transition. We are on a path to building a quality portfolio that fully reflects our aspiration to be a key player right across the energy transition landscape.

The Tendrara Phase 1 mLNG project is now well underway and the Tendrara Phase 2 Development, which is significantly greater in scale than Phase 1 and therefore offers the potential for greater rewards, but also presents more challenges from a financing perspective, is also moving forward. Following the execution of the binding gas sales and purchase agreement with ONEE in November 2021, we have been able to materially advance financing discussions and I am pleased that not only do we have strong interest from established international service providers but also from a number of Moroccan banks, which underscores the potential and strategic significance of this nationally important Moroccan gas development project.

Strategically, I am pleased with the progress we are making to deliver growth on the current portfolio but also in identifying and maturing a funnel of transition energy and renewable power opportunities that all have the potential to offer attractive returns for the Company whilst playing an important role in strengthening energy security of supply and decarbonisation. I am particularly pleased that we have been able to do so within an embedded culture of capital discipline which has only been possible through the commitment, focus, abilities and energy of our team"

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