21 June 2016

Sound Energy plc

("Sound Energy" or the "Company")

Issue of Bonds and Warrants

Sound Energy, the European / Mediterranean focused upstream gas company, announces that, pursuant to a subscription agreement dated 21 June 2016 (the "Subscription Agreement"), Greenberry S.A. ("Greenberry") has subscribed for 5 year non-amortising secured bonds with an aggregate par value of Euro 28.8 million (the "Bonds"). The terms of the Bonds were previously announced by Sound Energy on 10 May 2016.

Alongside the Bonds, the Company will issue 70,312,500 warrants to subscribe for new ordinary shares in the Company at an exercise price of 30 pence per ordinary share and an exercise period of approximately five years, concurrent with the term of the Bonds, to Greenberry (the "Warrants"). The issue of 3,335,214 Warrants will remain subject to Sound Energy shareholder approval at the Company's 2016 annual general meeting.  

The net proceeds of the Bond Issue will be utilised to: (i) provide the Company with additional cash resources of Euro 6 million with which to pursue its growth strategy; (ii) settle in full, including termination of the associated royalty agreement, (at a 50% discount to par value) the Euro 7 million Nervesa reserve based lending facility provided by Greenberry falling due for maturity in November 2016 (the "RBL Settlement"); and (iii) settle in full (at par value) the existing £7 million corporate loan from Greenberry falling due for maturity in July 2017 (the "Greenberry Loan Settlement" and together with the RBL Settlement the "Debt Settlement"). The £1 million loan originally provided to Sound Energy in January 2014 (the "Director Loan") by Simon Davies, the Company's Chairman, will remain in place until its expiry in July 2017.

Certain of the assets of Sound Energy Holdings Italy Limited (the Sound Energy subsidiary that that holds the group's Italian assets), on which the Bonds are secured, were previously provided as security under the Director Loan. Following the transfer of the Director Loan from Mr. Davies to his wife, Mrs. Davies has agreed to release the previous Director Loan security and the Director Loan is now, pursuant to the terms of a share charge agreement entered into with the Company, secured on the shares in Sound Energy Morocco South Limited currently held, and to be held by Sound Energy (the "Security Amendments").

Under the Subscription Agreement, the Bonds will be issued in a number of tranches and the Warrants will be issued alongside the final tranche of the Bonds (the "Bond and Warrant Issue"). The first tranche of the Bonds, with an aggregate par value of Euro 10 million, have been issued immediately. 

The Bonds have a 5% coupon and are being issued at a 32% discount to par value. A total cash fee of Euro 1.1 million (3.8% of the par value of the Bonds) is payable by the Company to Greenberry in connection with the issue of the Bonds.

Related Party Transaction

Continental Investment Partners S.A. ("Continental"), which is directly and indirectly interested in 12.98% of Sound Energy's issued ordinary share capital. Greenberry is an affiliate of Continental by virtue of its common ownership and Marco Fumagalli, a director of the Company, is Managing Partner of, and a 25% shareholder in, Continental. Under the AIM Rules for Companies (the "AIM Rules") therefore, Continental, Greenberry and Simon Davies, a director of the Company, are deemed related parties of the Company and the Bond and Warrant Issue, the Debt Settlement and the Security Amendments (together the "Transaction") are a related party transaction pursuant to Rule 13 of the AIM Rules for Companies.

The directors of Sound Energy (excluding Marco Fumagalli and Simon Davies) consider, having consulted with the Company's nominated adviser, that the terms of the Transaction are fair and reasonable insofar as the shareholders of Sound Energy are concerned.

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