Ascent Resources plc: Final results for the year ended 31 December 2014
Tuesday, May 12, 2015
From the refinancing of Ascent in early 2013, the Company’s strategy has been to focus exclusively on the Petišovci project.  Accordingly, over the past two years we have exited from our interests in Hungary, the Netherlands, Switzerland and Italy.

At the macro level, Slovenia’s need for the Petišovci project has never been greater:

·  Like much of the EU, the country is in a weak economic condition and in need of new areas for growth.

·   Slovenia’s banks are pushing hard to raise foreign direct investment for their key industries.

·   We believe the Petišovci project is one of a relatively small number of fundable and viable projects the country has to offer to the international investment community.

·  Slovenia has very little domestic gas production and is reliant on expensive and potentially unreliable foreign gas.

·   The verified P50 contingent resources in the Petišovci field contain over 7 times the annual gas consumption in Slovenia.  Management production estimates for phase one equate to 10%- 15% of the country’s annual consumption and this proportion will increase significantly as the project moves into phase two.

·   The region in which the Petišovci fields are located is one of the less economically developed in Slovenia and would benefit from additional employment opportunities.

Encouragingly we now understand that the Slovenian Government has decided to adopt a more supportive view of the project than in previous years in recognition of its strategic importance to the country.

Farm-out process

Led by First Energy the Company has been conducting a farm-out process to find industry partners interested in working with Ascent to develop the Petišovci field to its full potential.  Farm-out partners would be expected to fund a large proportion of future development costs.

The Board has been impressed with the calibre and financial standing of the organisations expressing interest.  In the opinion of the Board all the organisations still remaining in the process are satisfied with the technical aspects of the Petišovci project and have the financial resources to see a deal through.  We believe this not only validates the asset, but also makes its commercialisation more likely.  Further announcements will be made on a farm-out transaction as the process develops.



Between December 2012 and April 2015 the Company raised £9.5 million through the issue of convertible loan notes (£9m) and new ordinary shares (£0.5m).  The Company also generated £0.5 million net of selling expenses from the sale of its interests in Hungary and the Netherlands.

Of the total £10m that was raised:

·    £3.5m was spent directly on the Petišovci project.

·   £3.0m was spent on debt repayments and servicing; this debt had been incurred prior to 2012 largely in relation to operations in Slovenia.

·    £3.1m was spent on group costs; the annual cost has been reduced by 30% between 2013 and 2014 due to a reduction in headcount and administrative expenses.

·  £0.4m was spent on former operations in Italy, Netherlands and Hungary.

Variation of loan note terms

The £8.5 million of convertible loan notes issued in 2013 and 2014 were due for repayment by the end of January 2015. Despite vigorous efforts by the Board to attract alternative sources of funding, Ascent did not have the funds required to pay the amounts due.  The Board therefore agreed with Henderson Global Investors Limited and Henderson Alternative Investment Advisor Limited (together, “Henderson”), being the majority holder of the convertible loan notes, to adjust the conversion price of all the convertible loan notes to 0.1 pence, in return for extending the maturity date of the convertible loan notes and terminating the accrual of interest on them.  Accordingly, on a fully diluted basis, the ordinary shareholders’ interest in Ascent, other than Henderson, fell from 28.7% to 13.7%.

Henderson’s ability to convert the loans without being obliged to make a general offer to all remaining shareholders was approved by independent shareholders on 19 February 2015. 

Recent funding

Short term funding of £550,000 was secured on 1 May 2015 through a placing of 275,000,000 new ordinary shares via the crowd funding Primary Bid platform.

Additionally the Company has agreed terms on a new £7 million loan facility with Henderson, demonstrating their continued support.  The loan can be drawn at any time from signing to the 30 June 2016 at the discretion of the lender.  The loan accrues interest at the rate of 7.5% per annum on the amount drawn and this is added to the amount of the loan.  The loan is subject to a drawdown fee of 1.75% per draw down, which is deducted from the funds advanced.  The loan is also subject to a repayment fee of 1.25% on any amounts repaid by the Company.  The balance outstanding is repayable on demand at any time.

Project funding

For many years the bank most closely associated with the Petišovci project was BNP Paribas. During 2014 we widened the banking pool to include The European Bank for Reconstruction and Development (“EBRD”), which has identified Slovenia as a country for increased engagement. We expect in the coming weeks to receive a conditional offer of project funding for the development of the first phase of the Petišovci project jointly from EBRD and BNP Paribas.

Operational issues at Petišovci

Power lines

Most of the delays experienced in 2014 stemmed from the decision of the state-owned electricity company to route a new high-tension power line directly over the existing gas gathering and separation station (the “Plant” or “GGSS”).  The field development plan had, from the outset, proposed the construction of an expanded gas processing facility on this site, to handle production from Pg-10, Pg-11A and subsequent wells, primarily but not exclusively to reduce the CO2 content to meet national transmission pipeline specifications.  Studies were commissioned to evaluate the impact of the high-voltage line on the proposed facility and it was concluded that electromagnetic and other effects of the power line presented an unacceptable safety hazard.

As a result of the above, the initial plans had to be abandoned and the Company and its partners commenced a search for an alternative site for the GGSS.  Eventually, a range of suitable, nearby land plots was identified and after extended negotiations with the owners, a commercially acceptable transaction was entered into for the acquisition of the land by the partners.

IPPC permits

In conjunction with the above, Ascent had to redesign the GGSS and related infrastructure for the new site, which was a time-consuming process.  These designs were incorporated into the application for an Integrated Pollution Prevention and Control (“IPPC”) permit, required under the terms of EU directives adopted by the Slovenian government.  Again, this was a very complex and extended process.  In July 2014 the application was completed and submitted to the Environmental Agency for approval.  Encouragingly the application was processed without undue delay and was approved, subject to public consultation in December 2014.

At the close of the public consultation phase, comments had been received from two potential stakeholders. These objectors have now had an opportunity to present their cases and while it is not possible to predict when this consultation process will conclude we continue in the expectation that the economic interest of the country and its inhabitants will prevail.

Nafta Petrochem

In September 2014 Nafta Petrochem, a leading subsidiary of Nafta Lendava, entered into a voluntary liquidation process.  Ascent was in the process of negotiating certain easement rights with this subsidiary for the routing of its 8″ gas delivery pipeline.  The liquidation has disrupted this process and new negotiations now need to be concluded with the administrator.

Field development programme

While the above problems have resulted in significant delays, other aspects of the field development programme have progressed satisfactorily.  For example, the specification and design of the measuring and metering station for delivery of processed gas to the national transmission system was completed and the related contract with the transmission operator was negotiated and signed.


A significant effort was made during 2014 in first negotiating and then attempting to enforce the Subscription Agreement with Global Power Sources s.r.l. (“GPS”) under which GPS would have invested some £11.7 million in Ascent by way of a subscription for new ordinary shares in the Company at a price of 0.8p per share.

As set out in the circular to shareholders dated 6 February 2015, since the failure of GPS to honour its commitment to subscribe for new ordinary shares, the Board has worked hard with GPS to try to find an alternative way forward.  However, GPS informed the Company towards the end of 2014 that it has experienced further significant issues as the result of its acquisition of Ascent Italia in 2013, which made the completion of any alternative transaction highly unlikely.

Your Board is of the view that pursuing GPS through the UK and Italian courts to seek redress for GPS’s failure to perform under the Subscription Agreement does not make commercial sense.


As set out in the Operations Review, the Petišovci project continues to be a very positive opportunity.

This, is in the opinion of the Board, is supported by the continuing interest in the farm-out process that is currently in progress, the recent funding transactions and the progression of the formal bank led project finance.

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