Ascent Resources plc

("Ascent" or "the Company")

Final results for the year ended 31 December 2014

 

Ascent presents its audited results for the year ended 31 December 2014.

Chairman's Statement

Overview:  Petišovci project

From the refinancing of Ascent in early 2013, the Company's strategy has been to focus exclusively on the Petišovci project.  Accordingly, over the past two years we have exited from our interests in Hungary, the Netherlands, Switzerland and Italy.

At the macro level, Slovenia's need for the Petišovci project has never been greater:

·              Like much of the EU, the country is in a weak economic condition and in need of new areas for growth.

·              Slovenia's banks are pushing hard to raise foreign direct investment for their key industries.

·              We believe the Petišovci project is one of a relatively small number of fundable and viable projects the country has to offer to the international investment community.

·              Slovenia has very little domestic gas production and is reliant on expensive and potentially unreliable foreign gas.

·              The verified P50 contingent resources in the Petišovci field contain over 7 times the annual gas consumption in Slovenia.  Management production estimates for phase one equate to 10%- 15% of the country's annual consumption and this proportion will increase significantly as the project moves into phase two.

·           The region in which the Petišovci fields are located is one of the less economically developed in Slovenia and would benefit from additional employment opportunities.

 

Encouragingly we now understand that the Slovenian Government has decided to adopt a more supportive view of the project than in previous years in recognition of its strategic importance to the country.

Farm-out process

Led by First Energy the Company has been conducting a farm-out process to find industry partners interested in working with Ascent to develop the Petišovci field to its full potential.  Farm-out partners would be expected to fund a large proportion of future development costs.

The Board has been impressed with the calibre and financial standing of the organisations expressing interest.  In the opinion of the Board all the organisations still remaining in the process are satisfied with the technical aspects of the Petišovci project and have the financial resources to see a deal through.  We believe this not only validates the asset, but also makes its commercialisation more likely.  Further announcements will be made on a farm-out transaction as the process develops.

Funding

Historic

Between December 2012 and April 2015 the Company raised £9.5 million through the issue of convertible loan notes (£9m) and new ordinary shares (£0.5m).  The Company also generated £0.5 million net of selling expenses from the sale of its interests in Hungary and the Netherlands. 

Of the total £10m that was raised:

·      £3.5m was spent directly on the Petišovci project.

·      £3.0m was spent on debt repayments and servicing; this debt had been incurred prior to 2012 largely in relation to operations in Slovenia.

·      £3.1m was spent on group costs; the annual cost has been reduced by 30% between 2013 and 2014 due to a reduction in headcount and administrative expenses.

·      £0.4m was spent on former operations in Italy, Netherlands and Hungary.

Variation of loan note terms

The £8.5 million of convertible loan notes issued in 2013 and 2014 were due for repayment by the end of January 2015. Despite vigorous efforts by the Board to attract alternative sources of funding, Ascent did not have the funds required to pay the amounts due.  The Board therefore agreed with Henderson Global Investors Limited and Henderson Alternative Investment Advisor Limited (together, "Henderson"), being the majority holder of the convertible loan notes, to adjust the conversion price of all the convertible loan notes to 0.1 pence, in return for extending the maturity date of the convertible loan notes and terminating the accrual of interest on them.  Accordingly, on a fully diluted basis, the ordinary shareholders' interest in Ascent, other than Henderson, fell from 28.7% to 13.7%.

Henderson's ability to convert the loans without being obliged to make a general offer to all remaining shareholders was approved by independent shareholders on 19 February 2015.  

Recent funding

Short term funding of £550,000 was secured on 1 May 2015 through a placing of 275,000,000 new ordinary shares via the crowd funding Primary Bid platform. 

Additionally the Company has agreed terms on a new £7 million loan facility with Henderson, demonstrating their continued support.  The loan can be drawn at any time from signing to the 30 June 2016 at the discretion of the lender.  The loan accrues interest at the rate of 7.5% per annum on the amount drawn and this is added to the amount of the loan.  The loan is subject to a drawdown fee of 1.75% per draw down, which is deducted from the funds advanced.  The loan is also subject to a repayment fee of 1.25% on any amounts repaid by the Company.  The balance outstanding is repayable on demand at any time.

Project funding

For many years the bank most closely associated with the Petišovci project was BNP Paribas. During 2014 we widened the banking pool to include The European Bank for Reconstruction and Development ("EBRD"), which has identified Slovenia as a country for increased engagement. We expect in the coming weeks to receive a conditional offer of project funding for the development of the first phase of the Petišovci project jointly from EBRD and BNP Paribas.

Operational issues at Petišovci

Power lines

Most of the delays experienced in 2014 stemmed from the decision of the state-owned electricity company to route a new high-tension power line directly over the existing gas gathering and separation station (the "Plant" or "GGSS").  The field development plan had, from the outset, proposed the construction of an expanded gas processing facility on this site, to handle production from Pg-10, Pg-11A and subsequent wells, primarily but not exclusively to reduce the CO₂ content to meet national transmission pipeline specifications.  Studies were commissioned to evaluate the impact of the high-voltage line on the proposed facility and it was concluded that electromagnetic and other effects of the power line presented an unacceptable safety hazard.

As a result of the above, the initial plans had to be abandoned and the Company and its partners commenced a search for an alternative site for the GGSS.  Eventually, a range of suitable, nearby land plots was identified and after extended negotiations with the owners, a commercially acceptable transaction was entered into for the acquisition of the land by the partners.

IPPC permits

In conjunction with the above, Ascent had to redesign the GGSS and related infrastructure for the new site, which was a time-consuming process.  These designs were incorporated into the application for an Integrated Pollution Prevention and Control ("IPPC") permit, required under the terms of EU directives adopted by the Slovenian government.  Again, this was a very complex and extended process.  In July 2014 the application was completed and submitted to the Environmental Agency for approval.  Encouragingly the application was processed without undue delay and was approved, subject to public consultation in December 2014.

At the close of the public consultation phase, comments had been received from two potential stakeholders. These objectors have now had an opportunity to present their cases and while it is not possible to predict when this consultation process will conclude we continue in the expectation that the economic interest of the country and its inhabitants will prevail.

Nafta Petrochem

In September 2014 Nafta Petrochem, a leading subsidiary of Nafta Lendava, entered into a voluntary liquidation process.  Ascent was in the process of negotiating certain easement rights with this subsidiary for the routing of its 8" gas delivery pipeline.  The liquidation has disrupted this process and new negotiations now need to be concluded with the administrator.

Field development programme

While the above problems have resulted in significant delays, other aspects of the field development programme have progressed satisfactorily.  For example, the specification and design of the measuring and metering station for delivery of processed gas to the national transmission system was completed and the related contract with the transmission operator was negotiated and signed. 

GPS

A significant effort was made during 2014 in first negotiating and then attempting to enforce the Subscription Agreement with Global Power Sources s.r.l. ("GPS") under which GPS would have invested some £11.7 million in Ascent by way of a subscription for new ordinary shares in the Company at a price of 0.8p per share.

As set out in the circular to shareholders dated 6 February 2015, since the failure of GPS to honour its commitment to subscribe for new ordinary shares, the Board has worked hard with GPS to try to find an alternative way forward.  However, GPS informed the Company towards the end of 2014 that it has experienced further significant issues as the result of its acquisition of Ascent Italia in 2013, which made the completion of any alternative transaction highly unlikely.

Your Board is of the view that pursuing GPS through the UK and Italian courts to seek redress for GPS's failure to perform under the Subscription Agreement does not make commercial sense.

Outlook

As set out in the Operations Review, the Petišovci project continues to be a very positive opportunity.

This, is in the opinion of the Board, is supported by the continuing interest in the farm-out process that is currently in progress, the recent funding transactions and the progression of the formal bank led project finance.

Based on the recent actions of the Slovenian Government we remain optimistic of an early award of the IPPC permit.

Clive Carver

Chairman

11 May 2015

 

 

Enquiries:

Ascent Resources plc.

Len Reece / Colin Hutchinson

Tel: +44 (0)20 7251 4905

finnCap (Nominated Adviser and Broker)

Christopher Raggett / Kate Bannatyne

Tel: +44 (0) 20 7220 0500

 

The Petišovci Project, Slovenia

Ascent Slovenia Ltd 75% (operator), Geoenergo d.o.o. 25% (concession holder)

 

The Petišovci Tight Gas Project, in a 98 km² area in north eastern Slovenia, targets the development of substantial tight gas reservoirs known to be in Miocene clastic sediments.

Ascent first acquired an interest in the Petišovci project in 2007 and in 2009 an extensive 3D seismic survey was conducted across the Petišovci concession area.

The structure has two sets of reservoirs, the shallower Upper Miocene and the deeper Middle Miocene.  The Middle Miocene Badenian reservoirs, or Pg sands, are the focus of Ascent's development objectives; however the shallow reservoirs, which were extensively developed during the 1960s, are not considered to be fully depleted.

Two new appraisal wells, Pg-10 and Pg-11, drilled in 2010/2011 to a total vertical depth of 3,497 m and 3,500 m respectively, confirmed gas in all six Middle Miocene Badenian reservoirs ('A' to 'F' Pg sands).  Gas flowed for the first time from the shallowest 'A' sands and, in addition, gas and condensate were sampled from the Lower Badenian 'L' to'Q' sands.  Pg-10 proved productive from the 'F' sands and Pg‑11A (Pg-11 was side-tracked for technical reasons to Pg-11A) from the deeper 'L' to 'Q' sands.  Both wells were successfully fracture stimulated resulting in flow rates of 8 MMscfd from the 'F' sands and 2 MMscfd from the 'L, M and N' sands, proving the commercial potential of both wells.

The data generated from the Pg-11 well, including three 18 m core samples and state-of-the-art wireline logging, supplemented the 2009 3D survey of the project area.  The Company has reported independently verified P50 estimate of gas in place of 456 Bcf (13 Bm3; 76 MMboe).

Both wells will require further recompletions in preparation for a production testing phase which will help to better understand the long-term productivity performance of the reservoirs.  The test production results will inform decisions regarding a possible full field Petišovci development.  The north east region of Slovenia has been an oil and gas producing area since the early 1940s and contains much of the infrastructure necessary for processing and exporting produced hydrocarbons.  Some improvements to these existing facilities will be required for the test production phase.

The next step in this project's redevelopment plan is to bring gas from Pg-10 and Pg-11A on stream via dedicated well-site facilities, through a newly constructed gas processing plant and from there to the national gas pipeline terminal.  This will be followed by the deepening of 3 existing wells, Pg-6, 7 and 9.  Processing will be necessary to reduce the carbon dioxide content of the gas from approximately 3% to less than the 1.5% required for the national transmission system specifications, to remove condensate for sale separately and to ensure dew point control by dehydration.

Less than a kilometre from the wells is a methanol production plant which was mothballed in 2010 as falls in methanol pricing had made production uneconomic.  There is scope for it to be sold to new owners.  The gas from Pg-10 and Pg-11A could be sold to this plant for methanol production.  The advantages of this option are that (i) the gas would need very little processing before entering the methanol plant; (ii) the local processing plant could manage this without much modification; and (iii) the Company could derive an early income from associated gas sales .

After a period of test gas production to monitor reservoir performance, the partners will proceed to the next phase in developing the Petišovci field, which includes: further upgrading and expansion of the processing facility for a substantially higher capacity; enlarged gas export capacity; and modifications to the national grid connection.  The Company has recently completed a fully revised field development plan and strategy for the further expansion of this significant Petišovci gas field complex.

Back-in Rights

 

The Hermrigen and Linden exploration permits in Switzerland cover undeveloped discoveries made by Elf Aquitaine in 1972 and 1982 with a combined estimated gas resource base of over 360 Bcf.  As the original Hermrigen well was drilled before gas pipeline infrastructure was built in the area, the discovery has remained unappraised.  Despite selling its interest in 2010 to eCORP, the current operator of the project, Ascent retains various back-in rights on any successful outcome of six conventional appraisal prospects, provided relevant apportioned costs are covered.

As part of the Sale and Purchase agreement with Tulip Oil, Ascent has the right to re-purchase a 10% interest in each of the Dutch licences once Tulip has made a final investment decision with respect to the commercial development of the Terschelling-Noord Field.

Strategic report

Section 414C of the Companies Act ('the Act') requires that the Company inform its members as to how the Directors have performed their duty to promote the success of the Company by way of a Strategic Report.

Fair review of the business

The Companies Act 2006 requires the Company to set out in the Directors' Report a fair review of the business of the Company during the financial year ended 31 December 2014 including an analysis of the position of the business at the end of the financial year and a description of the principal risks and uncertainties facing the Company (the 'Business Review').  The purpose of the Business Review is to enable shareholders to assess how the Directors have performed their duties under Section 172 of the Companies Act 2006, being the duty to promote the success of the Company.  The Chairman's Statement and the Group Operations Review, starting on pages 3 and 7, together with the Corporate Responsibility Statement, corporate governance statements and Principal Risks and Uncertainties section of the Annual Report, which are incorporated herein by reference, are considered to fulfil the requirements of the Business Review.

Principal risks and uncertainties

The Group operates in an industry characterised by a range of business risks.  The Company maintains a risk register that categorises risks under the headings:  Strategic, Operations, Financial, Compliance and Knowledge.  The key risks and uncertainties faced by the Group are summarised below.

·      Strategic - the achievement of corporate objectives is dependent on the strategy followed by the Group, as well as the interaction with stakeholders and shareholders, good governance and an understanding of economic and market dynamics.  This risk is mitigated by the expertise of the Company's Directors and specialists.

·      Operations - the operations of the Group may be adversely affected by its ability to find and develop adequate gas and oil reserves, to develop and exploit new gas and oil acreage and to recruit and retain management and staff with the right technical skills.  This risk is mitigated through the experience and expertise of the Company's specialists and consultants, the application of appropriate technology and the selection of appropriate prospective exploration and development assets.

·      Financial - the Group's ability to meet its obligations and achieve objectives is influenced by its liquidity, gearing, movements in commodity prices and costs, movements in foreign exchange, funding and financial reporting requirements.  Foreign exchange risk is mitigated by close monitoring of exchange rate movements and holding cash reserves with a variety of different institutions in a variety of currencies being Euro, US Dollar and British Pound.  All other financial risks are mitigated by the expertise of the Company's financial staff.

·      Compliance - the Group must comply with a range of corporate, legal and industry regulations and the nature of its operations necessitates strong controls around contractual arrangements, especially in respect of areas such as joint venture agreements.  This risk is mitigated by the expertise of the Company's Directors and advisers.

·      Knowledge - the Group is dependent on the efficient and effective operation of its information systems, and the management and reporting of project data and reserves information is key.  Loss of key personnel may also lead to the potential loss of corporate 'intellectual property'.  This risk is mitigated by ensuring all Company information is both readily available to the relevant Company employees and is securely maintained on a regularly backed up, password protected IT system.

 

Analysis of the development and performance of the business

This information is contained in pages 3 to 6 of the Chairman's statement.

Analysis of the position of the business

This information is contained in pages 3 to 6 of the Chairman's statement.

Analysis using other key performance indicators

The Directors consider a range of financial and non-financial key performance indicators.  Financial indicators are principally focussed on the regular review of major projects, comparing actual costs with budgets and projections.  More detailed assessments are also made of un-risked and risked net present values ('NPVs'), project rates of return and investment ratios such as 'success case investment efficiency'.  Monthly trading and cash movements are also reviewed for each of the Group companies.  Specific exploration-related key performance indicators include:  the probability of geological success (Pg), the probability of commerciality or completion (Pc) and the probability of economic success (Pe).

The projected NPV of the Petišovci project has been reassessed during the year and offers a significant premium to the current market capitalisation of the Company.

Approved for issue by the Board of Directors

and signed on its behalf

 

 

 

Clive Carver

Chairman

11 May 2015

Directors' Report

The Directors present their Directors' Report and Financial Statements for the year ended 31 December 2014 ('the year').

Principal activities

The principal activities of the Group comprise gas and oil exploration and production.  The Company is registered in England and Wales and is listed on the AIM Market of the London Stock Exchange.

The Group has its headquarters in London and has oil and gas interests in Slovenia.  The Group operates its own undertakings both through subsidiary companies and joint ventures.  The subsidiary undertakings affecting the Group's results and net assets are listed in Note 9 to the Financial Statements.

Future developments

The Company has identified the European gas market as a relatively stable and secure arena in which to compete.  The European market continues to be a net importer of gas whilst diversity of supply is central to the energy security strategy of most nations.  The Petišovci field in Slovenia has the potential to supply a significant proportion of the country's gas requirement for many years.

Financial risk management

Details of the Group's financial instruments and its policies with regard to financial risk management are given in Note 24 of the Financial Statements.

Results and dividends

The loss for the year after taxation was £5.6 million (2013:  £3.5 million).  The Directors do not recommend the payment of a dividend (2013: Nil).

Post balance sheet events

On 2 February 2015 the Company announced the variation of the terms of the 2013 and 2014 Loan notes.  To date £5 million has been drawn under the 2013 CLNs and £4 million has been drawn under the 2014 CLNs. In total, including accrued interest, some £10 million in aggregate was due for repayment under the 2013 and 2014 CLNs, in part on 23 December 2014 and in part on 31 January 2015.

In return for extending the maturity date of the Loan Notes and terminating the accrual of further interest, the board of Ascent has agreed to adjust the conversion price in respect of both the 2013 and 2014 Convertible Loan Notes from 0.5p and 0.2p respectively to 0.1p for all Loan Notes. On a fully diluted basis and assuming only Henderson convert this would take them to 88.6 per cent of the Company and accordingly the consent of the Company's shareholders was required.

On 20 February 2015 at a General Meeting of the Company, the shareholders approved the Whitewash and associated resolutions.

On 9 March 2015, the Company joined PrimaryBid.com, the online platform dedicated to equity crowdfunding for AIM-listed companies. On 1 May 2015 the Company has raised £550,000 via the placing of 275,000,000 ordinary shares in the capital of the Company at a price of 0.2p per Ordinary Share with investors using the Primarybid.com platform.  The Company received £525,250 net of costs which will provide the Company with additional working capital to be used over as it concludes advanced negotiations with potential sources of additional financing. The Directors are confident that they will receive significant further funds as a result of such negotiations that will allow the Company to develop the project for the foreseeable future, towards cash flow.

On 1 May 2015 the Company announced that it had received a notice of exercise to convert 420 convertible loan notes of £1 each which were issued in May 2013 as part of an open offer to all shareholders (the "Loan Notes") and the terms of which were amended in February 2015. The Loan Notes, including rolled up interest, are convertible into new ordinary shares of 0.1 pence each in the capital of the Company ("Ordinary Shares") at a price of 0.1 pence per Ordinary Share. Consequently a total of 473,030 new Ordinary Shares ("the Conversion Shares") were issued pursuant to the Notice.

In May 2015 the Company agreed terms on a £7million loan facility with Henderson Global Investors Limited.  The loan can be drawn at any time from signing to the 30 June 2016 at the discretion of the lender.  The loan accrues interest at the rate of 7.5% per annum on the amount drawn and this is added to the amount of the loan.  The loan is subject to a drawdown fee of 1.75% per draw down which is deducted from the funds advanced.  The loan is also subject to a repayment fee of 1.25% on any amounts repaid by the Company.  The balance outstanding is repayable on demand at any time.

Directors

The Directors of the Company that served during the year, and subsequently, were as follows:

Leonard John Reece

Clive Nathan Carver

Nigel Sandford Johnson Moore

William Cameron Davies

Colin Hutchinson (appointed 20 August 2014)

 

Relevant details of the Directors, which include committee memberships, are set out on page 14.

Directors' interests

The beneficial and non-beneficial interests in the issued share capital and convertible loan notes of the Company were as follows:

	Ordinary shares of 0.1p each.		Convertible loan notes.
	At 31 December 2014	At 31 December 2013	At 31 December 2014	At 31 December 2013
Leonard Reece	-	-	63,444	63,444
Clive Carver	-	-	17,500	17,500
Nigel Moore	119,500	119,500	-	-
Cameron Davies	150,000	150,000	-	-
Colin Hutchinson	-	-	-	-

 

Details of Directors' share options and remuneration are set out in Note 4 to the Financial Statements under the heading 'Directors' remuneration'.

Directors' emoluments

For details of Directors' emoluments and share options please see Note 4 of the Financial Statements.

Third party indemnity provision

The Company has provided liability insurance for its Directors.  The annual cost of the cover is not material to the Group.  The Company's Articles of Association allow it to provide an indemnity for the benefit of its Directors which is a qualifying indemnity provision for the purposes of the Companies Act 2006.

Share capital

Details of changes to share capital in the period are set out in Note 18 to the Financial Statements.

As at 11 May 2015 the Company has been notified of the following significant interests in its ordinary shares, being a holding of 3% and above:

	Number of ordinary shares	%
Global Power Sources Srl	307,126,793	17.71
Henderson Global Investors	185,325,944	10.69
EnQuest PLC	160,903,958	9.28
Seren Capital Management Ltd	100,412,944	5.79

 

Shareholder communications

The Company has a website, www.ascentresources.co.uk, for the purposes of improving information flow to shareholders, as well as potential investors.

Employees

The Company's Board composition provides the platform for sound corporate governance and robust leadership in implementing the Company's strategies to meet its stated goals and objectives.

The Group's employees and consultants play an integral part in executing its strategy and the overall success and sustainability of the organisation.  The Group has a highly skilled and dedicated team of employees and consultants and places great emphasis on attracting and retaining quality staff.  As an international oil and gas company, we facilitate the development of leadership from the communities in which we operate.  There is a large pool of qualified upstream oil and gas exploration and production professionals in the areas in which we operate, and we are committed to building and developing our teams from these talent pools.

The Group holds its employees and consultants at all levels to high standards and expects the conduct of its employees to reflect mutual respect, tolerance of cultural differences, adherence to the corporate code of conduct and an ambition to excel in their various disciplines.

Disclosure of information to auditors

In the case of each person who was a Director at the time this report was approved:

·      so far as that Director was aware there was no relevant audit information of which the Company's auditors were unaware; and

·      that Director had taken all steps that the Director ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditors were aware of that information.

This information is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Going Concern

The Financial Statements of the Group are prepared on a going concern basis.

The Company has sufficient cash to fund its current trading obligations but further funding will be required for working capital through the year and to finance work programmes in Slovenia.  In addition both the 2013 & 2014 Convertible Loan notes become due in November 2015 and the £3m due to EnQuest becomes payable in December 2015.  Consequently the Directors are considering a range of funding options, including a strategic investor.

However, there can be no guarantee over the outcome of these negotiations and as a consequence there is a material uncertainty of the Group's ability to raise additional finance, which may cast significant doubt on the Group's ability to continue as a going concern.  Further, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Directors, however, remain confident of the Group's ability to operate as a going concern given the funding discussions that have and continue to take place and in light of the significant recent support from existing shareholders.

Auditors

In accordance with Section 489 of the Companies Act 2006, a resolution for the reappointment of BDO LLP as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.

Approved for issue by the Board of Directors

and signed on its behalf

 

 

Clive Carver

Chairman

11 May 2015

Board of Directors

 

Clive Carver

Non-executive Chairman

Clive Carver has worked in the City since 1986 and focussed exclusively on the small cap sector since 1994.  He is the Executive Chairman of Roxi Petroleum plc, an AIM listed oil and gas exploration and production company operating in Kazakhstan, where he served as Non-executive Chairman from 2006 to May 2012.  He is also a Non-executive Director of Fastjet PLC, a low cost airline operating in Africa;  Non-executive Chairman of Iafyds PLC, an AIM listed investment company; and also a Non-executive Director of unlisted Darwin Strategic Limited, a company which funds many AIM listed businesses.  Clive is a Fellow of the Institute of Chartered Accountants in England and Wales and is a qualified Corporate Treasurer.

Leonard Reece

Chief Executive Officer

Leonard Reece has over thirty years of E&P sector experience, of which over twenty years have been at Managing Director and CEO level.  His most recent role was as CEO of Valhalla Oil and Gas AS, a private Norwegian oil company, where he was responsible for identifying, acquiring and developing commercially successful oil and gas assets.  He previously held the position of Managing Director of Spectrum Energy and Information Technology Ltd, which provided multi-client surveys and high quality seismic imaging services.  

Colin Hutchinson

Finance Director

 

Colin Hutchinson is a fellow of the Institute of Chartered Accountants in Ireland and holds an MBA from Warwick Business School.  He has over fifteen years international experience gained in commercially orientated finance roles.  Colin previously served as the Company's Financial Controller.  Prior to joining Ascent, he was Financial Controller at Lochard Energy plc and Finance Director at Samba Communications Ltd.  He is also a Non-executive Director of Iafyds plc.

 

Nigel Moore

Non-executive Director

Chairman of the Audit Committee and member of the Remuneration Committee

Nigel Moore is a Chartered Accountant and was a former partner at Ernst & Young for thirty years until 2003.  For the last ten years at Ernst & Young he specialised in the oil and gas sector, advising a wide range of client companies, providing significant input to strategic options, new opportunities and helping to deliver shareholder value.  During the last 12 years Nigel has been a member of a number of Boards focussed on extractive industries and is currently on the Board and Chairman of the Audit Committee of Hochschild Mining PLC and Chairman of JKX Oil & Gas PLC.

Cameron Davies

Non-executive Director

Chairman of the Remuneration Committee and member of the Audit Committee

Cameron Davies is an international energy sector specialist and the former Chief Executive of Alkane Energy plc.  He has an excellent track record of exploration success and growing profits in a quoted energy company.  Beginning his career as a geologist, Dr Davies has over thirty-five years' experience in the oil and gas sectors.  He founded AIM listed Alkane Energy plc in 1994 and managed the business from original concept, through venture capital funding and an IPO to become a profitable operator of gas to power generation plants.  He has a PhD from Imperial College, is a Fellow of the Geological Society of London and a member of the European Petroleum Negotiators Group and the PESGB.

Directors and Advisers

 

Directors	Clive Carver Leonard Reece Nigel Moore Cameron Davies Colin Hutchinson
Secretary	Colin Hutchinson
Registered Office	5 New Street Square London EC4A 3TW
Nominated Adviser and Broker	finnCap Ltd 60 New Broad Street London EC2M 1JJ
Auditors	BDO LLP 55 Baker Street London W1U 7EU
Solicitors	Taylor Wessing LLP 5 New Street Square London EC4A 3TW
Bankers	Barclays Corporate Bank 1 Churchill Place London E14 5HP
Share Registry	Computershare Investors Services Plc The Pavilions Bridgwater Road Bristol BS13 8AE
Company's registered number	05239285

Summary of Group Net Oil and Gas Reserves

Net Reserves and Resources by country

 

	Net Attributable			Net Attributable			Net Attributable
	Reserves			Contingent Resources			Prospective Resources
	(Bcfe)			(Bcfe)			(Bcfe)
	P90	P50	P10	Low	Best	High	Low	Best	High
Slovenia	41	88	174	42	76	140	-	-	-

 

These figures are based on RPS gas-in-place estimates with a management assumption of a 50% recovery factor and Ascent's 75% participation.

Tested and/or produced commercial sands are included as reserves while untested and unproduced sands remain as resources.  The condensate content of gas is not included.

Remaining reserves have been adjusted to take account of historic field production, which to the end of 2014 was 8.7 Bcfe.

Proven Reserves are those quantities of petroleum which can be estimated with reasonable certainty to be commercially recoverable, from known reservoirs and under current economic conditions, operating methods and government regulations.  There is at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.

Probable Reserves are those unproven reserves which are more likely than not to be recoverable.  There is at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proven plus probable reserves.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies.  Contingent resources may include, for example, projects for which there are currently no viable markets or where commercial recovery is dependent on technology under development or where evaluation of the accumulation is insufficient to clearly assess commerciality.

Prospective Resources are those quantities of petroleum which are estimated to be potentially recoverable from undiscovered accumulations.

P90 (P50; P10) Reserves:  at least a 90% (50%; 10%) probability that the quantities will equal or exceed the estimate.  This is a measure of uncertainty not geological or commercial risk.

Summary of Ascent Resources plc's Licence Interests as at 31 December 2014

Permit	Subsidiary	Working Interest	Permit Area Gross	Net	Status
		(%)	(km2)	(km2)
Operations
Slovenia
Petišovci Concession	Ascent Slovenia Limited	75	98	73	Oil & gas exploitation
Back in rights
Switzerland
Seeland-Frienisberg	Ascent Resources plc		364	-	Gas appraisal
Linden	Ascent Resources plc		330	-	Gas appraisal
Gros de Vaud	Ascent Resources plc		736	-	Oil & gas exploration
The Netherlands
M10/M11	Ascent Resources plc		110	59	Gas exploration and appraisal

 

 

Glossary

 

M	Thousand*		cf	Cubic feet
MM	Million*		scf	Standard cubic feet
B	Billion*		scfd	Standard cubic feet per day
km2	Square kilometres
m3	Cubic metres

*       These are 'oilfield' units, as commonly used in the oil and gas industry.  Other units conform to the Système International d'unités (SI) convention

Prospect:  a potential trap which geologists believe may contain hydrocarbon resources

Reservoirs:  a subsurface body of rock having sufficient porosity and permeability to store and transmit hydrocarbons

Miocene:  a geological epoch of the Neogene Period that extended from about 13 to 25 million years ago.

Corporate Responsibility

Ascent operates a Management System that embodies Environmental, Health, Safety ('EHS') and Social Responsibility ('SR') principles.  This system defines objectives to be met by Ascent, its subsidiaries, affiliates, associates and operated joint ventures (hereinafter collectively referred to as Ascent) in the management of EHS and SR.

The policy of the Board of Ascent is to be fully accountable for the necessary practices, procedures and means being in place so as to ensure that each EHS and SR objective is demonstrated in full and that continuous improvement practices are operating to ensure that the required practices, procedures and means are being monitored, refined and optimised as necessary.  The Board will accordingly review and report regularly to external stakeholders as to the achievement of the objectives of this policy.

In accordance with this policy, the Executive Directors of Ascent are directly and collectively responsible to the Board for demonstrating that the EHS and SR objectives are attained throughout Ascent.  The Executive Directors have adopted Management System Guidelines as guidance for demonstrating this.

The objectives of the Environment, Health, Safety and Social Responsibility Policy are:

§  Ascent shall manage all operations in a manner that protects the environment and the health and safety of employees, third parties and the community.

§  The Executive Directors provide the vision, establish the framework, set the objectives and provide the resources for responsible management of Ascent's operations.

§  Leadership and visible commitment to continuous improvement are critical elements of successful operations.

§  A process that measures performance relative to policy aims and objectives is essential to improving performance.  Sharing best practices and learning from each other promotes improvement.

§  Effective business controls ensure the prevention, control and mitigation of threats and hazards to business stewardship.

§  Risk identification, assessment and prioritisation can reduce risk and mitigate hazards to employees, third parties, the community and the environment.  Management of risk is a continuous process.

§  Safe, environmentally sound operations rely on well-trained, motivated people.  Careful selection, placement, training, development and assessment of employees and clear communication and understanding of responsibilities are critical to achieving operating excellence.

§  The use of internationally recognised standards, procedures and specifications for design, construction, commissioning, modifications and decommissioning activities are essential for achieving operating excellence.

§  Operations within recognised and prudent parameters are essential to achieving clear operating excellence.  This requires operating, inspection and maintenance procedures and information on the processes, facilities and materials handled, together with systems to ensure that such procedures have been properly communicated and understood.

§  Adhering to established safe work practices, evaluating and managing change and providing up-to-date procedures to manage safety and health risks contribute to a safe workplace for employees and third parties.

§  The minimisation of environmental risks and liabilities are integral parts of Ascent's operations.

§  Third parties who provide materials and services (personnel and equipment) or operate facilities on Ascent's behalf have an impact on EHS and SR excellence.  It is essential that third-party services are provided in a manner consistent with Ascent's EHS and SR Policy and Management System Guidelines.

§  Compliance with regulatory requirements and company guidelines must be periodically measured and verified as part of the continuous improvement process.

§  Preparedness and planning for emergencies are essential to ensuring that all necessary actions are taken if an incident occurs, to protect employees, third parties, the public, the environment, the assets and brand of Ascent.

§  Effective reporting, incident investigation, communication and lessons learned are essential to attaining and improving performance.

§  Open and honest communication with the communities, authorities and stakeholders with which Ascent operates builds confidence and trust in the integrity of Ascent.

During 2014, the Group was Operator of one exploration project which was closely managed for maintaining the EHS and SR policy aims.

There have been no convictions in relation to breaches of any applicable Acts recorded against the Group during the reporting period.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Directors' Report, the Strategic Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year.  Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.  Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.  The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the AIM Market.

In preparing these financial statements the Directors are required to:

•        select suitable accounting policies and then apply them consistently;

•        make judgements and accounting estimates that are reasonable and prudent;

•        state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

•        prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website.  Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.  The maintenance and integrity of the Company's website is the responsibility of the Directors.  The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Independent Auditors Report to the Members of Ascent Resources plc

We have audited the financial statements of Ascent Resources plc for the year ended 31 December 2014 which comprise the consolidated income statement and consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statement of changes in equity, the consolidated and company statement of cash flows and the related notes.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditors

 

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

 

A description of the scope of an audit of financial statements is provided on the FRC's website at www.frc.org.uk/auditscopeukprivate.

 

Opinion on financial statements

 

In our opinion:

 

·      the financial statements give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2014 and of the group's loss for the year then ended;

·      the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

·      the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

·      the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

Emphasis of matter - Going concern

In forming our opinion of the financial statements, which is not modified, we have considered the adequacy of the disclosures made in Note 1 to the financial statements concerning the Company's ability to continue as a going concern.  Further funds will be required to finance the Company's planned work programme and to service existing debt facilities. While the Directors are confident of being able to acquire the finance necessary to meet both capital and administrative obligations and liabilities as they fall due, the necessary facilities are not currently in place. 

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

Opinion on other matters prescribed by the Companies Act 2006

 

In our opinion the information given in the strategic report and directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

·      adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

·      the parent company financial statements are not in agreement with the accounting records and returns; or

·      certain disclosures of directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit.

 

 

 

 

Scott Knight (senior statutory auditor)

For and on behalf of BDO LLP, statutory auditor

London

United Kingdom

11 May 2015

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

Consolidated Income Statement

For the year ended 31 December 2014

		Year ended	Year ended
		31 December	31 December
		2014	2013
	Notes	£ '000s	£ '000s
Administrative expenses	3	(1,879)	(1,924)
Aborted transaction costs		(228)	-
Loss from operating activities		(2,107)	(1,924)
Finance income	5	3	1,423
Finance cost	5	(3,519)	(1,266)
Net finance costs		(3,516)	157
Loss before taxation		(5,623)	(1,767)
Income tax expense	6	-	-
Loss for the year from continuing operations		(5,623)	(1,767)
Loss for the year from discontinued operations		-	(1,825)
Loss for the year		(5,623)	(3,592)
Loss attributable to:
Owners of the Company		(5,623)	(3,587)
Non-controlling interests		-	(5)
Loss for the year		(5,623)	(3,592)
Loss per share
Basic & fully diluted loss per share (Pence)	7	(0.39)	(0.32)

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

		Year ended 31 December 2014	Year ended 31 December 2013
		£ '000s	£ '000s
Loss for the year		(5,623)	(3,592)
Other comprehensive income
Foreign currency translation differences for foreign operations *		(1,248)	(1,276)
Recycling of foreign exchange on disposals *		-	(1,324)
Total comprehensive loss for the year		(6,871)	(6,192)
Total comprehensive loss attributable to:
Owners of the Company		(6,871)	(6,187)
Non-controlling interest		-	(5)
Total comprehensive loss for the year		(6,871)	(6,192)

 

* Foreign currency translation differences from foreign operations may be recycled through the income statement in the future if certain future conditions arise.