THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

This Announcement contains inside information.

27 October 2016

Ascent Resources plc
("Ascent", the "Group", or the "Company")

Proposed Placing

The Board of Ascent (AIM: AST) is pleased to announce that it has conditionally raised approximately £4.5 million (gross of expenses) through the placing of 349,901,027 new Ordinary Shares (the "Placing Shares") at a price of 1.0 pence per share (the "Placing Price") and the subscription for £1,000,000 in principal amount of new 2016 Loan Notes at a price of £1 each (together, the "Placing") with existing and new investors. This is expected to provide the Company with sufficient funds to complete the programme of works required to bring the Petišovci field into production in early 2017 and make the Company operating cash flow positive.

The Placing funds will be deployed to:

·     Recomplete wells Pg-10 and Pg-11a

·     Tie-in the two wells to the existing central treatment station (CPP)

·     Refurbish the CPP

·     Provide additional working capital to the Company, and

·     Repay the £871,510 outstanding Henderson Loan Facility

Furthermore, the Company has agreed with Henderson on behalf of the 2013 and 2014 Loan Note holders to defer the redemption date on the balance of approximately £8.2 million 2013 and 2014 Loan Notes (including rolled up interest) to 19 November 2019, the same redemption date as for the new 2016 Loan Notes.

The Placing Price and the 2016 Loan Note conversion price of, in each case, 1 pence, represents a discount of approximately 14.9 per cent. to the closing price for the Company's ordinary shares on 26 October 2016, being 1.175 pence per Ordinary Share.

The Placing is being implemented under the Company's existing share authorities, save in respect of the placing of 87,151,027 Placing Shares which are to be issued conditional, inter alia, on the approval of certain resolutions by shareholders at a general meeting expected to be convened for 15 November 2016 ("General Meeting").

Settlement and admission to trading on AIM of the 262,750,000 First Placing Shares, and the issue of the 2016 Loan Notes, is expected to occur on 31 October 2016. Settlement and admission to trading on AIM of the 87,151,027 Second Placing Shares is expected to occur, subject to shareholder approval, shortly following the General Meeting.

Additionally, the Directors have indicated their desire to invest up to £50,000 in the 2016 Loan Notes. A further announcement updating the position of the Directors will be made in due course.

Colin Hutchinson, CEO, commented:

"We are very pleased with the support from our stakeholders, existing and new in the fund raise, which we  expect to allow us to complete the work required to reach first gas in early 2017 and as such is a significant development for the Company.

We look forward to updating the market with further news in due course."

Enquiries:

Ascent Resources plc                                                                                                     0207 251 4905

Clive Carver, Chairman

Colin Hutchinson, CEO

Stockdale Securities Limited, Nominated Adviser and Broker                     020 7601 6100

Richard Johnson

Andy Crossley

Northland Capital Partners Limited, Broker                                                         020 3861 6625

Tom Price

John Howes      

Abigail Wayne

IFC Advisory Ltd, Financial PR and IR                                                                       0203 053 8671                                        

Graham Herring

Tim Metcalfe

Heather Armstrong

A Circular, to include a notice of General Meeting expected to be held on or around 15 November 2016, will be sent to Shareholders shortly and will also be available on the Company's website: www.ascentresources.co.uk.

Note:    This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation. In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

Stockdale Securities Limited ("Stockdale") and Northland Capital Partners Limited ("Northland") are acting exclusively for the Company and no-one else in connection with the Placing and Admission and will not regard themselves as owing duties under the rules and regulations of the Financial Conduct Authority to any other person or regard any other persons as their client, nor are they providing advice in relation to the Placing, Admission or any transaction, matter or arrangement referred to in this Announcement.

Neither this Announcement nor any part of it constitutes an offer to sell or subscribe for, nor a solicitation to offer to purchase or to subscribe for Company securities in any jurisdiction. 

The distribution of this Announcement and the Placing of the Placing Shares and 2016 Loan Notes in certain jurisdictions may be restricted by law. No action has been taken by the Company or Stockdale or Northland that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company, Stockdale and Northland to inform themselves about, and to observe, such restrictions.

No offering document, prospectus or admission document has been or will be submitted to be approved by the FCA or submitted to the London Stock Exchange plc in relation to the Placing and/or Admission.   Any investment decision to buy securities in the Placing must be made solely on the basis of publicly available information. Such information is not the responsibility of and has not been independently verified by the Company, Stockdale or Northland or any of their respective affiliates.

1.         Introduction

The Board of Ascent is pleased to announce that it has conditionally raised approximately £4.5 million (gross of expenses) through the placing of 349,901,027 new Ordinary Shares at a price of 1.0 pence per share and the subscription for £1,000,000 in principal amount of new 2016 Loan Notes at a price of £1 each with existing and new investors. This is expected to provide the Company with sufficient funds to complete the programme of works required to bring the Petišovci field into production in early 2017. 

Furthermore, the Company has agreed with Henderson on behalf of the existing Loan Note holders to defer the redemption date on the balance of approximately £8.2 million 2013 and 2014 Loan Notes (including rolled up interest which ceased accruing in January 2015) to 19 November 2019, which is the redemption date for the new 2016 Loan Notes.

Additionally, the Directors have indicated their desire to invest up to £50,000 in the 2016 Loan Notes. A further announcement updating the position of the Directors will be made in due course.

The proceeds of the Placing will be used principally to fund the capital programme required to bring the Petišovci field into production.  Additionally, subject to completion of the Second Placing, the Company will use the £871,510 Second Placing proceeds to repay the outstanding balance including accrued interest and fees owed on the Company's £7 million facility provided by Henderson Global Investors in 2015 ("Henderson Loan Facility").  This repayment will materially reduce the Company's interest-bearing debt. Following repayment of the balance due Henderson has agreed to release its charge over shares in Ascent Slovenia Limited.

The Petišovci concession in north eastern Slovenia has independently verified gas in place of 456 BCF. Ascent has a 75% interest in the concession which management estimate has an NPV10 of around €200 million.  The natural gas contained within the field offers Slovenia the ability to achieve a significant degree of energy independence and could significantly boost the economy of the region.

The Placing funds are expected to take the Company through to first gas and to operating cash flow positive.  From early 2017 the Board expects the Company to be generating cash and building knowledge about well performance and reservoir behaviour.  This should allow the Company to fund further field development, principally through a mixture of debt and operating cash flow.

2.         The Petišovci project

Background

Ascent has a 75% interest in the Petišovci gas field in Slovenia, with its partner Geoenergo holding the remaining 25% through a concession signed in 2002 which is due for renewal in 2022.  Ascent is liable for 100% of the financing obligations for the project.  In 2011, two wells were drilled and flowed briefly at commercial rates; however, as previously reported, development of the Petišovci field has been delayed due to various joint venture and permitting issues.

Approximately €43 million has been spent to date on the development of the field, which could supply a significant portion of Slovenia's future gas requirements, thereby reducing its dependency on imported gas.  The Board estimates that Ascent's investment in the Petišovci project is the largest UK investment in Slovenia and Ascent's share of the project has an estimated NPV10 of €200 million. 

In 2015, in recognition of the key strategic importance of the project, the Slovenian government designated Nafta Lendava, which holds an interest in the concession through its shareholding in Geoenergo, as one of 21 important national assets. 

Route to first gas

The Petišovci field is around 5km from the Croatian border and the location of the Međimurje gas fields of Vučkovec, Vukanovec and Zebanec which are operated by INA, Croatia's leading Oil & Gas company.

INA's existing production pipeline runs from these gas fields to the methanol plant adjacent to the Petišovci field previously used to deliver untreated gas to the methanol plant.  At Međimurje this pipeline is linked to INA's newly constructed production pipeline which connects INA's gas production fields at Međimurje to a gas processing facility at Molve, also in Croatia.

Over the past 12 months the Company and its Slovenian partners have negotiated a commercial agreement with INA, and an operational plan, which will enable the Joint Venture to sell untreated gas, within our partner's production systems, at the Slovenian/Croatian border.

The agreement will continue for an initial period of twelve months whilst the Company tests the productivity of the wells and the responsiveness of the gas reservoirs.  After twelve months the agreement can be renewed.  Gas will be sold at a price indexed to the day ahead Central European gas hub pricing less a discount to reflect the costs of treatment in Croatia.

IPPC Permit

The Company's long term plan for the project is to sell joint venture gas into the national grid in Slovenia as this should attract a higher margin.  Before gas from Petišovci can be injected into the national or international grid it needs to be cleaned to remove excess carbon dioxide.  The cleaning of the gas requires a Gas Gathering and Separation Station ("GGSS") to reduce the carbon dioxide content of the gas to meet national gas grid specifications.

Under Directives adopted by all EU Governments, the installation of the GGSS requires an IPPC Permit.  The application was completed in June 2014 and submitted to the Environmental Agency ("ARSO") for approval.  ARSO approved the permit in December 2014, subject to public consultation, and in June 2015 announced that, following completion of the consultation, the Permit had been provisionally awarded, subject to a statutory period for appeals.  In August 2015, the Company received formal notification that two non-government organisations had lodged appeals, to which Ascent submitted its responses in August 2015.  The Slovenian Environment Minister informed the Company in November 2015 that she had rejected the appeals against the June 2015 award of the IPPC permit. One of the non-governmental organisations appealed the decision to the Administrative Court.

In May 2016 the Administrative Court ruled that the IPPC Permit should be withdrawn.  The reason given by the Court for this decision was that, after the original application was made in June 2014, the relevant law was changed and the process that was followed did not accord to the new law. This is despite the new law explicitly stating that any applications submitted (but not yet resolved) prior to the effective date for the new law should be pursued exclusively under the old rules.

As previously reported, the Company is currently preparing its appeal against a decision it considers to be wrong and damaging to the Company, its partners and the Slovenian people. The Company is working with its partners to avoid the need for an unnecessary additional Environmental Impact report and therefore to fast-track the issuance of the IPPC permit. Based on the absence of environmental rationale for the Court's decision and our continued dialogue with the Slovenian authorities, the Board is optimistic of an early success in this regard.

3.            Work programme

The pressure test of the export production pipeline, which is a pre-condition to the commencement of gas deliveries to INA, was completed to the Company and INA's satisfaction in August 2016. The Directors are confident that the official certification of the pipeline will be received shortly.

The remaining work programme consists principally of:

·        refurbishment of an existing gas treatment facility (CPP) which is owned by Petrol Geoterm, a sub-contractor to the Joint Venture, which Ascent will finance.  This facility will be used to prepare the gas for transmission into INA's production pipeline;

·        making existing wells Pg-10 and Pg-11A ready for production and tying them into the existing pipeline infrastructure; and

·        connecting the pipeline which currently runs from the existing CPP to INA's production pipeline.

In aggregate the capital expenditure required is expected to be approximately €3 million and the work

programme is expected to take around five months.  The Company plans to begin test production in January 2017 with the first commercial sale of raw gas expected to occur in early 2017.

4.            Funding

Ascent is committed under the terms of existing joint venture arrangements to fund 100% of the project costs, which to date amount to €43 million.  Once in production however, under the terms of the Joint Venture Agreement, Ascent will receive 90% of the proceeds from the project until at least the €43 million costs have been recovered. 

Commencing production using the new route to Croatia will provide the Directors with far greater knowledge of the productivity of the two principal wells and the gas reservoirs.  The Directors now expect the Company to be cash flow positive before any commitments are entered into concerning a new treatment facility in Slovenia.

5.            Commercial rationale

Completion of the proposed Placing will enable the Company to conduct the work programme referred to above and to repay a £800,000 short-term loan (along with £71,510 of accrued interest and fees).  The loan was part of a facility of up to £7 million made available by Henderson during 2015 and 2016.

6.            Placing details

Details of the Placing

The Company intends to raise approximately £4.5 million (gross of expenses) through the issue of 349,901,027 new Ordinary Shares at the Placing Price and the issue of £1,000,000 in principal amount of new 2016 Loan Notes at a price of £1 each. The Placing Shares will, when issued, rank pari passu in all respects with the Ordinary Shares, including the right to receive dividends and other distributions declared following

Admission.

The Placing will be conducted in two tranches. The first tranche comprises 262,750,000 new Ordinary Shares ("First Placing Shares") and £1.0 million in principal of 2016 Loan Notes, each of which are being issued using the Directors' existing authority. The second tranche comprises 87,151,027 new Ordinary Shares ("Second Placing Shares"), which are being placed, conditional on, inter alia, the passing of certain resolutions ("Resolutions") at the general meeting of the shareholders of the Company (the "General Meeting"), expected to be convened on 15 November 2016.

Application for Admission

Application has been made to the London Stock Exchange for the First Placing Shares to be admitted to trading on AIM. Subject to completion of the Placing, it is expected that the First Placing Shares will be admitted to trading on AIM and that dealings will commence in the First Placing Shares at 8.00 a.m. on 31 October 2016 ("First Admission"), following which the Company will have 989,542,004 ordinary shares in issue.  There are no shares held in treasury.  The total voting rights in the Company will therefore be 989,542,004 at First Admission and Shareholders may use this figure as the denominator by which they are required to notify their interest in, or change to their interest in, the Company under the Disclosure Guidance and Transparency Rules. 

Settlement and admission to trading on AIM of the 87,151,027 Second Placing Shares ("Second Admission") is expected to occur, subject to shareholder approval, shortly following the General Meeting. A further announcement will be made in due course in relation to application for admission to trading on AIM of the 87,151,027 Second Placing Shares.

The issue of the First Placing Shares, is conditional, inter alia, upon the Placing Agreement (as detailed below) becoming wholly unconditional (save as to First Admission) and not having been terminated in accordance with its terms at any time prior to First Admission.  The First Placing is not conditional on the passing of the Resolutions at the General Meeting.

The issue of the Second Placing Shares, is conditional, inter alia, upon (i) the approval of the Resolutions at the General Meeting, and (ii) the Placing Agreement becoming wholly unconditional (save as to Second Admission) and not having been terminated in accordance with its terms at any time prior to Second Admission.

Upon First Admission the First Placing Shares will represent approximately 26.5 per cent. of the Company's issued share capital at that time. Assuming completion of the Second Placing, the total Placing Shares will represent 32.5 per cent.  of the Company's share capital as enlarged by the Placing.

No application will be made for the listing of the 2016 Loan Notes on any exchange.

The Placing Agreement

Pursuant to the terms of the Placing Agreement, Stockdale and Northland have conditionally agreed to use their reasonable endeavours, as agents for the Company, to procure subscribers for the Placing Shares at the Placing Price and subscribers for the new 2016 Loan Notes at a price of £1 each. The Placing is not being underwritten.

The Placing Agreement contains customary warranties given by the Company with respect to its business and certain matters connected with the Placing. In addition, the Company has given certain indemnities to Stockdale and Northland in connection with the Placing. Stockdale and Northland are entitled to terminate the Placing Agreement in specified circumstances including where there has been a material breach of the warranties.

7.            General Meeting

The Directors do not currently have the authority to allot all of the Placing Shares and, accordingly, a Circular, to include a notice of General Meeting expected to be held on 15 November 2016, will be sent to Shareholders shortly, at which resolutions will proposed:

·        authorising the issue of the Second Placing Shares;

·        giving the Directors general authority to allot Ordinary Shares;

·        dis-applying statutory pre-emption rights in relation to the issue of the Second Placing Shares; and

·        dis-applying statutory pre-emption rights in relation to the general authority to allot Ordinary Shares.

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

A reference to £ is to pounds sterling, being the lawful currency of the UK