Proposed Acquisition of OGIF's Interests in Eastern Morocco

Source: 1/19/2017, Location: Africa

Sound Energy, the African and European focused upstream gas company, is pleased to announce the signature, following the successful extended well test, of non-binding heads of agreement for the acquisition of all of Oil & Gas Investment Fund's ("OGIF's") assets in Eastern Morocco (the "Proposed Acquisition").

OGIF is a Moroccan fund, owned by seven large Moroccan financial institutions: Attijariwafa Bank Group (the largest Moroccan bank), CIMR and CDG Group (the largest Moroccan Pension Funds), Finance Com and Advisory and Finance Group (Investment Companies), Mamda-Mcma and Saham (Insurance Companies).

OGIF's Eastern Moroccan assets consist of a 20% interest in Tendrara, a 75% interest in Meridja (including a 55% interest in Meridja over which Sound Energy has previously exercised an option, conditional on regulatory approval) and an application for a 75% position in the relinquished area close to Tendrara (the "OGIF Interests").

The consideration for the acquisition of the OGIF Interests will be 272 million new ordinary shares in the Company (the "Consideration Shares"). The Consideration Shares will, on issue, represent 29.0% of the Company's enlarged issued share capital (24.5% of the Company's fully diluted share capital). As part of the transaction, OGIF will agree to a 12 month lock-in in relation to the Consideration Shares, a 36 month restriction on exceeding 29.9% ownership of the Company and will enter into a relationship agreement with the Company. OGIF will be granted the right to appoint one Non-Executive Director, expected to be a senior OGIF executive, to the Board of the Company for so long as OGIF continues to hold more than 10% of the Company's issued ordinary share capital.

Further to the expression of interest from OGIF to fund, build and operate a new pipeline connecting Tendrara to the Gazoduc Maghreb Europe (GME) pipeline announced on 7 July 2016, OGIF and Sound Energy have also agreed, as part of this transaction, to together identify and secure a low cost and high quality solution for the Tendrara infrastructure, which may include using OGIF's shareholders to fund the pipeline.

Following this transaction Sound Energy will hold 75% of Tendrara and 75% of Meridja on a gross basis - representing 47.5% of Tendrara on a net basis (after the Schlumberger synthetic farm in announced in December 2015) and 75% of Meridja on a net basis. The remaining 25% interests in Tendrara and Meridja are held by Morocco's Office National des Hydrocarbures et des Mines ("ONHYM").

The Proposed Acquisition will, subject to contract and Sound Energy shareholder approval, render it unnecessary to finalise the completion of the Company's previously exercised option to acquire a 55% operated interest in Meridja.

A circular containing details of the Proposed Acquisition and a notice convening a General Meeting for the purposes of seeking shareholder approval for the issue of the Consideration Shares, will be posted to shareholders in due course, following the finalisation of contracts.

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

"This transaction positions Sound Energy with: · a hugely attractive, material and consolidated portfolio across Eastern Morocco
· significant additional upside prior to the drilling of TE-8, our first step-out well at Tendrara, which is due to spud next month
· a second supportive cornerstone investor group made up of Morocco's largest institutions which secures us a hugely advantaged position in Morocco

We are pleased to have entered into heads of agreement with OGIF following the successful extended well test and I look forward to welcoming them to our shareholder register. I have worked closely with the OGIF team for over 18 months now and their access to Moroccan debt capital and their relationship and influence in country are second to none."

Mohammed Benslimane, Chief Executive Officer of OGIF's management company commented:

"Morocco is a fast growing and low risk emerging country with significant hydrocarbon potential. Sound Energy has already played a critical role in unlocking the Eastern Moroccan gas promise over the last eighteen months and we remain hugely impressed by James and his team.

This new partnership aligns the interests of OGIF and Morocco's largest financial institutions with those of Sound Energy.

We see huge short term upside potential in the equity of Sound Energy and look forward to what will certainly be a successful future together."

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