Ascent Resources plc LON:AST, the AIM quoted European oil and gas exploration and production company is pleased to report its full year results for the year ended 31 December 2015.
Highlights:
-- Significant progress made in the IPPC Permit application process -- Second route to market identified and in advanced stage discussions to implement -- Raised GBP1.2million via equity placings through PrimaryBid.com -- New loan facility secured
Post Period Highlights:
-- GBP0.5m raised through PrimaryBid.com in April 2016 -- Preliminary approach from Cadogan highlighting the potential value in the Ascent asset -- Colin Hutchinson appointed as permanent CEO
Clive Carver, Chairman of Ascent, commented: “2015 has been a year of solid progress for Ascent. The IPPC process has been a long one, however we are now at the final hurdle and expect a positive outcome from the Slovenian courts. In addition, we’ve developed an alternative route to market which should accelerate our journey to first gas which we expect in 2016.
“We would like to take this opportunity to thank our partners and shareholders for your support throughout 2015 and look forward to 2016 with optimism.”
Chairman’s Statement
Introduction
I am pleased to present the financial results for the year ended 31 December 2015.
The issue of the permitting delays at our Petišovci project was raised at the highest political level by the UK Government and we too raised it with the visiting Slovenian Prime Minister late in 2015.
Towards the end of the period under review and continuing in the first few months of 2016 we have experienced a positive change in the attitude of those on whom we rely to commence production.
In addition, we have also seen an increase in the interest displayed by industry participants in developing our Petišovci gas field once a clear route to first gas exists which is encouraging.
Routes to first gas
Shareholders may recall that we have three theoretical routes to first gas. The first and the most conventional route is to secure an environmental permit (‘IPPC’) to construct and operate a new gas treatment works. The gas would then be treated on site and piped into the national grid. The second involves sending the gas untreated across national boundaries, and the third is to supply untreated gas to a reconditioned methanol plant adjacent to our field.
IPPC permit
The preferred field development plan to date has been to install a Gas Gathering and Separation Station (‘GGSS’) to reduce the carbon dioxide content of the gas to meet national grid specifications, upgrade a metering station to at the entry point to the national grid and connect the wells via the GGSS to the metering station. The installation of the GGSS requires an IPPC permit, for which an application was lodged in June 2014; it was initially approved and put out to public consultation in December 2014 and following an extensive consultation process the Permit was awarded in July 2015.
Under the prevailing rules there is very little cost associated with objecting to the environment ministry’s decision. It was therefore predictable that the original decision would be appealed, however we were pleasantly surprised that only two protest groups challenged the original decision.
Under the appeal the Environment Minister was required to re-assess the decision of her department, which she did and in November 2015 confirmed the initial ruling to grant the Permit.
Under the rules, objectors again have the option to refer the Minister’s decision to the Slovenian Courts. Once again such a review is without material cost or inconvenience to the objector and inevitably one of the protesters saw fit to challenge the Minister’s decision.
Thankfully the referral to the Court provides the last opportunity for a decision to be reviewed. We understand that the Court has already reviewed the files and we await their decision.
One of the unexpected benefits of the prolonged delays has been that the costs of construction of the proposed treatment works have fallen, with some suppliers being prepared to either lease the equipment or to receive payment from gas sold.
In anticipation of a favourable and final ruling we have issued tenders for the metering station.
Cross border gas
The Lendava location of our gas field is within a few miles of the Austrian, Hungarian and Croatian borders. There exists a network of pipes that would allow our gas to be transported across the border to an existing and underutilised treatment facility. This route to market does not require the IPPC permit to have been issued
We are at an advanced stage of negotiations to have joint venture gas treated outside Slovenia. While this may not be a long term solution, in particular when the second phase of the Petišovci field is developed, it would bring forward the date when we first receive income from the field. It also allows us to demonstrate to any banks that may provide project funding prolonged data on well performance and reservoir behaviour which we expect to reduce the risk and therefore the cost of any project finance facility.
A further advantage of this arrangement would be positive cash flow during the period when the treatment works envisaged under the IPPC permit is constructed.
Sale of gas to a reconditioned methanol plant
A characteristic of methanol is that it can be produced from gas with a sulphur content higher than is acceptable for the national grid.
Therefore, with a disused methanol plant adjacent to our gas field we have for some time entertained thoughts of being able to achieve first gas without the need for a new treatment works and therefore without the need in the short term for an IPPC permit.
Our hopes were raised in September 2015 when we learnt that the methanol plant in question had been acquired by a Californian based company for EUR5 million. However, despite repeated attempts to contact the new owners, we have yet to establish whether their intention is to refurbish the plant or alternatively use it for scrap.
We have therefore for the time being discounted thoughts of first gas being achieved via methanol production.
Management
From September 2015, Colin Hutchinson has in addition to being Finance Director fulfilled the duties of the CEO. I am pleased to report that following his performance the non-executive directors have resolved to appoint Colin as permanent CEO.
Funding
We are unable to generate income until we have a clear route to first gas. We have therefore been dependent upon issues of equity and debt to meet the costs of maintaining a presence in the UK and Slovenia.
In both locations we have reduced costs to a minimum, with as noted above our new CEO also fulfilling the role of Finance Director. In the UK we have held numerous discussions with industry participants interested in developing the Petišovci project once a clear route to first gas exists.
In Slovenia our team has worked to maintain the condition of the field and prepare the tender documentation for the issue of the IPPC permit.
We have been reliant on the continued support of our largest stakeholders Henderson Global Investors and EnQuest PLC in the period under review and subsequently.
From Henderson Global Investors we drew GBP500,000 in convertible loan notes in February 2015, a further GBP450,000 from the GBP7 million debt facility in 2015 and have drawn a further GBP350,000 of the facility since the end of the year. In July 2015, we issued GBP2 million of Convertible Loan Notes (‘CLNs’) in full settlement of a GBP3 million liability.
In addition, we have taken in a further GBP1.2million in new equity over the same period thereby broadening the shareholder base and preserving the value of the Ascent investment in the Petišovci project.
Subsequent to the period under review, on 7 April 2016 the Company raised GBP500,000 gross (GBP477,500 net to the Company) via the placing of 35,714,285 new ordinary shares of 0.2p each in the Company at a price of 1.4p per Placing Share with investors using the Primarybid.com platform. These funds will meet the working capital requirements of the Company until the end of Q2 2016 during which time the final outcome of the IPPC Permit and negotiations around an alternative route to first gas are expected
Outlook
We have two live options for a clear path to first gas. Our expectation is that both will crystallise during Q2 2016. An early agreement on the cross border route would still allow first gas in 2016.
The Placing in April 2016 has provided the Company with sufficient funds to meet its commitments during the period when these options are expected to crystallise and enables the Company to make progress towards the next stage of the project.
More importantly perhaps, we believe that the value of the project as a whole has been recognised by industry participants, whose interest we expect to firm up once a clear route to first gas exists.
Clive Carver
Chairman
3 May 2016
Operations Review
Slovenia
Ascent Slovenia Ltd 75% (operator), Geoenergo d.o.o. 25% (concession holder)
The Petišovci Tight Gas Project, in a 98 km2 area in north eastern Slovenia, targets the development of substantial tight gas reservoirs known to be in Miocene clastic sediments.
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May 04, 2016 02:01 ET (06:01 GMT)
Ascent first acquired an interest in the Petišovci project in 2007 and in 2009 an extensive 3D seismic survey was conducted across the Petišovci concession area.
The structure has two sets of reservoirs, the shallower Upper Miocene and the deeper Middle Miocene. The Middle Miocene Badenian reservoirs, or Pg sands, are the focus of Ascent’s development objectives; however, the shallow reservoirs, which were extensively developed during the 1960s, are not considered to be fully depleted.
The north east region of Slovenia has been an oil and gas producing area since the early 1940s and contains much of the infrastructure necessary for processing and exporting produced hydrocarbons.
Two new appraisal wells, Pg-10 and Pg-11, drilled in 2010/2011 to a total vertical depth of 3,497 m and 3,500 m respectively, confirmed gas in all six Middle Miocene Badenian reservoirs (‘A’ to ‘F’ Pg sands). Gas flowed for the first time from the shallowest ‘A’ sands and, in addition, gas and condensate were sampled from the Lower Badenian ‘L’ to ‘Q’ sands. Pg-10 proved productive from the ‘F’ sands and Pg–11A (Pg-11 was side-tracked for technical reasons to Pg-11A) from the deeper ‘L’ to ‘Q’ sands. Both wells were successfully fracture stimulated resulting in flow rates of 8 MMscfd from the ‘F’ sands and 2 MMscfd from the ‘L, M and N’ sands, proving the commercial potential of both wells.
The data generated from the Pg-11 well, including three 18 m core samples and state-of-the-art wireline logging, supplemented the 2009 3D survey of the project area. The Company has reported independently verified P50 estimate of gas in place of 456 Bcf (13 Bm3; 76 MMboe).
Both wells will require a further recompletion prior to Phase One production which will help to better understand the long-term productivity performance of the reservoirs. The Phase One production results will inform decisions regarding the Phase Two, full field, Petišovci development.
Back-in Rights
Switzerland
The Hermrigen and Linden exploration permits in Switzerland cover undeveloped discoveries made by Elf Aquitaine in 1972 and 1982 with a combined estimated gas resource base of over 360 Bcf. As the original Hermrigen well was drilled before gas pipeline infrastructure was built in the area, the discovery has remained unappraised. Despite selling its interest in 2010 to eCORP, the current operator of the project, Ascent retains various back-in rights on any successful outcome of six conventional appraisal prospects, provided relevant apportioned costs are covered.
Netherlands
As part of the Sale and Purchase agreement with Tulip Oil for the Company’s former Dutch licences, Ascent has the right to re-purchase a 10% interest in each of the Dutch licences once Tulip has made a final investment decision with respect to the commercial development of the Terschelling-Noord Field.
Clive Carver
Chairman
