Annual Report and Financial Statements
Year ended 31 December 2013
Registered number 05239285
CONTENTS
Company Overview ................................................................................................ 2
Chairman’s Statement ........................................................................................... 3
Operations Review ................................................................................................. 7
Directors’ Report ................................................................................................... 9
Board of Directors .................................................................................................14
Directors and Advisers ..........................................................................................15
Summary of Group Net Oil and Gas Reserves .......................................................16
Strategic report .....................................................................................................18
Corporate Responsibility .......................................................................................19
Statement of Directors' Responsibilities ...............................................................21
Independent Auditors Report to the Members of Ascent Resources plc...............22
Consolidated Income Statement ...........................................................................24
Consolidated Statement of Comprehensive Income .............................................25
Consolidated Statement of Changes in Equity ......................................................26
Company Statement of Changes in Equity ............................................................27
Consolidated Statement of Financial Position .......................................................28
Company Statement of Financial Position .............................................................29
Consolidated Cash Flow Statement .......................................................................30
Company Cash Flow Statement ............................................................................31
Notes to the accounts ...........................................................................................32
- 1 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Company Overview
Ascent Resources plc (LSE:AST) (‘Ascent’ or ‘the Company’) is an independent oil and gas exploration and
production (‘E&P’) company that was admitted on AIM, operated by the London Stock Exchange, in November
2004 (LSE:AST). Since then its portfolio has consisted of predominantly European onshore projects. Ascent
operates the Petišovci tight gas project in Slovenia which is currently its sole asset.
Our strategy
The Board firmly believes that the gas field at Petišovci in Slovenia is the Company’s outstanding prospect and
therefore intends to focus its resources on this project. Our strategy is therefore to direct our available
funding towards bringing Petišovci into production.
The Group plans to continue its exploration programme in the longer term and take advantage of the
significant possible reserves and contingent resources within its areas of interest.
How we operate
Our project is operated through a local entity in a joint venture which is able to access the best local technical
knowledge to help us develop our assets effectively and efficiently.
The Company utilises a full range of advanced geophysical, geological and other state-of-the-art technology to
evaluate and de-risk projects and to reap maximum benefit from its appraisal, development and production
activities.
Our people
Ascent has a small experienced management team, implementing a defined development programme. This is
supplemented, as the need requires, with regional technical and operational expertise to ensure the highest
standards are delivered on our projects.
As an important employer in our area of operation we take our environmental and social responsibilities
seriously and always strive to be a good corporate citizen.
Our markets
Dependency on imported gas is very high throughout the EU, particularly in Slovenia. This and the relatively
buoyant price of gas in Europe, underpins our strategy of exploration, development and production in this
region.
Our operations are in close proximity to existing processing facilities, intra-field and national pipelines,
ensuring low cost connection and easy access to the market.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Chairman’s Statement
I am pleased to present the annual report, which covers the year ended 31 December 2013 and the
subsequent period.
In summary during the period under review:
the £5.5 million funding led by Henderson Global Investors was successfully completed
•
• we disposed of our investments in Hungary, the Netherlands and Italy to focus exclusively on the
•
•
Petišovci project in Slovenia
at Petišovci, after many frustrating years, key agreements with our partners were reworked to
international industry standards and finally signed
following the period end, up to a further £5 million was raised to provide working capital and fund
the Petišovci project.
Asset disposals
In accordance with the strategy outlined at the time of the rescue funding, the Company embarked on
disposing of its non-core assets. In April we sold our interest in the nearly depleted Hungarian assets for a
consideration of €450,000. In August 2013 we sold our interests in our Dutch assets and in July 2013 we
announced the sale of our difficult Italian assets.
The condition of the licences and the assets sold in Italy were such that the acquirer, Global Power Sources Srl
(‘GPS’), notified us of potentially serious breaches of the warranties given at the time of the sale.
While no formal legal steps were taken by GPS in relation to these matters, and no admission of liability was
made by Ascent, the Company and GPS agreed that, in return for a full settlement and waiver of any and all
claims or potential claims by GPS against Ascent, Ascent would issue 275 million ordinary shares to GPS,
credited as fully paid, at a price of 1.2p per share. At the time of the settlement the Ascent Board did not have
the authority to allot the full 275 million shares. Accordingly, 268 million shares were issued and a further 7
million of the settlement shares will be issued, credited as fully paid, following approval by shareholders at the
Annual General Meeting.
The disposal of these legacy assets marked the end of the past divergent and costly asset base and allowed the
full focus of the Company to be devoted to the Petišovci project in Slovenia.
The Petišovci project
Work done on this project to date, including an extensive 3D seismic survey conducted in 2009, core samples
taken from Pg-11, state-of-the-art wireline logging of Pg-11 and gas tested in the A to F as well as the deeper K
sands, has established that this asset has the potential to supply all Slovenia’s natural gas needs for 10 years.
An independent report by RPS of gas initially in place defined a gross P50 estimate of 456 Bcf and a mean of
592 Bcf. Further information is in the Operations Review.
The Company believes that this project, with its potentially high levels of recoverable gas, to be an excellent,
high value asset due to its scale and its risk/reward profile.
Partners
Our partners in the Petišovci project are the Petrol Group (‘Petrol’) and Nafta Lendava doo (‘Nafta’), who
together make up Geoenergo doo (‘Geoenergo’), the Concession holder.
Petrol is Slovenia’s largest company and the main supplier of petroleum products in Slovenia with annual sales
of some €4 billion. Petrol also has business interests in oil and gas trading and the alternative energy sector.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Nafta is a state owned company active in the production of chemicals, the treatment of waste water, fire
prevention services and petroleum storage products. Nafta will supply much of the onsite assistance required
for the development of the Petišovci project, particularly in relation to wastewater (formation water)
treatment services, fire prevention services and, to some extent, project design services.
Under the joint venture agreements, Ascent retains a 75% economic interest and is required to fund 100% of
the development costs. The remaining 25% economic interest is held by Geoenergo.
Progress in 2013
Together with investments made before Ascent bought into the asset, some €40 million has been invested into
the Petišovci project to date. For many years the project was stalled by disagreements between the parties
and the absence of a political will to bring the project into production.
After hard lobbying in 2012 and 2013, the project received a kick-start when, following a reordering of the
local Nafta administration, new management at Nafta adopted a more pragmatic and commercial approach to
the development of the field.
In May 2013, Petrol acquired Nafta Geoterm, which owns a significant portion of the existing gas processing
infrastructure and pipeline network required to take the gas from our Petišovci wells to the Plinovodi terminal
and connection to the national gas pipeline grid.
The major achievement of 2013 was the re-working of the main legal agreements, regulating the development
of the field, into industry standard agreements in forms that will be acceptable to providers of development
finance to build out the field. It would also make any sale or part sale of the asset far easier to complete.
Permitting
The Petišovci project is now in the detailed permitting phase. Progress to date has been slow, in part as
Slovenia does not have an established oil and gas regulatory infrastructure and therefore many of the
requests, considered standard elsewhere in the world, are new to the regulatory authorities.
During 2013, Slovenia adopted in full two major EU directives which will impact on the development of the
Petišovci project. Additionally the project is required to comply with the EU tendering obligations. These
developments mean that the permitting phase will take longer than previously anticipated.
Ascent has significantly strengthened its team working on permitting, with the addition of local and
international experts. However, EU directives have made this a much more complicated process and it is not
possible to predict exactly when the required permits will be forthcoming.
Project funding
Until the permits have been granted it is unlikely that we would be able to utilise conventional debt funding.
Once the permits are in place the Board expects to conclude a project finance facility to allow the existing
wells to be connected to the national pipeline grid and several shallower wells to be deepened for production.
The facility is also expected to fund the construction of a new gas treatment facility, new piping and a
connection to Slovenia’s national pipeline network.
Methanol plant
A very welcome development in the period under review was the sale by Nafta of a methanol plant adjacent to
the Petišovci field. This plant has not been operational for several years and has been acquired by an
international consortium subject to testing.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Gas used for the production of methanol does not need to be of the standard required for acceptance to the
national grid. Sales of gas to the methanol plant could therefore be made before the completion of the
permitting referred to above and also without the completion of a new treatment facility or the proposed new
pipelines and connection to the national grid.
We are in negotiations with the new owners of the methanol plant to sell our untreated gas and expect to
conclude an acceptable agreement in the coming months. Untreated gas from Petišovci could be sold for use
in the methanol plant before the end of the third quarter of 2014.
Funding
As noted above, 2012 closed with the Company announcing a conditional £5.5 million rescue funding led by
Henderson Global Investors, the terms of which were approved by shareholders in April 2013.
This funding allowed the Company the opportunity to rationalise its portfolio of assets and to re-focus its
efforts on, by far the most promising of its assets, Petišovci in Slovenia, but as noted at the time, this was not
sufficient to bring the Petišovci project into production.
Through tight cash management and a reduction in general and administrative costs of over £1 million on an
annualised basis, the £5.5 million raised funded the Group through to the end of 2013.
In May 2012, the Company secured a €15 million facility from BNP Paribas (‘BNPP’) to finance the project into
production, subject to the consent of all the signatories to the Joint Venture Agreement. In spite of
considerable efforts by the Company, these consents were not granted so the BNPP facility expired in June
2013.
After this frustrating delay in obtaining consents, the Company was extremely pleased to announce, at the end
of October 2013, that it had signed a series of key agreements with its Slovenian partners, putting an end to
the prolonged impasse that had thwarted previous attempts to secure project finance and to move forward.
The agreements signed included: (i) a revised Joint Venture agreement which significantly simplifies the
relationship between the partners and removes the serious problems caused by lack of consents; (ii) an
infrastructure agreement with Petrol Geoterm doo, which will facilitate the operation of the infrastructure and
construction of the processing plant; and (iii) a service agreement with Petrol Geoterm doo, who will oversee
the processing of hydrocarbons and their transmission to the national grid. The signing of these agreements
marked a significant step forward towards bringing the Petišovci asset into production and work is being done
to secure project finance for the initial phase of the field development.
With project funding for Petišovci dependent upon the completion of the permitting phase, the Company was
obliged to seek additional funding. Accordingly, in February 2014 up to an additional £5 million was raised via
the issue of further convertible loan notes.
Slovenia
Slovenia is a small country without a history of large scale gas production and where much of the applicable
regulation has been taken from the mining industry. Until recently there has been little noticeable assistance
from the variety of authorities charged with regulating the oil and gas industry. As a result, progress over the
past decade has been painfully slow and many opportunities have been missed.
Once operating at full capacity the Petišovci field could provide sufficient gas for the whole of Slovenia for ten
years. The recent severe, adverse economic climate in Slovenia has resulted in a change of attitude in bringing
the Petišovci fields into production: it has now become a national priority. Whether this perspective will filter
through to the local regulators involved in the Petišovci permitting remains to be seen.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
With some €40 million invested to date in the Petišovci project, and given the Company’s new focus entirely
on Slovenia, Ascent has become probably the most prominent direct foreign investor in the country. Others
are watching carefully and it would be a major setback to Slovenia in attracting further international
investment if the new national priority for this project is not reflected in quick, local permitting decisions.
Staff
I would like to thank the staff and consultants for their continued hard work. Under Len Reece’s leadership a
team of long-standing and new staff has been built in Slovenia with strong technical and project management
skills.
Outlook
The past year has seen the Company implement the strategy outlined at the beginning of 2013. The Company
is now focussed on a single project with a strong potential and without the distractions of the past.
The Company has two principal opportunities of generating value. The first is to bring the Petišovci field into
production and tie into the Slovenian national grid as previously outlined. The second is to sell untreated gas
direct to the adjacent methanol plant.
Provided that either the permitting phase currently under way can be completed with the minimum of delays
or the testing of the methanol plant is successful then prospects for the Company to achieve significant
revenues in the foreseeable future look encouraging.
Clive Carver
Chairman
9 April 2014
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Operations Review
The Petišovci Project, Slovenia
Ascent Slovenia Ltd 75% (operator), Geoenergo doo 25% (concession holder)
The Petišovci Tight Gas Project, in a 98 km2 area in north eastern Slovenia, targets the development of
substantial tight gas reservoirs known to be in Miocene clastic sediments.
Ascent first acquired an interest in the Petišovci project in 2007 and in 2009 an extensive 3D seismic survey
was conducted across the Petišovci concession area.
The structure has two sets of reservoirs, the shallower Pontian and the deeper Miocene. The Miocene
reservoirs, or Pg. sands, are the focus of Ascent's development objectives; however the shallow reservoirs,
which were extensively developed during the 1960s, are not considered to be fully depleted.
Two new appraisal wells, Pg-10 and Pg-11, drilled in 2010/2011 to a total vertical depth of 3,497 m and
3,500 m respectively, confirmed gas in all six Middle Miocene Badenian reservoirs (‘A’ to ‘F’ Pg. sands). Gas
flowed for the first time from the shallowest 'A' sands and, in addition, gas and condensate were sampled from
the Lower Miocene Karpatian (‘K’ sands) reservoir. Pg-10 proved productive from the ‘F’ sands and Pg-11A
(Pg-11 was side-tracked for technical reasons to Pg-11A) from the deeper ‘K’ sands. Both wells were
successfully fracture stimulated resulting in flow rates of 8 MMscfd from the ‘F’ sands and 2 MMscfd from the
‘K’ sands, proving the commercial potential of both wells.
The data generated from the Pg-11 well, including three 18 m core samples and state-of-the-art wireline
logging, supplemented the 2009 3D survey of the project area. The Company has reported independently
verified P50 estimate of gas in place of 456 Bcf (13 Bm3; 76 MMboe).
Both wells have been recompleted ready for a production testing phase which will help to better understand
the long-term productivity performance of the reservoir. The test production results will inform decisions
regarding a possible full field Petišovci development. The north eastern corner of Slovenia has been an oil and
gas producing area since the early 1940s and contains much of the infrastructure necessary for processing and
exporting produced hydrocarbons. Some improvements to these existing facilities will be required for the test
production phase.
The next step in this project’s redevelopment plan is to bring gas from Pg-10 and Pg-11A on stream via
dedicated well-site facilities, through a modified, upgraded, existing, gas processing plant and from there to
the national gas pipeline terminal. This will be followed by the deepening of 3 existing wells, Pg-6, 7 and 9.
Processing will be necessary to reduce the carbon dioxide content of the gas from approx. 3% to less than the
1.5% required for the national transmission system specifications, to remove condensate for sale separately
and to ensure dew point control by dehydration.
Less than a kilometre from the wells is a methanol production plant which was mothballed in 2010 as falls in
methanol pricing had made production uneconomic. Following a recovery in methanol pricing, work has
started to bring this plant back into production by mid-2014. The gas from Pg-10 and Pg-11A could be sold to
this plant for methanol production. The advantages of this option are that (i) the gas would need very little
processing before entering the methanol plant; (ii) the local processing plant could manage this without much
modification; and (iii) the Company could derive an income as early as Q3 2014.
After a period of test gas production to monitor reservoir performance, the partners will proceed to the next
phase in developing the Petišovci field, which includes: further upgrading and expansion of the processing
facility for a substantially higher capacity; enlarged gas export capacity; and modifications to the national grid
connection. The partners will also prepare a field development strategy for the further expansion of this
significant Petišovci gas field complex.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Back-in Rights
The Hermrigen and Linden exploration permits in Switzerland cover undeveloped discoveries made by Elf
Aquitaine in 1972 and 1982 with a combined estimated gas resource base of over 360 Bcf. As the original
Hermrigen well was drilled before gas pipeline infrastructure was built in the area, the discovery has remained
unappraised. Despite selling its interest in 2010 to eCORP, the current operator of the project, Ascent retains
various back-in rights on any successful outcome of six conventional appraisal prospects, provided relevant
apportioned costs are covered.
As part of the Sale and Purchase agreement with Tulip Oil, Ascent has the right to re-purchase a 10% interest
in each of the Dutch licences once Tulip has made a final investment decision with respect to the commercial
development of the Terschelling-Noord Field.
The sale and purchase agreement signed with Global Power Sources Srl (GPS) provides for Ascent to be
granted a 48 month call option to buy back at least a 51% participation, at cost plus 5%, in any future discovery
made by ARI.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Directors’ Report
The Directors present their Directors’ Report and Financial Statements for the year ended 31 December 2013
(‘the year’).
Principal activities
The principal activities of the Group comprise gas and oil exploration and production. The Company is
registered in England and Wales and is listed on the AIM Market of the London Stock Exchange.
The Group has its headquarters in London and has oil and gas interests in Slovenia. The Group operates its
own undertakings both through subsidiary companies and joint ventures. The subsidiary undertakings
affecting the Group’s results and net assets are listed in Note 12 to the Financial Statements.
Business review
The Companies Act 2006 requires the Company to set out in the Directors’ Report a fair review of the business
of the Company during the financial year ended 31 December 2013 including an analysis of the position of the
business at the end of the financial year and a description of the principal risks and uncertainties facing the
Company (the ‘Business Review’). The purpose of the Business Review is to enable shareholders to assess how
the Directors have performed their duties under Section 172 of the Companies Act 2006, being the duty to
promote the success of the Company. The Chairman’s Statement and the Group Operations Review, starting
on pages 3 and 7, together with the Corporate Responsibility Statement, corporate governance statements
and Principal Risks and Uncertainties section of the Annual Report, which are incorporated herein by
reference, are considered to fulfil the requirements of the Business Review.
Principal risks and uncertainties
The Group operates in an industry characterised by a range of business risks. The Company maintains a risk
register that categorises risks under the headings: Strategic, Operations, Financial, Compliance and
Knowledge. The key risks and uncertainties faced by the Group are summarised below.
Strategic – the achievement of corporate objectives is dependent on the strategy followed by the
Group, as well as the interaction with stakeholders and shareholders, good governance and an
understanding of economic and market dynamics. This risk is mitigated by the expertise of the
Company’s Directors and specialists.
Operations – the operations of the Group may be adversely affected by its ability to find and develop
adequate gas and oil reserves, to develop and exploit new gas and oil acreage and to recruit and
retain management and staff with the right technical skills. This risk is mitigated through the
experience and expertise of the Company’s specialists and consultants, the application of appropriate
technology and the selection of appropriate prospective exploration and development assets.
Financial – the Group’s ability to meet its obligations and achieve objectives is influenced by its
liquidity, gearing, movements in commodity prices and costs, movements in foreign exchange,
funding and financial reporting requirements. Foreign exchange risk is mitigated by close monitoring
of exchange rate movements and holding cash reserves with a variety of different institutions in a
variety of currencies being Euro, US Dollar and British Pound. All other financial risks are mitigated by
the expertise of the Company’s financial staff.
Compliance – the Group must comply with a range of corporate, legal and industry regulations and
the nature of its operations necessitates strong controls around contractual arrangements, especially
in respect of areas such as joint venture agreements. This risk is mitigated by the expertise of the
Company’s Directors and advisers.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Knowledge – the Group is dependent on the efficient and effective operation of its information
systems, and the management and reporting of project data and reserves information is key. Loss of
key personnel may also lead to the potential loss of corporate ‘intellectual property’. This risk is
mitigated by ensuring all Company information is both readily available to the relevant Company
employees and is securely maintained on a regularly backed up, password protected IT system.
Key performance indicators
The Directors consider a range of financial and non-financial key performance indicators. Financial indicators
are principally focussed on the regular review of major projects, comparing actual costs with budgets and
projections. More detailed assessments are also made of un-risked and risked net present values (‘NPVs’),
project rates of return and investment ratios such as ‘success case investment efficiency’. Monthly trading and
cash movements are also reviewed for each of the Group companies. Specific exploration-related key
performance indicators include: the probability of geological success (Pg.), the probability of commerciality or
completion (Pc) and the probability of economic success (Pe).
Future developments
The Company has identified the European gas market as a relatively stable and secure arena in which to
compete. The European market continues to be a net importer of gas whilst diversity of supply is central to
the energy security strategy of most nations. The Company continues to seek to exploit the market through
the identification and exploration of gas reserves near to core industrial and residential conurbations. It
competes in the European oil and gas exploration and production sector by seeking to realise value rapidly
from its assets, minimising risk through spreading investment over a range of European countries.
Financial risk management
Details of the Group’s financial instruments and its policies with regard to financial risk management are given
in Note 27 of the Financial Statements.
Results and dividends
The loss for the year after taxation was £3.5 million (2012: £6.0 million). The Directors do not recommend the
payment of a dividend.
Post balance sheet events
On 5 February 2014 the Company announced that it had entered into an agreement with Henderson Global
Investors Limited and Henderson Alternative Investment Advisor Limited (together ‘Henderson’) for the
subscription by funds managed by Henderson of convertible loan notes of up to £5 million in principal amount.
The first £2 million of the Henderson Loan Notes was drawn down in February 2014 and will be used to fund
existing project commitments in Slovenia. The balance will be available for draw down, if required, to allow
the Company to make further progress towards securing the necessary permits required for gas processing
facilities and pipelines in Petišovci in advance of full project finance for the construction phase of the
development.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Directors
The Directors of the Company that served during the year, and subsequently, were as follows:
Leonard John Reece
Clive Nathan Carver
Nigel Sandford Johnson Moore
William Cameron Davies
John Patrick Kenny (resigned 30 April 2013)
Scott James Richardson Brown (resigned 30 April 2013)
William Graham Cooper (resigned 30 April 2013)
Relevant details of the Directors, which include committee memberships, are set out on page 14.
Directors’ interests
The beneficial and non-beneficial interests in the issued share capital of the Company were as follows:
Ordinary shares of 0.1p each.
At 31 December 2013
At 31 December 2012
Leonard Reece
Clive Carver
Nigel Moore
Cameron Davies
John Kenny *
Scott Richardson Brown *
Graham Cooper *
-
-
119,500
150,000
700,000
200,000
-
-
-
119,500
150,000
700,000
200,000
-
* Note that John Kenny, Scott Richardson Brown and Graham Cooper resigned during the year.
Details of Directors’ share options and remuneration are set out in Note 5 to the Financial Statements under
the heading ‘Directors’ remuneration’.
Directors’ emoluments
For details of Directors’ emoluments and share options please see Note 5 of the Financial Statements.
Third party indemnity provision
The Company has provided liability insurance for its Directors. The annual cost of the cover is not material to
the Group. The Company’s Articles of Association allow it to provide an indemnity for the benefit of its
Directors which is a qualifying indemnity provision for the purposes of the Companies Act 2006.
Share capital
Details of changes to share capital in the period are set out in Note 21 to the Financial Statements.
As at 2 April 2014 the Company has been notified of the following significant interests in its ordinary shares,
being a holding of 3% and above:
Global Power Sources Srl
Henderson Global Investors
EnQuest PLC
Seren Capital Management Ltd
Shareholder communications
Number of ordinary
shares
300,126,793
182,410,041
160,903,958
104,018,000
%
20.68
12.57
11.09
7.17
The Company has a website, www.ascentresources.co.uk, for the purposes of improving information flow to
shareholders, as well as potential investors.
- 11 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Employees
The Company’s Board composition provides the platform for sound corporate governance and robust
leadership in implementing the Company’s strategies to meet its stated goals and objectives.
The Group’s employees and consultants play an integral part in executing its strategy and the overall success
and sustainability of the organisation. The Group has a highly skilled and dedicated team of employees and
consultants and places great emphasis on attracting and retaining quality staff. As an international oil and gas
company, we facilitate the development of leadership from the communities in which we operate. There is a
large pool of qualified upstream oil and gas exploration and production professionals in the areas in which we
operate, and we are committed to building and developing our teams from these talent pools.
The Group holds its employees and consultants at all levels to high standards and expects the conduct of its
employees to reflect mutual respect, tolerance of cultural differences, adherence to the corporate code of
conduct and an ambition to excel in their various disciplines.
Disclosure of information to auditors
In the case of each person who was a Director at the time this report was approved:
so far as that Director was aware there was no relevant available information of which the Company’s
auditors were unaware; and
that Director had taken all steps that the Director ought to have taken as a Director to make himself
aware of any relevant audit information and to establish that the Company’s auditors were aware of
that information.
This information is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
Going Concern
The Financial Statements of the Group are prepared on a going concern basis.
Recently, the Company raised short-term funding, by way of a convertible loan note facility of up to £5 million
from Henderson Global Investors, to continue to develop the Petišovci project and cover overheads. In the
Board’s opinion such debt arrangements are not the ideal basis on which to sensibly develop the project over
the longer term. They place a strain on the Company’s balance sheet and could restrict the availability of
project debt once the permitting phase has been completed.
The sale of the Company’s untreated gas to the adjacent methanol plant, which is currently planned for Q3
2014, would provide sufficient cash for the Company to continue as a going concern. This however cannot be
guaranteed and further cash is likely to be required to allow the full development of the project in the planned
timeframe.
Existing cash resources are sufficient to meet overheads through the current financial year but further funding
will be required to refinance the short-term borrowings and fund work programmes in Slovenia. Consequently
the Directors are considering a range of funding options, including a strategic investor.
However, there can be no guarantee over the outcome of these negotiations and as a consequence there is a
material uncertainty of the Group’s ability to raise additional finance, which may cast significant doubt on the
Group’s ability to continue as a going concern. Further, the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business.
The Directors, however, remain confident of the Group’s ability to operate as a going concern given the
funding discussions that have and continue to take place and in light of the significant recent support from
existing shareholders.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the reappointment of BDO LLP as
auditors of the Company is to be proposed at the forthcoming Annual General Meeting.
Approved for issue by the Board of Directors
and signed on its behalf
Clive Carver
Chairman
9 April 2014
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Board of Directors
Clive Carver
Non-executive Director
Clive Carver has worked in the City since 1986 and focussed exclusively on the small cap sector since 1994. He
is the Executive Chairman of Roxi Petroleum plc, an AIM listed oil and gas exploration and production company
operating in Kazakhstan, where he served as Non-executive Chairman from 2006 to May 2012. He is also Non-
executive Director of Darwin Strategic Limited and Iafyds plc. Clive is a Fellow of the Institute of Chartered
Accountants in England and Wales and is a qualified Corporate Treasurer.
Leonard Reece
Chief Executive Officer
Leonard Reece has over thirty years of E&P sector experience, of which over twenty years have been at
Managing Director and CEO level. His most recent role was as CEO of Valhalla Oil and Gas AS, a private
Norwegian oil company, where he was responsible for identifying, acquiring and developing commercially
successful oil and gas assets. He previously held the position of Managing Director of Spectrum Energy and
Information Technology Ltd, which provided multi-client surveys and high quality seismic imaging services. His
extensive commercial and managerial experience is of significant value to Ascent in developing its key
Petišovci asset in Slovenia.
Nigel Moore
Non-executive Director
Chairman of the Audit Committee and member of the Remuneration Committee
Nigel Moore is a Chartered Accountant and was a former partner at Ernst & Young for 30 years until 2003. For
the last ten years at Ernst & Young he specialised in the oil and gas sector, advising a wide range of client
companies, providing significant input to strategic options, new opportunities and helping to deliver
shareholder value. Nigel is also on the Boards of Hochschild Mining plc and Vitec Group plc and is Chairman of
JKX Oil and Gas plc.
Cameron Davies
Non-executive Director
Chairman of the Remuneration Committee and member of the Audit Committee
Cameron Davies is an international energy sector specialist and the former Chief Executive of Alkane Energy
plc. He has an excellent track record of exploration success and growing profits in a quoted energy company.
Beginning his career as a geologist, Dr Davies has over 35 years’ experience in the oil and gas sectors. He
founded AIM listed Alkane Energy plc in 1994 and managed the business from original concept, through
venture capital funding and an IPO to become a profitable operator of gas to power generation plants using
coal mine methane as fuel. He has a PhD from Imperial College, is a Fellow of the Geological Society of London
and a member of the European Petroleum Negotiators Group and the PESGB.
- 14 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Directors and Advisers
Directors
Secretary
Registered Office
Nominated Adviser and Broker
Auditors
Solicitors
Bankers
Share Registry
Clive Carver
Leonard Reece
Nigel Moore
Cameron Davies
Colin Hutchinson
5 Charterhouse Square
London EC1M 6EE
finnCap Ltd
60 New Broad Street
London EC2M 1JJ
BDO LLP
55 Baker Street
London W1U 7EU
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Barclays Corporate Bank
1 Churchill Place
London
E14 5HP
Computershare Investors Services Plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Company’s registered number
05239285
- 15 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Summary of Group Net Oil and Gas Reserves
Net Reserves and Resources by country
Net Proven
+ Probable
Reserves
(Bcfe)
-
Slovenia
Net Attributable
Contingent Resources
(Bcfe)
2-C
171.0
3-C
320.3
1-C
90.0
Net Attributable
Prospective Resources
(Bcfe)
Best
-
Low
-
High
-
These figures are based on RPS gas-in-place estimates with a management assumption of a 50% recovery
factor.
Proven Reserves are those quantities of petroleum which can be estimated with reasonable certainty to be
commercially recoverable, from known reservoirs and under current economic conditions, operating methods
and government regulations. There is at least a 90% probability that the quantities actually recovered will
equal or exceed the estimate.
Probable Reserves are those unproven reserves which are more likely than not to be recoverable. There is at
least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proven
plus probable reserves.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for
commercial development due to one or more contingencies. Contingent resources may include, for example,
projects for which there are currently no viable markets or where commercial recovery is dependent on
technology under development or where evaluation of the accumulation is insufficient to clearly assess
commerciality.
Prospective Resources are those quantities of petroleum which are estimated to be potentially recoverable
from undiscovered accumulations.
- 16 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Summary of Ascent Resources plc’s Licence Interests as at 31st December 2013
Permit
Operations
Slovenia
Subsidiary
Working
Interest
(%)
Permit
Area
Gross
(km2)
Net
(km2)
Status
Petišovci Concession
Ascent Slovenia Limited
75
98
73
Oil & gas exploitation
Back in rights
Italy
Fiume Arrone
Strangolagalli
Switzerland
Seeland-Frienisberg
Linden
Gros de Vaud
The Netherlands
M10/M11
Ascent Resources plc
Ascent Resources plc
Ascent Resources plc
Ascent Resources plc
Ascent Resources plc
358
41
364
330
736
251
21
Gas exploration
Oil exploitation
-
-
-
Gas appraisal
Gas appraisal
Oil & gas exploration
Ascent Resources plc
110
59
Gas exploration and
appraisal
Glossary
M
MM
B
km2
m3
Thousand*
Million*
Billion*
Square kilometres
Cubic metres
cf
scf
scfd
Cubic feet
Standard cubic feet
Standard cubic feet per day
*
These are ‘oilfield’ units, as commonly used in the oil and gas industry. Other units conform to the Système International
d'unités (SI) convention
P90 (P50; P10) Reserves: at least a 90% (50%; 10%) probability that the quantities will equal or exceed the
estimate. This is a measure of uncertainty not geological or commercial risk
Prospect: a potential trap which geologists believe may contain hydrocarbon resources
Reservoirs: a subsurface body of rock having sufficient porosity and permeability to store and transmit
hydrocarbons
Production string: string of drill pipe or of tubing run into a well
Miocene: a geological epoch of the Neogene Period that extended from about 13 to 25 million years ago.
- 17 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Strategic report
Section 414C of the Companies Act (‘the Act’) requires that the Company inform its members as to how the
Directors have performed their duty to promote the success of the Company by way of a Strategic Report.
Fair review of the business
This information is contained in pages 3 to 6 of the Chairman’s statement and pages 7 to 8 of the Operations
review.
Principal risks and uncertainties
This information is contained in pages 9 to 10 of the Directors’ report.
Analysis of the development and performance of the business
This information is contained in pages 3 to 6 of the Chairman’s statement.
Analysis of the position of the business
This information is contained in pages 3 to 6 of the Chairman’s statement.
Analysis using other key performance indicators
This information is contained on page 10 of the Directors’ Report.
Approved for issue by the Board of Directors
and signed on its behalf
Clive Carver
Chairman
9 April 2014
- 18 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Corporate Responsibility
Ascent operates a Management System that embodies Environmental, Health, Safety (‘EHS’) and Social
Responsibility (‘SR’) principles. This system defines objectives to be met by Ascent, its subsidiaries, affiliates,
associates and operated joint ventures (hereinafter collectively referred to as Ascent) in the management of
EHS and SR.
The policy of the Board of Ascent is to be fully accountable for the necessary practices, procedures and means
being in place so as to ensure that each EHS and SR objective is demonstrated in full and that continuous
improvement practices are operating to ensure that the required practices, procedures and means are being
monitored, refined and optimised as necessary. The Board will accordingly review and report regularly to
external stakeholders as to the achievement of the objectives of this policy.
In accordance with this policy, the Executive Directors of Ascent are directly and collectively responsible to the
Board for demonstrating that the EHS and SR objectives are attained throughout Ascent. The Executive
Directors have adopted Management System Guidelines as guidance for demonstrating this.
The objectives of the Environment, Health, Safety and Social Responsibility Policy are:
Ascent shall manage all operations in a manner that protects the environment and the health and
safety of employees, third parties and the community.
The Executive Directors provide the vision, establish the framework, set the objectives and provide
the resources for responsible management of Ascent’s operations.
Leadership and visible commitment to continuous improvement are critical elements of successful
operations.
A process that measures performance relative to policy aims and objectives is essential to improving
performance. Sharing best practices and learning from each other promotes improvement.
Effective business controls ensure the prevention, control and mitigation of threats and hazards to
business stewardship.
Risk identification, assessment and prioritisation can reduce risk and mitigate hazards to employees,
third parties, the community and the environment. Management of risk is a continuous process.
Safe, environmentally sound operations rely on well-trained, motivated people. Careful selection,
placement, training, development and assessment of employees, and clear communication and
understanding of responsibilities are critical to achieving operating excellence.
The use of internationally recognised standards, procedures and specifications for design,
construction, commissioning, modifications and decommissioning activities is essential for achieving
operating excellence.
Operations within recognised and prudent parameters are essential to achieving clear operating
excellence. This requires operating, inspection and maintenance procedures, and information on
the processes, facilities and materials handled, together with systems to ensure that such
procedures have been properly communicated and understood.
Adhering to established safe work practices, evaluating and managing change, and providing up-to-
date procedures to manage safety and health risks contribute to a safe workplace for employees
and third parties.
The minimisation of environmental risks and liabilities are integral parts of Ascent’s operations.
Third parties who provide materials and services (personnel and equipment) or operate facilities on
Ascent’s behalf have an impact on EHS and SR excellence. It is essential that third-party services are
provided in a manner consistent with Ascent’s EHS and SR Policy and Management System
Guidelines.
Compliance with regulatory requirements and company guidelines must be periodically measured
and verified as part of the continuous improvement process.
- 19 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Preparedness and planning for emergencies are essential to ensuring that all necessary actions are
taken if an incident occurs, to protect employees, third parties, the public, the environment, the
assets and brand of Ascent.
Effective reporting, incident investigation, communication and lessons learned are essential to
attaining and improving performance.
Open and honest communication with the communities, authorities and stakeholders with which
Ascent operates builds confidence and trust in the integrity of Ascent.
During 2013, the Group was Operator of several exploration projects, all of which were closely managed for
maintaining the EHS and SR policy aims.
There have been no convictions in relation to breaches of any applicable Acts recorded against the Group
during the reporting period.
- 20 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors’ Report, the Strategic Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law
the Directors have elected to prepare the Group and Company financial statements in accordance with
International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union. Under company law
the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.
The Directors are also required to prepare financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the AIM Market.
In preparing these financial statements the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the European
Union, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on a going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available
on a website. Financial statements are published on the Company's website in accordance with legislation in
the United Kingdom governing the preparation and dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the
Financial Statements contained therein.
- 21 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Independent Auditors Report to the Members of Ascent Resources plc
We have audited the financial statements of Ascent Resources plc for the year ended 31 December 2013 which
comprise the consolidated income statement and consolidated statement of comprehensive income, the
consolidated and company statements of financial position, the consolidated and company statements of
changes in equity, the consolidated and company statement of cash flows and the related notes. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and the parent company’s
affairs as at 31 December 2013 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Emphasis of matter
In forming our opinion of the financial statements, which is not modified, we have considered the adequacy of
the disclosures made in Note 1 to the financial statements concerning the Company’s ability to continue as a
going concern. Further funds are required to finance the Company’s planned work programme and to service
existing debt facilities. While the Directors are confident of being able to acquire the finance necessary to
meet capital and administrative obligations and liabilities as they fall due, a significant uncertainty exists that
sufficient facilities are not currently in place.
These conditions indicate the existence of a material uncertainty which may cast significant doubt about the
Company’s ability to continue as a going concern. These financial statements do not include the adjustments
that would result if the Company were unable to continue as a going concern.
- 22 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Scott Knight (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
9 April 2014
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
- 23 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Consolidated Income Statement
For the year ended 31st December 2013
Revenue
Cost of sales
Gross profit
Administrative expenses
Loss from operating activities
Finance income
Finance cost
Net finance income / (costs)
Loss before taxation
Income tax expense
Loss for the year from continuing operations
Loss for the year from discontinued operations
Loss for the year
Loss attributable to:
Owners of the Company
Non-controlling interests
Loss for the year
Loss per share
Year ended
Year ended
31 December
31 December
2013
£ ’000s
2012
£ ’000s
Notes
4
6
6
7
3
-
-
-
79
(26)
53
(1,924)
(2,379)
(1,924)
(2,326)
1,423
(1,266)
157
318
(886)
(568)
(1,767)
(2,894)
-
-
(1,767)
(2,894)
(1,825)
(3,130)
(3,592)
(6,024)
(3,587)
(5)
(3,592)
(6,032)
8
(6,024)
Basic & fully diluted loss per share (pence)
8
(0.32)
(0.58)
- 24 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Consolidated Statement of Comprehensive Income
For the year ended 31st December 2013
Year ended
Year ended
31 December
31 December
2013
£ ’000s
2012
£ ’000s
Loss for the year
(3,592)
(6,024)
Other comprehensive income
Foreign currency translation differences for foreign
operations *
Recycling of foreign exchange on disposals *
(1,276)
(1,324)
(616)
-
Total comprehensive loss for the year
(6,192)
(6,640)
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive loss for the year
(6,187)
(5)
(6,192)
(6,648)
8
(6,640)
* Foreign currency translation differences from foreign operations may be recycled through the income statement in the
future if certain future conditions arise.
- 25 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Consolidated Statement of Changes in Equity
For the year ended 31st December 2013
Share
capital
Share
premium
Equity
reserve
Shares
to be
issued
£ ’000s
£ ’000s
£ ’000s
£ ’000s
Share
based
payment
reserve
£ ’000s
Translation
reserve
Retained
earnings
Total
Non-
Controlling
interest
Total
£ ’000s
£ ’000s
£ ’000s
£ ’000s
Balance at 1 January 2012
Comprehensive income
Loss for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
Transactions with owners
Transfer to non-current liabilities
Share-based payments
Balance at 31 December 2012
Balance at 1 January 2013
Comprehensive income
Loss for the year
Other comprehensive income
Currency translation differences
FX differences recycled on discontinued operations
Total comprehensive income
Transactions with owners
Issue of convertible loan notes
1,026
52,198
-
-
-
-
-
-
-
-
-
-
1,026
1,026
52,198
52,198
-
-
-
-
-
-
-
-
-
-
Issue of shares during the year net of costs
Share-based payments
425
-
3,635
-
-
-
-
-
-
-
-
-
-
-
-
-
518
-
-
Balance at 31 December 2013
1,451
55,833
518
-
-
-
-
-
-
-
-
-
-
-
-
-
84
-
84
4,735
2,718
(25,248)
35,429
(3)
35,426
-
-
-
(2,307)
(527)
1,901
1,901
-
-
-
-
-
-
(5)
1,896
-
-
(6,032)
(6,032)
-
(616)
(616)
-
(616)
(6,032)
(6,648)
-
-
-
-
(2,307)
593
66
2,102
(30,684)
26,543
2,102
(30,684)
26,543
-
8
-
-
8
-
-
-
5
5
-
(6,024)
-
(616)
(6,640)
-
(2,307)
66
26,548
26,548
-
-
(3,587)
(3,587)
(5)
(3,592)
(1,276)
(1,324)
-
-
(1,276)
(1,324)
-
-
(1,276)
(1,324)
(2,600)
(3,587)
(6,187)
(5)
(6,192)
-
-
-
-
-
100
-
518
4,144
95
(498)
(34,171)
25,113
-
518
4,144
95
25,113
-
-
-
-
- 26 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Company Statement of Changes in Equity
For the year ended 31st December 2013
Balance at 1 January 2012
Comprehensive income
Loss and total comprehensive income for the year
Transactions with owners
Transfer to non-current liabilities
Convertible loan
Issue of shares during the year net of costs
Share-based payments
Balance at 31 December 2012
Balance at 1 January 2013
Comprehensive income
Loss and total comprehensive income for the year
Transactions with owners
Issue of convertible loan notes
Issue of shares during the year net of costs
Share-based payments
Balance at 31 December 2013
Share capital
Share
premium
Equity
reserve
Shares to be
issued
£ ’000s
£ ’000s
£ ’000s
£ ’000s
Share based
payment
reserve
£ ’000s
Retained
earnings
Total parent
equity
£ ’000s
£ ’000s
1,026
52,198
-
-
-
-
-
-
-
-
1,026
1,026
52,198
52,198
-
-
425
-
1,451
-
-
3,635
-
55,833
-
-
-
-
-
-
-
-
518
-
-
518
-
-
-
-
-
-
-
-
84
-
84
4,735
(18,152)
39,807
-
(10,638)
(10,638)
(2,307)
-
(527)
1,901
1,901
-
-
-
(5)
1,896
-
-
191
(28,599)
(28,599)
(2,307)
-
(336)
26,526
26,526
(6,190)
(6,190)
-
-
100
518
4,144
95
(34,689)
25,093
- 27 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Consolidated Statement of Financial Position
As at 31st December 2013
Assets
Non-current assets
Property, plant and equipment
Exploration and evaluation costs
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Attributable to the equity holders of the Parent Company
Share capital
Share premium account
Equity reserve
Shares to be issued
Share-based payment reserve
Translation reserves
Retained earnings
Total equity attributable to the shareholders
Non-Controlling interest
Total equity
Non-current liabilities
Borrowings
Provisions
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
9
11
13
21
16
17
18
19
16
31 December
31 December
2013
£ ’000s
3
33,628
33,631
-
110
184
294
33,925
1,451
55,833
518
84
1,896
(498)
(34,171)
25,113
-
25,113
4,957
437
2,255
7,649
409
754
1,163
8,812
33,925
2012
£ ’000s
181
32,203
32,384
136
916
3,452
4,504
36,888
1,026
52,198
-
-
1,901
2,102
(30,684)
26,543
5
26,548
3,554
540
2,307
6,401
1,704
2,235
3,939
10,340
36,888
The notes on pages 32 to 58 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 9 April 2014 and signed on its behalf
by:
Clive Carver, Chairman
9 April 2014
- 28 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Company Statement of Financial Position
As at 31st December 2013
Non-current assets
Property, plant and equipment
Investment in subsidiaries and joint ventures
Intercompany receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium
Equity reserve
Shares to be issued
Share-based payment reserve
Retained loss
Total equity
Non-Current liabilities
Borrowings
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2013
£ ’000s
31 December
2012
£ ’000s
Notes
10
12
25
14
21
16
18
20
16
2
14,340
18,815
33,157
71
175
246
4
14,419
16,776
31,199
56
3,211
3,267
33,403
34,466
1,451
55,833
518
84
1,896
(34,689)
25,093
4,957
2,255
7,212
344
754
1,098
8,310
1,026
52,198
-
-
1,901
(28,599)
26,526
3,065
2,307
5,372
640
1,928
2,568
7,940
33,403
34,466
The notes on pages 32 to 58 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 9 April 2014 and signed on its behalf
by:
Clive Carver
Chairman
9 April 2014
- 29 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Consolidated Cash Flow Statement
For the year ended 31st December 2013
Cash flows from operations
Loss after tax for the year
Tax charge
DD&A charge
Decrease in receivables
Decrease in payables
Increase in other long-term payables
Decrease in inventories
Impairment of exploration expenditure
Increase in decommissioning provision
Exchange differences
Finance income
Finance cost
Loss on the sale of discontinued operations (net of tax)
Tax paid
Net cash used in operating activities
Cash flows from investing activities
Interest received
Payments for investing in exploration
Disposal of discontinued operations net of cash disposed of
Disposal / (Purchase) of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Interest paid and other finance fees
Proceeds from loans
Loans repaid
Loan issue costs
Proceeds from issue of shares
Share issue costs
Net cash generated from financing activities
Net increase in cash and cash equivalents for the year
Effect of foreign exchange differences
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
- 30 -
Year ended 31
December
2013
£ ’000s
Year ended 31
December
2012
£ ’000s
(3,592)
-
(2)
171
(547)
96
-
-
-
(190)
(1,423)
1,266
1,792
-
(2,429)
5
(1,346)
(228)
101
(1,468)
(226)
2,061
(2,031)
(20)
887
(44)
627
(3,270)
2
3,452
184
(6,024)
60
1,269
353
(1,110)
66
136
2,288
16
2
(318)
1,002
-
(60)
(2,320)
68
(780)
-
(682)
(1,394)
(1,180)
5,748
(484)
-
-
-
4,084
370
176
2,906
3,452
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Company Cash Flow Statement
For the year ended 31st December 2013
Cash flows from in operations
Loss for the year
Depreciation charge
(Increase) / Decrease in receivables
Increase / (Decrease) in payables
Increase / (Decrease) in other long-term payables
Settlement of warranty claim
Write off of investment
Foreign exchange
Finance income
Finance cost
Net cash generated from / (used in) operating activities
Cash flows from investing activities
Interest received
Advances to subsidiaries
Investment in PPE
Addition to investment
Year ended 31
December
2013
£ ’000s
Year ended 31
December
2012
£ ’000s
(6,190)
(10,640)
2
(16)
114
96
3,300
79
(73)
(5)
1,183
(1,510)
(47)
(2,449)
-
-
2
6,792
145
72
-
1,668
(415)
(196)
274
(2,298)
160
(1,404)
(1)
(64)
Net cash flows used in investing activities
(2,496)
(1,309)
Cash flows from financing activities
Interest paid
Repayment of loan
Proceeds from loans
Loan issue costs
Cash proceeds from issue of shares
Share issue costs
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effects of foreign exchange differences
Cash and cash equivalents at end of the year
(143)
(1,775)
2,061
(20)
887
(44)
966
(3,038)
3,211
2
175
(315)
(484)
5,300
-
-
-
4,501
894
2,317
-
3,211
- 31 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Notes to the accounts
1 Accounting policies
Reporting entity
Ascent Resources plc (‘the Company’ or ‘Ascent’) is a company domiciled and incorporated in England. The address of the
Company’s registered office is 5 Charterhouse Square, London EC1M 6EE. The consolidated financial statements of the
Company for the year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the
‘Group’) and the Group’s interest in associates and joint ventures. 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.
The consolidated financial statements of the Group for the year ended 31 December 2013 are available from the Company’s
website at www.ascentresources.co.uk.
Statement of compliance
The Group’s and Company’s financial statements for the year ended 31 December 2013 were approved and authorised for
issue by the Board of Directors on 9 April 2014 and the Statements of Financial Position were signed on behalf of the Board by
Clive Carver.
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 International Financial Reporting Standards as adopted by the EU
(‘IFRSs’).
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 £6.2million.
Measurement Convention
The financial statements have been prepared under the historical cost convention except for available-for-sale financial assets
and financial instruments which are measured at fair value through profit and loss. The financial statements are presented in
sterling and have been rounded to the nearest thousand (£ ’000s) except where otherwise indicated.
The principal accounting policies set out below have been consistently applied to all periods presented.
Going Concern
The Financial Statements of the Group are prepared on a going concern basis.
Recently, the Company raised short-term funding, by way of a convertible loan note facility of up to £5 million from Henderson
Global Investors, to continue to develop the Petišovci project and cover overheads. In the Board’s opinion such debt
arrangements are not the ideal basis on which to sensibly develop the project over the longer term. They place a strain on the
Company’s balance sheet and could restrict the availability of project debt once the permitting phase has been completed.
The sale of the Company’s untreated gas to the adjacent methanol plant, which is currently planned for Q3 2014, would
provide sufficient cash for the Company to continue as a going concern. This however cannot be guaranteed and further cash is
likely to be required to allow the full development of the project in the planned timeframe.
Existing cash resources are sufficient to meet overheads through the current financial year but further funding will be required
to refinance the short-term borrowings and fund work programmes in Slovenia. Consequently, the Directors are considering a
range of funding options, including a strategic investor.
However, there can be no guarantee over the outcome of these negotiations and as a consequence there is a material
uncertainty of the Group’s ability to raise additional finance, which may cast significant doubt on the Group’s ability to continue
as a going concern. Further, the Group may be unable to realise its assets and discharge its liabilities in the normal course of
business.
The Directors, however, remain confident of the Group’s ability to operate as a going concern given the funding discussions
that have and continue to take place and in light of the significant recent support from existing shareholders.
- 32 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
New and amended Standards effective for 31 December 2013 year end adopted by the Group:
i. The following new standards and amendments to standards are mandatory for the first time for the Group for financial
year beginning 1 January 2013. The adoption of these standards and amendments has had no material effect on the
Group’s accounting policies.
Standard
Effective date
IAS 1
IFRS 7
IFRS 13
IAS 19
Presentation of items of other comprehensive income (amendments to IAS 1)
Disclosures—Offsetting Financial Assets and Financial Liabilities
Fair Value Measurement
Employee Benefits
Improvements to IFRS (2009-2011 cycle)
Impact on initial
application
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
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
IAS 32
IFRS 10
IFRS 11
IFRS 12
IAS 27
IAS 28
IAS 36
Description
Amendment – Offsetting Financial Assets and Financial
Liabilities
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Separate Financial Statements
Investments in Associates and Joint Ventures
Recoverable amounts disclosures for non-financial assets
IFRS 10, IFRS 11 and IFRS 12 Amendment – Transition guidance
IFRS 10, IFRS 12, and IAS 27
IAS 19
Investment Entities
Defined Benefit Plans: Employee Contributions
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Financial instruments
IFRS 9
Effective date
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 July 2014
1 July 2014
1 July 2014
n/a
The Group has not yet assessed the impact of IFRS 9. The adoption of IFRS 9 will eventually replace IAS 39 in its entirety and
consequently may have a material effect on the presentation, classification, measurement and disclosures of the Group’s
financial instruments.
Critical accounting estimates and assumptions
The preparation of the consolidated financial statements in conformity with IFRSs requires management to make estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related
disclosures. The estimates and underlying assumptions are based on practical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be
necessary if there are changes in the circumstances on which the estimate was based or as a result of new information. Such
changes are recorded in the period in which the estimate is revised.
Critical judgements in applying the Group’s accounting policies
The application of the Group’s accounting policies may require management to make judgements, apart from those involving
estimates, which can have a significant effect on the amounts amortised in the financial statements. Management judgement
is particularly required when assessing the substance of transactions that have a complicated structure or legal form.
The key areas where management judgement will need to be applied will be in the areas of:
(a) Oil and gas assets – 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 impairment at least annually based on an estimation of the recoverability of the cost pool from
future revenues of the related oil and gas reserves (see Note 11);
(b) Decommissioning provision – the cost of decommissioning is estimated by reference to operators and internal specialist
staff (see Note c));
- 33 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
(c) Convertible loan notes – management assessed the fair value of the liability component at issue and the appropriateness
of the amortisation period (see Note 16);
(d) Basis of consolidation – management consider the Company’s ability to exert financial and operational control, as well as
the level of voting rights and representation on the Board as a basis of consolidation;
(e) Share-based payments – management assesses the fair value of each option using an appropriate pricing model based on
option and share prices, volatility and the life of the option (see Note 26).
(f) Commercial reserves – Commercial reserves are proven and probable oil and gas reserves, calculated on an entitlement
basis. Estimates of commercial reserves underpin the calculation of depletion and amortisation on a unit of production
basis. 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.
Basis of consolidation
The financial statements comprise the consolidation of the accounts of the Company and its subsidiary undertakings and
incorporate the results of its share of jointly controlled entities using the proportional consolidation method of accounting.
Consistent accounting policies have been used to prepare the consolidated financial statements.
Control is achieved where the Group has the power to govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities. The results of undertakings acquired or disposed of are consolidated from or to the date
when control passes to or from the Group. For the Company’s financial statements only, investments in subsidiary
undertakings are stated at cost less provision for impairment.
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.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-
controlling interests in proportion to their relative ownership interests.
Where the Group acquires an equity interest from non-controlling parties, the excess/(shortfall) between the consideration
paid and the element of the reserve for non-controlling interest that has been acquired is taken directly to retained earnings.
No gain or loss is recognised through profit or loss.
Jointly controlled operations are arrangements in which the Group holds an interest on a long-term basis which are jointly
controlled by the Group and one or more ventures under a contractual arrangement. The Group’s exploration, development
and production activities are sometimes conducted jointly with other companies in this way. Since these arrangements do not
constitute entities in their own right, the consolidated financial statements reflect the relevant proportion of costs, revenues,
assets and liabilities applicable to the Group’s interests.
Business combinations
On acquisition, the assets, liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of
acquisition. Any excess of cost of acquisition over net fair values of the identifiable assets, liabilities and contingent liabilities
acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the net fair values of the identifiable assets,
liabilities and contingent liabilities acquired (i.e. discount on acquisition) is credited to profit and loss in the period of
acquisition.
Non-current assets held for sale and discontinued operations
Non-current assets are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to
sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
A discontinued operation is a component of the Group’s business that represents a separate major line of business or
geographical area of operations. Classification as a discontinued operation occurs upon disposal or when the operation meets
the criteria to be classified as held for sale.
Interest in jointly controlled entities
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is
subject to joint control.
- 34 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Where a company undertakes its activities under a joint venture arrangement directly, the Group’s share of jointly controlled
assets and any liabilities incurred jointly with the other ventures are recognised in the financial statements of the relevant
Group Company and classified according to their nature.
Similarly, income from the sale and use of the Group’s share of the output of jointly controlled assets and its share of joint
venture expenses, are recognised in the financial statements of the relevant Group Company and classified according to their
nature.
Increase in interests in jointly controlled entities
When an entity acquires an additional interest in jointly controlled entities the entity’s portion of identifiable net assets of the
jointly controlled entity acquired is measured at cost at the date of additional investment with any surplus accounted for as
goodwill.
Oil and Gas Exploration Assets
The Group follows the ‘successful efforts’ method of accounting for exploration and evaluation costs. 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.
When production commences the accumulated costs for the relevant area of interest are transferred from intangible fixed
assets to Property, Plant and Equipment as ‘Developed oil and gas assets’.
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. Any impairment arising is
recognised in the Income Statement for the year.
Impairment reviews on development/producing assets are carried out on each cash-generating unit identified in accordance
with IAS 36 ‘Impairment of Assets’. Ascent’s cash-generating units are those assets which generate largely independent cash
flows and are normally, but not always, single development areas.
At each reporting date where there are indicators of impairment the net book value of the cash-generating unit is compared
with the measurable recoverable amount, which is defined as the higher of fair value less costs to sell or value in use. If the net
book value is higher, then the difference is written off to the Income Statement as impairment. Forecast production profiles
are determined on an asset by asset basis using appropriate petroleum engineering techniques.
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 developed oil and gas assets
When events or changes in circumstances indicate that the carrying amount of expenditure attributable to a successful well
may not be recoverable from future net revenues from oil and gas reserves attributable to that well, a comparison between the
net book value of the cost attributable to that well and the discounted future cash flows from that well is undertaken. To the
extent that the carrying amount exceeds the recoverable amount, the cost attributable to that well is written down to its
recoverable amount and charged as an impairment.
Depletion of developed oil and gas assets
Costs carried in each well are depreciated on a unit of production basis using the ratio of oil and gas production in the period to
the estimated quantity of commercial proven and probable oil and gas reserves at the end of the period plus production in the
period. Costs in the unit of production calculation include the net book value of capitalised costs plus estimated future
development costs.
Changes in estimates of commercial, proven and probable oil and gas reserves or future development costs are dealt with
prospectively.
- 35 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Decommissioning costs
Where a material liability for the removal of production facilities and site restoration at the end of the field life exists, a
provision for decommissioning is recognised. The amount recognised is the net present value of estimated future expenditure
determined in accordance with local conditions and requirements. An asset of an amount equivalent to the provision is also
added to oil and gas exploration assets and depreciated on a unit of production basis. Changes in estimates are recognised
prospectively, with corresponding adjustments to the provision and the associated asset.
Property, plant and equipment assets other than oil and gas assets
Property, plant and equipment other than oil and gas assets are stated at cost, less accumulated depreciation and any provision
for impairment. Depreciation is provided at rates estimated to write off the cost, less estimated residual value of each asset
over its expected useful life as follows:
Computer and office equipment – 33% straight line.
Revenue recognition
Oil and gas sales revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for the Group’s share of oil and gas supplied in the period. Revenue is recognised when the risks and rewards of
ownership are transferred to the purchaser of the oil or gas.
Inventories
Inventories, including materials, equipment and inventories of gas and oil held for sale in the ordinary course of business, are
stated at weighted average historical costs, less provision for deterioration and obsolescence or, if lower, net realisable value.
Foreign currency
The Group’s strategy is focussed on developing oil and gas projects across Europe 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 balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated to the functional currency at the rates prevailing on the balance sheet 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, including fair value adjustments arising on consolidation, 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. They are released into the income statement upon disposal.
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and
accumulated in the foreign exchange reserve.
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 statement of comprehensive income as part of the
profit or loss on disposal.
Exchange differences on all other transactions, except intercompany foreign currency loans, are taken to operating loss.
Taxation
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 balance
- 36 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
sheet 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 further shares in licence areas are treated as additions to Slovenian exploration costs
at Group level and increases in Investments at Company level.
Provisions
A provision is recognised in the balance sheet 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 discounting 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 convertible loan where the convertible option is at a fixed rate, the net proceeds received from the issue of
convertible loan notes 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 convertible loan notes 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 re-measured.
Subsequent to the initial requisition the liability component is measured at amortised cost using the effective interest method.
However, where, at inception, the conversion option is such that the option will not be settled by the Company exchanging a
fixed number of its own equity instruments for a fixed amount of cash, the convertible loan does not meet the definition of a
compound financial instrument. In such cases, the convertible loan (the host contract) is a hybrid financial instrument and the
option to convert is an embedded derivative. Attached options (options entered into in consideration for entering into the host
contract) on similar terms are also embedded derivatives. The embedded derivatives are separated from the host contract as
their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair
value. At each reporting date, the embedded derivatives are measured at fair value with changes in fair value recognised in the
income statement as they arise. The method used for revaluation is the Black Scholes method. The host contract carrying
value on initial recognition is based on the net proceeds of issuance of the convertible loan reduced by the fair value of the
embedded derivatives and is subsequently carried at each reporting date at amortised cost.
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
Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost
using the effective interest method. A provision is established when there is objective evidence that the Group will not be able
to collect all amounts due. The amount of any provision is recognised in the income statement.
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less.
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost using the
effective interest rate method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments
issued by the Company are recorded at the proceeds received, net of direct issue costs.
- 37 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Interest bearing bank loans, overdrafts and other loans are recorded at fair value less any directly attributable costs, with
subsequent measurement at amortised cost. Finance costs are accounted for on an accruals basis in the income statement
using the effective interest method.
Equity
Equity instruments issued by the Company are recorded at the proceeds received, net of any direct issue costs.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost. Provisions are made for any permanent diminution in value
when the fair value of the assets is assessed as less than the carrying amount of the asset. Intercompany loans are repayable
on demand but are included as non-current as the realisation is not expected in the short term.
Pension costs
Contributions are made to the individual pension scheme of a director’s choice and are charged to the Income Statement as
they become payable.
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’).
2
Segmental Analysis
Following the disposal during the year of Italy, Netherlands and Hungary, the Group now 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 is
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
UK
- exploration and development
- 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. Transfer prices between segments are set on an arm’s length basis in a manner
similar to transactions with third parties. 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. Initial performance is
measured by the results that arise from the exploration and development works carried out. Once producing, other production
performance measures are based on the production revenues achieved. This is reported to the Group’s CEO by the level of
capitalised exploration costs and the results from studies carried out at the individual locations of the wells. The CEO uses
these measures to evaluate project viability within each operating segment.
There is no revenue in the current year from continuing operations.
- 38 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
2013
Hydrocarbons
Intercompany sales
Total revenue
Cost of sales
P&L on disposal of subsidiary /
discontinued operations
Administrative expenses
Material non-cash items
Net finance costs
Reportable segment (loss)/profit before
tax
Taxation
Reportable segment (loss)/profit after
taxation
Reportable segment assets
Carrying value of exploration assets
Additions to exploration assets
Total plant and equipment
Total non-current assets
Other assets
Consolidated total assets
Reportable segmental liabilities
Trade payables
External loan balances
Inter-group borrowings
Other liabilities
Consolidated total liabilities
Discontinued Operations
Italy Netherlands Hungary
eliminations
Sub Total
UK
Continuing Operations
eliminations
Slovenia
Sub Total
eliminations
Group
Total
£ ’000s
-
93
93
-
(1,937)
£ ’000s
-
-
-
-
100
£ ’000s
304
-
304
(90)
45
£ ’000s
-
(93)
(93)
-
-
£ ’000s
304
-
304
(90)
(1,792)
£ ’000s
-
213
213
(263)
-
£ ’000s
-
23
23
102
-
£ ’000s
-
(236)
(236)
161
-
£ ’000s
-
-
-
-
-
£ ’000s
(304)
-
(304)
90
(33)
£ ’000s
-
-
-
-
(1,825)
(78)
(31)
(59)
-
(168)
(1,402)
(684)
162
(1,924)
168
(1,924)
(70)
(1,992)
-
(1,992)
-
-
-
-
-
-
-
-
-
-
-
-
69
-
69
-
-
-
-
-
-
-
-
-
-
-
(9)
191
-
191
-
-
-
-
-
-
-
-
-
-
-
-
(93)
-
(93)
(79)
(1,825)
282
(1,170)
-
(1,825)
-
(1,170)
(125)
(684)
-
(684)
-
-
-
-
-
-
-
-
-
-
-
-
-
2
2
33,401
33,403
(120)
(5,711)
-
(2,479)
(8,310)
32,285
1,343
1
33,629
430
34,059
(11)
-
(18,747)
(491)
(19,249)
-
-
-
-
-
-
-
-
-
-
-
- 39 -
-
87
-
87
-
-
-
-
(33,537)
(33,537)
-
-
18,747
-
18,747
157
(1,767)
-
(1,767)
32,285
1,343
3
33,631
294
33,925
(131)
(5,711)
-
(2,970)
(8,812)
79
-
157
(3,592)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,592)
32,285
1,343
3
33,631
294
33,925
(131)
(5,711)
-
(2,970)
(8,812)
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
2012
Hydrocarbons
Stock sale
Intercompany sales
Total revenue
Other income
Cost of sales
Profit / (Loss) from discontinued
operations
Administrative expenses
Material non-cash items
Impairment of exploration assets
Impairment of investments
Net finance costs
Reportable segment (loss)/profit before
tax
Taxation
Reportable segment (loss)/profit after
taxation
Reportable segment assets
Carrying value of exploration assets
Additions to exploration assets
Total plant and equipment
Total non-current assets
Other assets
Consolidated total assets
Reportable segmental liabilities
Trade payables
External loan balances
Inter-group borrowings
Other liabilities
Consolidated total liabilities
-
(629)
(1,836)
1,754
(88)
(708)
(4)
(712)
-
103
-
103
713
816
(556)
(796)
(82)
(28)
(1,462)
Discontinued Operations
Italy Netherlands Hungary
£ ’000s
£ ’000s
1,576
-
11
-
-
-
1,587
-
-
-
(1,201)
-
£ ’000s
-
18
199
217
41
(167)
eliminations
£ ’000s
-
-
(199)
(199)
-
151
Sub Total
£ ’000s
1,576
29
-
1,605
41
(1,217)
UK
£ ’000s
-
-
280
280
-
-
Continuing Operations
eliminations
£ ’000s
-
-
(280)
(280)
-
-
Slovenia
£ ’000s
13
66
-
79
-
(26)
Total
Sub Total
£ ’000s
13
66
-
79
-
(26)
eliminations
£ ’000s
(1,576)
(29)
-
(1,605)
(41)
1,217
Group
£ ’000s
13
66
-
79
-
(26)
-
(39)
-
263
-
-
-
-
-
-
-
(3,130)
(3,130)
(405)
(3,099)
(798)
1,518
(2,379)
405
(2,379)
-
-
-
(568)
-
-
-
(1,142)
2,239
(28)
-
(3,993)
-
(2,978)
-
(116)
-
(5,558)
(37)
-
-
(531)
-
5,558
-
-
-
(568)
2,978
-
116
(39)
1,718
(4,041)
(3,070)
(8,414)
(1,276)
6,796
(2,894)
(60)
(6,024)
-
(56)
-
(60)
-
-
-
-
60
-
(39)
1,662
(4,041)
(3,130)
(8,414)
(1,276)
6,796
(2,894)
300
186
177
663
2,113
3,439
(668)
(796)
-
(325)
(1,789)
-
-
4
4
34,462
34,466
(169)
(4,993)
(1,434)
(1,344)
(7,940)
30,772
945
-
31,717
(1,705)
30,012
(133)
-
(16,576)
(1,912)
(18,621)
-
-
-
-
(31,029)
(31,029)
-
-
18,010
-
18,010
30,772
945
4
31,721
1,728
33,449
(302)
(4,993)
-
(3,256)
(8,551)
204
83
-
287
887
1,174
-
-
(1,270)
(2)
(1,272)
96
-
177
273
513
786
(112)
-
(375)
(295)
(782)
-
-
-
-
-
-
-
-
1,727
-
1,727
- 40 -
-
-
-
-
-
-
-
-
-
-
-
-
(6,024)
31,072
1,131
181
32,384
3,841
36,225
(970)
(5,789)
-
(3,581)
(10,340)
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
3 Discontinued operations
During the year, the Company successfully accomplished its strategic aim of disposing of its non-core assets.
In April 2013 we realised €450,000 from the sale of our 48.66% share in PetroHungaria kft, the joint venture company which
held the partners’ interest in the Penészlek field. The sale was a way to realise the full value of the remaining production in an
up-front cash payment.
In July 2013 we sold Ascent Resources Italia Srl (ARI), which held our Frosinone, Strangolagalli and Fiume Arrone interests
together with loan obligations and all future work commitments to Global Power Sources Srl (GPS). Subsequently the
Company became aware of a number of matters, which could have resulted in warranty claims under the terms of the Sale &
Purchase Agreement (SPA). While no formal legal steps were taken by GPS, the Company took legal advice on its position and
the parties agreed that in return for a full waiver of any and all claims or potential claims by GPS under the SPA, Ascent issued
275 million ordinary shares of 0.1pence each in the share capital of the company to GPS. 268 million were credited in
December 2013 with the balance of 7 million to be credited following approval by shareholders at the next general meeting of
the Company.
In August 2013 the Company’s sold its full interest in the Netherlands Exploration Licences for €450,000 before selling
expenses. The sale provided short-term cash for the Company to allow it to focus its efforts and resources on its core Petišovci
project in Slovenia.
The post-tax gain on disposal of discontinued operations was determined as follows:
Cash consideration received
Selling expenses
Net cash consideration
Cash disposed of
Net cash outflow on disposal of discontinued operations
Net assets disposed of other than cash
Property, plant & equipment
Intangibles
Inventory
Trade & other receivables
Trade & other payables
Provisions
Borrowings
Issuance of warranty shares
Recycling of foreign exchange gains
Loss on disposal of discontinued operations
Result of discontinued operations
Revenue
Expenses other than finance costs
Finance costs
Tax expense
Loss from selling discontinued operations after tax
Loss on discontinued operations for the year
31 December
2012
£ ’000s
31 December
2013
£ ’000s
761
(223)
538
(766)
(228)
(176)
(285)
(139)
(548)
854
103
603
412
(3,300)
1,324
(1,792)
304
(258)
(79)
-
(1,792)
(1,825)
1,605
(4,559)
(116)
(60)
-
(3,130)
- 41 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
4 Administrative expenses
Employee costs (see Note 5)
Operating lease costs
Insurance
Travel & accommodation
Share based payment charge
Legal & Professional
Audit, Accountancy & Tax
Listing costs
Consultancy costs
Other office costs
Included within Admin Expenses
Audit Fees
Fees payable to the Company’s auditor other services
Other assurance services
Audit of the Company’s subsidiaries
5
Employees and directors
a. Employees
Year ended
31 December 2013
£ ’000s
1,114
-
63
61
96
189
110
90
123
78
1,924
Year ended
31 December 2012
£ ’000s
1,108
17
11
16
71
12
69
124
645
306
2,379
52
7
12
-
71
53
-
-
2
55
The average number of persons employed by the Company and Group, including Executive Directors, was:
Year ended 31
December 2013
Year ended 31
December 2012
Management and technical
7
11
Wages and salaries
Social security costs
Pension costs
Share-based payments
Taxable benefits
b. Directors and key management remuneration
Fees and emoluments
Termination payments
Social security costs
Pension costs
Share-based payments (Note 27)
Taxable benefits
£ ’000s
895
123
-
96
-
1,114
£ ’000s
928
63
35
68
14
1,108
Year ended
31 December 2013
£ ’000s
415
261
65
-
81
-
822
Year ended
31 December 2012
£ ’000s
532
-
46
35
68
14
695
- 42 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
c. Directors remuneration
2013
Executive Directors
L Reece
S Richardson Brown
Non-executive Directors
C Carver
G Cooper
C Davies
N Moore
J Kenny
J Eng
Total
2012
Executive Directors
J Eng
S Richardson Brown
L Reece1
Non-executive Directors
J Kenny
C Davies
N Moore
G Cooper
C Carver
Total
Salary/fees
£
Termination
payments
£
Taxable
Benefits
£
2013 Total
£
220,000
61,367
63,750
-
30,000
30,000
10,000
-
415,117
-
148,438
-
-
-
-
15,000
98,000
261,438
-
-
-
-
-
-
-
-
-
220,000
209,805
63,750
-
30,000
30,000
25,000
98,000
676,555
Salary/fees
Pension
£
£
Taxable
Benefits
£
2012 Total
£
184,870
184,100
73,337
30,000
30,000
30,000
-
-
532,307
35,302
-
-
-
-
-
-
-
35,302
14,192
-
-
-
-
-
-
-
14,192
234,364
184,100
73,337
30,000
30,000
30,000
-
-
581,801
1 L Reece was appointed on 17 September 2012
The highest paid Director in the year ended 31 December 2013 was Leonard Reece earning £220,000 (2012: Jeremy Eng
earning £234,364.
- 43 -
As at
01-Jan-13
Granted/
(Lapsed)
As at
31-Dec-13
Date
Granted
-
-
-
-
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
69,079,066 69,079,066
30-Apr-13
26,568,871 26,568,871
30-Apr-13
Share
Price
at Grant
5.25p
5.25p
5.25p
5.25p
0.82p
0.82p
Exercise
Price
Exercise Period
Start
End
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
1p
1p
30-Apr-16
30-Apr-23
30-Apr-16
30-Apr-23
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
d. Directors incentive share options
2013
N Moore
C Davies
L Reece
C Carver
S Richardson-
Brown
J Kenny
2012
N Moore
C Davies
L Reece
S Richardson-
Brown
J Kenny
J Eng
500,000
500,000
500,000
500,000
-
-
1,000,000
1,000,000
2,500,000
2,500,000
500,000
500,000
-
-
-
-
-
-
500,000
500,000
500,000
500,000
-
1,000,000
1,000,000
2,500,000
2,500,000
500,000
500,000
5,000,000
5,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
As at
01-Jan-12
Granted/
(Lapsed)
As at
31-Dec-13
Date
Granted
1,000,000
01-Nov-10
4.875p
4.875p
01-Nov-11
01-Nov-15
1,000,000
01-Nov-10
4.875p
7.313p
01-Nov-12
01-Nov-15
2,500,000
07-Sep-11
2,500,000
07-Sep-11
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
500,000
17-Nov-10
-
-
3.16p
3.16p
5.25p
5.25p
Share
Price at
Grant
5.25p
5.25p
5.25p
5.25p
-
5p
12p
30-Jun-12
07-Sep-16
30-Jun-12
07-Sep-16
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
Exercise
Price
Exercise Period
Start
End
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
7.313p
17-Nov-11
17-Nov-15
15p
-
17-Nov-11
17-Nov-15
17-Nov-11
17-Nov-15
1,000,000
01-Nov-10
4.875p
4.875p
01-Nov-11
01-Nov-15
1,000,000
01-Nov-10
4.875p
7.313p
01-Nov-12
01-Nov-15
2,500,000
07-Sep-11
2,500,000
07-Sep-11
500,000
17-Nov-10
500,000
17-Nov-10
5,000,000
17-Nov-10
5,000,000
17-Nov-10
3.16p
3.16p
5.25p
5.25p
5.25p
5.25p
5p
12p
30-Jun-12
07-Sep-16
30-Jun-12
07-Sep-16
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
7.313p
17-Nov-11
17-Nov-15
15p
17-Nov-11
17-Nov-15
- 44 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
6
Finance income and costs recognised in the year
Finance income
Income on bank deposits
Foreign exchange movements realised
Adjustment to EnQuest Provision due to change in estimate
Revaluation of derivative instrument
Finance cost
Interest payable on borrowings
Bank Charges
Unwinding of rehabilitation provision
Foreign exchange movements realised
7
Income tax expense
Current tax expense
Deferred tax expense
Total tax expense for the year
Year ended
31 December 2013
£ ’000s
Year ended
31 December 2012
£ ’000s
5
1,366
52
-
1,423
(1,036)
(230)
-
-
(1,266)
35
250
-
33
318
(752)
-
(23)
(111)
(886)
Year ended
31 December 2013
£ ’000s
-
-
-
Year ended
31 December 2012
£ ’000s
58
2
60
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:
Loss for the year
Year ended
31 December 2013
£ ’000s
(1,765)
Year ended
31 December 2012
£ ’000s
(6,640)
Income tax using the Company’s domestic tax rate at 23.25%
(2012: 24.49%)
(410)
(1,626)
Effects of:
Net increase in unrecognised losses c/f
Change in unrecognised temporary differences
Effect of tax rates in foreign jurisdictions
Other non-taxable items
Other non-deductible expenses
Utilisation of losses brought forward
Total tax expense for the year
915
(12)
22
(531)
63
(47)
0
721
(6)
(106)
(505)
1,632
(50)
60
- 45 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
8
Loss per share
Result for the year
Loss from continuing operations
(Loss) / profit from discontinued operations
Total loss for the year attributable to equity shareholders
31 December 2013
£ ’000s
31 December 2012
£ ’000s
(1,767)
(1,825)
(3,592)
(2,894)
(3,130)
(6,024)
Weighted average number of ordinary shares
For basic earnings per share
Number
1,132,819,931
Number
1,025,509,722
Loss per share (pence)
Loss per share from continuing operations
Loss per share from discontinued operations
Total loss per share
(0.16)
(0.16)
(0.32)
(0.28)
(0.30)
(0.58)
As result for the year was a loss no dilutive EPS is disclosed. At 31 December 2013 potentially dilutive instruments in issue were
1,079,918,586 (2012: nil). Dilutive shares arise from share options and convertible loan notes issued by the Company.
9 Property plant and equipment – Group
PP&E – Group
Cost
At 1 January 2012
Additions
Foreign exchange movements
At 31 December 2012
At 1 January 2013
Additions
Discontinued Operations
At 31 December 2013
Depreciation & Impairment
At 1 January 2012
Depreciation for the year
Impairment
Foreign exchange movements
At 31 December 2012
At 1 January 2012
Depreciation for the year
Discontinued Operations
At 31 December 2013
Carrying amounts
At 31 December 2013
At 31 December 2012
At 1 January 2012
Office
Equipment
Oil & Gas
Total
62
1
-
63
63
2
(41)
24
18
40
-
-
58
58
(2)
(35)
21
3
5
44
3,152
681
155
3,988
3,988
-
(3,988)
-
2,462
538
694
118
3,812
3,812
-
(3,812)
-
-
176
690
3,214
682
155
4,051
4,051
2
(4,029)
24
2,480
578
694
118
3,870
3,870
(2)
(3,847)
21
3
181
734
- 46 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
10 Property plant and equipment – Company
Office Equipment
Cost
At 1 January 2012
Additions
Foreign exchange movements
At 31 December 2012
At 1 January 2013
Additions
Foreign exchange movements
At 31 December 2013
Depreciation & Impairment
At 1 January 2012
Depreciation for the year
Foreign exchange movements
At 31 December 2012
At 1 January 2013
Depreciation for the year
Impairment
Foreign exchange movements
At 31 December 2013
Carrying amounts
At 31 December 2013
At 31 December 2012
At 1 January 2012
17
1
-
18
18
-
-
18
12
2
-
14
14
2
16
2
4
5
- 47 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
11 Exploration and evaluation costs – Group
Exploration Costs - Group
Cost
At 1 January 2012
Additions
Effects of exchange rate movements
At 31 December 2012
At 1 January 2013
Additions
Disposal of discontinued operations
Effects of exchange rate movements
At 31 December 2013
Impairment
At 1 January 2012
Charge for the year
Effects of exchange rate movements
At 31 December 2012
At 1 January 2013
Charge for the year
Discontinued Operations
Effects of exchange rate movements
At 31 December 2013
Carrying value
At 31 December 2013
At 31 December 2012
At 1 January 2012
Italy
Hungary
Slovenia
Netherlands
Total
12,750
103
(328)
12,525
12,525
-
(12,525)
-
-
10,916
1,836
(227)
12,525
12,525
-
(12,525)
-
-
-
-
1,834
5,458
-
129
5,587
5,587
-
(5,587)
-
-
4,954
448
93
5,495
5,495
-
(5,495)
-
-
31,374
945
(401)
31,918
31,918
1,343
-
367
33,628
-
-
-
-
-
-
-
-
-
-
92
504
33,628
31,918
31,374
334
83
(7)
410
410
3
(413)
-
-
212
-
5
217
217
-
(217)
-
-
-
193
122
49,916
1,131
(607)
50,440
50,440
1,346
(18,525)
367
33,628
16,082
2,284
(129)
18,237
18,237
-
(18,237)
-
-
33,628
32,203
33,834
For the purposes of impairment testing the intangible oil and gas assets are allocated to the Group’s cash-generating units,
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 amounts for intangible exploration assets represent costs incurred on active exploration projects. These amounts are
written off to the income statement as impairment expense unless commercial reserves are established or the determination
process is not completed and there are no indications of impairment. The outcome of ongoing exploration, and therefore
whether the carrying value of intangible exploration assets will ultimately be recovered, is inherently uncertain.
12 Investment in subsidiaries and jointly controlled entities – Company
At 1 January 2012
Additions
Impairment in year
At 31 December 2012
At 1 January 2013
Additions
Disposals
Impairment in year
At 31 December 2013
£000s
16,023
64
(1,668)
14,419
14,419
-
(79)
-
14,340
The impairment during the prior year relates to the write down of the carrying values of Ascent Italia Resources Srl. The
decision was taken in light of the likely realisable value from the asset.
- 48 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Name of company
Principal activity
Country of incorporation
Ascent Slovenia Limited
Ascent Resources doo
Ascent Production Ltd
Ascent Drilling Ltd
Ascent Hungary Ltd
PetroHungaria kft (Joint Venture)
Ascent Hungary kft
Pelsolaj kft (Joint Venture)
Ascent Resources Italia Srl
Ascent Netherlands BV
Oil and Gas exploration
Oil and Gas exploration
Holding company
Holding company
Holding company
Oil and Gas exploration
Oil and Gas exploration
Oil and Gas exploration
Oil and Gas exploration
Oil and Gas exploration
British Virgin Islands
Slovenia
England
England
England
Hungary
Hungary
Hungary
Italy
Netherlands
% of share
capital held
2013
100%
100%
-
-
100%
-
100%
-
-
100%
% of share
capital held
2012
100%
100%
100%
100%
100%
48.8%
100%
60%
100%
100%
The legal form of PetroHungaria kft, Pelsolaj kft and Ascent Hungary kft are limited liability companies of what are in substance
joint venture agreements between the Group and its partners.
All subsidiary companies are held directly by Ascent Resources plc.
13 Trade and other receivables – Group
2013
£ ’000s
-
43
43
24
110
2013
£ ’000s
5
42
24
71
2012
£ ’000s
339
332
212
33
916
2012
£ ’000s
23
-
33
56
2013
£ ’000s
2012
£ ’000s
(23,907)
5,738
(24,120)
5,789
(8,460)
(2,030)
(7,168)
1,720
Trade receivables
VAT recoverable
Other receivables
Prepayments & accrued income
14 Trade and other receivables – Company
VAT recoverable
Other receivables
Prepayments & accrued income
15 Deferred tax – Group & Company
Group
Total tax losses
Unrecorded deferred tax asset at 24% (2012: 24%)
Company
Total tax losses
Unrecorded deferred tax asset at 24% (2012: 24%)
- 49 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
16 Borrowings – Group & Company
Group
Current
Loan with financial institution
Bank Loan
Convertible loan note
Non-current
Bank Loan
Convertible loan note
Derivative liability
Company
Current
Loan with financial institution
Convertible loan note
Non-current
Bank Loan
Convertible loan note
Derivative liability
Non-current borrowings are repayable within:
One to two years
Two to three years
Convertible Loan Note
Fair value of consideration received
Equity component
Liability component on initial recognition
Liability brought forward
Liability on initial recognition
Equity component of £3m received in Dec '12 and approved April '13
Interest expense
Exchange movements
Deferral of set up costs
Liability at 31 December
2013
£ ’000s
2012
£ ’000s
150
-
604
754
-
4,957
-
4,957
150
604
754
-
4,957
-
4,957
4,957
-
2013
£ ’000s
1,954
(204)
1,750
3,217
1,749
(314)
920
9
(20)
5,561
1,775
307
153
2,235
489
3,064
1
3,554
1,775
153
1,928
3,064
-
1
3,065
-
3,065
2012
£ ’000s
3,000
-
3,000
552
3,000
-
-
(10)
(325)
3,217
The Directors consider that the carrying amount of the bank and other loans approximates to their fair value. The weighted
average interest rate of the bank loan is 9% (2012: 9%).
Bank loan
a) On 16 May 2013 the Group repaid in full the balance outstanding on the one year loan facility of £2.3 million with YA
Global Master SPV Ltd ('Yorkville'), an investment fund managed by Yorkville Advisors LLC.
b) On 4 April 2012, the Group secured a 3 year loan facility of €1.0 million with Cassa Di Risparmio de Cento Bank. This loan
was disposed of on the sale of Ascent Resources Italia Srl with an outstanding balance of £603,000.
- 50 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
c) On 30 November 2013 the Group secured a 6 months loan facility of £500,000 with Darwin Strategic Limited. Under the
terms of the facility a 5% commitment fee was payable on draw down and interest will be payable at 12% per annum on
any amounts drawn down. The facility is repayable in full together with accrued interest on 30 May 2014. At 31
December 2013 the Group had drawn down £150,000 of this funding.
17 Provisions – Group
At 1 January 2012
Used during the year
Provisions made during the year
Unwinding of discount
At 31 December 2012
At 1 January 2013
Disposal
Provisions made during the year
Unwinding of discount
At 31 December 2013
£000s
524
(7)
-
23
540
540
(103)
-
-
437
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 between after 2022.
18 Other non-current liabilities – Group & Company
The other non-current liability of £2,255,000 (2012: £2,307,000) relates to the grant in 2011 of a nil cost option over 29,686,000
new Ordinary Shares of 0.1p each in the Company to EnQuest. The options are convertible at a price of 10p each; given the
current share price the Company considers it to be likely that the option will be settled in cash rather than through the issue of
equity. As a result this was reclassified in 2012 from equity to non-current liabilities. This is held at a discounted rate and
repayment is due in December 2015.
The discount rate used for the purposes of calculating accretion interest was revised to 15% (2012: 10%). The interest accreted
for the period was £154,008 and a credit of £205,982 was recognised due to the change in estimate.
19 Trade and other payables – Group
Trade payables
Tax and social security payable
Other payables
Accruals and deferred income
20 Trade and other payables – Company
Trade payables
Tax and social security payable
Accruals and deferred income
Other payables
2013
£ ’000s
131
-
19
259
409
2013
£ ’000s
116
-
209
19
344
2012
£ ’000s
971
151
156
426
1,704
2012
£ ’000s
169
24
447
-
640
- 51 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
21 Called up share capital
Share Capital
Authorised
10,000,000,000 ordinary shares of 0.10p each
2013
£ ’000s
10,000
2012
£ ’000s
10,000
Allotted, called up and fully paid
1,451,114,395 (2012: 1,025,509,722) ordinary shares of 0.10p each
1,451
1,026
Reconciliation of share capital movement
At 1 January
Open Offer
Sale of Ascent Resources Italia
Warranty settlement to GPS
At 31 December
Shares issued during the year
Open Offer
2013
1,025,509,722
2012
1,025,509,722
125,477,880
32,126,793
268,000,000
1,451,114,395
-
-
-
1,025,509,722
On 30 April 2013 a General Meeting of the Company approved the Open Offer announced on 12 April 2013. The Company
received valid acceptances for 125,477,880 Open Offer Shares at a price of 0.5 pence per ordinary share and 394,414 Offer
Loan Notes, convertible at 200 shares for every note, from qualifying shareholders representing a take up of 40.9 per cent.
Sale of Ascent Resources Italia
On 22 July 2013 the Company announced the sale of Ascent Resources Italia Srl (ARI) to Global Power Sources (GPS). Under the
terms of the sale and purchase agreement (SPA) the Company issued ARI with shares for cash consideration of €300,000 at the
average market price in the 15 days prior to closing which represented 32,176,793 Ordinary Shares.
Warranty settlement to GPS
On 18 December 2013 the Company announced that it had reached a settlement with GPS in respect of a number of matters
related to ARI which had the potential to result in Warranty claims under the SPA. In return for a full waiver of any and all
claims or potential claims Ascent agreed to issue GPS with 275 million shares. 268 million were issued immediately with 7
million to be issued following approval by shareholders at a General Meeting.
Equity instruments issued during the year
Convertible Loan Note
On 24 December 2012 the Group entered into an agreement with Henderson Global Investors Limited and Henderson
Alternative Investment Advisor Limited (together, ‘Henderson’) for the subscription by Henderson of convertible loan notes of
up to £5.5 million in principal. At 31 December 2012, £3 million of this facility had been drawn with the remaining £2.5 million
made available to eligible shareholders in the form of an Open Offer which was completed on 30 April 2013.
On 30 April 2013 the terms of the Open Offer were approved at a General Meeting of the Company. £394,414 of notes were
taken up by eligible shareholders: £1,478,197 were taken up by Henderson and £81,144 were purchased by Clive Carver and
Len Reece.
This loan was secured to provide funding for existing debts and overheads going forward. This was valued at £1,436,000 on
initial recognition. At year end the carrying value of the total convertible loan is £5,711,000 (2012: £3,217,000).
The Convertible Loan is unsecured and the Loan Notes are convertible at any time, at the holder's option, at a conversion price,
fixed at 0.5 pence (‘the Conversion Price’). Each Convertible Loan Note of £1 is therefore convertible into 200 Ordinary Shares.
- 52 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
Other matters
The Equity Financing facility
On 12 February 2013 the Company entered into an agreement with Darwin Strategic Limited (Darwin) to provide a £10 million
Equity Financing Facility (EFF). The purpose of the agreement is to provide additional working capital for the Company and the
Group.
Ascent is under no obligation to make a draw down and may make drawdowns at its discretion, up to the total value of the EFF,
by way of issuing subscription notices to Darwin. However, there will be an additional fee payable to Darwin in the event that
less than £500,000 is drawn down within the first 24 months. Following delivery of a subscription notice, Darwin will subscribe
and the Company will allot to Darwin new ordinary shares in Ascent ('Ordinary Shares').
The subscription price for any Ordinary Shares to be subscribed by Darwin under a subscription notice will be the average of
the eight lowest Volume Weighted Average Prices of the Ordinary Shares over the 15 trading days following the subscription
notice. To be reduced pro-rata for shorter pricing periods.
Ascent is also obliged to specify in each subscription notice a minimum price below which Ordinary Shares will not be issued to
Darwin. The Company will have the right (with the consent of Darwin) to modify that minimum price at any time during the
relevant pricing period.
The number of Ordinary Shares which may be issued under any individual subscription notice may be up to the lower of 25 per
cent of the Company's issued share capital following completion of the relevant subscription, or four times the average daily
trading volume of Ascent's Ordinary Shares over the 15 trading days preceding the issue of the relevant subscription notice.
This may be reduced in certain circumstances, including where the minimum price is not maintained.
The maximum amount of a subscription notice may not exceed £500,000 without Darwin's permission. Darwin is entitled to a
commission of up to 5 per cent of amounts subscribed but may agree with Ascent in lieu thereof for the subscription price for
the Ordinary Shares to be discounted by 5 per cent.
Darwin and Ascent may mutually agree at the end of the pricing period to a variation of subscription price. This may allow for a
larger subscription via any over-allotment facility authorised by the Company.
Darwin and Ascent may terminate the EFF agreement if certain conditions are not met.
Reserve description and purpose
The following describes the nature and purpose of each reserve within owners’ equity:
Shares to be issued: Warranty settlement shares to be issued to Global Power Sources Srl please refer to Note 3.
Share capital: Amount subscribed for share capital at nominal value.
Equity reserve: Amount of proceeds on issue of convertible debt relating to the equity component, i.e. option to
convert the debt into share capital.
Share premium: Amounts subscribed for share capital in excess of nominal value less costs of shares associated with
share issues.
Share-based payment reserve: Value of share options granted and calculated with reference to a binomial pricing
model. When options lapse or are exercised, amounts are transferred from this account to retained earnings.
Translation reserve: Exchange movements arising on the retranslation of net assets of operation into the
presentation currency.
Retained earnings: Cumulative net gains and losses recognised in consolidated income.
22 Operating lease arrangements
At the balance sheet date, the Group had no outstanding commitments under non-cancellable operating leases (2012: £nil).
23 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 2013 the Group had exploration and expenditure commitments of £Nil (2012 - Nil).
- 53 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
24 Related party transactions
a. Group companies – transactions
PetroHungaria kft
Ascent Italia Srl
Ascent Netherlands BV
Ascent Slovenia Limited
Ascent Resources doo
Ascent Hungary kft
Pelsolaj kft
b. Group companies – balances
PetroHungaria kft
Ascent Netherlands BV
Ascent Slovenia Limited
Ascent Resources doo
c. Directors
2013
Cash
-
-
-
743
1,183
-
-
1,926
2013
Cash
-
-
14,319
1,183
15,502
2013
Services
-
-
-
296
418
-
-
714
2013
Services
-
-
2,895
418
3,313
2012
Cash
(1,753)
(85)
(362)
1,893
-
(8)
-
(315)
2012
Cash
368
(890)
13,576
-
13,054
2012
Services
(1,141)
(105)
(486)
1,033
-
-
(285)
(984)
2012
Services
-
1,123
2,599
-
3,722
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 5.
2013
On 30 April 2013, Clive Carver, Chairman, and Len Reece, CEO, purchased 17,500 and 63,644 Incentive Loan Notes
respectively, as described in the circular sent to shareholders dated 12 April 2013. The Incentive Loan Notes are
convertible loan notes of £1 each, convertible into 200 Ordinary Shares, each repayable on 31 January 2015, with a
coupon of 9%.
The loan notes purchased by Len Reece are being paid for through salary; at the year-end £21,215 had been recovered
from salary (Note 5) and the balance of £41,000 is included within other receivables (note 13).
2012
There were no related party transactions related to Directors other than their remuneration in 2012.
d. Henderson Global Investors
Henderson global Investors, who are a substantial shareholder in the Company, issued a £5.5m convertible loan to
Ascent in 2012 and 2013. For further details see Note 16.
25 Events subsequent to the reporting period
On 5 February 2014 the Company announced that it had entered into an agreement with Henderson Global Investors Limited
and Henderson Alternative Investment Advisor Limited (together ‘Henderson’) for the subscription by funds managed by
Henderson of convertible loan notes of up to £5 million in principal amount.
The first £2 million of the Henderson Loan Notes was drawn down in February 2014 and will be used to fund existing project
commitments in Slovenia. The balance will be available for draw down, if required, to allow the Company to make further
progress towards securing the necessary permits required for gas processing facilities and pipelines in Petišovci in advance of
full project finance for the construction phase of the development.
- 54 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
26 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 four years after which time the option lapses.
Details of the share options outstanding during the year are as follows:
Outstanding at 1 January 2013
Granted during the year
Expired during the year
Exercised during the year
Outstanding at 31 December 2013
Exercisable at 31 December 2013
Outstanding at 1 January 2012
Granted during the year
Expired during the year
Exercised during the year
Outstanding at 31 December 2012
Exercisable at 31 December 2012
Shares
40,475,000
113,714,768
(1,775,000)
-
152,414,768
38,700,000
68,453,422
3,482,578
(29,686,000)
(1,775,000)
40,475,000
40,475,000
Weighted
Average price
(pence)
9.69
1.00
9.11
3.18
3.29
5.55p
8.36p
10.00p
9.61p
9.69p
9.69p
The value of the options is measured by the use of a binomial pricing model. The inputs into the binomial model were as
follows:
Share price at grant date
Exercise price
Volatility
Expected life
Risk free rate
Expected dividend yield
0.8p – 8.12p
1p – 15p
50%
3-5 years
0.5%
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 2013 have an exercise price in the range of 1p and 15p (31 December 2012: 3.175p and
15p) and a weighted average contractual life of 7.3 years (31 December 2012: 3.3 years).
27 Financial risk management
Group and Company
The Group’s financial liabilities comprise bank loans, convertible loan notes, other loans and trade payables. All liabilities are
measured at amortised cost with the exception of the derivative financial liability which is measured at fair value through the
profit and loss. These are detailed in Notes 16 and 18.
The Group has various financial assets, being trade receivables and cash, which arise directly from its operations. All are
classified as loans and receivables. These are detailed in Note 13.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and interest risk. The risk
management policies employed by the Group to manage these risks are discussed below:
a. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group.
The Group does not have any significant credit risk exposure.
The Group makes allowances for impairment of receivables where there is an identified event which, based on previous
experience, is evidence of a reduction in the recoverability of cash flows.
- 55 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
The credit risk on liquid funds (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 recorded in the financial statements represents the fair value of the Group’s
exposure to credit risk.
At Company level, there is the risk of impairment of intercompany 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.
b. Currency risk
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.
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 and the
United States Dollar.
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.
Group
Profit or loss
10% strengthening of sterling
10% weakening of sterling
Equity
10% strengthening of sterling
10% weakening of sterling
Euro currency change
Year ended
31 December 2013
£ ’000s
Year ended
31 December 2012
£ ’000s
US Dollar Currency change
Year ended
31 December 2013
£ ’000s
Year ended
31 December 2012
£ ’000s
(1)
1
(1,750)
2,139
(770)
1,213
(633)
962
(13)
16
19
(24)
(3)
7
38
(47)
Company
Euro currency change
Year ended
31 December 2013
£ ’000s
Year ended
31 December 2012
£ ’000s
US Dollar Currency change
Year ended
31 December 2013
£ ’000s
Year ended
31 December 2012
£ ’000s
Profit or loss
10% strengthening of sterling
10% weakening of sterling
Equity
10% strengthening of sterling
10% weakening of sterling
(45)
55
(2,462)
3,009
(326)
725
(2,174)
2,657
(13)
16
19
(24)
(3)
38
(47)
- 56 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
c.
Interest rate risk
The Group and Company’s exposure to interest rate risk arises from cash and cash equivalents and borrowings.
At 31 December 2013 the Group and Company has GBP loans valued at £5,260,000 rates of 9% per annum and a Euro loan
at sterling equivalent of £451,000.
At 31 December 2012 the Group and Company has GBP loans valued at £4,603,000 rates of 9% per annum and a Euro loan
at sterling equivalent of £390,000 and the Group has a Euro loan at sterling equivalent of £796,000 at 8.5% per annum.
d.
Liquidity risk
The Group and Company manages its liquidity requirements by using both short and long-term cash flow projections,
supplemented by maintaining debt financing plans and active portfolio management. 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.
Maturity analysis of financial liabilities
Less than six months
Between six months and a year
Over one year
2013
£ ’000s
798
2,158
8,860
2012
£ ’000s
1,843
434
7,587
e. Capital management
The Directors recognise that this is an area in which they may need to develop specific policies should the Group become
exposed to wider financial risks as the business develops.
Set in the foregoing is a comparison of carrying amounts and fair values of the Group’s and the Company’s financial
instruments:
Carrying amount
Year ended
31 December
2013
£ ’000s
Fair value
Year ended
31 December
2013
£ ’000s
Carrying amount
Year ended
31 December
2012
£ ’000s
Fair value
Year ended
31 December
2012
£ ’000s
Group
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Trade Creditors
Convertible loans at fixed rate
Company
Financial assets
Cash and cash equivalent
Intercompany receivables
Financial liabilities
Trade Creditors
Convertible loan at fixed rate
184
-
128
5,506
175
19,225
117
5,506
3,452
420
973
3,217
3,211
24,275
169
3,217
3,452
420
973
3,616
3,211
24,275
169
3,616
184
-
128
5,560
175
19,225
117
5,560
- 57 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2013
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 & intercompany 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, 19 and 20.
Cash and cash equivalents
Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation to fair
value.
- 58 -