REG - Ascent Resources PLC - Final Results
29/06/2023 08:15
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RNS Number : 3721E Ascent Resources PLC 29 June 2023
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 (MAR), and is disclosed
in accordance with the Company's obligations under Article 17 of MAR.
29 June
2023
Ascent Resources plc
("Ascent" or the "Company")
Final Results
Ascent Resources Plc (LON: AST), the European and Latin American focused
natural resources company, announces its final results for the year ended 31
December 2022.
Highlights:
· Partially solved partner disputes in Slovenia to be able to recognise
net revenue of €651k for hydrocarbons produced and sold in 2020 and 2021
· Initiated Slovenian arbitration proceedings to seek payment of agreed
but unpaid hydrocarbon revenues for 2022 as well as to settle difference in
interpretation of the JV contract relating to production above the baseline
whilst Ascent is in a preferential cost recovery mode (i.e. until it has
earned its investment back)
· Secured funding from specialist litigation and arbitration
specialists Enyo Law LLP via a damages-based agreement, to pursue the
Company's Energy Charter Treaty damages claim, initially estimated to be in
excess of €500 million, against the Republic of Slovenia over their breaches
which have destroyed the value of the Company's investment in country
Corporate
· Production of 1.16 million scm of gas and 37,855 litres of condensate
in 2022 from PG-10 and PG-11A wells
· Focused ESG Metals growth strategy on Latin and Hispanic America and
advanced business development activities in Peru and Chile, which are both
countries with a long history in mining and mineral processing positioning the
Company to execute on its maiden metals deal shortly
· Raised £1.2 million in new equity by way of subscription and placing
Post Balance Sheet Events
· Constitution of the Tribunal under the ICSID rules, in the Company's
€500+ million ECT damages claim against the Republic of Slovenia and first
Tribunal meeting held in April 2023
· Resolved partner dispute in Slovenia and received €1.7 million
relating to production from January 2022 through to February 2023 and
recognised €1.4 million of production related costs which corresponds to all
outstanding service provider costs claimed since 2019 through to February
2023, with the amount being paid being a discount of approximately 30% to the
amounts claimed
· Agreement to amend the monthly fixed fee to the Slovenian service
provider from €40,000 per month to the higher of €20,000 per month or 35%
of Ascent Slovenia Limited's entitlement to monthly proceeds from the PG-10
and PG-11A wells
· Indicative proposal to acquire Amur Minerals Limited, with the
intention of combing their remaining available cash resource with Ascent's
advanced business development inventory in Peru and Chile
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
Ascent Resources plc has been focused in recent years on defending its
investment interests following the Republic of Slovenia's ban on stimulation,
effectively expropriating the Company's flagship oil and gas assets. Having
secured a binding damages-based agreement, successfully registered the claim
and very recently constituted the Tribunal, the arbitration process is now
firmly in play. This includes, as announced in August 2022, making a formal
submission of the request for arbitration against the Republic of Slovenia,
which included an updated preliminary damages assessment in excess of €500
million (it should be cautioned that in the event the Company is successful in
its claim any amount actually received by the Company may be significantly
lower). It also includes the Tribunal being constituted.
Whilst these arbitration proceedings alone, we believe, already make Ascent
Resources plc a unique and compelling proposition for shareholders, the
Company has also been preparing for its maiden ESG Metals/ tailings
transaction. Despite recent political turmoil in Peru, the company's
near-term focus remains on Latin America with its deep-rooted mining legacy
and attractively priced opportunity set. Once delivered, the Company's maiden
transaction is expected to provide balance to the portfolio, dovetailing in
assets that can exhibit sustainable and low risk cash flow generation with the
binary outcome of our potentially highly material claim. Our recent intended
bid for Amur Minerals Corporation is one component of a carefully planned
funding strategy for this maiden transaction, which seeks to minimises equity
dilution.
Gas production at the Petisovci project in Slovenia has continued with the
PG-10 and PG-11A wells producing a total of 1,164,500 scm of gas during 2022.
Despite significant partner complexity in country, the Company received a net
payment of €651k in 2022 as payment for hydrocarbon revenues related to the
2020 and 2021 production years. For the 2022 production, a further
€1.3million net revenue remains outstanding at year end and due to the
uncertainty of settlement has not been recognised in the 2022 financial
statements (Note 1 - Revenue recognition). Accordingly in December 2022 ASL
initiated arbitration proceedings to ensure its partners compliance with its
obligations to pay owed amounts from the PG-10 and PG-11A wells in addition to
ASL's claim to receive, whilst it is in a preferential cost recovery mode
(i.e. until it has earnt back its investment) its share of production above
the baseline production profile for the other wells on the concession area. In
April 2023, after the period in review the arbitration tribunal has been
constituted. The parties have agreed ASL's recognition of PG-10 and PG-11A
hydrocarbons for January 2022 through to February 2023 which is a total
payment of €1.4m (net of VAT). The arbitration proceedings in relation to
ASL's claim for revenue from the other wells took place in mid-June 2023 and
the Company awaits the tribunal decision shortly.
We thank our shareholders for their patience and ongoing support as we
continue to navigate the Company away from its legacy Slovenian business and
towards the exciting opportunities that we see elsewhere in ESG
mining/tailings whilst continuing to pursue our arbitration claim. We look
forward to updating shareholders on our progress in what we believe will be a
very exciting and rewarding year for Ascent shareholders.
STATEMENT FROM THE CEO
Legacy Slovenian Investment & ECT Damages Claim
2022 has been a year of significant change directly impacting the Company's
flagship project in Slovenia, with the Government of Slovenia, in April 2022,
voting to implement changes to the country's mining laws which, specific to
the Company, included a ban on the production of hydrocarbons with the use of
any form of stimulation which then came quickly into effect in May. Given that
the future development plans of the Petisovci field have always included the
use of low volume hydraulic stimulation (in conformity with the EU definition
on stimulation levels), which has been conducted some thirty or more times on
the field during the last fifty years, the ban has now destroyed the full
economic value of Ascent's investment in Slovenia given that the Company will
now no longer be able to execute the field development plan to be able to
produce the 400+bcf discovered gas in place in the tight rock reservoirs. As
such, the Company undertook a review of the Petisovci field at the end of the
year and recognising that the economic value had been substantially destroyed,
took the decision to recognise a 100% write down of the historical PPE and
capitalised exploration costs totalling £39.7m.
The Company responded quickly to these law changes and served the Republic of
Slovenia ("Slovenia" or "the State") with a new notice of dispute of further
breaches under the UK-Slovenia bilateral investment treaty ("BIT") and the
Energy Charter Treaty ('ECT') on 5 May 2022. The Company then entered into a
binding damages agreement, appointing Enyo Law LLP to represent it in its
dispute with the State, as announced on 30 May 2022. Enyo Law LLP is a
specialist arbitration and litigation legal firm who filed both of the Notices
of Disputes on behalf of the Company and who represented the Company in 2021's
pre-arbitration negotiations with the Republic of Slovenia. On 15 August 2022,
the Company formally initiated arbitration proceedings against the Republic of
Slovenia with a revised monetary damages claim in excess of €500 million,
which was accepted and successfully registered by the International Centre for
Settlement of Investment Disputes ("ICSID") on 1 September 2022. It should be
cautioned that in the event the Company is successful in its claim any amount
actually received by the Company may be significantly lower.
The Company appointed Mr Klaus Reichert (German/Irish) as its arbitrator in
November 2022. Mr Reichert is a very experienced arbitrator having
participated in over 250 disputes. In December 2022, Slovenia appointed Ms
Brigitte Stern, a French professor and experienced arbitrator. Post period end
Dr Raed Fathallah (Canadian, French, Lebanese) was appointed as president
arbitrator and accordingly on 7 March 2023 the Tribunal was constituted in
accordance with Article 37(2)(a) of the ICSID Convention. Following a
procedural first session in April 2023 the case will continue to progress
through the structured arbitration process. It should be cautioned that in the
event the Company is successful in its claim any amount actually received by
the Company may be significantly lower.
The claim results from what the Board believe to be a populist campaign
carried out by Slovenia against the Company and its investment, which has
prevented the development of the Petišovci oil and gas field. In particular,
Slovenia has prevented the restimulation of two wells (PG-10 and PG-11A) in
2017, which was necessary to maintain the levels of gas produced from the
tight rock reservoir (as has been done multiple times over the last fifty
years). This frustration of the ability to develop the field was initiated via
a decision of the State's regulator, the Slovenian Environment Agency
("ARSO"), which determined that an Environmental Impact Assessment ("EIA")
would be required to be approved in order to conduct the low-volume hydraulic
stimulation, even though such an EIA was not required and never had been
previously under Slovenian law, and ARSO's conclusion was contrary to the
conclusion of Slovenia's own expert bodies. This decision significantly slowed
down the development of the field by the Company. Pending such low-volume
hydraulic stimulation, the amount of gas produced by the field was very
significantly reduced, resulting in a significant loss of the Company's
revenues.
At the same time, the Minister of the Environment and Spatial Planning of
Slovenia repeatedly made public statements portraying Ascent, as well as the
Petišovci project, in a negative light, and the Company believes that leaks
were made by ARSO to the press. This further demonstrates that ARSO was biased
against the Company and that the ARSO's decision was politically motivated.
Slovenia's campaign against the investors culminated in a complete ban on
low-volume hydraulic stimulation, which came into effect on 5 May 2022. The
Board believes that statements made during the parliamentary debate on the ban
leave no doubt that the Investors were being specifically targeted by it. This
has left Ascent with no choice but to execute on its claim in relation to
Slovenia's measures that have destroyed the value of Ascent's investments in
the Slovenian energy sector, and which have de facto deprived Ascent of its
right to produce gas in Slovenia. Ascent's rights have been unlawfully
expropriated by Slovenia, in breach of the country's obligations under
international law and both the ECT and the BIT. The Company has therefore
sustained losses for which it is seeking compensation. The Company remains
amenable to discussing settlement with the Republic of Slovenia following its
review of the matter or otherwise pursuing this significant damages claim
through to a binding result for the Company.
Slovenia Operational Update
Throughout the year the wells in the concession area have continued to produce
small volumes of gas into the buoyant gas market with sales continuing to
local industrial buyers through the low pressure pipeline. Total production
from the PG-10 and PG-11A wells in 2022 was 1.1 million scm of gas and 37,855
litres of condensate and the average realised gas price for this production
was €125/MWh, resulting in net invoiceable hydrocarbon revenues of €1.3
million due to ASL from the PG10 and PG11A wells only.
The Company's subsidiary, Ascent Slovenia Limited ("ASL"), continued to manage
the ongoing disputes with its joint venture ("JV") partner Geoenergo as well
as the JV's service provider Petrol Geo. (Geoenergo is 50% owned by Nafta
Lendava which is a 100% Slovenian government controlled entity and 50% owned
by Petrol which is a publicly listed 30% Slovenia State controlled company,
Petrol Geo is a connected party by virtue of being a 100% subsidiary of
Petrol). Whilst these disputes resulted in a continuing commercial stalemate
throughout the period under review, ASL made some progress when in August 2022
it was able to agree recognition of payment for the outstanding hydrocarbon
sales proceeds from the PG-10 and PG-11A wells for the period April 2020
through to December 2021 which was a total gross sum of €832k. As part of
the agreements with Geoenergo for Ascent to receive these proceeds, ASL also
agreed to recognise costs of €181k which Geoenergo claims to have paid in
relation to the concession extension, as a result the Company received a net
payment of €651k in August 2022. ASL was also successful in agreeing its
share of the PG-10 and PG-11A revenues for the first half of 2022 amounting to
€857k, however despite Geoenergo's prior confirmation that they would make
this outstanding and owed payment in August as well, at the financial year end
this amount was still outstanding as is the amount for the invoices raised and
sent through the second half of 2022.
The revenue recognition dispute has been through a mediation process in
September 2022, following which in December 2022 the Company raised some new
equity proceeds to lodge its arbitration claim against Geoenergo in pursuit of
a binding and enforceable resolution to this matter as well as resolution over
ASL and Geoenergo's different interpretations of the joint venture contract
relating to ASL's entitlement to hydrocarbons produced above a contractual
base line performance profile whilst ASL is in a preferential cost recovery
mode (i.e. until it has earnt its investment back). The arbitration is in
process and has a long stop date, according to the Ljubljana Arbitration
Centre rules, of 26 October 2023 to reach a binding result. The Company
expects to make meaningful progress on this claim in the summer months of
2023, with the Company and its in country legal advisors remaining confident
in the merits of ASL's claims which seek payment for in excess of €3 million
from Geoenergo over the last three years. The tribunal hearing to decide on
entitlement happened in June 2023 and the decision is expected to be rendered
shortly. Separately, Petrol Geo had a claim against the joint venture over
monthly fixed fee service invoices which the joint venture has rejected since
April 2020 until February 2023 based on a significant change in circumstances.
At the financial year end, Petrol Geo were claiming a total sum of
approximately €1.7 million is owed by the joint venture in rejected monthly
invoices. Post period under review, the JV and Petrol Geo entered into a
dispute mediation process, which in April 2023 resulted in a mutually agreed
resolution to this matter. Petrol Geo's claims against the JV over disputed
and rejected invoices claimed since 2019 through to February 2023,
totalling €2,083,491 (plus claimed interests and costs), were agreed to be
settled for €1,436,000, representing a discount of approximately 30% to the
face value. For the year under review €501,000 (net) of this settlement
amount has been recognised against the 2020 and 2021 revenue noted above.
Furthermore, the JV successfully renegotiated a reduction in Petrol Geo's
fixed fee until the concession expiration in November 2023 to the higher of
i) €20,000 per month, being a 55% discount to the prior fee level; or ii)
35% of ASL's share of the hydrocarbons produced from the PG-10 and PG-11A
wells. The previous fee was a fixed €44,000 per month, which was
unstainable when the gas prices were lower and as production levels continue
to naturally decline.
Post the year end, Slovenia has approved new amendments to its mining
concession legislation which proposes to give automatic 30 months extensions
to those concessions which are due to expire in 2023 and 2024. Accordingly,
the concession was previously due to expire on 28 November 2023 and is now
expected, upon submission by Geoenergo of the relevant information, to be
extended to 28 May 2026.
New Environment, Social & Governance ('ESG') Metals Strategy
The Company remains very focused on executing on its new ESG Metals growth
strategy and confirmed this during the year announcing that whilst the Company
continues to evaluate a number of ESG Metal transactions across Latin and
Hispanic America, it has identified Peru as a 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,
Silver and Zinc 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. Similarly, a lot of these traits are
shared by neighbouring Chile, which is the world's largest Copper producer and
has a long history or mining and mineral processing giving rise to large
accumulations of surface stockpiled materials consistent with the Company's
ESG Metals strategy.
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 and commercial scale and which have multiple local operating and
permitting benefits. The Company is actively developing a number of potential
transactions in the gold tailing re-processing and artisanal gold ore
processing theme, however given the political disruption in Peru towards the
end of 2022 and beginning of 2023, the Company expects its first transaction
in ESG Metals may be in a neighbouring territory, with the expectation that a
new country entry to Peru focused on precious metals would still materialise
in the Company's near future.
Corporate & 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, its Slovenian JV partner and for the
new ESG Metals initiatives. The Company successfully funded its significant
monetary damages claim against Slovenia through the damages-based agreement to
appoint Enyo Law LLP to represent it. Consequently the Company remains
positioned as a clean vehicle with a strong Board, access to capital, a funded
significant damages claim and a clear growth trajectory.
In January 2022, in support of the Company focusing its ESG Metal strategy on
Latin America, the Company successfully raised new gross equity proceeds of
£0.6 million to fund working capital requirements and wider business
development activity at a price of 3.3 pence per new share, which represented
a nil discount to the closing bid price on the prior day. The subscribers
received one new equity warrant per new share subscribed for, with the warrant
being exercisable at 5p per warrant share at any time in the next two years.
In April 2022, the Company agreed with the holders of the remaining 4p equity
warrants that were issued on 6 August 2020 to an immediate warrant exercise
whereby all 4p warrants were exercised, realising new equity proceeds of
£242,500 for the Company. In exchange for this accelerated warrant exercise,
the Company awarded one and half new warrants for each warrant exercised, with
each new warrant being exercisable at 5p per new warrant at any time over the
next three years. In December the Company successfully raised new equity
proceeds of £0.6 million by way of issue of 15 million new shares at 4p,
being the closing bid price on the night before. Each placing share was issued
with a warrant at 5p.
Alongside the December 2022 placing, the Company agreed with its only lender,
RiverFort, to restructure its debts and to repay £50,000 of the total
outstanding payment obligations of £561,620, with £25,000 in cash plus
£25,000 which will be satisfied with the issue of 625,000 new shares. The
remaining balance of £511,620 was re-profiled such that it will incur a
coupon of 8 per cent and now be redeemable in six equal cash instalments of
£92,091.60 as of 14 September 2023 and monthly thereafter with final payment
on 14 February 2024.
Additionally, the Company was successful in recognising some revenue in the
2022 financial year with receipt of a net payment (after certain concession
related costs) of €651k in August 2022. Post the year end the Company also
recognised €1,724,689 of revenue for January 2022 through to February 2023,
against which it also agreed to acknowledge and pay the discounted amount of
€1,436,000 to Petrol Geo in full and final payment of all amounts claimed to
be owed and outstanding since 2019 to February 2023. Post the year end the
Company therefore received net cash payment of €288,689 as a result of a
successful mediation process involving the negotiation of a discount to
historic and future fixed processing costs being charged by Petrol Geo.
In February 2022, Mr Ewen Ainsworth stepped down from his position as
Non-Executive Director following his acceptance of a full-time executive
position elsewhere. In December 2022 the Company appointed Mr Marco Fumagalli
to the Board. Marco is a Founding Partner at Continental Investment Partners
SA, a Swiss-based investment fund. Marco is a well-known Italian businessman
and industrial investor who was previously a group partner at 3i. He is a
qualified accountant and holds a degree in business administration
from Bocconi University in Milan and has many years' experience as an AIM
company director. Subsequently, Marco became Chairman of the Audit Committee.
Post the year end, the Company has raised £400k through a placing of new
shares at 3p (being the spot price on the day before announcement) with a one
for one warrant attached that is exercisable at 5p per new warrant share.
Additionally the Company is pursuing a claim to recognise its share of the
hydrocarbons produced in the concession area above the baseline production
profile and if successful expects to be able to recognise further revenues of
circa €3+ million over the last three years.
Summary
The Company has gained traction with its Slovenian operational disputes and
recognition of revenue for the first time in several years, alongside
positioning its shareholders with exposure to a funded significant monetary
damages claim, in excess of €500 million, against the Republic of Slovenia
under the Energy Charter Treaty (it should be cautioned that in the event the
Company is successful in its claim any amount actually received by the Company
may be significantly lower) and is well placed to complete on its continuing
ESG Metals business development activity during the 2023 financial year.
James Parsons
Executive Chairman
Andrew Dennan
Chief Executive Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Notes Year Ended Year Ended
31 December 31 December
2022 2021
£'000s £'000s
Revenue 2 581 -
Cost of Sales 2 (504) (19)
Depreciation of oil & gas assets 10 (214) (328)
Gross loss (137) (347)
Administrative expenses 3 (1,472) (1,596)
Decommissioning provision 16 (326) -
Goodwill impairment 9 (203) -
Impairment expenses 10,11,12 (39,721) -
Operating loss (41,859) (1,943)
Finance cost 5 (32) (28)
Net finance costs (32) (28)
Loss before taxation (41,891) (1,971)
Income tax expense 6 - -
Loss for the year (41,891) (1,971)
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations 318 (1,621)
Total comprehensive income for the year (41,573) (3,592)
Earnings per share
Basic & fully diluted loss per share (Pence) 8 (31.87) (1.83)
The consolidated balance sheet should be read in conjunction with the
accompanying notes.
Consolidated Statement of Financial Position
For the year ended 31 December 2022
Assets Notes 31 December 31 December
2022 2021
£'000s £'000s
Non-current assets
Property, plant and equipment 10 4 21,111
Exploration and evaluation assets 11 - 18,463
Goodwill 9 - 653
Prepaid abandonment fund 13 300 300
Total non-current assets 304 40,527
Current Assets
Trade and other receivables 13 11 8
Cash and cash equivalents 25 325 97
Total current assets 336 105
Total assets 640 40,632
Equity and liabilities
Attributable to the equity holders of the Parent Company
Share capital 20 8,214 7,998
Share premium account 76,298 75,021
Merger reserve 570 570
Share-based payment reserve 24 2,131 2,129
Translation reserve (276) (594)
Retained earnings (88,457) (46,566)
Total equity attributable to the shareholders (1,520) 35,558
Total equity (1,520) 35,558
Non-current liabilities
Borrowings 15 516 536
Provisions 16 663 312
Total non-current liabilities 1,179 848
Current liabilities
Borrowings 15 5 5
Contingent consideration on acquisition 17 - 450
Trade and other payables 18 976 771
Total current liabilities 981 1,226
Total liabilities 2,160 2,074
Total equity and liabilities 640 40,632
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 2022
Share capital Share premium Merger reserve Equity reserve Share base payment reserve Translation reserve Retained earnings Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as 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 - - - (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
Balance at 1 January 2022 7,998 75,021 570 - 2,129 (594) (46,566) 38,558
Comprehensive income
Loss for the year - - - - - - (41,891) (41,891)
Other comprehensive income
Currency translation differences - - - - - 318 - 318
Total comprehensive income - - - - - 318 (41,891) (41,573)
Transactions with owners
Issue of ordinary shares 216 1,366 - - - - - 1,582
Costs related to share issues - (89) - - - - - (89)
Share-based payments - - - - 2 - - 2
Total transactions with owners 216 1,277 - - 2 - - 1,495
Balance at 31 December 2022 8,214 76,298 570 - 2,131 (276) (88,457) (1,520)
The consolidated balance sheet should be read in conjunction with the
accompanying notes.
Consolidated Cash Flow Statement
For the year ended 31 December 2022
Year ended Year ended
31 December 2022 31 December 2021
£'000s £'000s
Cash flows from operations
Loss after tax for the year (41,891) (1,971)
Depreciation 214 328
Impairment of PPE and exploration asset 39,721 -
Goodwill impairment 203 -
Decommissioning provision 326 -
Change in receivables 3 42
Change in payables 205 75
Increase in share-based payments 2 12
Exchange differences 6 42
Net cash used in operating activities (1,211) (1,472)
Cash flows from investing activities
Payments from fixed assets (1) (3)
Net cash used in investing activities (1) (3)
Cash flows from financing activities
Loans advanced - 375
Loans repaid (20) -
Interest paid (32) -
Proceeds from issue of shares 1,581 1,140
Share issue costs (89) (58)
Net cash generated from financing activities 1,440 1,457
Net increase / (decrease) in cash and cash equivalents for the year 228 (18)
Effect of foreign exchange differences - -
Cash and cash equivalents at beginning of the year 97 115
Cash and cash equivalents at end of the year 325 97
The consolidated balance sheet should be read in conjunction with the
accompanying notes.
Notes to the Financial Statements
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 2022
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
2022 were approved and authorised for issue by the Board of Directors on 28
June 2023 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 £44,159,000 (2021: loss of
£1,550,000).
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 Group and Company financial statements have been prepared under the going
concern assumption, which presumes that the Group and Company will be able to
meet its obligations as they fall due for the foreseeable future.
The Company has raised £0.4 million in new equity since the balance sheet
date from new and existing investors and has settled revenue disputes with its
JV partner and settled invoice disputes with its JV operator such that a net
€288,000 was received by the Company. Under the Group's forecasts, the funds
raised together with existing bank balances provide sufficient funding for at
least two months, as of the date of the publication of this report, based on
anticipated outgoings.
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.
Negotiations with potential new investors is ongoing and 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, there is
a material uncertainty to the going concern of the Group.
New and amended Standards effective for 31 December 2022 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 2022. 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 3 Business Combinations - Reference to the Conceptual Framework
Amendments to IFRS 16 Property, Plant and Equipment
Amendments to IFRS 37 Provisions, Contingent Liabilities and Contingent Assets
N/A Annual Improvements to IFRS Standards 2018-2020 Cycle
The new standards effective from 1 January 2022, 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
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
IAS 17 amendments Insurance contracts - Initial Application of IFRS 17 and IFRS 9 - Comparative 1 January 2023*
Information
*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. The Company believes that
this ban has substantially destroyed the economic value of the Petisovci
field. Consequently, the operational and development review conducted by the
Company determined that further field development was not economically viable
and that the current producing wells had a remaining production life of 5.5
years. The result of the impairment review identified an impairment charge of
£17,800,000 and the carrying value of exploration assets at 31 December 2022
are nil (2021: £18,463,000).
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) - In April 2022, the Republic of Slovenia approved amendments to its
Mining Law which include a total ban on hydraulic stimulation. Consequently,
the operational and development review conducted by the Company determined
that further field development was not economically viable and that the
current producing wells had a remaining production life of 5.5 years. The
result of the impairment review identified an impairment charge of
£21,665,000 and the carrying value of property, plant and equipment assets at
31 December 2022 was nil (2021: £21,106,000).
The 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.
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 £214,000 (2021: £328,000) 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 2022 the Board has concluded that no deferred tax asset is yet applicable.
This is included at Note 7.
Decommissioning costs (Note 16)
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. A change
in the key assumptions used to calculate rehabilitation provisions could have
a material impact on the carrying value of the provisions.
The carrying value of these provisions in the financial statements represents
an estimate of the future costs expected to be incurred to rehabilitate each
well, which is reviewed at least annually. Future costs are estimated by
internal experts, with external specialists engaged periodically to assist
management. These estimates are based on current price observations, taking
into account developments in technology and changes to legal and contractual
requirements. Expectations regarding cost inflation are also incorporated. He
carrying value of these provisions have not been discounted to provide a
present value of these future costs due to the near-term uncertainty of when
these costs may materialise.
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. In April 2022, the
Republic of Slovenia approved amendments to its Mining Law which include a
total ban on hydraulic stimulation. Consequently, the operational and
development review conducted by the Company determined that further field
development was not economically viable and that the current producing wells
had a remaining production life of 5.5 years. Recognising the loss in economic
value, management took the decision fully impair the receivable in the Company
accounts (2021: £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.
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 2022 was £1: €1.1308 (2021: £1:€1.1900).
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.
Share-based payments
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 share-based payments. The
expense is recognised over the vesting period, which is the period over which
all of the specified vesting conditions are to be satisfied.
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.
The Share premium reserve relates to amounts subscribed for share capital in
excess of nominal value less costs of shares associated with share issues.
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 Merger reserve relates to the value of shares, in excess of nominal value,
issued with respect of the Trameta acquisition in 2016.
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.
2022 UK Slovenia Elims Total
£,000s £'000s £'000s £'000s
Hydrocarbon sales - 581 - 581
Intercompany sales 417 12 (429) -
Total revenue 417 593 (429) 581
Cost of sales - (504) - (504)
Administrative expenses (719) (642) (111) (1,472)
Material non-cash items
Depreciation (1) (213) - (214)
Impairment (43,622) (25,795) 29,696 (39,721)
Goodwill impairment (203) - - (203)
Decommission provision - (326) - (326)
Net finance costs (31) (1) - (32)
Reportable segment profit/(loss) before taxation (44,159) (26,888) 28,156 (41,891)
Taxation - - - -
Reportable segment profit/(loss) after taxation (44,159) (26,888) 28,156 (41,891)
Reportable segment assets
Carrying value of exploration assets - 18,463 - 18,463
Impairment to exploration assets - (18,820) - (18,820)
Effect of exchange rate movements - 357 - 357
Total plant and equipment 4 - - 4
Prepaid abandonment fund - 300 - 300
Investment in subsidiaries - - - -
Intercompany receivables - - - -
Total non-current assets 4 300 - 304
Other assets 326 10 - 336
Consolidated total assets 330 310 - 640
Reportable segment liabilities
Trade payables (219) (757) - (976)
External loan balances (521) - - (521)
Inter-group borrowings - (34,536) 34,536 -
Other liabilities - (663) - (663)
Consolidated total liabilities (740) (35,956) 34,536 (2,160)
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 - (328) - (328)
Net finance costs (27) (1) - (28)
Reportable segment profit/(loss) before taxation (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 segment 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)
Revenue from customers
Revenue for 2022 was £581,000 (2021: nil). The on-going dispute with the JV
partner was partially resolved in August 2022 resulting in the recognition of
revenue, and receipt of funds, from the hydrocarbon production for the period
April 2020 to December 2021. Hydrocarbon production for 2022 is still subject
to dispute and has not been recognised in the 2022 year. 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 Year ended
31 December 31 December
2022 2021
£'000s £'000s
Employee costs 812 1,067
Shared based payment charge 2 -
Depreciation 214 328
Auditor's remuneration:
Audit fees - PKF 52 45
Fees payable to the Company's auditor for other services - -
52 45
4. Employees and directors
a) Employees
The average number of persons employed by the Group, including Executive
Directors, was:
Year ended Year ended
31 December 31 December
2022 2021
Management and technical 7 7
b) Directors and employee's remuneration
Year ended Year ended
31 December 31 December
2022 2021
£'000s £'000s
Employees and directors
Wages and salaries 667 826
Social security costs 91 145
Pension costs 1 2
Bonuses 53 86
Share base payments 2 -
Taxable benefits 13 8
827 1,067
c) Director's remuneration
Please see Remuneration report on pages 32-33.
5. Finance income and costs recognised in the year
Finance costs Year ended Year ended
31 December 31 December
2022 2021
£'000s £'000s
Interest charge on loans (30) (26)
Bank charges (2) (2)
(32) (28)
Please refer to Note 15 for a description of financing activity during the
year.
6. Income tax expense
Year ended Year ended
31 December 31 December
2022 2021
£'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 Year ended
31 December 31 December
2022 2021
£'000s £'000s
Loss for the year (41,891) (1,971)
Income tax using the Company's domestic tax rate at 19% (2021: 19%) (7,959) (375)
Effects of:
Net increase in unrecognised losses c/f 7,959 375
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 Year ended
31 December 31 December
2022 2021
£'000s £'000s
Group
Total tax losses - UK and Slovenia (95,118) (53,277)
Unrecorded deferred tax asset at 19% (2021: 19%) 16,170 9,049
Company
Total tax losses (59,249) (15,080)
Unrecorded deferred tax asset at 19% (2021: 19%) 10,072 1,548
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 Year ended
31 December 31 December
2022 2021
£'000s £'000s
Result for the year
Total loss for the year attributable to equity shareholders (41,891) (1,971)
Weighted average number of shares Number Number
For basic earnings per share 133,972,082 108,007,151
Loss per share (pence) (31.27) (1.83)
As the result for the year was a loss, the basic and diluted loss per share
are the same. At 31 December 2022, potentially dilutive instruments in issue
were 65,969,404 (2021: 29,262,396). Dilutive shares arise from share options
and warrants issued by the Company.
9. Business combinations
There have been no acquisitions during the period, however the Board
strategically expect acquisitions to be a common component of growth in the
future.
In April 2020, the Company acquired 100% of the share capital of Energetical
Limited, a UK Company with exclusive rights to secure a Production Sharing
Contract ("PSC") on a producing onshore Cuban oil licence. The initial
consideration for the acquisition of Energetical comprised of the issue of six
million new ordinary shares valued at £203,000 and a further £450,000 (see
note 17) of contingent consideration that would be payable on the execution of
production sharing contracts.
Consideration - new ordinary shares issued at 3.38p 203
Contingent consideration (note 17) 450
Total consideration and value of goodwill 653
The exclusive MOU covering the rights to negotiate PSCs with the exclusivity
lapsed on 31 December 2021 and the MOU remaining on a non-exclusive basis
until the end of April 2022. The Company took to decision to cease evaluating
assets in Cuba on 15 August 2022 and to fully impair the value goodwill.
Goodwill
At 1 January 2022 653
Impairment (653)
At 31 December 2022 -
10. Property, plant and equipment
Cost Computer Developed Oil Total
Equipment & Gas Assets £'000s
£'000s £'000s
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
At 1 January 2022 11 22,963 22,974
Additions 1 - 1
Effect of exchange rate movements - 1,203 1,203
At 31 December 2022 12 24,166 24,178
Depreciation
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)
At 1 January 2022 (6) (1,857) (1,863)
Charge for the year (2) (212) (214)
Impairment - (21,193) (21,193)
Effect of exchange rate movements - (904) (904)
At 31 December 2022 (8) (24,166) (24,174)
Carrying value
At 31 December 2022 4 - 4
At 31 December 2021 5 21,106 21,111
At 1 January 2021 - 22,783 22,783
Impairment of £21,193,000 (2021: nil) has been recognised during the year. In
April 2022, the Republic of Slovenia approved amendments to its Mining Law
which include a total ban on hydraulic stimulation. Consequently, the
operational and development review conducted by the Company determined that
further field development was not economically viable and that the current
producing wells had a remaining production life of 5.5 years. Details of the
impairment judgments and estimates in the fair value less cost to develop
assessment as set out in Note 1.
11. Exploration and evaluation assets - Group
Cost Slovenia Total
£'000s £'000s
At 1 January 2021 18,753 18,753
Effects of exchange rate movements (290) (290)
At 31 December 2021 18,463 18,463
At 1 January 2022 18,463 18,463
Impairment (18,820) (18,820)
Effects of exchange rate movements 357 357
At 31 December 2022 - -
At 31 December 2022 - -
At 31 December 2021 18,463 18,463
At 1 January 2021 18,753 18,753
Impairment of £18,820,000 (2021: nil) has been recognised during the year. In
April 2022, the Republic of Slovenia approved amendments to its Mining Law
which include a total ban on hydraulic stimulation. Consequently, the
operational and development review conducted by the Company determined that
further field development was not economically viable and that the current
producing wells had a remaining production life of 5.5 years. As at 31
December 2022 the net present value was significantly lower than the carrying
value of the assets which indicated that an impairment of 100% of intangible
oil and gas assets was warranted. Details of the impairment judgments and
estimates and the fair value less cost to develop assessment as set out in
Note 1.
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.
The residual value of the intangible oil and gas assets represents the amount
provided for decommissioning costs (note 16) less the amounts in the Prepaid
Abandonment Fund (note 13).
12. Investments in subsidiaries - Company
2022 2021
£'000s £'000s
Cost
At 1 January 16,102 16,096
Additions 0 6
At 31 December 16,102 16,102
Accumulated impairment
At 1 January - -
Impairment (16,102) -
At 31 December - -
Net book value
At 31 December - 16,102
Impairment of £16,102,000 (2021: nil) has been recognised during the year. In
April 2022, the Republic of Slovenia approved amendments to its Mining Law
which include a total ban on hydraulic stimulation. Consequently, the
operational and development review conducted by the Company determined that
further field development was not economically viable and that the current
producing wells had a remaining production life of 5.5 years. As at 31
December 2022 the net present value was significantly lower than the carrying
value of the assets which indicated that an impairment of 100% of investment
in subsidiaries.
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 2022 % of share capital held 2021
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% 100%
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
2022 2021
£'000s £'000s
VAT recoverable 33 42
Prepaid abandonment liability 300 300
Prepayments & accrued income (22) (34)
311 308
Less non-current portion (300) (300)
Current portion 11 8
The prepaid abandonment liability represents funds the Group has deposited
into a bank account to be made available for the purposes of decommissioning
wells that are currently in production.
14. Trade and other receivables - Company
a) Trade Receivables
2022 2021
£'000s £'000s
VAT recoverable 14 19
Prepayments & accrued income 10 9
24 28
b) Intercompany Receivables
Cash 2022 Services Total Cash 2021 Services Total
£'000s £'000s £'000s £'000s £'000s £'000s
Ascent Slovenia Limited - - - 17,368 5,404 22,772
Ascent Resources doo - - - 2,951 1,730 4,681
Trameta doo - - - 11 - 11
Ascent Hispanic Ventures - - - 56 - 56
- - - 20,386 7,134 27,520
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.
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.
In April 2022, the Republic of Slovenia approved amendments to its Mining Law
which include a total ban on hydraulic stimulation. Consequently, the
operational and development review conducted by the Company determined that
further field development was not economically viable and that the current
producing wells had a remaining production life of 5.5 years. As at 31
December 2022 the net present value was significantly lower than the carrying
value of the assets which indicated that an impairment of 100% of intercompany
receivables at the Company level was warranted. Impairment for the year under
review was £27,520,000 (2021: nil).
15. Borrowings - Group and Company
Group 2022 2021
£'000s £'000s
Current
Borrowings - -
Convertible loan notes 5 5
Non-current
Borrowing 516 536
521 541
Company
Current
Borrowings - -
Convertible loan notes 5 5
Non-current
Borrowing 516 536
521 541
In December 2022, the Company reprofiled its outstanding debt with Riverfort
Global Opportunities. The total outstanding obligation stood at £566,000 with
the Company repaying £50,000 of the total outstanding payment obligations of
£561,620, with £25,000 in cash plus £25,000 which will be satisfied with
the issue of 625,000 new shares. The remaining balance of £511,620 was
re-profiled such that it will incur a coupon of 8 per cent and now be
redeemable in six equal cash instalments of £92,091.60 as of 14 September
2023 and monthly thereafter with final payment on 14 February 2024.
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 2021 328
Foreign exchange movement (16)
Provision -
At 31 December 2021 312
At 1 January 2022 312
Foreign exchange movement 13
Provision 338
At 31 December 2022 663
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. The
Company has placed £300,000 on deposit as collateral against this liability
see Note 13.
17. Contingent consideration due on Acquisition
Group 2022 2021
£'000s £'000s
Non-Current
Ascent Hispanic Limited (formerly Energetical Limited) - 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 in cash and a further £350,000 in shares. The Company
has not discounted the contingent consideration since the impact would not be
material. The Company took to decision to cease evaluating assets in Cuba on
15 August 2022 and as such write down the value of the contingent
consideration in full.
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
2022 2021
£'000s £'000s
Trade payables 437 581
Tax and social security payable 44 16
Accruals and deferred income 495 174
976 771
19. Trade and other payables - Company
2022 2021
£'000s £'000s
Trade payables 138 309
Tax and social security payable 28 10
Accruals and deferred income 53 174
219 493
20. Called up share capital
2022 2021
£'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 763 547
8,214 7,998
Reconciliation of share capital movement 2022 2021
number
number
At 1 January 109,376,804 95,283,281
Issue of shares during the year 43,041,211 14,093,523
At 31 December 152,418,015 109,376,804
The deferred shares have no voting rights and are not eligible for dividends.
Shares issued during the year
• On 19 January 2022, the Company raised £600,000 via a placing of
18,181,818 ordinary shares with investors.
• On 19 January 2022, the Company issued 303,030 ordinary shares at
a price of 3.30p to a professional advisor in lieu of fees.
• On 3 February 2022, the Company issued 1,636,363 ordinary shares
at a price of 3.30p to professional advisors in lieu of fees and to staff in
lieu of bonus.
• On 14 April 2022, the Company received £242,500 in respect to a
warrants exercise over 6,062,500 new ordinary shares.
• On 1 December 2022, the Company raised £600,000 via a placing of
15,000,000 ordinary shares with investors.
• On 1 December 2022, the Company issued 1,232,500 ordinary shares
at a price of 4.00p to professional advisors in lieu of fees.
• On 1 December 2022, The Company issued 625,000 ordinary shares at
a price of 4.00p to Riverfort Global Opportunities as a repayment of loan.
Shares issued during the prior 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.
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 2022, the Group had exploration and expenditure commitments of
£ Nil (2021 - Nil).
22. Related party transactions
There is no ultimate controlling party for the Company.
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.
2022
There were no transactions involving directors during the year (2021: nil).
23. Events subsequent to the reporting period
In February 2023 the Company granted an aggregate of 4,600,000 options over
ordinary shares as had been announced by RNS on 11 November 2022.
On 23 February 2023 the Company announced that it had signed a Strategic
Collaboration Agreement with Beryl International (Pty) Ltd in which the
parties agree to work together to identify and potentially fund both those
LATAM ESG Metals opportunities already identified by Ascent and new African
opportunities introduced by Beryl. In support of the collaboration, Beryl has
agreed to subscribe for£ 1,000,000 in new equity via a direct subscription at
4 pence per new share. The Subscription will be conducted in two tranches,
with a first tranche of £300,000 in new equity closing on 21 March 2023 and
the balance of £700,000 closing on or before 30 June 2023.
On 21 March 2023 the Company announced that, following the inclusion of South
Africa to the FATF's 'grey list' on 24 February 2023 and the consequent
additional processes required to complete international funds transfers out of
South Africa, the direct subscription from Beryl, as announced on 23 February
2023, has now been delayed. It is now expected that settlement of the £1
million subscription at 4 pence per new subscription share will take place in
one full £1 million tranche on completion of the capitalisation of the
Mauritius domiciled special purpose vehicle created by Beryl for this
investment.
On 4 April 2023 the Company announced that achieved a positive resolution in
the mediation process between ASL and Geoenergo as joint venture ("JV")
partners and Petrol Geo as JV service provider. Geoenergo has agreed to settle
all outstanding hydrocarbon revenues owed to ASL from January
2022 to February 2023 which total €1,724,689 and ASL has agreed to
settle all outstanding JV operating costs owed to Petrol Geo for €1,436,000.
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:
Shares Weighted Average Price (pence)
Outstanding at 1 January 2021 7,348,142 53.12
Outstanding at 31 December 2021 7,348,142 53.12
Exercisable at 31 December 2021 1,450,763 248.72
Outstanding at 1 January 2022 7,348,142 253.72
Granted during the year 500,000 5.00
Expired during the year -
Outstanding at 31 December 2022 7,848,142 50.05
Exercisable at 31 December 2022 1,450,763 248.72
The value of the options is measured by the use of a Black Scholes Model. The
inputs into the Black Scholes Model made in 2022 were as follows:
Share price at grant 3.85
Exercise price 5.00
Volatility 59.45%
Expected life 5 years
Risk free rate 1%
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 2022 have an exercise price in the range of
2.9p and 7.78p (31 December 2021: 2.9p and 7.78p) and a weighted average
contractual life of 4.5 years (31 December 2021: 4.5 years). The amount
recognised in the income statement for the year ended 31 December 2022 was
£2,000 (2021: nil).
Details of the warrants issued in the year are as follows:
Issued Exercisable from Expiry date Number outstanding Exercise price
27 January 2022 Anytime until 26 January 2024 20,303,030 5.00p
27 January 2022 Anytime until 26 January 2024 1,000,000 5.00p
14 April 2022 Anytime until 14 April 2025 9,093,750 4.00p
1 December 2022 Anytime until 1 December 2024 15,000,000 5.00p
1 December 2022 Anytime until 1 December 2024 4,600,000 5.00p
Warrants Weighted Average Price (pence)
Outstanding at 1 January 2022 21,914,254 6.80
Granted during the year 49,996,780 4.82
Exercised during the year (6,062,500) 4.00
Expired during the year (7,727,272) 5.50
Outstanding at 31 December 2022 58,121,262 5.20
Exercisable at 31 December 2022 58,121,262 5.20
The warrants outstanding at the period end have a weighted average remaining
contractual life of 2.2 years. The exercise prices of the warrants are between
4.00 - 7.50p per share.
25. Notes supporting the statement of cash flows
Group 2022 2021
£'000s £'000s
Cash at bank and available on demand 325 97
Cash held on deposit against bank guarantee - -
325 97
Company
Cash at bank and available on demand 302 88
Cash held on deposit against bank guarantee - -
302 88
Significant non-cash transactions are as follows:
2022 2021
£'000s £'000s
Interest charged on loans 30 26
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 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 Group'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
2022 2021 2022 2021
£'000s
£'000s
£'000s
£'000s
Trade and other receivables - - - -
Cash and cash equivalents 29 9 6 7
Trade and other payables (314) (277) - 2
Net exposure (285) (268) 6 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
Group Year ended Year ended
31 December 2022
31 December 2021
Profit or loss
10% strengthening of sterling 124 40
10% weakening of sterling (151) (48)
Equity
10% strengthening of sterling 69 (3,598)
10% weakening of sterling (85) 4,398
Company
Profit or loss
10% strengthening of sterling - -
10% weakening of sterling - -
Equity
10% strengthening of sterling - (3,045)
10% weakening of sterling - 3,722
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 2022, the Group and Company has GBP loans valued at £521,000
rates of 8% per annum. At 31 December 2021, the Group and Company had GBP
loans valued at £536,000 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 2022 2021 2022 2021
£'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 516 536 516 536
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 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:
Categorisation of Financial Assets and Liabilities - Group Carrying amount Year ended 31 December Fair Value Year ended 31 December Carrying amount Year ended 31 December Fair Value Year ended 31 December
2022 2022 2021 2021
Financial assets
Cash and equivalents - unrestricted 325 325 97 97
Cash and equivalents - restricted - - - -
Trade receivables 11 11 8 8
Prepaid abandonment fund (refundable) 300 300 300 300
Financial liabilities
Trade and other payables 599 599 771 771
Loans at fixed rate 516 516 536 536
Capital management - Company Carrying amount Year ended 31 December Fair Value Year ended 31 December Carrying amount Year ended 31 December Fair Value Year ended 31 December
2022 2022 2021 2021
Financial assets
Cash and equivalents - unrestricted 302 302 88 88
Trade receivables 26 26 28 28
Financial liabilities
Trade and other payables 283 283 493 493
Loans at fixed rate 516 516 536 536
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 and contingencies
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 plus interest of €12,103. Post the
period under review the Company settled this dispute with Petrol Geo settling
all outstanding invoices from 2019 to February 2023.
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 Slovenian mining law in in April 2022
creating a ban on hydraulic stimulation, further development of the concession
is uncertain as is the development of additional wells. A provision of
£663,000 (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.
Publication of the Annual Report
The Company confirms that the Company's annual report and financial statements
for the year ended 31 December 2022 (the "Annual Report") will be published to
shareholders and will be on the Company's website shortly.
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