Institutional Investment

RNS Number : 4890F

Sound Oil PLC

25 April 2014

Sound Oil plc

("Sound Oil" or the "Company")

Institutional Investment

Sound Oil, the Mediterranean focused upstream oil and gas company, is pleased to announce that it has signed Heads of Terms with a new Institutional Investor, Continental Investment Partners SA, acting on behalf of itself and entities it controls (together the "Investor").

The Investor has agreed, subject to due diligence and contract, to inject a total of £14 million into the Company at an average price, post warrant exercise, of approximately 9 pence per share (a 69% premium to the closing share price on 24 April 2014). These funds (net of expenses) will be utilized to fund the drill programme for the next year, including Nervesa and Badile. The Company continues to make progress on potential farm-ins and looks forward to updating shareholders in due course.

Ordinary share issue

Subject to due diligence, contract and approval by the Company's shareholders, the Investor will subscribe for 100,000,000 new ordinary shares at a price of 8 pence per share to raise £8,000,000 before expenses. As a result, the Investor will therefore own 23.41% of the Company's issued ordinary share capital. The Investor has agreed to an 18 month lock-in period for half of the shares to be subscribed for and a 12 months lock-in period for the other half.

The loan note and warrant issue

As a sign of its commitment to the transaction, the Investor will immediately (prior to due diligence) subscribe for a £1.5 million 3 year loan at a 10% coupon and will, on issue of this initial loan, be granted 14,423,076 warrants to subscribe for new ordinary shares in the Company exercisable at a price of 10.4 pence per share. The exercise price of 10.4 pence per share represents a 98% premium to the closing share price on 24 April 2014 and a 79% premium to the three month VWAP. Coupon payments will be made quarterly in arrears in cash.

Subject to due diligence and contract, and following approval by the Company's shareholders of the ordinary share issue, the Investor will provide Sound Oil with an additional £4.5 million by way of a further loan on the same terms as the initial £1.5 million loan described above (10% coupon and the issue of 43,269,230 warrants, exercisable at 10.4 pence per share). Coupon payments will also be made quarterly in arrears in cash. A fee of 5% of the total proceeds of the £14 million fundraising will be payable to the Investor by the Company.

The warrants will be both detachable and transferable and can be exercised at any point during the term of the loan. Should any of the warrants be exercised, the Company is entitled, but not obliged, to apply the proceeds received to the repayment of the loan at the time of exercise. The Investor will only be able to exercise the warrants up to the point where its ownership does not exceed 29.9% of the issued share capital of the Company. Any balance of the loan not repaid after three years will be repayable at that point in cash by the Company.

It is intended that on the issue of the second tranche of the loan note, the existing £1 million loan from Simon Davies, a director of the Company, will convert into a new loan on identical terms to the Investor loan (including the issue of warrants) but without fees.

Proposed Board changes

Upon successful completion of the ordinary share issue and issue of the loan notes and warrants, it is intended that the Investor will have the right to nominate two Non-Executive Directors for appointment to the Board of the Company. It is intended that this will include Continental's Managing Partner, Marco Fumagalli. Marco is a well-known Italian businessman who was previously a Group Partner at 3i. The new Board structure will be the subject of a further announcement upon transaction execution.

James Parsons, Chief Executive Officer of Sound Oil, commented:

"I am very pleased to welcome Continental Investment Partners as our largest shareholder and first cornerstone institutional investor. The Investor is investing on behalf of private family offices in Italy, Switzerland and the UK. Continental's Managing Partners, Carlo Sgarbi and Marco Fumagalli, are highly supportive of our assets, our published business plan and the team we have built.

This transaction will deliver to Sound Oil:

• £14 million cash which we will use to substantially fund the medium term drill programme.

• A high quality and supportive institutional investor with strong relationships in the Mediterranean region."

The Company is also pleased to invite investors to a conference call with James Parsons (CEO) and Stuart Joyner (CFO) at 1:30pm (BST) today. Details are as follows:

UK Toll Number: 02031394830

UK Toll-Free Number: 08082370030

Participant Pin Code: 67642811#

For further information please contact:

Sound Oil

James Parsons, Chief Executive Officer

Stuart Joyner, Chief Financial Officer

j.parsons@soundoil.co.uk

s.joyner@soundoil.co.uk

Smith & Williamson - Nominated Adviser

Azhic Basirov

David Jones