TIDMAST
RNS Number : 1467X
Ascent Resources PLC
30 April 2021
30 April 2021
Ascent Resources plc
("Ascent" or the "Company")
Final Results
Ascent Resources Plc (LON: AST), the onshore Caribbean, Hispanic
American and European focused energy and natural resources company,
announces its final results for the year ended 31 December
2020.
Highlights:
Corporate
-- New Board and Senior executive team appointed in March, April and October 2020
-- Initiation of new international growth strategy targeting
resource opportunities in Hispanic Americas, Caribbean, and
Europe
-- Entry into Cuba through the acquisition of Energetical
Limited in April 2020, securing the exclusive rights to negotiate
the production sharing contract ('PSC') for the incremental
production rights to the Cuban onshore oil production block 9B
-- Entry into direct memorandum of understanding with CUPET
(Cuba's national oil company), to secure the exclusive rights to
negotiate the PSCs for onshore exploration blocks 9A, 12 and 15,
which in aggregate cover over 7,000km2 of license area which
include historic wells with oil shows and discoveries
-- Strategic review of Slovenian position resulting in work
towards concession extension renewal and review and update of field
development plan along with preparation for submission of an
environmental impact assessment to perform routine mechanical
stimulation techniques
-- Initiation, in July 2020, of a process to seek redress from
the Republic of Slovenia with the serving of a formal Notice of
Dispute over certain actions by Slovenia, in breach of their
obligations under the UK-Slovenia bilateral investment treaty and
the Energy Charter Treaty, which have caused considerable harm to
the Company's investments in Slovenia
-- Entered into direct negotiations with the Republic of
Slovenia in October, with a view to agreeing a mutually acceptable
way to resolve the dispute.
Post Balance Sheet Events
-- Launched Environmental, Social and Governance ('ESG') Metals
strategy which includes secondary mining and metal recovery
opportunities which the Company see as being consistent with ESG
principles. In particular the Company believes there are good
opportunities in precious, base and battery metals, where the
economics are especially attractive and the opportunity set has the
ability of delivering lowest cost quartile sustainable metal
production from legacy mining tailings. Such opportunities have the
potential to provide strong cash returns without exploration risk
and only require modest upfront capital.
-- Raised GBP1.01 million before expenses in February 2021
through share placing, extending funding runway for the Company
through to at least the end of the calendar year
-- Announced on 19 March 2021 that an amicable settlement with
the Republic of Slovenia is presently not achievable and the
Company expects to commence arbitration proceedings shortly
-- Extended the Company's MOUs with CUPET over Cuban oil
production and exploration blocks 9A, 9B, 12 and 15 by six months
from the 29 April
Enquiries:
Ascent Resources plc Via Vigo Communications
Andrew Dennan
WH Ireland, Nominated Adviser & Broker
James Joyce / Chris Savidge 0207 220 1666
Novum Securities, Joint Broker
John Belliss 0207 399 9400
STATEMENT FROM THE CHAIRMAN
This has been a very challenging but ultimately transformational
year for your company.
During 2020, and despite the inevitable challenges of the global
pandemic, Ascent Resources plc made significant progress
restructuring its Board, strategy and portfolio. The Company's
primary focus has been seeking redress for damages suffered in the
development of its flagship asset in Slovenia, alongside
diversifying its strategy to exploit select Special Situations
across Hispanic America, the Caribbean and Europe. This includes
Cuba, one of the few remaining unexploited hydrocarbon systems
globally, and a specific ESG Metals focus positioning the company
to access low risk and low capital intensity opportunities in the
metals and minerals processing arena. Having laid some important
foundations in 2020, we look forward to progressing the business
this year.
LEGACY SLOVENIAN ASSET
In June 2020, the Administrative Court of the Republic of
Slovenia published its decision in relation to Ascent's JV
partner's appeal against the Slovenian environmental agency ARSO's
decision to require an Environmental Impact Assessment ("EIA") in
order to re-stimulate the PG-10 and PG-11A wells. Work towards the
concession renewal remains in progress.
In July 2020, the Company and its subsidiary, Ascent Slovenia
Limited, served a Notice of Dispute to the Republic of Slovenia
(the "State") under the Energy Charter Treaty ("ECT") and
UK-Slovenia Bilateral Investment Treaty ("BIT") over damages
suffered as a result of the State's failures to administer normal
procedure and political bias expressed against the Company and the
Petišovci gas project. In particular, the Government of Slovenia
were notified of the fact that certain actions which had caused
considerable harm to the Group's investments in Slovenia constitute
breaches by the State of the protections established by the
UK-Slovenia BIT and ECT, including, inter-alia, the guarantee that
the investments would be accorded fair and equitable treatment and
Slovenia's guarantee that the management, maintenance, use,
enjoyment or disposal of the investments would not be impaired by
arbitrary, unreasonable or discriminatory measures. On serving of
the Notice of Dispute the Company triggered an automatic three
month cooling off period, designed to allow the parties to attempt
to resolve their dispute ahead of arbitration proceedings.
NEW ESG METALS STRATEGY
During the year, the Company launched an international growth
strategy focused on unlocking Special Situations across Hispanic
America, the Caribbean and Europe. This strategy was introduced
counter cyclically against the backdrop of dynamic commodity
markets and post period in review the Company confirmed that it
would focus its efforts specifically towards Environmental, Social
and Governance ("ESG") Metals within its resource focused
business.
ESG Metals includes secondary mining and recovery opportunities
typically involving the reclassification, through highly efficient
recovery techniques, of stockpiled surface mining waste (often
previously viewed as a liability for mining companies) as a
valuable asset for reprocessing and commercial sale to industry,
governments and metals traders. The Company sees waste management,
remediation and restoration of land impacted by historic and
on-going mining activities as a critical element in the global ESG
agenda and integral to the transition to a low carbon economy. The
Company is looking at a number of potential projects in Hispanic
America and South Africa as well as Europe. In particular, the
Company believes that there are good opportunities in gold, silver,
platinum, base metals and ferrochrome, where the economics are
especially attractive and the opportunity set has the ability to
deliver lowest cost quartile sustainable metal production from
legacy mining tailings, with low geological risk. Such
opportunities have the potential to provide strong cash returns
without exploration risk and only require modest upfront capital
outlay.
CUBA MARKET ENTRY
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 European 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.
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 2020, the Company announced the
appointment of Andrew Dennan as Chief Executive Officer. In October
2020, Leonardo Salvadori stepped down from the board in order to
contribute on an executive basis in his capacity as Technical
Director. At the same time Stephen Birrell was appointed to the
Board as Non-executive Director and Chairman of the Remuneration
and HSE/Technical Committees and Malcolm Graham-Wood was appointed
as Non-executive Director and is a member of the Audit
Committee.
FUNDING
The Equity Sharing Agreement with RiverFort, as announced on 20
September 2019, was cancelled alongside the initial changes to the
Board, effective February 14, 2020. The outstanding US $468,776
loan (as of the restructuring date and inclusive of fees and
commission) with Riverfort was re-negotiated into a two-year,
coupon free, bullet loan with a GBP denominated principle of
GBP375,020. Repayment is due at maturity in February 2022, and
there are conversion rights for the lender at 7.5 pence per share.
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, were also now not
awarded.
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 0.5 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.
In August the Company announced it had secured a new funding
package totalling GBP700,000 in support of the Company's continued
progress across both Cuba and Slovenia as well as the execution of
its special situations international growth strategy. The Company
raised GBP300,000 in new equity at a price of 2 pence per new
share, being a nil discount to the spot price at the time, with one
warrant attached for every two shares subscribed for exercisable at
4 pence per new warrant share, of which the Company has received
some cash through subsequent exercises. Additionally, the Company
announced a GBP400,000 unsecured loan facility with an 8% fixed
coupon payable on redemption or conversion through the exercise of
all the warrants which were issued attached to the loan notes at
2.5 pence per new warrant share. This conversion subsequently took
place. As part of this funding the Company agreed with RiverFort to
repay certain amounts of their debt obligation which has
subsequently been reduced from GBP375,020 to GBP270,020.
In December, the Company secured additional funding of
GBP500,000 in a new loan facility with warrants attached
exercisable at 7.5 pence per share, being a 41.5% premium to the
share price at the time. Subsequently and post period end the
Company has drawn down part of this loan facility and agreed with
the lenders to extend the drawdown date for the remaining balance
available. Under this facility the Company has drawn down
GBP250,000 of which GBP125,000 has been converted into equity
pursuant to warrant exercises as well as receipt of a further
GBP70,000 by way of further warrant exercises.
GOING CONCERN
The Company has raised GBP1.01 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 until the end of
the calendar year, 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.
The forecasts are sensitive to the timing and cash flows
associated with the continuing situation in Slovenia, and
discretionary spend incurred with executing on the ESG Metals
Strategy through acquisition and 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, if and 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, the
auditors have specified a material uncertainty related to going
concern.
James Parsons
Executive Chairman
Andrew Dennan
Chief Executive Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Notes Year ended Year ended
31 December 31 December
2020 2019
GBP '000s GBP '000s
------------------------------------------ ------ ------------ ------------
Revenue 2 - 298
Cost of sales 2 (120) (462)
Depreciation of oil & gas assets 10 (397) (440)
Gross loss (517) (604)
Administrative expenses 3 (2,279) (2,132)
Operating loss (2,796) (2,736)
Finance cost 5 (35) (924)
Net finance costs (35) (924)
Loss before taxation (2,831) (3,660)
Income tax expense 6 - -
Loss for the year (2,831) (3,660)
Other comprehensive income
Items that may be reclassified to profit
and loss
Exchange differences on translation
of foreign operations 1,327 (1,700)
------------------------------------------ ------ ------------ ------------
Total comprehensive income for the year (1,504) (5,360)
Earnings per share
Basic & fully diluted loss per share
(Pence) 8 (4.66) (14.00)
The consolidated balance sheet should be read in conjunction
with the accompanying notes.
Consolidated Statement of Financial Position
Company Number: 05239285
As at 31 December 2020
Notes 31 December 31 December
2020 2019
Assets GBP '000s GBP '000s
----------------------------------------------- ------ ------------ ------------
Non-current assets
Property, plant and equipment 10 22,783 22,069
Exploration and evaluation costs 11 18,753 18,576
Goodwill 9 653 -
Prepaid abandonment fund 12 300 240
Total non-current assets 42,489 40,885
Current assets
Trade and other receivables 13 66 254
Cash and cash equivalents 25 115 77
Total current assets 181 331
Total assets 42,670 41,216
----------------------------------------------- ------ ------------ ------------
Equity and liabilities
Attributable to the equity holders of
the Parent Company
Share capital 20 7,928 7,604
Share premium account 73,863 72,330
Merger reserve 570 570
Equity reserve 73 -
Share-based payment reserve 24 2,129 1,873
Translation reserves 1,027 (300)
Retained earnings (44,595) (41,964)
Total equity attributable to the shareholders 40,995 40,113
Total equity 40,995 40,113
----------------------------------------------- ------ ------------ ------------
Non-current liabilities
Borrowings 15 197 -
Provisions 16 328 255
Total non-current liabilities 525 255
Current liabilities
Borrowings 15 5 385
Contingent consideration on acquisition 17 450 -
Trade and other payables 18 695 463
Total current liabilities 1,150 848
Total liabilities 1,675 1,103
----------------------------------------------- ------ ------------ ------------
Total equity and liabilities 42,670 41,216
----------------------------------------------- ------ ------------ ------------
The consolidated balance sheet should be read in conjunction
with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share
based
Share Share Merger Equity payment Translation Retained
capital premium Reserve reserve reserve reserve earnings Total
GBP GBP '000s GBP GBP GBP '000s GBP '000s GBP '000s GBP '000s
'000s '000s '000s
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
income - - - - - (1,700) (3,660) (5,360)
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Transactions with
owners
Issue of ordinary
shares 1,458 738 - - - - - 2,196
Costs related to share
issues - (56) - - - - - (56)
Expiry on loan note
conversion rights - - - (16) - - - (16)
Share-based payments
and expiry of options - - - - 216 - 53 269
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Total transactions
with owners 1,458 682 - (16) 216 - 53 2,393
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Balance at 31 December
2019 7,604 72,330 570 - 1,873 (300) (41,964) 40,113
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Balance at 1 January
2020 7,604 72,330 570 - 1,873 (300) (41,964) 40,113
Comprehensive income
Loss for the year - - - - - - (2,831) (2,831)
Other comprehensive
income
Currency translation
differences - - - - - 1,327 - 1,327
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Total comprehensive
income - - - - - 1,327 (2,831) (1,504)
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Transactions with
owners
Issue of ordinary
shares 324 1,713 - - - - - 2,037
Costs related to share
issues - (180) - - - - - (180)
Equity value of
convertible
loan note - - - 73 - - - 73
Share-based payments
and expiry of options - - - - 256 - 200 456
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Total transactions
with owners 324 1,533 - 73 256 - 200 2,386
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
Balance at 31 December
2020 7,928 73,863 570 73 2,129 1,027 (44,595) 40,995
----------------------- --------- ---------- --------- --------- ---------- ------------ ---------- ----------
The consolidated balance sheet should be read in conjunction
with the accompanying notes.
Consolidated Cash Flow Statement
For the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
GBP '000s GBP '000s
------------
Cash flows from operations
Loss after tax for the year (2,831) (3,660)
Depreciation 397 440
Change in inventory - (3)
Change in receivables 188 152
Change in payables 232 71
Increase in share-based payments 456 269
Exchange differences 212 (40)
Finance income - -
Finance cost - 924
Transfer to / from restricted cash - 180
Net cash generation used in operating activities (1,346) (1,667)
------------ ------------
Cash flows from investing activities
Interest received - (3)
Payments for fixed assets - (3)
Net cash used in investing activities - (6)
------------ ------------
Cash flows from financing activities
Interest paid and other finance fees (35) (67)
Loans advanced 300 410
Loans repaid (417) (27)
Interest paid - -
Proceeds from issue of shares 1,648 1,114
Share issue costs (180) (55)
Net cash generated from financing activities 1,386 1,375
------------ ------------
Net increase in cash and cash equivalents
for the year 38 (299)
Effect of foreign exchange differences -
Cash and cash equivalents at beginning of
the year 77 376
Cash and cash equivalents at end of the year 115 77
============ ============
The consolidated balance sheet should be read in conjunction
with the accompanying notes.
Notes to the Financial Statements
1. Accounting policies
Reporting entity
Ascent Resources plc (Company no: 05239285) ('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 2020 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.
Statement of compliance
The financial statements of the Group and Company have been
prepared in accordance with international accounting standards and
IFRIC interpretations and the requirements of the Companies Act
2006 applicable to companies reporting under IFRS.
The Group's and Company's financial statements for the year
ended 31 December 2020 were approved and authorised for issue by
the Board of Directors on 29 April 2021 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 GBP2,060,000 (2019: loss of
GBP8,362,000).
The presentational currency of the Group is British Pounds
Stirling ("GBP") and the functional currency of the Group's
subsidiaries domiciled outside of the UK in Malta, Slovenia and
Netherlands are in Euros ("EUR").
Measurement Convention
The financial statements have been prepared under the historical
cost convention. 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 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 GBP1.01 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 until the end of
the calendar year, 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.
The forecasts are sensitive to the timing and cash flows
associated with the continuing situation in Slovenia, and
discretionary spend incurred with executing on the ESG Metals
Strategy through acquisition and 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, if and 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.
New and amended Standards effective for 31 December 2020
year-end adopted by the Group:
i. The following IFRS or IFRIC interpretations were effective
for the first time for the financial year beginning 1 January 2020.
Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements:
Standard Description
IAS 1 and IAS 8 Definition of a material
amendments
-------------------------------------------
IFRS 3 Business Combinations
-------------------------------------------
Amendments to IFRS Interest rate benchmark reform
9, IFRS 17 and IAS
39
-------------------------------------------
N/A Amendments to References to the Conceptual
Framework in IFRS Standards
-------------------------------------------
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
IAS 1 Presentation of Financial Statements: 1 January
amendments Classification of Liabilities as Current 2023
or Non-Current and Classification of Liabilities
as Current or Non-current - Deferral of
Effective Date:
-------------------------------------------------- ----------
IFRS Business Combinations - Reference to the 1 January
3 amendments Conceptual Framework 2022
-------------------------------------------------- ----------
IAS 16 Property, Plant and Equipment: Effective 1 January
amendments 1 January 2022 2022
-------------------------------------------------- ----------
IAS 37 Provisions, Contingent Liabilities and 1 January
amendments Contingent Assets: 2022
-------------------------------------------------- ----------
N/A Annual Improvements to IFRS Standards 1 January
2018-2020 Cycle: 2022
-------------------------------------------------- ----------
There are no IFRS's or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Company or Group.
Estimates and judgments
Exploration and evaluation assets (Note 11) - 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 2020 was GBP18,753,000 (2019:
GBP18,576,000).
Reserves - 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) (Note 10) - 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 (Note 10) - 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
GBP397,000 (2019: GBP434,000) 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 (Note 6) - 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 (Note 22) - 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 GBPnil (2019: GBP4.8 million)
has been recognised in the Company accounts against a receivable of
GBP32 million (2019: GBP32 million).
Investments (note 12) - Judgement has been made in respect of
the carrying value of the Company's carrying value of its
investments in the subsidiaries. The process for this is the same
as the consideration given in respect of both Intangible Assets and
Property, Plant and Equipment (see above).
Basis of consolidation (Note 12) - 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 (Note 9) - Business combinations are
accounted for using the acquisition method. The consideration
transferred for the acquisition of a subsidiary comprises the:
-- fair value of assets transferred;
-- liabilities incurred to the former owners of the acquired business;
-- equity instruments issued by the Group;
-- fair value of any asset or liability resulting from
contingent consideration arrangement; and
-- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The Group recognises any noncontrolling interest
in the acquired entity on an acquisition-by-acquisition basis
either at fair value or at the noncontrolling interest's
proportionate share of the acquired entity's net identifiable
assets. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, amount of any
non-controlling interest and fair value of pre-existing equity
interest over the fair value of net identifiable assets acquired is
recorded as goodwill. If those amounts are less than the fair value
of the net identifiable assets acquired, the difference is
recognised immediately in profit or loss as a gain on bargain
purchase.
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 as disclosed on page 9, 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 one off amount to the Company's JV partner
as per the Revised Joint Venture Agreement.
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 2020 was GBP1: EUR1.1192
(2019: GBP1:EUR1.1755).
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 (Note 6)
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 (Note 16)
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 estimating 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 remeasured.
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 nonconvertible 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.
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 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
Share capital is determined using the nominal value of shares
that have been issued.
Share based payments relate to transactions where the Group
receives services from employees or service providers and the terms
of the arrangements include payment of a part or whole of
consideration by issuing equity instruments to the counterparty.
The Group measures the services received from non-employees, and
the corresponding increase in equity, at the fair value of the
goods or services received. When the transactions are with
employees, the fair value is measured by reference to the fair
value of the shares issued. The expense is recognised over the
vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied
Equity-settled share-based payments are credited to a
share-based payment reserve as a component of equity until related
options or warrants are exercised or lapse
The Translation reserve comprises the exchange differences from
translating the net investment in foreign entities and of monetary
items receivable from subsidiaries for which settlement is neither
planned nor likely in the foreseeable future
Retained losses includes all current and prior period results as
disclosed in the income statement.
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.
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.
Goodwill
Goodwill arising from business combinations is included in
intangible assets. Goodwill is not amortised but it is tested for
impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Goodwill is allocated to
cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the
business combination in which the goodwill arose.
Contingent Consideration
Contingent consideration is measured at fair value at the time
of the business combination and is considered in the determination
of goodwill.
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.
UK Slovenia Elims Total
2020 GBP '000s GBP '000s GBP '000s GBP '000s
-------------------------------------- ---------- ---------- ------------- ----------
Hydrocarbon sales - - - -
Intercompany sales - 267 (267) -
Total revenue - - - -
Cost of sales (10) (111) - (121)
Administrative expenses (2,013) (506) 240 (2,279)
Material non-cash items -
Depreciation (2) (395) - (397)
Net finance costs (35) - - (35)
Reportable segment profit/(loss)
before tax (2,060) (745) (27) (2,831)
Taxation - - - -
Reportable segment profit/(loss)
after taxation (2,060) (745) (27) (2,831)
-------------------------------------- ---------- ---------- ------------- ----------
Reportable segment assets
Carrying value of exploration assets - 18,576 - 18,576
Additions to exploration assets - - - -
Effect of exchange rate movements - 177 - 177
Total plant and equipment - 22,783 - 22,783
Prepaid abandonment fund - 300 - 300
Investment in subsidiaries 16,096 - (15,443) 653
Intercompany receivables 27,447 - (27,447) -
Total non-current assets 43,543 41,836 (42,890) 42,489
Other assets 175 6 - 181
Consolidated total assets 43,718 41,842 (42,890) 42,670
-------------------------------------- ---------- ---------- ------------- ----------
Reportable segmental liabilities
Trade payables (417) (278) - (695)
External loan balances (202) - - (202)
Inter-group borrowings - (35,083) 35,083 -
Other liabilities (450) (328) - (778)
Consolidated total liabilities (1,069) (35,689) 35,083 (1,675)
-------------------------------------- ---------- ---------- ------------- ----------
UK Slovenia eliminations Total
2019 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) 1,144 (924)
Reportable segment profit/(loss)
before tax (8,362) (2,786) 7,489 (3,660)
Taxation - - - -
Reportable segment profit/(loss)
after taxation (8,362) (2,786) 7,489 (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)
-------------------------------------- ---------- ---------- ------------- ----------
Revenue from customers
Revenue was earned by the Slovenian segment through the joint
venture structure; sales were made to end customers in Slovenia
GBPnil; Croatia GBPnil and Hungary GBPnil (2019: GBP99,000; Croatia
GBP160,000 and Hungary GBP39,000). Gas sales comprised GBPnil
(2019: GBP259,000) whilst condensate sales totalled GBPnil (2019:
GBP39,000). 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
2020 2019
GBP '000s GBP '000s
--------------------------------------------- ------------ ------------
Employee costs 729 693
Share based payment charge 456 269
Depreciation 397 440
Auditor's remuneration:
Audit Fees - BDO - 70
Audit Fees - PKF 43 -
Fees payable to the company's auditor other - -
services
43 70
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
2020 2019
-------------------------- ------------ ------------
Management and technical 10 8
-------------------------- ------------ ------------
The average number of personal employed by the Company,
including Executive Directors, was:
Year ended Year ended
31 December 31 December
2020 2019
-------------------------- ------------ ------------
Management and technical 7 5
-------------------------- ------------ ------------
b. Directors and employee's remuneration
Year ended Year ended
31 December 31 December
2020 2019
----------------------- ------------ ------------
Employees & Directors
Wages and salaries 628 611
Social security costs 56 27
Pension costs 7 53
Bonuses 38 -
Share-based payments 456 269
Taxable benefits - 2
1,185 962
----------------------- ------------ ------------
c. Directors remuneration
Please see Remuneration report on pages 31 - 33
5. Finance income and costs recognised in the year
Finance costs
Accretion charge on convertible loan notes - (3)
Interest charge on loans (24) (40)
Change in fair value of receivable under Equity
Sharing Agreement - (814)
Bank charges (11) (67)
(35) (924)
===== ======
Please refer to Note 15 for a description of financing activity
during the year.
6. Income tax expense
Year ended Year ended
31 December 31 December
2020 2019
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
2020 2019
GBP '000s GBP '000s
Loss for the year (2,831) (3,660)
Income tax using the Company's domestic tax
rate at 19% (2019: 19%) (537) (696)
Effects of:
Net increase in unrecognised losses c/f 537 2,816
Effect of tax rates in foreign jurisdictions - 32
Other non-taxable items (537) (2,152)
Other non-deductible expenses - -
Total tax expense for the year - -
============ ============
7. Deferred tax - Group & Company
Year ended Year ended
31 December 31 December
2020 2019
GBP '000s GBP '000s
Group
Total tax losses - UK and Slovenia (51,255) (48,424)
Unrecorded deferred tax asset at 17% (2019:
17%) 8,713 8,232
------------ ------------
Company
Total tax losses (13,632) (11,772)
Unrecorded deferred tax asset at 17% (2019:
17%) 2,317 2,001
------------ ------------
No deferred tax asset has been recognised in respect of the tax
losses carried forward, due to the uncertainty as to when profits
will be generated. Refer to critical accounting estimates and
judgments.
8. Earnings per share
Year ended Year ended
31 December 31 December
2020 2019
GBP '000s GBP '000s
Result for the year
Total loss for the year attributable to equity
shareholders (2,831) (3,660)
Weighted average number of ordinary shares Number Number
For basic earnings per share 60,693,793 26,590,316
Loss per share (Pence) (4.66) (14.00)
As the result for the year was a loss, the basic and diluted
loss per share are the same. At 31 December 2020, potentially
dilutive instruments in issue were 65,868,482 (2019: 145,076,254).
Dilutive shares arise from share options and warrants issued by the
Company.
9. Business Combinations
There has been one acquisition during the period.
The Board strategically expect acquisitions to be a common
component of growth in the future.
Acquisitions made during the period to 31 December 2020
were:
Energetical Limited (renamed to Ascent Hispanic Resources
Limited)
As a first step towards building its Cuban portfolio, the
Company acquired 100% of the share capital of Energetical Limited
on 13 April 2020. Energetical Limited is a UK Company with
exclusive rights to secure a Production Sharing Contract ('PSC') on
a producing onshore Cuban oil licence, and this was the primary
reason for acquisition. The initial consideration for the
acquisition of Energetical comprised of the issue of six million
new ordinary shares ("Consideration Shares") to the selling
shareholders ("Sellers") of Energetical. A further GBP450,000 of
contingent consideration will be payable on the execution of
production sharing contracts covering the 9B Block, of which
GBP350,000 will be satisfied by the issue of new ordinary shares
("Deferred Consideration Shares"), priced at the 30 day VWAP at the
time of issue and GBP100,000 will be paid in cash. The Sellers have
agreed not to dispose of any of the Consideration Shares for a
period of one year. The Company has agreed to a carve-out to this
lock-in which permits the sale of up to an aggregate of one million
Consideration Shares following the expiry of an initial three-month
period.
The amount of identifiable net assets assumed at the acquisition
date is shown below:
Fair Values
Recognised amounts of net assets acquired GBP '000s
and liabilities assumed
Identifiable net assets -
Goodwill 653
Total Consideration 653
============
Satisfied by:
Consideration - new ordinary shares
issued at 3.38p 203
Contingent consideration 450
Total Consideration 653
====
The fair value acquired assesses the future cash flows
associated with exclusive rights in securing a Production Sharing
Contract ('PSC') on an onshore Cuban oil licence, delivered by
exclusive rights to the 9B Block in Cuba ("Block 9B") that contains
the onshore Majaguillar and San Anton fields, located on the North
coast of Cuba and currently producing 190 bbls/day gross from three
wells.
10. Property, Plant & Equipment - Group
Computer Developed Total
Equipment Oil & Gas
Assets
Cost GBP '000s GBP '000s GBP '000s
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
----------- ----------- ----------
At 1 January 2020 6 23,483 23,489
Additions - - -
Effect of exchange rate movements - 1,111 1,111
At 31 December 2020 6 24,594 24,600
----------- ----------- ----------
Depreciation
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)
----------- ----------- ----------
At 1 January 2020 (6) (1,414) (1,420)
Charge for the year - (397) (397)
Effect of exchange rate movements - - -
At 31 December 2020 (6) (1,811) (1,817)
----------- ----------- ----------
Carrying value
At 31 December 2020 - 22,783 22,783
At 31 December 2019 - 22,069 22,069
----------- ----------- ----------
At 1 January 2019 6 23,773 23,779
----------- ----------- ----------
No impairment has been recognised during the year as an
independent experts NPV model values the assets higher than the
carrying amounts; 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 and the
fair value less cost to develop assessment as set out in Note 1.
Should the permits not be granted, nor the concession extension
confirmed, the carrying value of these assets would be
impaired.
11. Exploration and evaluation assets - Group
Slovenia Total
Cost GBP '000s GBP '000s
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 1 January 2020 18,576 18,576
Additions - -
Effects of exchange rate movements 177 177
At 31 December 2020 18,753 18,753
---------- ----------
At 31 December 2020 18,753 18,753
---------- ----------
At 31 December 2019 18,576 18,576
---------- ----------
At 1 January 2019 18,968 18,968
---------- ----------
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.
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 2020 and 2019 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.
12. Investment in subsidiaries - Company
2020 2019
GBP '000s GBP '000s
Cost
At 1 January 15,443 15,443
Additions 653 -
At 31 December 16,096 15,443
---------- ----------
Accumulated impairment
At 1 January - -
Impairment - -
At 31 December - -
---------- ----------
Net book value
At 31 December 16,096 15,443
---------- ----------
The Company's subsidiary undertakings at the date of issue of
these financial statements, which are all 100% owned, are set out
below:
Name of company Principal activity Country % of share % of share
& registered office of incorporation capital capital
address held 2020 held 2019
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%
Ascent Hispanic
Resources UK Limited
5 New Street Square England
London EC4A 3TW Oil and Gas exploration and Wales 100% 100%
All subsidiary companies are held directly by Ascent Resources
plc.
13. Trade and other receivables - Group
2020 2019
GBP '000s GBP '000s
------------------------------- ---------- ----------
Trade receivables - 54
VAT recoverable 49 27
Prepaid abandonment liability 300 240
Amounts receivable on ESA - 173
Prepayments & accrued income 17 -
350 494
------------------------------- ---------- ----------
Less non-current portion (300) (240)
Current portion 66 254
------------------------------- ---------- ----------
14. Trade and other receivables - Company
2020 2019
GBP '000s GBP '000s
------------------------------ ---------- ----------
VAT recoverable 21 16
Amounts receivable on ESA - 173
Prepayments & accrued income 47 7
68 196
------------------------------ ---------- ----------
15. Borrowings - Group & Company
2020 2019
GBP '000s GBP '000s
Group
Current
Borrowings - 368
Convertible loan notes 5 17
Non-current
Borrowing 197 -
202 385
------------------------ ---------- ----------
Company
Current
Borrowings - 368
Convertible loan notes 5 17
Non-current
Borrowing 197 -
202 385
------------------------ ---------- ----------
The non-current borrowings relate to the loan arrangement with
Riverfort Global opportunities that was refinanced in February
2020. The outstanding loan of GBP375,020 as at February 2020 was
re-negotiated to a two-year coupon free bullet with conversion
rights for the lender at 7.5 pence per share. No conversion can
occur until the share price exceeds 10 pence per share for five
consecutive days. The Group made convertible loan note repayments
in the year of GBP105,000 to Riverfort Global opportunities,
resulting in an ending convertible loan note balance of GBP270,000,
comprising GBP197,000 recognised as the debt component and a
further GBP73,000 recognised in Equity Reserve.
The current convertible loan was due from redemption on 19
November 2019 and at the balance sheet date GBP5,625 remain
unclaimed.
16. Provisions - Group
GBP000s
--------------------------- --------
At 1 January 2019 263
Foreign exchange movement (8)
At 31 December 2019 255
---------------------------- --------
At 1 January 2020 263
Foreign exchange movement 5
Provision 60
At 31 December 2020 328
---------------------------- --------
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. During 2017 the Company has placed
EUR300,000 (GBP268,000) on deposit as collateral against this
liability see Note 13.
17. Contingent Consideration due on Acquisition
2020 2019
Group GBP '000s GBP '000s
---------------------------------------------- ---------- ----------
Non-current
Ascent Hispanic Limited (formerly Energetical 450 -
Limited)
450 -
---------------------------------------------- ---------- ----------
The contingent consideration is based on the defined contingent
consideration in the acquisition of Energetical Limited, comprising
GBP100,000.00 in cash and a further GBP350,000,00 in shares. The
Company has not discounted the contingent consideration since the
impact would not be material. Please refer to note 9 of the
financial statements for the consideration in the acquisition of
Ascent Hispanic Limited.
18. Trade and other payables - Group
2020 2019
GBP '000s GBP '000s
--------------------------------- ---------- ----------
Trade payables 573 392
Tax and social security payable 56 5
Accruals and deferred income 66 66
695 463
--------------------------------- ---------- ----------
19. Trade and other payables - Company
2020 2019
GBP '000s GBP '000s
--------------------------------- ---------- ----------
Trade payables 295 115
Tax and social security payable 56 6
Other payables - -
Accruals and deferred income 66 54
417 175
--------------------------------- ---------- ----------
20. Called up share capital
2020 2019
GBP '000s GBP '000s
Authorised
2,000,000,000 ordinary shares of 0.5p
each 10,000 10,000
Allotted, called up and fully paid
3,019,648,452 deferred shares of 0.195p
each 5,888 5,888
1,737,110,763 deferred shares of 0.09p
each 1,563 1,563
95,283,281 ordinary shares of 0.5p each
(2019: 3,019,452 ordinary shares of 0.2p
each) 477 153
7,928 7,604
Reconciliation of share capital movement 2020 2019
Number Number
At 1 January 3,019,648,452 2,291,310,686
---------------- --------------
Share consolidation (2,989,451,968) -
Issue of Trameta consideration shares 91,167 -
Issue of shares during the year 64,995,630 728,337,766
At 31 December 95,283,281 3,019,648,452
================ ==============
The deferred shares have no voting rights and are not eligible
for dividends.
Shares issued during the year
Issuance of equity throughout the year:
-- On 13 March 2020, the Company raised GBP485,000 (GBP445,802
net of costs) via the Placing of 9,700,000 Ordinary shares with
investors
-- On 24 March 2020, the Company issued 166,666 shares at a
price of 5p to exiting directors in lieu of a cash settlement and a
further 390,000 shares at a price of 5p each per share and 214,286
shares at a price of 3.5p each to select professional advisors.
-- On 8 April 2020, the Company issued 1,000,000 ordinary shares
at a placing price of 5p per share in order to settle an amount of
GBP50,000 with a relevant investor
-- On 8 April 2002, the Company issued 91,167 ordinary shares as
a result of the acquisition of Trameta doo announced on 1 August
2015. This was the final payment and no further contingent
consideration of shares will be due.
-- On 14 April 2020, the Company agreed to purchase Energetical
Limited for the issuance of 6,000,000 new ordinary shares
-- On 20 April 2020, the Company issued 623,777 new ordinary
shares of 0.5p at a price of 3.5p to a professional advisor in lieu
of fees.
-- On 30 April 2020. The Company issued 7,727,272 new ordinary
shares of 0.5p at a price of 2.75p, raising gross proceeds of
GBP212,500
-- On 4 May 2020, the Company issued 750,000 ordinary shares at
a placing price of 5p per share in order to settle an amount
outstanding in the amount of GBP37,500.
-- On 7 May 2020, the Company issued 2,250,000 ordinary shares
at a placing price of 5p per share relating to a settlement of
remaining sums from a relevant investor.
-- On 6 August 2020 the Company raised GBP300,000 via the
placing of 15,000,000 Ordinary shares with investors
-- On 6 August 2020 the Company issued 1,500,000 ordinary shares
at a placing price of 2p per share relating to the settle amounts
with creditors.
-- On 15 October 2020 the Company issued 525,090 ordinary shares
in lieu of payment of consultancy fees at a price of 4p per
share
-- On 23 October 2020 the Company received GBP50,000 in respect
of a warrants exercise of 2,000,000 ordinary shares
-- On 26 October 2020 the Company received notice of the
exercise of warrants of 4,000,000 ordinary shares for consideration
of GBP100,000 and agreed to issue 320,00 ordinary shares at a price
of 2.5p per share in lieu of the 8% cash coupon on the convertible
loan amount
-- On 5 November 2020 the Company issued 457,720 ordinary shares
to a supplier for financial and economic modelling services
rendered in the months of September and October
-- On 19 November 2020 the Company received notice in respect of
warrants exercised in the amount of 1,250,00 ordinary shares
-- On 1 December 2020 the Company received notice of the
exercise of warrants of 4,000,000 ordinary shares for consideration
of GBP100,000 and agreed to issue 320,00 ordinary shares at a price
of 2.5p per share in lieu of the 8% cash coupon on the convertible
loan amount
-- On 1 December 2020 the Company issued 480,000 ordinary shares
at a price of 7.5p per share in respect of a supplier invoice
Shares issued during the prior year
The Company raised funds through placings during the prior
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.
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.
21. 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 2020, the Group had exploration and expenditure
commitments of GBP Nil (2019 - Nil).
22. Related party transactions
Group companies - transactions
2020 2019
Cash Services Total Cash Services Total
Ascent Slovenia Limited 267 - 267 111 1,858 1,969
Ascent Resources
doo - - - (9) (5) (14)
Trameta doo - - - 2 - 2
267 - 267 102 1,853 1,955
------------------------- ----- --------- ------ ----- --------- ------
Group companies - balances
2020 2019
Cash Services Total Cash Services Total
Ascent Slovenia Limited 17,351 5,404 22,755 17,084 5,404 22,488
Ascent Resources
doo 2,951 1,730 4,681 2,951 1,730 4,681
Trameta doo 11 - 11 11 - 11
20,313 7,134 27,447 20,046 7,134 27,180
------------------------- ------- --------- ------- ------- --------- -------
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 relatively remote. A provision of GBPnil (EUR4.8
million) has been recognised in the Company accounts.
2020 2019
GBP GBP
'000s '000s
--------------------------------------------- ------- -------
Expected credit loss provision start of the
year 6,500 1,700
Change in expected credit
loss - 4,800
Expected credit loss
provision at the end
of year 6,500 6,500
------------------------------------------------- ------- -------
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.
2020
There were no transactions involving directors during the
year.
2019
There were no transactions involving directors during the
year.
23. 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 and processes. Production operations in
Slovenia have been unaffected to date.
On 6 January 2021 the Company issued 208,991 ordinary shares to
a supplier for financial modelling and business development
services rendered in the months of November and December at an
average issue price of 5.74p per share calculated as the monthly
volume weighted average price
On 11 January 2021 the Company received a warrant exercise
notice of 833,333 ordinary shares for consideration of GBP62,500,
additionally the Company has agreed to issue 66,667 new ordinary
shares of 7.5p being the coupon conversion price in lieu of the 8%
cash coupon that is incurred on the converted loan amount
On 4 February 2021 the Company received a warrant exercise
notice of 833,333 ordinary shares for consideration of GBP62,500,
additionally the Company has agreed to issue 66,667 new ordinary
shares of 7.5p being the coupon conversion price in lieu of the 8%
cash coupon that is incurred on the converted loan amount
On 5 February 2021 the Company received a warrant exercise
notice of 900,000 new ordinary shares for consideration of
GBP67,500
On 11 February 2021 the Company raised GBP1m before expense for
the placing of 9,997,032 ordinary shares of 0.5p each at a price of
10.1p per share.
24. Share based payments
The Company has provided the Directors, certain employees and
institutional investors with share options and warrants
('options'). 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 2019 152,576,254 2.46
Outstanding at 31 December 2019 152,576,254 2.46
Exercisable at 31 December 2020 84,513,744 2.86
Outstanding at 1 January 2020 152,576,254 2.46
Consolidation of existing shares (151,050,492)
Granted during the year 5,897,379
Expired during the year (75,000)
Outstanding at 31 December 2020 7,348,142 253.72
Exercisable at 31 December 2020 1,450,763 248.72
The value of the options is measured by the use of a binomial
pricing model. The inputs into the binomial model made in 2020 were
as follows.
Share price at grant date 2.9p - 778p
Exercise price 5.0p - 2000p
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 2020 have an exercise price
in the range of 2.9p and 778p (31 December 2019: 1.58p and 20.00p)
and a weighted average contractual life of 5.5 years (31 December
2019: 9.9 years). The amount recognised in the income statement for
the year ended 31 December 2020 was GBP456,000 (2019:
GBP269,000).
Details of the warrants issued in the year are as follows:
Exercisable
Issued from Expiry date Number outstanding Exercise price
24 March 2020 Anytime until 24 March 2025 225,000 5.00p
--------------- --------------- ------------------- ---------------
24 March 2020 Anytime until 24 March 2025 199,482 5.00p
--------------- --------------- ------------------- ---------------
30 April 2020 Anytime until 30 April 2022 8,727,272 5.50p
--------------- --------------- ------------------- ---------------
6 August 2020 Anytime until 5 August 2022 7,500,000 4.00p
--------------- --------------- ------------------- ---------------
11 August 2020 Anytime until 6 August 2023 16,000,000 2.50p
--------------- --------------- ------------------- ---------------
30 November 30 November
2020 Anytime until 2023 6,666,666 7.50p
--------------- --------------- ------------------- ---------------
Warrants Weighted Average
price (pence)
Outstanding at 1 January 2020 - -
Granted during the year 39,318,420 4.33
Exercised during the year (17,250,000) 3.36
Outstanding at 31 December 2020 22,068,420 5.44
Exercisable at 31 December 2020 22,068,420 5.44
The warrants outstanding at the period end have a weighted
average remaining contractual life of 1.8 years. The exercise
prices of the warrants are between 4.00 - 7.50p per share.
25. Notes supporting the statement of cash flows
Group 2020 2019
GBP '000s GBP '000s
Cash at bank and available on demand 115 77
Cash held on deposit against bank guarantee - -
115 77
======================== =====================
Company 2020 2019
GBP '000s GBP '000s
Cash at bank and available on demand 107 63
Cash held on deposit against bank guarantee - -
107 63
======================== =====================
Significant non-cash transactions are as follows:
2020 2019
GBP '000s GBP '000s
Conversion of loan notes - -
Interest charged on loans - 40
Accretion charge on convertible
loan notes - 3
26. Financial risk management
Group and Company
The Group's financial liabilities comprise CLNs, borrowings and
trade payables. All liabilities are measured at amortised cost .
These are detailed in Notes 15, 0 and 18.
The Group has various financial assets, being trade receivables
and cash, which arise directly from its operations. All are
classified at amortised cost. These are detailed in Notes 13, 14
and 25.
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:
Credit risk
Credit risk is the risk of an unexpected loss if a counter party
to a financial instrument fails to meet its commercial obligations.
The Groups's maximum credit risk exposure is limited to the
carrying amount of cash of GBP115,000 and trade and other
receivables of GBP49,000. Credit risk is managed on a Group basis.
Funds are deposited with financial institutions with a credit
rating equivalent to, or above, the main UK clearing banks. The
Company's liquid resources are invested having regard to the timing
of payment to be made in the ordinary course of the Group's
activities. All financial liabilities are payable in the short term
(between 0 to 3 months) and the Group maintains adequate bank
balances to meet those liabilities.
The Group makes allowances for impairment of receivables where
there is an ECL identified. Refer to Note 22 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.
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.
The Group's and Company's exposure to foreign currency risk at
the end of the reporting period is summarised below. All amounts
are presented in GBP equivalent.
Group Company
2020 2019 2020 2019
GBP '000s GBP '000s GBP '000s GBP '000s
Trade and other receivables - 58 - -
Cash and cash equivalents 8 13 - -
Trade and other payables (279) (288) - -
----------------------------- ---------- ---------- ---------- ----------
Net Exposure (271) (217) - -
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
2020 2019
Profit or loss
10% strengthening of sterling 135 33
10% weakening of sterling (9) (55)
Equity
10% strengthening of sterling (3,839) (3,897)
10% weakening of sterling 4,693 4,764
Company
Profit or loss
10% strengthening of sterling - (123)
10% weakening of sterling - 151
Equity
10% strengthening of sterling (4,070) (4,542)
10% weakening of sterling 4,832 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 valued
at GBP270,000 rates of 12% per annum. At 31 December 2019, the
Group and Company had GBP loans valued at GBP385,000 rates of 12%
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
2020 2019 2020 2019
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 - 392 - 392
Between six months and a
year - - - -
Over one year 197 - 197 -
Capital management
The Group manages its capital to ensure that it will be able to
continue as a going concern while maximising the return to
shareholders through the optimisation of the balance between debt
and equity. The capital structure of the Group as at 31 December
2020 consisted of equity attributable to the equity holders of the
Company, totalling GBP41,069. The Group reviews the capital
structure on an on-going basis. As part of this review, the
directors consider the cost of capital and the risks associated
with each class of capital. The Group will balance its overall
capital structure through new share issues and the issue of new
debt or the repayment of existing debt.
There are no externally imposed capital requirements.
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:
Categorisation of Financial Carrying Fair Value Carrying Fair Value
Assets and Liabilities - amount amount
Group
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2020 2020 2019 2019
Financial assets
Cash and equivalents - unrestricted 115 115 77 77
Cash and equivalents - restricted - - - -
Trade receivables 66 66 54 54
Prepaid abandonment fund
(refundable) 240 240 240 240
Financial liabilities
Trade and other payables 695 695 392 392
Loans at fixed rate 197 197 385 385
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
2020 2020 2019 2019
Financial assets
Cash and equivalents - unrestricted 107 107 63 63
Trade receivables 68 68 - -
Financial liabilities
Trade and other payables 417 417 175 175
Loans at fixed rate 197 197 385 385
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 13, 14, 14, 18
and 19.
Cash and cash equivalents
Cash and cash equivalents are all readily available and
therefore carrying value represents a close approximation to fair
value.
27. Commitments & contingencies
As at 31 December 2020, the Company recognises GBP450,000 in
contingent consideration relating to the acquisition of Energetical
Limited (renamed to Ascent Hispanic Resources UK Limited).
Post period in review, as announced on 10 March 2021, the
Company's JV Service Provide, Petro Geo, issued a local enforcement
order attempting to claim payment for an unsubstantiated amount of
EUR662,288.63 plus interest of EUR12,103.19.
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END
FR SEDESUEFSEDL
(END) Dow Jones Newswires
April 30, 2021 02:00 ET (06:00 GMT)
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