LON:AST | Ascent Resources - All Change For 2010 ? | Proselenes

18th Feb '10 by Proselenes

71 comments 23506 reads

......or will it be same same again.

EPIC : AST

Web site : http://www.ascentresources.co.uk

Dec 2009 Presentation : http://tiny.cc/Kx2xk

Dec 2009 Broker Note : http://www.mediafire.com/?tmnnkzmmznm

Jan 2010 Interview with the MD : http://tiny.cc/FAmYe

Funded with the most cash they have ever had, following the placing of last year, 2010 could be a year of significant performance, or will it be same same again from Ascent ?

Hopefully it shall be an exciting year and it should kick off soon with news from the PEN-101 drill before the end of Feb.

Fontana-1 completion of drilling and coring news should be due early March.

Spudding of PEN-106 should follow in early March along with PEN-105 and then PEN-101 going on line production.

And of course, Slovenia, lots of oil and gas potential, can Ascent deliver some of it in 2010 ?

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Proselenes

14th Oct '10

jonnyT, yes, thats the difference between management expectations and the independent (RPS) estimates.

Take the 412 bcf figure, then discount it for AST's 50%, and discount it again for 50% recovery, and you end up with say 100 bcf net prospective resources in the ground.

$9/mcf has been stable price in Slovenia for a long time (years), there is a severe need for more gas there. Onshore development costs are very much cheaper than offshore, and there is existing infrastructure in the area.

I would say you can use a value in the ground of $3.5/mcf and then using this as a figure for any DCF model.

Therefore value to AST would be 350 million US$, or say £220 million

Shares in issue is circa = 500 million

The value therefore to AST if this is turned into 2P reserves = circa 44p per share

You can see why this project has such importance to AST and if they do start to turn this prospective resource into producing reserves then their share price will re-rate rather rapidly.

Spud in November means we should start to know by Christmas, and a large Christmas present might be waiting for long suffering AST holders as the process starts to yield positive results, fingers crossed ;)

jonnyt

If only it were that simple!

corkboy

19th Oct '10

Hi,

I've only just started reading up on Ascent and it certainly looks as though the next few months could be very interesting indeed. As JonnyT has pointed out here, if anyone of a few prospects come in, then they could take off. I'm sorely tempted to take a punt although would like to get a better handle on Ascent's finances.

In the latest iterim report (http://www.ascentresources.co.uk/news/interim-results--6), there is the following note:

On 14 November 2007 the Company issued 2,500,000 £1 loan notes at par to finance further working capital requirements of the Group. The term of the loan notes is three years and the debt is unsecured.

Does this mean that £2.5m is due for repayment next month? As it is in "Current Liabilities", I presume so in which case most of the £3m in cash will disappear there?

The maiden profit that they report includes the one-off profit of £3.7m from the sale of the Swiss acreage to eCorp so should really be stripped out to give a more accurate on-going view. This would mean a loss of about £3.3m for the 6 months.

More encouragingly though, the interims also state:

The Directors are of the opinion that the Group and Company will have sufficient cash to fund its activities based on forecast cash flow information for a period in excess of twelve months from the date of approval of these financial statements.

Of the upcoming potential "company-makers":
- Hemrigen wont cost them anything unless they want to back in to a discovery so that sounds great.
- Agnani-2 is a shallow, on-shore well and so shouldn't cost much but I haven't seen any figures for the estimated cost?
- Lovászi and Peti?ovci; I see that drilling is due to start in November and that contingent reserves have been independently assessed as having a P50 of 412BCF which is great although how much is this well likely to cost? With the rig lined up, have they paid some of this in advance or what? (apologies if I'm thick but just trying to understand how this will be paid for.) I guess if this well comes in then they may farm down?

Thanks

21st Oct '10

corkboy, they have now received the next lump of cash from E-Corp for the Swiss farm out, that was after period end.

Loan notes I imagine will be rolled over in some kind of deal ? but you are correct in the term and repayment being due.

Anagni-2 - do not forget they sold their stake in the Italian drilling company but have a deal for a lot of drills at very cheap prices as part of the sales agreement, so costs for that should be very low.

Ah yep, good points Proselenes, thanks.

There was an RNS on the 29th of Sept (the most recent interims covered up until the 30th of June) which says that they have "completed the commercial conditions required to receive the additional €3million of consideration from the disposal of its Swiss subsidiary". Assuming that the can roll over the £3m loan notes then that should be about £5.5m available to fund drilling.

As you say, regarding Italy, they do state in the most recent interims:

The Company's 22.5% interest in Perazzoli Drilling (now known as LP Drilling srl) was sold to the original owners with the retention of preferential rights to utilise LP Drilling's fleet of three drilling rigs at discounted rates.

AFAICS, the only producing asset is Penészlek? They announced that they successfully reperforated the well in late May so I'd hope that would contribute a lot more to the Revenue figures for the second half of the year than it did in the first?

I dont know any of the history behind Ascent but references to "long-suffering shareholders" and a quick glance at the 5 year stock chart do provide a sober view. It does look as though there is huge potential on offer over the next few months though (especially the 412BCF prospect in Lovászi and Peti?ovci in November) and they have divested the non-core assets so it could be very good indeed. Assuming this well in November was successful, I guess they would need to farm-down in order to get this to production?

Thanks

Corkboy

22nd Oct '10

No, the first well can be hooked up to production within 2 months.

However it will take 20 plus wells to unlock the full value, we currently have funding for 1 at most.

However, a successful first well will unlock the value in terms of "farm in" partners and make it very attractive.

This is the conundrum, do they farm out first and take a lesser deal, or drill one hole and, all being well, get success and then get a much better farm out deal ?

corkboy, this summary was done by a poster on AFN.

Near term projects -:

Petisovci/Lovaszi

412bcf P50/200 P90/836bcf opportunity. The ownership of the licence area is messy -:
Lovaszi Prospect - 50% with MOL
Petisovci shallows - 50%
Pet/Glob deeps - 26.5%
New 75bcf opp on recently shot 61.5km2 seismic - 75%

Currently own 75% of intial 4 well campaign on a sole risk basis and in negotiations with Enquest to obtain 75% of the Pet/Glob deeps. The challenge now is funding and at 3m euros a pop the cashflow risk is clear to see. My estimates are that they have £6m ish cash in bank after E-Corp cash and at this point a sole risk well is a major cost. AST will be trying to weigh up going alone v farming and the decision will be made on the latest data received. A successful sole risk well will mean a far better farm out deal and more control for AST but i would prefer a reasonable farm out deal pre Nov drill. We only had 15% of the Pet/Glob deeps and the opp to obtain 75% and farm is great deal for AST as even a 50% farm down with zero drill costs,free carry would leave us with 37.5% v 26.5% we currently own.

Switzerland

Hemrigen/Essertines and Linden - AST share 45%

Gross gas in place estimated @ 600bcf+ by TRACS International

We have negotiated a great farm out deal raising 8m euro which has enabled AST to progress other operations within the portfolio. A 2 drill campaign planned initially at ZERO cost to AST and if successful back in rights available. AST were hoping for drill to commence in Q4, this is dependant on receiving final permit.

Frosinone Permit - Anagni

Awaiting permitting and i suspect that drill will be in Q1 2011. The opportunity @ Anagni has been estimated @ anything from 5 - 100mb !. The failure of previous wells in the lower parts of the structure has meant that the likely finds are going to be smaller reservoir(s). The project at this juncture is a cheap one and this will be our last chance to prove up our Italian opportunity.

Holland - M10/M11 blocks in N Sea

Own 54% of this project and we will either farm down, sell or lose the licence area. I believe the key to success lies with the ability to farm it down and i know AST are working very hard on this.

All of the above projects are 'company makers' and i will let the old hands work out the possible NAV's and they will be well in excess of £2 !!! should we gain success at all.

Other projects

Strangolagalli - Ripi
More seismic planned soon

Pen - Hungary

Awaiting pipeline modifications which should lead to gas increase, i am hoping for a 30%+ hike.AST will decide whether they take on more wells @ Pen, i don't think they will although the Igall project looks like another Pen so who really knows.

Igall Project

Seismic being shot and a Pen like opp in Pannonian bu oil instead of gas

There are other opps but i see them all as back burner projects and we have enough to focus on in the short term. The upside is clear to see, the challenge will be to get success before any more fund raising at higher sp.

Finally a new broker note to be issued and dependant on Enquest outcome, the new target sp will be some way north of current estimates of 20p. A rerating is on its way and a little success to validate the value is all we need.

4th Nov '10

News today.

300K US$ up front then 300K US$ per Bcf, seem to be getting their ducks in a row and concentrating on the main projects and disposing of the others for cash.

A deal with Enquest would be good to divest the Dutch North Sea blocks in exchange for a confirmed greater percentage in Slovenia, IMO.

Spud late this month for the PG-11 drill in Slovenia ?

Bit more on it.

http://www.proactiveinvestors.co.uk/companies/news/22713/ascent-sells-stake-in-hungarian-gas-field--22713.html

Ascent sells stake in Hungarian gas field

Thursday, November 04, 2010 by Ian Lyall

Proceeds from the sale to Hunga................................If the reserves are proved up, then Peti?ovci-Lovaszi will be one of the biggest onshore gas fields in Europe...........

.

9th Nov '10

http://proactiveinvestors.co.uk/companies/news/22835/slovenia-success-could-transform-ascent-resources-22835.html

Ascent Resources (LON:AST) is a stock many people struggle to understand.

There are too many moving parts to this oil and gas play, its critics claim.

While this might have be..............

Anyone else spot that the article isn't the wholly truthful?

lowersharpnose

I don't know the story, so I didn't. What's wrong with it johnnyt?

But Ascent doesn’t really want to dilute down its 75% stake in the project.
They currently own around 26%

Peti?ovci-Lovaszi’s gas is what finance director Simon Cunningham describes as being on the “conventional side of tight”.
By that he means the well Pg-11 is expected to flow without the help of any of the state-of-the art extraction techniques associated with tight gas.
However, with the help of horizontal wells or maybe even fraccing the flow rate will improve markedly.
I don't buy this. It is either low permeability or it isn't. Most tight gas wells will flow initially using a conventional vertical completion, but tend to peter out to a dribble within months. I do not expect PG-11 if drilled vertically and not fracced to be any different. Given that only 10BCF has been previously extracted despite numerous wells suggests this isn't on the conventional side of tight. It's tight full stop.

It is actually a development story.
Really? only 10BCF has been flowed, the asset isn't proven, far from it.

However to counter balance the article there is a lot of truth in the newer stimulation techniques, which have been used successfully in the analogous Southern North Sea and mainland Germany.

Nice to see a more realistic cost of the wells around 6 million euros rather than 4 million quoted by Envoi, though I still maintain this is light if horesontals and muti stage fracs are required

JonnyT

18th Nov '10

Translating this document it appears eCorp intend to have the rig in November and complete drilling to TD by end of 2010.

http://www.merzligen.ch/uploads/media/Info_Erdgasbohrung.pdf

That will make for an interesting year end, and even if its delayed a few weeks certainly an exciting January 2011.

Looking at the situation, AST have sold the asset and have presently 0% direct interest.

Yes they have "back in rights" if they so wish on success but the direct ownership is presently 0%.

Would they be obliged to update the market ? Perhaps not ? They could in fact just let e-Corp get on with it and only update the market on success and if they wished to "back in" to the project.

Interesting, I do hope they do RNS the spud, but they might not have to if they do not want to.

19th Nov '10

They pay 45% of the drill cost for a 45% share of possible 150 Bcf recoverable.

So they pay circa 4.5 million Euro's and potentially have 67.5 Bcf of gas.

I would say you can use a value in the ground of $3.5/mcf and then using this as a figure for any DCF model you could get say.

67.5Bcf x $3.5/mcf = Circa 236.25m US$ or £148.5m

500 million shares in issue so around 29.7p per share.

So, eCORP pay everything first with no risk or cost to AST, if its a success AST can back in for circa 4.5m Euros and get circa 30p per share uprating in the blink of an eye.

Not bad when your share price is 5.5p at the moment.

Slovenia is a potential company maker, as is this Swiss drill and so could be Anagni-2 in Italy, while PEN keeps cash flow coming in in the background.

Very good news out today IMO.

And that gets rid of the old loan notes, looks like Yorkville have paid back the £2m loan notes for AST and given AST a new loan by this paragraph of todays RNS

http://www.investegate.co.uk/Article.aspx?id=201011190700094713W

........The one year loan facility can be drawn down following completion of certain conditions precedent, including (inter alia) provision of security over Ascent's interest in its Hungarian subsidiary. The loan carries an interest rate of 6% per cent. per annum, payment of which will be covered from cashflow from Ascent's existing production. During the term of the facility, Yorkville has the right to convert the outstanding loan balance into shares in Ascent at prices ranging from 8.4p-10.5p. The loan will be secured by a charge over Ascent's assets..........

20th Nov '10

The trouble with any stock as it comes out of a period of financial difficulty and bad drilling luck is that there is a while host of stale bulls ready to sell the moment the price gets back to break even for them. And on to that the additional stock thats been generated during the past awkward times and also the profit takers who bought the bottom and selling for a near 100% profit and you will always get a sustained period of weakness in any rises.

I was encouraged to see the price get past 5.5p bid and stay above it, that has been a long time coming and should mean that the worst is over in terms of ridding the stale bulls from the shareholders list.

PG-11 is key for Slovenia and we now know is spudding very soon.

A good well and then they are farming out "Europe's largest onshore gas field".

As was said, if you want to turn a £25m company into a £250m company sometimes you have to do big things, and sole risk on PG-11 is a big thing but the benefits of a good well will be very big too. Risk/Reward as ever.

If eCORP can get Hermrigen-2 spudded soon as well (and according to their August release they intend to do it Nov/Dec) we might have 2 drills ongoing at the same time...... two potential company makers on the go.

That will drive buying and clear out the stale holders and then success at either will bring in new shareholders looking to the future, with the ones looking to the past all gone already.......

The new director buy Friday at near 6.5p tells me one thing, they have no intention if possible of using the SEDA below 6.5p IMO.

What I see has been done, imo, is that they have used £2m cash and paid back the 2 year old Convertable Bond, then to replace that £2m they have got a new loan from Yorkville with much better terms. As far as I can see its just moving the ducks around but the end result is much better than it was before. This loan will be part used to fund PG-11.

The SEDA should kick in after PG-11 is drilled, or perhaps if Hermrigen-2 is spudded it will be have a draw down done during that excitement, or it may kick in after PG-11 and Hermrigen-2 and both complete.

All I think is that the director buy says "we are not using the SEDA below 6.5p", IMO.

As ever, DYOR !

(PS also very happy to see Yorkville involved now and it appears GEM being given the boot. Yorkville appear to be "good" and GEM, well, I do not wish to comment on GEM)

2nd Dec '10

http://www.proactiveinvestors.co.uk/companies/news/23594/ascent-resources-potential-is-clearly-being-underestimated-finncap-23594.html

The potential of Ascent Resources (LON:AST) assets is clearly being underestimated by the market, according to research by city broker finnCap.

The broker believes that Ascent’s projects could deliver nearly 10x upside i.........

Ascent Resources - All change for 2010 ?

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Proselenes

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