Ascent Resources Plc (LON:AST) Chief Executive Officer Colin Hutchinson caught up with DirectorsTalk for an exclusive interview to discuss the Petišovci project, IPPC permit and higher returns for the future
Q1: Now Colin, you announced an update to the market this morning, can you give us some background on your Petišovci project and what you’re looking to achieve in 2016?
A1: Just some background to the company and the project for people who aren’t familiar with it, Petišovci is a sense the sole asset, it’s a field with about 456 Bcf of gas located to the North-Eastern Slovenia and we’ve got a 75% interest in the project. Ascent Resource has been involved since 2007, things started to get interesting in guess in 2011 when we drilled 2 wells which proved the commerciality of the field and since then, we’ve been working through getting those wells into production. There were some issues in 2012 within the joint venture which we sold in 2013 when we restructured the agreements and then in 2014 and 2015, we’ve been working through the IPPC permitting process which we are now in the final stages of. The announcement today was to the effect that we’ve received one appeal, the permits been awarded 3 times now, it was initially awarded in December ’14 subject to public consultation, we went through public consultation and got the permit awarded again in June this year. 2 environmental organisations appealed against the permit, those appeals were rejected in November and one of them has now accepted the decision and one has decided to appeal through the courts. So based on this, with the legal advice we’ve been given and based on expectations for how long these things normally take, we hope to have the permit awarded sometime in 2016.
Q2: You’ve just touched on the Integrated Pollution Prevention and Control (IPPC) permit that you’re applying for and the appeal process, do you have any concerns over the local reaction to your project?
A2: I think we’ve been through a rather lengthy public consultation stretch for about 6 months at the beginning of this year and there’s just one party that continues to have concerns about the project and we’ve addressed all of their concerns, numerous times. The facility that we’re intending to build is not particularly controversial, it’s a standard sort of facility that you see across the world so the area in which we’re constructing the facility is well used to industry and oil and gas production so no, we don’t have any concerns about local reaction.
Q3: Is it right to think that when Ascent Resources Plc get this permit and can construct your own gas treatment works, you’ll be able to drive even higher returns from the Petišovci field?
A3: I think the permit’s important because the permit allows us to construct our own treatment works and that is the medium term goal for the company. Fortunately, as we’ve touched on in the announcement today, the company has an alternative route to market for the gas, this route to market is much cheaper and much quicker than the construction of our own treatment works and that should allow us to be in production by sometime in Q3 of next year. So the award of the permit or the appeal against the permit today, the news about that is good for 2 reasons really, firstly that there is just 1 appeal which makes it even more certain that we’ll get the permit in 2016 and secondly, the fact that there’s been an appeal means we can focus on a route that makes more sense for the company. At the moment, it’s cheaper and quicker getting the first gas more quickly, it’s good because we obviously get cash in more quickly, the company hasn’t really generated any cash apart from investment over the last number of years so to get cash in would be good and also, it’ll prove that the field can deliver what we said it’s going to deliver. We’ve been in discussion with a number of banks over the last year or so, we have a facility tentatively agreed with them subject to the permitting but it’s quite expensive and the reason it’s expensive is because the field hasn’t been in production yet. So if we can get into production more quickly and cheaply then we can bring the cost of raising finance, for the field development when we construct the treatment work, down significantly. So the treatment works is the end game but this alternative route to market is very official for the company.
