We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.20 | 2.10 | 2.30 | 2.20 | 2.10 | 2.20 | 176,932 | 08:00:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Crude Petroleum & Natural Gs | 581k | -41.89M | -0.1004 | -0.22 | 9.18M |
From Apr 2022 to Apr 2024
TIDMAST
RNS Number : 8088Q
Ascent Resources PLC
30 June 2022
30 June 2022
Ascent Resources plc
("Ascent" or the "Company")
Final Results
Ascent Resources Plc (LON: AST), the onshore Caribbean, Hispanic American and European focused energy and natural resources company, announces its final results for the year ended 31 December 2021.
Highlights:
Corporate
-- Signature of "no win-no fee" style funding for the international arbitration proceedings against the Republic of Slovenia
-- Production of 1.53 million scm of gas and 52,196 litres of condensate from PG-10 and PG-11A wells
-- Expansion of Latin & Hispanic Americas strategy to include onshore gas production and development strategy alongside new Environment, Social and Governance ('ESG') Metals
-- Continued engagement with joint venture partners with a view to resolve legacy commercial disputes
-- Raised GBP1 million in new equity by way of oversubscribed subscription and placing
Post Balance Sheet Events
-- Completion of "no win-no fee" Slovenia damages claim funding
-- Peru identified as country of initial focus for the Company to pursue new industrial ESG Metal projects
Publication of the Annual Report
-- The Company confirms that the Company's annual report for the year ended 31 December 2021 (the "Annual Report") will be posted to shareholders today and a copy of the Annual Report will shortly be available on the Company's website, www.ascentresources.co.uk/investors/reports-accounts.
Enquiries:
Ascent Resources plc Via Vigo Communications Andrew Dennan WH Ireland, Nominated Adviser & Broker James Joyce / Sarah Mather 0207 220 1666 Novum Securities, Joint Broker John Belliss 0207 399 9400
STATEMENT FROM THE CHAIRMAN
Following the completion of the "no win-no fee" style funding agreement for our international arbitration proceedings against the Republic of Slovenia, the Company is now positioned with upside exposure from a monetary damages claim significantly in excess of EUR100 million. These arbitration proceedings alone, we believe, already make Ascent Resources plc a unique and compelling proposition for shareholders.
The Company is also pursuing an industrial growth strategy across both onshore gas and ESG Metals where it has, for some time now, been preparing for its maiden transaction with a near term focus on Peru. Underpinning its growth strategy is its gas production at the Petisovci project in Slovenia, which continues and is of course buoyed by the strong European gas market backdrop.
Our vision remains, by the end of 2022, to have finalised this transformation of Ascent such that the Company has both sustainable cash flow generation from its operations and compelling upside exposure from a funded claim, all supported by an "on the money" ESG compatible strategy in an exciting, growth focused, part of the world.
We thank our shareholders for their support and look forward to achieving success together.
STATEMENT FROM THE CHAIRMAN
Legacy Slovenian Asset
2021 remained a challenging year for the Petišovci tight gas project in Slovenia, with ongoing disputes between the Company and its joint venture ("JV") partner Geoenergo as well as the JV's service provider Petrol Geo resulting in a continuing commercial stalemate and as such the Company has not recognised any revenue for the year. In March 2022, the Company announced that it had now elected to invoice for its share of production revenues for the months of April 2020 through to February 2022. Regional gas prices experienced an increase of nearly 500%, having started in January 2021 with an average monthly gas price of EUR18.75 / MWh and ending the year in December 2021 with an average monthly price of EUR112.11 / MWh. Production at PG-10 continued to produce a consistent volume of gas whilst a pressure anomaly was observed at PG-11A, leading to the well being put back into production with initial flow rates of circa 20,000 standard cubic metres ("scm") /day allowing production to be exported via the pipeline to INA in Croatia. However, production thereafter declined, as anticipated, and PG-11A is currently producing sporadic gas along with PG-10 which is sold locally to industrial buyers. Total production from the PG-10 and PG-11A wells in 2021 was 1.53 million scm of gas and 52,196 litres of condensate with the majority of the annual production being sold to local buyers.
The year started with the Company continuing to remain engaged in direct negotiations with the State Attorney's Office of the Republic of Slovenia in relation to pre-arbitration settlement discussions, following the Company having received a response in Q4 2020 to its Notice of Dispute to the Republic of Slovenia dated 23 July 2020. The Company entered into these discussions in good faith with a view to potentially settling the Company's claim in an amicable manner in the short term. In February 2021, the Company announced that the Republic of Slovenia had notified the Company that it shall be in a position to respond formally to the proposed settlement terms by the 19 March 2021 and Slovenia accordingly requested that the Company did not initiate any arbitration proceedings before such date to which the Company agreed. On 19 March 2021, the Company announced receipt of a further letter from the Republic of Slovenia claiming that an amicable settlement was not achievable.
On 8 November 2021, the Company announced the signature a binding damages-based agreement with Enyo Law LLP, a specialist arbitration and litigation legal firm who had previously filed the Notice of Dispute and represented the Company in the pre-arbitration negotiations, to commence proceedings against the Republic of Slovenia under the Energy Charter Treaty and the UK-Slovenia Bilateral Investment Treaty. In May 2022 the 'no win-no fee' style arrangement completed and allows the Company to securely initiate arbitration proceedings against the Republic of Slovenia under the ECT and BIT. Enyo are funding the payment of advanced disbursements which are expected to be incurred in the pursuit of the claim, and these disbursements along with the time of Enyo's lawyers will only be paid out of the proceeds of the arbitration in the event of a successful damages award or execution of a binding settlement agreement (if achieved sooner).
As referenced in the first paragraph, commercial disputes between the Company and its JV partner Geoenergo and JV service provider Petrol Geo continued throughout the year. The Company has rejected all invoices received by Petrol Geo on the basis of a fundamental change in circumstances, with the project now only producing a fraction of the production volumes it expected to be producing when it signed the relevant contracts back in 2013, amongst a number of other matters that Ascent has highlighted to its counterparties and which remain under discussion, including the Company's Gas Sale revenues entitlement under the joint operating agreement. In October 2021 the Company announced that following a recent stakeholder engagement process in Slovenia and a productive Operating Committee Meeting between the partners, that the JV was aligned on key future workstreams relating to the long-term concession renewal, environmental impact assessment and permitting. The Company also announced that it was in constructive dialogue with its JV partners regarding resolution of all disputed legacy matters and the restructuring of certain production costs.
During the year the concession holder, Geoenergo, filed the requested documents ahead of the deadline to be granted an automatic 18-month concession extension pursuant to Article 11 of the Act on Intervention Measures implemented in Slovenia to assist the economy in mitigating the consequences of the COVID-19 pandemic. Accordingly, the concession expiry date will now be 25 November 2023. Post period in review, the Company announced in March 2022 that it had now elected to invoice for its share of production revenues for the months of April 2020 through to February 2022. The Company remains hopeful that working with its partners they can agree terms to resolve the historic disputes and allow all the parties to begin to recognise monthly cash revenue streams from the remaining production.
Post period under review, in April 2022 the Republic of Slovenia approved amendments to its Mining Law which now include a total ban on exploring and/or producing hydrocarbons with the use of any form of mechanical stimulation, furthermore the Company understands it is now no longer possible to have a mining concession approved if stimulation is included in the extraction plan. Accordingly, the Company does not expect to complete the workstreams relating to the EIA and re-stimulation of the PG-10 and PG-11A wells, given that the Company has subsequently been deprived of its reasonable expectation to continue the historic practice of undertaking low volume mechanical stimulation to produce the tight rock gas reservoir, as has been done over thirty times in the last fifty years. In light of these legislative changes, which the Company believes are specifically targeted to preclude Ascent's investment in Slovenia from succeeding and amount to a form of expropriation, the Company notified the Republic of Slovenia of a second notice of dispute on 5 May 2022 and that such latest actions constitute a loss of the full investment value. The Company is currently reviewing future field development plans that do not involve any form of stimulation, such that a concession renewal may be possible before or on the extended expiry date.
New Environment, Social & Governance ('ESG') Metals Strategy & Peru Market Entry
In February 2021 the Company announced, following a period of reviewing different special situations, that it was now focusing its strategy to include ESG Metals as a new target sector within its resource focused business.
ESG Metals includes secondary mining and recovery opportunities typically involving the reclassification, through highly efficient recovery techniques, of stockpiled surface mining waste (often previously viewed as a liability for mining companies) as a valuable asset for reprocessing and commercial sale to industry, governments and metals traders. The Company sees waste management, remediation and restoration of land impacted by historic and on-going mining activities as a critical element in the global ESG agenda and integral to the transition to a low carbon economy. The Company is looking at a number of potential projects in Hispanic America and South Africa as well as Europe. In particular, the Company believes that there are good opportunities in gold, silver, platinum, base metals and ferrochrome, where the economics are especially attractive and the opportunity set has the ability to deliver lowest cost quartile sustainable metal production from legacy mining tailings, with low geological risk. Such opportunities have the potential to provide strong cash returns without exploration risk and only require modest upfront capital outlay.
Post the period under review the Company updated investors on its ESG Metals Strategy, confirming that whilst the Company continues to evaluate a number of ESG Metal transactions across Latin and Hispanic America, it has now identified Peru as its primary target geography. Peru is widely recognised as one of the largest and most diversified mineral producers with some of the most extensive reserves in the world with mining the most important sector in the Peruvian economy (some 10% of national GDP). Peru is currently the world's second largest Copper and Silver producer and Latin America's largest Gold, Zinc, Tin and Lead producer. Peru's Long-Term Credit Rating is rated as BBB by most agencies, which is amongst the strongest in the region. The country also benefits from a long history of mining, a robust mining legal framework and a significant pool of local expertise. Most recently, the Country enacted a new law that extends the process of formalisation of artisanal miners to 31 December 2024 alongside a law that establishes a national policy for small-scale and artisanal mining.
The Company sees significant opportunity for attractive entry points in mining following the global pandemic which has triggered international capital flight and significant capital constraints for small-scale miners. The Company therefore initially expects to focus its attention on small-scale operations (up to 350 tpd), which the Company considers affordable, of an efficient operational scale and which have multiple local operating and permitting benefits.
To accelerate the Company's entry into Peru, the Company also announced in February 2022 the signature of a new joint venture agreement with Blanco Safi SAC ("Blanco"), based in Lima. Blanco was founded in 2010 and is a Peruvian registered professional investment manager which arranges and invests discretionary funds and third-party investment monies in a variety of Peruvian businesses, where it currently manages over $150 million in assets, including specifically a number of direct investments in Peru's small-scale mining sector. The Blanco team has over 50 years' combined experience in the banking, finance, mine and resource sectors and is present across offices in five regions throughout Peru, consequently Blanco have access to a number of high-quality precious metal small-scale mineral processing operations throughout Peru.
The joint venture will focus its attention initially on the identification, screening and then subsequent negotiation and potential acquisition of small-scale yet sustainable ESG metals processing businesses in Peru, ideally adjacent to surface stockpiled materials for processing. Blanco and the Company already have a number of attractive prospective leads, as well as an active network in the small and medium scale miner sector of Peru.
Cuba MOU
The Company maintained its MOU giving it exclusive rights to negotiate the production sharing contracts over onshore blocks 9a, 9b, 12 and 15 throughout the year, with extensions being required due to inability to travel to Cuba during the COVID-19 pandemic which remained throughout the majority of the year. Consequently, the Company successfully attained extensions in both April and then again in November, with exclusivity on the blocks lapsing on 31 December and the memorandum of understanding ("MOU") remaining on a non-exclusive basis through to end of April 2022. Although Cuba will remain on the Company's watchlist and CUPET have offered an extension, the Company has elected not to sign a further extension to the non-exclusive MOU, primarily driven by the exciting opportunities it has originated in Peru and the lack of softening of US Sanctions in recent years.
Funding
The Board have continued to manage costs and relationships with JV parties while its legacy disputes continue to be resolved, managing various historical outstanding balances and raising additional funds to enable the pursuit of the Company's damages claim against Slovenia and for the new ESG Metals initiative to be instigated. The Company remains positioned as a clean vehicle with a strong Board, access to capital and a clear growth trajectory.
In December 2020, the Company announced it had signed a new GBP500,000 unsecured loan facility with warrants attached exercisable at 7.5 pence per new warrant share, representing a 41.5% premium to the prevailing share price at the time. This transaction was a structure designed to mitigate dilution with an equity component at higher prices, these equity warrants were mostly exercised throughout the year which resulted in the Company repaying GBP175,000 of drawn-down debt to Align Research Ltd ("Align") as well as receiving a further GBP75,000 in cash warrant exercises throughout the year and extinguishing any monies owed to Align, with the balance of GBP250,000 under the December facility remaining owed to Riverfort Global Opportunities ("Riverfort") (the other lender in that transaction).
In February 2021, alongside and in support of the Company's new ESG Metals strategy, the Company successfully raised GBP1 million at an issue price of 10.1 pence per new placing share, representing a 12.5% discount to the closing bid price from the day before, by way of oversubscribed subscription and placing of new shares to institutional investors and existing shareholders.
In December 2021 the Company successfully announced the restructuring of its two debts to Riverfort, with the legacy debt of GBP275,000 (pursuant to a financial transaction agreed in 2019 and restructured in 2020) would be extended out in Maturity from the initial maturity date of 14 February 2022 to the date falling on 14 February 2023, following which the Company is expected to pay Riverfort a cash monthly sum of GBP45,003 over the next six months such that the debt is repaid fully in cash by 14 July 2023. The Company also agreed with Riverfort to amend the maturity date of the GBP250,000 loan outstanding under the December 2020 funding such that it is now repayable on the 31 December 2022. As part of the loan maturity extension agreements, the Company issued Riverfort with 3,600,000 new warrants with an initial exercise price of 7.5 pence per new warrant share.
In January 2022 the Company successfully raised a further GBP600,000 by the issue of new equity shares at an issue price of 3.3 pence per new ordinary share, representing a nil discount to the closing bid price from the day before, with warrants attached at 5 pence per new warrant share. The Company also agreed with the holders of the remaining 4p new equity warrants issued in August 2020 to the accelerated exercise of the remaining warrants for a cash exercise consideration of GBP242,500 in exchange for being issued 1.5 new warrants for each August 2020 Warrant exercised with the new warrants being exercisable at 5 pence per new warrant share at any time over the next three years.
COVID-19
COVID-19 has had relatively limited direct impact on Ascent's assets in Slovenia, save as potentially being a catalyst to the increasing gas price environment thought the second half of the year as well as providing for receipt of an 18-month automatic concession extension pursuant to Slovenia COVID-19 disruption legislation, as announced by the Company post period in review.
COVID-19 has however impacted the Company's ability to travel through the majority of the year, which in turn has a consequence on ability to execute on certain business development activities. Finally, COVID-19 has had an impact on the Company's ability to execute on its MOU over Cuban onshore blocks 9A, 9B, 12 and 15. Production operations in Slovenia have been unaffected to date, with the assets being managed through a combination of on-site working within social distancing guidelines or remote oversight, with all appropriate safety procedures remaining in place to protect staff and local communities, although the risk of future disruption remains.
Summary
Set against the backdrop of improving commodity prices the Company has made progress with JV partner dialogues in relation to historical disputes and the completion (post period in review) of the 'no win - no fee' arrangement to fund the Company's significant monetary damages claim under the ECT and BIT against the Republic of Slovenia, this allows the Company to widen its reach away from the dependency on a single asset as the Company evolves to focus on the Latin and Hispanic Americas and executing on its new ESG Metals growth initiative along with onshore gas development opportunities. As a Board we remain resolved to protect the Company's investment in Slovenia whilst we expand our international footprint and diverse our commodity exposures.
GOING CONCERN
The Company has raised GBP0.6 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 the least next two months, as of the date of the publication of this report, based on anticipated outgoings and in the absence of the receipt of revenues from production.
In addition to the need to raise additional funding in the next two months, the forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and discretionary spend incurred with executing the ESG Metals Strategy through acquisition. As such, the Company will need to raise new capital within the forecast period to fund such discretionary spend.
Based on historical and recent support from new and existing investors the Board believes that such funding, if and when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds is not guaranteed at the date of signing these financial statements. As a consequence, the auditors have made reference to going concern by way of a material uncertainty.
James Parsons
Executive Chairman
Andrew Dennan
Chief Executive Officer
Independent Auditor's Report to the members of Ascent Resources plc
Opinion
We have audited the financial statements of Ascent Resources Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Cash Flow Statements and notes to the accounts, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
-- the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
-- the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006 ; and
-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion .
Material uncertainty relating to going concern
We draw attention to note 1 in the financial statements, which indicates that the group and parent company will require additional funding within 12 months from the date on which the financial statements are authorised for issue in order to meet its working capital cashflow requirements. The ability of the group to meet its cashflow requirements is therefore dependent on successfully raising additional funds. The total comprehensive loss for the group for the year ended 31 December 2021 was GBP3.592m and the year end cash position was GBP97k. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a material uncertainty exists that may cast significant doubt on the group's and company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group's and parent company's ability to continue to adopt the going concern basis of accounting included a review of budgets for 12 months from the date of approval of these financial statements including checking the mathematical accuracy of the budgets and discussion of significant assumptions used by the management and comparing these with current year and post year end performance. We have also reviewed the latest available post year end management accounts, bank statements, regulatory announcements, board minutes and assessed any external industry wide factors which might affect the group and the company.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report .
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the group financial statements was set at GBP564,000 (2020: GBP640,000), with performance materiality set at GBP394,800 (2020: GBP448,000).
Materiality has been calculated as 1.5% of the benchmark of Net Assets (2020: 1.5% of Gross Assets), which we have determined, in our professional judgement, to be one of the principal benchmarks within the financial statements relevant to members of the group in assessing financial performance. Net Assets benchmark was used for the group and all significant components as it reflects key balances including Exploration and evaluation assets, Property, plant and equipment ('PPE'), Investments and intragroup receivables (parent company only) and borrowings.
The materiality applied to the company financial statements was GBP394,800 for balance sheet testing and GBP69,000 for income statement testing. The performance materiality was GBP276,360 and GBP48,300 respectively. For each component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality and materiality for the significant components ranged between GBP339,000 to GBP394,800. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above GBP28,200 (group audit) and GBP19,740 for the parent company, respectively.
Our approach to the audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the group and company financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain such as the impairment of intangible assets, PPE and investments in subsidiaries (parent company only). We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
The group holds five (active) companies that are consolidated within these financial statements, two based in the UK and three based in Europe. We identified two significant components, being the parent company, Ascent Resources Plc and Ascent Slovenia Limited, which were subject to a full scope audit by a team with relevant sector experience. No component auditors were engaged.
In addition, we identified components which were not significant to the group and performed an audit of specific account balances and classes of transactions to ensure that balances which were material to the group were subject to audit procedures.
The approach gave the audit team 96% coverage on gross assets and 97% coverage on loss for the year .
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty related to going concern section we have determined the matters described below to be the key audit matters to be communicated in our report .
Hot Features
Premium
Key Audit Matter How our scope addressed this matter
Carrying Value of Exploration Our work in this area included:
Assets (Note 11)
* Confirmation that the group has good title to the
The group holds intangible assets applicable licences.
of GBP18.5m in relation to capitalised
exploration costs in respect of
its projects in Slovenia. There * Review of capitalised costs including consideration
is the risk that these assets have of appropriateness for capitalisation under IFRS 6.
been incorrectly capitalized in
accordance with IFRS 6 and that
there are indicators of impairment * Assessment of progress at the individual projects
as at 31 December 2021. during the year and post year-end and discussions
with management surrounding their intentions thereon;
Particularly for early-stage exploration
projects where the calculation
of recoverable amount via value * Consideration of management's impairment reviews,
in use calculations is not possible, including challenge to all key assumptions and
management's assessment of impairment sensitivity to reasonably possible changes; and
under International Financial Reporting
Standard ('IFRS') 6 requires estimation
and judgement. For this reason, * Review of disclosures made surrounding exploration
along with the financial significance assets to ensure compliance with IFRS.
of the account balance, we have
assessed this to be a key audit
matter.
Based on the audit work performed,
In addition there are a number we do not consider exploration
of disputes ongoing in relation assets as at 31 December 2021 to
to Slovenian assets, including be materially misstated. It is
claims brought by the company against however important to draw user's
the Republic of Slovenia under attention to the fact that the
the Energy Charter Treaty and the recoverable value of the exploration
UK-Slovenia Bilateral Investment assets is dependent on the group's
Treaty, and commercial disputes JV partner obtaining the necessary
between the company and its JV renewals of concession contract
partner Geoenergo and JV service beyond November 2023, the current
provider Petrol Geo. These disputes expiry date, and positive outcome
present a further risk of overstatement of the disputes in Slovenia enabling
of these assets. the group to obtain the necessary
permit approvals going forward.
Failure to obtain the necessary
concession contract renewal, or
unfavourable outcome in the disputes
mentioned is likely to result in
an impairment to the carrying value
of exploration assets held.
We also draw attention to post
balance sheet events as disclosed
in the Chief Executive Officer's
statement in relation to amendments
to Slovenian Mining Law. While
we are satisfied these conditions
did not exist at the year end,
and therefore that exploration
assets are not materially misstated
in the financial statements, we
note that the outcome of these
changes could result in impairment
to these assets in subsequent periods.
------------------------------------------------------------------------
Carrying Value of Producing Assets Our work in this area included:
(Note 10)
* Review of capitalised costs including consideration
At 31 December 2021, the carrying of appropriateness for capitalisation under IAS 16.;
value of the producing assets in
relation to the group's Petisovci
project in Slovenia are GBP21.1m. * Consideration of management's impairment reviews,
including challenge to all key assumptions and
Management are required to assess sensitivity to reasonably possible changes in the
the producing assets for impairment impairment model;
indicators under IAS 36. In this
case, impairment indicators include
but are not limited to disruption * Reviewing the latest developments regarding the
in operations due to disputes in permit applications, including obtaining relevant
Slovenian as detailed above. The correspondence where appropriate and any legal advice
production levels in Slovenia have obtained by the group;
not yet reached the desired levels
and no significant progress has
been made in relation to the ongoing * Contacting the company's legal advisers involved in
dispute with the Republic of Slovenia, the disputes in Slovenia and obtaining their opinion
as well as continue disputes between regarding possible outcome and status; and
the company and its JV partner.
The carrying value and ultimate * Review of disclosures made surrounding producing
recoverability of the assets is assets to ensure compliance with IFRS.
linked to outcome of these disputes
and appropriate renewal of the
concession contract. There is a
risk that the carrying value of Based on the audit work performed,
these assets is overstated as management's we do not consider producing assets
assessment of carrying value is as at 31 December 2021 to be materially
based on estimates and judgements misstated. It is however important
regarding future cashflows. For to draw user's attention to the
this reason along with the financial fact that the recoverable value
significance of the account balance, of the producing assets is dependent
we have assessed this to be a key on the group's JV partner obtaining
audit matter. the necessary renewals of concession
contract beyond November 2023,
the current expiry date, and positive
outcome of the disputes in Slovenia
enabling the group to obtain the
necessary permit approvals going
forward.
Failure to obtain the necessary
concession contract renewal, or
unfavourable outcome in the disputes
mentioned is likely to result in
an impairment to the carrying value
of producing assets held.
We also draw attention to post
balance sheet events as disclosed
in the Chief Executive Officer's
statement in relation to amendments
to Slovenian Mining Law. While
we are satisfied these conditions
did not exist at the year end,
and therefore that producing assets
are not materially misstated in
the financial statements, we note
that the outcome of these changes
could result in impairment to these
assets in subsequent periods.
------------------------------------------------------------------------
Recoverability of investments Our work in this area included:
and intragroup receivables (Parent
Company) (Note 12)
* Confirmation of ownership of investments;
At 31 December 2021, the Investments
in subsidiaries are GBP16.1m and
intragroup receivables are GBP27.5m. * Consideration of recoverability of investments and
These balances are the most significant intragroup loans by reference to underlying net asset
assets in the parent company's values and projects; and
financial statements. The recoverability
of these balances is directly linked
to the recoverability of the tangible * Review of disclosures made surrounding investments in
and intangible assets held by those subsidiaries to ensure compliance with IFRS.
entities, and hence there is a
risk these are not be fully recoverable.
The recoverability of the underlying Based on the audit work performed,
assets are subject to significant we do not consider investments
management estimate and judgement and intragroup receivables as at
regarding future cashflows as noted 31 December 2021 to be materially
above. For this reason along with misstated.
the financial significance of the
account balance, we have assessed We draw attention to the findings
this to be a key audit matter. disclosed within the other Key
audit matters above which are also
relevant to the future recoverability
of these balances.
------------------------------------------------------------------------
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard .
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
-- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
-- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion :
-- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
-- the parent company financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or -- we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors Responsibilities, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so .
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
-- We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, application of cumulative audit knowledge and experience of the sector. This is evidenced by discussion of laws and regulations with the management, reviewing minutes of meetings of those charged with governance and Regulatory News Service (RNS) and review of legal or professional expenditures. As for the Slovenian company, which is a key component, we have obtained an understanding of local laws and regulations as they apply to the group through industry knowledge, discussion with management, liaising with external lawyers engaged by the company in respect of specific matters, and review of relevant correspondence and documentation relating to exploration and producing assets.
-- We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from Companies Act 2006, AIM rules, and local laws and regulations in Slovenia relating to exploration and production.
-- We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:
o Discussion with management regarding potential non-compliance;
o Review of legal and professional fees to understand the nature of the costs and the existence of any non-compliance with laws and regulations; and
o Review of minutes of meetings of those charged with governance and RNS announcements.
-- We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, we did not identify any significant fraud risks.
As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business and review of the bank statements during the year to identify any large and unusual transactions where the business rationale is not clear.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report .
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed .
Joseph Archer (Senior Statutory Auditor) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory Auditor London E14 4HD
30 June 2022
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
Notes 2021 2020
GBP '000s GBP '000s
--------------------------------------------- ------- --------------- ---------------
Revenue 2 - -
Cost of sales 2 (19) (120)
Depreciation of oil & gas assets 10 (328) (397)
============================================= ======= =============== ===============
Gross loss (347) (517)
( 2,279
Administrative expenses 3 (1,596) )
============================================= ======= =============== ===============
( 2,796
Operating loss (1,943) )
Finance cost 5 (28) (35)
============================================= ======= =============== ===============
Net finance costs (28) (35)
============================================= ======= =============== ===============
( 2,831
Loss before taxation (1,971) )
Income tax expense 6 - -
============================================= ======= =============== ===============
( 2,831
Loss for the year (1,971) )
Other comprehensive income
Items that may be reclassified to profit
and loss
Exchange differences on translation of
foreign operations (1,621) 1,327
============================================= ======= =============== ===============
( 1,504
Total comprehensive income for the year (3,592) )
Earnings per share
( 4 . 66
Basic & fully diluted loss per share (Pence) 8 (1.83) )
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
Company Number: 05239285
As at 31 December 2021
31 December 31 December
Assets Notes 2021 2020
GBP '000s GBP '000s
============================================== ======= ============= =============
Non-current assets
P r o pe rt y , pl a nt and e quipm e nt 10 21,111 22,783
Exploration and evaluation costs 11 18,463 18,753
Goodwill 9 653 653
Prepaid abandonment fund 12 300 300
============================================== ======= ============= =============
Total non-current assets 40,527 42,489
Current assets
Trade and other receivables 13 8 66
Cash and cash equivalents 25 97 115
============================================== ======= ============= =============
Total current assets 105 181
============================================== ======= ============= =============
Total assets 40,632 42,670
============================================== ======= ============= =============
Equity and liabilities
Attributable to the equity holders of
the Parent Company
Share capital 20 7,998 7,928
Share premium account 75,021 73,863
Merger reserve 570 570
Equity reserve - 73
Share-based payment reserve 24 2,129 2,129
Translation reserves (594) 1,027
( 44,595
Retained earnings (46,566) )
============================================== ======= ============= =============
Total equity attributable to the shareholders 38,558 40,995
Total equity 38,558 40,995
============================================== ======= ============= =============
Non-current liabilities
Borrowings 15 536 197
Provisions 16 312 328
============================================== ======= ============= =============
Total non-current liabilities 848 525
Current liabilities
Borrowings 15 5 5
Contingent consideration on acquisition 17 450 450
Trade and other payables 18 770 695
============================================== ======= ============= =============
Total current liabilities 1,225 1,150
============================================== ======= ============= =============
Total liabilities 2,073 1,675
============================================== ======= ============= =============
Total equity and liabilities 40,632 42,670
============================================== ======= ============= =============
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share
Share Share Merger Equity based Translation Retained Total
capital premium reserve reserve payment reserve earnings GBP
GBP GBP GBP GBP reserve GBP '000s GBP '000s '000s
'000s '000s '000s '000s GBP '000s
============== ========== ============ ============ =========== =========== ============ ============= =======
Balance at 1
January
2020 7,604 72,330 570 - 1,873 (300) (41,964) 40,113
Comprehensive
income
Loss for the
year - - - - - - (2,831) (2,831)
Other
comprehensive
income
Currency
translation
differences - - - - - 1,327 - 1,327
============== ========== ============ ============ =========== =========== ============ ============= =======
Total
comprehensive
income - - - - - 1,327 (2,831) (1,504)
============== ========== ============ ============ =========== =========== ============ ============= =======
Transactions
with owners
Issue of
ordinary
shares 324 1,713 - - - - - 2,037
Costs related
to share
issues - (180) - - - - - (180)
Equity value
of
convertible
loan note - - - 73 - - - 73
Share-based
payments
and
expiry of
options - - - - 256 - 200 456
============== ========== ============ ============ =========== =========== ============ ============= =======
Total
transactions
with
owners 324 1,533 - 73 256 - 200 2,386
============== ========== ============ ============ =========== =========== ============ ============= =======
Balance at 31
December
2020 7,928 73,863 570 73 2,129 1,027 (44,595) 40,995
============== ========== ============ ============ =========== =========== ============ ============= =======
Balance at 1
January
2021 7,928 73,863 570 73 2,129 1,027 (44,595) 40,995
Comprehensive
income
Loss for the
year - - - - - - (1,971) (1,971)
Other
comprehensive
income
Currency
translation
differences - - - - - (1,621) - (1,621)
============== ========== ============ ============ =========== =========== ============ ============= =======
Total
comprehensive
income - - - - - (1,621) (1,971) (3,592)
============== ========== ============ ============ =========== =========== ============ ============= =======
Transactions
with owners
Issue of
ordinary
shares 70 1,216 - - - - - 1,286
Costs related
to share
issues - (58) - - - - - (58)
Equity value
of
convertible
loan note - - - (73) - - - (73)
Total
transactions
with
owners 70 1,158 - (73) - - - 1,155
============== ========== ============ ============ =========== =========== ============ ============= =======
Balance at 31
December
2021 7,998 75,021 570 - 2,129 (594) (46,566) 38,558
-------------- ---------- ------------ ------------ ----------- ----------- ------------ ------------- -------
Notes 20 24
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Consolidated Cash Flow Statement
For the year ended 31 December 2021
Year ended 31 December Year ended
2021 31 December
GBP '000s 2020
GBP '000s
============================================= =============================================== ===============
Cash flows from operations
Loss after tax for the year (1,971) (2,831)
Depreciation 328 397
Change in receivables 42 188
Change in payables 75 232
Increase in share-based payments 12 456
Exchange differences 42 212
Net cash used in operating activities (1,472) (1,346)
============================================= =============================================== ===============
Cash flows from investing activities
Payments for fixed assets (3) -
============================================= =============================================== ===============
Net cash used in investing activities (3) -
============================================= =============================================== ===============
Cash flows from financing activities
Interest paid and other finance fees - (35)
Loans advanced 375 300
Loans repaid - (417)
Interest paid - -
Proceeds from issue of shares 1,140 1,648
Share issue costs (58) (180)
============================================= =============================================== ===============
Net cash generated from financing activities 1,457 1,386
============================================= =============================================== ===============
Net (decrease) / increase in cash and
cash equivalents for the year (18) 38
Effect of foreign exchange differences -
Cash and cash equivalents at beginning
of the year 115 77
============================================= =============================================== ===============
Cash and cash equivalents at end of the
year 97 115
============================================= =============================================== ===============
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Notes to the Financial Statements
1. Accounting policies
Reporting entity
Ascent Resources plc (Company no: 05239285) ('the Company' or 'Ascent') is a company domiciled and incorporated in England. The address of the Company's registered office is 5 New Street Square, London, EC4A 3TW. The consolidated financial statements of the Company for the year ended 31 December 2021 comprise the Company and its subsidiaries (together referred to as the 'Group'). The Parent Company financial statements present information about the Company as a separate entity and not about its Group.
The Company is admitted to AIM, a market of the London Stock Exchange.
Statement of compliance
The financial statements of the Group and Company have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.
The Group's and Company's financial statements for the year ended 31 December 2021 were approved and authorised for issue by the Board of Directors on 30 June 2022 and the Statements of Financial Position were signed on behalf of the Board by James Parsons.
Both the Parent Company financial statements and the Group financial statements give a true and fair view and have been prepared and approved by the Directors in accordance with UK-adopted international accounting standards and with the requirements 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 loss for the year was GBP1,550,000 (2020: loss of GBP2,060,000).
The presentational currency of the Group is British Pounds Stirling ("GBP") and the functional currency of the Group's subsidiaries domiciled outside of the UK in Malta, Slovenia and Netherlands are in Euros ("EUR").
Measurement Convention
The financial statements have been prepared under the historical cost convention. The financial statements are presented in sterling and have been rounded to the nearest thousand (GBP'000s) except where otherwise indicated.
The principal accounting policies set out below have been consistently applied to all periods presented.
Going Concern
The Financial Statements of the Group have been prepared on a going concern basis. The Directors consider the Group to be a going concern and therefore that it is appropriate to prepare the accounts on said basis.
The Company has raised GBP0.6 million in new equity since the balance sheet date from new and existing investors. Under the Group's forecasts, the funds raised together with existing bank balances provide sufficient funding for at least the next two months, as of the date of the publication of this report, based on anticipated outgoings and in the absence of the receipt of revenues from production.
In addition to the need to raise additional funding in the next two month, the forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and discretionary spend incurred with executing on the ESG Metals Strategy through acquisition. As such, the Company will need to raise new capital within the forecast period to fund such discretionary spend.
Based on historical and recent support from new and existing investors the Board believes that such funding, if and when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds is not guaranteed at the date of signing these financial statements. The auditors have made reference to going concern by way of a material uncertainty.
New and amended Standards effective for 31 December 2021 year-end adopted by the Group:
i. The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January 2021. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:
Standard Description ========================= ========================================== Amendments to IFRS 9, IAS Interest rate benchmark reform - Phase 2 39, IFRS 7, IFRS 4 and IFRS 16 ------------------------- ------------------------------------------
The new standards effective from 1 January 2021, as listed above, did not have a material effect on the Group's financial statements.
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 3 amendments Business Combinations - Reference to the Conceptual 1 January 2022*
Framework
I A S 16 am P r o pe rt y , P l a nt and E quipm e n t: 1 January 2022*
e ndm e nts E f f e ct i ve 1 Jan u a ry 2022
IAS 37 amendments Provisions, Contingent Liabilities and Contingent 1 January 2022*
Assets:
N/A A nn u a l I mp rov e m e nts to I FRS S t 1 January 2022*
an d a r ds 201 8 -2020 C y c l e:
IAS 1 amendments Presentation of Financial Statements and IFRS 1 January 2023*
Practice Statement 2: Disclosure of Accounting
Policies
IAS 8 amendments Accounting policies, Changes in Accounting 1 January 2023*
Estimates and Errors - Definition of Accounting
Estimates
IAS 12 amendments Income Taxes - Deferred Tax related to Assets 1 January 2023*
and Liabilities arising from a Single Transaction
================= ===================================================== ==================
*Subject to UK endorsement
There are no IFRS's or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company or Group.
Estimates and judgements
Exploration and evaluation assets (Note 11) - exploration and evaluation costs are initially classified and held as intangible fixed assets rather than being expensed. The carrying value of intangible exploration and evaluation assets are then determined. Management considers these assets for indicators of impairment under IFRS 6 at least annually based on an estimation of the recoverability of the cost pool from future development and production of the related oil and gas reserves which requires judgement. This assessment includes assessment of the underlying financial models for the Petišovci field and requires estimates of gas reserves, production, gas prices, operating and capital costs associated with the field and discount rates (see Note 10) using the fair value less cost to development method which is commonplace in the oil and gas sector. The forecasts are based on the JV partners submitting and obtaining approval for an environmental impact assessment, and also the renewal of the concessions that are currently scheduled to expire in November 2023. The Board considers these factors to be an ordinary risk for oil and gas developments. In April 2022, the Republic of Slovenia approved amendments to its Mining Law which include a total ban on hydraulic stimulation. Consequently, the Company does now nor expect to be able to complete certain workstreams pertaining to existing wells and is now reviewing future field development. The carrying value of exploration assets at 31 December 2021 was GBP18,463,000 (2020: GBP18,753,000) and as at the reporting date when the Company conducted its impairment review, fully expected any revision of the Mining Law to continue to permit low volume hydraulic stimulation.
Reserves - Reserves are proven, and probable oil and gas reserves calculated on an entitlement basis and are integral to the assessment of the carrying value of the exploration, evaluation and production assets. Estimates of commercial reserves include estimates of the amount of oil and gas in place, assumptions about reservoir performance over the life of the field and assumptions about commercial factors which, in turn, will be affected by the future oil and gas price. (See page 15)
Carrying value of property, plant and equipment (developed oil and gas assets) (Note 10) - developed oil and gas assets are assessed for indicators of impairment and tested for impairment at each reporting date when indicators of impairment exist. An impairment test was performed based on a discounted cash flow model using a fair value less cost to develop approach commonplace within the oil and gas sector. Key inputs requiring judgment and estimate included gas prices, production and reserves, future costs and discount rates. With regard to the financial inputs, a weighted average cost of capital ("WACC") was used as the discount rate, and calculated as 12.0% (post-tax, nominal) and for gas prices, the Company has used a combination of futures rates for the local region.
Gas prices in the near term are forecast based on management's expectation of market prices less deductions under the INA contract, before reverting to market prices with reference to the forward curve following the approval of the IPPC permit and transition to gas sales taking place into the Slovenian market. The forecasts include future well workovers to access the reserves included in the model together with the wider estimated field development costs to access field reserves. Refer to Note 9. As with the exploration and evaluation assets, judgment was required regarding the likelihood of the necessary environmental permits being granted and the status of legal matters which are key to the commercial value of the assets. In April 2022, the Republic of Slovenia approved amendments to its Mining Law which include a total ban on hydraulic stimulation. Consequently, the Company does now nor expect to be able to complete certain workstreams pertaining to existing wells and is now reviewing future field development. The impairment test conducted as at the reporting date fully expected any revision of the Mining Law to continue to permit low volume hydraulic stimulation, and as such demonstrates significant headroom.
Depreciation of property, plant and equipment (Note 10) - Upon commencing commercial production we began to depreciate the assets associated with current production. The depreciation on a unit of production basis requires judgment and estimation in terms of the applicable reserves over which the assets are depreciated and the extent to which future capital expenditure is included in the depreciable cost when such expenditure is required to extract the reserve base. The calculations have been based on actual production, estimates of P50 reserves and best estimates of the future workover costs on the producing wells to extract this reserve. The depreciation charge for the year was GBP328,000 (2020: GBP397,000) including both depreciation associated with the unit of production method and straight-line charges for existing processing infrastructure. This is included in Notes 9 and 10 below.
Deferred tax (Note 6) - judgment has been required in assessing the extent to which a deferred tax asset is recorded, or not recorded, in respect of the Slovenian operations. Noting the history of taxable losses and the initial phases of production, together with assessment of budgets and forecasts of tax in 2021 the Board has concluded that no deferred tax asset is yet applicable. This is included at Note 7.
Intercompany receivables (Note 22) - In line with the requirements of IFRS 9 the Board has carried out an assessment of the potential future credit loss on intercompany receivables under a number of scenarios. Arriving at the expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan receivables, the possible credit losses that could arise and the probabilities for these scenarios. The Company would suffer a credit loss where the permits necessary for the development of the field are not obtained and a court case for damages against the Republic of Slovenia is unsuccessful. Based on legal advice received in relation to the permit process and the strength of our case we consider the risk of credit loss to be relatively limited. A provision of GBP4.8 million has been recognised in the Company accounts against a receivable of GBP32 million (2020: GBP32 million).
Investments (note 12) - Judgement has been made in respect of the carrying value of the Company's carrying value of its investments in the subsidiaries. The process for this is the same as the consideration given in respect of both Intangible Assets and Property, Plant and Equipment (see above).
Basis of consolidation (Note 12) - Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.
The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Group. The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Income Statement from the date that control commences until the date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into line with those used by the Group.
Business combinations (Note 9) - Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary comprises the:
-- fair value of assets transferred; -- liabilities incurred to the former owners of the acquired business; -- equity instruments issued by the Group;
-- fair value of any asset or liability resulting from contingent consideration arrangement; and
-- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any noncontrolling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the noncontrolling interest's proportionate share of the acquired entity's net identifiable assets. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, amount of any non-controlling interest and fair value of pre-existing equity interest over the fair value of net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets acquired, the difference is recognised immediately in profit or loss as a gain on bargain purchase.
Joint arrangements - The Group is party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either joint ventures, where the Group has rights to only the net assets of the joint arrangement, or joint operations where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.
All of the Group's joint arrangements are classified as joint operations. The Group accounts for its interests in joint operations by recognising its assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.
The Group has one joint arrangement, the Petišovci joint venture in Slovenia in which Ascent Slovenia Limited (a 100% subsidiary of Ascent Resources plc) has a 75% working interest, however whilst in a cost recovery position the Company is entitled to 90% of hydrocarbon revenues produced.
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 has been determined and the Group concludes that the assets can generate commercial production. This assessment considers factors including the extent to which reserves have been established, the production levels and margins associated with such production. The costs transferred comprise direct costs associated with the relevant wells and infrastructure, together with an allocation of the wider unallocated exploration costs in the cost pool such as original acquisition costs for the field. The producing assets start to be depreciated following transfer.
Depreciation of property plant and equipment - The cost of production wells is depreciated on a unit of production basis. The depreciation charge is calculated based on total costs incurred to date plus anticipated future workover expenditure required to extract the associated gas reserves. This depreciable asset base is charged to the income statement based on production in the period over their expected lifetime P50 production extractable from the wells per the field plan. The infrastructure associated with export production is depreciated on a straight-line basis over a two-year period as this is the anticipated period over which this infrastructure will be used.
Impairment of oil and gas exploration assets
Exploration/appraisal assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6 'Exploration for and Evaluation of Mineral Resources' and tested for impairment where such indicators exist.
In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether the Group's oil and gas exploration assets may be impaired:
-- whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;
-- whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;
-- whether exploration for and evaluation of oil and gas reserves in a specific area have not led to the discovery of commercially viable quantities of oil and gas and the Group has decided to discontinue such activities in the specific area; and
-- whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale.
If any such facts or circumstances are noted, the Group, as a next step, perform an impairment test in accordance with the provisions of IAS 36. In such circumstances the aggregate carrying value of the oil and gas exploration and assets is compared against the expected recoverable amount of the cash generating unit. The recoverable amount is the higher of value in use and the fair value less costs to sell.
The Group has identified one cash generating unit, the wider Petišovci project in Slovenia. Any impairment arising is recognised in the Income Statement for the year.
Where there has been a charge for impairment in an earlier period that charge will be reversed in a later period where there has been a change in circumstances to the extent that the discounted future net cash flows are higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be increased to the lower of its original carrying values or the carrying value that would have been determined (net of depletion) had no impairment loss been recognised in prior periods.
Impairment of development and production assets and other property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its PP&E to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell (otherwise referred to as fair value less cost to develop in the oil and gas sector) and value in use. Fair value less costs to sell is determined by discounting the post-tax cash flows expected to be generated by the cash- generating unit, net of associated selling costs, and takes into account assumptions market participants would use in estimating fair value including future capital expenditure and development cost for extraction of the field reserves. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
Decommissioning costs
Where a material obligation for the removal of wells and production facilities and site restoration at the end of the field life exists, a provision for decommissioning is recognised. The amount recognised is the one-off amount to the Company's JV partner as per the Revised Joint Venture Agreement.
Foreign currency
The Group's strategy is focussed on developing oil and gas projects and ESG metals 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 2021 was GBP1: EUR1.1900 (2020: GBP1:EUR1.1192).
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.
Exchange differences on all other transactions, except inter-company foreign currency loans, are taken to operating loss.
Taxation (Note 6)
The tax expense represents the sum of the tax currently payable and any deferred tax.
The tax currently payable is based on the estimated taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the expected tax rate applicable to annual earnings.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is charged to the income statement over the vesting period of the related share options or share allocations. The cost is based on the fair values of the options and shares allocated determined using the binomial method. The value of the charge is adjusted to reflect expected and actual levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Where equity instruments are granted to persons other than directors or employees the Consolidated Income Statement is charged with the fair value of any goods or services received.
Grants of options in relation to acquiring exploration assets in licence areas are treated as additions to Slovenian exploration costs at Group level and increases in investments at Company level.
Provisions (Note 16)
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by estimating the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Convertible loan notes
Upon issue of a new convertible loan, where the convertible option is at a fixed rate, the net proceeds received from the issue of CLNs are split between a liability element and an equity component at the date of issue. The fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the CLNs and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity and is not remeasured.
Subsequent to the initial recognition the liability component is measured at amortised cost using the effective interest method.
When there are amendments to the contractual loan note terms these terms are assessed to determine whether the amendment represents an inducement to the loan note holders to convert. If this is considered to be the case the estimate of fair value adjusted as appropriate and any loss arising is recorded in the income statement.
Where there are amendments to the contractual loan note terms that are considered to represent a modification to the loan note, without representing an inducement to convert, the Group treats the transaction as an extinguishment of the existing convertible loan note and replaces the instrument with a new convertible loan note. The fair value of the liability component is estimated using the prevailing market interest rate for similar nonconvertible debt. The fair value of the conversion right is recorded as an increase in equity. The previous equity reserve is reclassified to retained loss. Any gain or loss arising on the extinguishment of the instrument is recorded in the income statement, unless the transaction is with a counterparty considered to be acting in their capacity as a shareholder whereby the gain or loss is recorded in equity.
Where the loan note is converted into ordinary shares by the loan note holder; the unaccreted portion of the loan notes is transferred from the equity reserve to the liability; the full liability is then converted into share capital and share premium based on the conversion price on the note.
Non-derivative financial instruments
Non-derivative financial instruments comprise of investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Financial instruments
Classes and categories
Financial assets that meet the following conditions are measured subsequently at amortised cost using effective interest rate method:
-- The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and,
-- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets for which the amount of future receipts are dependent upon the Company's share price over the term of the instrument do not meet the criteria above and are recorded at fair value through profit and loss.
Measurement
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
Impairment
For trade receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The Group's trade receivables are generally settled on a short time frame without material credit risk.
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a twelve-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next twelve months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Lifetime expected credit losses (ECLs) for intercompany loan receivables are based on the assumptions that repayment of the loans are demanded at the reporting date due to the fact that the loan is contractually repayable on demand. The subsidiaries do not have sufficient funds in order to repay the loan if demanded and therefore the expected manner of recovery to measure lifetime expected credit losses is considered. A range of different recovery strategies and credit loss scenarios are evaluated using reasonable and supportable external and internal information to assess the likelihood of recoverability of the balance under these scenarios.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at fair value net of transaction costs incurred. Subsequent to initial measurement financial liabilities are recognised at amortised costs. The difference between initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms using the effective interest rate method. This category includes the following classes of the financial liabilities, trade and other payables, bonds and other financial liabilities. Financial liabilities at amortised costs are classified as current or non-current depending on whether these are due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognised when either the Group is discharged from its obligation, they expire, are cancelled, or replaced by a new liability with substantially modified terms.
Warrants
Warrants granted as part of a financing arrangement which fail the fixed-for-fixed criteria as a result of either the consideration to be received or the number of warrants to be issued is variable, are initially recorded at fair value as a financial liability and charged as transaction cost deducted against the loan and held subsequently at fair value. Subsequently the derivative liability is revalued at each reporting date with changes in the fair value recorded within finance income or costs.
Equity
Share capital is determined using the nominal value of shares that have been issued.
Share based payments relate to transactions where the Group receives services from employees or service providers and the terms of the arrangements include payment of a part or whole of consideration by issuing equity instruments to the counterparty. The Group measures the services received from non-employees, and the corresponding increase in equity, at the fair value of the goods or services received. When the transactions are with employees, the fair value is measured by reference to the fair value of the shares issued. The expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied Equity-settled share-based payments are credited to a share-based payment reserve as a component of equity until related options or warrants are exercised or lapse.
The Translation reserve comprises the exchange differences from translating the net investment in foreign entities and of monetary items receivable from subsidiaries for which settlement is neither planned nor likely in the foreseeable future Retained losses includes all current and prior period results as disclosed in the income statement.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost. Provisions are made for any impairment when the fair value of the assets is assessed as less than the carrying amount of the asset. Inter-company loans are repayable on demand but are included as non-current as the realisation is not expected in the short term.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer ("CEO").
Revenue recognition
Sales represent amounts received and receivable from third parties for goods and services rendered to the customers. Sales are recognised when control of the goods has transferred to the customer. Condensate, which is collected at a separating station and transported via trucks to a customer in Hungary is recorded on delivery according to 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. The Company follows the five step process set out in IFRS 15 for revenue recognition.
Revenue is derived from the production of hydrocarbons under the Petišovci Concession, which Ascent Slovenia Limited holds a 75% working interest, however whilst in a cost recovery position the Company is entitled to 90% of hydrocarbon revenues produced. 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.
During the year the information required to determine the transaction price of the revenues relating to producing assets under the Petišovci Concession was not available. The contractual terms under the Joint arrangement in Slovenia are under dispute and it was therefore unclear at the year end whether the performance obligations had been met. For these reasons, no revenue has been recognised during the year in accordance with IFRS 15.
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 hydrocarbon revenues produced whilst in a cost recovery position in the Petišovci area and the Group records revenue on the entitlement basis accordingly.
Credit terms are agreed per RJOA contract and are short term, without any financing component.
The Group has no sales returns or reclamations of services since it has only one costumer. Sales are disaggregated by geography.
Goodwill
Goodwill arising from business combinations is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash- generating units that are expected to benefit from the business combination in which the goodwill arose.
Contingent Consideration
Contingent consideration is measured at fair value at the time of the business combination and is considered in the determination of goodwill.
Contingent Liability
A contingent liability is recognised when the group has a possible obligation (legal or constructive), as a result of a past event, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group, or the amount of the obligation cannot be measured with sufficient reliability.
If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nor a contingent liability and no disclosure is made.
Contingent Asset
A contingent asset is recognised when the group has a possible asset, as a result of a past event, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group.
Such contingent assets are only recognised as assets in the financial statements where the realisation of income is virtually certain. If the inflow of economic benefits is only probable, the contingent asset is disclosed as a claim in favour of the group but not recognised in the statement of financial position.
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.
2021 UK Slovenia Elims Total
GBP '000s GBP '000s GBP '000s GBP '000s
================================== ========================= =============== ========== ==========
Hydrocarbon sales - - - -
Intercompany sales - 13 (13) -
Total revenue - 13 (13) -
Cost of sales - (19) - (19)
Administrative expenses (1,520) (89) 13 (1,596)
Material non-cash items
Depreciation (0) (328) - (328)
Net finance costs (27) (1) - (28)
---------------------------------- ------------------------- --------------- ---------- ----------
Reportable segment profit/(loss)
before tax (1,547) (424) - (1,971)
Taxation - - - -
================================== ========================= =============== ========== ==========
Reportable segment profit/(loss)
after taxation (1,547) (424) - (1,971)
================================== ========================= =============== ========== ==========
Reportable segment assets
Carrying value of exploration
assets - 18,753 - 18,753
Additions to exploration assets - - - -
Effect of exchange rate movements - (290) - (290)
Total plant and equipment - 21,111 - 21,111
Prepaid abandonment fund - 300 - 300
Investment in subsidiaries 16,099 - ( 15,446) 653
Intercompany receivables 27,526 - (27,526) -
Total non-current assets 43,625 39,874 (42,972) 40,527
Other assets 115 (10) - 105
================================== ========================= =============== ========== ==========
Consolidated total assets 43,740 38,694 (42,972) 40,632
================================== ========================= =============== ========== ==========
Reportable segmental liabilities
Trade payables (494) (277) - (771)
External loan balances (541) - - (541)
Inter-group borrowings - (32,677) 32,677 -
Other liabilities (450) (312) - (762)
================================== ========================= =============== ========== ==========
Consolidated total liabilities (1,485) (33,266) 32,677 (2,074)
================================== ========================= =============== ========== ==========
2020 UK Slovenia eliminations Total
GBP '000s GBP '000s GBP '000s GBP '000s
===================================== ========================= =============== ============ ============
Hydrocarbon sales - - - -
Intercompany sales - 267 (267) -
Total revenue - - - -
Cost of sales (10) (111) (121)
Administrative expenses (2,013) (506) 240 (2,279)
Material non-cash items
Depreciation (2) (395) - (397)
Net finance costs (35) - - (35)
===================================== ========================= =============== ============ ============
Reportable segment profit/(loss)
before tax (2,060) (745) (27) (2,831)
Taxation - - - -
===================================== ========================= =============== ============ ============
Reportable segment profit/(loss)
after taxation (2,060) (745) (27) (2,831)
===================================== ========================= =============== ============ ============
Reportable segment assets
Carrying value of exploration assets - 18,576 - 18,576
Additions to exploration assets - - - -
Effect of exchange rate movements - 177 177
Total plant and equipment - 22,783 - 22,783
Prepaid abandonment fund - 300 - 300
Investment in subsidiaries 16,096 - (15,443) 653
Intercompany receivables 27,447 - (27,447) -
Total non-current assets 43,543 41,836 (42,8900 42,489
Other assets 175 6 - 181
===================================== ========================= =============== ============ ============
Consolidated total assets 43,718 41,842 (42,890) 42,670
===================================== ========================= =============== ============ ============
Reportable segmental liabilities
Trade payables (417) (278) - (695)
External loan balances (202) - - (202)
Inter-group borrowings - (35,083) 35,083 -
Other liabilities (450) (328) - (778)
===================================== ========================= =============== ============ ============
Consolidated total liabilities (1,069) (35,689) (35,083) (1,675)
===================================== ========================= =============== ============ ============
Revenue from customers
Revenue for 2021 was nil (2020: nil). During the year under review and the prior year, the Company has not recognised revenue due to the ongoing dispute over revenue entitlement with its JV partner Geoenergo. The Company announced in March 2022 that it had elected to invoice for its share of production revenues for the months April 2020 through to February 2022. The performance obligations are set out in the Group's revenue recognition policy. 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 31 Year ended
December 31 December
2021 2020
GBP '000s GBP '000s
============================================ ==================================== ==============
Employee costs 1,067 729
Share based payment charge - 456
Depreciation 328 397
Auditor's remuneration:
Audit Fees - PKF 45 43
Fees payable to the company's auditor other - -
services
============================================ ==================================== ==============
45 43
4. Employees and directors
a) Employees
The average number of persons employed by the Group, including Executive Directors, was:
Year ended 31 December Year ended
2021 31 December
2020
========================= ============================================================== ==============
Management and technical 7 10
========================= ============================================================== ==============
The average number of persons employed by the Company, including Executive Directors, was:
Year ended 31 December Year ended
2021 31 December
2020
========================= ================================ ==============
Management and technical 7 7
========================= ================================ ==============
b) Directors and employee's remuneration
Year ended 31 December Year ended
2021 31 December
2020
====================== ================================================================= ==============
Employees & Directors
Wages and salaries 826 628
Social security costs 145 56
Pension costs 2 7
Bonuses 86 38
Share-based payments - 456
Taxable benefits 8 -
====================== ================================================================= ==============
1,067 1,185
====================== ================================================================= ==============
c) Directors' remuneration
Please see Remuneration report on pages 28-30.
5. Finance income and costs recognised in the year
Year ended 31 Year ended
Finance costs December 31 December
2021 2020
GBP '000s GBP '000s
========================= ================================ ==============
Interest charge on loans (26) (24)
Bank charges (2) (11)
========================= ================================ ==============
(28) (35)
========================= ================================ ==============
Please refer to Note 15 for a description of financing activity during the year.
6. Income tax expense
Year ended 31 December Year ended
2021 31 December
GBP '000s 2020
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
2021 2020
GBP '000s GBP '000s
================================================== ========================== ==============
( 2,831
Loss for the year (1,971) )
I ncom e t ax usi ng t he C om p a n y 's domes
t ic t ax r a te at 19% (2020: 19%) (375) (537)
Effects of:
Net increase in unrecognised losses c/f 375 537
Effect of tax rates in foreign jurisdictions - -
Other non-deductible expenses - -
-------------------------------------------------- -------------------------- --------------
Total tax expense for the year - -
-------------------------------------------------- -------------------------- --------------
7. Deferred tax - Group and Company
Year ended 31 December Year ended
2021 31 December
GBP '000s 2020
GBP '000s
======================================= =================================================== ==============
Group
( 51,255
Total tax losses - UK and Slovenia (53,227) )
======================================= =================================================== ==============
U n r e co r d e d d e f e r r ed t ax
ass et at 1 9% (2020: 1 9 %) 9,049 8,713
======================================= =================================================== ==============
Company
( 13,632
Total tax losses (15,080) )
======================================= =================================================== ==============
U n r e co r d e d d e f e r r ed t ax
ass et at 1 9% (2020: 1 9 %) 1,548 2,317
======================================= =================================================== ==============
No deferred tax asset has been recognised in respect of the tax losses carried forward, due to the uncertainty as to
when profits will be generated. Refer to critical accounting estimates and judgments.
8. Earnings per share
Year ended 31 December Year ended
2021 31 December
GBP '000s 2020
GBP '000s
============================================= ================================================ ==============
Result for the year
============================================= ================================================ ==============
Total loss for the year attributable to ( 2,831
equity shareholders (1,971) )
Weighted average number of ordinary shares Number Number
For basic earnings per share 108,007,151 60,693,793
Loss per share (Pence) (1.83) ( 4.66)
As the result for the year was a loss, the basic and diluted loss per share are the same. At 31 December 2021, potentially dilutive instruments in issue were 29,262,396 (2020: 65,868,482). Dilutive shares arise from share options and warrants issued by the Company.
9. Business Combinations
There have been no acquisitions during the period.
The Board strategically expect acquisitions to be a common component of growth in the future.
Acquisitions made during the period to 31 December 2020 were:
Energetical Limited (renamed to Ascent Hispanic Resources Limited)
As a first step towards building its Cuban portfolio, the Company acquired 100% of the share capital of Energetical Limited on 13 April 2020. Energetical Limited is a UK Company with exclusive rights to secure a Production Sharing Contract ('PSC') on a producing onshore Cuban oil licence, and this was the primary reason for acquisition. The initial consideration for the acquisition of Energetical comprised of the issue of six million new ordinary shares ("Consideration Shares") to the selling shareholders ("Sellers") of Energetical. A further GBP450,000 of contingent consideration will be payable on the execution of production sharing contracts covering the 9B Block, of which GBP350,000 will be satisfied by the issue of new ordinary shares ("Deferred Consideration Shares"), priced at the 30-day VWAP at the time of issue and GBP100,000 will be paid in cash. The Sellers have agreed not to dispose of any of the Consideration Shares for a period of one year. The Company has agreed to a carve-out to this lock-in which permits the sale of up to an aggregate of one million Consideration Shares following the expiry of an initial three- month period.
The amount of identifiable net assets assumed at the acquisition date is shown below:
Fair Values
GBP '000s
Recognised amounts of net assets acquired and liabilities assumed
Identifiable net assets -
Goodwill 653
============================================= =====================
Total Consideration 653
============================================= =====================
Satisfied by:
Consideration - new ordinary shares issued at
3.38p 203
Contingent consideration 450
============================================== ===
Total Consideration 653
============================================== ===
The Company successfully attained extensions in April and November 2021 to the exclusive MOU covering the rights to negotiate PSCs with the exclusivity lapsing on 31 December 2021 and the MOU remaining on a non-exclusive basis until the end of April 2022. The value of the goodwill could be impaired depending on future decision taken by the Company.
10. Property, Plant and Equipment - Group
Computer Equipment Developed Total
Cost GBP '000s Oil & Gas GBP '000s
Assets
GBP '000s
================================== ================================================= =========== ===========
At 1 January 2020 6 23,483 23,489
Additions - - -
Effect of exchange rate movements - 1,111 1,111
================================== ================================================= =========== ===========
At 31 December 2020 6 24,594 24,600
================================== ================================================= =========== ===========
At 1 January 2021 6 24,594 24,600
Additions 5 - 5
Effect of exchange rate movements - (1,631) (1,631)
================================== ================================================= =========== ===========
At 31 December 2021 11 22,963 22,974
================================== ================================================= =========== ===========
Depreciation
At 1 January 2020 (6) (1,414) (1,420)
Charge for the year 0 (397) (397)
Effect of exchange rate movements - -
================================== ================================================= =========== ===========
At 31 December 2020 (6) (1,811) (1,817)
================================== ================================================= =========== ===========
At 1 January 2021 (6) (1,811) (1,817)
Charge for the year - (328) (328)
Effect of exchange rate movements - 282 282
================================== ================================================= =========== ===========
At 31 December 2021 (6) (1,857) (1,863)
Carrying value
================================== ================================================= =========== ===========
At 31 December 2021 5 21,106 21,111
================================== ================================================= =========== ===========
A t 31 De c e m ber 2020 - 22,783 22,783
================================== ================================================= =========== ===========
A t 1 Jan u a ry 2020 6 23,483 23,489
================================== ================================================= =========== ===========
No impairment has been recognised during the year. During the year the concession holder, Geoenergo, was granted an 18-month concession extension to 25 November 2023 to continue with the planned development of the Petišovci field. Details of the impairment judgments and estimates in the fair value less cost to develop assessment as set out in Note 1, including the significant judgment regarding the ability to renew the concession and obtain required permits. Should the permits not be granted, or the concession extension confirmed, the carrying value of these assets would be impaired as the permits are required to maintain commercial production rates at the wells and in the absence of renewal of the concession the Company would not hold title to the asset.
11. Exploration and evaluation assets - Group
Cost Slovenia Total
GBP '000s GBP '000s
=================================== ========== =============
At 1 January 2020 18,576 18,576
Additions - -
Effects of exchange rate movements 177 177
=================================== ========== =============
At 31 December 2020 18,753 18,753
=================================== ========== =============
At 1 January 2021 18,753 18,753
Additions - -
Effects of exchange rate movements (290) (290)
=================================== ========== =============
At 31 December 2021 18,463 18,463
=================================== ========== =============
At 31 December 2021 18,463 18,463
1 8 ,
A t 31 De c e m ber 2020 1 8 , 753 753
A t 1 Jan u a ry 2020 1 8 ,576 1 8 ,576
For the purposes of impairment testing the intangible oil and gas assets are allocated to the Group's cash- generating unit, which represent the lowest level within the Group at which the intangible oil and gas assets are measured for internal management purposes, which is not higher than the Group's operating segments as reported in Note 2. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as set out in Note 1.
The amounts for intangible exploration assets represent costs incurred on active exploration projects. Amounts capitalised are assessed for impairment indicators under IFRS 6 at each period end as detailed in the Group's accounting policy. In addition, the Group routinely reviews the economic model and reasonably possible sensitivities and considers whether there are indicators of impairment. As at 31 December 2021 and 2020 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 and is dependent on the extension of the licence expiry dates, which is scheduled for 25 November 2023. Should the extension not be granted the value of the asset may be impaired.
12. Investment in subsidiaries - Company
2021 2020
GBP '000s GBP '000s
======================= ========== ==========
Cost
At 1 January 16,096 15,443
Additions 6 653
======================= ========== ==========
At 31 December 16,102 16,096
======================= ========== ==========
Accumulated impairment
At 1 January - -
Impairment - -
======================= ========== ==========
At 31 December - -
======================= ========== ==========
Net book value
======================= ========== ==========
At 31 December 16,102 16,096
======================= ========== ==========
The Company's subsidiary undertakings at the date of issue of these financial statements, which are all 100% owned,
are set out below:
Name of company & Principal activity Country of % of share % of share
registered office incorporation capital held capital held
address 2021 2020
============================ ========================= ================== ============== ===================
Ascent Slovenia Limited
Tower Gate Place Tal-Qroqq
Street M si d a, M
al ta Oil and Gas exploration Malta 1 0 0% 1 0 0%
Ascent Resources doo
Glavna ulica 7
9220 Lendava Slovenia Oil and Gas exploration Slovenia 1 0 0% 1 0 0%
Infrastructure
Trameta doo owner Slovenia 1 0 0% 1 0 0%
Glavna ulica 7
9220 Lendava Slovenia
Ascent Hispanic Resources
UK Limited
5 New Street Square England and
London EC4A 3TW Oil and Gas exploration Wales 1 0 0% 1 0 0%
Ascent Hispanic Ventures, Oil and Gas exploration Spain 100% N/A - incorporated
S.L. in 2021
C Lluis Muntadas,
8
08035 Barcelona
All subsidiary companies are held directly by Ascent Resources plc.
Consideration of the carrying value of investments is carried out alongside the assessments made in respect of the recoverability of carrying value of the group's producing and intangibles assets. The judgements and estimates made therein are the same as for investments and as such no separate disclosure is made.
13. Trade and other receivables - Group
2021 2020
GBP '000s GBP '000s
============================== ========== ==========
VAT recoverable 42 49
Prepaid abandonment liability 300 300
Prepayments & accrued income (34) -
============================== ========== ==========
308 350
============================== ========== ==========
Less non-current portion (300) (300)
============================== ========== ==========
Current portion 8 66
============================== ========== ==========
14. Trade and other receivables - Company
2021 2020
GBP '000s GBP '000s
============================= ========== ==========
VAT recoverable 19 21
Prepayments & accrued income 7 47
============================= ========== ==========
26 68
============================= ========== ==========
15. Borrowings - Group and Company
Group 2021 2020
GBP '000s GBP '000s
======================= ========== ==========
Current
Borrowings - -
Convertible loan notes 5 5
Non-current
Borrowing 536 197
======================= ========== ==========
541 202
======================= ========== ==========
Company
Current
Borrowings - -
Convertible loan notes 5 5
Non-current
Borrowing 536 197
======================= ========== ==========
541 202
======================= ========== ==========
The non-current borrowings relate to the loan arrangement with Riverfort Global Opportunities with a loan note balance at end of 2020 of GBP270,000, comprising GBP197,000 recognised as the debt component and a further GBP73,000 recognised in Equity Reserve. In December 2020 the Company signed a loan agreement provided equally by Align Research Limited and Riverfort Global Opportunities and under this loan agreement, the Company drew down a total of GBP375,000 in 2021, representing GBP125,000 from Align and GBP250,000 from Riverfort. During 2021 the Company repaid GBP125,000 resulting in a loan balance of GBP250,000 as of the end of 2021.
In December 2021, the Company extended the maturity of the outstanding loan amount so that it is payable in six equal instalments commencing February 2023.
The current convertible loan was due for redemption on 19 November 2019 and at the balance sheet date GBP5,625 remain unclaimed.
16. Provisions - Group
GBP000s
========================== =======
At 1 January 2020 263
Foreign exchange movement 5
Provision 60
========================== =======
At 31 December 2020 328
-------------------------- -------
At 1 January 2021 328
Foreign exchange movement (16)
Provision -
========================== =======
At 31 December 2021 312
========================== =======
The amount provided for decommissioning costs represents the Group's share of site restoration costs for the Petišovci field in Slovenia. The most recent estimate is that the year-end provision will become payable after 2037. During 2017 the Company has placed EUR300,000 (GBP268,000) on deposit as collateral against this liability see Note 13.
17. Contingent Consideration due on Acquisition
Group 2021 2020
GBP '000s GBP '000s
============================================== ========== ==========
Non-current
Ascent Hispanic Limited (formerly Energetical
Limited) 450 450
============================================== ========== ==========
450 450
============================================== ========== ==========
The contingent consideration is based on the defined contingent consideration in the acquisition of Ascent Hispanic Limited (Formerly Energetical Limited), comprising GBP100,000.00 in cash and a further GBP350,000.00 in shares. The Company has not discounted the contingent consideration since the impact would not be material. Please refer to note 9 of the financial statements for the consideration in the acquisition of Ascent Hispanic Limited.
18. Trade and other payables - Group
2021 2020
GBP '000s GBP '000s
================================ ========== ==========
Trade payables 581 573
Tax and social security payable 16 56
Accruals and deferred income 174 66
================================ ========== ==========
771 695
================================ ========== ==========
19. Trade and other payables - Company
2021 2020
GBP '000s GBP '000s
================================ ========== ==========
Trade payables 309 295
Tax and social security payable 10 56
Accruals and deferred income 174 66
================================ ========== ==========
493 417
================================ ========== ==========
20. Called up share capital
2021 2020
GBP '000s GBP '000s
============================================= =========== ===============
Authorised
2,000,000,000 ordinary shares of 0.5p each 10,000 10 ,000
Allotted, called up and fully paid
3 , 01 9, 64 8, 4 52 d e f e r r ed s h a r
es of 0. 1 95p e ach 5,888 5,888
1 , 737 , 1 10 , 7 63 d e f e r r ed s h a r
es of 0. 0 9p e ach 1,563 1 , 563
109,376,804 o r di n a r y sh a r es of 0.5p
e ach 547 477
7,998 7,604
Reconciliation of share capital movement 2021 2020
Number Number
============================================= =========== ===============
At 1 January 95,283,281 3,019,648,452
============================================= =========== ===============
Share consolidation - (2,989,451,968)
Issue of Trameta consideration shares - 91,167
Issue of shares during the year 14,093,523 64,995,630
============================================= =========== ===============
At 31 December 109,376,804 95,283,281
============================================= =========== ===============
The deferred shares have no voting rights and are not eligible for dividends.
Shares issued during the year
-- On 6 January 2021, the Company issued 208,991 ordinary shares at a price of 5.74p to a professional advisor in lieu of fees.
-- On 11 January 2021, the Company received GBP62,500 in respect to a warrants exercise over 833,333 new ordinary shares. Additionally, the Company issued 66,667 new shares at 7.5p in lieu of the 8% cash coupon.
-- On 12 January 2021, the Company received GBP55,000 in respect to a warrants exercise over 1,000,000 new ordinary shares.
-- On 2 February 2021, the Company received GBP7,500 in respect to a warrants exercise over 187,500 new ordinary shares.
-- On 4 February 2021, the Company received GBP62,500 in respect to a warrants exercise over 833,333 new ordinary shares. Additionally, the Company issued 66,667 new shares at 7.5p in lieu of the 8% cash coupon.
-- On 5 February 2021, received GBP62,500 in respect to a warrants exercise over 900,000 new ordinary shares.
-- On 11 February 2021, the Company raised GBP1m via a placing of 9,997,032 ordinary shares with investors.
Shares issued during the prior year
Issuance of equity during the prior year:
-- On 13 March 2020, the Company raised GBP485,000 (GBP445,802 net of costs) via the Placing of 9,700,000 Ordinary
shares with investors
-- On 24 March 2020, the Company issued 166,666 shares at a price of 5p to exiting directors in lieu of a cash settlement and a further 390,000 shares at a price of 5p each per share and 214,286 shares at a price of 3.5p each to select professional advisors.
-- On 8 April 2020, the Company issued 1,000,000 ordinary shares at a placing price of 5p per share in order to settle an amount of GBP50,000 with a relevant investor
-- On 8 April 2002, the Company issued 91,167 ordinary shares as a result of the acquisition of Trameta doo announced on 1 August 2015. This was the final payment and no further contingent consideration of shares will be due.
-- On 14 April 2020, the Company agreed to purchase Energetical Limited for the issuance of 6,000,000 new ordinary shares
-- On 20 April 2020, the Company issued 623,777 new ordinary shares of 0.5p at a price of 3.5p to a professional advisor in lieu of fees.
-- On 30 April 2020. The Company issued 7,727,272 new ordinary shares of 0.5p at a price of 2.75p, raising gross proceeds of GBP212,500.
-- On 4 May 2020, the Company issued 750,000 ordinary shares at a placing price of 5p per share in order to settle an amount outstanding in the amount of GBP37,500
-- On 7 May 2020, the Company issued 2,250,000 ordinary shares at a placing price of 5p per share relating to a
settlement of remaining sums from a relevant investor .
-- On 6 August 2020 the Company raised GBP300,000 via the placing of 15,000,000 Ordinary shares with investors
-- On 6 August 2020 the Company issued 1,500,000 ordinary shares at a placing price of 2p per share relating to the settle amounts with creditors.
-- On 15 October 2020 the Company issued 525,090 ordinary shares in lieu of payment of consultancy fees at a price of 4p per share.
-- On 23 October 2020 the Company received GBP50,000 in respect of a warrants exercise of 2,000,000 ordinary
shares.
-- On 26 October 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for consideration of GBP100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8% cash coupon on the convertible loan amount.
-- On 5 November 2020 the Company issued 457,720 ordinary shares to a supplier for financial and economic modelling services rendered in the months of September and October.
-- On 19 November 2020 the Company received notice in respect of warrants exercised in the amount of 1,250,00 ordinary shares
-- On 1 December 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for consideration of GBP100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8% cash coupon on the convertible loan amount
-- On 1 December 2020 the Company issued 480,000 ordinary shares at a price of 7.5p per share in respect of a supplier invoice
Reserve description and purpose
The following describes the nature and purpose of each reserve within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Merger reserve: Value of shares, in excess of nominal value, issued with respect of the Trameta acquisition in 2016.
-- Equity reserve: Amount of proceeds on issue of convertible debt relating to the equity component and contribution on modification of the convertible loan notes, i.e. option to convert the debt into share capital.
-- Share premium: Amounts subscribed for share capital in excess of nominal value less costs of shares associated with share issues.
-- Share-based payment reserve: Value of share options granted and calculated with reference to a binomial pricing model. When options lapse or are exercised, amounts are transferred from this account to retained earnings.
-- Translation reserve: Exchange movements arising on the retranslation of net assets of operation into the presentation currency.
-- Accumulated losses: Cumulative net gains and losses recognised in consolidated income.
21. Exploration expenditure commitments
In order to maintain an interest in the oil and gas permits in which the Group is involved, the Group is committed to
meet the conditions under which the permits were granted and the obligations of any joint operating agreements.
The timing and the amount of exploration expenditure commitments and obligations of the Group are subject to the work programmes required as per the permit commitments. This may vary significantly from the forecast programmes based upon the results of the work performed. Drilling results in any of the projects may also cause variations to the forecast programmes and consequent expenditure. Such activity may lead to accelerated or decreased expenditure. It is the Group's policy to seek joint operating partners at an early stage to reduce its commitments.
At 31 December 2021, the Group had exploration and expenditure commitments of GBP Nil (2020 - Nil).
22. Related party transactions
a) Group companies - transactions
2021 2020
Cash Services Total Cash Services Total
======================== ==== ============ ===== =========== =========== ===========
Ascent Slovenia Limited 17 - 17 267 - 267
Ascent Resources doo - - - - - -
Trameta doo - - - - - -
Trameta doo 56 - 56 - - -
======================== ==== ============ ===== =========== =========== ===========
79 - 79 267 - 267
======================== ==== ============ ===== =========== =========== ===========
b) Group companies - balances
2021 2020
Cash Services Total Cash Services Total
========================= ====== ============ ====== ====== ============ ======
Ascent Slovenia Limited 17,368 5,404 22,772 17,351 5,404 22,755
Ascent Resources doo 2,951 1,730 4,681 2,951 1 , 730 4,681
Trameta doo 11 - 11 11 - 11
Ascent Hispanic Ventures 56 - 56 - - -
========================= ====== ============ ====== ====== ============ ======
20,386 7,134 27,520 20,313 7,134 27,447
========================= ====== ============ ====== ====== ============ ======
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, however a provision of GBP4.8 million has been recognised in the accounts against potential future credit loss.
2021 2020
GBP '000s GBP '000s
========================================== ========== ==========
Expected credit loss provision start of
the year 4,800 4,800
Change in expected credit loss - -
========================================== ========== ==========
Expected credit loss provision at the end
of year 4,800 4,800
========================================== ========== ==========
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.
2021
There were no transactions involving directors during the year.
2020
There were no transactions involving directors during the year.
23. Events subsequent to the reporting period
On 18 January 2022 the Company raised GBP0.6m before expense for the placing of 18,181,818 ordinary shares of 0.5p each at a price of 3.3p per share.
On 3 February 2022 the Company issued a total of 1,636,363 ordinary shares at an issue price of 3.3p with 303,030 issued to a consultant in lieu of cash, 242,424 issued to staff and 1,090,909 issued to Align Research for research services to be provided over the next year.
On 22 February 2022 Ewen Ainsworth stepped down from his position of Non-executive Director effective from 28 February following his acceptance of a full-time executive position elsewhere.
In March 2022 , the Company announced in March 2022 that it had now elected to invoice for its share of production revenues for the months of April 2020 through to February 2022.
On 14 April 2022 the Company received a warrant exercise notice of 6,062,500 new ordinary shares for consideration of GBP242,500.
In April 2022, Slovenia approved amendments to its Mining Law which prohibit the use of mechanical stimulation for the purpose of exploring or producing hydrocarbons. Furthermore, the amendments confirm that it is now no longer possible to get a concession contract approved if it contemplates the use of mechanical stimulation for the purpose of producing hydrocarbons.
24. Share based payments
The Company has provided the Directors, certain employees and institutional investors with share options and warrants ('options'). Options are exercisable at a price equal to the closing market price of the Company's shares on the date of grant. The exercisable period varies and can be up to seven years once fully vested after which time the option lapses.
Details of the share options outstanding during the year are as follows:
Weighted
Shares Average
price
(pence)
=================================== ================ =============
O u t s t andi n g at 1 Jan u a ry
2020 1 5 2, 57 6 ,254 2.46
Outstanding at 31 December 2020 7,348,142 253.72
Exercisable at 31 December 2020 1,450,763 248.72
Outstanding at 1 January 2021 7,348,142 253.72
Granted during the year -
Expired during the year -
O u t s t andi n g at 31 De c e m
ber 2021 7 , 3 4 8 , 142 253.72
Exercisable at 31 December 2021 1,450,763 248.72
=================================== ================ =============
The value of the options is measured by the use of a binomial pricing model. The inputs into the binomial model made in 2021 were as follows.
Share price at grant date 2.9p - 778p Exercise price 5.0p - 2000p Volatility 50% Expected life 3-5 years Risk free rate 0.5% Expected dividend yield 0% ========================== ============
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous
5 years. The expected life is the expiry period of the options from the date of issue.
Options outstanding at 31 December 2021 have an exercise price in the range of 2.9p and 7.78p (31 December 2020: 2.9p and 7.78p) and a weighted average contractual life of 4.5 years (31 December 2020: 5.5 years). The amount recognised in the income statement for the year ended 31 December 2021 was nil (2020: GBP456,000).
Details of the warrants issued in the year are as follows:
Issued Exercisable Expiry date Number outstanding Exercise price
from
============ ================= ======================= ===================== ==================
23 December
2021 Anytime until 23 December 2023 3,600,000 7.50p
============ ================= ======================= ===================== ==================
Weighted
Warrants Average
price
(pence)
================================== ============ ============
Outstanding at 1 January 2021 22,068,420 5.44
Granted during the year 3,600,000 7.50
Exercised during the year (3,754,166) 6.80
O u t s t andi n g at 31 De c e m
ber 2021 21,914,254 6.80
Exercisable at 31 December 2021 21,914,254 6.80
================================== ============ ============
The warrants outstanding at the period end have a weighted average remaining contractual life of 1.8 years. The exercise prices of the warrants are between 4.00 - 7.50p per share.
25. Notes supporting the statement of cash flows
Group 2021 2020
GBP '000s GBP '000s
============================================ =========== ===========
Cash at bank and available on demand 97 115
Cash held on deposit against bank guarantee - -
============================================ =========== ===========
97 115
============================================ =========== ===========
Company 2021 2020
GBP '000s GBP '000s
============================================ =========== ===========
Cash at bank and available on demand 88 107
Cash held on deposit against bank guarantee - -
============================================ =========== ===========
88 107
============================================ =========== ===========
Significant non-cash transactions are as follows:
2021 2020
GBP '000s GBP '000s
========================================== ========== ==========
Conversion of loan notes - -
Interest charged on loans - -
Accretion charge on convertible loan notes - -
========================================== ========== ==========
26. Financial risk management
Group and Company
The Group's financial liabilities comprise CLNs, borrowings and trade payables. All liabilities are measured at
amortised cost. These are detailed in Notes 15, 0 and 18.
The Group has various financial assets, being trade receivables and cash, which arise directly from its operations. All are classified at amortised cost. These are detailed in Notes 13, 14 and 25.
The main risks arising from the Group's financial instruments are credit risk, liquidity risk and market risk (including interest risk and currency risk). The risk management policies employed by the Group to manage these risks are discussed below:
Credit risk
Credit risk is the risk of an unexpected loss if a counter party to a financial instrument fails to meet its commercial obligations. The Groups's maximum credit risk exposure is limited to the carrying amount of cash of GBP97,000 and trade and other receivables of GBP42,000. Credit risk is managed on a Group basis. Funds are deposited with financial institutions with a credit rating equivalent to, or above, the main UK clearing banks. The Company's liquid resources are invested having regard to the timing of payment to be made in the ordinary course of the Group's activities. All financial liabilities are payable in the short term (between 0 to 3 months) and the Group maintains adequate bank balances to meet those liabilities.
The Group makes allowances for impairment of receivables where there is an ECL identified. Refer to Note 22 for
details of the intercompany loan ECL assessment.
The credit risk on cash is considered to be limited because the counterparties are financial institutions with high and
good credit ratings assigned by international credit rating agencies in the UK.
The carrying amount of financial assets, trade receivables and cash held with financial institutions recorded in the financial statements represents the exposure to credit risk for the Group.
At Company level, there is the risk of impairment of inter-company receivables if the full amount is not deemed
as recoverable from the relevant subsidiary company. These amounts are written down when their deemed recoverable amount is deemed less than the current carrying value. An IFRS 9 assessment has been carried out as per Note 1.
Market risk
i) Currency risk
Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Company.
The Group's operations are predominantly in Slovenia. Foreign exchange risk arises from translating the euro earnings, assets and liabilities of the Ascent Resources doo and Ascent Slovenia Limited into sterling. The Group manages exposures that arise from receipt of monies in a non-functional currency by matching receipts and payments in the same currency.
The Company often raises funds for future development through the issue of new shares in sterling. These funds are predominantly to pay for the Company's exploration costs abroad in euros. As such any sterling balances held are at risk of currency fluctuations and may prove to be insufficient to meet the Company's planned euro requirements if there is devaluation.
The Group's and Company's exposure to foreign currency risk at the end of the reporting period is summarised below. All amounts are presented in GBP equivalent.
Group Company
2021 2020 2021 2020
============================ ==================================== ========== ======= =======
Trade and other receivables - - - -
Cash and cash equivalents 9 8 7 -
Trade and other payables (277) (279) 2 -
============================ ==================================== ========== ======= =======
Net Exposure (268) ( 271) 9 -
============================ ==================================== ========== ======= =======
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
Year ended 31 December Year ended
Group 2021 31 December
2020
============================== =================================================================== ==============
Profit or loss
10% strengthening of sterling 40 135
10% weakening of sterling (48) (9)
Equity
( 3 , 8
10% strengthening of sterling (3,598) 39 )
10% weakening of sterling 4,398 4,693
Company
Profit or loss
10% strengthening of sterling - -
10% weakening of sterling - -
Equity
( 4 , 070
10% strengthening of sterling (3,045) )
10% weakening of sterling 3,722 4,832
============================== =================================================================== ==============
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 2021, the Group and Company has GBP loans valued at GBP536,000 rates of 8% per annum. At 31 December 2020, the Group and Company had GBP loans valued at GBP270,000 rates of 8% 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
2021 2020 2021 2020
Categorisation of Borrowings - Group GBP '000s GBP '000s GBP '000s GBP '000s
===================================== ==================== ========== ========== ==========
Less than six months - loans and - - - -
borrowings
Less than six months - trade and - - - -
other payables
Between six months and a year - - - -
Over one year 536 197 536 197
Capital management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the balance between debt and equity. The capital structure of the Group as at 31 December 2021 consisted of equity attributable to the equity holders of the Company, totalling
GBP41,069. The Group reviews the capital structure on an on-going basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through new share issues and the issue of new debt or the repayment of existing debt.
There are no externally imposed capital requirements.
Fair value of financial instruments
Set in the foregoing is a comparison of carrying amounts and fair values of the Group's and the Company's financial
instruments:
Carrying Fair Value Carrying Fair Value
amount Year Year ended amount Year ended
Categorisation of Financial Assets ended 31 31 December Year ended 31 December
and Liabilities - Group December 2021 31 December 2020
2021 2020
====================================== =================== ================ ================= ================
Financial assets
Cash and equivalents - unrestricted 97 97 115 115
Cash and equivalents - restricted - - - -
Trade receivables 48 48 66 66
Prepaid abandonment fund (refundable) 300 300 240 240
Financial liabilities
Trade and other payables 770 770 695 695
Loans at fixed rate 536 536 197 197
Carrying
Carrying
amount Fair Value amount Fair Value
Year ended Year ended Year ended Year ended
Capital management - Company 31 December 31 December 31 December 31 December
2021 2021 2020 2020
================================= ================================ =============== ============= ===============
Financial assets
Cash and equivalents -
unrestricted 88 88 107 107
Trade receivables 66 66 68 68
Financial liabilities
Trade and other payables 493 493 417 417
Loans at fixed rate 536 536 197 197
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 and inter-company receivables
All trade and other receivables and payables have a remaining life of less than one year. The ageing profile of the Group and Company receivable and payables are shown in Notes 13, 14, 14, 18 and 19.
Cash and cash equivalents
Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation to fair value.
27. Commitments & contingencies
As at 31 December 2021, the Company recognises GBP450,000 in contingent consideration relating to the acquisition of Energetical Limited (renamed to Ascent Hispanic Resources UK Limited).
On 10 March 2021, the Company announced that its JV Service Provider, Petro Geo, issued a local enforcement order attempting to claim payment for an unsubstantiated amount of EUR662,288.63 plus interest of EUR12,103.19.
Decommissioning costs for the Petišovci Project are estimated to be EUR9m, consisting of EUR0.5m for each of the 16 proposed wells plus an additional EUR1m for pipes and related infrastructure. Decommissioning costs become payable at the end of a wells operational life and a provision for decommissioning costs is made only when a well is put into production. The estimate for pipes and infrastructure is based on all wells being put into operation. With the change in the Sloven mining law in in April 2022 creating a ban on mechanical stimulation, further development of the concession is uncertain as is the development of additional wells. A provision of GBP312,000 (Note 16) has been made for the decommissioning of the PG10 and PG11A wells that are currently in production and represents the Group's share of the restoration costs for the Petišovci field.
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.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR SDMSASEESEDM
(END) Dow Jones Newswires
June 30, 2022 04:45 ET (08:45 GMT)
1 Year Ascent Resources Chart |
1 Month Ascent Resources Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
