ASCENT RESOURCES PLC

Interim / Quarterly Report • Sep 28, 2017

National Storage Mechanism | Additional information

You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.

RNS Number : 0252S

Ascent Resources PLC

28 September 2017

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:

Ascent Resources plc Clive Carver, Chairman Colin Hutchinson, CEO	0207 251 4905
WH Ireland Limited James Joyce / Alex Bond	0207 220 1666
Yellow Jersey Tim Thompson Harriet Jackson Henry Wilkinson	0203 735 8825

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

		Six months ended	Six months ended	Year ended
	30 June 2017	30 June 2016	31 December 2016
	Unaudited	Unaudited	Audited
	Notes	£ '000s	£ '000s	£ '000s
Revenue		154	-	-
Cost of sales		(154)	-	-
Gross profit		-	-	-
Administrative expenses	2	(921)	(676)	(1,888)
Loss from operating activities		(921)	(676)	(1,888)
Finance income	3	7	153	159
Finance cost	3	(305)	(821)	(1,453)
Net finance costs		(298)	(668)	(1,294)
Loss before taxation		(1,219)	(1,344)	(2,676)
Income tax expense		-	-	-
Loss for the period		(1,219)	(1,344)	(2,676)
Loss per share
Basic & fully diluted loss per share (Pence) *	4	0.08	0.52	0.49

Consolidated Statement of Comprehensive Income

for the Period ended 30 June 2017

		Six months ended	Six months ended	Year ended
	30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Loss for the period		(1,219)	(1,344)	(2,676)
Other comprehensive income
Foreign currency translation differences for foreign operations		500	2,293	2,997
Total comprehensive gain / (loss) for the period		(719)	949	321

Consolidated Statement of Changes in Equity

for the Period ended 30 June 2017

		Share capital	Share premium	Equity reserve	Share based payment reserve	Translation reserve	Accumulated losses	Total
		£ '000s	£ '000s	£ '000s	£ '000s	£ '000s	£ '000s	£ '000s
Balance at 1 January 2016		1,878	56,693	1,572	483	(2,805)	(37,147)	20,674
Loss for the period		-	-	-	-	-	(1,344)	(1,344)
Currency translation differences		-	-	-	-	2,293	-	2,293
Total comprehensive income		-	-	-	-	2,293	(1,344)	949
Conversion of loan notes		565	2,260	(369)	-	-	369	2,825
Issue of shares during the period net of costs		405	1,010	-	-	-	-	1,415
Share-based payments and expiry of options		-	-	-	83	-	-	83
Balance at 30 June 2016		2,848	59,963	1,203	566	(512)	(38,122)	25,946
Balance at 1 January 2016		1,878	56,693	1,572	483	(2,805)	(37,147)	20,674
Loss for the period		-	-	-	-	-	(2,676)	(2,676)
Currency translation differences		-	-	-	-	2,997	-	2,997
Total comprehensive income		-	-	-	-	2,997	(2,676)	321
Acquisition of Trameta		-	-	-	1,103	-	-	1,103
Extinguishment of convertible loan notes		-	-	(1,572)	-	-	1,572	-
Extension of convertible loan notes		-	-	2,787	-	-	-	2,787
Issue of convertible loan notes		-	-	360	-	-	-	360
Conversion of loan notes		749	2,996	-	-	-	-	3,745
Issue of shares during the period net of costs		1,105	3,584	-	-	-	-	4,689
Share-based payments and expiry of options		-	-	-	94	-	94	188
Balance at 31 December 2016		3,732	63,273	3,147	1,680	192	(38,157)	33,867
Balance at 1 January 2017		3,732	63,273	3,147	1,680	192	(38,157)	33,867
Loss for the period		-	-	-	-	-	(1,219)	(1,194)
Currency translation differences		-	-	-	-	500	-	500
Total comprehensive income		-	-	-	-	500	(1,219)	(1,008)
Conversion of loan notes		813	3,259	(1,826)	-	-	1,826	4,072
Issue of shares during the period net of costs		323	2,503	-	-	-	-	2,826
Share-based payments		-	-	-	102	-	-	102
Balance at 30 June 2017		4,868	69,035	1,321	1,782	692	(37,550)	40,418

Consolidated Statement of Financial Position

As at 30 June 2017

		30 June 2017	30 June 2016	31 December 2016
	Unaudited	Unaudited	Audited
Assets	Notes	£ '000s	£ '000s	£ '000s
Non-current assets
Property, plant and equipment		4	4	4
Exploration and evaluation costs	5	40,024	35,214	37,541
Total non-current assets		40,028	35,218	37,545
Current assets
Trade and other receivables		556	23	32
Cash and cash equivalents		2,708	860	3,153
Total current assets		3,073	883	3,185
Total assets		43,236	36,101	40,730
Equity and liabilities
Share capital	7	4,868	2,848	3,732
Share premium account	7	69,035	59,963	63,273
Equity reserve		1,321	1,203	3,147
Share-based payment reserve		1,782	566	1,680
Translation reserves		692	(512)	192
Accumulated losses		(37,550)	(38,122)	(38,157)
Total equity		40,148	25,946	33,867
Non-current liabilities
Borrowings		-	-	6,162
Provisions		460	434	447
Total non-current liabilities		460	434	6,609
Current liabilities
Trade and other payables		292	297	254
Borrowings	6	2,392	9,424	-
Total current liabilities		2,684	9,721	254
Total liabilities		3,144	10,155	6,863
Total equity and liabilities		43,292	36,101	40,730

Consolidated Statement of Cash Flows

for the six months ended 30 June 2017

		6 months ended 30 June 2017	6 months ended 30 June 2016	Year ended 31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Cash flows from operations
Loss after tax for the period		(1,219)	(1,344)	(2,676)
Adjustment related to test production		115	-	-
Decrease/ (increase) in receivables		(524)	38	29
Increase / (Decrease) in payables		38	(211)	(252)
Increase in share based payments		102	83	188
Exchange differences		(23)	(8)	1
Finance income		(7)	(153)	(159)
Finance cost		305	821	1,453
Net cash used in operating activities		(1,213)	(774)	(1,416)
Cash flows from investing activities
Interest received		-	-	1
Payments for fixed assets		-	-	(1)
Payments for investing in exploration		(2,062)	(158)	(677)
Disposal / (Purchase) of property, plant and equipment		-	(1)	-
Net cash used in investing activities		(2,062)	(159)	(677)
Cash flows from financing activities
Interest paid and other finance fees		(2)	-	(73)
Proceeds from loans		-	350	1,400
Loan issue costs		-	(6)	(800)
Proceeds from issue of shares		2,988	1,455	4,999
Share issue costs		(162)	(40)	(311)
Net cash generated from financing activities		2,824	1,759	5,215
Net increase in cash and cash equivalents for the period		(445)	826	3,122
Effect of foreign exchange differences		6	2	(1)
Cash and cash equivalents at beginning of the period		3,153	32	32
Cash and cash equivalents at end of the period		2,708	860	3,153

1.     Accounting Policies

Reporting entity

Ascent Resources plc ('the Company') is a company domiciled in England.  The address of the Company's registered office is 5 New Street Square, London EC4A 3TW.  The unaudited consolidated interim financial statements of the Company as at 30 June 2017 comprise the Company and its subsidiaries (together referred to as the 'Group').

Basis of preparation

The interim financial statements have been prepared using measurement and recognition criteria based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted for use in the EU.  The interim financial information has been prepared using the accounting policies which will be applied in the Group's statutory financial statements for the year ended 31 December 2017 and were applied in the Group's statutory financial statements for the year ended 31 December 2016.

All amounts have been prepared in British pounds, this being the Group's presentational currency.

The interim financial information for the six months to 30 June 2017 and 30 June 2016 is unaudited and does not constitute statutory financial information.  The comparatives for the full year ended 31 December 2016 are not the Group's full statutory accounts for that year.  The information given for the year ended 31 December 2016 does not constitute statutory financial statements as defined by Section 435 of the Companies Act.  The statutory accounts for the year ended 31 December 2016 have been filed with the Registrar and are available on the Company's web site www.ascentresources.co.uk. The auditors' report on those accounts was unqualified.  It did not contain a statement under Section 498(2)-(3) of the Companies Act 2006.

During the period, the Group has generated revenue from test production on well Pg-10.  There has been a credit to costs of sales of £115,000 begin the gross margin on production which has been recorded against capitalised exploration costs.

Going Concern

The Financial Statements of the Group are prepared on a going concern basis.  Provided that the INA contract proceeds as anticipated the Directors consider the Company has sufficient cash to fund its current obligations for at least the next 12 months.

Principal Risks and Uncertainties:

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 46-48 of the Annual Review 2016, a copy of which is available on the Company's website at www.ascentresources.co.uk. 

2.     Operating loss is stated after charging

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Employee costs		449	277	560
Share based payment charge		102	83	188
Foreign Exchange differences		-	(1)	-
Included within Admin Expenses
Audit Fees		31	25	60
Fees payable to the company's auditor other services		-	-	2
		31	25	62

3.     Finance income and costs recognised in loss

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Finance income
Income on bank deposits		-	-	-
Foreign exchange movements realised		7	-	6
Other income		-	153	153
		7	153	159
Finance cost
Interest payable on borrowings		-	(32)	(51)
Accretion charge on loan notes		(303)	(782)	(1,380)
Bank Charges		(2)	(8)	(16)
Foreign exchange movements realised		-	1	(6)
		(305)	(821)	(1,453)

The liability of £153,000 written off as other income represented a creditor dating back more than five years which the Company no longer deems to be payable.

Convertible loan notes were restructured during the prior periods and a full commentary is contained within the audited financial statements for the year ended 31 December 2016 and are available at www.ascentresources.co.uk.

4.     Loss per share

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Result for the period
Total loss for the period attributable to equity shareholders		1,219	1,344	2,676
Weighted average number of ordinary shares		Number	Number	Number
For basic earnings per share		1,580,679,071	258,096,858	544,270,848
Loss per share (Pence)		0.08	0.52	0.49

5.     Exploration and Evaluation Costs

Exploration Costs		Slovenia &Total
Cost
At 1 January 2016		32,711
Additions		144
Effects of exchange rate movements		2,345
At 30 June 2016		35,200
At 1 July 2016		35,200
Additions		1,635
Effects of exchange rate movements		706
At 31 December 2016		37,541
At 1 January 2017		37,541
Additions		2,073
Adjustment related to test production		(115)
Effects of exchange rate movements		536
At 30 June 2017		40,024
Carrying value
At 30 June 2017		40,024
At 31 December 2016		37,541
At 30 June 2016		32,711

6.     Borrowings

		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Current
Short term loan facility		-	838	-
Convertible loan notes		2,392	8,586	6,162
		2,392	9,424	6,162
Convertible Loan Notes		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Liability brought forward		6,162	10,778	10,778
Interest expense		303	786	1,380
Conversion loan notes		(4,073)	(2,825)	(3,745)
Modification to convertible loan notes - derecognition Nov 2016)		-	-	(8,140)
Modification to convertible loan notes - recognition of amended loan notes (Nov 2016)		-	-	5,352
Fair value of new convertible loan notes issued (Nov 2016)		-	-	690
Other movements		-	(153)	(153)
Liability carried forward		2,392	8,586	6,162

7.     Share Capital

		30 June 2017	30 June 2016	31 December 2016
		Unaudited	Unaudited	Audited
		£ '000s	£ '000s	£ '000s
Allotted, called up and fully paid
Ordinary shares of 0.20 pence each		4,868	2,848	1,878
Reconciliation of share capital movement		Number	Number	Number
At 1 January		1,084,074,224	157,306,900	157,306,900
Placing of ordinary shares		161,500,000	202,380,960	552,281,987
Conversion of loan notes		590,046,319	282,542,511	374,485,337
At end of period		1,835,620,543	642,230,371	1,084,074,224

Equity raised

On 14 February 2017, the Company raised £2,987,750 (£2,825,863 net of costs) via a Placing of 161,500,000 Ordinary Shares through the PrimaryBid.com platform.

The Company also raised funds through placings during the prior year:

·      On 12 April 2016, the Company raised £500,000 (£477,500 net of costs) via the Placing of 35,714,285 Ordinary Shares with investors using the PrimaryBid.com platform.

·      On 7 June 2016, the Company raised £500,000 (£477,500 net of costs) via the Placing of 83,333,333 Ordinary Shares with investors using the PrimaryBid.com platform.

·      On 15 June 2016, the Company raised £500,000 (£500,000 net of costs) via the Placing of 83,333,333 Ordinary Shares to Henderson Global Investors.

·      On 31 October 2016, the Company raised £2,627,500 (£2,402,434 net of costs) via the Placing of 262,750,000 Ordinary Shares.

·      On 7 November 2016, the Company raised £871,510 (£871,510 net of costs) via the Placing of 87,151,027 Ordinary Shares to Henderson Global Investors.

Loan note conversions

Over the course of the period a total of 590,076,850 shares were issued as a result of loan note conversions.  In total £5,900,769 of liabilities were converted into equity.  This is the cash value of the loan notes which is lower than the accounting value in Note 6 which had been discounted to net present value.

During 2016 a total of 374,485,337 shares were issued as a result of loan note conversions.  In total £3,744,853 of liabilities were converted into equity.

	Loan notes converted including accrued interest		Shares issued
	2016	2017	2016	2017
January	0	0	0	0
February	0	2,652,107	0	265,210,704
March	0	1,597,018	0	159,701,787
April	1,088,390	1,581,609	108,838,990	158,160,880
May	463,113	69,709	46,311,258	6,970,931
June	1,273,923	325	127,392,263	32,548
July	0		0
August	845,053		84,505,321
September	563		56,312
October	0		0
November	73,455		7,345,491
December	357		35,702
	3,744,853	5,900,769	374,485,337	590,076,850

8.     Events subsequent to the end of the reporting period

There were £3,018,831 of loan note principal converted during July 2017 into 311,713,705 Ordinary Shares.  As at 26 July 2017 all of the loan notes issued to Henderson Global Investors (subsequently Lombard Odier) have been converted in full.  The balance of £49,423 (including rolled up interest) is held by other investors.

On 4 August 2017, the Company announced that all of the infrastructure required to produce to INA had been installed and the new infrastructure was being used for local production.

On 7 September 2017, the Company announced that well Pg-11a had been successfully recompleted and production would begin on 8 September 2017 to be sold locally.

DIRECTORS AND ADVISERS

Directors	Clive Nathan Carver
	Colin Hutchinson
	William Cameron Davies
	Nigel Sandford Johnson Moore
Secretary	Colin Hutchinson
Registered Office	5 New Street Square
	London EC4A 3TW
Nominated Adviser & Broker	WH Ireland Corporate Brokers
	24 Martin Lane London EC4R 0DR
	WH Ireland Corporate Brokers
Auditors	BDO LLP
	55 Baker Street
	London W1U 7EU
Solicitors	Taylor Wessing LLP
	5 New Street Square
	London EC4A 3TW
Bankers	Barclays Corporate Banking
	1 Churchill Place
	London E14 5HP
Share Registry	Computershare Investors Services plc
	The Pavilions
	Bridgwater Road
	Bristol BS13 8AE
IR & PR	Yellow Jersey PR Limited 30 Stamford Street London SE1 9LQ
Company's registered number	05239285

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR EAXNXAELXEFF