28 September 2017

Ascent Resources plc

("Ascent" or the "Company")

Interim results for the period ended 30 June 2017

Ascent Resources plc, the AIM quoted European oil and gas exploration and production company is pleased to report its interim results for the six months ended 30 June 2017.

Highlights:

·     Recompletion and flow testing of well Pg-10.

·     Construction of the new pipeline connection at MRS Lendava (land acquired by Ascent from Trameta in July 2016) required to export gas production to Croatia.

·     Refurbishment of separation equipment at the existing CPP (a gas separation facility) owned and operated by our partner Petrol Geoterm.

·     Raised £2,988,000 through a successful Placing on the PrimaryBid platform which allowed private and other investors the opportunity to participate on equal terms.

·     Reduction in debt of almost £6 million through loan note conversions.

Post Period Highlights:

·     Recompletion of well Pg-11A

·     Company poised to commence supplying gas to INA

·     Further loan note conversions of £2.3 million which has virtually eliminated convertible loan notes from the balance sheet, debt down to less than £50K.

Colin Hutchinson, CEO of Ascent, commented: 

"2017 has been a transformational year for the Company and probably the most successful in its history. We have begun selling gas, reported revenues for the first time since 2013 and are now virtually debt free. The Company is now in a strong position to look to expand our operations into new territories and face the future with increased optimism."

Enquiries:

Chairman's statement

The period under review and subsequently has been probably the most successful in the Company's history.

We achieved first gas selling to local customers from our Pg-10 well in April 2017.

During the first half of the year we refurbished infrastructure and installed pipeline connections to facilitate the export of gas to Croatia under the gas sales agreement signed in July 2016.

Following recompletion work we brought on stream our second well Pg-11A in September 2017.

We are now poised to commence supplying gas to INA and are waiting only on a final approval from one of the Croatian ministries.

Additionally, over the past 18 months we have dramatically improved our balance sheet via conversion of almost £12 million of loan notes leaving less than £50,000 of outstanding convertible debt.

The impact of the above successes has been to transform the company from a pre-income explorer into a cash positive producer, which has inevitably led to a rerating of our shares.

The future

In the coming months, we look forward to updating the market with news of the IPPC permit, which is again with the Slovenian Administrative Court. We await yet further confirmation from the Slovenian regulatory system that all is fine with our plans for the Petišovci gas field.  We also note that it is only the refusal by a single environmental protestor to accept the several previous regulatory rulings that is delaying the progress of the project to the detriment of the Slovenian state.  In the meantime, we will intend to sell our untreated gas to INA in Croatia.

Our successes now allow us to consider both the future development of both the Petišovci gas field and investments in other projects from a position of strength compared to previous periods.

We again thank our shareholders and partners for their continued support.

Clive Carver

Non-executive Chairman

CEO's report

The first half of the year saw Ascent Resources move from an exploration company to a production company after ten years of operation in Slovenia.  Bringing Pg-10 and then Pg-11A into production were momentous events.  We have also completed the necessary infrastructure refurbishment at the CPP and work on the export pipeline; and we now look forward to the imminent commencement of export sales.

During the period under review and subsequently there have been a series of significant developments:

Recompletion of well Pg-10

In January 2017, we finalised the recompletion work on the first of two wells, Pg-10, and perforated the production tubing at a depth of 3,102 metres.  The well was subsequently tested and a maximum stabilised flow rate of 249,000 cubic metres (8.8MMscfd) was achieved on a 12mm choke.  The well was subsequently shut in while it was connected to infrastructure.

Recompletion of well Pg-11A

The workover at Pg-11A started in April 2017 and was completed in August 2017.  The work consisted of an operation to remove and replace a section of the production tubing and install production well head equipment.  The operation took longer than anticipated after a wireline tool became stuck in the tubing during the final procedures to remove the bottom hole plug.  We commenced the sale of gas from Pg-11A in September 2017.

Construction of flow lines

The 500metre flowline between well Pg-10 and the existing separating station (CPP) which is owned by our partner Petrol Geoterm, was laid during January 2017 and connected to well Pg-10 once the flow test had been completed in March 2017.

The 40metre flowline between well Pg-11A and the production line which runs to the CPP was completed during June 2017 and connected to well Pg-11A once the workover had been completed.

Refurbishment of the CPP

In order to produce gas for export it was necessary to refurbish certain infrastructure in the CPP.  The main work involved installing a replacement separator, sufficient for the increased pressures and flow rates expected on the export line.  This work was completed in July 2017 and the replacement separator is capable of processing 240,000 cubic metres per day (8.5MMscfd).

Connection and certification of the export pipeline

The 8" export line which runs from the land at MRS Lendava owned by our 100% owned subsidiary, Trameta, to the field operated by INA at Medjimurje in Croatia was pressure tested and certificated by the Slovenian authorities in November 2016.

The 6" production pipeline which runs from the CPP past MRS Lendava was refurbished and recertified during the period under review.  At the same time, the surface infrastructure required to clean and maintain the pipeline was installed at MRS Lendava. 

Following the work on the production pipeline, the connection between the two lines was installed and tested and an operational certificate issued by the Slovenian authorities.

Finally, in July 2017, the Croatian authorities reviewed the application from our partner, INA, to recertify the pipeline on their side of the border, which INA have advised they expect to receive imminently.

Once operational, the export pipeline could accommodate daily production of over 800,000 cubic metres per day (28MMscfd).

Commencement of production

In April 2017, the Joint Venture commenced production from well Pg-10 which was sold locally to industrial customers after separation at the CPP.  The revenues for the period to 30 June 2017 were €180,644 (£154,000).  In total 1,113,217 cubic metres (39,313Mcf) of gas and 24,992 litres (157 barrels) of condensate were sold during the period.  Average daily production for the period was 84boepd.

Whilst the volumes and revenues are modest in the context of our long-term plans for the project, commencing production after ten years of operations in Slovenia was a hugely significant milestone.

Supply under the INA contract is expected to commence shortly, once the final Croatian ministerial approval has been received.

The terms of the INA contract set an upper and lower limit on production calculated in megawatt hours (MwH).  For the first two months, these translate into a range of 58,182 to 77,577 cubic metres per day; which based on the average rates over the last twelve months would generate revenue to Ascent of between €220,000 and €290,000 per month.  In the subsequent ten months of the contract the range is 63,031 to 82,425 cubic metres per day; which based on the average rates over the last twelve months would generate revenue to Ascent of between €240,000 and €310,000 per month.  Production at these levels, and average rates remaining reasonably stable over the period, will make the Company profitable at an EBITDA level and generate positive operating cash flow.

The contract provides for the maximum level to be increased following the agreement of both parties and the infrastructure has been constructed and refurbished in such a way as to allow for production to be increased.

Financial performance

The financial highlights for the period are the reporting of revenues for the first time since 2013 and the significant reduction of debt which has reduced to less than £50,000 since the end of the period.

·     Revenues for the period of £154,000 were wholly derived from hydrocarbon sales in Slovenia as discussed above.

·     An additional charge of £115,000 was made to cost of sales bring the gross margin to zero as production during the period is considered 'test' production.

·     The loss from operating activities during the period increased on the comparable period in 2016 by £105,000 to £781,000 as a result of the increase in activities required to bring the field into production.

·     The loss before tax reduced by £265,000 to £1,079,000 as the result of the reduced finance costs on loan notes following early conversion.

·     Borrowings have reduced by £7 million over the past 12 months and by nearly £4 million since the beginning of the year.  Further conversions since the end of the period have reduced the amount of outstanding notes to less than £50,000.

·     Raised £2,988,000 before costs in equity during February 2017 through a heavily subscribed offer through the PrimaryBid platform which ensured the maximum practical access to the offering.

Outlook

2017 has been a transformative year so far for the Company.  We look forward to the continued development of the Petišovci field.  Wells Pg-10 and Pg-11A are intended to prove the commerciality of the field and the significant reserves and resources contained within.

While we anticipate receiving the IPPC permit to construct our own processing facility in due course this is no longer as important to the Company.  We have refurbished the existing infrastructure to give ourselves room to grow independent of the IPPC Permit.

Additionally, as the Company is now generating revenue and is virtually debt free, we are in a strong position to look to expand our operations into new territories.

Consolidated Income Statement

for the Period ended 30 June 2017

Consolidated Statement of Comprehensive Income

for the Period ended 30 June 2017