THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

Sound Oil PLC

("Sound Oil" or "the Company")

Acquisition and Placing to Raise £3.7 million

Sound Oil (LSE: SOU), the upstream oil and gas company with assets in Indonesia, today announces that it has conditionally acquired 96 per cent of the issued share capital of Consul Oil & Gas Limited ("Consul"), a private UK exploration and production company with licences in Italy (the "Acquisition").

The consideration of approximately £4.62 million will be satisfied by the payment of approximately US$2.19 million (£1.39 million) in cash and the issue of 269,127,983 New Ordinary Shares in the capital of Sound ("Ordinary Shares").  In addition, the Company will also purchase from RAB Octane (Master) Fund Limited ("RAB") an existing loan and associated interest from RAB to Consul of approximately €1.15 million.

Sound has also made an offer to acquire the remaining 4% of the issued share capital of Consul which, if accepted, will result in an additional cash payment of US$93,333 and the issue of a further 11,111,110 New Ordinary Shares in Sound.

The Company also announces a conditional placing ("Placing") of 311,251,000 New Ordinary Shares at 1.2p per share ("Placing Shares") to raise approximately £3.7 million, before expenses.

In addition, the Company announces that it has entered into a £10 million Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd, an investment fund managed by Yorkville Advisors LLC, further details of which are set out below. 

The net proceeds of the Placing, together with the available funds under the SEDA, will be used to fund the combined work programme and ongoing costs of the Company and its subsidiaries.

Further, the Company has agreed to issue a total of 12,500,000 New Ordinary Shares to two directors of Consul as payment for services, in lieu of cash.

Application has been made for in total 592,878,983 New Ordinary Shares (the "New Ordinary Shares") to be admitted to trading on AIM and dealings are expected to commence in the New Ordinary Shares on 5 January 2011, subject to shareholder approval.

The Company intends to post a circular today to all of its shareholders setting out full details of the Acquisition and Placing and convening a general meeting seeking shareholder approval for the issue of the New Ordinary Shares in connection with the Acquisition and the Placing. The general meeting has been convened for 11.00 am on 4 January 2011.

Each member of the Board has given irrevocable undertakings to vote in favour of the resolutions to be proposed at the general meeting in respect of their own beneficial holdings of 153,458,786 Ordinary Shares, representing, in aggregate, 22.17 per cent. of the existing Ordinary Shares.  Additionally, RAB Energy Fund has given an irrevocable undertaking to vote in favour of the resolutions in respect of their own beneficial holding of 32,084,290 Ordinary Shares, representing 4.63 per cent. of the existing Ordinary Shares.

Details of Consul Oil & Gas

Consul is a private company founded in 2006 which holds 17 oil and gas exploration permits and applications, in Italy. Independent experts, Fugro Robertson Limited, have estimated that Consul's licence areas hold a minimum of 13 mmboe of net contingent resources with a combined success case value of US$226 million.  In addition, exploration potential for 284 Bscf of net prospective resources has been identified in two prospects in one permit.

The Board considers that the commercial rationale for the Acquisition is compelling. By acquiring Consul, Sound will add a portfolio of low-risk, operated developments, with near term revenue potential, to its longer term but non-operated Indonesian assets. Furthermore, Consul comes with significant upside potential from a number of exploration prospects. Limited work commitments, favourable fiscal terms, strong pricing environment and widespread infrastructure in Italy will lower the financial and operational risk profile of Sound.

Apennine Energy srl., the 100% subsidiary of Consul, is the title-holder to the permits and application in Italy and the operator of the majority of its assets. Apennine holds high equity positions ranging from 50 per cent. to 100 per cent. which gives it control over the level and pace of development and spending. The portfolio consists of a mix of oil and gas development and production opportunities and high impact exploration prospects. Italy is a proven hydrocarbon region which provides attractive fiscal terms in a stable political environment.

Directors' Shareholding

Gerald Orbell, a Director of Sound, is also a vendor of Consul and will receive 8,016,873 New Ordinary Shares in exchange for his shares in Consul.  As a result, following Admission of the New Ordinary Shares to trading on AIM, Gerald Orbell will be interested in a total of 12,241,418 Ordinary Shares representing 0.95% of the enlarged issued share capital of the Company.

SEDA Facility

Subject to its terms, the £10 million SEDA facility can be drawn upon at the discretion of the Company. Under the terms of the agreement, Sound may draw down on funds over a period of up to three years in exchange for the issue of New Ordinary Shares. The Ordinary Shares issued by the Company will be at a 5% discount to the prevailing market price during the 10 day pricing period of a draw down. The Company may also set a minimum price for each draw down. The maximum advance that may be requested is 200% of the average daily trading volume of Ordinary Shares multiplied by the volume weighted average price of such shares for each of the 10 trading days prior to the draw down request. The facility may only be drawn down upon once every 10 days.

Commenting on the acquisition, Gerald Orbell, Chief Executive of Sound Oil said:

"We are delighted to be announcing this proposed acquisition of Consul which forms an important element of our expansion strategy. The proposed acquisition offers us the prospect of exploring and producing within the extremely profitable Italian oil and gas fields whilst allowing us the opportunity to diversify our portfolio by adding exciting new assets. Over the next 12 to 24 months the Company is expected to participate in at least seven wells in Italy and Indonesia"  

For further information please contact:

SHARE CAPITAL AND PLACING STATISTICS

Number of Ordinary Shares in issue as at the date of this document                       692,427,348

Number of Placing Shares                                                                                   311,251,000

Number of Ordinary Shares to be issued pursuant to the Acquisition                       269,127,983

Number of Ordinary Shares in issue on Admission                                              1,285,306,331

Net proceeds of the Placing due to the Company excluding                                     £2.8 million

the SEDA facility

Net proceeds of the Placing due to the Company including the                              £12.8 million

fully utilised SEDA facility

Market capitalisation of the Company on Admission at the Placing Price                £15,423,676

Dr Michael Cope BSc PhD CGeol, Head of Exploration at Sound Oil, a Chartered Geologist in the United Kingdom, has reviewed the technical information contained in this news release.