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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ascent Resources Plc | LSE:AST | London | Ordinary Share | GB00BJVH7905 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.03 | 1.29% | 2.35 | 2.30 | 2.40 | 2.35 | 2.25 | 2.25 | 76,857 | 08:00:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Crude Petroleum & Natural Gs | 581k | -41.89M | -0.1004 | -0.23 | 9.8M |
From Apr 2019 to Apr 2024
TIDMAST
RNS Number : 7414Y
Ascent Resources PLC
13 May 2019
Ascent Resources plc / Epic: AST / Index: AIM / Sector: Oil and Gas
13 May 2019
Ascent Resources plc
("Ascent" or the "Company")
Audited Final Results for the year ended 31 December 2018
Ascent Resources plc (AIM: AST), the AIM quoted European oil and gas exploration and production company, is pleased to announce its audited full year results for the year ended 31 December 2018. The Company also announces that its Annual Report and Accounts for the year ended 31 December 2018, together with the notice of Annual General Meeting, to be held at 5 New Street Square, London, EC4A 3TW on 18 June 2019 at 9.30 a.m. are being posted to shareholders on 16 May 2019.
Developments in 2019 to date
-- IPPC Permit confirmed as fully valid in April 2019. -- Gas sales agreement extended to November 2019.
-- GBP1.1 million raised in two placings in January and April 2019 - the April placing was oversubscribed and included institutional investors.
-- John Buggenhagen and Louis Castro joined the board in February 2019.
2018 Highlights
-- The Company produced 11.9 million cubic metres (0.4 Bcf) of gas and 2,930 barrels of condensate during the year which generated revenue of GBP1.9 million, more than double the revenues for 2017 and the highest recorded revenue for the Company since 2011.
-- EBITDA was a loss of GBP589,000 reduced from the prior year EBITDA loss of GBP1,380,000 due to higher revenues and reduced costs.
-- Operating cash flow was positive in 2018 for the first time since 2010 at GBP360,000 due to improved operating results and reduction in receivables.
Colin Hutchinson, CEO of Ascent Resources plc, commented:
"While 2018 was a challenging year for the Company we look forward to 2019 with renewed optimism. The first few months of the year have seen significant progress in Slovenia, with the award of the IPPC Permit and the extension of our gas sales agreement, and at a corporate level, with two new experienced directors joining the board and GBP1.1 million in new funds raised."
Enquiries:
Ascent Resources plc +44 20 7251 4905
Colin Hutchinson, CEO
Cameron Davies, Chairman
John Buggenhagen, COO
WH Ireland, Nominated Adviser +44 20 7220 1666
James Joyce / Chris Savidge
SP Angel, Joint Broker +44 20 3470 0470
Richard Redmayne / Richard Hail
Yellow Jersey, Financial PR and IR +44 20 3004 9512
Tim Thompson / Harriet Jackson / Henry Wilkinson
Chairman's Statement
After the progress of 2017 the year under review was a challenging one, therefore it was crucially important and very encouraging that we received the IPPC Permit in April 2019.
The award of this permit, the additions to the board and the GBP1.1 million in new funding raised during the first part of 2019 gives grounds to be optimistic as the Company seeks to maximise the potential in Slovenia while assessing additional accretive projects in the region.
In November 2017 the Petišovci field was brought into export production but the Company was unable to immediately build on this success during 2018 due largely to the manner in which the Slovenian system has dealt with our environmental permit applications. The unpredictability of the process and the failure of officials to adhere to Slovenian and EU regulations and prescribed timescales, thwarted a successful outcome to the Strategic Review and has delayed further investment in our Slovenia project.
The award of the IPPC Permit in April 2019 gives the Board renewed confidence that the remaining permit will be issued in due course.
Given the difficulties in doing business in Slovenia, it is right that we return to the strategy of seeking to grow Ascent Resources plc ('Ascent' or 'the Company') outside of the country, leveraging our experience and relationships in the region. To that end we have begun assessing the opportunities presented in the Croatian Onshore Licensing Round. To facilitate a smooth process, the Croatian government introduced a new hydrocarbon law and is actively marketing the opportunities to foreign and domestic investors to encourage the deployment of private risk capital to develop the, already significant, Croatian energy industry. Such an approach makes Croatia an appealing destination for foreign investors.
In addition, we continue to review a number of other interesting opportunities in the Central European region where a combination of good geology, strong energy prices and well-defined regulatory regimes, create opportunities which Ascent is well positioned to benefit from.
The addition of John Buggenhagen and Louis Castro to the Board in February 2019 will support this strategy as we seek to grow Ascent into an established European Oil & Gas company.
I would like to also thank Nigel Moore and Clive Carver who provided years of valuable service to the Company. Both were instrumental in steering the Company through difficult times and to achieving first production in Slovenia in 2017, and we wish them both well for the future.
Dr Cameron Davies
Non-executive Chairman
10 May 2019
Chief Executive's Review
While the period under review was a challenging one for the Company, as we went through the strategic review and suffered permitting delays, the period since the year end has seen several positive developments and we look forward to progress in 2019 as the Company executes the strategy of maximising our existing potential whilst growing in the region.
Progress in 2019 to date
1. Corporate developments
In January 2019 we strengthened the management team and board with the addition two experienced directors: John Buggenhagen, as Chief Operating Officer and Louis Castro as non-executive director and Chairman of the Audit Committee.
John is an astute, highly qualified geophysicist with extensive experience in the region and a track record of commercial oil and gas discoveries.
Louis has a wealth of City experience in investment banking and corporate broking, and also in growing successful AIM listed Oil & Gas companies.
2. Operational developments
In April 2019 we received confirmation of the IPPC Permit which is important for the future development of the project and demonstrates that permits can be obtained through the Slovenian system.
During April we also completed the renewal of the gas sales agreement, under which untreated gas is sold to INA in Croatia. The agreement has been extended for six months, to November 2019, and all parties will now work towards a fresh agreement for the following period. It is planned that, by then, the agreement can consider increased production volumes following the installation of compression equipment and, subject to permitting, the re-stimulation of our existing wells.
3. Future plans
In May we plan to conclude a contract for the purchase of the required compression equipment which should improve production from both wells and significantly extend the useful life of the current completions prior to any future re-stimulation.
By June we expect to have the results of the reprocessing of our existing 3D seismic data which will increase our understanding of the remaining oil and gas volumes in the shallow zones, and of the prospectivity of the deeper pre-Tertiary Triassic basement.
At the end of June, bids are due in the Croatian onshore licensing round where Ascent is currently reviewing the available blocks and talking to potential partners.
4. Funding
During the period post year end, we have also raised GBP1.1 million in equity from new and existing investors which will be used to support the Company as we develop Petišovci and progress new projects in the region.
2018 review of the year
The year under review was dominated by two key processes; the Strategic Review and Formal Sale Process, and the ongoing permit applications to further develop our Petišovci project in Slovenia.
1. Strategic Review and Formal Sale Process
The Strategic Review was initiated on 17 April 2018 with the intention of finding a strategic partner to support the Company as it seeks to realise the full potential of its Slovenian assets. The Review received significant interest with over 20 companies signing confidentiality agreements and participating in due diligence. The majority of those who engaged in discussions appreciated the value of the project but were put off by the unpredictability of the Slovenian permitting system.
On 6 December 2018 the Board halted the Strategic Review and Formal Sale Process after an intervention by the (then) Slovenian Environment Minister caused a further delay in the long overdue permitting decision.
2. Permitting
The Company was pursuing two permits necessary for the development of the project during the period under review:
-- the IPPC Permit enables the partners to construct a processing plant to treat Slovenian gas to a standard suitable for the Slovenian national grid. This would allow the partners to receive a higher price for treated gas and allow Slovenians to benefit from the country's natural resources.
-- the Well Permit is required to re-stimulate the existing operating wells to restore production to its full potential.
Since the end of the period, the IPPC Permit has been awarded and we have lodged an appeal against a decision by ARSO to further delay the Well Permit. Based on the strength of our legal arguments and the opinion of technical experts on the lack of significant environmental risk, we have good grounds to hope that an objective review of the facts by the new Environment Minister should result in a favourable decision.
a. Environmental impact
The stimulation process which the partners wish to carry out on Pg-10 and Pg-11A has been commonplace in Slovenia since 1956. It has been carried out on over 50 wells in the region since then, with the most recent operations being in 2011 on Pg-10 and Pg-11A. During this time there have been no adverse environmental impacts noted in the various studies which have taken place. It is therefore nothing new and attempts by opponents of the project to conflate the activities in Petišovci with North American shale projects are completely unfounded. ARSO's own decision was that the project does not equate to the EU definition of fracking but is more appropriately defined as low volume hydraulic stimulation which is significantly less impactful to the environment.
During the extensive preliminary screening process the partners have provided numerous additional reports and amendments to the initial application, and the level of detail already provided is now close to what would have been required for a full Environmental Impact Assessment ("EIA"). As part of its review ARSO has consulted six expert Slovenian government agencies, all of whom concluded that there was no requirement for an EIA as the project to re-stimulate the wells was not likely to have a significant impact on the environment.
b. Background to the permitting application
The preliminary screening application to re-stimulate our two existing wells, Pg-10 and Pg-11A, was first applied for in May 2017. Slovenian and EU law state that a permitting decision should be made within 90 days.
On 11 March 2019 the partners were advised that ARSO had decided that a full EIA would be required for the well permit.
The Company and its partners have filed an appeal against this manifestly unjust decision, which should be decided by the new Environment Minister.
c. Benefits to Slovenia
We continue to work to inform stakeholders in Slovenia and the general public on the expert opinions which conclude there is no significant environmental risk from the proposed development and at the same time state the clear benefits to the country from an environmental, economic and strategic perspective.
The development of Petišovci would support the Slovenian Environment Minister in lowering carbon emissions, as gas is a recognised transition fuel to a lower carbon economy. Electricity generation from natural gas creates less than half of the emissions from other fossil fuels, especially coal. Slovenia currently generates around 20% of its electricity through burning coal and imports all of its gas requirement.
The Prekmurje region has a long history of oil and gas development which dates back to the 1940s. The first well stimulations were carried out on the field during the 1950s and, at its peak, the industry supported the employment of hundreds of people. The project continues to provide employment directly at Ascent and our partners and indirectly with the numerous companies who carry out work for the project. The benefits to the local and national economy from jobs and tax revenues will increase significantly if the project is permitted to develop by the politicians and special interest groups in Ljubljana.
Slovenia currently imports virtually all of its natural gas requirement from foreign countries. The Petišovci asset could provide a significant percentage of the country's annual natural gas consumption for the foreseeable future once the necessary permits are confirmed.
Analysis of business performance
1. Financial performance
-- Revenue for 2018 was GBP1.9m more than double the revenues for 2017, the highest recorded revenue for the Company since 2011.
-- Test production to local commercial consumers commenced in April 2017 and export production began in November 2017.
-- At the same time administrative expenses reduced by GBP31,000 from GBP1,791,000 to GBP1,760,000. Administrative costs principally comprise staff costs, overheads and listing related expenses, with the reduction due to cost control.
-- EBITDA was a loss of GBP589,000 reduced from the prior year EBITDA loss of GBP1,380,000 reflecting increased revenue and margin contribution from increased production and pricing.
-- The loss for the year totalled GBP1,365,000 versus GBP1,966,000 in 2017, reflecting the factors above and reduced finance costs following the conversion of loan notes in the prior year.
-- Operating cash flow was positive in 2018 for the first time since 2010 at GBP360,000 (2017: outflow of GBP2,079,000) principally reflecting improved operating results and reduction in receivables.
-- Cash at the end of the period was GBP556k, including GBP180k (EUR200k) of restricted cash which is held on deposit against a bank guarantee.
-- Borrowings at the end of the year were GBP44,000 (2017: 36,000), which relates to convertible loan notes of GBP49,000 due for redemption in November 2019 and accreted up to their redemption value.
Hot Features
Premium
Financial KPI's 2018 2017 Variance
------------------------- --------- --------- ---------
GBP 000s GBP 000s GBP 000s
Revenue 1,942 814 1,128
Administrative expenses (1,760) (1,791) 31
EBITDA (589) (1,380) 791
Operating cash flow 360 (2,079) 2,439
Cash balance (excluding
restricted cash) 376 721 (345)
2. Operational performance
-- The Company produced 11.9 million cubic metres (0.4 Bcf) of gas and 2,930 barrels of condensate during the year and earned over EUR2.1m (GBP1.9m) in revenue. Euro revenue is presented to reflect the underlying revenue in Slovenia before exchange rate effects.
-- Production has declined over the period and the Company intends to install compression equipment during this year to prolong the life of the wells and maximise recovery.
-- Once the permits are in place the Company will be able to re-stimulate both wells and rectify the production issues at Pg-11A to restore both to their full potential.
Production KPI's Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018 Jun-2018 ------------------------ --------- --------- --------- --------- --------- --------- Total production (000s Cubic Metres) 2,250 1,788 1,243 1,191 1,067 1,028 Total production (Mcf) 79,464 63,129 43,894 42,062 37,673 36,301 Average daily - 000s cubic metres 72.6 63.8 40.1 39.7 34.4 34.3 Average daily - MMscfd 2.6 2.3 1.4 1.4 1.2 1.2 Condensate production (litres) 104,517 65,470 56,130 58,428 29,646 36,666 Litres per 1000 cubic metres of gas 46 37 45 49 28 36 BOE - Gas 13,701 10,884 7,568 7,252 6,495 6,259 BOE - Condensate 605 412 372 368 186 231 Revenue (EUR000's) 304.5 271.9 241.5 208.5 202.3 202.7 Average EUR per Mcf 3.8 4.3 5.5 5.0 5.4 5.6 Production KPI's Jul-2018 Aug-2018 Sep-2018 Oct-2018 Nov-2018 Dec-2018 ------------------------ --------- --------- --------- --------- --------- --------- Total production (000s Cubic Metres) 816 727 232 680 463 421 Total production (Mcf) 28,834 25,679 8,201 24,002 16,356 14,852 Average daily - 000s cubic metres 26.3 23.5 7.7 21.9 15.4 13.6 Average daily - MMscfd 0.9 0.8 0.3 0.8 0.5 0.5 Condensate production (litres) 31,212 23,652 12,258 19,080 15,714 18,418 Litres per 1000 cubic metres of gas 38 33 53 28 34 44 BOE - Gas 4,971 4,427 1,414 4,138 2,820 2,561 BOE - Condensate 196 149 77 120 99 116 Revenue (EUR'000s) 165.4 155.6 69.6 162.1 96.5 79.5 Average EUR per Mcf 5.7 6.1 8.5 6.8 5.9 5.4
Principal risks and uncertainties
Permitting The single biggest issue when carrying out operations
risk in Slovenia over the past five years has been the
environmental permitting process. This is not unique
to Ascent and it is our opinion that inefficiencies
and uncertainties within the environmental permitting
process are a significant hurdle to economic growth
in Slovenia.
Permitting risk exists for any element of the field
development plan which requires an environmental
permit; mainly well stimulation and the installation
of processing equipment. This risk is mitigated by
our detailed understanding of the process and our
actions to ensure Slovenian and EU regulations are
followed properly by Slovenian officials.
The award of the IPPC Permit post-year end gives
the Board an increased degree of confidence that
the permits necessary for field development can be
obtained.
Concession The date when the concession is due to be renewed
extension is now only three years away which means that before
risk any further significant investment in facilities
is made the Company and its partners will need to
have obtained an early extension of the concession.
The Company and its partners have, for over a year
now, been completing the documentation required to
seek an early extension of the concession which is
due to expire in 2022. While we are confident that
an extension will be granted as a matter of course,
there is no guarantee that this will be the case.
This risk is mitigated by the goals of the partners
being well aligned; the fact that we have brought
the field into production safely and successfully
and we have started the preparatory work well in
advance of the concession end date. As a result,
we believe that the extension should be awarded in
due course.
-----------------------------------------------------------
Sub-surface The nature of the Petišovci Project is such
risk that a range of health and safety, drilling, production
and commercial risks are identified for the development
of the resource.
The Petišovci Pg reservoirs are over-pressured
and hot, relative to normal hydrostatic and thermal
gradients. The reservoir gas contains some carbon
dioxide and low levels of hydrogen sulphide and mercaptan
sulphur.
There is a risk that the Company is unable to effectively
exploit the proven reserves and resources from the
Petišovci field which may result in a lower
than anticipated return on investment. This risk
is mitigated by the experience of the expert technical
consultants and sub-contractors retained by the Company
and the knowledge acquired by the Company from production
to date.
-----------------------------------------------------------
Risks associated As a UK registered Company with operations in the
with the UK EU, there is a risk of a negative impact from the
withdrawal UK's departure from the European Union. This risk
from the European is mitigated as we operate through locally owned
Union subsidiaries selling gas produced in Slovenia to
Croatia, another EU member state.
-----------------------------------------------------------
Outlook
While 2018 was a challenging year for the Board and its shareholders we look forward to 2019 with renewed optimism. The addition of John and Louis to the Board provides a fresh perspective on the potential of our Slovenian asset and access to new opportunities to grow the Company in the region.
Colin Hutchinson
Chief Executive Officer
Strategic Report
Section 414C of the Companies Act 2006 ('the Act') requires that the Company inform its members as to how the Directors have performed their duty to promote the success of the Company by way of a Strategic Report which includes a fair review of the business, an analysis of the development and performance of the business and analysis of financial position and key performance indicators.
We have incorporated these requirements into the information set out below, included in the Chief Executive's Review and the Operations Report.
Company Overview
Ascent Resources plc ('Ascent' or 'the Company') is an independent oil and gas exploration and production ('E&P') company that was admitted to trading on AIM in November 2004 (AIM: AST). Ascent has been involved in Slovenia for just over 10 years where it operates the Petišovci Tight Gas Project. To date it has invested around EUR50 million in this project, which is currently its principal asset. This asset has significant oil and gas reserves and resources and an established, local production infrastructure with connections to local and export customers.
During 2017 the Company brought two wells into production and started export production from the Petišovci field in Slovenia to INA in Croatia. The Company is now focussed on developing the field further to increase production and enhance its long-term prospects.
Asset Overview
The Petišovci Tight Gas Project is in an area that has been exploited since 1943. The project targets the significant gas reserves and resources in the Middle Miocene Badenian or Petišovci-Globoki ('Pg') gas reservoirs.
Using the results of an extensive 3D seismic survey conducted in 2009 by Ascent and its partners, the locations of two new wells were determined. These wells, Pg-11A and Pg-10 were successfully drilled, completed and stimulated between 2010 and 2012. During 2017 the Company brought both of these wells into production and started exporting gas from Petišovci to INA in Croatia.
Cumulative gas production from the Pg gas field since 1988, including fuel and flare use and accounting for the gas equivalent of the historical condensate production, is 9.8 Bcfe (277.6 MMsm(3) ). This is 2% of the currently estimated gas initially in place ('GIIP') of 456 Bcfe, (12.9 Bsm(3) ), based on independent third-party estimates.
Further details of the asset and current reserves and resources can be found on pages 9 and 11 below.
Ascent operates the Petišovci project on behalf of the Joint Venture between Ascent Slovenia Limited and Geoenergo. Ascent has a 75% working interest in the project and carries 100% of the costs. Until Ascent has recovered its costs in full it will receive 90% of the net revenues.
Our strategy
The Board firmly believes that the gas field at Petišovci is an outstanding prospect and therefore to date has focussed all of its resources on this project, directing available funding towards bringing Petišovci into production.
Ascent aims to maximise the production and sale of hydrocarbons from the Petišovci Project for the benefit of all stakeholders. We will achieve this by carefully managing producing wells, successfully reworking existing wells and drilling further wells. In support of this we are currently working to have the existing concession renewed in a timely fashion.
The commencement of production during 2017 was a significant milestone. The development of the project stalled during 2018 due to the Slovenian environmental permitting process. The award of the IPPC Permit in April 2019 gives renewed optimism that the remaining permit can be obtained in due course.
We will continue to pursue the remaining permit while at the same time progressing legal options should this permit continue to be unjustly delayed. Once this permit has also been confirmed we will proceed with the second stage of our development plan at Petišovci.
At the same time, we continue to review additional onshore oil and gas opportunities in Central and Eastern Europe with a focus on markets with:
- Attractive geology in proven petroleum systems - Where there is an opportunity to use modern exploration techniques for risk reduction - Markets with strong gas prices and access to high demand markets - Well established oil and gas infrastructure and regulatory regimes - Management that have relevant experience - Potential to engage partners with local expertise
Our markets
Dependency on imported gas is very high throughout the EU, particularly in Slovenia. This, and the history of relatively stable gas prices in Europe underpins our strategy of exploration, development and production in this region.
Our wells are connected to existing processing facilities, intra-field and international pipelines, ensuring low cost connection and easy access to the market.
The board recognises the attractiveness of the region for oil and gas development and many countries outside of Slovenia have strong gas prices, well organised regulatory frameworks and a history of oil and gas development.
How we operate
The Company utilises a full range of advanced geophysical, geological and other state-of-the-art technology to evaluate and de-risk projects and to reap maximum benefit from its appraisal, development and production activities. Our Petišovci project is operated through a local entity in a joint venture. Wherever possible we utilise local companies to provide services to the project effectively and efficiently.
Our people
Ascent has a small management team, implementing a defined development programme. This is supplemented, as the need requires, with regional technical and operational expertise to ensure the highest standards are delivered on our projects. As an important local employer in our area of operation we take our environmental and social responsibilities seriously and always strive to be a good corporate citizen.
Approved for issue by the Board of Directors
and signed on its behalf
Cameron Davies
Chairman
10 May 2019
Operations Review
Slovenia
Ascent Slovenia Ltd 75% (operator), Geoenergo d.o.o. 25% (concession holder)
The Petišovci Tight Gas Project, in a 98 km(2) area in north eastern Slovenia, targets the development of tight gas reservoirs known to be in Miocene clastic sediments.
Ascent first acquired an interest in the Petišovci project in 2007, and in 2009 an extensive 3D seismic survey was conducted across the Petišovci concession area.
The structure has two sets of reservoirs, the shallower Upper Miocene and the deeper Middle Miocene. The Middle Miocene Badenian reservoirs, or Pg sands, are the focus of Ascent's development objectives; however, the shallow reservoirs, which were extensively developed during the 1960s, are not considered to be fully depleted.
The north-east region of Slovenia has been an oil and gas producing area since the early 1940s and contains much of the infrastructure necessary for processing and exporting produced hydrocarbons.
Two new appraisal wells, Pg-10 and Pg-11, drilled in 2010/2011 to a total vertical depth of 3,497 m and 3,500 m respectively, confirmed gas in all six Middle Miocene Badenian reservoirs ('A' to 'F' Pg sands). Gas flowed for the first time from the shallowest 'A' sands and, in addition, gas and condensate were sampled from the Lower Badenian 'L' to 'Q' sands. Pg-10 proved productive from the 'F' sands and Pg--11A (Pg-11 was side-tracked for technical reasons to Pg-11A) from the deeper 'L' to 'Q' sands. Both wells were successfully stimulated resulting in flow rates of 8 MMscfd from the 'F' sands and 2 MMscfd from the 'L, M and N' sands, proving the commercial potential of both wells.
During 2017 both Pg-10 and Pg-11A were brought into production. In April 2017 test production commenced from Pg-10 with the resulting gas sold to a local industrial customer. In November 2017 export production began. This followed the upgrade and installation of infrastructure and the recommissioning of the export pipeline which links the Petišovci field in Slovenia with the Medjimurje field in Croatia which is operated by INA. Total production since November 2017 is 15.5 million cubic metres of gas.
Back-in Rights
Netherlands
As part of the Sale and Purchase Agreement signed in 2013 with Tulip Oil Netherlands B.V. for the Company's former Dutch licences, Ascent has the right to re-purchase a 10% interest in each of the Dutch licences (M10a, M11 or Terschelling Noord) once Tulip has made a final investment decision with respect to commercial development.
Summary of Group Net Oil and Gas Reserves
Net Reserves and Resources
Net Attributable Net Attributable Net Attributable
----------
Reserves Contingent Resources Prospective Resources
----------
(Bcfe) (Bcfe) (Bcfe)
--------------------- ------------------------- --------------------------
P90 P50 P10 Low Best High Low Best High
---------- ------ ------ ----- ------- ------- ------- ------- -------- -------
Slovenia 40 87 173 42 76 140 - - -
------ ------ ----- ------- ------- ------- ------- -------- -------
These figures are based on RPS gas-in-place estimates with a management assumption of a 50% recovery factor and Ascent's 75% participation.
Tested and/or produced commercial sands are included as reserves while untested and unproduced sands remain as resources. The condensate content of gas is not included.
Remaining reserves have been adjusted to take account of historic field production and estimates of process flare and fuel, which to the end of 2018 were 9.8 Bcfe. Ascent's share of this production and gas use is 7.4 Bcf.
Proven Reserves (P90) are those quantities of petroleum which can be estimated with reasonable certainty to be commercially recoverable, from known reservoirs and under current economic conditions, operating methods and government regulations.
Proven + Probable Reserves (P50) includes those unproven reserves which are more likely than not to be recoverable.
For the P90 (P50 and P10) Reserves there is at least a 90% (50%; 10%) probability that the quantities actually recovered will equal or exceed the estimate.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent resources may include, for example, projects for which there are currently no viable markets or where commercial recovery is dependent on technology under development or where evaluation of the accumulation is insufficient to clearly assess commerciality.
Prospective Resources are those quantities of petroleum which are estimated to be potentially recoverable from undiscovered accumulations.
The range of estimates shown for each category of reserves or resources is a measure of the uncertainty inherent in the estimation of producible volumes and includes the current perceptions of geological, operational and commercial risk.
Summary of Ascent Resources plc's Licence Interests as at 31 December 2018
Permit
Working Area
Interest Gross Net
(%) (km(2) (km(2)
Permit Subsidiary ) ) Status
Operations
Slovenia
Petišovci Ascent Slovenia
Concession Limited 75 98 73 Oil & gas exploitation
Back-in rights
The Netherlands
M10a/M11 Ascent Resources Gas exploration
Terschelling-Noord Netherlands BV 110 59 and appraisal
Glossary
M Thousand* cf Cubic feet
MM Million* scf Standard cubic feet
B Billion* scfd Standard cubic feet
per day
km(2) Square kilometres Bcfe Billion cubic feet
equivalent
m(3) Cubic metres
* These are 'oilfield' units, as commonly used in the oil and gas industry. Other units conform to the Système International d'unités (SI) convention
Directors' Report
The Directors present their Directors' Report and Financial Statements for the year ended 31 December 2018 ('the year').
Principal activities
The principal activities of the Group comprise gas and oil exploration and production. The Company is registered in England and Wales and is quoted on the AIM Market of the London Stock Exchange.
The Group's corporate management is in London and its oil and gas interests are in Slovenia. The Group operates its own undertakings both through subsidiary companies and joint ventures. The subsidiary undertakings affecting the Group's results and net assets are listed in Note 11 to the Financial Statements.
Future developments
The Company has identified the European gas market as a relatively stable and secure arena in which to compete. The European market continues to be a net importer of gas whilst diversity of supply is central to the energy security strategy of most nations. The Petišovci field in Slovenia has the potential to supply a significant proportion of the country's gas requirement for many years.
Financial risk management
Details of the Group's financial instruments and its policies with regard to financial risk management are given in Note 25 of the Financial Statements.
Results and dividends
The loss for the year after taxation was GBP1.4 million (2017: GBP2.0 million). The Directors do not recommend the payment of a dividend (2017: Nil).
Post balance sheet events
On 14 January 2019, Clive Carver resigned from the Board and was replaced as Chairman by Cameron Davies.
On 20 January 2019 the Company raised GBP349,056 in an offer via the PrimaryBid platform at the price of 0.3 pence per ordinary share. A total of 121,052,097 shares were issued including 4,700,000 ordinary shares issued to suppliers at the same price. Colin Hutchinson, Chief Executive of the Company subscribed for 1,000,000 shares in the placing.
On 18 February 2019, Nigel Moore retired from the Board while John Buggenhagen and Louis Castro were both appointed to the Board.
On 15 April 2019 the Company announced that it had received confirmation that the IPPC Permit was fully valid.
On 24 April 2019 the Company announced it had raised GBP750,000 in an oversubscribed placing of 214,285,714 Ordinary Shares of 0.2 pence each at a price of 0.35 pence per share.
On 29 April 2019 the Company extended the gas sales agreement under which untreated raw gas is sold to INA in Croatia until November 2019.
Directors
The Directors of the Company that served during the year, and subsequently, were as follows:
Colin Hutchinson Clive Nathan Carver (resigned 15 January 2019) Nigel Sandford Johnson Moore (resigned 18 February 2019) William Cameron Davies John Edmund Buggenhagen (appointed 18 February 2019) Louis Emmanuel Castro (appointed 18 February 2019)
Relevant details of the Directors, which include committee memberships, are set out on page 17.
Directors' interests
The beneficial and non-beneficial interests in the issued share capital and Convertible Loan Notes ("CLN") of the Company were as follows:
Ordinary shares of 0.2p each.
At 31 December 2018 At 31 December 2017
Clive Carver 3,304,231 3,304,231
Nigel Moore 1,339,275 1,339,275
Cameron Davies 1,340,800 1,340,800
Colin Hutchinson 1,570,370 1,570,270
Directors' emoluments
Details of Directors' share options and remuneration are set out in Note 4 to the Financial Statements, under the heading 'Directors' remuneration'.
Third party indemnity provision
The Company has provided liability insurance for its Directors. The annual cost of the cover is not material to the Group. The Company's Articles of Association allow it to provide an indemnity for the benefit of its Directors which is a qualifying indemnity provision for the purposes of the Companies Act 2006.
Share capital
Details of changes to share capital in the period are set out in Note 18 to the Financial Statements.
As at 6 May 2019 the Company has been notified of the following significant interests in its ordinary shares, being a holding of 3% and above:
Number of ordinary
shares %
Hargreaves Lansdown (Nominees) Limited
<15942> 265,072,814 10.09
Hargreaves Lansdown (Nominees) Limited
<HLNOM> 256,493,594 9.77
Interactive Investor Services Nominees
Limited <SMKTNOMS> 212,681,458 8.10
Barclays Direct Investing Nominees
Limited <Client1> 185,898,373 7.08
Hargreaves Lansdown (Nominees) Limited
<VRA> 184,881,033 7.04
HSDL Nominees Limited 176,551,762 6.72
Share Nominees Ltd 142,522,519 5.43
Interactive Investor Services Nominees
Limited <SMKTISAS> 111,350,896 4.24
HSDL Nominees Limited <Maxi> 101,929,940 3.88
Lombard Odier 94,285,714 3.59
Jamieson Principal Pension Fund 92,900,000 3.54
Shareholder communications
The Company has a website, www.ascentresources.co.uk, for the purposes of improving information flow to shareholders, as well as potential investors.
Employees
The Company's Board composition provides the platform for sound corporate governance and robust leadership in implementing the Company's strategies to meet its stated goals and objectives.
The Group's employees and consultants play an integral part in executing its strategy and the overall success and sustainability of the organisation. The Group has a highly skilled and dedicated team of employees and consultants and places great emphasis on attracting and retaining quality staff. As an international oil and gas company, we facilitate the development of leadership from the communities in which we operate. There is a large pool of qualified upstream oil and gas exploration and production professionals in the areas in which we operate, and we are committed to building and developing our teams from these talent pools.
The Group holds its employees and consultants at all levels to high standards and expects the conduct of its employees to reflect mutual respect, tolerance of cultural differences, adherence to the corporate code of conduct and an ambition to excel in their various disciplines.
Disclosure of information to auditors
In the case of each person who was a Director at the time this report was approved:
-- so far as that Director was aware there was no relevant audit information of which the Company's auditors were unaware; and
-- that Director had taken all steps that the Director ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditors were aware of that information.
This information is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
Going Concern
The Financial Statements of the Group are prepared on a going concern basis as detailed in Note 1 to the financial statements.
The Company has raised GBP1.1 million in new equity since the balance sheet date from new and existing investors. Under the Group's forecasts, the funds raised together with existing bank balances provide sufficient funding for at least the next twelve months based on anticipated outgoings and the receipt of revenues from production.
However, the forecast cash balances do become limited towards the end of 2019, until the anticipated production growth from the planned capital expenditure takes effect. The forecasts are sensitive to the timing and cash flows associated with the capital works and the associated production improvement. In the event that the anticipated cash outflows be greater than expected or cash inflows are lower than expected, further funding would be required. As a result, there can be no guarantee that additional funding will not be required.
Based on recent support from new and existing investors the Board believes that such funding, if required, would be obtained through debt or equity.
As a consequence, there is material uncertainty which may cast significant doubt over the Group and Parent Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the reappointment of BDO LLP as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.
Approved for issue by the Board of Directors
and signed on its behalf
Dr Cameron Davies
Chairman
10 May 2019
Board of Directors
Cameron Davies
Non-executive Chairman
Chairman of the Remuneration Committee and member of the Audit Committee
Cameron Davies is an international energy sector specialist and the former Chief Executive of Alkane Energy plc. He has a PhD in Applied Geochemistry from Imperial College, is a Fellow of the Geological Society of London and a member of the European Petroleum Negotiators Group and the PESGB. He has an excellent track record of exploration success and also growing profits in a quoted energy company. His career successes include the discovery of the third largest oilfield in Tunisia. In 1994 he founded Alkane Energy plc and managed the business from original concept, through venture capital funding and an IPO to become a profitable operator of c. 160 MW of gas to power generation plants. In Q4 2016 Alkane was acquired for c.GBP61 million by Balfour Beatty Infrastructure Partners when Cameron resigned as a director. He is also Non-executive Chairman of Powerhouse Energy PLC.
Colin Hutchinson
Chief Executive Officer & Finance Director
Colin Hutchinson is a fellow of the Institute of Chartered Accountants in Ireland; he holds a law degree from the University of Dundee and an MBA from Warwick Business School. Colin previously served as the Company's Finance Director until June 2016 when he became Chief Executive Officer and Finance Director. After completing his accountancy training with Deloitte, he gained significant international experience while working in commercially orientated finance roles with a mix of technology and energy companies. Prior to joining Ascent, he was Group Financial Controller & Company Secretary at Lochard Energy plc and Co-Founder & Finance Director at Samba Communications Ltd.
John Buggenhagen
Chief Operating Officer
John Buggenhagen is an experienced and dynamic geophysicist with 20 years' working knowledge of the oil and gas industry. He holds a bachelor's degree in geophysics from the University of Arizona, a master's degree in geophysics from the University of Wyoming, and a Ph.D. in geophysics also from the University of Wyoming. His previous roles include CEO of Palomar Natural Resources, a Polish focussed E&P Company, Director of Exploration for San Leon Energy in London and Exploration Manager Europe for Aspect Energy/Hungarian Horizon.
Louis Castro
Non-executive Chairman
Chairman of the Audit Committee and member of the Remuneration Committee
Louis Castro has over 30 years' experience in investment banking and broking both in the UK and overseas. Most recently he was the Chief Financial Officer at Eland Oil & Gas, a publicly quoted company where he was one of two executive board directors. Previously he was Chief Executive of Northland Capital Partners in London and before this was Head of Corporate Finance at Matrix Corporate Capital and at Insinger de Beaufort. He started his career by qualifying as a Chartered Accountant with Coopers & Lybrand (now PWC).
Directors and Advisers
Directors Cameron Davies
Colin Hutchinson
John Buggenhagen
Louis Castro
Secretary Colin Hutchinson
Registered Office 5 New Street Square
London EC4A 3TW
Nominated Adviser Joint Broker WH Ireland Corporate Brokers
24 Martin Lane
London EC4R 0DR
Joint Broker SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
Auditors BDO LLP
55 Baker Street
London W1U 7EU
Solicitors Taylor Wessing LLP
5 New Street Square
London EC4A 3TW
Bankers Barclays Corporate Banking
1 Churchill Place
London E14 5HP
Share Registry Computershare Investors Services
PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
PR & IR Yellow Jersey PR Limited
33 Stockwell Green
London SW99HZ
Company's registered number 05239285
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the AIM Market.
In preparing these financial statements the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial statements are published on the Company's website (www.ascentresources.co.uk) in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Consolidated Income Statement &
Statement of Other Comprehensive Income
For the year ended 31 December 2018
Year ended Year ended
Notes 31 December 31 December
2018 2017
GBP '000s GBP '000s
Revenue 2 1,942 814
Other Cost of sales 2 (771) (403)
Depreciation of oil & gas assets
* 9 (793) (239)
-------------------------------------- ------ ------------------------ ------------------------
Gross profit 378 172
Administrative expenses 3 (1,760) (1,791)
------------------------ ------------------------
Operating profit / (loss) (1,382) (1,619)
Finance income 5 26 -
Finance cost 5 (9) (347)
------------------------ ------------------------
Net finance costs 17 (347)
Loss before taxation (1,365) (1,966)
Income tax expense 6 - -
------------------------ ------------------------
Loss for the period after tax (1,365) (1,966)
Loss for the year attributable to
equity shareholders (1,365) (1,966)
Loss per share
Basic & fully diluted loss per share
(Pence) 8 (0.06) (0.10)
Year ended Year ended
31 December 31 December
2018 2017
GBP '000s GBP '000s
Loss for the year (1,365) (1,966)
Other comprehensive income
Foreign currency translation
differences for foreign operations 310 898
Total comprehensive gain /
(loss) for the year (1,055) (1,068)
* Depreciation was disclosed within Administrative expenses during the prior year
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Share Share Merger Equity Share Translation Retained Total
capital premium Reserve reserve based reserve earnings
payment
reserve
GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s
Balance at 1
January 2017 3,732 63,273 - 3,147 1,680 192 (38,157) 33,867
Comprehensive -
income
Loss for the
year - - - - - - (1,966) (1,966)
Other
comprehensive
income
Currency
translation
differences - - - - - 898 - 898
Total
comprehensive
income - - - - - 898 (1,966) (1,068)
Transactions
with owners
Conversion of
loan notes 1,803 4,564 - (3,131) - - 3,131 6,367
Issue of
shares during
the
year net of
costs 516 3,810 - - - - - 4,326
Shares issued
under the
Trameta
acquisition 50 - 300 - (350) - - -
Share-based
payments and
expiry of
options - - - - 239 - - 239
Balance at 31
December 2017 6,101 71,647 300 16 1,569 1,090 (36,992) 43,731
--------------- ------------ ------------- ---------- ---------- ---------- ------------ ---------- ----------
Balance at 1
January 2018 6,101 71,647 300 16 1,569 1,090 (36,992) 43,731
Comprehensive
income
Loss for the
year - - - - - - (1,365) (1,365)
Other
comprehensive
income
Currency
translation
differences - - - - - 310 - 310
Total
comprehensive
income - - - - - 310 (1,365) (1,055)
Transactions
with owners
Conversion of
loan notes - 1 - - - - - 1
Shares issued
under the
Trameta
acquisition 45 - 270 - (315) - - -
Share-based
payments - - - - 403 - - 403
Balance at 31
December 2018 6,146 71,648 570 16 1,657 1,400 (38,357) 43,080
--------------- ------------ ------------- ---------- ---------- ---------- ------------ ---------- ----------
Company Statement of Changes in Equity
For the year ended 31 December 2018
Share capital Share premium Merger Equity Share Retained Total
Reserve reserve based earnings
payment
reserve
GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s GBP '000s
Balance at 1 January 2017 3,732 63,273 - 3,147 1,680 (35,322) 36,510
Comprehensive income
Profit for the year - - - - - 1,349 1,349
Total comprehensive
income - - - - - 1,349 1,349
Transactions with owners
Conversion of loan notes 1,803 4,564 - (3,131) - 3,131 6,367
Issue of shares during
the
year net of costs 516 3,810 - - - - 4,326
Shares issued under the
Trameta
acquisition 50 - 300 - (350) - -
Share-based payments and
expiry of options - - - - 239 - 239
Balance at 31 December
2017 6,101 71,647 300 16 1,569 (30,842) 48,791
-------------------------- -------------- -------------- ---------- ---------- ---------- ---------- ----------
IFRS 9 adjustment on
intercompany
debt - - - - - (1,697) (1,697)
Balance at 1 January 2018 6,101 71,647 300 16 1,569 (32,539) 47,094
Comprehensive income
Profit and total
comprehensive
income for the year - - - - - 794 794
Total comprehensive
income - - - - - 794 794
Transactions with owners
Conversion of loan notes - 1 - - - - 1
Shares issued under the
Trameta
acquisition 45 - 270 - (315) - -
Share-based payments - - - - 403 - 403
Balance at 31 December
2018 6,146 71,648 570 16 1,657 (31,745) 48,292
-------------------------- -------------- -------------- ---------- ---------- ---------- ---------- ----------
Consolidated Statement of Financial Position
As at 31 December 2018
Notes 31 December 31 December
2018 2017
Assets GBP '000s GBP '000s
Non-current assets
Property, plant and equipment 9 23,779 23,902
Exploration and evaluation costs 10 18,968 18,587
Prepaid abandonment fund 12 240 279
------------ ------------
Total non-current assets 42,987 42,768
Current assets
Inventory 3 2
Trade and other receivables 12 233 763
Cash and cash equivalents 24 376 721
Restricted cash 24 180 355
------------ ------------
Total current assets 792 1,841
Total assets 43,779 44,609
============ ============
Equity and liabilities
Attributable to the equity holders
of the Parent Company
Share capital 18 6,146 6,101
Share premium account 71,648 71,647
Merger reserve 570 300
Equity reserve 16 16
Share-based payment reserve 1,657 1,569
Translation reserves 1,400 1,090
Retained earnings (38,357) (36,992)
------------ ------------
Total equity 43,080 43,731
------------ ------------
Non-current liabilities
Borrowings 14 44 36
Provisions 15 263 266
Total non-current liabilities 307 302
Current liabilities
Trade and other payables 16 392 576
Total current liabilities 392 576
Total liabilities 699 878
------------ ------------
Total equity and liabilities 43,779 44,609
============ ============
These financial statements were approved and authorised for issue by the Board of Directors on 10 May 2019 and signed on its behalf by:
Dr Cameron Davies
Chairman
10 May 2019
Company Statement of Financial Position
As at 31 December 2018
31 December 31 December
2018 2017
Assets GBP '000s GBP '000s
Non-current assets
Property, plant and equipment 1 1
Investment in subsidiaries and joint
ventures 11 15,443 15,443
Intercompany receivables 21 32,713 32,447
------------ ------------
Total non-current assets 48,157 47,891
Current assets
Trade and other receivables 13 11 55
Cash and cash equivalents 24 112 700
Restricted cash 24 180 355
------------ ------------
Total current assets 302 1,110
Total assets 48,460 49,001
============ ============
Equity and liabilities
Share capital 18 6,146 6,101
Share premium account 71,648 71,647
Merger reserve 570 300
Equity reserve 16 16
Share-based payment reserve 1,657 1,569
Retained loss (31,745) (30,842)
------------ ------------
Total equity 48,292 48,791
------------ ------------
Non-current liabilities
Borrowings 14 44 36
Total non-current liabilities 44 36
Current liabilities
Trade and other payables 17 124 174
Total current liabilities 124 174
Total liabilities 168 210
------------ ------------
Total equity and liabilities 48,460 49,001
============ ============
The Company profit for the year was GBP0.8 million (2017: profit of GBP1.3 million).
These financial statements were approved and authorised for issue by the Board of Directors on 10 May 2019 and signed on its behalf by:
Dr Cameron Davies
Chairman
10 May 2019
Consolidated Cash Flow Statement
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
GBP '000s GBP '000s
Cash flows from operations
Loss after tax for the year (1,365) (1,966)
Depreciation 793 239
Change in inventory 1 (2)
Change in receivables 530 (731)
Change in payables (184) 121
Increase in share-based payments 403 239
Exchange differences 24 29
Finance income (26) -
Finance cost 9 347
Transfer from / (to) restricted cash 175 (355)
Net cash generation from (used in)
operating activities 360 (2,079)
------------ ------------
Cash flows from investing activities
Interest received 24 -
Payments for fixed assets (411) (45)
Payments for investing in exploration (319) (4,343)
Prepayment to the abandonment fund - (279)
Net cash used in investing activities (706) (4,667)
------------ ------------
Cash flows from financing activities
Interest paid and other finance fees (1) (12)
Proceeds from issue of shares - 4,500
Share issue costs - (174)
Net cash generated from financing activities (1) 4,314
------------ ------------
Net increase in cash and cash equivalents
for the year (347) (2,432)
Effect of foreign exchange differences 2 -
Cash and cash equivalents at beginning
of the year 721 3,153
Cash and cash equivalents at end of
the year 376 721
============ ============
* Restricted cash related to monies held on deposit by Ascent as collateral against a bank guarantee in favour of INA to cover any potential future penalties under the gas sales agreement.
Company Cash Flow Statement
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
GBP '000s GBP '000s*
Cash flows from operations
Profit after tax for the year 794 1,349
Adjustments for:
Change in receivables 44 (45)
Change in payables (50) 9
Change in intercompany receivables (1,513) (2,097)
Increase in share-based payments 403 239
Exchange differences (450) (1,294)
Finance cost 8 337
Transfer to / from restricted cash 175 (355)
Net cash generation from (used in)
operating activities (589) (1,857)
------------ ------------
Cash flows from investing activities
Advances to subsidiaries - (4,911)
Net cash used in investing activities - (4,911)
------------ ------------
Cash flows from financing activities
Interest paid and other finance fees (1) (2)
Proceeds from issue of shares - 4,500
Share issue costs - (174)
Net cash generated from financing activities (1) 4,324
------------ ------------
Net increase in cash and cash equivalents
for the year (590) (2,444)
Effect of foreign exchange differences 2 1
Cash and cash equivalents at beginning
of the year 700 3,143
Cash and cash equivalents at end of
the year 112 700
============ ============
* Restricted cash related to monies held on deposit by Ascent as collateral against a bank guarantee in favour of INA to cover any potential future penalties under the gas sales agreement. GBP2,097k has been reclassified from advances to subsidiaries within investing activities to change in intercompany receivables within operating activities in 2017 following an assessment of the nature of the cash flows.
Notes to the accounts
1 Accounting policies
Reporting entity
Ascent Resources plc ('the Company' or 'Ascent') is a company domiciled and incorporated in England. The address of the Company's registered office is 5 New Street Square, London, EC4A 3TW. The consolidated financial statements of the Company for the year ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in associates and joint ventures. The Parent Company financial statements present information about the Company as a separate entity and not about its Group.
The Company is admitted to AIM, a market of the London Stock Exchange.
The consolidated financial statements of the Group for the year ended 31 December 2018 are available from the Company's website at www.ascentresources.co.uk.
Statement of compliance
The financial statements of the Group and Company have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) as adopted by the European Union, and with the Companies Act 2006 as applicable to companies reporting under IFRS.
The Group's and Company's financial statements for the year ended 31 December 2018 were approved and authorised for issue by the Board of Directors on 10 May 2019 and the Statements of Financial Position were signed on behalf of the Board by Cameron Davies.
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').
The financial information for the year ended 31 December 2018 and 31 December 2017 set out in this announcement does not constitute the Company's statutory financial statements for the year ended 31 December 2018 but is extracted from the audited financial statements for those years. The 31 December 2017 accounts have been delivered to the Registrar of Companies. The statutory financial statements for 2018 will be delivered to the Registrar of Companies in due course.
The auditors have reported on the financial statements for the year ended 31 December 2018; their report contained a paragraph drawing attention to disclosures in the financial statements regarding the existence of a material uncertainty related to the ability of the Company to continue as a going concern. Their opinion on the financial statements was not modified in respect of this matter. The report did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
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 profit for the year was GBP794,000 (2017: profit of GBP1,349,000)
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 Company has raised GBP1.1 million in new equity since the balance sheet date from new and existing investors. Under the Group's forecasts, the funds raised together with existing bank balances provide sufficient funding for at least the next twelve months based on anticipated outgoings and the receipt of revenues from production.
However, the forecast cash balances do become limited towards the end of 2019, until the anticipated production growth from the planned capital expenditure takes effect. The forecasts are sensitive to the timing and cash flows associated with the capital works and the associated production improvement. In the event that the anticipated cash outflows be greater than expected or cash inflows are lower than expected, further funding would be required. As a result, there can be no guarantee that additional funding will not be required.
Based on recent support from new and existing investors the Board believes that such funding, if required, would be obtained through debt or equity.
As a consequence, there is material uncertainty which may cast significant doubt over the Group and Parent Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.
New and amended Standards effective for 31 December 2018 year-end adopted by the Group:
i. The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 January 2018. The adoption of these standards and amendments has had no material effect on the Group's results, although they have given rise to changes to disclosures.
Standard Description Effective
date
IFRS 9 Financial instruments 1 January
2018
-------------------------------------- ----------
IFRS15 Revenue from Contracts with Customers 1 January
2018
-------------------------------------- ----------
IFRS 15 is introduces a single framework for revenue recognition and clarify principles of revenue recognition. This standard modifies the determination of when to recognise revenue and how much revenue to recognise. The core principle is that an entity recognises revenue to depict the transfer of promised goods and services to the customer of an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Transfer takes place when the hydrocarbons are delivered to the customer at a price indexed to the Central European Gas Hub price. The Company has only one customer as all production is sold by our joint venture partner: the concession holder. Management have assessed the point of revenue recognition as a result of IFRS15 and there are no changes. Revenue continues to be recognised at the point in time that hydrocarbons are delivered to the ultimate customer being a defined metering point for sales to INA or the point and on delivery to the customer in the case of condensate and the obligation under the joint venture for the concession holder to remit proceeds to the joint venture partners is created.
IFRS 9 replaces the incurred loss model of IAS 39 with a model based on expected credit losses or losses on loans. The standard addresses the accounting principles for the financial reporting of financial assets and financial liabilities, including classification, measurement and impairment, derecognition and hedge accounting.
The Group has performed a review of the business model corresponding to the different portfolios of financial assets and of the characteristics of these financial assets.
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 concerns at the time of transition, so this change in policy had no material impact on the amounts recognised in the financial statements.
Loans to subsidiary undertakings are subject to IFRS 9's new expected credit loss model. As all intercompany loans are repayable on demand, the loan is considered to be in stage 3 of the IFRS 9 ECL model on the basis the subsidiary does not have highly liquid assets in order to repay the loans if demanded. Lifetime ECLs are determined using all relevant, reasonable and supportable historical, current and forward-looking information that provides evidence about the risk that the subsidiaries will default on the loan and the amount of losses that would arise as a result of that default. All recovery strategies indicated that the Company will fully recover the full balances of the loans so no ECL has been recognised in the current period. Loans will either be repaid through net income from production or from a claim for damages resulting from the withholding of necessary permits.
The standard was mandatory for the accounting period beginning on 1 January 2018 and was applied using the modified retrospective transition approach. See Note 21 for the impact of IFRS 9 and new accounting policies.
ii. Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early:
Standard Description Effective
date
IFRS Leases 1 January
16 2019
------------------------------------------ ----------
IFRIC Uncertainty over income tax treatments 1 January
23 * 2019
------------------------------------------ ----------
IAS 28* Amendments to IAS 28: Long term interests 1 January
in Associates and Joint Ventures 2019
------------------------------------------ ----------
Annual improvements to IFRSs (2015-2017 1 January
cycle)* 2019
------------------------------------------ ----------
* not yet adopted by the European Union
IFRS 16 introduces a single lease accounting model. This standard requires lessees to account for all leases under a single on-balance sheet model. Under the new standard, a lessee is required to recognise all lease assets and liabilities on the balance sheet; recognise amortisation of leased assets and interest on lease liabilities over the lease term; and separately present the principal amount of cash paid and interest in the cash flow statement. Management is finalising its analysis and will be in a position to adopt the new standard and quantify its impact within H1 2019 for the interim results. The Group does not expect this to have a material impact on the financial statements although the analysis is ongoing at this stage.
The Group does not expect the other standards to have a material impact on the financial statements.
Critical accounting estimates and assumptions and critical judgements in applying the Group's accounting policies
The preparation of the consolidated financial statements in conformity with IFRSs requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. The estimates and underlying assumptions are based on practical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information. Such changes are recorded in the period in which the estimate is revised.
The application of the Group's accounting policies may require management to make judgements, apart from those involving estimates, which can have a significant effect on the amounts amortised in the financial statements. Management judgement is particularly required when assessing the substance of transactions that have a complicated structure or legal form.
(a) Exploration and evaluation assets - exploration and evaluation costs are initially classified and held as intangible fixed assets rather than being expensed. The carrying value of intangible exploration and evaluation assets are then determined. Management considers these assets for indicators of impairment under IFRS 6 at least annually based on an estimation of the recoverability of the cost pool from future development and production of the related oil and gas reserves which requires judgement. This assessment includes assessment of the underlying financial models for the Petišovci field and requires estimates of gas reserves, production, gas prices, operating and capital costs associated with the field and discount rates (see Note 10) using the fair value less cost to develop method which is commonplace in the oil and gas sector. The forecasts are based on the approval of the IPPC permit and other environmental permits which the Board anticipate being issued having considered all facts and circumstances and noting the recent approval by the Slovenian authorities on 15 April 2019. The carrying value of exploration assets at 31 December 2018 was GBP18,968,000 (2017: GBP18,587,000).
(b) Decommissioning provision - the provision for decommissioning is estimated by reference to operators and internal specialist staff and requires estimates regarding the cost of decommissioning, inflation, discount rates and the timing of works which requires judgement (see Note 15); The carrying value of the provision is GBP263,000 (2017: GBP266,000).
(c) Commercial reserves - Commercial reserves are proven, and probable oil and gas reserves calculated on an entitlement basis and are integral to the assessment of the carrying value of the exploration, evaluation and production assets. Estimates of commercial reserves include estimates of the amount of oil and gas in place, assumptions about reservoir performance over the life of the field and assumptions about commercial factors which, in turn, will be affected by the future oil and gas price.
(d) Transfer of exploration assets to property, plant and equipment - during the prior year we transferred the costs associated with areas of the Petišovci asset that were determined to have achieved commercial feasibility with commercial production from exploration costs to PPE. This judgment was based on assessment of the gas reserves, levels of production and associated profitability and the commencement of export production at Pg-10 and Pg-11A. Judgment was required in establishing the costs to be transferred from the exploration cost pool. Costs transferred comprised direct costs associated with the wells and infrastructure, together with an apportionment of the wider unallocated cost pool based on the ratio of estimated future production from the two wells relative to the field as a whole. During the prior year GBP24,092,000 was transferred from exploration to property plant and equipment. This is included in Notes 9 and 10.
(e) Carrying value of property, plant and equipment (developed oil and gas assets) - developed oil and gas assets are tested for impairment at each reporting date. The impairment test was 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 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 headroom despite the underperformance of Pg-11A being an indicator of impairment.
(f) Depreciation of property, plant and equipment - during the prior year 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 GBP793,000 (2017: GBP239,000) 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.
(g) Deferred tax - judgment has been required in assessing the extent to which a deferred tax asset is recorded, or not recorded, in respect of the Slovenian operations. Noting the history of taxable losses and the initial phases of production, together with assessment of budgets and forecasts of tax in 2019 the Board has concluded that no deferred tax asset is yet applicable. This is included at Note 7.
(h) Intercompany receivables - following the introduction of IFRS 9 the Board has carried out an assessment of the potential future credit loss on intercompany receivables 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 GBP1.7m (EUR1.9 million) has been recognised in the Company accounts.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.
The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Group. The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Income Statement from the date that control commences until the date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into line with those used by the Group.
Business combinations
On acquisition, the assets, liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over net fair values of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the net fair values of the identifiable assets, liabilities and contingent liabilities acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.
Joint arrangements
The Group is party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either joint ventures, where the Group has rights to only the net assets of the joint arrangement, or joint operations where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.
All of the Group's joint arrangements are classified as joint operations. The Group accounts for its interests in joint operations by recognising its assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.
The Group has one joint arrangement 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 net present value of estimated future expenditure determined in accordance with local conditions and requirements. An asset of an amount equivalent to the provision is also added to oil and gas exploration assets and depreciated on a unit of production basis once production begins. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated asset.
Foreign currency
The Group's strategy is focussed on developing oil and gas projects across Europe funded by shareholder equity and other financial assets which are principally denominated in sterling. The functional currency of the Company is sterling.
Transactions in foreign currency are translated to the respective functional currency of the Group entity at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional currency at the rates prevailing on the reporting date. Exchange gains and losses on short-term foreign currency borrowings and deposits are included with net interest payable.
The assets and liabilities of foreign operations are translated to sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at the average rate ruling during the period. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity. Foreign exchange differences arising on inter-company loans considered to be permanent as equity are recorded in equity. The exchange rate from euro to sterling at 31 December 2018 was GBP1: EUR1.1126 (2017: GBP1: EUR1.1262).
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.
Exchange differences on all other transactions, except inter-company foreign currency loans, are taken to operating loss.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.
The tax currently payable is based on the estimated taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the expected tax rate applicable to annual earnings.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is charged to the income statement over the vesting period of the related share options or share allocations. The cost is based on the fair values of the options and shares allocated determined using the binomial method. The value of the charge is adjusted to reflect expected and actual levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Where equity instruments are granted to persons other than directors or employees the Consolidated Income Statement is charged with the fair value of any goods or services received.
Grants of options in relation to acquiring exploration assets in licence areas are treated as additions to Slovenian exploration costs at Group level and increases in investments at Company level.
Provisions
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Convertible loan notes
Upon issue of a new convertible loan, where the convertible option is at a fixed rate, the net proceeds received from the issue of CLNs are split between a liability element and an equity component at the date of issue. The fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the CLNs and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity and is not re-measured.
Subsequent to the initial recognition the liability component is measured at amortised cost using the effective interest method.
When there are amendments to the contractual loan note terms these terms are assessed to determine whether the amendment represents an inducement to the loan note holders to convert. If this is considered to be the case the estimate of fair value adjusted as appropriate and any loss arising is recorded in the income statement.
Where there are amendments to the contractual loan note terms that are considered to represent a modification to the loan note, without representing an inducement to convert, the Group treats the transaction as an extinguishment of the existing convertible loan note and replaces the instrument with a new convertible loan note. The fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The fair value of the conversion right is recorded as an increase in equity. The previous equity reserve is reclassified to retained loss. Any gain or loss arising on the extinguishment of the instrument is recorded in the income statement, unless the transaction is with a counterparty considered to be acting in their capacity as a shareholder whereby the gain or loss is recorded in equity.
Where the loan note is converted into ordinary shares by the loan note holder; the unaccreted portion of the loan notes is transferred from the equity reserve to the liability; the full liability is then converted into share capital and share premium based on the conversion price on the note.
Non-derivative financial instruments
Non-derivative financial instruments comprise of investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Financial instruments
Classes and categories
Financial assets that meet the following conditions are measured subsequently at amortised cost using effective interest rate method:
-- The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and,
-- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets-Recognition and derecognition
The settlement date is used for initial recognition and derecognition of financial assets as these transactions are generally under contracts whose terms require delivery within the time frame established in the contract. Financial assets are derecognised when substantially all the Groups rights to cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risk and rewards of ownership.
Measurement
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
Impairment
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 costs
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.
Equity
Equity instruments issued by the Company are recorded at the proceeds received, net of any direct issue costs.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost. Provisions are made for any impairment when the fair value of the assets is assessed as less than the carrying amount of the asset. Inter-company loans are repayable on demand but are included as non-current as the realisation is not expected in the short term.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer ('CEO').
Revenue recognition
Sales represent amounts received and receivable from third parties for goods and services rendered to the costumers. Sales are recognised when control of the goods has transferred to the customer, which is at the border to Croatia under the contract and is recorded at this point. Condensate, which is collected at a separating station and transported via trucks to a customer in Hungary is recorded on delivery according the terms of the contract. At this point in time, the performance obligation is satisfied in full with title, risk, entitlement to payment and customer possession confirmed. Revenue is measured as the amount of consideration which the Group expects to receive, based on the market price for gas and condensate after deduction of costs agreed per the Restated Joint Operating Agreement ("RJOA") and sales taxes.
Revenue is derived from the production of hydrocarbons under the Petišovci Concession, which Ascent Slovenia Limited holds a 75% working interest. Under the terms of the RJOA, and in accordance with Slovenian law, the concession holder retains the rights to all hydrocarbons produced. The concession holder enters into sales agreements with customers and transfers the relevant portion of hydrocarbon sales to Ascent Slovenia Limited for the services it provides under the RJOA.
Payments are typically received around 30 days from the end of the month during which delivery has occurred. There are no balances of accrued or deferred revenue at the balance sheet date.
Under the RJOA, the Group is entitled to 90% of the revenues until 25% of Investments in the Petišovci area have been recovered and the Group records revenue on the entitlement basis accordingly.
Credit terms are agreed per RJOA contract and are short term, without any financing component.
The Group has no sales returns or reclamations of services since it has only one costumer. Sales are disaggregated by geography.
2 Segmental Analysis
The Group has two reportable segments, an operating segment and a head office segment, as described below. The operations and day to day running of the business are carried out on a local level and therefore managed separately. The operating segment reports to the UK head office which evaluates performance, decide how to allocate resources and make other operating decisions such as the purchase of material capital assets and services. Internal reports are generated and submitted to the Group's CEO for review on a monthly basis.
The operations of the Group as a whole are the exploration for, development and production of oil and gas reserves.
The two geographic reporting segments are made up as follows:
Slovenia - exploration, development and production UK - head office
The costs of exploration and development works are carried out under shared licences with joint ventures and subsidiaries which are co-ordinated by the UK head office. Segment revenue, segment expense and segment results include transfers between segments. Those transfers are eliminated on consolidation. Information regarding the current and prior year's results for each reportable segment is included below.
A single customer accounted for 84% of total revenues for the year and is disclosed within the Slovenia segment below.
2018 UK Slovenia eliminations Total
GBP '000s GBP '000s GBP '000s GBP '000s
Hydrocarbon sales - 1,942 1,942
Intercompany sales 1,356 428 (1,784) -
Total revenue 1,356 2,370 (1,784) 1,942
Cost of sales - (771) (771)
Administrative expenses (1,093) (1,252) 585 (1,760)
Material non-cash items
Depreciation - (793) - (793)
Net finance costs 23 (1,205) 1,199 17
---------------------------------- ---------- ---------- ------------- ----------
Reportable segment (loss)/profit
before tax 286 (1,651) - (1,365)
Taxation - - - -
Reportable segment (loss)/profit
after taxation 286 (1,651) - (1,365)
---------- -------------
Reportable segment assets
Carrying value of exploration
assets - 18,587 - 18,587
Additions to exploration
assets - 319 - 319
Effect of exchange rate
movements - 62 - 62
Total plant and equipment 1 23,778 - 23,779
Prepaid abandonment fund - 240 - 240
Investment in subsidiaries 15,443 - (15,443) -
Intercompany receivables 32,713 - (32,713) -
Total non-current assets 48,157 42,986 (48,156) 42,987
Other assets 303 489 - 792
Consolidated total assets 48,460 43,475 (48,156) 43,779
---------- -------------
Reportable segmental liabilities
Trade payables (53) (229) - (282)
External loan balances (44) - - (44)
Inter-group borrowings - (34,410) 34,410 -
Other liabilities (71) (302) - (373)
---------------------------------- ---------- ---------- ------------- ----------
Consolidated total liabilities (168) (34,941) 34,410 (699)
---------------------------------- ---------- ---------- ------------- ----------
2017 UK Slovenia eliminations Total
GBP '000s GBP '000s GBP '000s GBP '000s
Hydrocarbon sales - 814 - 814
Intercompany sales 1,601 (1,601) -
Total revenue 1,601 814 (1,601) 814
Cost of sales - (403) - (403)
Administrative expenses (1,148) (1,292) 649 (1,791)
Material non-cash items
Depreciation - (239) - (239)
Net finance costs (337) (1,282) 1,272 (347)
---------------------------------- ---------- ---------- ------------- ----------
Reportable segment (loss)/profit
before tax 116 (2,402) 320 (1,966)
Taxation - - - -
Reportable segment (loss)/profit
after taxation 116 (2,402) 320 (1,966)
---------- -------------
Reportable segment assets
Carrying value of exploration
assets - 37,541 - 37,541
Additions to exploration
assets - 4,544 - 4,544
Decrease in decommissioning
asset - (199) - (199)
Transfers to plant & equipment - (24,092) - (24,092)
Effect of exchange rate
movements - 793 - 793
Total plant & equipment 3 23,899 - 23,902
Prepaid abandonment fund - 279 - 279
Investment in subsidiaries 15,443 - (15,443) -
Intercompany receivables 32,447 - (32,447) -
Total non-current assets 47,893 42,765 - 42,768
Other assets 1,110 731 - 1,841
Consolidated total assets 49,003 43,496 (47,890) 44,609
---------- -------------
Reportable segmental liabilities
Trade payables (92) (338) - (430)
External loan balances (36) - - (36)
Inter-group borrowings - (32,447) 32,447 -
Other liabilities (82) (330) - (412)
---------------------------------- ---------- ---------- ------------- ----------
Consolidated total liabilities (210) (33,115) 32,447 (878)
---------------------------------- ---------- ---------- ------------- ----------
Revenue from customers
Revenue was earned by the Slovenian segment through the joint venture structure; sales were made to end customers in Slovenia GBP178,000; Croatia GBP1,633,000 and Hungary GBP131,000 (2017: Slovenia GBP294,000, Croatia GBP489,000 and Hungary GBP32,000). Gas sales comprised GBP1,811,000 (2017: GBP783,000) whilst condensate sales totalled GBP131,000 (2017: GBP32,000). 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
2018 2017
GBP '000s GBP '000s
Employee costs 653 797
Share based payment charge 402 235
Foreign Exchange differences - -
Included within Admin Expenses
Audit Fees 72 73
Fees payable to the company's - -
auditor other services
------------ ------------
72 73
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
2018 2017
Management and technical 8 9
============= =============
b. Directors and employee's remuneration
Year ended Year ended
31 December 31 December
2018 2017
Employees & Executive Directors GBP '000s GBP '000s
Wages and salaries 570 687
Social security costs 37 64
Pension costs 41 44
Share-based payments 423 235
Taxable benefits 2 2
1,073 1,032
============= =============
c. Directors remuneration
Salary/fees Bonus* Pension Total Share Employers
Based NIC
Payments
expense
2018 GBP GBP GBP GBP GBP GBP
Executive Directors
C Hutchinson 158,900 - 904 159,804 199,543 19,825
Non-executive
Directors
C Carver 43,333 - - 43,333 79,817 5,737
C Davies 21,667 - - 21,667 39,909 2,287
N Moore 21,667 - - 21,667 39,909 2,070
------------ ------- -------- -------- ---------- ----------
Total 245,567 - 904 246,471 359,178 29,919
Salary/fees Bonus* Pension Total Share Employers
Based NIC
Payments
expense
2017
Executive Directors
C Hutchinson 164,471 51,750 760 216,981 65,445 28,653
Non-executive
Directors
C Carver 73,875 30,000 - 103,875 26,178 2,813
C Davies 37,192 15,000 - 52,192 13,089 6,076
N Moore 37,192 15,000 - 52,192 13,089 6,076
------------ -------- -------- -------- ---------- ----------
Total 312,730 111,750 760 425,239 117,801 43,618
* Bonuses were payable on achieving first gas sales.
The highest paid Director in the year ended 31 December 2018 was Colin Hutchinson earning GBP159,804 (2017: C Hutchinson earning GBP216,981). Colin Hutchinson is a member of the defined contribution pension scheme which commenced in December 2017; contributions during the year were GBP904 (2017: GBP760).
d. Directors' incentive share options
Share
Opening Granted/ Closing Date Price Exercise Exercise Period
2018 (Lapsed) Granted at Grant Price Start End
C Carver 1,328,443 - 1,328,443 30-Apr-13 16.4p 20p 30-Apr-16 30-Apr-23
C Carver 13,985,884 - 13,985,884 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Carver 13,612,502 - 13,612,502 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Hutchinson 265,688 - 265,688 23-May-13 16.4p 20p 23-May-16 23-May-23
C Hutchinson 34,964,709 - 34,964,709 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Hutchinson 34,031,255 - 34,031,255 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
N Moore 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
N Moore 6,806,251 - 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Davies 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Davies 6,806,251 - 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
Opening Granted/ Closing Date Share Exercise Exercise
Price Period
2017 (Lapsed) Granted at Grant Price Start End
C Carver 1,328,443 - 1,328,443 30-Apr-13 16.4p 20p 30-Apr-16 30-Apr-23
C Carver 13,985,884 - 13,985,884 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Carver - 13,612,502 13,612,502 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Hutchinson 265,688 - 265,688 23-May-13 16.4p 20p 23-May-16 23-May-23
C Hutchinson 34,964,709 - 34,964,709 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Hutchinson - 34,031,255 34,031,255 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
N Moore 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
N Moore - 6,806,251 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
C Davies 6,992,942 - 6,992,942 05-May-16 1.58p 1.58p 05-May-19 06-May-26
C Davies - 6,806,251 6,806,251 07-Nov-17 1.975p 1.975p 06-Nov-20 08-Nov-27
5 Finance income and costs recognised in the year
Year ended Year ended
31 December 31 December
2018 2017
Finance income GBP '000s GBP '000s
Foreign exchange movements realised 1 -
Other income 25 -
26 -
============ ============
Finance costs
Accretion charge on convertible loan
notes (8) (241)
Foreign exchange movements realised - (94)
Bank charges (1) (12)
------------ ------------
(9) (347)
============ ============
Please refer to Note 14 for a description of financing activity during the year.
6 Income tax expense
Year ended Year ended
31 December 31 December
2018 2017
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
2018 2017
GBP '000s GBP '000s
Loss for the year (1,365) (1,966)
Income tax using the Company's domestic
tax rate at 19 % (2017: 19%) (259) (374)
Effects of:
Net increase in unrecognised losses
carried forward 257 273
Effect of tax rates in foreign jurisdictions 36 40
Other non-taxable items (34) (98)
Other non-deductible expenses - 159
Total tax expense for the year - -
============ ============
7 Deferred tax - Group & Company
2018 2017
GBP '000s GBP '000s
Group
Total tax losses - UK and Slovenia (36,684) (37,080)
Unrecorded deferred tax asset at 17%
(2017: 17%) 6,236 6,304
---------- ----------
Company
Total tax losses (11,829) (10,912)
Unrecorded deferred tax asset at 17%
(2017: 17%) 2,011 1,855
---------- ----------
No deferred tax asset has been recognised in respect of the tax losses carried forward. Refer to critical accounting estimates and judgments
8 Loss per share
31 December 31 December
2018 2017
GBP '000s GBP '000s
-------------- --------------
Result for the year
Total loss for the year attributable
to equity shareholders (1,365) (1,966)
Weighted average number of ordinary Number Number
shares
For basic earnings per share 2,270,968,177 1,877,070,907
Loss per share (Pence) (0.06) (0.10)
As the result for the year was a loss, the basic and diluted loss per share are the same. At 31 December 2018, potentially dilutive instruments in issue were 184,883,861 (2017: 207,383,681). Dilutive shares arise from share options and CLNs issued by the Company and from the deferred consideration on the Trameta transaction.
9 Property, Plant & Equipment - Group
Computer Developed Total
Equipment Oil & Gas
Assets
Cost
At 1 January 2017 4 - 4
Additions 2 43 45
Transfer from Exploration - 24,092 24,092
At 31 December 2017 6 24,135 24,141
----------- ----------- --------
At 1 January 2018 6 24,135 24,141
Additions - 411 411
Effect of exchange rate movements - 262 262
At 31 December 2018 6 24,808 24,814
----------- ----------- --------
Depreciation
At 1 January 2017 - - -
Charge for the year - (239) (239)
At 31 December 2017 - (239) (239)
----------- ----------- --------
At 1 January 2018 - (239) (239)
Charge for the year (793) (793)
Effect of exchange rate movements (3) (3)
At 31 December 2018 - (1,035) (1,035)
----------- ----------- --------
Carrying value
At 31 December 2018 6 23,773 23,779
----------- ----------- --------
At 31 December 2017 6 23,896 23,902
----------- ----------- --------
At 1 January 2017 4 - 4
----------- ----------- --------
No impairment has been recognised during the year, this assumes that the Group can obtain the necessary environmental permits and the concession extension due in 2022 to continue with the planned development of the Petišovci field. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as set out in Note 1. Should the permits not be granted, or the concession extension confirmed, the carrying value of these assets would be impaired.
10 Exploration and evaluation assets - Group
Slovenia Total
Cost
At 1 January 2017 37,541 37,541
Additions 4,544 4,544
Transfer to PPE (24,092) (24,092)
Adjustment to decommissioning asset (199) (199)
Effects of exchange rate movements 793 793
At 31 December 2017 18,587 18,587
--------- ---------
At 1 January 2018 18,587 18,587
Additions 319 319
Effects of exchange rate movements 62 62
At 31 December 2018 18,968 18,968
--------- ---------
Carrying value
At 31 December 2018 18,968 18,968
--------- ---------
At 31 December 2017 18,587 18,587
--------- ---------
At 1 January 2017 37,541 37,541
--------- ---------
During the prior year the Company brought Pg-10 and Pg-11A into commercial production and therefore transferred the related costs from exploration assets to property, plant & equipment to reflect to producing nature of the assets. The total historic costs for Pg-10 and Pg-11A and the cost of the infrastructure related to export gas production, together with an apportionment of past exploration costs has been transferred from exploration to property plant and equipment. The apportionment of past historic costs was allocated to wells Pg-10 and Pg-11A based on their expected contribution to total field production.
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 0. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as set out in Note 1.
In the prior year, the Company accounted for the Trameta transaction as the acquisition of land and pipeline rights. relating to the exploration project. This fair value of consideration was GBP1.1 million, see Note 03.
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 2018 and 2017 the net present value significantly exceeded the carrying value of the assets. The key estimates associated with the economic model net present value are detailed in Note 1. The outcome of ongoing exploration, and therefore whether the carrying value of intangible exploration assets will ultimately be recovered, is inherently uncertain.
11 Investment in subsidiaries - Company
GBP000s
At 1 January 2017, 31 December 2017 & 31
December 2018 15,443
========
Name of company Principal activity Country % of share % of share
of incorporation capital capital
held 2018 held 2017
Ascent Slovenia
Limited
Tower Gate Place
Tal-Qroqq Street
Msida, Malta Oil and Gas exploration Malta 100% 100%
Ascent Resources
doo
Glavna ulica 7
9220 Lendava
Slovenia Oil and Gas exploration Slovenia 100% 100%
Infrastructure
Trameta doo owner Slovenia 100% 100%
Glavna ulica 7
9220 Lendava
Slovenia
Ascent Resources
Netherlands BV
c/o Ascent Resources
plc
5 New Street Square
London EC4A 3TW Oil and Gas exploration Netherlands 100% 100%
All subsidiary companies are held directly by Ascent Resources plc.
12 Trade and other receivables - Group
2018 2017
GBP '000s GBP '000s
Trade receivables 198 655
VAT recoverable 29 72
Prepaid abandonment deposit 240 279
Prepayments 6 36
473 1,042
========== ==========
Less non-current portion (240) (279)
Current portion 233 763
========== ==========
13 Trade and other receivables - Company
2018 2017
GBP '000s GBP '000s
VAT recoverable 5 19
Prepayments 6 36
11 55
========== ==========
14 Borrowings - Group & Company
2018 2017
Group GBP '000s GBP '000s
Non-current
Convertible loan notes 44 36
44 36
---------- ----------
Company
Non-current
Convertible loan notes 44 36
44 36
---------- ----------
Convertible Loan Note 2018 2017
GBP '000s GBP '000s
Liability brought forward 36 6,162
Interest expense 8 241
Converted notes - (6,367)
Liability at 31 December 44 36
---------- ----------
The only transactions relating to the convertible loan notes during 2018 was one conversion request in which the loan notes were converted to equity. The transactions during 2017 and the background to the notes is also covered below:
(i) Conversions
There were a number of loan note conversions carried out during the periods:
Loan notes converted Shares issued
including accrued interest*
2018 2017 2018 2017
GBP GBP No. No.
January - - - -
February 603 2,652,107 60,366 265,210,704
March - 1,597,018 - 159,701,787
April - 1,581,609 - 158,160,880
May - 69,709 - 6,970,931
June - 325 - 32,548
July - 3,117,137 - 311,713,705
August - - - -
September - - - -
October - - - -
November - - - -
December - - - -
603 9,017,905 60,366 901,790,555
* The amounts stated represent the loan note principal and accumulated coupon interest rather than the amortised cost of the loan notes under IFRS after the impact of discounting to fair value at inception and subsequent accretion. The amortised cost of the converted loan notes was GBP44,000 representing GBP49,706 less the unamortised cost adjustment of GBP5,358.
In 2017 the amortised cost of the converted loan notes was GBP6,367,000 representing GBP9,017,906 less the unamortised cost adjustment of GBP2,650,906. On conversion, the amount recorded in equity at inception of GBP3,131,000 has been transferred to retained earnings from the equity reserve.
(ii) Background
The balance at 31 December 2018 relates to the residual balance of the 2013 convertible loan notes which are convertible at the discretion of the holder into Ordinary shares at 100 Ordinary shares per GBP1 principal of loan note.
The Group issued GBP5 million of 9 per cent 2013 CLNs during 2012 and 2013, convertible at any time at the discretion of the holder, into Ordinary Shares at 200 Ordinary Shares per GBP1 principal of loan note, an effective conversion price of between 0.1p and 0.5p per Ordinary share depending on whether the balance could be sold to independent third-party investors. The CLNs were due to mature in January 2015.
On 5 February 2014, the Group agreed with Henderson to create a new GBP5 million class of 9 per cent CLNs with a maturity date of December 2014, convertible at any time at the discretion of the holder, into Ordinary Shares at 100 Ordinary Shares per GBP1 principal of loan note, an effective conversion price of 1 pence per Ordinary share. The first GBP2 million available under these 2014 CLNs was drawn immediately with the balance intended for sale to independent third-party investors, with the intention that the pricing of all the 2014 CLNs would be reset to the lowest price paid by these new investors.
These convertible loan notes were subsequently subject to various variations in terms and extensions through to 2016.
15 Provisions - Group
GBP000s
At 1 January 2017 447
Adjustment to the decommissioning provision (199)
Foreign exchange movement 18
At 31 December 2017 266
--------
At 1 January 2018 266
Foreign exchange movement (3)
At 31 December 2018 263
--------
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 the prior year the Company has placed EUR300,000 (GBP279,000) on deposit as collateral against this liability see Note 12.
16 Trade and other payables - Group
2018 2017
GBP '000s GBP '000s
Trade payables 282 430
Tax and social security payable 15 30
Other payables 29 19
Accruals 66 97
392 576
========== ==========
17 Trade and other payables - Company
2018 2017
GBP '000s GBP '000s
Trade payables 53 92
Tax and social security payable 3 16
Other payables 9 -
Accruals 59 66
124 174
========== ==========
18 Called up share capital
2018 2017
GBP '000s GBP '000s
Authorised
10,000,000,000 ordinary shares
of 0.10p each 10,000 10,000
Allotted, called up and fully
paid
2,291,310,686 (2017: 2,268,750,320)
ordinary shares of 0.2pence each
(2017: 0.2p each) 6,146 6,101
Reconciliation of share capital 2018 2017
movement
Number Number
At 1 January 2,268,750,320 1,084,074,224
-------------- --------------
Loan note conversions 60,366 901,790,555
Issue of Trameta consideration
shares 22,500,000 25,000,000
Placings - 257,885,541
At 31 December 2,291,310,686 2,268,750,320
============== ==============
Shares issued during the year
There was one conversion request processed during the year; for the details see Note 14.
Shares issued during the prior year
There were a number of conversion requests processed during the year; for the details see Note 14.
The Company also raised funds through placings during the year:
-- On 13 February 2017, the Company raised GBP2,987,500 (GBP2,838,363 net of costs) via the Placing of 161,500,000 Ordinary Shares with investors using the PrimaryBid.com platform.
-- On 27 October 2017, the Company raised GBP1,500,000 (GBP1,500,000 net of costs) via the Placing of 96,385,541 Ordinary Shares with investors using the PrimaryBid.com platform.
Reserve description and purpose
The following describes the nature and purpose of each reserve within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Merger reserve: Value of shares, in excess of nominal value, issued with respect of the Trameta acquisition in 2016.
-- Equity reserve: Amount of proceeds on issue of convertible debt relating to the equity component and contribution on modification of the convertible loan notes, i.e. option to convert the debt into share capital.
-- Share premium: Amounts subscribed for share capital in excess of nominal value less costs of shares associated with share issues.
-- Share-based payment reserve: Value of share options granted and calculated with reference to a binomial pricing model. When options lapse or are exercised, amounts are transferred from this account to retained earnings.
-- Translation reserve: Exchange movements arising on the retranslation of net assets of operation into the presentation currency.
-- Accumulated losses: Cumulative net gains and losses recognised in consolidated income. 19 Operating lease arrangements
At the balance sheet date, the Group had no outstanding commitments under non-cancellable operating leases (2017: GBPnil).
20 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 2018, the Group had exploration and expenditure commitments of GBP Nil (2017 - Nil).
21 Related party transactions
a. Group companies - transactions
2018 2017
Cash Services Total Cash Services Total
Ascent Slovenia
Limited 1,209 302 1,511 5,588 799 6,387
Ascent Resources
doo - 2 2 612 - 612
Trameta doo - - - 9 - 9
1,209 304 1,513 6,209 799 7,008
------ --------- ------ ------ --------- ------
b. Group companies - balances
2018 2017
Cash Services Total Cash Services Total
Ascent Slovenia
Limited 23,303 4,455 27,758 23,450 4,104 27,554
Ascent Resources
doo 3,118 1,828 4,946 3,078 1,806 4,884
Trameta doo 9 - 9 9 - 9
26,430 6,283 32,713 26,537 5,910 32,447
------- --------- ------- ------- --------- -------
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 GBP1.7m (EUR1.9 million) has been recognised in the Company accounts.
c. Directors
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In the opinion of the Board, the Group's key management are the Directors of Ascent Resources plc. Information regarding their compensation is given in Note 4.
2018
There were no transactions involving directors during the year.
2017
In February 2017, Colin Hutchinson subscribed for 270,270 Ordinary Shares as part of the Placing described in Note 18.
In November 2017, Colin Hutchinson acquired 300,000 Ordinary Shares in the market.
Clive Carver is a director of Darwin Strategic Limited, which is the owner of PrimaryBid through which the Company raised GBP4.5 million in equity during 2017. Refer to Note 18 for further share issues.
22 Events subsequent to the reporting period
On 14 January 2019, Clive Carver resigned from the Board and was replaced as Chairman by Cameron Davies.
On 20 January 2019 the Company raised GBP349,056 in an offer via the PrimaryBid platform at the price of 0.3 pence per ordinary share. A total of 121,052,097 shares were issued including 4,700,000 ordinary shares issued to suppliers at the same price. Colin Hutchinson, Chief Executive of the Company subscribed for 1,000,000 shares in the placing.
On 18 February 2019, Nigel Moore retired from the board while John Buggenhagen and Louis Castro were both appointed to the Board.
On 15 April 2019 the Company announced that it had received confirmation that the IPPC Permit was fully valid.
On 24 April 2019 the Company announced raised GBP750,000 in an oversubscribed placing of 214,285,714 Ordinary Shares of 0.2 pence each at a price of 0.35 pence per share.
On 29 April 2019 the Company extended the gas sales agreement under which untreated raw gas is sold to INA in Croatia until November 2019.
23 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 2018 152,576,254 2.38
Outstanding at 31 December 2018 152,576,254 2.38
Exercisable at 31 December 2018 5,685,738 20.00
Outstanding at 1 January 2017 84,513,744 2.86
Granted during the year 68,062,510 1.98
Outstanding at 31 December 2017 152,576,254 2.38
Exercisable at 31 December 2017 13,185,738 9.76
The value of the options is measured by the use of a binomial pricing model. The inputs into the binomial model made in 2017 were as follows. No options were issued in 2018 and so no equivalent table is disclosed for 2018
Share price at grant date 1.32p - 1.58p Exercise price 1.54p - 2.00p Volatility 50% Expected life 3-5 years Risk free rate 0.5% Expected dividend yield 0%
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous 5 years. The expected life is the expiry period of the options from the date of issue.
Options outstanding at 31 December 2018 have an exercise price in the range of 1.58p and 20.00p (31 December 2017: 1.54p and 20.00p) and a weighted average contractual life of 7.6 years (31 December 2017: 8.3 years).
Trameta acquisition
During 2016, the Company acquired Trameta doo which owned land and access rights over the export pipeline. Consideration for the transaction was 75 million ordinary shares which vest in four tranches on the one-year anniversary of various conditions being met. An option over a further 7.5 million ordinary shares at an exercise price of 2 pence is valid for three years from November 2016 when the second condition was met.
The 75 million consideration shares, not including the option, were valued using the Black-Scholes model under the assumption that 100% of the shares will vest as management expects all four of the vesting criteria to be successfully achieved. The conditions have been met for the first three tranches, being completion of the SPA, the certification of the pipeline and the transmission of the first million cubic metres of gas along the export pipeline. As at the balance sheet date 27,500,000 remain outstanding valued at GBP385,000.
The value of the options was measured by the use of a binomial pricing model. The inputs into the binomial model in respect of the Trameta consideration shares were as follows:
Share price at grant date 1.425p Exercise price Nil Volatility 101% - 130% Expected life 1 -3 years Risk free rate 1.75% Expected dividend yield 0%
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous comparable periods. The expected life is the expiry period of the options from the date of issue.
The value of the shares and options was GBP1.1 million which was recognised as an addition to exploration and evaluation costs, see Note 10.
24 Notes supporting the statement of cash flows
Group 2018 2017
GBP '000s GBP '000s
Cash at bank and available on
demand 375 721
Cash held on deposit against bank
guarantee 180 355
555 1,076
========== ==========
Company 2018 2017
GBP '000s GBP '000s
Cash at bank and available on
demand 112 699
Cash held on deposit against bank
guarantee 180 355
292 1,054
========== ==========
Included within cash and equivalents is GBP180,000 which is held as EUR200,000 on deposit as a security against a bank guarantee against a gas sales agreement. The Gas Sales Agreement originally lasted a minimum term of 12 months which expired in November 2018 and was extended to May 2019.
Significant non-cash transactions are as follows:
2018 2017
GBP '000s GBP '000s
Conversion of loan notes - 6,367
Accretion charge on convertible
loan notes 8 241
25 Financial risk management
Group and Company
The Group's financial liabilities comprise CLNs and trade payables. All liabilities are measured at amortised cost. These are detailed in Notes 14, 15 and 16.
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 12, 13 and 24.
The main risks arising from the Group's financial instruments are credit risk, liquidity risk and market risk (including interest risk and currency risk). The risk management policies employed by the Group to manage these risks are discussed below:
a. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group makes allowances for impairment of receivables where there is an ECL identified. Trade receivables have been received post year end. Refer to Note 21 for details of the intercompany loan ECL assessment.
The credit risk on cash is considered to be limited because the counterparties are financial institutions with high and good credit ratings assigned by international credit rating agencies in the UK.
The carrying amount of financial assets, trade receivables and cash held with financial institutions recorded in the financial statements represents the exposure to credit risk for the Group.
At Company level, there is the risk of impairment of inter-company receivables if the full amount is not deemed as recoverable from the relevant subsidiary company. These amounts are written down when their deemed recoverable amount is deemed less than the current carrying value. An IFRS 9 assessment has been carried out as per Note 1.
b. Market risk (i) Currency risk
Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Company.
The Group's operations are predominantly in Slovenia. Foreign exchange risk arises from translating the euro earnings, assets and liabilities of the Ascent Resources doo and Ascent Slovenia Limited into sterling. The Group manages exposures that arise from receipt of monies in a non-functional currency by matching receipts and payments in the same currency.
The Company often raises funds for future development through the issue of new shares in sterling. These funds are predominantly to pay for the Company's exploration costs abroad in euros. As such any sterling balances held are at risk of currency fluctuations and may prove to be insufficient to meet the Company's planned euro requirements if there is devaluation.
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the European Union (the euro).
The Group operates internationally and is exposed to currency risk on sales, purchases, borrowings and cash and cash equivalents that are denominated in a currency other than sterling. The currencies giving rise to this are the euro.
Foreign exchange risk arises from transactions and recognised assets and liabilities.
The Group does not use foreign exchange contracts to hedge its currency risk.
Sensitivity analysis
The following table details the Group's sensitivity to a 10% increase and decrease in sterling against the stated currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis comprises cash and cash equivalents held at the balance sheet date. A positive number below indicates an increase in profit and other equity where sterling weakens 10% against the relevant currency.
Euro currency change
Group Year ended Year ended
31 December 31 December
2018 2017
Profit or loss
10% strengthening of sterling 33 44
10% weakening of sterling (55) (53)
Equity
10% strengthening of sterling (3,897) (2,489)
10% weakening of sterling 4,764 3,040
Company
Profit or loss
10% strengthening of sterling (123) (146)
10% weakening of sterling 151 178
Equity
10% strengthening of sterling (4,542) (2,948)
10% weakening of sterling 5,551 3,604
(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 2018, the Group and Company has GBP loans valued at GBP44,000 rates of 0% per annum. At 31 December 2017, the Group and Company has GBP loans valued at GBP36,000 rates of 0% per annum.
(iii) Liquidity risk
Liquidity risk refers to the risk that the Company has insufficient cash resources to meet working capital requirements.
The Group and Company manages its liquidity requirements by using both short- and long-term cash flow projections and raises funds through debt or equity placings as required. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity management requirements.
The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced, and sensitivities run for different scenarios (see Note 1). For further details on the Group's liquidity position, please refer to the Going Concern paragraph in Note 1 of these accounts.
Group Company
2018 2017 2018 2017
GBP '000s GBP '000s GBP '000s GBP '000s
Less than six months - loans
and borrowings - - - -
Less than six months - trade
and other payables 282 576 53 174
Between six months and a
year 44 - 44 -
Over one year - 36 - 36
c. Capital management
The Group manages its shares and CLN's as capital.
d. There are no externally imposed capital requirements. e. Fair value of financial instruments
Set in the foregoing is a comparison of carrying amounts and fair values of the Group's and the Company's financial instruments:
Carrying Fair Value Carrying Fair Value
Capital management - Group amount amount
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2018 2018 2017 2017
Financial assets
Cash and equivalents - unrestricted 375 375 721 721
Cash and equivalents - restricted 180 180 355 355
Trade receivables 198 198 655 655
Prepaid abandonment fund
(refundable) 240 240 279 279
Financial liabilities
Trade and other payables 282 282 576 576
Convertible loans at fixed
rate 44 44 36 36
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
2018 2018 2017 2017
Financial assets
Cash and equivalents - unrestricted 112 112 700 700
Cash and equivalents - restricted 180 180 355 355
Trade receivables - - - -
Financial liabilities
Trade and other payables 53 53 174 174
Convertible loans at fixed
rate 44 44 36 36
Convertible loan at fixed rate
Fair value of convertible loans has been determined based on tier 3 measurement techniques. The fair value is estimated at the present value of future cash flows, discounted at estimated market rates. Fair value is not significantly different from carrying value.
Trade and other receivables/payables & inter-company receivables
All trade and other receivables and payables have a remaining life of less than one year. The ageing profile of the Group and Company receivable and payables are shown in Notes 12, 13, 14, 16 and 17.
Cash and cash equivalents
Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation to fair value.
26 Commitments & contingencies
Now that the Group is generating revenue from the Slovenian asset it has received legal claims relating to past activities. Based on legal advice received we consider these to be spurious and without merit. The Board will vigorously reject such opportunistic approaches.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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May 13, 2019 02:00 ET (06:00 GMT)
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