Sound Energy said on Jan. 22 it has entered into a binding conditional sale and purchase agreement with Saffron Energy Plc where Saffron will acquire Sound Energy’s portfolio of Italian interests and permits.

Sound Energy Holdings Italy Ltd. (SEHIL) holds all of Sound Energy’s Italian oil and gas interests through its own wholly owned subsidiary, Apennine Energy SpA. It is proposed that Saffron will be renamed Coro Energy Plc.

The binding agreement constitutes the first part of the transaction envisaged by the heads of terms announced on October 5, 2017 and the acquisition of SEHIL by Saffron will result in the combination of the Italian oil and gas portfolios of Sound Energy and Saffron.

The binding agreement is conditional on, inter alia, completion of a firm and conditional placing by Saffron to raise funds for working capital, the approval of shareholders of Saffron and re-admission of the entire issued, and to be issued, share capital of Saffron to trading on the AIM market of the London Stock Exchange Plc, as well as the approval by Sound shareholders of the Sound Capital Reduction. It is currently expected that these conditions will be satisfied by the end of April 2018.

Under the agreement, and subject to Saffron shareholders approving the issue of new shares by Saffron, the consideration for the disposal of SEHIL will be fully satisfied through the issue of 185,907,500 new ordinary shares of £0.001 each in the capital of Saffron, subject to any rounding of fractional entitlements.

Under the terms of the agreement, Sound Energy will retain its economic rights to receive the proceeds of any future sale of the land comprising the Badile permit and situated in the Piedmont Lombard Basin in northern Italy owned by SEHIL and also the benefit of expected SEHIL Italian VAT receivables totaling €4 million (US$4.9 million) linked to Badile drilling costs.

Under the transaction, Saffron has undertaken to remit the net proceeds of the Badile Land sale and the VAT to Sound Energy on receipt by SEHIL.

Furthermore Saffron has agreed to grant Sound an overriding royalty of 5% on all revenue that may be derived from any wells drilled on the exploration license D.R.74 AP, colloquially referred to as ‘Laura’.