Sound Energy Regulatory News (SOU)

12 December 2012

Sound Oil plc

("Sound Oil" or "the Company")

Sale of Indonesian Subsidiary, Board Change, Share Consolidation

and Notice of General Meeting

Sale of Bangkanai and Board Change

Sound Oil, the Italian focused upstream oil and gas company, is pleased to announce that it has agreed to sell its Indonesian subsidiary, Mitra Energia Bangkanai Limited ("Mitra"), to Salamander Energy plc, the operator. The transaction involves the Company selling 100% of its shares in Mitra (whose only material asset is a 5% working interest in the Bangkanai Production Sharing Contract ("PSC")) in exchange for a total of up to US$7.1 million in cash, structured as follows:

·; US$4.5 million, payable immediately

·; US$1.1 million payable on the later of first gas from the Kerendan field or signature of a new gas sales agreement for the currently unsold gas in the Kerendan field

·; Up to US$1.5 million to be paid as a royalty out of revenues from a future discovery on the Bangkanai PSC

A total of US$0.4 million of taxes is also immediately payable to the Indonesian tax authorities by the Company on this transaction and the Company has provided a tax indemnity to the purchaser.

The forward programme on the Bangkanai PSC involves the completion of the Kerendan development wells and the drilling of two water disposal wells after which it is planned to move the Drillco 1 rig to drill the West Kerendan-1 exploration well. The operator has advised that first gas from the Kerendan field is currently expected mid 2014 earliest.

Following the exit of the Company from Indonesia, Ilham Habibie, a Non-Executive Director of the Company, has decided to leave the Board. The Board would like to thank Ilham for his significant contribution to the Company over many years.

Ilham Habibie commented:

"I have valued my time on the Board of Sound Oil and remain excited about the Italian high upside portfolio. I am pleased to confirm my intention to retain my shareholding and support the Company moving forward."

Share Consolidation and General Meeting

The Company also announces its intention to propose a share consolidation at a General Meeting of shareholders to be held on 4 January 2013 pursuant to which every 10 existing ordinary shares of 0.1p each ("Existing Ordinary Shares") that are in issue as at 5.00 p.m. on 4 January 2013 will be consolidated into one ordinary share of 1p each ("New Ordinary Share").

As at 11 December 2012, the Company had 2,870,120,815 Existing Ordinary Shares in issue and a mid-market price at the close of business that day of 1.05p per share. With shares of low denominations, small absolute movements in the share price can represent large percentage movements resulting in volatility. The consolidation is expected to assist in reducing the volatility in the Company's share price and enable a more consistent valuation of the Company. The Board also believes that the bid-offer spread on shares priced at low absolute levels can be disproportionate to the share price and therefore to the detriment of shareholders.

Other than the change in nominal value, the New Ordinary Shares arising on implementation of the share consolidation will have the same rights as the Existing Ordinary Shares, including voting, dividend and other rights.

Following the share consolidation, the Company's new SEDOL code will be B90XFF1 and its new ISIN code will be GB00B90XFF12.

A circular will be sent to shareholders shortly with further information on the proposed consolidation and the General Meeting (at which the renewal of the powers of the Board to allot shares will also be proposed) and will be available on the Company's website: www.soundoil.co.uk.

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

"The sale of the Bangkanai PSC is the next step in the re-shaping of Sound Oil's portfolio. This transaction exchanges potential annual cash flows from a development project (scheduled to commence mid 2014 but exposed to potential delays, including from the construction of the PLN plant) for cash upfront, which can be utilised to mature our high upside portfolio in Italy.

Sound Oil now has a very clear strategic focus and some US$10.2 million cash in the bank. This should enable Sound Oil to complete a large portion of its 2013 work programme without equity dilution.

This transaction also enables the immediate complete closure of the Jakarta office, which is part of a broader structural cost reduction programme. The running cost of the Jakarta office was circa US$800,000 per annum.

The proposed share consolidation will significantly reduce the number of shares in issue and the associated price volatility, therefore preparing the Company for the next stage of its development. We have consciously chosen a consolidation ratio which does not penalise our private investors.

I am personally disappointed to see Ilham leave as a Director although we look forward to continued dialogue in his role as a significant shareholder."

For further information please contact:

Additional information

Sound Oil's Indonesian subsidiary, Mitra Energia Bangkanai Limited, made a profit of US$ nil in the year ended 31 December 2011 and had total assets of approximately US$5.7 million at that date. Sound Oil's investment in Mitra Energia Bangkanai Limited was carried in the consolidated balance sheet of the Company at 30 June 2012 at a book value of approximately £1.5 million. It is intended that the net proceeds of the sale will be redeployed by the Company in progressing its Italian operations and for working capital purposes.