REG - Ascent Resources PLC - Final Results
30/06/2022 09:45
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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 £1 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
(http://www.ascentresources.co.uk/investors/reports-accounts) .
Enquiries:
Ascent Resources plc Via Vigo Communications
Andrew Dennan
WH Ireland, Nominated Adviser & Broker 0207 220 1666
James Joyce / Sarah Mather
Novum Securities, Joint Broker 0207 399 9400
John Belliss
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 €100 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 €18.75 / MWh and ending the year in December 2021 with
an average monthly price of €112.11 / 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 £500,000
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 £175,000
of drawn-down debt to Align Research Ltd ("Align") as well as receiving a
further £75,000 in cash warrant exercises throughout the year and
extinguishing any monies owed to Align, with the balance of £250,000 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 £1 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 £275,000 (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 £45,003 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 £250,000 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 £600,000 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 £242,500 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 £0.6 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 £3.592m and the year end cash position was
£97k. 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 £564,000
(2020: £640,000), with performance materiality set at £394,800 (2020:
£448,000).
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 £394,800 for
balance sheet testing and £69,000 for income statement testing. The
performance materiality was £276,360 and £48,300 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 £339,000 to £394,800. We agreed with the Audit
Committee that we would report to them misstatements identified during our
audit above £28,200 (group audit) and £19,740 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.
Key Audit Matter How our scope addressed this matter
Carrying Value of Exploration Assets (Note 11) Our work in this area included:
The group holds intangible assets of £18.5m in relation to capitalised · Confirmation that the group has good title to the applicable
exploration costs in respect of its projects in Slovenia. There is the risk licences.
that these assets have been incorrectly capitalized in accordance with IFRS 6
and that there are indicators of impairment as at 31 December 2021. · Review of capitalised costs including consideration of
appropriateness for capitalisation under IFRS 6.
· Assessment of progress at the individual projects during the year
Particularly for early-stage exploration projects where the calculation of and post year-end and discussions with management surrounding their intentions
recoverable amount via value in use calculations is not possible, management's thereon;
assessment of impairment under International Financial Reporting Standard
('IFRS') 6 requires estimation and judgement. For this reason, along with the · Consideration of management's impairment reviews, including
financial significance of the account balance, we have assessed this to be a challenge to all key assumptions and sensitivity to reasonably possible
key audit matter. changes; and
· Review of disclosures made surrounding exploration assets to
ensure compliance with IFRS.
In addition there are a number of disputes ongoing in relation to Slovenian
assets, including claims brought by the company against the Republic of
Slovenia under the Energy Charter Treaty and the UK-Slovenia Bilateral
Investment Treaty, and commercial disputes between the company and its JV Based on the audit work performed, we do not consider exploration assets as at
partner Geoenergo and JV service provider Petrol Geo. These disputes present a 31 December 2021 to be materially misstated. It is however important to draw
further risk of overstatement of these assets. user's attention to the fact that the recoverable value of the exploration
assets is dependent on the group's JV partner obtaining 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 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 (Note 10) Our work in this area included:
At 31 December 2021, the carrying value of the producing assets in relation to · Review of capitalised costs including consideration of
the group's Petisovci project in Slovenia are £21.1m. appropriateness for capitalisation under IAS 16.;
· Consideration of management's impairment reviews, including
challenge to all key assumptions and sensitivity to reasonably possible
Management are required to assess the producing assets for impairment changes in the impairment model;
indicators under IAS 36. In this case, impairment indicators include but are
not limited to disruption in operations due to disputes in Slovenian as · Reviewing the latest developments regarding the permit
detailed above. The production levels in Slovenia have not yet reached the applications, including obtaining relevant correspondence where appropriate
desired levels and no significant progress has been made in relation to the and any legal advice obtained by the group;
ongoing dispute with the Republic of Slovenia, as well as continue disputes
between the company and its JV partner. · Contacting the company's legal advisers involved in the disputes
in Slovenia and obtaining their opinion regarding possible outcome and status;
and
The carrying value and ultimate recoverability of the assets is linked to · Review of disclosures made surrounding producing assets to ensure
outcome of these disputes and appropriate renewal of the concession contract. compliance with IFRS.
There is a risk that the carrying value of these assets is overstated as
management's assessment of carrying value is based on estimates and judgements
regarding future cashflows. For this reason along with the financial
significance of the account balance, we have assessed this to be a key audit Based on the audit work performed, we do not consider producing assets as at
matter. 31 December 2021 to be materially misstated. It is however important to draw
user's attention to the fact that the recoverable value of the producing
assets is dependent on the group's JV partner obtaining 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 and intragroup receivables (Parent Company) Our work in this area included:
(Note 12)
At 31 December 2021, the Investments in subsidiaries are £16.1m and
intragroup receivables are £27.5m. These balances are the most significant · Confirmation of ownership of investments;
assets in the parent company's financial statements. The recoverability of
these balances is directly linked to the recoverability of the tangible and · Consideration of recoverability of investments and intragroup
intangible assets held by those entities, and hence there is a risk these are loans by reference to underlying net asset values and projects; and
not be fully recoverable.
· Review of disclosures made surrounding investments in
subsidiaries to ensure compliance with IFRS.
The recoverability of the underlying assets are subject to significant
management estimate and judgement regarding future cashflows as noted above.
For this reason along with the financial significance of the account balance, Based on the audit work performed, we do not consider investments and
we have assessed this to be a key audit matter. intragroup receivables as at 31 December 2021 to be materially misstated.
We draw attention to the findings 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
(http://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 31 December Year ended 31 December
2021 2020
Notes £ '000s £ '000s
Revenue 2 - -
Cost of sales 2 (19) (120)
Depreciation of oil & gas assets 10 (328) (397)
Gross loss (347) (517)
Administrative expenses 3 (1,596) (2,279)
Operating loss (1,943) (2,796)
Finance cost 5 (28) (35)
Net finance costs (28) (35)
Loss before taxation (1,971) (2,831)
Income tax expense 6 - -
Loss for the year (1,971) (2,831)
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations (1,621) 1,327
Total comprehensive income for the year (3,592) (1,504)
Earnings per share
Basic & fully diluted loss per share (Pence) 8 (1.83) (4.66)
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
£ '000s £ '000s
Non-current assets
Property, plant and equipment 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
Retained earnings (46,566) (44,595)
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 based payment reserve
Share capital Share premium Merger reserve Equity reserve £ '000s Translation Retained earnings Total
£ '000s £ '000s £ '000s £ '000s reserve £ '000s £ '000s
£ '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 - - - - 256 - 200 456
expiry of options
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 31 December
2021 2020
£ '000s £ '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 £1,550,000 (2020: loss of
£2,060,000).
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 (£'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 £0.6 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 39, IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform - Phase 2
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 Framework 1 January 2022*
IAS 16 amendments Property, Plant and Equipment: Effective 1 January 2022 1 January 2022*
IAS 37 amendments Provisions, Contingent Liabilities and Contingent Assets: 1 January 2022*
N/A Annual Improvements to IFRS Standards 2018-2020 Cycle: 1 January 2022*
IAS 1 amendments Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure 1 January 2023*
of Accounting Policies
IAS 8 amendments Accounting policies, Changes in Accounting Estimates and Errors - Definition 1 January 2023*
of Accounting Estimates
IAS 12 amendments Income Taxes - Deferred Tax related to Assets and Liabilities arising from a 1 January 2023*
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 £18,463,000 (2020: £18,753,000) 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 £328,000 (2020: £397,000) 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 £4.8 million has been
recognised in the Company accounts against a receivable of £32 million (2020:
£32 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 £1: €1.1900 (2020: £1:€1.1192).
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
£ '000s £ '000s £ '000s £ '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
£ '000s £ '000s £ '000s £ '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 December Year ended 31 December
2021 2020
£ '000s £ '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 31 December
2021 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 31 December
2021 2020
Management and technical 7 7
b) Directors and employee's remuneration
Year ended 31 December Year ended 31 December
2021 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 December Year ended 31 December
Finance costs 2021 2020
£ '000s £ '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 31 December
2021 2020
£ '000s £ '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 31 December Year ended 31 December
2021 2020
£ '000s £ '000s
Loss for the year (1,971) (2,831)
Income tax using the Company's domestic tax rate 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 31 December
2021 2020
£ '000s £ '000s
Group
Total tax losses - UK and Slovenia (53,227) (51,255)
Unrecorded deferred tax asset at 19% (2020: 19%) 9,049 8,713
Company
Total tax losses (15,080) (13,632)
Unrecorded deferred tax asset at 19% (2020: 19%) 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 31 December
2021 2020
£ '000s £ '000s
Result for the year
Total loss for the year attributable to equity shareholders (1,971) (2,831)
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 £450,000 of contingent consideration will be payable
on the execution of production sharing contracts covering the 9B Block, of
which £350,000 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 £100,000 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
£ '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 Oil & Gas Assets Total
Cost £ '000s £ '000s £ '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
At 31 December 2020 - 22,783 22,783
At 1 January 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
£ '000s £ '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
At 31 December 2020 18,753 18,753
At 1 January 2020 18,576 18,576
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
£ '000s £ '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 & registered office address Principal activity Country of incorporation % of share capital held 2021 % of share capital held 2020
Ascent Slovenia Limited Oil and Gas exploration Malta 100% 100%
Tower Gate Place Tal-Qroqq Street Msida, Malta
Ascent Resources doo Oil and Gas exploration Slovenia 100% 100%
Glavna ulica 7
9220 Lendava Slovenia
Trameta doo Infrastructure owner Slovenia 100% 100%
Glavna ulica 7
9220 Lendava Slovenia
Ascent Hispanic Resources UK Limited Oil and Gas exploration England and Wales 100% 100%
5 New Street Square
London EC4A 3TW
Ascent Hispanic Ventures, S.L. Oil and Gas exploration Spain 100% N/A - incorporated 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
£ '000s £ '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
£ '000s £ '000s
VAT recoverable 19 21
Prepayments & accrued income 7 47
26 68
15. Borrowings - Group and Company
Group 2021 2020
£ '000s £ '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 £270,000,
comprising £197,000 recognised as the debt component and a further £73,000
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
£375,000 in 2021, representing £125,000 from Align and £250,000 from
Riverfort. During 2021 the Company repaid £125,000 resulting in a loan
balance of £250,000 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 £5,625 remain unclaimed.
16. Provisions - Group
£000s
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 €300,000 (£268,000) on deposit as collateral
against this liability see Note 13.
17. Contingent Consideration due on Acquisition
Group 2021 2020
£ '000s £ '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 £100,000.00 in cash and a further £350,000.00 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
£ '000s £ '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
£ '000s £ '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
£ '000s £ '000s
Authorised
2,000,000,000 ordinary shares of 0.5p each 10,000 10,000
Allotted, called up and fully paid
3,019,648,452 deferred shares of 0.195p each 5,888 5,888
1,737,110,763 deferred shares of 0.09p each 1,563 1,563
109,376,804 ordinary shares of 0.5p each 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 £62,500 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 £55,000 in respect to a
warrants exercise over 1,000,000 new ordinary shares.
• On 2 February 2021, the Company received £7,500 in respect to a
warrants exercise over 187,500 new ordinary shares.
• On 4 February 2021, the Company received £62,500 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 £62,500 in respect to a warrants
exercise over 900,000 new ordinary shares.
• On 11 February 2021, the Company raised £1m 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 £485,000 (£445,802 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 £50,000 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 £212,500.
• 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 £37,500
• 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 £300,000 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 £50,000 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 £100,000 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 £100,000 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
£ 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 £4.8 million has been recognised in the
accounts against potential future credit loss.
2021 2020
£ '000s £ '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 £0.6m 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 £242,500.
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 Average price
Shares (pence)
Outstanding at 1 January 2020 152,576,254 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 -
Outstanding at 31 December 2021 7,348,142 253.72
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: £456,000).
Details of the warrants issued in the year are as follows:
Issued Exercisable from Expiry date Number outstanding Exercise price
23 December 2021 Anytime until 23 December 2023 3,600,000 7.50p
Weighted Average price
Warrants (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
Outstanding at 31 December 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
£ '000s £ '000s
Cash at bank and available on demand 97 115
Cash held on deposit against bank guarantee - -
97 115
Company 2021 2020
£ '000s £ '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
£ '000s £ '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
£97,000 and trade and other receivables of £42,000. 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 31 December
Group 2021 2020
Profit or loss
10% strengthening of sterling 40 135
10% weakening of sterling (48) (9)
Equity
10% strengthening of sterling (3,598) (3,839)
10% weakening of sterling 4,398 4,693
Company
Profit or loss
10% strengthening of sterling - -
10% weakening of sterling - -
Equity
10% strengthening of sterling (3,045) (4,070)
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 £536,000
rates of 8% per annum. At 31 December 2020, the Group and Company had GBP
loans valued at £270,000 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
Categorisation of Borrowings - Group 2021 2020 2021 2020
£ '000s £ '000s £ '000s £ '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
£41,069. 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 amount Year ended 31 December Fair Value Year ended 31 December Carrying amount Year ended 31 December Fair Value Year ended 31 December
2021 2021 2020 2020
Categorisation of Financial Assets and Liabilities - Group
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
Fair Value amount Fair Value
amount
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 £450,000 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 €662,288.63 plus interest of €12,103.19.
Decommissioning costs for the Petišovci Project are estimated to be €9m,
consisting of €0.5m for each of the 16 proposed wells plus an additional
€1m 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 £312,000
(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.
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