SOUND ENERGY PLC

Interim / Quarterly Report • Sep 13, 2018

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RNS Number : 6078A

Sound Energy PLC

13 September 2018

13 September 2018

Sound Energy plc

("Sound Energy" or the "Company")

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018

Sound Energy, the Morocco focused upstream gas company, announces its unaudited half year report for the six months ended 30 June 2018.

HALF YEAR HIGHLIGHTS

Morocco

·     Completion of 2,850 line kilometre seismic programme in Eastern Morocco, fully funded by Schlumberger

·     Application for Production Concession for Tendrara gas discovery (subsequently awarded post period end)

·     Approval of Environmental Impact Assessment for TE-9 and TE-10 wells at the Tendrara-Labkir permit, with ground works now underway at TE-9

·     Heads of terms with a consortium for the front end engineering and design, construction and financing of a 20 inch pipeline and associated facilities under a 'build-own-operate-transfer' (BOOT) structure.

Corporate

·     Continued strong safety record

·     Cash balance at 30 June 2018 of £14.7 million plus successful equity raise of US$15 million (£11.4 million) (before costs) in July 2018

·     Completion of Italy exit with consideration shares in Coro Energy plc distributed directly to Sound Energy shareholders

·     David Clarkson appointed as non-executive director; JJ Traynor appointed as executive director

For further information please contact:

Vigo Communications - PR Adviser Patrick d'Ancona Chris McMahon Kate Rogucheva	Tel: +44 (0)20 7390 0230
Sound Energy James Parsons, Chief Executive Officer JJ Traynor, Chief Financial Officer	j.parsons@soundenergyplc.com jj.traynor@soundenergyplc.com
Smith & Williamson - Nominated Adviser Azhic Basirov David Jones Ben Jeynes	Tel: +44 (0)20 7131 4000
RBC Capital Markets - Joint Broker Matthew Coakes Martin Copeland	Tel: +44 (0)20 7653 4000
Macquarie Capital (Europe) Limited - Joint Broker Alex Reynolds Nick Stamp	Tel: +44 (0)20 3031 2000

Statement from the Chairman and Chief Executive Officer

"Our priority so far this year has been the de-risking in Eastern Morocco of both our existing discovery and our significant exploration potential. The Company is now ready for this next, potentially transformational, period of exploration drilling."

The Company continues to believe that the TAGI and Paleozoic plays across Tendrara, Anoual and Matarka have the potential to become a material hydrocarbon province transforming both the Company and the Moroccan gas industry. The first half of 2018 has been an incredibly busy period, albeit largely behind the scenes.

The Company has made progress in both developing the existing discovery and in de-risking the exploration potential, including:

·     the closing out of the Eastern Morocco seismic programme, where early results have already enabled the finalisation of the TE-9 and TE-10 well locations

·     securing of a new 8 year licence combining Tendrara and Matarka

·     formal submission of the production concession application for the existing discovery at Tendrara (subsequently awarded in September 2018)

·     award of FEED and signing of a Heads of Terms covering the infrastructure, including a 20 inch pipeline, with a consortium including Enagas

·     Commencement of the process to introduce Schlumberger directly onto the Eastern Morocco licences

·     award of a new Petroleum Agreement for Sidi Moktar

Eastern Morocco

We continue to deepen our knowledge of the Eastern Morocco basin through, in part, the recently completed US$27.2 million seismic programme fully funded by Schlumberger, one of our strategic partners. This work, completed in August 2018, has supported our new Eastern Morocco basin model and is critical to minimising the risk of our rapidly approaching drill programme. Preparations for the first well, TE-9, targeting the A1 structure at Tendrara are complete with the EIA approval secured, a successful CPR issued and ground works now well under way. The Company hopes that the A1 prospect will unlock significant value for the Company, reduce the risk on nearby leads and increase further our overall confidence in the broader TAGI structural play. Preparations also continue apace on the subsequent TE-10 and TE-11 wells.

Excellent progress has also been made on the development of our existing discovery. The Company submitted the production concession application in June 2018 and the production concession was subsequently awarded in September 2018. A Heads of Terms for front end engineering and design (FEED) for a 20 inch pipeline and production facilities was signed with the consortium of Enagas, Elecnor and Fomento who bring strong industry expertise and capabilities. Following this competitive process and negotiation an innovative 'build-own-operate-transfer' (BOOT) structure was agreed with the consortium which further underpins the financial robustness of the development. Positive discussions continue to agree the gas sales agreement (GSA) for offtake which forms a key building block to support project sanction.

The Company continues to maintain a strong focus on health, safety, environment and the community, and work has recently begun in partnership with a local charity on the renovation of the Matarka health care centre.

Sidi Moktar

The Company views our Sidi Moktar licences as an exciting opportunity to explore for high impact prospectivity, within the pre-salt Triassic and Palaeozoic plays in the underexplored Essaouira Basin. In June we were delighted to receive Ministerial approval of a new 8 year Sidi Moktar Onshore Petroleum Agreement. The Company continues to progress a potential farm down, whilst retaining operatorship of the permits, ahead of further exploration operations in 2019.

Italy

The sale of the Company's Italian assets was completed in April. Work continues with the new owners on the preparation of the Badile land, to which the Company retains its economic rights to receive the proceeds, for a future sale.

Corporate

The Company remains in a strong financial position for the second half of 2018 with 30 June 2018 cash balances of US$19.4 million and, following the period end, the Company successfully completing an equity placing of US$15 million before expenses.

The Company has significantly strengthened the Board during 2018 with Richard Liddell being appointed as Non-Executive Chairman, David Clarkson joining as a non-executive director and JJ Traynor, the Company's Chief Financial Officer, joining the Board.

Richard Liddell

Non-Executive Chairman

James Parsons

Chief Executive Officer

CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT

	Notes	Six months ended 30 June 2018 Unaudited £'000s	Six months ended  30 June  2017 Unaudited  £'000s	Year ended  31 Dec 2017 Audited £'000s
Continuing operations
Administrative expenses		(4,077)	(3,976)	(8,458)
Group operating loss from continuing operations		(4,077)	(3,976)	(8,458)
Finance revenue		35	9	23
Foreign exchange gain		1,885	756	(914)
Other gains and (losses)
- derivative financial instruments		(80)	182	(1,873)
External interest costs		(1,195)	(45)	(1,117)
Profit/(loss) for period from continuing operations before taxation		(3,432)	(3,074)	(12,339)
Tax credit/(expense)		-	-	-
Profit/(loss) for period from continuing operations after taxation		(3,432)	(3,074)	(12,339)
Discontinued operations
Profit/(loss) from discontinued operations	8	5,236	(16,140)	(21,811)
Total profit/(loss) for the period		1,804	(19,214)	(34,150)
Other comprehensive (loss)/income
Foreign currency translation income/(loss)		2,872	(167)	(5,361)
Total comprehensive profit/(loss) for the period attributable to equity holders of the parent		4,676	(19,381)	(39,511)
		Pence	Pence	Pence
Basic and diluted profit/(loss) per share for the period from continuing and discontinued operations attributable to equity holders of the parent	3	0.17	(2.73)	(4.28)
Basic and diluted loss per share for the period from continuing operations attributable to equity holders of the parent	3	(0.34)	(0.44)	(1.54)

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

As at 30 June 2018

	Notes	30 June 2018 Unaudited £'000s	30 June  2017 Unaudited £'000s	31 Dec 2017 Audited  £'000s
Non-current assets
Property, plant and equipment		680	1,811	372
Intangible assets	4	170,585	31,828	163,939
Land and buildings		-	1,581	-
		171,265	35,220	164,311
Current assets
Inventories		602	705	628
Other receivables	5	8,235	6,087	3,526
Derivative financial instruments		-	2,135	80
Prepayments		227	201	117
Cash and short term deposits		14,664	38,532	21,198
		23,728	47,660	25,549
Assets of the Group held for sale		-	-	12,292
Total assets		194,993	82,880	202,152
Current liabilities
Trade and other payables		5,925	10,649	6,601
Provisions		-	1,406	-
		5,925	12,055	6,601
Liabilities of the Group held for sale		-	-	4,492
Non-current liabilities
Deferred tax liabilities		-	433	-
Loans due in over one year	6	19,290	17,632	18,566
Provisions		-	1,876	-
		19,290	19,941	18,566
Total liabilities		25,215	31,996	29,659
Net assets		169,778	50,884	172,493
Capital and reserves
Share capital and share premium		10,974	147,371	287,829
Warrant reserve		4,090	4,090	4,090
Foreign currency reserve		(2,579)	1,276	(3,918)
Accumulated surplus/(deficit)		157,293	(101,853)	(115,508)
Total equity		169,778	50,884	172,493

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital £'000s	Share premium £'000s	Shares  to be issued  £'000s	Accumulated surplus/ (deficit) £'000s	Warrant reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2018	10,159	277,670	-	(115,508)	4,090	(3,918)	172,493
Total profit for the period	-	-	-	1,804	-	-	1,804
Other comprehensive income	-	-	-	-	-	2,872	2,872
Total comprehensive income for the period	-	-	-	1,804	-	2,872	4,676
Reclassification to profit and loss account on Italy divestment	-	-	-	-	-	(1,533)	(1,533)
Reclassification on share premium account cancellation	-	(277,738)	-	277,738	-	-	-
Distribution to shareholders on Italy divestment	-	-	-	(7,994)	-	-	(7,994)
Issue of share capital	41	842	-	-	-	-	883
Share based payments	-	-	-	1,253	-	-	1,253
At 30 June 2018 (unaudited)	10,200	774	-	157,293	4,090	(2,579)	169,778

	Share capital £'000s	Share premium £'000s	Shares  to be issued  £'000s	Accumulated deficit  £'000s	Warrant reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2017	6,651	129,016	223	(84,213)	4,459	1,443	57,579
Total loss for the year	-	-	-	(34,150)	-	-	(34,150)
Other comprehensive loss	-	-	-	-	-	(5,361)	(5,361)
Total comprehensive loss	-	-	-	(34,150)	-	(5,361)	(39,511)
Issue of share capital	3,490	148,449	-	-	-	-	151,939
Reclassification on share issue	18	205	(223)	-	-	-	-
Reclassification on debt settlement	-	-	-	369	(369)	-	-
Share based payments	-	-	-	2,486	-	-	2,486
At 31 December 2017	10,159	277,670	-	(115,508)	4,090	(3,918)	172,493

	Share capital £'000s	Share premium £'000s	Shares  to be issued  £'000s	Accumulated deficit £'000s	Warrant reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2017	6,651	129,016	223	(84,213)	4,459	1,443	57,579
Total loss for the period	-	-	-	(19,214)	-	-	(19,214)
Other comprehensive income	-	-	-	-	-	(167)	(167)
Total comprehensive income for the period	-	-	-	(19,214)	-	(167)	(19,381)
Reclassification on debt settlement	-	-	-	369	(369)	-	-
Reclassification on share issue	18	205	(223)	-	-	-	-
Issue of share capital	646	10,835	-	-	-	-	11,481
Share based payments	-	-	-	1,205	-	-	1,205
At 30 June 2017 (unaudited)	7,315	140,056	-	(101,853)	4,090	1,276	50,884

CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT

Notes		Six months ended 30 June 2018 Unaudited £'000s	Six months ended 30 June 2017 Unaudited £'000s	Year ended 31 Dec 2017 Audited £'000s
Cash flow from operating activities
Cash flow from operations		(1,202)	(3,308)	(11,849)
Interest received		61	37	102
Net cash flow from operating activities		(1,141)	(3,271)	(11,747)
Cash flow from investing activities
Capital expenditure and disposals		(382)	(370)	(478)
Exploration and development expenditure		(3,122)	(14,345)	(23,482)
Cash disposed with Italian operations		(2,655)	-	-
Net cash flow from investing activities		(6,159)	(14,715)	(23,960)
Proceeds from derivative financial instruments		-	-	592
Net proceeds from equity issue		607	9,813	11,550
Interest payments		(634)	(645)	(1,293)
Net cash flow from financing activities		(27)	9,168	10,849
Net decrease in cash and cash equivalents		(7,327)	(8,818)	(24,858)
Net foreign exchange difference		(20)	541	60
Cash and cash equivalents at the beginning of the period		22,011	46,809	46,809
Cash and cash equivalents at the end of the period		14,664	38,532	22,011

Notes		Six months ended 30 June 2018 Unaudited £'000s	Six months  ended 30 June 2017 Unaudited £'000s	Year ended  31 Dec  2017 Audited £'000s
Cash flow from operations reconciliation
Profit/(loss) before tax from continuing operations		(3,432)	(3,074)	(12,339)
Profit/(loss) before tax from discontinued operations		5,236	(16,140)	(21,866)
Total profit/(loss) for the period before tax		1,804	(19,214)	(34,205)
Finance revenue		(61)	(37)	(102)
Impairment of goodwill		-	-	55
Exploration expenditure written off and impairment of assets		-	15,124	19,833
Gain on disposal of Italian operations	8	(3,967)	-	-
Decrease in accruals and short term payables		(379)	(2,327)	(5,783)
Depreciation		176	331	406
Share based payments charge and bonuses paid in shares		1,529	1,205	2,486
Decrease/(Increase) in drilling inventories		28	(374)	(430)
Loss/(gain) on derivative financial instruments		80	(182)	1,873
Finance costs and exchange differences		(690)	(643)	2,158
Foreign currency translation gain reclassified from other comprehensive income	8	(1,533)	-	-
Decrease in short term receivables and prepayments		1,811	2,809	1,860
Cash flow from operations		(1,202)	(3,308)	(11,849)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The financial information for the year ended 31 December 2017 is based on the statutory accounts for the year ended 31 December 2017. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2017 statutory accounts, except for the adoption of IFRS 9, Financial instruments which did not have a material impact on the condensed interim financial information and in accordance with IAS 34 Interim Financial Reporting. IFRS 15, Revenue from contracts with customers and several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the condensed interim consolidated financial statements of the Group.

The seasonality or cyclicality of operations does not impact on the interim financial statements.

2. Segment information

The Group categorises its operations into three business segments based on Corporate, Exploration and Appraisal and Development and Production. The Group's Exploration and Appraisal activities are carried out in Morocco. The Group's reportable segments are based on internal reports about the components of the Group which are regularly reviewed by the Board of Directors, being the Chief Operating Decision Maker (''COMD''), for strategic decision making and resources allocation to the segment and to assess its performance. The segment results for the period ended 30 June 2018 are as follows:

Segment results for the period ended 30 June 2018

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total  £'000s
Administration expenses	(4,077)	-	-	(4,077)
Operating loss segment result	(4,077)	-	-	(4,077)
Finance revenue	35	-	-	35
Gain/(loss) on derivative financial instruments	(80)	-	-	(80)
Finance costs and exchange adjustments	690	-	-	690
Loss for the period before taxation	(3,432)	-	-	(3,432)

The segments assets and liabilities at 30 June 2018 are as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Capital expenditure	680	-	170,585	171,265
Other assets	19,999	-	3,729	23,728
Total liabilities	(21,080)	-	(4,135)	(25,215)

The geographical split of non-current assets is as follows:

	UK £'000s	Morocco £'000s
Fixtures, fittings and office equipment	148	532
Exploration and evaluation assets	-	170,449
Software	45	91
Total	193	171,072

Segment results for the period ended 30 June 2017

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total  £'000s
Administration expenses	(3,976)	-	-	(3,976)
Operating loss segment result	(3,976)	-		(3,976)
Finance revenue	9	-	-	9
Gain on derivative financial instruments	182	-	-	182
Finance costs and exchange adjustments	711	-	-	711
Profit/(loss) for the period before taxation	(3,074)	-	-	(3,074)

The segments assets and liabilities at 30 June 2017 were as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Capital expenditure	512	-	26,763	27,275
Other assets	38,561	-	3,371	41,932
Liabilities attributable to continuing operations	(18,980)	-	(5,689)	(24,669)

The geographical split of non-current assets is as follows:

	UK £'000s	Morocco £'000s
Fixtures, fittings and office equipment	192	232
Exploration and evaluation assets	-	26,622
Software	88	141
Total	280	26,995

The segmental results as at 30 June 2017 excludes the results of discontinued operations.

Segment results for the year ended 31 December 2017

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Administration expenses	(8,458)	-	-	(8,458)
Operating loss segment result	(8,458)	-	-	(8,458)
Interest receivable	23	-	-	23
Loss on derivative financial instruments	(1,873)	-	-	(1,873)
Finance costs and exchange adjustments	(2,031)	-	-	(2,031)
Loss for the period before taxation from continuing operations	(12,339)	-	-	(12,339)

The segments assets and liabilities at 31 December 2017 were as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Non-current assets	372	-	163,939	164,311
Current assets	21,701	-	3,848	25,549
Liabilities attributable to continuing operations	(20,165)	-	(5,002)	(25,167)

The geographical split of non-current assets is as follows:

	UK £'000s	Morocco £'000
Fixtures, fittings and office equipment	177	195
Exploration and evaluation assets	-	163,737
Software	66	136
Total	243	164,068

3. Profit/(loss) per share

The calculation of basic profit/(loss) per Ordinary Share is based on the profit/(loss) after tax and on the weighted average number of Ordinary Shares in issue during the period. The calculation of diluted profit/(loss) per share is based on the profit/(loss) after tax on the weighted average number of ordinary shares in issue plus weighted average number of shares that would be issued if dilutive options and warrants were converted into shares. Basic and diluted profit/(loss) per share is calculated as follows:

	30 June 2018 £'000	30 June 2017 £'000	31 December 2017 £'000
Loss after tax from continuing operations	(3,432)	(3,074)	(12,339)
Profit/(loss) after tax from discontinued operations	5,236	(16,140)	(21,811)
Total profit/(loss) for the period	1,804	(19,214)	(34,150)

	million	million	million
Weighted average shares in issue	1,019	703	799
Dilutive potential ordinary shares	33	-	-
Diluted weighted average number of shares	1,052	703	799

Basic profit/(loss) per share

	Pence	Pence	Pence
Basic loss per share from continuing operations	(0.34)	(0.44)	(1.54)
Basic profit/(loss) per share from discontinued operations	0.51	(2.29)	(2.74)
Basic profit/(loss) per share from continuing and discontinued operations	0.17	(2.73)	(4.28)

Diluted profit/(loss) per share

	Pence	Pence	Pence
Diluted loss per share from continuing operations	(0.34)	(0.44)	(1.54)
Diluted profit/(loss) per share from discontinued operations	0.50	(2.29)	(2.74)
Diluted profit/(loss) per share from continuing and discontinued operations	0.17	(2.73)	(4.28)

The effect of the potential dilutive shares noted above on the earnings per share from continuing operations would be anti-dilutive and therefore are not included in the above calculation of diluted earnings per share from continuing operations.

4. Intangibles

	30 June  2018 Unaudited £'000s	30 June 2017 Unaudited £'000s	31 Dec 2017  Audited £'000s
Cost
At start of period	164,018	42,386	42,386
Additions	3,408	18,186	165,762
Exchange adjustments	3,304	(284)	(5,986)
Reclassification to assets of disposal group held for sale	-	-	(38,144)
At end of period	170,730	60,288	164,018
Impairment and Depreciation
At start of period	79	14,326	14,326
Charge for period	64	13,761	19,190
Exchange adjustments	2	373	(85)
Reclassified to assets of disposal group held for sale	-	-	(33,352)
At end of period	145	28,460	79
Net book amount	170,585	31,828	163,939

5. Other receivables

	30 June  2018 Unaudited £'000s	30 June 2017 Unaudited £'000s	31 Dec 2017 Audited £'000s
Italian Vat refundable	2,730	-	-
Badile land proceeds receivable	1,592	-	-
Other receivable	3,913	6,087	3,526
	8,235	6,087	3,526

6. Loans and Borrowings

	30 June  2018 Unaudited £'000s	30 June 2017 Unaudited £'000s	31 Dec 2017 Audited £'000s
Non-current liability
5-year secured bonds	19,290	17,632	18,566
	19,290	17,632	18,566

The Company has 5-year non-amortising secured bonds with an aggregate value of €28.8 million. The bonds are secured over the share capital of Sound Energy Morocco South Limited, have a 5% coupon and were issued at a 32% discount to par value. Alongside the bonds, the Company issued 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. The effective interest rate is approximately 16.3%. The 5-year secured bonds are due in June 2021.

7. Shares in issue and share based payments

As at 30 June 2017, the Company had 1,019,954,543 ordinary shares in issue. In the period to 30 June 2018, a total of 0.9 million warrants were exercised for total proceeds of £0.2 million.

During the period to 30 June 2018, the Company granted 2.8 million restricted stock units awards to staff under its long term incentive plan. Approximately 2.5 million share options were exercised and 2.2 million expired during the period.

8. Discontinued operations

On 5 October 2017, the Company announced that it had entered into non-binding conditional heads of terms with Saffron Energy plc (''Saffron'') and Po Valley Energy Limited under which it was proposed that the Company disposed of its portfolio of Italian interests and permits through the sale of Sound Energy Holdings Italy (''SEHIL'') and Apennine Energy SpA (''APN'') (the ''disposal'') for the consideration of 185,907,500 new ordinary shares in Saffron (subsequently renamed Coro Energy plc) issued directly to the Company's shareholders. On 23 January 2018, the Company announced that it had entered into a binding agreement with Saffron for the disposal and the transaction completed on 9 April 2018. The value of the 185, 907, 500 Coro Energy plc shares distributed to the Company's shareholders was £8.0 million using the completion date share price of 4.3 pence.

The results of the Italian operations for the period are presented below:

	Six months ended 30 June 2018* Unaudited £'000	Six months ended 30 June 2017 Unaudited £'000	Twelve months ended 31 December 2017 Audited £'000
Revenue	140	378	708
Operating costs	(170)	(169)	(697)
Impairment of Intangible assets and goodwill	-	(13,761)	(19,073)
Exploration costs	(25)	(1,362)	(761)
Gross loss	(55)	(14,914)	(19,823)
Administrative expenses	(235)	(1,186)	(1,995)
Operating loss from discontinued operations	(290)	(16,100)	(21,818)
Finance revenue	26	28	79
Foreign exchange gain	-	4	4
Finance costs	-	(72)	(131)
Foreign currency translation gain reclassified from other comprehensive income	1,533	-	-
Gain on disposal of Italian operations	3,967	-	-
Profit/(loss) for the period before taxation from discontinued operations	5,236	(16,140)	(21,866)
Deferred tax credit	-	-	55
Profit/(loss) for the period after taxation from discontinued operations	5,236	(16,140)	(21,811)
*Represent the results for the period to divestment on 9 April 2018.
The net cash flows for the period were as follows:

Net cash flow from operating activities	1,897	1,049	(2,513)
Net cash flow from investing activities	-	(9,649)	(13,962)
Net cash flow from financing activities	-	-	-
Net cash outflow	1,897	(8,600)	(16,475)

9. Post Balance Sheet events

On 2 July 2018, the Company announced that it had placed 30,829,308 new ordinary shares of 1p each at a placing price of 37p to raise approximately US$15 million before costs (approximately US$14.25 million after costs).

On 23 July 2018, the Company announced the initiation of the process of converting the existing 27.5% synthetic interests held by an affiliate of Schlumberger in the Tendrara Lakbir permits, the Anoual permits and the Matarka reconnaissance licence ("Eastern Morocco Portfolio") into 27.5% participating interests in the Eastern Morocco contract area. Sound Energy will remain the operator.

On 31 August 2018, the Company announced that it had signed a new 8 year petroleum agreement uniting the areas previously covered by the Tendrara petroleum agreement and the Matarka reconnaissance licence (''Greater Tendrara''). The agreement will become effective on approval of the Moroccan Energy and Finance Ministries. The Company will hold an operated 47.5% interest, Schlumberger 27.5% interest and the remaining 25% by L'Office National des Hydrocarbures et des Mines (''ONHYM''),the Moroccan state regulator for petroleum operations.

On 6 September 2018, the Company announced the award by the Moroccan Ministry of Energy of the production concession relating to the Tendrara gas discovery in Eastern Morocco. The production concession award covers an area of 133. 5 Km2.

This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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