TIDMAST
RNS Number : 1499R
Ascent Resources PLC
26 June 2020
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of MAR.
Ascent Resources plc
("Ascent" or the "Company")
Final Results for the Year ended 31 December 2019
Ascent Resources plc (LON: AST), the onshore Caribbean, Hispanic
American and European energy and natural resources company, is
pleased to announce its results for the year ended 31 December
2019. The information below is extracted from the Company's Annual
Report and Accounts.
Developments in 2020 to date:
-- New Board of Directors focused on unlocking value in Slovenia
and introducing a portfolio approach to broaden the Company's asset
base
-- Launched new international growth strategy focused on Special
Situations across Hispanic Americas, Caribbean and wider
territories
-- Strategic review of Slovenian interests which resulted in
restructuring proposal submitted to Joint Venture partners and
decision to submit a Notice of Dispute to the Republic of Slovenia,
expected shortly
-- Engaged new technical team to prepare the required
environmental impact assessment and design the longer term field
development plan for the Petišovci gas field
-- Entered Cuban oil and gas market with the acquisition of
Energetical Limited, securing exclusive rights to negotiate the
production sharing contract for Cuba onshore producing block 9B
-- Expanded interests in Cuba with three further MOUs direct
with Cuban national oil and gas company ("CUPET") over onshore
Blocks 9A, 12 and 15, in total covering over 7,000 km2
2019 Highilights:
-- Produced over 3 million standard cubic meters of gas and over
136 thousand litres of condensate during the year
For further information please contact:
Ascent Resources plc Via Vigo Communications
Andrew Dennan
WH Ireland, Nominated Adviser & Broker
James Joyce / Chris Savidge 0207 220 1666
SP Angel, Joint Broker
Richard Hail, Caroline Rowe 0203 470 0470
Chairman and Chief Executive Officers' Statement
The Ascent story has been transformed since the period under
review ended, and the changes made since then point to an exciting
future with a revamped strategy, re-energised senior team, and new
assets already being accessed. In March 2020, the Company announced
a complete restructuring of its business, including the appointment
of a new Board of Directors and Executive Management, alongside new
funding and the launch of an international growth strategy focused
on unlocking select special situations across Hispanic Americas,
the Caribbean and wider territories. As a first step in that growth
strategy, the Company has announced exclusive negotiations on an
onshore oil portfolio in Cuba.
Legacy Slovenian Asset:
Under the previous leadership, 2019 was a challenging year for
the Company and its attempts to develop the Petišovci gas field in
Slovenia. Throughout the year the Company experienced continued
delays in permitting which have created significant headwinds for
the Company to develop the Petišovci gas field commercially.
Notwithstanding these difficulties, some operational progress
was achieved. Total production in 2019 was 3,074,842 scm of gas and
136,836 litres of condensate. An IPPC permit for a new gas
processing plant was received in March 2019. An appeal against the
decision of the Slovenian Environment Ministry to require an
Environmental Impact Assessment ('EIA') for the proposed well
stimulation work at its Petišovci project was submitted in July
2019. Whilst the stimulation work is considered essential in order
to address the production decline and operations of this nature
having been carried out in Slovenia more than a hundred times since
the 1950's, the Company was made aware in June 2020 that the
Administrative Court of the Republic of Slovenia had ruled that an
EIA would be required to enable the re-stimulation of PG-10 and
PG11A wells. Accordingly, the Company is beginning preparations for
submission of an EIA.
Gas sales to INA are currently suspended as wellhead pressure is
below the pipeline pressure. The sales contract remains valid and,
should the Company receive permitting to stimulate the PG wells or
add compression to the reservoir, production may be able to be
resumed.
Despite the challenges faced in 2019, the Company remains firmly
resolved to protect its Slovenian investment and extract value from
its interests in the Petišovci field. With this goal in mind, the
recently appointed Board initiated in Q1 2020 a review of its
portfolio in Slovenia and has begun discussions with its partners
and the government. This review has initially concluded;
i) That continued material production from the tight gas project
will require regular stimulation activity and that the Slovenian
government is clearly taking positive action to maximise the
potential of the local resources and streamlining and positively
reforming the local permitting framework (including the framework
for EIAs). There will, however, always remain inherent permitting
risk. This is a common issue for stimulation activities in other
European countries and is considered by the new Board to be an
ordinary risk of oil and gas developments;
ii) That further stimulation at PG-10 and PG-11A should have a
material impact on production levels, potentially returning them to
close to historic levels, on the assumption that the stimulation is
designed and executed to the highest technical standards using
modern techniques.
iii) That production is sold with reference to the Central
European Gas Hub Index ("CEGH") and requires realised gas prices
above EUR1.80 to EUR2.00 per Mscf (which means a CEGH index of Euro
10.5/MWh based on the current sales price formula) to generate
positive cash flow. The Company notes that the average 2019 CEGH
index was Euro 14.4/MWh and despite the recent collapse in global
oil and gas prices that the 2021/22 gas futures are already circa
Euro 13-15/MWh. Hence the Board see significant core economic value
at Petis ovci and expect significant cash generation from the asset
in the medium term with further upside if global oil and gas prices
continue to recover.
iv) The potential legal claim against the Republic of Slovenia,
to be brought under the Energy Charter Treaty, has some risks and
inherent uncertainty at this stage but appears to have a valid
legal basis. The Company is refining its view on the prospects of
success and the likely quantum of any potential award.
Ascent has therefore decided upon a dual-pronged strategy which
simultaneously progresses both industrial and legal alternatives
for the next three months (as of the date of this document). The
updated strategy accelerates the asset's development, as well as
clearly setting out the Company's legal position and retaining
optionality for that process if required.
Recently Launched International Growth Strategy:
The Company recently launched an international growth strategy
focused on unlocking special situations across Hispanic Americas,
the Caribbean and Europe. This strategy is being introduced counter
cyclically against the backdrop of exceptionally volatile commodity
markets for oil and gas driven by a combination of COVID-19 related
demand decline and market oversupply from the disbandment of OPEC+
earlier this year. The Board believes that this volatile pricing
environment provides a unique window of opportunity to expand the
Company's asset footprint at favourable prices. The strategy is
focused on securing low cost barrels with manageable capital
commitments and material upside.
Cuba Market Entry:
The Republic of Cuba is one of the few remaining world-class,
yet largely unexploited hydrocarbon systems. Cuba currently
produces approximately 45,000 bopd of mostly heavy oil with c. 100
mscf/d of gas with clear targets for growth in their E&P sector
to fuel electricity generation. Cuba has the advantage of offering
an international investor access to good infrastructure and an
educated workforce alongside significant under exploited
hydrocarbon resource potential. To promote international investment
Cuba enacted a new law in 2014 to offer protections to foreign
investors, allowing payments in foreign currency and withdrawal of
funds from the country. Cuba currently offers excellent fiscal and
commercial terms for oil and gas operators, including nil cost
entries into PSCs and the right to sell all crude at the wellhead
priced in foreign currency, thereby securing oil
commercialization.
The Company sees clear first mover opportunity for a quoted oil
and gas Company to counter cyclically deploy its operational skill
and access to capital in a country which has been starved of
investment and technology and impacted by US Sanctions.
As the first step in advancing its international growth strategy
the Company announced on 14 April 2020 the acquisition of
Energetical Limited ('Energetical') for a total consideration of
GBP652,500 of which GBP202,500 has been satisfied by the issue of 6
million new shares and, subject to the Company signing a production
sharing contract ('PSC') over Cuban onshore producing block 9B,
deferred consideration of GBP450,000 which will be satisfied by way
of a cash payment of GBP100,000 and the issue of new shares for a
consideration of GBP350,000 to be issued at the 30 day volume
weighted average share price of the Company at the time of PSC
signature.
The acquisition of Energetical has secured the rights for the
Company to exclusively negotiate the production sharing contract
for block 9B which is expected to give the Company an entitlement
to incremental barrels produced above the existing base of circa
190 bbls/day from three wells. The Company has initially assessed
that recovery rates could be significantly rejuvenated with the
simple and relatively low-cost addition of basic equipment and
reservoir management. It is also assessing the viability of new
deviated onshore wells drilled into the crest of the fields which
it expects to flow with an initial production rate in excess of
1,000 bopd. None of these operations require new seismic and none
of the wells have yet to produce any water and no oil water contact
has been identified. There are another three wells at Majaguillar
and the San Anton field that are shut in at this time mainly due to
the lack of basic equipment such as pumps.
Building momentum on this new market entry into Cuba, also post
period in review, the Company announced the signature of binding
MOUs with the Cuban national oil company CUPET over Cuban onshore
exploration blocks 9A, 12 and 15 which covers an aerial extent over
7,000 km2 along the northern coast. The combination of Blocks 9a,
9b, 12 and 15 positions the Company with exclusive negotiating
rights to potentially one of the largest non-state-owned, onshore
Cuban portfolios. The portfolio provides a blend of existing
production for low risk redevelopment with significant upside
potential for both appraisal and exploration. The portfolio is
consistent with the Company's strategy of counter cyclical
acquisitive growth with a focus on low cost production, manageable
initial capital commitments and near-term high growth
potential.
This targeted portfolio is primarily low-cost barrels with a
blend of development, appraisal and exploration potential,
representing a balance of opportunities across the cycle, with
selective mining assets also being considered.
Board Restructuring:
In March 2020, several new Board members joined to strengthen
the management of the Company while bringing significant
international oil, gas and mining experience and access to capital
in order to take the Company forward including James Parsons as
Executive Chairman, Ewen Ainsworth as Non-executive Director and
Chairman of the Audit Committee and Leonardo Salvadori as
Non-executive Director. In April the Company announced the
appointment of Andrew Dennan as Chief Executive Officer.
Funding:
The recently appointed Board has reduced costs, dealt with
various historical outstanding balances and raised some additional
funds to enable the new Cuban work programme to be delivered. This
has now positioned the company as a clean vehicle with strong
management, access to capital and a growth trajectory.
During the course of 2019 the previous management of the Company
accessed new equity funding totalling gross proceeds of circa
GBP1.2 million from placings in January and April. In January the
Company raised gross proceeds of GBP363,156 through the issue of
new shares at a price of 0.3 pence per new share by way of an offer
for shares conducted through PrimaryBid. In April the company
raised gross proceeds of GBP750,000 at a price of 0.35 pence with a
small number of institutional investors. Additionally, in September
the Company entered into arrangements with RiverFort Global
Opportunities PCC Limited which resulted in Ascent issuing to
RiverFort 393m shares with an agreement to pay for them over 12
months under an Equity Sharing Agreement. At the same time
RiverFort lent Ascent US$500k repayable on or before September 2020
under a US$1.0m loan facility. Each month RiverFort was allowed to
sell up to a fixed number of shares in the market dependent on
market liquidity and share price. The proceeds realised from these
share sales were to be used to repay the US$500k loan (less
interest and dealing commission). Once the loan was repaid the
remaining funds for share sales were due to come directly to the
company.
Post period in review, the new Board has sought and achieved a
restructuring of the September 2019 RiverFort Arrangement. The
Equity Sharing Agreement with RiverFort as announced on 20
September 2019 has now been cancelled, effective February 14, 2020.
The outstanding US $468,776 loan (as of the restructuring date and
inclusive of fees and commission) with Riverfort has been
re-negotiated to a two-year coupon free bullet repayment due on
maturity with conversion rights for the lender at 0.075 pence (7.5
pence per share post re-organisation, details below). No conversion
can occur until the share price exceeds 0.1 pence (10 pence per
share post re-organisation) for five consecutive days. The Company
has a right to buy out up to 50% of the loan prior to its expiry at
nil premium whilst the share price is below the conversion price.
If the Company does exercise this right, then the conversion price
is adjusted upwards to 0.0875 pence (8.75 pence post
re-organisation) per conversion share. The 43 million warrants
initially to be awarded to Riverfort, as announced on 20 September
2019, will no longer be awarded.
Post period in review, in March 2020, shareholders approved a
share re-organisation, including a 100:1 consolidation, with the
nominal value of the shares to be set to 0.05 pence. Further to the
successful passing of the resolutions at the Company's General
Meeting held on 5 March 2020 and despite the market volatility at
the time, the Company completed a fundraising for gross proceeds of
GBP685,000 at 5 pence per share. Furthermore, in support of funding
work streams associated with advancing the Company's entry into
Cuba the Company raised a further GBP212,500 by the issuance of new
shares at 2.75 pence being a nil premium to the closing bid price
at the time of issue in April.
COVID-19:
COVID-19 has had limited direct impact on Ascent's assets in
Slovenia but there may be delays in obtaining the necessary
governmental approvals and processes. Production operations in
Slovenia have been unaffected to date, with the assets being
managed through a combination of on-site working within social
distancing guidelines or remote oversight, with all appropriate
safety procedures remaining in place to protect staff and local
communities, although the risk of future disruption remains.
Summary:
After a challenging 2019, we believe shareholders have good
cause to be optimistic about the future of Ascent Resources as it
enters a new growth phase targeting the Hispanic Americas, the
Caribbean and Europe. As a new Board we are determined to both
protect the Company's investment in Slovenia and expand our
international footprint accessing special situations.
We thank our shareholders for their patience and support during
2019 and wish them, our advisors, staff and their family's safe
passage through these turbulent times.
Andrew Dennan James Parsons
Chief Executive Officer Executive Chairman
Strategic Report
Section 414C of the Companies Act 2006 ('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 which includes a fair review of the business,
an analysis of the development and performance of the business and
analysis of financial position and key performance indicators.
We have incorporated these requirements into the information set
out below.
Company Overview
Ascent Resources plc ('Ascent' or 'the Company') is an
independent oil and gas exploration and production ('E&P')
company that was admitted to trading on AIM in November 2004 (AIM:
AST). Ascent has been involved in Slovenia for just over 11 years
where it operates the Petis ovci Tight Gas Project. To date it has
invested around EUR50 million in this project. This asset, despite
significant legal and permitting complexity, has significant oil
and gas reserves and resources and an established, local production
infrastructure with connections to local and export customers.
During 2017 the Company brought two wells into production and
started export production from the Petis ovci field in Slovenia to
INA in Croatia. In 2019 production was suspended and sales of gas
to INA stopped as a result of well head pressure falling below the
pipeline pressure.
Post period in review, the Company has undergone a
transformation including the appointment of a new Board of
Directors and new initial seed funding alongside the launch of a
strategic review of its Slovenian portfolio and the implementation
of a new international growth strategy focused on Hispanic
Americas, the Caribbean and Europe which has already resulted in
the announcement of a new market entry into Cuba.
Asset Overview
Slovenia - Petis ovci Tight Gas Project
The Petis ovci Tight Gas Project is in an area that has been
exploited since 1943. The project targets the significant gas
reserves and resources in the Middle Miocene Badenian or Petis
ovci-Globoki ('Pg') gas reservoirs.
Using the results of an extensive 3D seismic survey conducted in
2009 by Ascent and its partners, the locations of two new wells
were determined. These wells, Pg-11A and Pg-10 were successfully
drilled, completed and stimulated between 2010 and 2012. During
2017 the Company brought both of these wells into production and
started exporting gas from Petis ovci to INA in Croatia.
Cumulative gas production from the Pg gas field since 1988,
including fuel and flare use and accounting for the gas equivalent
of the historical condensate production, is 9.8 Bcfe (277.6 MMsm3).
This is 2% of the currently estimated gas initially in place
('GIIP') of 456 Bcfe, (12.9 Bsm3), based on independent third-party
estimates.
Further details of the asset and current reserves and resources
can be found on page 18.
Ascent operates the Petis ovci project on behalf of the Joint
Venture between Ascent Slovenia Limited and Geoenergo. Ascent has a
75% working interest in the project and carries 100% of the costs.
Until Ascent has recovered its costs in full it will receive 90% of
the net revenues.
Cuba - MOUs blocks 9A, 9B, 12 and 15
Post period in review, the Company announced the acquisition of
Energetical Limited which has secured the rights for the Company to
exclusively negotiate the production sharing contract for Cuban
onshore producing oil block 9B which is expected to give the
Company an entitlement to incremental barrels produced above the
existing base of circa 190 bbls/day from three wells.
The Company has initially assessed that recovery rates could be
significantly rejuvenated with the simple and relatively low-cost
addition of basic equipment and reservoir management. It is also
assessing the viability of new deviated onshore wells drilled into
the crest of the fields which it expects to flow with an initial
production rate in excess of 1,000 bopd. None of these operations
require new seismic and none of the wells have yet to produce any
water and no oil water contact has been identified. There are
another three wells at Majaguillar and the San Anton field that are
shut in at this time mainly due to the lack of basic equipment such
as pumps.
Additionally, the Company has also secured binding MOUs with the
Cuban national oil company CUPET over Cuban onshore exploration
blocks 9A, 12 and 15 which covers an aerial extent over 7,000 km2
along the northern coast. The combination of Blocks 9a, 9b, 12 and
15 positions the Company with exclusive negotiating rights to
potentially one of the largest non-state owned, onshore Cuban
portfolios. The portfolio provides a blend of existing production
for low risk redevelopment with significant upside potential for
both appraisal and exploration. The portfolio is consistent with
the Company's strategy of counter cyclical acquisitive growth with
a focus on low cost production, manageable initial capital
commitments and near term inflection points.
Our strategy
Historically the Company has focussed all of its resources on
its Slovenian project, directing available funding towards bringing
Petis ovci into production. The commencement of production during
2017 was a significant milestone. The development of the project
stalled during 2018 due to the Slovenian environmental permitting
process. The appointment of a new government and the award of the
IPPC Permit in April 2019 may provide some confidence that the
remaining permit can be obtained in due course but there is no
certainty of this happening. In 2020 we have observed recent
changes being introduced by the new Slovenian Government including
proposals to make amendments to the Nature Preservation Act and
Environment Protection Act intended to better facilitate to
development of industrial projects.
Following a strategic review in Q1 2020 the new Board identified
that the successful commercialisation of the Petis ovci field is
economic at the prevailing 2021/2022 gas future prices of circa
Euro 13-15/Mwh and that stimulation is required to materially
increase and sustain production at the field. In June 2020 the
Administrative Court of the Republic of Slovenia decided that the
JV partner's appeal against ARSO decision to require an EIA to
re-stimulate PG-10 and PG-11A well was rejected and an EIA would be
required. The Company has started work to submit an EIA and
contracted a new expert consultancy team of professionals to review
the historic stimulation data at Petis ovci, design the detailed
forward stimulation programme so that equipment can be procured
without delay when permits are received, and prepare a full Field
Development Plan. This strategy will take maximum advantage of the
current reduction in industry contractor and stimulation equipment
rates and avoid further project delays and increase production
levels.
Additionally, the new Board of Directors have launched an
international growth strategy focused on unlocking latent value in
special situations across Hispanic Americas, the Caribbean and
Europe. This will see the Company diversify its breadth and become
a portfolio of assets. This strategy is being introduced counter
cyclically against the backdrop of exceptionally volatile commodity
markets for oil and gas driven by a combination of COVID-19 related
demand decline and market oversupply from the disbandment of OPEC+.
The Board believe that this volatile pricing environment provides a
unique window of opportunity to expand the Company's asset
footprint at favourable prices. The strategy is focused on securing
low cost barrels with manageable capital commitments.
Our markets
Dependency on imported gas is very high throughout the EU,
particularly in Slovenia. This, and the history of relatively
stable gas prices in Europe underpins our strategy of exploration,
development and production in this region. Our wells are connected
to existing processing facilities, intra-field and international
pipelines, ensuring low cost connection and easy access to the
market.
The Board recognises the attractiveness of the region for oil
and gas development and many countries outside of Slovenia have
strong gas prices, well organised regulatory frameworks and a
history of oil and gas development.
The Company has identified the Caribbean and Hispanic America
region as highly prospective for oil and gas, even when taking into
consideration current volatile markets and the recent decline in
global oil prices.
The Republic of Cuba is one of the few remaining world-class,
yet largely unexploited hydrocarbon systems. The Company sees clear
first mover opportunity for a quoted oil and gas Company to counter
cyclically deploy its operational skill and access to capital in a
country which has been starved of investment and technology and
impacted by US Sanctions. Cuba currently produces approximately
45,000 bopd of mostly heavy oil with c. 100 mscf/d of gas with
clear targets for growth in their E&P sector to fuel
electricity generation. Cuba has the advantage of offering an
international investor access to good infrastructure and an
educated workforce alongside significant under exploited
hydrocarbon resource potential.
Directors' Statement under Section 172 (1) of the Companies Act
2006
The Section 172 (1) of the Companies Act obliges the Directors
to promote the success of the Company for the benefit of the
Company's members as a whole.
The section specifies that the Directors must act in good faith
when promoting the success of the Company and in doing so have
regard (amongst other things) to:
a. the likely consequences of any decision in the long term,
b. the interests of the Company's employees,
c. the need to foster the Company's business relationship with suppliers, customers and others,
d. the impact of the Company's operations on the community and environment,
e. the desirability of the Company maintaining a reputation for
high standards of business conduct, and
f. the need to act fairly as between members of the Company.
The Board of Directors is collectively responsible for the
decisions made towards the long-term success of the Company and how
the strategic, operational and risk management decisions have been
implemented throughout the business is detailed in this Strategic
Report on page 6to 9.
The Company has gone through significant change during the last
year. The previous Board worked with the newly appointed directors
and management team to provide a transition across to the new
management for the benefit of all stakeholders of the Company. The
newly appointed Board has taken the important strategic decision to
continue its commitment in Slovenia and to try and work with the
Government and authorities in to move the business forward in
country. At the same time steps have been taken to develop a growth
strategy within Hispanic Americas, the Caribbean and Europe. This
has been combined with capital raises to fund the business moving
forward for the benefit of all stakeholders: shareholders,
employees and suppliers alike.
Stakeholder engagement
The Board recognises that our employees are one of the key
resources of our business which enables delivery of Company's
vision and goals. Annual pay and benefit reviews are carried out to
determine whether all levels of employees are benefited equally and
to retain and encourage skills vital for the business. The
Remuneration Committee oversees and make recommendations of
executive remuneration and any long-term share/option awards. The
employees are informed of the results and important business
decisions and are encouraged to feel engaged and to improve career
potential.
In light of COVID-19 all employees within the business are
working from home, this situation will continue to be monitored and
at a point when it is considered right return to work will be
managed and considered by the Company will full consultation of its
employees.
The Board acknowledges that a strong business relationship with
suppliers and customers is a vital part of the growth. Whilst day
to day business operations are delegated to the executive
management, the Board sets directions with regard to new business
ventures. The Board uphold ethical business behaviour and
encourages management to seek comparable business practices from
all suppliers and customers doing business with the Company. We
value the feedback we receive from our stakeholders and we take
every opportunity to ensure that where possible their wishes are
duly considered.
The Board considers that relationships and dealings with host
Governments plays an integral part of developing oil and gas
ventures and accordingly interacts with host Governments and the
respective authorities.
Policies and processes
Under the direction of the Board, the Company operates a
Management System that embodies Environmental, Health, Safety
('EHS') and Social Responsibility ('SR') principles. This system
defines objectives to be met by the Company, its subsidiaries,
affiliates, associates and operated joint ventures, in the
management of EHS and SR.
The Board is 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.
In accordance with this policy, the Executive Directors are
directly and collectively responsible to the Board for
demonstrating that the EHS and SR objectives are attained
throughout the Business. The Executive Directors have adopted
Management System Guidelines as guidance for demonstrating
this.
The Board periodically reviews the health and safety measures
implemented in the business premises and improvements are
recommended for better practices.
Maintaining High Standards of Business Conduct
The Company is incorporated in the UK, governed by the Companies
Act 2006 and carries out its business in Cuba and Slovenia. The
Board guides management and the employees to conform with relevant
statutory and regulatory provisions in the United Kingdom and any
other prevailing regulations and best practices at other operative
locations.
The Company has adopted the Quoted Companies Alliance Corporate
Governance Code 2018 and the Board recognises the importance of
maintaining a good level of corporate governance, which together
with the requirements to comply with the AIM Rules ensures that the
interests of the Company's stakeholders are safeguarded.
The Board has prompted that ethical behavior and business
practices should be implemented across the business. Anti
-corruption and anti-bribery training are provided to staff and
contractors and the anti-bribery statement and policy is contained
in the Company's Employee Manual. The Company's expectation of
honest, fair and professional behaviour is reflected by this and
there is zero tolerance for bribery and unethical behaviour by
anyone relating to the Company.
The importance of making all employees feel safe in their
environment is maintained and a Whistleblowing policy is in place
to enable staff to confidentially raise any concerns freely and to
discuss any issues that arise. Strong financial controls are in
place and are well documented.
Shareholders
The Board places equal importance on all shareholders and
recognises the significance of transparent and effective
communications with shareholders. As an AIM listed company there is
a need to provide fair and balanced information in a way that is
understandable to all stakeholders and particularly our
shareholders.
The Company values the views of its shareholders, the newly
appointed directors are keen to engage with shareholders and work
with them so that they are aligned to the strategy and growth of
the business. Once the restrictions in place with the COVID-19
pandemic have been lifted the Company will seek to engage with
shareholders in person.
The primary communication tool with our shareholders is through
the Regulatory News Service, ("RNS") on regulatory matters and
matters of material substance. The Company's website provides
details of the business, investor presentations and details of the
Board and Board Committees, changes to major shareholder
information, QCA Code disclosure updates under AIM Rule 26. Changes
are promptly published on the website to enable the shareholders to
be kept abreast of Company's affairs. The Company's Annual Report
and Notice of Annual General Meetings (AGM) are available to all
shareholders. The Interim Report and other investor presentations
are also available on our website.
The AGM is an annual opportunity for shareholders to meet with
the Company and receive a full update of the business from both the
Board and management. With the constraints of the Coronavirus
pandemic (Covid-19) and the inability to hold the 2020 AGM in the
usual format the Company intends to keep shareholders engaged
through the Company's website. There will be full transparency of
the voting on the resolutions at the AGM, with the Company
disclosing the proxy votes received on each resolution in the RNS
released shortly after the AGM.
In order to increase shareholder awareness, the Company has
recorded a number of media interviews which are available to
download on leading investor-focused websites and from the media
section of the Company's website. An email alert service has also
established to which shareholders can subscribe to receive company
announcements as and when they are released.
Community and Environment
The Board places utmost importance of matters pertaining
Environmental, Health safety and Social Responsibility and guides
the Company on following due policies and processes in order to
protect the Community the Company operates within. A management
system has been implemented with set of clearly defined objectives
of the Environmental, Health, Safety and Social Responsibility
Policy. Health and Safety measures implemented in the business
premises are reviewed periodically and the necessary improvements
are recommended for better practices. The Company recognises its
role as an oil and gas exploration and production company and is
aware of the potential impact that it may have on the environment.
The Company ensures that its subsidiary companies comply with the
local regulatory requirements with regard to the environment.
Financial Report
Revenue for 2019 was GBP0.298 million, down from GBP1.9 million
in the prior year due to a decrease in stabilised production rates
and gas sales prices realised.
Administrative expenses increased from GBP1.760 million in 2018
to GBP2.132 million in 2019. Administrative costs principally
comprise staff costs, overheads and listing related expenses with
the increase in 2019 being attributable to an increase in
consultancy fees and legal fees incurred in relation to the
Slovenian project.
Finance costs increased from GBP9k in 2018 to GBP924k,
principally due to the fair value loss associated with amounts
receivable under the equity sharing agreement, reflecting the
decrease in the Company's share price during the period which
reduced the value of the amounts receivable.
The loss for the year totalled GBP3.660 million versus GBP1.365
million in 2018, with the increase in loss most notably due to the
contraction of revenues and increase in administrative and finance
expenses.
Operating cash flow was an outflow of GBP1.668 million In 2019
versus a positive inflow of GBP0.36 million in 2018. This reflects
the reduction in revenue and an increase in expenditures with the
principal difference to the overall accounting loss represented by
non-cash depreciation charges and non-cash finance costs.
Cash at the end of the period was GBP77k versus GBP376k at the
end of 2018.
Borrowings at the end of the year were GBP385k mostly
constituted of the Riverfort Loan arrangement announced in
September 2019.
Financial KPI's 2019 2018 Variance
Revenue 298 1,942 (1,644)
Administrative Expenses (2,132) (1,760) (372)
EBITDA (2,296) (589) (1,707)
Operating Cash Flow (1,668) 360 (2,028)
Cash Balance 77 376 (299)
Operational Performance
The Company produced 3,074,842 cubic metres of gas and 136,836
litres of condensate during the year and earned GBP298k in
revenue.
Production has declined further over the period. Once the
necessary permits are in place the Company will be able to
re-stimulate both wells to restore both to their full
potential.
Production KPI's Jan-2019 Feb-2019 Mar-2019 Apr-2019 May-2019 June-2019
Total production (000s
Cubic Metres) 412.76 311.44 334.41 296.07 292.38 249.97
Total production (Mcf) 14,574.56 10,996.95 11,808.02 10,454.23 10,323.94 8,826.44
Average daily - 000s
cubic metres 13.31 11.12 10.79 9.87 9.43 8.33
Average daily - MMscfd 0.47 0.39 0.38 0.35 0.33 0.29
Condensate production
(litres) 16,956.00 12,744.00 14,634.00 12,798.00 15,336.00 12,258.00
Litres per 1000 cubic
metres of gas 41.08 40.92 43.76 43.23 52.45 49.04
BOE - Gas 2,512.65 1,895.87 2,035.70 1,802.31 1,779.85 1,521.68
BOE - Condensate 99.72 74.95 86.06 75.26 90.19 72.09
64.91 40.24 36.56 35.98 33.21
Revenue (EUR000's) EUR EUR EUR EUR EUR 21.43
Production KPI's Jul-2019 Aug-2019 Sep-2019 Oct-2019 Nov-2019 Dec-2019
---------- ---------- ---------- ---------- ---------- ----------
Total production (000s
Cubic Metres) 216.91 237.9 231.33 221.6 102.69 167.392
Total production (Mcf) 7,659.09 8,400.25 8,168.26 7,824.70 3,625.98 5,910.61
Average daily - 000s
cubic metres 7.00 7.67 7.71 7.15 3.42 5.40
Average daily - MMscfd 0.25 0.27 0.27 0.25 0.12 0.19
Condensate production
(litres) 7,884.00 10,584.00 11,502.00 12,312.00 3,942.00 5,886.00
Litres per 1000 cubic
metres of gas 36.35 44.49 49.72 55.56 38.39 35.16
BOE - Gas 1,320.43 1,448.20 1,408.21 1,348.98 625.12 1,018.99
BOE - Condensate 46.37 62.24 67.64 72.41 23.18 34.62
13.34 13.41 14.76 12.74 10.78
Revenue (EUR'000s) EUR EUR EUR EUR EUR 0
---------- ---------- ---------- ---------- ---------- ----------
Our Principal risks and uncertainties
Commodity The Group is exposed to risks arising from fluctuations
Prices in the demand for, and price of, hydrocarbons. Oil
and gas prices depend on numerous factors over which
the Group does not have any control, including global
supply, international economic trends (such as the
current downturn caused by COVID-19), currency exchange
fluctuations, inflation, consumption patterns and
global or regional political events. This risk impacts
revenues from the Group's existing asset portfolio
in Slovenia, projects under development including
the Cuban MOUs, and evaluation of business development
opportunities where commerciality depends on assumptions
around future commodity prices.
In terms of evaluating and sanctioning new investments,
the Group adopts a conservative price forecast to
ensure capital is allocated to projects with robust
economics, even in lower commodity price environments.
Permitting The single biggest issue when carrying out operations
risk in Slovenia over the past six years has been the
environmental permitting process. This is not unique
to Ascent and it is our opinion that inefficiencies
and uncertainties within the environmental permitting
process are a significant hurdle to economic growth
in Slovenia.
Permitting risk exists for any element of the field
development plan which requires an environmental
permit; mainly well stimulation and the installation
of processing equipment. This risk is managed by
our detailed understanding of the process and our
actions to ensure Slovenian and EU regulations are
followed properly by Slovenian officials.
The award of the IPPC Permit during the year gives
the Board an increased degree of confidence that
the permits necessary for field development can be
obtained. An appeal against the decision of the Slovenian
Environment Ministry to require an Environmental
Impact Assessment ('EIA') for the proposed well stimulation
work at its Petišovci project was submitted
in July 2019. Whilst the stimulation work is considered
essential in order to address the production decline
and operations of this nature having been carried
out in Slovenia more than a hundred times since the
1950's, the Company was made aware in June 2020 that
the Administrative Court of the Republic of Slovenia
had ruled that an EIA would be required to enable
the re-stimulation of PG-10 and PG11A wells. Accordingly,
the Company is beginning preparations for submission
of an EIA. Should the JV partners EIA be successful
further permits will be required to begin intended
operational activities, which the Company would expect
to receive in due course, however there can be no
guarantee of receipt of the necessary permitting.
-------------------------------------------------------------
Concession The date when the concession is due to be renewed
extension is now only two years away which means that before
risk any further significant investment in facilities
is made the Company and its partners will need to
have obtained an early extension of the concession.
The Company and its partners have, for over a year
now, been completing the documentation required to
seek an early extension of the concession which is
due to expire in 2022. While we are confident that
an extension will be granted as a matter of course,
there is no guarantee that this will be the case.
This risk is mitigated by the goals of the partners
being well aligned; the fact that we have brought
the field into production safely and successfully
and we have started the preparatory work well in
advance of the concession end date. As a result,
we believe that the extension should be awarded in
due course.
-------------------------------------------------------------
Sub-surface The nature of the Petišovci Project is such
risk that a range of health and safety, drilling, production
and commercial risks are identified for the development
of the resource.
The Petišovci Pg reservoirs are over-pressured
and hot, relative to normal hydrostatic and thermal
gradients. The reservoir gas contains some carbon
dioxide and low levels of hydrogen sulphide and mercaptan
sulphur.
There is a risk that the Company is unable to effectively
exploit the proven reserves and resources from the
Petišovci field which may result in a lower
than anticipated return on investment. This risk
is mitigated by the experience of the expert technical
consultants and sub-contractors retained by the Company
and the knowledge acquired by the Company from production
to date.
-------------------------------------------------------------
Risks associated Although there continues to be considerable uncertainty,
with the UK at this time the Directors do not expect the implementation
withdrawal of Brexit to have a materially adverse impact on
from the European the operations of the Company or the Group but as
Union a UK registered Company with operations in the EU,
there could potentially be a risk of a negative impact
from the UK's departure from the European Union,
mainly given to the consequences that the withdrawal
could have on the application of EU law.
This risk is mitigated as we operate through locally
owned subsidiaries selling gas produced in Slovenia
to Croatia, another EU member state. The Company's
entry in Cuba will also be structured in a way to
ensure that we benefit from the protection provided
by the EU legislation in that respect.
-------------------------------------------------------------
Operator qualification As part of international expansion the Company, post
risk period in review, the Company has secured four MOUs
for onshore oil and gas blocks in Cuba. As part of
being awarded the PSCs for these blocks and before
any work on the ground can begin the Company needs
to qualify as an onshore operator in Cuba. Whilst
the management believes the requirements imposed
under Cuban law can be met, and the Company has a
long history and operational track record in oil
and gas operations, there can be no guarantee of
such since the evaluation is to be carried by an
independent body of the Cuban administration in accordance
with the applicable law. Failure of the Company to
qualify as an operator in new jurisdictions will
limit the ability of the Company to achieve strategic
growth.
-------------------------------------------------------------
Cuba US Sanction The Company intends to do business in Cuba, a country
risk which is currently under a US embargo. The EU and
the UK do not impose any sanctions against Cuba.
The Company is implementing a robust set of policies
to safeguard the Company from being exposed to any
US nexus in dealings related to Cuba, including the
prohibition of use of USD currency. The main impact
of EU and UK sanctions on the Project is the interaction
of EU measures (and potentially UK measures, post-Brexit)
with US sanctions and their attempt to provide both
a shield and sword to any claims of US jurisdiction
over transactions in Cuba. For this reason, the Company
is also structuring its Cuba entry in a way to ensure
it benefits from EU legislation protection on Sanctions.
The main risk for the Group would be to become subject
to US jurisdiction and the extensive US embargo that
is in place against Cuba
-------------------------------------------------------------
COVID-19 risk COVID-19 has had limited direct impact on Ascent's
assets in Slovenia but there may be delays in obtaining
the necessary governmental approvals. In addition,
the pandemic has created increased commodity price
volatility as detailed above and may impact availability
of funding or the terms on which such funding is
available. Production operations in Slovenia have
been unaffected to date, with the assets being managed
through a combination of on-site working within social
distancing guidelines or remote oversight, with all
appropriate safety procedures remaining in place
to protect staff and local communities. However,
the potential for future disruption to operations
remains.
-------------------------------------------------------------
How we operate
The Company utilises a full range of advanced geophysical,
geological and other state-of-the-art technology to evaluate and
de-risk projects and to reap maximum benefit from its appraisal,
development and production activities. Our Petis ovci project is
operated through a local entity in a joint venture.
Our people
Ascent has a small executive team implementing a clear growth
strategy and a more operationally focused team based in Slovenia.
This is supplemented, as the need requires, with regional technical
and operational expertise to ensure the highest standards are
delivered on our projects. As an important local employer in our
area of operation we take our environmental and social
responsibilities seriously and always strive to be a good corporate
citizen.
Approved for issue by the Board of Directors and signed on its
behalf
James Parsons
Executive Chairman
25 June 2020
Summary of Group Net Oil and Gas Reserves As of 31 Dec 2019
Net Reserves and Resources
Net Attributable Net Attributable Net Attributable
Reserves Contingent Reserves Prospective Resources
(bcfe) (bcfe) (bcfe)
P90 P50 P10 Low Best High Low Best High
------ ------ ----- ------- ------- ------- ------- -------- --------
Slovenia 41 84 162 35 73 145 - - -
------ ------ ----- ------- ------- ------- ------- -------- --------
These figures are based on RPS Energy "Updated Independent
Volumetric Review of the Petišovci Area" 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 into account
historic field production since 1963, including estimates of
process flare and fuel, which to the end of 2019 were 12.60 bcf.
Ascent's share of this production and gas use is 9.45 bcf.
Proven Reserves (P90) 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.
Proven + Probable Reserves (P50) includes those unproven
reserves which are more likely than not to be recoverable.
For the P90 (P50 and P10) Reserves there is at least a 90% (50%;
10%) probability that the quantities actually recovered will equal
or exceed the estimate.
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.
The range of estimates shown for each category of reserves or
resources is a measure of the uncertainty inherent in the
estimation of producible volumes and includes the current
perceptions of geological, operational and commercial risk.
Directors' Report
The Directors present their Directors' Report and Financial
Statements for the year ended 31 December 2019 ('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 quoted on the AIM Market of the London Stock
Exchange.
The Group's corporate management is in London and its oil and
gas interests are in Slovenia and post period end Cuba. 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 11 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. As part of its ongoing strategic review in Europe,
the Company is pleased to confirm that given its existing skill
sets and regional relationships, it continues to evaluate multiple
opportunities to grow its European footprint, including in
neighbouring Central Eastern European countries and in the United
Kingdom.
Post period in review, as part of an expanded international
strategic review, the Company has also identified the Caribbean and
Hispanic America region as highly prospective for oil and gas, and
a region where the new team's industry experience, existing
relationships and skill set can add value for shareholders. The
Company is focused initially on attractive production and appraisal
portfolios and views the current low oil price environment as an
opportunity to secure advantageous entry terms. It also notes
recent legislative and licence changes to encourage foreign
investment with attractive fiscal terms, reduced tax rates and tax
holidays in some jurisdictions. We expect Ascent will benefit from
a counter cyclical early mover advantage as one of the few active
foreign independent E&P companies in the region.
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 GBP3.7 million (2018:
GBP1.4 million). The Directors do not recommend the payment of a
dividend (2018: Nil).
Post balance sheet events
Post year in review, in February 2020 , the new Board has
achieved a restructuring of the September 2019 RiverFort
Arrangement. The Equity Sharing Agreement with RiverFort as
announced on 20 September 2019 has now been cancelled, effective
February 14, 2020. The outstanding US $468,776 loan (including fees
and commission) with Riverfort has been re-negotiated to a two-year
coupon free bullet repayment due on maturity with conversion rights
for the lender at 7.5 pence per share (post re-organisation). No
conversion can occur until the share price exceeds 10 pence per
share for five consecutive days. The Company has a right to buy out
up to 50% of the loan prior to its expiry at nil premium whilst the
share price is below the conversion price. If the Company does
exercise this right, then the conversion price is adjusted upwards
to 0.0875 pence (8.75 pence post re-organisation) per conversion
share. The 43 million warrants initially to be awarded to
Riverfort, as announced on 20 September 2019, will no longer be
awarded.
Post period in review, in March 2020, shareholders approved a
share re-organisation, including a 100:1 consolidation, with the
nominal value of the shares to be set to 0.05 pence. Further to the
successful passing of the resolutions at the Company's General
Meeting held on 5 March 2020 and despite the market volatility at
the time, the Company completed a fundraising for gross proceeds of
GBP685,000 at 5 pence per share. Furthermore, in support of funding
work streams associated with advancing the Company's entry into
Cuba the Company raised a further GBP212,500 by the issuance of new
shares at 2.75 pence being a nil premium to the closing bid price
at the time of issue in April alongside the issue of 8,727,272
warrants exercisable by paying 5.5 pence per new share at any time
in the two years from issue.
Post Period in review the Company has announced a new country
entry into Cuba via, initially the acquisition of Energetical
Limited securing exclusive rights to negotiate the PSC for onshore
production block 9B, followed quickly with the announcement of a
signature of a further 3 memorandum of understanding directly with
Cuban National oil company CUPET over onshore blocks 9A, 12 and 15.
This positions the Company with exclusive rights to negotiate the
production sharing contracts to one of the largest non-state owned
portfolios of exploration and production licenses in Cuba covering
over 7,000 km2.
Directors
The Directors of the Company that served during the year, and
subsequently, were as follows:
Colin Hutchinson (resigned 5 March 2020)
Clive Nathan Carver (resigned 15 January 2019)
Nigel Sandford Johnson Moore (resigned 18 February
2019)
William Cameron Davies (resigned 29 July 2019)
John Edmund Buggenhagen (appointed 18 February
2019, resigned 14 April 2020)
Louis Emmanuel Castro (appointed 18 February
2019, resigned 5 March 2020)
James Parsons (appointed 5 March 2020)
Ewen Ainsworth (appointed 5 March 2020)
Leonardo Salvadori (appointed 14 April 2020)
Andrew Dennan (appointed 5 May 2020)
Relevant details of the Directors, which include committee
memberships, are set out in the full annual report.
Directors' interests
The beneficial and non-beneficial interests in the issued share
capital and Convertible Loan Notes ("CLN") of the Company were as
follows:
Ordinary shares of 0.2p each.
At 31 December 2019 At 31 December 2018
Clive Carver* n.a 3,304,231
Nigel Moore* n.a 1,339,275
Cameron Davies* n.a 1,340,800
Colin Hutchinson 1,570,370 1,570,270
Louis Castro n.a. n.a
John Edmund Buggenhagen n.a. n.a
*Resigned in period.
Directors' emoluments
Details of Directors' share options and remuneration are set out
in the Remuneration Committee report.
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 30 April 2020 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 %
Halifax Share Dealing Clients 5,779,038 9.78
Hargreaves Lansdown Private Client 5,428,811 9.18
Interactive Investor Clients 2,548,100 4.31
Shard Capital 2,409,090 4.08
Novum Securities 2,100,000 3.55
Andrew Dennan 1,900,000 3.21
Ewen Ainsworth 454,545 0.77
Shareholder communications
The Company's website, www.ascentresources.co.uk, provides a
platform 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 as detailed in Note 1. to the financial
statements.
The Company has raised GBP0.8975 million in new equity since the
balance sheet date from new and existing investors. Under the
Group's forecasts, the funds raised together with existing bank
balances provide sufficient funding for at least the next two
months, as of the date of the publication of this report, based on
anticipated outgoings and in the absence of the receipt of revenues
from production.
COVID-19 has had limited direct impact on Ascent's assets in
Slovenia but there may be delays in obtaining the necessary
governmental approvals and processes. Production operations in
Slovenia have been unaffected to date.
In addition to the need to raise additional funding in the next
two months, the forecasts are sensitive to the timing and cash
flows associated with operational continuation in Slovenia and
discretionary spend incurred on advancing the Cuban initiative
including deferred consideration that would become payable if the
Company elects to enter a PSC for Block 9b. As such, the Company
will need to raise new capital within the forecast period to fund
such discretionary spend.
Based on historical and recent support from new and existing
investors the Board believes that such funding, when required,
could be obtained through new debt or equity issuances. However,
the ability to raise these funds is not guaranteed at the date of
signing these financial statements.
As a consequence, there is material uncertainty which may cast
significant doubt over the Group and Parent 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.
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
James Parsons
Chairman
25 June 2020
Consolidated Income Statement &
Statement of Other Comprehensive Income
For the year ended 31 December 2019
Notes Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Revenue 2 298 1,942
Cost of sales 2 (462) (771)
Depreciation of oil & gas assets 9 (440) (793)
------------------------ ------------------------
Gross (loss) / profit (604) 378
Administrative expenses 3 (2,132) (1,760)
------------------------ ------------------------
Operating loss (2,736) (1,382)
Finance income 5 - 26
Finance cost 5 (924) (9)
------------------------ ------------------------
Net finance costs (924) 17
Loss before taxation (3,660) (1,365)
Income tax expense 6 - -
------------------------ ------------------------
Loss for the period after tax (3,660) (1,365)
Loss for the year attributable
to equity shareholders (3,660) (1,365)
Loss per share
Basic & fully diluted loss per
share (Pence) 8 (0.14) (0.06)
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Loss for the year (3,660) (1,365)
Other comprehensive income
Foreign currency translation differences
for foreign operations* (1,700) 310
Total comprehensive loss for the year (5,360) (1,055)
*Items which may be recycled through the income statement in
future periods.
The Notes are an integral part of these consolidated financial
statements .
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Merger Equity Share Translation Retained Total
capital premium Reserve reserve based reserve earnings
payment
reserve
GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s
Balance at 1
January
2018 6,101 71,647 300 16 1,569 1,090 (36,992) 43,731
Comprehensive -
income
Loss for the year - - - - - - (1,365) (1,365)
Other comprehensive
income
Currency
translation
differences - - - - - 310 - 310
Total comprehensive
income - - - - - 310 (1,365) (1,055)
Transactions with -
owners
Conversion of loan
notes - 1 - - - - - 1
Shares issued under
the Trameta
acquisition 45 - 270 - (315) - - -
Share-based
payments - - - - 403 - - 403
Balance at 31
December
2018 6,146 71,648 570 16 1,657 1,400 (38,357) 43,080
-------------------- ---------- ---------- ---------- ---------- ---------- ------------ ---------- ----------
Balance at 1
January
2019 6,146 71,648 570 16 1,657 1,400 (38,357) 43,080
Comprehensive -
income
Loss for the year - - - - - - (3,660)) (3,660)
Other comprehensive
income
Currency
translation
differences - - - - - (1,700) - (1,700)
Total comprehensive
loss - - - - - (1,700) (3,660) (5,360)
Transactions with -
owners
Issue of ordinary
shares
net of costs 1,458 682 - - - - - 2,140
Expiry on loan note
conversion rights - - - (16) - - - (16)
Share-based
payments - - - - 216 - 53 269
Balance at 31
December
2019 7,604 72,330 570 - 1,873 (300) (41,964) 40,113
-------------------- ---------- ---------- ---------- ---------- ---------- ------------ ---------- ----------
The Notes are an integral part of these consolidated financial
statements.
Company Statement of Changes in Equity
For the year ended 31 December 2019
Share capital Share premium Merger Equity reserve Share based Retained Total
Reserve payment earnings
reserve
GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s
Balance at 1
January 2018 6,101 71,647 300 16 1,569 (32,539) 47,094
Comprehensive -
income
Profit and
comprehensive
profit for
the year - - - - - 794 794
Total
comprehensive
income - - - - - 794 794
Transactions
with owners
Conversion of
loan notes - 1 - - - - 1
Shares issued
under the
Trameta
acquisition 45 - 270 - (315) - -
Share-based
payments and
expiry of
options - - - - 403 - 403
Balance at 31
December
2018 6,146 71,648 570 16 1,657 (31,745) 48,292
--------------- -------------- -------------- -------------- --------------- ------------ ---------- ----------
Balance at 1
January 2019 6,146 71,648 570 16 1,657 (31,745) 48,292
Comprehensive -
income
Loss and
comprehensive
loss for the
year (8,362) (8,362)
Total
comprehensive
loss - - - - - (8,362) (8,362)
Transactions
with owners
Issue of
ordinary
shares
net of costs 1,458 682 - - - - 2,140
Expiry on loan
note
conversion
rights - - - (16) - - (16)
Share-based
payments and
expiry of
options - - - - 216 53- 269
Balance at 31
December
2019 7,604 72,330 570 - 1,873 (40,054) 42,323
--------------- -------------- -------------- -------------- --------------- ------------ ---------- ----------
The Notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
As at 31 December 2019
Notes 31 December 31 December
2019 2018
Assets GBP '000s GBP '000s
Non-current assets
Property, plant and equipment 9 22,069 23,779
Exploration and evaluation costs 10 18,576 18,968
Prepaid abandonment fund 12 240 240
------------------------ ------------------------
Total non-current assets 40,885 42,987
Current assets
Inventory - 3
Trade and other receivables 12 254 233
Cash and cash equivalents 23 77 376
Restricted cash 23 - 180
------------------------ ------------------------
Total current assets 331 792
Total assets 41,216 43,779
======================== ========================
Equity and liabilities
Attributable to the equity holders
of the Parent Company
Share capital 18 7,604 6,146
Share premium account 72,330 71,648
Merger reserve 570 570
Equity reserve - 16
Share-based payment reserve 1,873 1,657
Translation reserves (300) 1,400
Retained earnings (41,964) (38,357)
------------------------ ------------------------
Total equity attributable to the shareholders 40,113 43,080
Total equity 40,113 43,080
------------------------ ------------------------
Non-current liabilities
Borrowings 14 - 44
Provisions 15 255 263
Total non-current liabilities 255 307
Current liabilities
Borrowings 14 385 -
Trade and other payables 16 463 392
Total current liabilities 848 392
Total liabilities 1,103 699
------------------------ ------------------------
Total equity and liabilities 41,216 43,779
======================== ========================
The Notes are an integral part of these consolidated financial
statements.
These financial statements were approved and authorised for
issue by the Board of Directors on 25 June 2020 and signed on its
behalf by:
James Parsons
Executive Chairman
25 June 2020
Company Statement of Financial Position
As at 31 December 2019
Notes 31 December 31 December
2019 2018
Assets GBP '000s GBP '000s
Non-current assets
Property, plant and equipment - 1
Investment in subsidiaries and joint
ventures 11 15,443 15,443
Intercompany receivables 20 27,180 32,713
------ ------------------------ ------------------------
Total non-current assets 42,623 48,157
Current assets
Trade and other receivables 13 196 11
Cash and cash equivalents 23 64 112
Restricted cash 23 - 180
------ ------------------------ ------------------------
Total current assets 260 303
Total assets 42,883 48,460
====== ======================== ========================
Equity and liabilities
Share capital 18 7,604 6,146
Share premium account 72,330 71,648
Merger reserve 570 570
Equity reserve - 16
Share-based payment reserve 1,873 1,657
Retained loss (40,054) (31,745)
------ ------------------------ ------------------------
Total equity attributable to the shareholders 42,323 48,292
Non-Controlling interest - -
------ ------------------------ ------------------------
Total equity 42,323 48,292
------ ------------------------ ------------------------
Non-current liabilities
Borrowings 14 - 44
Total non-current liabilities - 44
Current liabilities
Borrowings 14 385 -
Trade and other payables 17 175 124
Total current liabilities 560 124
Total liabilities 560 168
------ ------------------------ ------------------------
Total equity and liabilities 42,883 48,460
====== ======================== ========================
The Company loss for the year was GBP8,362,000 (2018: profit of
0.8 million).
The Notes are an integral part of these consolidated financial
statements.
These financial statements were approved and authorised for
issue by the Board of Directors on 25 June 2020 and signed on its
behalf by:
James Parsons
Executive Chairman
25 June 2020
Consolidated Cash Flow Statement
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Cash flows from operations
Loss after tax for the year (3,660) (1,365)
Depreciation 440 793
Change in inventory (3) 1
Change in receivables 152 530
Change in payables 71 (184)
Share-based payments 269 403
Exchange differences (40) 24
Finance income - (26)
Finance cost 924 9
Transfer from restricted cash 180 175
Net cash generation (used in)/from operating
activities (1,667) 360
------------------------- ------------------------
Cash flows from investing activities
Interest received (3) 24
Payments for fixed assets (3) (411)
Payments for investing in exploration - (319)
Net cash used in investing activities (6) (706)
------------------------- ------------------------
Cash flows from financing activities
Interest paid and other finance fees (67) (1)
Loans received 410
Loans repaid (27)
Proceeds from issue of shares 1,114 -
Share issue costs (55) -
Net cash generated from financing activities 1,375 (1)
------------------------- ------------------------
Net increase in cash and cash equivalents
for the year (299) (347)
Effect of foreign exchange differences - 2
Cash and cash equivalents at beginning
of the year 376 721
Cash and cash equivalents at end of the
year 77 376
========================= ========================
* Restricted cash related to monies held on deposit by Ascent as
collateral against a bank guarantee in favour of INA to cover any
potential future penalties under the gas sales agreement.
The Notes are an integral part of these consolidated financial
statements.
Company Cash Flow Statement
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Cash flows from operations
(Loss)/ profit after tax for the year (8,362) 794
Adjustments for:
Change in receivables (12) 44
Change in payables 51 (50)
Expected credit loss charge 4,796 -
Change in intercompany receivables (1,853) (1,513)
Increase in share-based payments 269 403
Exchange differences 2,692 (450)
Finance cost 853 8
Transfer from restricted cash 180 175
Net cash generation (used in) operating
activities (1,386) (589)
------------------------ ------------------------
Cash flows from investing activities
Advances to subsidiaries (102) -
Net cash used in investing activities (102) -
------------------------ ------------------------
Cash flows from financing activities
Interest paid and other finance fees (5) (1)
Loans advance received 410
Loans repaid (27)
Proceeds from issue of shares 1,114 -
Share issue costs (55) -
Net cash generated from financing activities 1,438 (1)
------------------------ ------------------------
Net increase in cash and cash equivalents
for the year (50) (590)
Effect of foreign exchange differences 2 2
Cash and cash equivalents at beginning
of the year 112 700
Cash and cash equivalents at end of the
year 64 112
======================== ========================
* Restricted cash related to monies held on deposit by Ascent as
collateral against a bank guarantee in favour of INA to cover any
potential future penalties under the gas sales agreement.
The Notes are an integral part of these consolidated financial
statements.
Notes to the accounts
1 Accounting policies
Reporting entity
Ascent Resources plc ('the Company' or 'Ascent') is a company
domiciled and incorporated in England. The address of the Company's
registered office is 5 New Street Square, London, EC4A 3TW. The
consolidated financial statements of the Company for the year ended
31 December 2019 comprise the Company and its subsidiaries
(together referred to as the 'Group') and the Group's interest in
associates and joint ventures. The Parent Company financial
statements present information about the Company as a separate
entity and not about its Group.
The Company is admitted to AIM, a market of the London Stock
Exchange.
The financial information set out herein does not constitute the
Group's statutory financial statements for the year ended 31
December 2019, but is derived from the Group's audited financial
statements. The auditors have reported on the 2019 financial
statements and their reports were unqualified and did not contain
statements under s498(2) or (3) Companies Act 2006 but did contain
a material uncertainty in relation to going concern.
The financial information in this statement is audited but does
not have the status of statutory accounts within the meaning of
Section 434 of the Companies Act 2006.
Statement of compliance
The financial statements of the Group and Company, which form
part of the 2019 Annual Report, have been prepared in accordance
with International Financial Reporting Standards (IFRS) and
interpretations issued by the IFRS Interpretations Committee (IFRS
IC) as adopted by the European Union, and with the Companies Act
2006 as applicable to companies reporting under IFRS.
The Group's and Company's financial statements for the year
ended 31 December 2019 were approved and authorised for issue by
the Board of Directors on 25 June 2020 and the Statements of
Financial Position were signed on behalf of the Board by James
Parsons.
Both the Parent Company financial statements and the Group
financial statements give a true and fair view and have been
prepared and approved by the Directors in accordance with
International Financial Reporting Standards as adopted by the EU
('IFRSs').
Basis of preparation
In publishing the Parent Company financial statements here
together with the Group financial statements, the Company is taking
advantage of the exemption in Section 408 of the Companies Act 2006
not to present its individual income statement and related notes
that form a part of these approved financial statements. The
Company loss for the year was GBP8,362,000 (2018: profit of
GBP794,000)
Measurement Convention
The financial statements have been prepared under the historical
cost convention, except for financial instruments measured at fair
value. The financial statements are presented in sterling and have
been rounded to the nearest thousand (GBP'000s) except where
otherwise indicated.
The principal accounting policies set out below have been
consistently applied to all periods presented.
Going Concern
The Board have reviewed cash flow forecasts covering a period of
at least the next twelve months from the date of approval of the
financial statements.
The Company has raised GBP0.8975 million in new equity since the
balance sheet date from new and existing investors. Under the
Group's forecasts, the funds raised together with existing bank
balances provide sufficient funding for at least the next two
months, as of the date of the publication of this report, based on
anticipated outgoings and in the absence of the receipt of revenues
from production.
COVID-19 has had limited direct impact on Ascent's assets in
Slovenia but there may be delays in obtaining the necessary
governmental approvals and administrative court processes.
Production operations in Slovenia have been unaffected to date.
In addition to the need to raise additional funding in the next
two months, the forecasts are sensitive to the timing and cash
flows associated with operational continuation in Slovenia and
discretionary spend incurred on advancing the Cuban initiative
including deferred consideration that would become payable if the
Company elects to enter a PSC for Block 9b. As such, the Company
will need to raise new capital within the forecast period to fund
such discretionary spend.
Based on historical and recent support from new and existing
investors the Board believes that such funding, when required,
could be obtained through new debt or equity issuances. However,
the ability to raise these funds is not guaranteed at the date of
signing these financial statements.
As a consequence, there is material uncertainty which may cast
significant doubt over the Group and Parent 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.
New and amended Standards effective for 31 December 2019
year-end adopted by the Group:
i. The following new standards and amendments to standards are
mandatory for the first time for the Group for the financial year
beginning 1 January 2019. The adoption of these standards and
amendments has had no material effect on the Group's results,
although they have given rise to changes to disclosures.
Standard Description Effective
date
IFRS 16 Leases 1 January
2019
--------------------------------------- ----------
IFRS 23 Uncertainty over Income Tax Treatments 1 January
2019
--------------------------------------- ----------
IFRS 9 Amendments to IFRS 9 Prepayment 1 January
Features with Negative Compensation 2019
--------------------------------------- ----------
Annual improvements to IFRS Standards 1 January
2015-2017 Cycle 2019
--------------------------------------- ----------
The new standards effective from 1 January 2019, as listed
above, did not have a material effect on the Group's financial
statements.
Management have undertaken a review of contracts for potential
lease arrangements. Based on the analysis the Group does not have
any leases requiring recognition and therefore IFRS 16 has had no
impact on the Group. The Group applied the modified retrospective
approach to adoption of IFRS 16. The Group has taken the exemption
within IFRS 16 not to record leases for low value items and
arrangements with a term of less than 12 months.
The Group has adopted IFRIC 23 Uncertainty over Income Tax
Treatments which is effective for accounting periods beginning on
or after January 1, 2019. The interpretation is applied to the
determination of taxable profit (tax loss), tax bases, unused tax
losses, unused tax credits and tax rates, when there is uncertainty
over income tax treatments under IAS 12. The adoption of this
interpretation has not had a material impact on the financial
statements of the Group.
.
ii. Standards, amendments and interpretations, which are
effective for reporting periods beginning after the date of these
financial statements which have not been adopted early:
Standard Description Effective
date
IFRS Business combinations 1 January
3 2020
-------------------------------------------- ----------
IAS 1 Presentation of Financial Statements and 1 January
IAS 8 Accounting Policies, Changes in 2020
Accounting Estimates and Errors (Amendment
- Definition of Material)
-------------------------------------------- ----------
IAS 1 Amendments to IAS 1 Classification of 1 January
Liabilities as Current or Non-current 2020
-------------------------------------------- ----------
Revised Conceptual Framework for Financial 1 January
Reporting 2020
-------------------------------------------- ----------
The Group is currently assessing the impact of these new
accounting standards and amendments. None of these are expected to
have a material impact on the financial statements.
Critical accounting estimates and assumptions and critical
judgements in applying the Group's accounting policies
The preparation of the consolidated financial statements in
conformity with IFRSs requires management to make estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income, expenses and related
disclosures. The estimates and underlying assumptions are based on
practical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form
the basis for making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Changes in accounting estimates may be necessary if
there are changes in the circumstances on which the estimate was
based or as a result of new information. Such changes are recorded
in the period in which the estimate is revised.
The application of the Group's accounting policies may require
management to make judgements, apart from those involving
estimates, which can have a significant effect on the amounts
amortised in the financial statements. Management judgement is
particularly required when assessing the substance of transactions
that have a complicated structure or legal form.
Exploration and evaluation assets - exploration and evaluation
costs are initially classified and held as intangible fixed assets
rather than being expensed. The carrying value of intangible
exploration and evaluation assets are then determined. Management
considers these assets for indicators of impairment under IFRS 6 at
least annually based on an estimation of the recoverability of the
cost pool from future development and production of the related oil
and gas reserves which requires judgement. This assessment includes
assessment of the underlying financial models for the Petišovci
field and requires estimates of gas reserves, production, gas
prices, operating and capital costs associated with the field and
discount rates (see Note 10 ) using the fair value less cost to
develop method which is commonplace in the oil and gas sector. The
forecasts are based on the JV partners submitting and obtaining
approval for an environmental impact assessment, which the Board
considers to be an ordinary risk for oil and gas developments, and
other environmental permits which the Board anticipate being
issued. In forming this judgment, the Board considered all facts
and circumstances including the IPPC award in 2019, the Court
ruling regarding the environmental permit applications and noting
the recent amendments to both the Nature Preservation Act as well
as law regarding building permits for facilities that could be
considered relevant. The carrying value of exploration assets at 31
December 2019 was GBP18,576,000 (2018: GBP18,968,000).
Commercial reserves - Commercial reserves are proven, and
probable oil and gas reserves calculated on an entitlement basis
and are integral to the assessment of the carrying value of the
exploration, evaluation and production assets. Estimates of
commercial reserves include estimates of the amount of oil and gas
in place, assumptions about reservoir performance over the life of
the field and assumptions about commercial factors which, in turn,
will be affected by the future oil and gas price.
Carrying value of property, plant and equipment (developed oil
and gas assets) - developed oil and gas assets are assessed for
indicators of impairment and tested for impairment at each
reporting date when indicators of impairment exist. An impairment
test was performed based on a discounted cash flow model using a
fair value less cost to develop approach commonplace within the oil
and gas sector. Key inputs requiring judgment and estimate included
gas prices, production and reserves, future costs and discount
rates. Gas prices in the near term are forecast based on
management's expectation of market prices less deductions under the
INA contract, before reverting to market prices with reference to
the forward curve following the approval of the IPPC permit and
transition to gas sales taking place into the Slovenian market. The
forecasts include future well workovers to access the reserves
included in the model together with the wider estimated field
development costs to access field reserves. Refer to Note 9. The
impairment test demonstrates significant headroom despite the
underperformance of the wells given the delays obtaining permits
for well stimulation. As with the exploration and evaluation
assets, judgment was required regarding the likelihood of the
necessary environmental permits being granted, which are key to the
commercial value of the assets.
Depreciation of property, plant and equipment - Upon commencing
commercial production we began to depreciate the assets associated
with current production. The depreciation on a unit of production
basis requires judgment and estimation in terms of the applicable
reserves over which the assets are depreciated and the extent to
which future capital expenditure is included in the depreciable
cost when such expenditure is required to extract the reserve base.
The calculations have been based on actual production, estimates of
P50 reserves and best estimate resources the estimated future
workover costs on the producing wells to extract this reserve. The
depreciation charge for the year was GBP434,000 (2018: GBP793,000)
including both depreciation associated with the unit of production
method and straight-line charges for existing processing
infrastructure. This is included in Notes 9 and 10 below.
Deferred tax - judgment has been required in assessing the
extent to which a deferred tax asset is recorded, or not recorded,
in respect of the Slovenian operations. Noting the history of
taxable losses and the initial phases of production, together with
assessment of budgets and forecasts of tax in 2019 the Board has
concluded that no deferred tax asset is yet applicable. This is
included at Note 7 .
Intercompany receivables - In line with the requirements of IFRS
9 the Board has carried out an assessment of the potential future
credit loss on intercompany receivables under a number of
scenarios. Arriving at the expected credit loss allowance involved
considering different scenarios for the recovery of the
intercompany loan receivables, the possible credit losses that
could arise and the probabilities for these scenarios. The Company
would suffer a credit loss where the permits necessary for the
development of the field are not obtained and a court case for
damages against the Republic of Slovenia is unsuccessful. Based on
legal advice received in relation to the permit process and the
strength of our case we consider the risk of credit loss to be
relatively limited. A provision of GBP4.8million (2018: GBP1.7
million) has been recognised in the Company accounts against a
receivable of GBP32 million (2018: GBP34.4 million).
Riverfort receivable - during the current year the Company
entered into a financing arrangement with Riverfort Global
Investors. Under the subscription agreement Riverfort subscribed
for shares at market price with equity issued at inception, the
payment for these shares was effectively deferred under an equity
sharing agreement with the proceeds receivable in instalments over
12 months with the value dependent on the share price performance
during that period. Accordingly, the transaction gave rise to a
receivable held at fair value. In addition, the Company entered an
investment agreement under which the Company was advanced a
$500,000 10% coupon loan repayable by September 2020 and which was
to be repaid from the proceeds of the equity sharing agreement
share sales. In addition, RiverFort were entitled to receive
43,000,000 warrants under the investment agreement with a
subscription price at the lower of 0.33p, 120% of the closing share
price at the date of warrant agreement or 120% of the share price
in certain fundraising events.
In respect of the receivable associated with the equity sharing
agreement classified at fair value through profit and loss,
estimates were required in determining the fair value at year end
based under a valuation model with key inputs being the share price
and future share price volatility scenarios. The fair value of the
warrants were assessed based on a Black-Scholes model at inception
and year end and was immaterial. Refer to notes 12 and 22 for
details.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries as if they formed a single entity.
Inter-company transactions and balances between Group companies are
therefore eliminated in full.
The results of undertakings acquired or disposed of are
consolidated from or to the date when control passes to or from the
Group. The results of subsidiaries acquired or disposed of during
the period are included in the Consolidated Income Statement from
the date that control commences until the date that control
ceases.
Where necessary, adjustments are made to the results of
subsidiaries to bring the accounting policies they use into line
with those used by the Group.
Business combinations
On acquisition, the assets, liabilities and contingent
liabilities of subsidiaries are measured at their fair values at
the date of acquisition. Any excess of cost of acquisition over net
fair values of the identifiable assets, liabilities and contingent
liabilities acquired is recognised as goodwill. Any deficiency of
the cost of acquisition below the net fair values of the
identifiable assets, liabilities and contingent liabilities
acquired (i.e. discount on acquisition) is credited to profit and
loss in the period of acquisition.
Joint arrangements
The Group is party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as
either joint ventures, where the Group has rights to only the net
assets of the joint arrangement, or joint operations where the
Group has both the rights to assets and obligations for the
liabilities of the joint arrangement.
All of the Group's joint arrangements are classified as joint
operations. The Group accounts for its interests in joint
operations by recognising its assets, liabilities, revenues and
expenses in accordance with its contractually conferred rights and
obligations.
The Group has one joint arrangement, the Petišovci joint venture
in Slovenia in which Ascent Slovenia Limited (a 100% subsidiary of
Ascent Resources plc) has a 75% working interest.
Oil and Gas Exploration Assets
All licence/project acquisitions, exploration and appraisal
costs incurred or acquired on the acquisition of a subsidiary, are
accumulated in respect of each identifiable project area. These
costs, which are classified as intangible fixed assets are only
carried forward to the extent that they are expected to be
recovered through the successful development of the area or where
activities in the area have not yet reached a stage which permits
reasonable assessment of the existence of economically recoverable
reserves.
Pre-licence/project costs are written off immediately. Other
costs are also written off unless commercial reserves have been
established or the determination process has not been completed.
Thus, accumulated cost in relation to an abandoned area are written
off in full to the statement of comprehensive income in the year in
which the decision to abandon the area is made.
Transfer of exploration assets to property, plant and
equipment
Assets, including licences or areas of licences, are transferred
from exploration and evaluation cost pools to property, plant and
equipment when the existence of commercially feasible reserves have
been determined and the Group concludes that the assets can
generate commercial production. This assessment considers factors
including the extent to which reserves have been established, the
production levels and margins associated with such production. The
costs transferred comprise direct costs associated with the
relevant wells and infrastructure, together with an allocation of
the wider unallocated exploration costs in the cost pool such as
original acquisition costs for the field. The producing assets
start to be depreciated following transfer.
Depreciation of property plant and equipment
The cost of production wells is depreciated on a unit of
production basis. The depreciation charge is calculated based on
total costs incurred to date plus anticipated future workover
expenditure required to extract the associated gas reserves. This
depreciable asset base is charged to the income statement based on
production in the period over their expected lifetime P50
production extractable from the wells per the field plan.
The infrastructure associated with export production is
depreciated on a straight-line basis over a two-year period as this
is the anticipated period over which this infrastructure will be
used.
Impairment of oil and gas exploration assets
Exploration/appraisal assets are reviewed regularly for
indicators of impairment following the guidance in IFRS 6
'Exploration for and Evaluation of Mineral Resources' and tested
for impairment where such indicators exist.
In accordance with IFRS 6 the Group considers the following
facts and circumstances in their assessment of whether the Group's
oil and gas exploration assets may be impaired:
-- whether the period for which the Group has the right to
explore in a specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
-- whether substantive expenditure on further exploration for
and evaluation of mineral resources in a specific area is neither
budgeted nor planned;
-- whether exploration for and evaluation of oil and gas
reserves in a specific area have not led to the discovery of
commercially viable quantities of oil and gas and the Group has
decided to discontinue such activities in the specific area;
and
-- whether sufficient data exists to indicate that although a
development in a specific area is likely to proceed, the carrying
amount of the exploration and evaluation assets is unlikely to be
recovered in full from successful development or by sale.
If any such facts or circumstances are noted, the Group, as a
next step, perform an impairment test in accordance with the
provisions of IAS 36. In such circumstances the aggregate carrying
value of the oil and gas exploration and assets is compared against
the expected recoverable amount of the cash generating unit. The
recoverable amount is the higher of value in use and the fair value
less costs to sell.
The Group has identified one cash generating unit, the wider
Petišovci project in Slovenia. Any impairment arising is recognised
in the Income Statement for the year.
Where there has been a charge for impairment in an earlier
period that charge will be reversed in a later period where there
has been a change in circumstances to the extent that the
discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of
the asset will be increased to the lower of its original carrying
values or the carrying value that would have been determined (net
of depletion) had no impairment loss been recognised in prior
periods.
Impairment of development and production assets and other
property, plant and equipment
At each balance sheet date, the Group reviews the carrying
amounts of its PP&E to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. The
recoverable amount is the higher of fair value less costs to sell
(otherwise referred to as fair value less cost to develop in the
oil and gas sector) and value in use. Fair value less costs to sell
is determined by discounting the post-tax cash flows expected to be
generated by the cash-generating unit, net of associated selling
costs, and takes into account assumptions market participants would
use in estimating fair value including future capital expenditure
and development cost for extraction of the field reserves. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately.
Decommissioning costs
Where a material obligation for the removal of wells and
production facilities and site restoration at the end of the field
life exists, a provision for decommissioning is recognised. The
amount recognised is the net present value of estimated future
expenditure determined in accordance with local conditions and
requirements. An asset of an amount equivalent to the provision is
also added to oil and gas exploration assets and depreciated on a
unit of production basis once production begins. Changes in
estimates are recognised prospectively, with corresponding
adjustments to the provision and the associated asset.
Foreign currency
The Group's strategy is focussed on developing oil and gas
projects across Europe funded by shareholder equity and other
financial assets which are principally denominated in sterling. The
functional currency of the Company is sterling.
Transactions in foreign currency are translated to the
respective functional currency of the Group entity at the rates of
exchange prevailing on the dates of the transactions. At each
reporting date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated to the
functional currency at the rates prevailing on the reporting date.
Exchange gains and losses on short-term foreign currency borrowings
and deposits are included with net interest payable.
The assets and liabilities of foreign operations are translated
to sterling at foreign exchange rates ruling at the balance sheet
date. The revenues and expenses of foreign operations are
translated to sterling at the average rate ruling during the
period. Foreign exchange differences arising on retranslation are
recognised directly in a separate component of equity. Foreign
exchange differences arising on inter-company loans considered to
be permanent as equity are recorded in equity. The exchange rate
from euro to sterling at 31 December 2019 was GBP1: EUR1.1755
(2018: GBP1: EUR1.1126).
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated income statement as part of the profit or loss on
disposal.
Exchange differences on all other transactions, except
inter-company foreign currency loans, are taken to operating
loss.
Taxation
The tax expense represents the sum of the tax currently payable
and any deferred tax.
The tax currently payable is based on the estimated taxable
profit for the period. Taxable profit differs from net profit as
reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using the expected
tax rate applicable to annual earnings.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the corresponding tax bases
used in the computation of taxable profit. It is accounted for
using the balance sheet liability method. Deferred tax liabilities
are recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is
charged to the income statement over the vesting period of the
related share options or share allocations. The cost is based on
the fair values of the options and shares allocated determined
using the binomial method. The value of the charge is adjusted to
reflect expected and actual levels of vesting. Charges are not
adjusted for market related conditions which are not achieved.
Where equity instruments are granted to persons other than
directors or employees the Consolidated Income Statement is charged
with the fair value of any goods or services received.
Grants of options in relation to acquiring exploration assets in
licence areas are treated as additions to Slovenian exploration
costs at Group level and increases in investments at Company
level.
Provisions
A provision is recognised in the Statement of Financial Position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks
specific to the liability.
Convertible loan notes
Upon issue of a new convertible loan, where the convertible
option is at a fixed rate, the net proceeds received from the issue
of CLNs are split between a liability element and an equity
component at the date of issue. The fair value of the liability
component is estimated using the prevailing market interest rate
for similar non-convertible debt. The difference between the
proceeds of issue of the CLNs and the fair value assigned to the
liability component, representing the embedded option to convert
the liability into equity of the Group, is included in equity and
is not re-measured.
Subsequent to the initial recognition the liability component is
measured at amortised cost using the effective interest method.
When there are amendments to the contractual loan note terms
these terms are assessed to determine whether the amendment
represents an inducement to the loan note holders to convert. If
this is considered to be the case the estimate of fair value
adjusted as appropriate and any loss arising is recorded in the
income statement.
Where there are amendments to the contractual loan note terms
that are considered to represent a modification to the loan note,
without representing an inducement to convert, the Group treats the
transaction as an extinguishment of the existing convertible loan
note and replaces the instrument with a new convertible loan note.
The fair value of the liability component is estimated using the
prevailing market interest rate for similar non-convertible debt.
The fair value of the conversion right is recorded as an increase
in equity. The previous equity reserve is reclassified to retained
loss. Any gain or loss arising on the extinguishment of the
instrument is recorded in the income statement, unless the
transaction is with a counterparty considered to be acting in their
capacity as a shareholder whereby the gain or loss is recorded in
equity.
Where the loan note is converted into ordinary shares by the
loan note holder; the unaccreted portion of the loan notes is
transferred from the equity reserve to the liability; the full
liability is then converted into share capital and share premium
based on the conversion price on the note.
Non-derivative financial instruments
Non-derivative financial instruments comprise of investments in
equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings and trade and other
payables.
Financial instruments
Classes and categories
Financial assets that meet the following conditions are measured
subsequently at amortised cost using effective interest rate
method:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and,
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets for which the amount of future receipts are
dependent upon the Company's share price over the term of the
instrument do not meet the criteria above and are recorded at fair
value through profit and loss.
Financial assets - Recognition and derecognition
The settlement date is used for initial recognition and
derecognition of financial assets as these transactions are
generally under contracts whose terms require delivery within the
time frame established in the contract. Financial assets are
derecognised when substantially all the Groups rights to cash flows
from the financial assets have expired or have been transferred and
the Group has transferred substantially all the risk and rewards of
ownership.
Measurement
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of
the following conditions are met: (i) it is held within a business
model whose objective is to hold assets in order to collect
contractual cash flows; and (ii) the contractual terms of the
financial asset represent contractual cash flows that are solely
payments of principal and interest.
Impairment
For trade receivables, a simplified approach to measuring
expected credit losses using a lifetime expected loss allowance is
available. The Group's trade receivables are generally settled on a
short time frame without material credit risk.
The Group recognises a loss allowance for expected credit losses
on financial assets which are measured at amortised cost. The
measurement of the loss allowance depends upon the Group's
assessment at the end of each reporting period as to whether the
financial instrument's credit risk has increased significantly
since initial recognition, based on reasonable and supportable
information that is available, without undue cost or effort to
obtain.
Where there has not been a significant increase in exposure to
credit risk since initial recognition, a twelve-month expected
credit loss allowance is estimated. This represents a portion of
the asset's lifetime expected credit losses that is attributable to
a default event that is possible within the next twelve months.
Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses.
The amount of expected credit loss recognised is measured on the
basis of the probability weighted present value of anticipated cash
shortfalls over the life of the instrument discounted at the
original effective interest rate.
Lifetime expected credit losses (ECLs) for intercompany loan
receivables are based on the assumptions that repayment of the
loans are demanded at the reporting date due to the fact that the
loan is contractually repayable on demand. The subsidiaries do not
have sufficient funds in order to repay the loan if demanded and
therefore the expected manner of recovery to measure lifetime
expected credit losses is considered. A range of different recovery
strategies and credit loss scenarios are evaluated using reasonable
and supportable external and internal information to assess the
likelihood of recoverability of the balance under these
scenarios.
Financial assets measured at fair value through profit and
loss
Financial assets measured at fair value through profit and loss
are carried in the statement of financial position at fair value
with changes in fair value recognised in the consolidated statement
of comprehensive income in the finance income or expense line.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at fair value net
of transaction costs incurred. Subsequent to initial measurement
financial liabilities are recognised at amortised costs. The
difference between initial carrying amount of the financial
liabilities and their redemption value is recognised in the income
statement over the contractual terms using the effective interest
rate method. This category includes the following classes of the
financial liabilities, trade and other payables, bonds and other
financial liabilities. Financial liabilities at amortised costs are
classified as current or non-current depending whether these are
due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognised when either the Group is
discharged from its obligation, they expire, are cancelled, or
replaced by a new liability with substantially modified terms.
Warrants
Warrants granted as part of a financing arrangement which fail
the fixed-for-fixed criteria as a result of either the
consideration to be received or the number of warrants to be issued
is variable, are initially recorded at fair value as a derivative
liability and charged as transaction cost deducted against the loan
and subsequently amortised through the effective interest rate.
Subsequently the derivative liability is revalued at each reporting
date with changes in the fair value recorded within finance income
or costs.
Equity
Equity instruments issued by the Company are recorded at the
proceeds received, net of any direct issue costs.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost.
Provisions are made for any impairment when the fair value of the
assets is assessed as less than the carrying amount of the asset.
Inter-company loans are repayable on demand but are included as
non-current as the realisation is not expected in the short
term.
Leases
As per IFRS 16 Leases the Group have applied the modified
retrospective transition approach. On adoption of IFRS 16, the
Group recognised lease liabilities in relation to leases which had
previously been classified as 'operating leases' under the
principles of IAS 17 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using the
incremental borrowing rate as of 1 January 2019. Until the 2019
financial year, leases of property, plant and equipment were
classified as either finance leases or operating leases. From 1
January 2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Assets and liabilities arising from
a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease
payments: ' fixed payments (including in-substance fixed payments),
less any lease incentives receivable and variable payments based on
index or rate ' amounts expected to be payable by the Group under
residual value guarantees ' payments of penalties for terminating
the lease, if the lease term reflects the Group exercising that
option. Lease payments to be made under reasonably certain
extension options are also included in the measurement of the
liability. The lease payments are discounted using the interest
rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group,
the lessee's incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the Chief
Executive Officer ('CEO').
Revenue recognition
Sales represent amounts received and receivable from third
parties for goods and services rendered to the costumers. Sales are
recognised when control of the goods has transferred to the
customer, which is at the border to Croatia under the contract and
is recorded at this point. Condensate, which is collected at a
separating station and transported via trucks to a customer in
Hungary is recorded on delivery according the terms of the
contract. At this point in time, the performance obligation is
satisfied in full with title, risk, entitlement to payment and
customer possession confirmed. Revenue is measured as the amount of
consideration which the Group expects to receive, based on the
market price for gas and condensate after deduction of costs agreed
per the Restated Joint Operating Agreement ("RJOA") and sales
taxes.
Revenue is derived from the production of hydrocarbons under the
Petišovci Concession, which Ascent Slovenia Limited holds a 75%
working interest. Under the terms of the RJOA, and in accordance
with Slovenian law, the concession holder retains the rights to all
hydrocarbons produced. The concession holder enters into sales
agreements with customers and transfers the relevant portion of
hydrocarbon sales to Ascent Slovenia Limited for the services it
provides under the RJOA.
Payments are typically received around 30 days from the end of
the month during which delivery has occurred. There are no balances
of accrued or deferred revenue at the balance sheet date.
Under the RJOA, the Group is entitled to 90% of the revenues
until 25% of Investments in the Petišovci area have been recovered
and the Group records revenue on the entitlement basis
accordingly.
Credit terms are agreed per RJOA contract and are short term,
without any financing component.
The Group has no sales returns or reclamations of services since
it has only one costumer. Sales are disaggregated by geography.
2 Segmental Analysis
The Group has two reportable segments, an operating segment and
a head office segment, as described below. The operations and day
to day running of the business are carried out on a local level and
therefore managed separately. The operating segment reports to the
UK head office which evaluates performance, decide how to allocate
resources and make other operating decisions such as the purchase
of material capital assets and services. Internal reports are
generated and submitted to the Group's CEO for review on a monthly
basis.
The operations of the Group as a whole are the exploration for,
development and production of oil and gas reserves.
The two geographic reporting segments are made up as
follows:
Slovenia - exploration, development and production
UK - head office
The costs of exploration and development works are carried out
under shared licences with joint ventures and subsidiaries which
are co-ordinated by the UK head office. Segment revenue, segment
expense and segment results include transfers between segments.
Those transfers are eliminated on consolidation. Information
regarding the current and prior year's results for each reportable
segment is included below.
2019 UK Slovenia eliminations Total
GBP '000s GBP '000s GBP '000s GBP '000s
Hydrocarbon sales - 298 298
Intercompany sales 1,187 232 (1,419) -
Total revenue 1,187 530 (1,419) 298
Cost of sales - (462) (462)
Administrative expenses (8,660) (1,236) 7,764 (2,132)
Material non-cash items
Depreciation - (440) - (440)
Net finance costs (889) (1,178) 1,143 (924)
----------------------------------- ---------- ---------- ------------- ----------
Reportable segment profit/(loss)
before tax (8,362) (2,785) 7,487 (3,660)
Taxation - - - -
Reportable segment profit/(loss)
after taxation (8,362) (2,785) 7,487 (3,660)
----------------------------------- ---------- -------------
Reportable segment assets
Carrying value of exploration
assets - 18,968 - 18,968
Additions to exploration assets - 52 - 52
Effect of exchange rate movements - (444) (444)
Total plant and equipment - 22,069 - 22,069
Prepaid abandonment fund - 240 - 240
Investment in subsidiaries 15,443 - (15,443) -
Intercompany receivables 27,180 (27,180) -
Total non-current assets 42,623 40,885 (42,623) 40,885
Other assets 260 71 - 331
Consolidated total assets 42,883 40,956 (42,623) 41,216
----------------------------------- ---------- -------------
Reportable segmental liabilities
Trade payables (115) (277) - (392)
External loan balances (385) - - (385)
Inter-group borrowings - (33,986) 33,986 -
Other liabilities (60) (266) - (326)
Consolidated total liabilities (560) (34,529) 33,986 (1,103)
2018 UK Slovenia Elims Total
GBP '000s GBP '000s GBP '000s GBP '000s
Hydrocarbon sales - 1,942 1,942
Intercompany sales 1,356 428 (1,784) -
Total revenue 1,356 2,370 (1,784) 1,942
Cost of sales - (771) (771)
Administrative expenses (2,791) 445 585 (1,761)
Material non-cash items -
Depreciation - (793) - (793)
Net finance costs 23 (1,205) 1,199 17
----------------------------------- ---------- ---------- ---------- ----------
Reportable segment (loss)/profit
before tax (1,412) 46 - (1,365)
Taxation - - - -
Reportable segment (loss)/profit
after taxation (1,412) 46 - (1,366)
----------------------------------- ---------- ----------
Reportable segment assets -
Carrying value of exploration
assets - 18,587 - 18,587
Additions to exploration assets - 319 - 319
Effect of exchange rate movements - 62 62
Total plant and equipment 1 23,778 - 23,779
Prepaid abandonment fund - 240 - 240
Investment in subsidiaries 15,443 - (15,443) -
Intercompany receivables 32,713 (32,713) -
Total non-current assets 48,157 42,986 (48,156) 42,987
Other assets 303 489 - 792
Consolidated total assets 48,460 43,475 (48,156) 43,779
----------------------------------- ---------- ----------
Reportable segmental liabilities -
Trade payables (53) (229) - (282)
External loan balances (44) - - (44)
Inter-group borrowings - (32,713) 32,713 -
Other liabilities (71) (302) - (373)
Consolidated total liabilities (168) (33,244) 32,713 (699)
Revenue from customers
Revenue was earned by the Slovenian segment through the joint
venture structure; sales were made to end customers in Slovenia
GBP99,000; Croatia GBP160,000 and Hungary GBP39,000 (2018: Slovenia
GBP178,000, Croatia GBP1,633,000, and Hungary GBP131,000). Gas
sales comprised GBP259,000 (2018: GBP1,811,000) whilst condensate
sales totalled GBP39,000 (2018: GBP131,000). The performance
obligations are set out in the Group's revenue recognition policy
and no outstanding performance obligations existed at year end. The
price for the sale of gas and condensate is set with reference to
the market price at the date the performance obligation is
satisfied.
3 Operating loss is stated after charging:
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Employee costs 693 653
Share based payment charge 269 402
Depreciation 440 793
Included within Admin Expenses
Audit Fees 70 72
Fees payable to the company's auditor - -
other services
------------------------ ------------------------
70 72
4 Employees and directors
a. Employees
The average number of persons employed by the Group, including
Executive Directors, was:
Year ended Year ended
31 December 31 December
2019 2018
Management and technical 8 9
============= =============
b. Directors and employee's remuneration
Year ended Year ended
31 December 31 December
2019 2018
Employees & Directors GBP '000s GBP '000s
Wages and salaries 611 570
Social security costs 27 37
Pension costs 53 41
Share-based payments 269 423
Taxable benefits 2 2
962 1,073
============= =============
c. Directors remuneration
Salary/fees Pension Total Share Employers
Based NIC
Payments
expense
2019 GBP GBP GBP GBP GBP
Executive Directors
J Buggenhagen 155,372 - 155,372 - -
C Hutchinson 182,673 1,947 184,620 133,223 23,757
Non-executive Directors -
C Davies 29,167 - 29,167 26,645 3,368
L Castro 48,556 - 48,556 - 3,423
------------ -------- -------- ---------- ----------
Total 421,939 1,947 423,886 159,867 30,547
Salary/fees Bonus* Pension Total Share Employers
Based NIC
Payments
expense
2018 GBP GBP GBP GBP GBP GBP
Executive Directors
C Hutchinson 158,900 - 904 159,804 199,543 19,825
Non-executive
Directors
C Carver 43,333 - - 43,333 79,817 5,737
C Davies 21,667 - - 21,667 39,909 2,287
N Moore 21,667 - - 21,667 39,909 2,070
------------ ------- -------- -------- ---------- ----------
Total 245,567 - 904 246,471 359,178 29,919
The highest paid Director in the year ended 31 December 2019 was
Colin Hutchinson earning GBP182,763 (2018: C Hutchinson earning
GBP158,900). Colin Hutchinson is a member of the defined
contribution pension scheme which commenced in December 2017;
contributions during the year were GBP1,947 (2018: GBP904).
d. Directors' incentive share options
Share
Opening Granted/ Closing Date Price Exercise Exercise Period
2019 (Lapsed) Granted at Grant Price Start End
C Hutchinson 265,688 - 265,688 23-May-13 16.4p 20p 23-May-16 23-May-23
C Hutchinson 34,964,709 - 34,964,709 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Hutchinson 34,031,255 - 34,031,255 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
Share
Opening Granted/ Closing Date Price Exercise Exercise Period
2018 (Lapsed) Granted at Grant Price Start End
C Carver 1,328,443 - 1,328,443 30-Apr-13 16.4p 20p 30-Apr-16 30-Apr-23
C Carver 13,985,884 - 13,985,884 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Carver 13,612,502 - 13,612,502 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Hutchinson 265,688 - 265,688 23-May-13 16.4p 20p 23-May-16 23-May-23
C Hutchinson 34,964,709 - 34,964,709 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Hutchinson 34,031,255 - 34,031,255 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
N Moore 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
N Moore 6,806,251 - 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Davies 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Davies 6,806,251 - 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
5 Finance income and costs recognised in the year
Year ended Year ended
31 December 31 December
2019 2018
Finance income GBP '000s GBP '000s
Foreign exchange movements realised - 1
Other income - 25
- 26
======================== ========================
Finance costs
Accretion charge on convertible loan notes (3) (8)
Interest charge on loans (40) -
Change in fair value of receivable under (814) -
Equity Sharing Agreement
Bank charges (67) (1)
------------------------ ------------------------
(924) (9)
======================== ========================
Please refer to Note 14 for a description of financing activity
during the year.
6 Income tax expense
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Current tax expense - -
Deferred tax expense - -
Total tax expense for the year - -
======================== ========================
The difference between the total tax expense shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the loss before tax is as follows:
Year ended Year ended
31 December 31 December
2019 2018
GBP '000s GBP '000s
Loss for the year (3,660) (1,365)
Income tax using the Company's domestic
tax rate at 19% (2017: 19%) (696) (259)
Effects of:
Net increase in unrecognised losses c/f 2,816 257
Effect of tax rates in foreign jurisdictions 32 36
Other non-taxable items (2,152) (34)
Other non-deductible expenses - -
Total tax expense for the year - -
======================== ========================
Unrecognised losses have increased for year ended 31 December
2019 as a result of the actual tax losses generated by the
Slovenian business.
7 Deferred tax - Group & Company
2019 2018
GBP '000s GBP '000s
Group
Total tax losses - UK and Slovenia (48,424) (36,684)
Unrecorded deferred tax asset at 17%
(2018: 17%) 8,232 6,236
---------- ----------
Company
Total tax losses (11,772) (11,829)
Unrecorded deferred tax asset at 17%
(2018: 17%) 2,001 2,011
---------- ----------
No deferred tax asset has been recognised in respect of the tax
losses carried forward. Refer to critical accounting estimates and
judgments. The tax losses in the UK and Slovenia do not expire.
8 Loss per share
31 December 31 December
2019 2018
GBP '000s GBP '000s
Result for the year
Total loss for the year attributable
to equity shareholders (3,660) (1,365)
Weighted average number of ordinary Number Number
shares
For basic earnings per share 26,590,316 22,709,682
Loss per share (Pence) (0.14) (0.06)
In March 2020, shareholders approved a share re-organisation,
including a 100:1 consolidation, with the nominal value of the
shares to be set to 0.05 pence. The weighted average number of
shares of 2019 and 2018 reflects the impact of the
consolidation.
As the result for the year was a loss, the basic and diluted
loss per share are the same. At 31 December 2019, potentially
dilutive instruments in issue were 145,076,254 (2018: 184,833,861).
Dilutive shares arise from share options, the 43 million warrants
to be issued pursuant to the Riverfort funding arrangement and CLNs
issued by the Company and from the deferred consideration on the
Trameta transaction.
9 Property, Plant & Equipment - Group
Computer Developed Total
Equipment Oil & Gas
Assets
Cost
At 1 January 2018 6 24,135 24,141
Additions - 411 411
Effect of exchange rate movements - 262 262
At 31 December 2018 6 24,808 24,814
------------------------ ------------------------ ------------------------
At 1 January 2019 6 24,808 24,814
Additions - 3 3
Effect of exchange rate movements - (1,328) (1,328)
At 31 December 2019 6 23,483 23,489
------------------------ ------------------------ ------------------------
Depreciation
At 1 January 2018 - (239) (239)
Charge for the year - (793) (793)
Effect of exchange rate movements - (3) (3)
At 31 December 2018 - (1,035) (1,035)
------------------------ ------------------------ ------------------------
At 1 January 2019 - (1,035) (1,035)
Charge for the year (6) (434) (440)
Effect of exchange rate movements - 55 55
At 31 December 2019 (6) (1,414) (1,420)
------------------------ ------------------------ ------------------------
Carrying value
At 31 December 2019 - 22,069 22,069
------------------------ ------------------------ ------------------------
At 31 December 2018 6 23,773 23,779
------------------------ ------------------------ ------------------------
At 1 January 2018 6 24,135 24,141
------------------------ ------------------------ ------------------------
No impairment has been recognised during the year, this assumes
that the Group can obtain the necessary environmental permits and
the concession extension due in 2022 to continue with the planned
development of the Petišovci field. Details of the impairment
judgments and estimates in the fair value less cost to develop
assessment as set out in Note 1, including the significant judgment
regarding the ability to renew the concession and obtain required
permits. Should the permits not be granted, or the concession
extension confirmed, the carrying value of these assets would be
impaired as the permits are required to maintain commercial
production rates at the wells and in the absence of renewal of the
concession the Company would not hold title to the asset.
10 Exploration and evaluation assets - Group
Slovenia Total
Cost
At 1 January 2018 18,587 18,587
Additions 319 319
Effects of exchange rate movements 62 62
At 31 December 2018 18,968 18,968
----------------------- -----------------------
At 1 January 2019 18,968 18,968
Additions 52 52
Effects of exchange rate movements (444) (444)
At 31 December 2019 18,576 18,576
----------------------- -----------------------
At 31 December 2019 18,576 18,576
----------------------- -----------------------
At 31 December 2018 18,968 18,968
----------------------- -----------------------
At 1 January 2018 18,587 18,587
----------------------- -----------------------
For the purposes of impairment testing the intangible oil and
gas assets are allocated to the Group's cash-generating unit, which
represent the lowest level within the Group at which the intangible
oil and gas assets are measured for internal management purposes,
which is not higher than the Group's operating segments as reported
in Note 2. Details of the impairment judgments and estimates and
the fair value less cost to develop assessment as set out in Note
1, including the significant judgment regarding the ability to
renew the concession and obtain required permits.
The amounts for intangible exploration assets represent costs
incurred on active exploration projects. Amounts capitalised are
assessed for impairment indicators under IFRS 6 at each period end
as detailed in the Group's accounting policy. In addition, the
Group routinely reviews the economic model and reasonably possible
sensitivities and considers whether there are indicators of
impairment. As at 31 December 2019 and 2018 the net present value
significantly exceeded the carrying value of the assets. The key
estimates associated with the economic model net present value are
detailed in Note 1. The outcome of ongoing exploration, and
therefore whether the carrying value of intangible exploration
assets will ultimately be recovered, is inherently uncertain.
11 Investment in subsidiaries - Company
GBP000s
At 1 January 2017, 31 December 2018 & 31
December 2019 15,443
========
Name of company Principal activity Country % of share % of share
of incorporation capital capital
held 2019 held 2018
Ascent Slovenia
Limited
Tower Gate Place
Tal-Qroqq Street
Msida, Malta Oil and Gas exploration Malta 100% 100%
Ascent Resources
doo
Glavna ulica 7
9220 Lendava
Slovenia Oil and Gas exploration Slovenia 100% 100%
Infrastructure
Trameta doo owner Slovenia 100% 100%
Glavna ulica 7
9220 Lendava
Slovenia
Ascent Resources
Netherlands BV
c/o Ascent Resources
plc
5 New Street Square
London EC4A 3TW Oil and Gas exploration Netherlands 100% 100%
All subsidiary companies are held directly by Ascent Resources
plc.
12 Trade and other receivables - Group
2019 2018
GBP '000s GBP '000s
Trade receivables 54 198
VAT recoverable 25 29
Prepaid abandonment liability 240 240
Amounts receivable on ESA 173 -
Prepayments & accrued income - 6
494 473
======================= ========================
Less non-current portion (240) (240)
Current portion 254 233
======================= ========================
Refer to note 1 for details of the accounting treatment and
associated fair value estimates associated with the amounts
receivable on the equity sharing agreement (ESA).
13 Trade and other receivables - Company
2019 2018
GBP '000s GBP '000s
VAT recoverable 16 5
Amounts receivable on ESA 173 -
Prepayments & accrued income 7 6
196 11
======================== ========================
14 Borrowings - Group & Company
2019 2018
Group GBP '000s GBP '000s
Current
Borrowings 368 -
Convertible loan notes 17 -
Non-current
Convertible loan notes - 44
385 44
----------------------- -----------------------
Company
Current
Borrowings 368 -
Convertible loan notes 17 -
Non-current
Convertible loan notes 44
-
385 44
----------------------- -----------------------
The Borrowings relate to the loan arrangement entered into with
Riverfort Global Opportunities in September 2019, which post period
in review was refinanced in March 2020 as detailed in note 21. The
loan bears interest at 10% coupon and is repayable on or before
September 2020 with accrued interest. The loan was unsecured.
The convertible notes were due for redemption on 19 November
2019 and at the balance sheet date GBP17,000 remained
unclaimed.
15 Provisions - Group
GBP000s
At 1 January 2018 266
Foreign exchange movement (3)
At 31 December 2018 263
----------------------
At 1 January 2019 263
Foreign exchange movement (8)
At 31 December 2019 255
----------------------
The amount provided for decommissioning costs represents the
Group's share of site restoration costs for the Petišovci field in
Slovenia. The most recent estimate is that the year-end provision
will become payable after 2037. The Company has placed EUR300,000
(GBP279,000) on deposit as collateral against this liability see
Note 12.
16 Trade and other payables - Group
2019 2018
GBP '000s GBP '000s
Trade payables 392 282
Tax and social security payable 5 15
Other payables - 29
Accruals and deferred income 66 66
463 392
======================== =======================
17 Trade and other payables - Company
2019 2018
GBP '000s GBP '000s
Trade payables 115 53
Tax and social security payable 6 3
Other payables - 9
Accruals and deferred income 54 59
175 124
========== ==========
18 Called up share capital
2019 2018
GBP '000s GBP '000s
Authorised
10,000,000,000 ordinary shares of 0.10p
each 10,000 10,000
Allotted, called up and fully paid
3,019,648,452 (2018: 2,291,310,686) ordinary
shares of 0.2pence each (2018: 0.2p each) 7,604 6,146
Reconciliation of share capital movement 2019 2018
Number Number
At 1 January 2,291,310,686 2,268,750,320
------------------------ ------------------------
Loan note conversions - 60,366
Issue of Trameta consideration shares - 22,500,000
Placings 728,337,766 -
At 31 December 3,019,648,452 2,291,310,686
======================== ========================
Shares issued during the year
The Company raised funds through placings during the year:
-- On 25 January 2019, the Company raised GBP363,156 (GBP345,703
net of costs) via the Placing of 121,052,097 Ordinary Shares with
investors using the PrimaryBid.com platform.
-- On 24 April 2019, the Company raised GBP750,000 (GBP708,950
net of costs) via the Placing of 214,285,669 Ordinary Shares with
various institutional investors.
-- On 23 September 2019, the Company raised GBP1,080,750
(GBP1,071,744 net of costs) via the Placing of 393,000,000 Ordinary
Shares with Riverfort Global Investors.
Shares issued during the prior year
There was one conversion request processed during the prior year
and shares were issued in connection with deferred consideration
for the Trameta transaction.
Shares issued post the year in review
Please see Note 21 Events subsequent to the reporting period
Reserve description and purpose
The following describes the nature and purpose of each reserve
within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Merger reserve: Value of shares, in excess of nominal value,
issued with respect of the Trameta acquisition in 2016.
-- Equity reserve: Amount of proceeds on issue of convertible
debt relating to the equity component and contribution on
modification of the convertible loan notes, i.e. option to convert
the debt into share capital.
-- Share premium: Amounts subscribed for share capital in excess
of nominal value less costs of shares associated with share
issues.
-- Share-based payment reserve: Value of share options granted
and calculated with reference to a binomial pricing model. When
options lapse or are exercised, amounts are transferred from this
account to retained earnings.
-- Translation reserve: Exchange movements arising on the
retranslation of net assets of operation into the presentation
currency.
-- Accumulated losses: Cumulative net gains and losses recognised in consolidated income.
19 Exploration expenditure commitments
In order to maintain an interest in the oil and gas permits in
which the Group is involved, the Group is committed to meet the
conditions under which the permits were granted and the obligations
of any joint operating agreements. The timing and the amount of
exploration expenditure commitments and obligations of the Group
are subject to the work programmes required as per the permit
commitments. This may vary significantly from the forecast
programmes based upon the results of the work performed. Drilling
results in any of the projects may also cause variations to the
forecast programmes and consequent expenditure. Such activity may
lead to accelerated or decreased expenditure. It is the Group's
policy to seek joint operating partners at an early stage to reduce
its commitments.
At 31 December 2019, the Group had exploration and expenditure
commitments of GBP Nil (2018 - Nil).
20 Related party transactions
a. Group companies - transactions
2019 2018
Cash Services Total Cash Services Total
Ascent Slovenia Limited 111 1,858 1,969 1,209 302 1,511
Ascent Resources doo (9) (5) (14) - 2 2
Trameta doo 2 - 2 - - -
102 1,853 1,955 1,209 304 1,513
----- --------- ------ ------ --------- ------
b. Group companies - balances
2019 2018
Cash Services Total Cash Services Total
Ascent Slovenia Limited 17,084 5,404 22,488 23,303 4,455 27,758
Ascent Resources doo 2,951 1,730 4,681 3,118 1,828 4,946
Trameta doo 11 - 11 9 - 9
20,046 7,134 27,180 26,430 6,283 32,713
------- --------- ------- ------- --------- -------
Cash refers to funds advanced by the Company to subsidiaries.
Services relates to services provided by the Company to
subsidiaries. The loans are repayable on demand but are classified
as non-current reflecting the period of expected ultimate
recovery.
Following the introduction of IFRS 9 Management have carried out
an assessment of the potential future credit loss the loans
classified as 'stage 3' under IFRS 9 and assessed for lifetime
expected credit loss given their on-demand nature under a number of
scenarios. The Company would suffer a credit loss where the permits
necessary for the development of the field are not obtained and a
court case for damages against the Republic of Slovenia is
unsuccessful. Based on legal advice received in relation to the
permit process and the strength of our case we consider the risk of
credit loss to be low. A provision of GBP4.8m (2018: GBP1.7m) has
been recognised in the Company accounts.
2019 2018
GBP '000s GBP '000s
Expected credit loss provision start of 1,700 -
the year
Change in expected credit loss 4,800 1,700
Expected credit loss provision at the end
of the year 6,500 1,700
========== ==========
c. Directors
Key management are those persons having authority and
responsibility for planning, controlling and directing the
activities of the Group. In the opinion of the Board, the Group's
key management are the Directors of Ascent Resources plc.
Information regarding their compensation is given in Note 4 .
2019
There were no transactions involving directors during the
year.
2018
There were no transactions involving directors during the
year.
21 Events subsequent to the reporting period
COVID-19 has had limited direct impact on Ascent's assets in
Slovenia but there may be delays in obtaining the necessary
governmental approvals. Production operations in Slovenia have been
unaffected to date, with the assets being managed through a
combination of on-site working within social distancing guidelines
or remote oversight, with all appropriate safety procedures
remaining in place to protect staff and local communities although
the potential for future disruption to operations remains. The
pandemic has also created volatility in commodity markets with gas
prices having reduced subsequent to the period end. A sustained
reduction in the gas price over the longer term may impact the
economic value of the Slovenian assets, although current futures
markets indicate pricing that supports the economics of the
field.
Changes to the Board of Directors in March and April of 2020
included the appointment of new Executive Chairman James Parsons,
Chief Executive Officer Andrew Dennan, Non-Executive Directors Ewen
Ainsworth and Leonardo Salvadori.
The Company has completed a restructuring of the RiverFort
equity sharing and loan arrangements and cancellation of warrants
due to be issued to RiverFort. As a result, the existing Equity
Sharing Agreement announced on 20 September 2019 has been
cancelled. The outstanding loan of $468,776 at the date of the
agreement with Riverfort has been re-negotiated to a two-year
coupon free bullet with conversion rights for the lender at 0.075
pence per share (7.5 pence per share post consolidation). No
conversion can occur until the share price exceeds 0.1 pence (10
pence post consolidation) per share for five consecutive days. The
Company has a right to buy out up to 50% of the loan prior to its
expiry at nil premium whilst the share price is below the
conversion price. If the Company does exercise this right, then the
conversion price is adjusted upwards to 0.0875 (8.75 pence post
consolidation). The 43 million warrants initially to be awarded to
Riverfort, as announced on 20 September 2019, will no longer be
awarded.
The Company has launched a new international growth strategy
focused on Caribbean, Hispanic Americas and Europe. As part of the
strategy new country entry to Cuba arose with the acquisition of
Energetical Limited securing MOU to producing block 9B and the
signature of three MOUs with Cuban National Oil Company CUPET over
a further three exploration blocks 9A, 12 and 15 covering over
7,000 km2 onshore Cuba.
On 14 April 2020 the Group acquired Energetical for a total
consideration of GBP652,500 of which GBP202,500 has been satisfied
by the issue of 6 million new shares and, subject to the Company
signing a production sharing contract ('PSC') over Cuban onshore
producing block 9B, deferred consideration of GBP450,000 which will
be satisfied by way of a cash payment of GBP100,000 and the issue
of new shares for a consideration of GBP350,000 to be issued at the
30 day volume weighted average share price of the Company at the
time of PSC signature.
The acquisition of Energetical has secured the rights for the
Company to exclusively negotiate the production sharing contract
for block 9B which is expected to give the Company an entitlement
to incremental barrels produced above the existing base of circa
190 bbls/day from three wells.
In March 2020, shareholders approved a share re-organisation,
including a 100:1 consolidation, with the nominal value of the
shares to be set to 0.05 pence.
On 5 March 2020 the Company completed a fundraising for gross
proceeds of GBP685,000 at 5 pence per share and on 30 April 2020 a
further GBP212,500 by the issuance of new shares at 2.75 pence.
22 Share based payments
The Company has provided the Directors, certain employees and
institutional investors with share options and warrants. Options
are exercisable at a price equal to the closing market price of the
Company's shares on the date of grant. The exercisable period
varies and can be up to seven years once fully vested after which
time the option lapses.
Details of the share options outstanding during the year are as
follows:
Shares Weighted Average
price (pence)
Outstanding at 1 January 2018 152,576,254 2.38
Outstanding at 31 December 2018 152,576,254 2.38
Exercisable at 31 December 2018 5,685,738 20.00
Outstanding at 1 January 2019 152,576,254 2.38
Outstanding at 31 December 2019 152,576,254 2.38
Exercisable at 31 December 2019 77,013,744 2.94
The value of the options is measured by the use of a binomial
pricing model. The inputs into the binomial model made in 2017 were
as follows. No options were issued in 2018 and 2019 and so no
equivalent table is disclosed for 2018 and 2019.
Share price at grant date 1.32p - 1.58p
Exercise price 1.54p - 2.00p
Volatility 50%
Expected life 3-5 years
Risk free rate 0.5%
Expected dividend yield 0%
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous 5 years.
The expected life is the expiry period of the options from the date
of issue.
Options outstanding at 31 December 2019 have an exercise price
in the range of 1.58p and 20.00p (31 December 2018: 1.58p and
20.00p) and a weighted average contractual life of 9.9 years (31
December 2018: 7.6 years).
Trameta acquisition
During 2016, the Company acquired Trameta doo which owned land
and access rights over the export pipeline. Consideration for the
transaction was 75 million ordinary shares which vest in four
tranches on the one-year anniversary of various conditions being
met. An option over a further 7.5 million ordinary shares at an
exercise price of 2 pence is valid for three years from November
2016 when the second condition was met.
The 75 million consideration shares, not including the option,
were valued using the Black-Scholes model under the assumption that
100% of the shares will vest as management expects all four of the
vesting criteria to be successfully achieved. The conditions have
been met for the first three tranches, being completion of the SPA,
the certification of the pipeline and the transmission of the first
million cubic metres of gas along the export pipeline. As at the
balance sheet date 27,500,000 remain outstanding valued at
GBP385,000.
The value of the options was measured by the use of a binomial
pricing model. The inputs into the binomial model in respect of the
Trameta consideration shares were as follows:
Share price at grant date 1.425p
Exercise price Nil
Volatility 101% - 130%
Expected life 1 -3 years
Risk free rate 1.75%
Expected dividend yield 0%
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous comparable
periods. The expected life is the expiry period of the options from
the date of issue.
The value of the shares and options was GBP1.1 million which was
recognised in 2016 as an addition to exploration and evaluation
costs. The option with a value of GBP52,500 expired in the year and
the amount has therefore been reclassified from share based payment
reserve to retained earnings.
Riverfort Warrants
In September 2019 the Company entered into financing
arrangements with Riverfort which included an agreement to issue 43
million warrants in the future. The Warrants were to be issued
subject to shareholder approval, and subsequent to post period in
review events will now not be issued as detailed in note 21.
However, the Company had agreed to issue the warrants and
consequently the warrants had a value at the time of agreement to
be issued of GBP43,018. The value of the options was measured by
the use of a binomial pricing model. The inputs into the binomial
model in respect of the warrants were as follows:
Share price at grant date 0.275p
Exercise price 0.33p
Volatility 50%
Expected life 4 years
Risk free rate 3%
Expected dividend yield 0%
As at the balance sheet date the fair value of the 43 million
warrants proposed to be issued to Riverfort was GBP4,901 as a
result of the reduction in the Company share price.
23 Notes supporting the statement of cash flows
Group 2019 2018
GBP '000s GBP '000s
Cash at bank and available on demand 77 376
Cash held on deposit against bank guarantee - 180
77 556
======================== ======================
Company 2019 2018
GBP '000s GBP '000s
Cash at bank and available on demand 64 112
Cash held on deposit against bank guarantee - 180
64 292
======================== ======================
Included within cash and equivalents in the prior year was
GBP180,000 which is held as EUR200,000 on deposit as a security
against a bank guarantee against a gas sales agreement. The Gas
Sales Agreement originally lasted a minimum term of 12 months which
expired in November 2018 and was extended to May 2019. All amounts
held on deposit were released during the year.
Under the terms of the equity sharing agreement, RiverFort
subscribed for 393,00,000 shares for GBP1,080,750 with a receivable
established for the amounts to be received which depended on the
subsequent share price performance as detailed in note 1.
Accordingly, the cash received under the arrangement was not equal
to the shares subscribed.
Significant other non-cash transactions are as follows:
2019 2018
GBP '000s GBP '000s
Conversion of loan notes - -
Fair value movement on equity 814 -
sharing agreement receivable
Interest charged on loans 40 -
Accretion charge on convertible
loan notes 3 8
A reconciliation of the debt is as follows:
Borrowings Convertible Receivables
Loan at fair
value
Balance at 1 January 2019 - 44 -
Loans advanced 400 - -
Loans repaid (32) (27) -
Accretion interest - 3 -
Receivable recognised on ESA - - 1,081
Shares sales under ESA - - (95)
Write down Adjustment to fair
value - - (812)
--------------------- --------------------- ---------------------
Balance at 31 December 2019 368 17 173
24 Financial risk management
Group and Company
The Group's financial liabilities comprise CLNs, borrowings,
warrants and trade and other payables. All liabilities are measured
at amortised cost except for the warrants which are immaterial.
These are detailed in Notes 14 , 15 and 16 .
The Group has various financial assets, being trade and other
receivables and cash, which arise directly from its operations. All
are classified at amortised cost except for the amounts receivable
under the equity sharing agreement at 31 December 2019 which are
held at fair value through profit and loss as disclosed in note 12.
These are detailed in Notes 12 , 13 and 23 .
The main risks arising from the Group's financial instruments
are credit risk, liquidity risk and market risk (including interest
risk and currency risk). The risk management policies employed by
the Group to manage these risks are discussed below:
a. Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group.
The Group makes allowances for impairment of receivables where
there is an ECL identified. Refer to Note 20 for details of the
intercompany loan ECL assessment.
The credit risk on cash is considered to be limited because the
counterparties are financial institutions with high and good credit
ratings assigned by international credit rating agencies in the
UK.
The carrying amount of financial assets, trade receivables and
cash held with financial institutions recorded in the financial
statements represents the exposure to credit risk for the
Group.
At Company level, there is the risk of impairment of
inter-company receivables if the full amount is not deemed as
recoverable from the relevant subsidiary company. These amounts are
written down when their deemed recoverable amount is deemed less
than the current carrying value. An IFRS 9 assessment has been
carried out as per Note 1.
b. Market risk
(i) Currency risk
Currency risk refers to the risk that fluctuations in foreign
currencies cause losses to the Company.
The Group's operations are predominantly in Slovenia. Foreign
exchange risk arises from translating the euro earnings, assets and
liabilities of the Ascent Resources doo and Ascent Slovenia Limited
into sterling. The Group manages exposures that arise from receipt
of monies in a non-functional currency by matching receipts and
payments in the same currency.
The Company often raises funds for future development through
the issue of new shares in sterling. These funds are predominantly
to pay for the Company's exploration costs abroad in euros. As such
any sterling balances held are at risk of currency fluctuations and
may prove to be insufficient to meet the Company's planned euro
requirements if there is devaluation.
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the European
Union (the euro).
The Group operates internationally and is exposed to currency
risk on sales, purchases, borrowings and cash and cash equivalents
that are denominated in a currency other than sterling. The
currencies giving rise to this are the euro.
Foreign exchange risk arises from transactions and recognised
assets and liabilities.
The Group does not use foreign exchange contracts to hedge its
currency risk.
Sensitivity analysis
The following table details the Group's sensitivity to a 10%
increase and decrease in sterling against the stated currencies.
10% is the sensitivity rate used when reporting foreign currency
risk internally to key management personnel and represents the
management's assessment of the reasonably possible change in
foreign exchange rates. The sensitivity analysis comprises cash and
cash equivalents held at the balance sheet date. A positive number
below indicates an increase in profit and other equity where
sterling weakens 10% against the relevant currency.
Euro currency change
Group Year ended Year ended
31 December 31 December
2019 2018
Profit or loss
10% strengthening of sterling 14 33
10% weakening of sterling (2) (55)
Equity
10% strengthening of sterling (3,448) (3,897)
10% weakening of sterling 4,726 4,764
Company
Profit or loss
10% strengthening of sterling (108) (123)
10% weakening of sterling 132 151
Equity
10% strengthening of sterling (4,036) (4,542)
10% weakening of sterling 4,932 5,551
(ii) Interest rate risk
Interest rate risk refers to the risk that fluctuations in
interest rates cause losses to the Company. The Group and Company
have no exposure to interest rate risk except on cash and cash
equivalent which carry variable interest rates. The Group carries
low units of cash and cash equivalents and the Group and Companies
monitor the variable interest risk accordingly.
At 31 December 2019, the Group and Company has GBP loans of
GBP385,000 rates of 0% - 12% per annum. At 31 December 2018, the
Group and Company had GBP loans of GBP44,000 rates of 0% per
annum.
(iii) Liquidity risk
Liquidity risk refers to the risk that the Company has
insufficient cash resources to meet working capital
requirements.
The Group and Company manages its liquidity requirements by
using both short- and long-term cash flow projections and raises
funds through debt or equity placings as required. Ultimate
responsibility for liquidity risk management rests with the Board
of Directors, which has built an appropriate liquidity risk
management framework for the management of the Group's short-,
medium- and long-term funding and liquidity management
requirements.
The Group closely monitors and manages its liquidity risk. Cash
forecasts are regularly produced, and sensitivities run for
different scenarios (see Note 1). For further details on the
Group's liquidity position, please refer to the Going Concern
paragraph in Note 1 of these accounts.
Group Company
2019 2018 2019 2018
GBP '000s GBP '000s GBP '000s GBP '000s
Less than six months - loans
and borrowings 385 - 385 -
Less than six months - trade
and other payables 458 377 169 121
Between six months and a
year - loans and borrowings - 44 - 44
Over one year - - - -
c. Capital management
The Group manages its shares and CLN's as capital.
d. There are no externally imposed capital requirements.
e. Fair value of financial instruments
Set in the foregoing is a comparison of carrying amounts and
fair values of the Group's and the Company's financial
instruments:
Carrying Fair Value Carrying Fair Value
Capital management - Group amount amount
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2019 2019 2018 2018
Financial assets measured
at amortised cost
Cash and equivalents - unrestricted 77 77 375 375
Cash and equivalents - restricted - - 180 180
Trade receivables 54 54 198 198
Prepaid abandonment fund
(refundable) 240 240 240 240
Financial assets measured
at fair value
Receivable under ESA 173 173 - -
Financial liabilities measured
at amortised cost
Trade and other payables 458 458 282 282
Loans at fixed rate 385 385 - -
Convertible loans at fixed
rate 17 17 44 44
Capital management - Company
Carrying Fair Value Carrying Fair Value
amount amount
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2019 2019 2018 2018
Financial assets measured
at amortised cost
Cash and equivalents - unrestricted 63 63 112 112
Cash and equivalents - restricted - - 180 180
Trade receivables - - - -
Financial assets measured
at fair value
Receivable under ESA 173 173 - -
Financial liabilities measured
at amortised cost
Trade and other payables 169 169 377 377
Loans at fixed rate 385 385 - -
Convertible loans at fixed
rate - - 44 44
Convertible loan at fixed rate
Fair value of convertible loans has been determined based on
tier 3 measurement techniques. The fair value is estimated at the
present value of future cash flows, discounted at estimated market
rates. Fair value is not significantly different from carrying
value.
Trade and other receivables/payables & inter-company
receivables
All trade and other receivables and payables have a remaining
life of less than one year. The ageing profile of the Group and
Company receivable and payables are shown in Notes 12 , 13 , 14, 16
and 17 .
Loans at fixed rate
Loans are initially measured at fair value and subsequently at
amortised costs. The fair values of the Group and Company loans are
considered equal to the book value as the effect of discounting on
the financial instruments is not considered to be material.
Equity sharing agreement receivable
The equity sharing agreement receivable has been deemed to be
level 2 assets under the fair value hierarchy. The receivable has
been valued using the monte carlo model. The inputs to the fair
value assessment included the Company's share price, modelled
scenarios for future share price volatility movements and a risk
free discount rate.
Cash and cash equivalents
Cash and cash equivalents are all readily available and
therefore carrying value represents a close approximation to fair
value.
25 Commitments & contingencies
Following first commercial revenues in Slovenia the Group
received legal claims relating to past activities. Based on legal
advice received we consider these to be spurious and without merit.
The Board will vigorously reject such opportunistic approaches.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEUESIESSEDM
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