Sound Energy : HYFR

Continuing to Fuel the Energy Transition

Half Yearly Report 2023

Contents	Page
Statement from the Executive Chairman	1
Operations review	3
Independent Auditor's Review Report	6
Condensed Interim Consolidated Income Statement	8
Condensed Interim Consolidated Balance Sheet	9
Condensed Interim Consolidated Statement of Changes in Equity	10
Condensed Interim Consolidated Cashflow Statement	12
Notes to the Condensed Interim Consolidated Financial Statements	13
Shareholder Information	20

Sound Energy plc

Statement from the Executive Chairman

Continuing to execute on our strategy to deliver revenue generation

Our strategy of the phased development of the Tendrara gas discovery is well defined and whilst the economic and geo-political environment continued to present challenges, the Company continues to make progress towards revenue generation.

Phase 1 Tendrara Micro LNG Project (mLNG)

Post the completion of site preparation in March 2023, the Company finalised the main civil works including the mLNG tank foundations by May 2023. Additionally, activities such as well head inspection and servicing tool fabrication, flowlines concept selection, engineering and owners engineering support have been ongoing and are well advanced.

Currently, there is extensive activity taking place offsite with our contractor Italfluid Geoenergy S.r.l and its sub-contractors designing and constructing plant equipment for delivery to site in early 2024. In addition to Italfluid's project scope of work, Sound Energy is to undertake well head and flow line preparation, including workovers of TE-6 and TE-7. Afriquia Gaz S.A is to procure and put in place the LNG transportation trucking, local storage and regasification facilities. Once on site, the processing and liquefaction equipment will be commissioned and integrated with the wells and trucking systems. Whilst the mLNG storage tank fabric has been manufactured, there has been some supply chain disruption leading to later than planned delivery to site which remains on the critical path. Despite this, the Company remains committed to commencing production in 2024.

Phase 2 Tendrara Processing and Pipeline Project

Progress continued to be made with the Phase 2 development project in 2023.

Crucially, significant progress has been made regarding Project funding with Attijariwafa Bank, Morocco's largest bank, as exclusive lead arranger of a senior debt financing issuing a binding conditioned term sheet. The bank completed legal and technical due diligence in respect of the proposed financing in March, and in June made a conditioned offer for a maximum financing of MAD 2.365 billion (approximately US$237 million), proposed to be 100% underwritten by the bank, and subject to certain conditions being met such as Governmental approvals, Gas Sales agreement amendments, further engineering and Contractor contracts being in place.

Corporate

Following the commencement in 2022 of a process to secure participation of a strategic partner, in June the Company entered into a period of exclusivity and non-binding term sheet with Calvalley Petroleum (Cyprus) Limited ("Calvalley") for a partial divestment of a net 40% working interest in the Tendrara Exploitation Concession and the Grand Tendrara Exploration Permit which will result in, subject to agreement of definitive transaction documentation:

• Funding of the first US$48 million of Sound Energy and Calvalley's Phase 2 equity funded development costs by Calvalley, subject to final investment decision
• Funding of 100% of the TE-4 Horst well costs by Calvalley up to a cap of US$7 million
• Funding of 40% share of Phase 1 costs, including back costs net to Calvalley of approximately US$8 million (through to July 2023)

Advancement to Sound Energy of additional Phase 1 and Phase 2 costs, if necessary, and at the Company's election, repayable out of future revenue. Post the period, definitive documents are being negotiated with the aim to conclude the transaction in 2023.

The combination of closing the transactions with Calvalley and Attijariwafa Bank will allow the Company to take the Final Investment decision and begin activities to construct the much-needed pipeline infrastructure at Tendrara.

In June the Company received of court papers confirming the withdrawal of cases between the Company and the Moroccan Tax authority for matters with respect to claims against Sound Energy Morocco East and Sound Energy Morocco SARL AU.

In June the Company raised up to £4.0 million by way of a senior unsecured convertible bond instrument. The proceeds will, if fully drawn, provide funds for the Company to continue to execute its Phase 1 development of the Tendrara Production Concession and bridge group working capital liquidity ahead of receipt of a receivable as disclosed in the year end results

and/or receipt of Phase 1 back costs from Calvalley if a partial divestment is ultimately completed. The term of the Convertible Notes is five years from draw down date, with interest of 15% per annum, payable bi-annually in cash or capitalised to the

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Sound Energy plc

Statement from the Executive Chairman

principal, at the Company's election. Post the period the Company announced a partial conversion of the Convertible Loan Note.

Subject to the draw down in full of the Convertible Notes, the Company is now funded for its near-term working capital requirements until year end 2023.

Board Changes

In May, Mr Marco Fumagalli announced that he would be stepping down in June a Non-Executive Director and former Acting Chairman of the company in order to pursue other business opportunities.

In June, Sound appointed Mr Simon Ashby-Rudd to the Board as Independent Non-Executive Director. Mr Ashby-Rudd is an international energy banking specialist with more than 35 years of experience.

I thank Marco for his contribution over the years and look forward to working with Mr Ashby-Rudd going forward.

Conclusion

I am grateful for continued support of all our shareholders and can say that the first half of 2023 saw significant advances preparing the Company for revenue generation. Significantly, we have laid out a funding plan for Phase 2; have made steady progress on Phase 1 with mLNG tank construction and tank site preparation, well preparation and design engineering; have identified a potential partner to enter the Tendrara area to work alongside us; removed the tax claim overhang; brought in new bridge funding and collected the receivables. All in all, a busy first half of the year.

There is much to do in closing and completing on these various initiatives and in positioning the Company for production and for further growth. As our key project in Morocco is considered of strategic importance in the country all efforts must be placed in ensuring a safe and efficient execution of our business plan within the resources available.

I would like to thank the Ministries in Morocco and ONHYM, our state partner for their continued co-operation and increased support.

Graham Lyon

Chairman (Executive)

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Sound Energy plc

Operations review

Tendrara Development: Micro LNG

Sound Energy is pursuing the Field Development Plan underpinning the Concession centred around the TE-5 Horst gas discovery. The development is progressing in two phases. Phase 1, targeting industrial consumers, is intended to prioritise early first cash flows from the Concession via a mLNG production scheme. The planned Phase 2 development provides gas to power via state energy power stations. It is centred around the installation of a 120km gas export pipeline to help fully unlock the gas potential of this region and lower the cost of development for future discoveries. Both phases address different markets in Morocco; the industrial energy user and the state power producer, both of which have strong and growing demand, with Tendrara gas playing an important role in supporting Morocco's strategy to lower carbon emissions.

Progress of the Phase 1 Development Project

This first phase focuses on the existing TE-6 and TE-7 wells of the TE-5 Horst. First gas will be achieved by tying the currently suspended TE-6 and TE-7 gas wells with flowlines connected to the inlet of a skid mounted, combined gas processing and mLNG plant.

In 2021, the Company entered into a contract with Italfluid Geoenergy S.r.l. (''Italfluid'') for the design, construction, commissioning, operation, and maintenance of the mLNG facilities under a 10-year lease arrangement. The mLNG facilities, which will also treat, and process raw gas produced from the wells prior to liquefaction, is the principal part of the surface facilities required to be built and operated as part of this first phase of development. LNG will be delivered to on-site storage from the outlet of the mLNG facilities whereupon Afriquia Gaz will lift and take title for LNG for transportation, distribution and sale to the Moroccan industrial market.

Groundworks for the construction of the mLNG facility commenced March 2022 following completion of surveying and remediation works to the access road for the facility. The raised foundation platform for the LNG storage tank, and pads for the skid mounted units, including the compressor package, have been completed. The necessary piping and cabling for the firefighting system have been installed along with fencing and lighting towers. Facilities engineering will continue to progress throughout the year with major vendors and Italfluid has placed purchase orders for the gas processing and liquefaction packages which is ready for factor testing now. Whilst the mLNG storage tank fabric has been manufactured, there has been some supply chain disruption leading to later than planned delivery. Despite this, the Company remains committed to commencing production in 2024.

The Company has also completed preliminary engineering of the wellhead facilities, flowlines and manifold system required to bring the raw gas form the TE-6 and TE-7 wellheads. This work was completed by Kellogg Brown and Root Ltd alongside the flow assurance work. Inspection and routine maintenance of the wellhead Christmas tree assemblies on TE-6 and TE-7, was successfully completed by Petroleum Equipment Supply Engineering Company Ltd.

The Company engaged Bedrock Drilling Ltd to design, plan and execute the necessary work overs of the TE-6 and TE-7 wells in preparation for turning these appraisal gas wells into long term gas producers. These works are planned to be undertaken during Q4 2023 and Q1 2024 in preparation for first gas.

The next key steps to progress the project include final design, engineering, procurement and installation of the flowline system and associated well head facility equipment for the gas gathering system to transport the gas from the well heads to the mLNG plant. Additionally, Italfluid continues to progress detailed design, place its remaining purchase orders for equipment packages and bulks, now the site preparation and commence civils foundation works have been completed.

Italfluid, Sound Energy and Afriquia Gaz are working together, to supply LNG to the local industry in 2024 in a safe and efficient manner.

Throughout 2023 and early 2024 the equipment packages are to be completed and tested in the workshops and later be brought from workshops located around the world, delivered to site via the main ports in Morocco and assembled on site.

Progress of the Phase 2 Development Project

On 13 June the Company announced that it has now entered into exclusivity for a period of 45 days on the basis of an otherwise non-binding term sheet with Calvalley, an associated company of Octavia Energy Corporation Limited. Whilst the exclusivity has expired the Company continues to support the ongoing due diligence by Calverley. The terms of the term sheet would provide Sound Energy, together with the envisaged project debt financing and under current cost estimates, with the required funds to achieve first gas under its Phase 2 development plan whilst also funding the costs of drilling the TE-4 Horst appraisal well, with an estimated unrisked exploration potential of 273 Bcf gross Pmean Gas Initially in Place ('GIIP').

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