REG - Ascent Resources PLC - Interim results for the period ended 30 June 2017 <Origin Href="QuoteRef">ASCR.L</Origin>

Ascent ResourcesAnnouncement

28/09/2017 07:09

RNS Number : 0252S
Ascent Resources PLC
28 September 2017
28 September 2017
Ascent Resources plc
("Ascent" or the "Company")
Interim results for the period ended 30 June 2017
Ascent Resources plc, the AIM quoted European oil and gas exploration and production company is pleased to report its interim results for the six months ended 30 June 2017.
Highlights:
 Recompletion and flow testing of well Pg-10.
 Construction of the new pipeline connection at MRS Lendava (land acquired by Ascent from Trameta in July 2016) required to export gas production to Croatia.
 Refurbishment of separation equipment at the existing CPP (a gas separation facility) owned and operated by our partner Petrol Geoterm.
 Raised 2,988,000 through a successful Placing on the PrimaryBid platform which allowed private and other investors the opportunity to participate on equal terms.
 Reduction in debt of almost 6 million through loan note conversions.
Post Period Highlights:
 Recompletion of well Pg-11A
 Company poised to commence supplying gas to INA
 Further loan note conversions of 2.3 million which has virtually eliminated convertible loan notes from the balance sheet, debt down to less than 50K.
Colin Hutchinson, CEO of Ascent, commented:
"2017 has been a transformational year for the Company and probably the most successful in its history. We have begun selling gas, reported revenues for the first time since 2013 and are now virtually debt free. The Company is now in a strong position to look to expand our operations into new territories and face the future with increased optimism."
Enquiries:
Ascent Resources plc
Clive Carver, Chairman
Colin Hutchinson, CEO

0207 251 4905
WH Ireland Limited
James Joyce / Alex Bond
0207 220 1666

Yellow Jersey 
Tim Thompson
Harriet Jackson
Henry Wilkinson

0203 735 8825
Chairman's statement
The period under review and subsequently has been probably the most successful in the Company's history. 
We achieved first gas selling to local customers from our Pg-10 well in April 2017.
During the first half of the year we refurbished infrastructure and installed pipeline connections to facilitate the export of gas to Croatia under the gas sales agreement signed in July 2016.
Following recompletion work we brought on stream our second well Pg-11A in September 2017.
We are now poised to commence supplying gas to INA and are waiting only on a final approval from one of the Croatian ministries.
Additionally, over the past 18 months we have dramatically improved our balance sheet via conversion of almost 12 million of loan notes leaving less than 50,000 of outstanding convertible debt. 
The impact of the above successes has been to transform the company from a pre-income explorer into a cash positive producer, which has inevitably led to a rerating of our shares. 
The future
In the coming months, we look forward to updating the market with news of the IPPC permit, which is again with the Slovenian Administrative Court. We await yet further confirmation from the Slovenian regulatory system that all is fine with our plans for the Petiovci gas field. We also note that it is only the refusal by a single environmental protestor to accept the several previous regulatory rulings that is delaying the progress of the project to the detriment of the Slovenian state. In the meantime, we will intend to sell our untreated gas to INA in Croatia.
Our successes now allow us to consider both the future development of both the Petiovci gas field and investments in other projects from a position of strength compared to previous periods. 
We again thank our shareholders and partners for their continued support.
Clive Carver
Non-executive Chairman


CEO's report
The first half of the year saw Ascent Resources move from an exploration company to a production company after ten years of operation in Slovenia. Bringing Pg-10 and then Pg-11A into production were momentous events. We have also completed the necessary infrastructure refurbishment at the CPP and work on the export pipeline; and we now look forward to the imminent commencement of export sales.
During the period under review and subsequently there have been a series of significant developments:
Recompletion of well Pg-10
In January 2017, we finalised the recompletion work on the first of two wells, Pg-10, and perforated the production tubing at a depth of 3,102 metres. The well was subsequently tested and a maximum stabilised flow rate of 249,000 cubic metres (8.8MMscfd) was achieved on a 12mm choke. The well was subsequently shut in while it was connected to infrastructure.
Recompletion of well Pg-11A
The workover at Pg-11A started in April 2017 and was completed in August 2017. The work consisted of an operation to remove and replace a section of the production tubing and install production well head equipment. The operation took longer than anticipated after a wireline tool became stuck in the tubing during the final procedures to remove the bottom hole plug. We commenced the sale of gas from Pg-11A in September 2017.
Construction of flow lines
The 500metre flowline between well Pg-10 and the existing separating station (CPP) which is owned by our partner Petrol Geoterm, was laid during January 2017 and connected to well Pg-10 once the flow test had been completed in March 2017.
The 40metre flowline between well Pg-11A and the production line which runs to the CPP was completed during June 2017 and connected to well Pg-11A once the workover had been completed.
Refurbishment of the CPP
In order to produce gas for export it was necessary to refurbish certain infrastructure in the CPP. The main work involved installing a replacement separator, sufficient for the increased pressures and flow rates expected on the export line. This work was completed in July 2017 and the replacement separator is capable of processing 240,000 cubic metres per day (8.5MMscfd).
Connection and certification of the export pipeline
The 8" export line which runs from the land at MRS Lendava owned by our 100% owned subsidiary, Trameta, to the field operated by INA at Medjimurje in Croatia was pressure tested and certificated by the Slovenian authorities in November 2016.
The 6" production pipeline which runs from the CPP past MRS Lendava was refurbished and recertified during the period under review. At the same time, the surface infrastructure required to clean and maintain the pipeline was installed at MRS Lendava. 
Following the work on the production pipeline, the connection between the two lines was installed and tested and an operational certificate issued by the Slovenian authorities.
Finally, in July 2017, the Croatian authorities reviewed the application from our partner, INA, to recertify the pipeline on their side of the border, which INA have advised they expect to receive imminently.
Once operational, the export pipeline could accommodate daily production of over 800,000 cubic metres per day (28MMscfd).
Commencement of production
In April 2017, the Joint Venture commenced production from well Pg-10 which was sold locally to industrial customers after separation at the CPP. The revenues for the period to 30 June 2017 were 180,644 (154,000). In total 1,113,217 cubic metres (39,313Mcf) of gas and 24,992 litres (157 barrels) of condensate were sold during the period. Average daily production for the period was 84boepd.
Whilst the volumes and revenues are modest in the context of our long-term plans for the project, commencing production after ten years of operations in Slovenia was a hugely significant milestone.
Supply under the INA contract is expected to commence shortly, once the final Croatian ministerial approval has been received.
The terms of the INA contract set an upper and lower limit on production calculated in megawatt hours (MwH). For the first two months, these translate into a range of 58,182 to 77,577 cubic metres per day; which based on the average rates over the last twelve months would generate revenue to Ascent of between 220,000 and 290,000 per month. In the subsequent ten months of the contract the range is 63,031 to 82,425 cubic metres per day; which based on the average rates over the last twelve months would generate revenue to Ascent of between 240,000 and 310,000 per month. Production at these levels, and average rates remaining reasonably stable over the period, will make the Company profitable at an EBITDA level and generate positive operating cash flow.
The contract provides for the maximum level to be increased following the agreement of both parties and the infrastructure has been constructed and refurbished in such a way as to allow for production to be increased.
Financial performance
The financial highlights for the period are the reporting of revenues for the first time since 2013 and the significant reduction of debt which has reduced to less than 50,000 since the end of the period.
 Revenues for the period of 154,000 were wholly derived from hydrocarbon sales in Slovenia as discussed above.
 An additional charge of 115,000 was made to cost of sales bring the gross margin to zero as production during the period is considered 'test' production.
 The loss from operating activities during the period increased on the comparable period in 2016 by 105,000 to 781,000 as a result of the increase in activities required to bring the field into production.
 The loss before tax reduced by 265,000 to 1,079,000 as the result of the reduced finance costs on loan notes following early conversion.
 Borrowings have reduced by 7 million over the past 12 months and by nearly 4 million since the beginning of the year. Further conversions since the end of the period have reduced the amount of outstanding notes to less than 50,000.
 Raised 2,988,000 before costs in equity during February 2017 through a heavily subscribed offer through the PrimaryBid platform which ensured the maximum practical access to the offering.
Outlook
2017 has been a transformative year so far for the Company. We look forward to the continued development of the Petiovci field. Wells Pg-10 and Pg-11A are intended to prove the commerciality of the field and the significant reserves and resources contained within. 
While we anticipate receiving the IPPC permit to construct our own processing facility in due course this is no longer as important to the Company. We have refurbished the existing infrastructure to give ourselves room to grow independent of the IPPC Permit.
Additionally, as the Company is now generating revenue and is virtually debt free, we are in a strong position to look to expand our operations into new territories.
Consolidated Income Statement
for the Period ended 30 June 2017


Six months ended
Six months ended
Year ended

30 June
2017
30 June
2016
31 December
2016

Unaudited
Unaudited
Audited

Notes
 '000s
 '000s
 '000s





Revenue

154
-
-
Cost of sales

(154)
-
-
Gross profit

-
-
-





Administrative expenses
2
(921)
(676)
(1,888)





Loss from operating activities

(921)
(676)
(1,888)





Finance income
3
7
153
159
Finance cost
3
(305)
(821)
(1,453)
Net finance costs

(298)
(668)
(1,294)





Loss before taxation 

(1,219)
(1,344)
(2,676)





Income tax expense

-
-
-
Loss for the period

(1,219)
(1,344)
(2,676)





Loss per share




Basic & fully diluted loss per share (Pence) *
4
0.08
0.52
0.49
Consolidated Statement of Comprehensive Income
for the Period ended 30 June 2017


Six months ended
Six months ended
Year ended

30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s





Loss for the period

(1,219)
(1,344)
(2,676)





Other comprehensive income




Foreign currency translation differences for foreign operations

500
2,293
2,997





Total comprehensive gain / (loss) for the period 

(719)
949
321

Consolidated Statement of Changes in Equity
for the Period ended 30 June 2017


Share capital
Share premium
Equity reserve
Share based payment reserve
Translation reserve
Accumulated losses
Total


 '000s
 '000s
 '000s
 '000s
 '000s
 '000s
 '000s
Balance at 1 January 2016

1,878
56,693
1,572
483
(2,805)
(37,147)
20,674
Loss for the period

-
-
-
-
-
(1,344)
(1,344)
Currency translation differences

-
-
-
-
2,293
-
2,293
Total comprehensive income

-
-
-
-
2,293
(1,344)
949
Conversion of loan notes

565
2,260
(369)
-
-
369
2,825
Issue of shares during the period net of costs

405
1,010
-
-
-
-
1,415
Share-based payments and expiry of options

-
-
-
83
-
-
83
Balance at 30 June 2016

2,848
59,963
1,203
566
(512)
(38,122)
25,946
Balance at 1 January 2016

1,878
56,693
1,572
483
(2,805)
(37,147)
20,674
Loss for the period

-
-
-
-
-
(2,676)
(2,676)
Currency translation differences

-
-
-
-
2,997
-
2,997
Total comprehensive income

-
-
-
-
2,997
(2,676)
321
Acquisition of Trameta

-
-
-
1,103
-
-
1,103
Extinguishment of convertible loan notes

-
-
(1,572)
-
-
1,572
-
Extension of convertible loan notes

-
-
2,787
-
-
-
2,787
Issue of convertible loan notes

-
-
360
-
-
-
360
Conversion of loan notes

749
2,996
-
-
-
-
3,745
Issue of shares during the period net of costs

1,105
3,584
-
-
-
-
4,689
Share-based payments and expiry of options

-
-
-
94
-
94
188
Balance at 31 December 2016

3,732
63,273
3,147
1,680
192
(38,157)
33,867
Balance at 1 January 2017

3,732
63,273
3,147
1,680
192
(38,157)
33,867
Loss for the period

-
-
-
-
-
(1,219)
(1,194)
Currency translation differences

-
-
-
-
500
-
500
Total comprehensive income

-
-
-
-
500
(1,219)
(1,008)
Conversion of loan notes

813
3,259
(1,826)
-
-
1,826
4,072
Issue of shares during the period net of costs

323
2,503
-
-
-
-
2,826
Share-based payments 

-
-
-
102
-
-
102
Balance at 30 June 2017

4,868
69,035
1,321
1,782
692
(37,550)
40,418

Consolidated Statement of Financial Position
As at 30 June 2017


30 June
2017
30 June
2016
31 December
2016

Unaudited
Unaudited
Audited
Assets
Notes
 '000s
 '000s
 '000s
Non-current assets




Property, plant and equipment

4
4
4
Exploration and evaluation costs
5
40,024
35,214
37,541
Total non-current assets

40,028
35,218
37,545
Current assets




Trade and other receivables

556
23
32
Cash and cash equivalents

2,708
860
3,153
Total current assets

3,073
883
3,185
Total assets

43,236
36,101
40,730





Equity and liabilities




Share capital 
7
4,868
2,848
3,732
Share premium account
7
69,035
59,963
63,273
Equity reserve

1,321
1,203
3,147
Share-based payment reserve

1,782
566
1,680
Translation reserves

692
(512)
192
Accumulated losses

(37,550)
(38,122)
(38,157)
Total equity

40,148
25,946
33,867





Non-current liabilities




Borrowings

-
-
6,162
Provisions

460
434
447
Total non-current liabilities

460
434
6,609
Current liabilities




Trade and other payables

292
297
254
Borrowings
6
2,392
9,424
-
Total current liabilities

2,684
9,721
254
Total liabilities

3,144
10,155
6,863
Total equity and liabilities

43,292
36,101
40,730

Consolidated Statement of Cash Flows
for the six months ended 30 June 2017


6 months ended 
30 June
2017
6 months ended 
30 June
2016
Year ended 31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Cash flows from operations 




Loss after tax for the period

(1,219)
(1,344)
(2,676)
Adjustment related to test production

115
-
-
Decrease/ (increase) in receivables

(524)
38
29
Increase / (Decrease) in payables

38
(211)
(252)
Increase in share based payments

102
83
188
Exchange differences

(23)
(8)
1
Finance income 

(7)
(153)
(159)
Finance cost

305
821
1,453
Net cash used in operating activities

(1,213)
(774)
(1,416)





Cash flows from investing activities




Interest received

-
-
1
Payments for fixed assets

-
-
(1)
Payments for investing in exploration

(2,062)
(158)
(677)
Disposal / (Purchase) of property, plant and equipment

-
(1)
-
Net cash used in investing activities

(2,062)
(159)
(677)





Cash flows from financing activities




Interest paid and other finance fees

(2)
-
(73)
Proceeds from loans

-
350
1,400
Loan issue costs

-
(6)
(800)
Proceeds from issue of shares

2,988
1,455
4,999
Share issue costs

(162)
(40)
(311)
Net cash generated from financing activities

2,824
1,759
5,215





Net increase in cash and cash equivalents for the period

(445)
826
3,122
Effect of foreign exchange differences 

6
2
(1)
Cash and cash equivalents at beginning of the period

3,153
32
32
Cash and cash equivalents at end of the period

2,708
860
3,153

1. Accounting Policies
Reporting entity
Ascent Resources plc ('the Company') is a company domiciled in England. The address of the Company's registered office is 5 New Street Square, London EC4A 3TW. The unaudited consolidated interim financial statements of the Company as at 30June 2017 comprise the Company and its subsidiaries (together referred to as the 'Group').
Basis of preparation
The interim financial statements have been prepared using measurement and recognition criteria based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted for use in the EU. The interim financial information has been prepared using the accounting policies which will be applied in the Group's statutory financial statements for the year ended 31 December 2017 and were applied in the Group's statutory financial statements for the year ended 31 December 2016.
All amounts have been prepared in British pounds, this being the Group's presentational currency.
The interim financial information for the six months to 30 June 2017 and 30 June 2016 is unaudited and does not constitute statutory financial information. The comparatives for the full year ended 31 December 2016 are not the Group's full statutory accounts for that year. The information given for the year ended 31 December 2016 does not constitute statutory financial statements as defined by Section 435 of the Companies Act. The statutory accounts for the year ended 31 December 2016 have been filed with the Registrar and are available on the Company's web sitewww.ascentresources.co.uk. The auditors' report on those accounts was unqualified. It did not contain a statement under Section 498(2)-(3) of the Companies Act 2006.
During the period, the Group has generated revenue from test production on well Pg-10. There has been a credit to costs of sales of 115,000 begin the gross margin on production which has been recorded against capitalised exploration costs.
Going Concern
The Financial Statements of the Group are prepared on a going concern basis. Provided that the INA contract proceeds as anticipated the Directors consider the Company has sufficient cash to fund its current obligations for at least the next 12 months.
Principal Risks and Uncertainties:
The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 46-48 of theAnnual Review 2016, a copy of which is available on the Company's website atwww.ascentresources.co.uk.
2. Operating loss is stated after charging


Six months ended
Six months ended
Year ended


30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Employee costs

449
277
560
Share based payment charge

102
83
188
Foreign Exchange differences

-
(1)
-





Included within Admin Expenses




Audit Fees

31
25
60
Fees payable to the company's auditor other services

-
-
2


31
25
62


3. Finance income and costs recognised in loss


Six months ended
Six months ended
Year ended


30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Finance income




Income on bank deposits

-
-
-
Foreign exchange movements realised

7
-
6
Other income

-
153
153


7
153
159
Finance cost




Interest payable on borrowings 

-
(32)
(51)
Accretion charge on loan notes

(303)
(782)
(1,380)
Bank Charges

(2)
(8)
(16)
Foreign exchange movements realised

-
1
(6)


(305)
(821)
(1,453)
The liability of 153,000 written off as other income represented a creditor dating back more than five years which the Company no longer deems to be payable.
Convertible loan notes were restructured during the prior periods and a full commentary is contained within the audited financial statements for the year ended 31 December 2016 and are available at www.ascentresources.co.uk.
4. Loss per share







Six months ended
Six months ended
Year ended


30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Result for the period




Total loss for the period attributable to equity shareholders

1,219
1,344
2,676





Weighted average number of ordinary shares

Number
Number
Number
For basic earnings per share

1,580,679,071
258,096,858
544,270,848





Loss per share (Pence)

0.08
0.52
0.49
5. Exploration and Evaluation Costs
Exploration Costs 

Slovenia &Total
Cost


At 1 January 2016

32,711
Additions

144
Effects of exchange rate movements

2,345
At 30 June 2016

35,200
At 1 July 2016

35,200
Additions

1,635
Effects of exchange rate movements

706
At 31 December 2016

37,541
At 1 January 2017

37,541
Additions

2,073
Adjustment related to test production

(115)
Effects of exchange rate movements

536
At 30 June 2017

40,024



Carrying value


At 30 June 2017

40,024 
At 31 December 2016

37,541 
At 30 June 2016

32,711 
6. Borrowings


30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Current




Short term loan facility

-
838
-
Convertible loan notes

2,392
8,586
6,162


2,392
9,424
6,162





Convertible Loan Notes

30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s





Liability brought forward

6,162
10,778
10,778





Interest expense

303
786
1,380
Conversion loan notes

(4,073)
(2,825)
(3,745)
Modification to convertible loan notes - derecognition 
Nov 2016)

-
-
(8,140)
Modification to convertible loan notes - recognition of amended loan notes (Nov 2016)

-
-
5,352
Fair value of new convertible loan notes issued (Nov 2016)

-
-
690
Other movements

-
(153)
(153)





Liability carried forward

2,392
8,586
6,162
7. Share Capital


30 June
2017
30 June
2016
31 December
2016


Unaudited
Unaudited
Audited


 '000s
 '000s
 '000s
Allotted, called up and fully paid




Ordinary shares of 0.20 pence each

4,868
2,848
1,878





Reconciliation of share capital movement

Number
Number
Number
At 1 January

1,084,074,224
157,306,900
157,306,900





Placing of ordinary shares

161,500,000
202,380,960
552,281,987
Conversion of loan notes

590,046,319
282,542,511
374,485,337
At end of period

1,835,620,543
642,230,371
1,084,074,224
Equity raised
On 14 February 2017, the Company raised 2,987,750 (2,825,863 net of costs) via a Placing of 161,500,000 Ordinary Shares through the PrimaryBid.com platform.
The Company also raised funds through placings during the prior year:
 On 12 April 2016, the Company raised 500,000 (477,500 net of costs) via the Placing of 35,714,285 Ordinary Shares with investors using the PrimaryBid.com platform.
 On 7 June 2016, the Company raised 500,000 (477,500 net of costs) via the Placing of 83,333,333 Ordinary Shares with investors using the PrimaryBid.com platform.
 On 15 June 2016, the Company raised 500,000 (500,000 net of costs) via the Placing of 83,333,333 Ordinary Shares to Henderson Global Investors.
 On 31 October 2016, the Company raised 2,627,500 (2,402,434 net of costs) via the Placing of 262,750,000 Ordinary Shares.
 On 7 November 2016, the Company raised 871,510 (871,510 net of costs) via the Placing of 87,151,027 Ordinary Shares to Henderson Global Investors.


Loan note conversions
Over the course of the period a total of 590,076,850 shares were issued as a result of loan note conversions. In total 5,900,769 of liabilities were converted into equity. This is the cash value of the loan notes which is lower than the accounting value in Note 6 which had been discounted to net present value.
During 2016 a total of 374,485,337 shares were issued as a result of loan note conversions. In total 3,744,853 of liabilities were converted into equity.

Loan notes converted including accrued interest
Shares issued

2016
2017
2016
2017
January
0
0
0
0
February
0
2,652,107
0
265,210,704
March
0
1,597,018
0
159,701,787
April
1,088,390
1,581,609
108,838,990
158,160,880
May
463,113
69,709
46,311,258
6,970,931
June
1,273,923
325
127,392,263
32,548
July
0

0

August
845,053

84,505,321

September
563

56,312

October
0

0

November
73,455

7,345,491

December
357

35,702


3,744,853
5,900,769
374,485,337
590,076,850
8. Events subsequent to the end of the reporting period
There were 3,018,831 of loan note principal converted during July 2017 into 311,713,705 Ordinary Shares. As at 26 July 2017 all of the loan notes issued to Henderson Global Investors (subsequently Lombard Odier) have been converted in full. The balance of 49,423 (including rolled up interest) is held by other investors. 
On 4 August 2017, the Company announced that all of the infrastructure required to produce to INA had been installed and the new infrastructure was being used for local production.
On 7 September 2017, the Company announced that well Pg-11a had been successfully recompleted and production would begin on 8 September 2017 to be sold locally.


DIRECTORS AND ADVISERS
Directors
Clive Nathan Carver

Colin Hutchinson

William Cameron Davies

Nigel Sandford Johnson Moore


Secretary
Colin Hutchinson


Registered Office
5 New Street Square

London EC4A 3TW


Nominated Adviser & Broker
WH Ireland Corporate Brokers

24 Martin Lane
London EC4R 0DR

WH Ireland Corporate Brokers


Auditors
BDO LLP

55 Baker Street

London W1U 7EU


Solicitors
Taylor Wessing LLP

5 New Street Square

London EC4A 3TW


Bankers
Barclays Corporate Banking

1 Churchill Place

London E14 5HP


Share Registry
Computershare Investors Services plc

The Pavilions

Bridgwater Road

Bristol BS13 8AE


IR & PR
Yellow Jersey PR Limited
30 Stamford Street 
London SE1 9LQ
Company's registered number
05239285

This information is provided by RNS
The company news service from the London Stock Exchange
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