Annual Report and Financial Statements
Year ended 31 December 2014
Registered number 05239285
CONTENTS
Company Overview ............................................................................................ 2
Chairman’s Statement ........................................................................................ 3
Operations Review ............................................................................................. 7
Strategic report .................................................................................................. 9
Directors’ Report .............................................................................................. 11
Board of Directors ............................................................................................ 15
Directors and Advisers ...................................................................................... 16
Summary of Group Net Oil and Gas Reserves.................................................... 17
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 2014
Company Overview
Ascent Resources plc (‘Ascent’ or ‘the Company’) is an independent oil and gas exploration and production
(‘E&P’) company that was admitted to trading on AIM, the London Stock Exchange’s market for smaller and
growing companies, 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 an 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
stable 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.
- 2 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Chairman’s Statement
Overview: Petišovci project
From the refinancing of Ascent in early 2013, the Company’s strategy has been to focus exclusively on the
Petišovci project. Accordingly, over the past two years we have exited from our interests in Hungary, the
Netherlands, Switzerland and Italy.
At the macro level, Slovenia’s need for the Petišovci project has never been greater:
Like much of the EU, the country is in a weak economic condition and in need of new areas for
growth.
Slovenia’s banks are pushing hard to raise foreign direct investment for their key industries.
We believe the Petišovci project is one of a relatively small number of fundable and viable
projects the country has to offer to the international investment community.
Slovenia has very little domestic gas production and is reliant on expensive and potentially
unreliable foreign gas.
The verified P50 contingent resources in the Petišovci field contain over 7 times the annual gas
consumption in Slovenia. Management production estimates for phase one equate to 10%- 15%
of the country’s annual consumption and this proportion will increase significantly as the project
moves into phase two.
The region in which the Petišovci fields are located is one of the less economically developed in
Slovenia and would benefit from additional employment opportunities.
Encouragingly we now understand that the Slovenian Government has decided to adopt a more supportive
view of the project than in previous years in recognition of its strategic importance to the country.
Farm-out process
Led by First Energy the Company has been conducting a farm-out process to find industry partners interested
in working with Ascent to develop the Petišovci field to its full potential. Farm-out partners would be expected
to fund a large proportion of future development costs.
The Board has been impressed with the calibre and financial standing of the organisations expressing interest.
In the opinion of the Board all the organisations still remaining in the process are satisfied with the technical
aspects of the Petišovci project and have the financial resources to see a deal through. We believe this not
only validates the asset, but also makes its commercialisation more likely. Further announcements will be
made on a farm-out transaction as the process develops.
Funding
Historic
Between December 2012 and April 2015 the Company raised £9.5 million through the issue of convertible loan
notes (£9m) and new ordinary shares (£0.5m). The Company also generated £0.5 million net of selling
expenses from the sale of its interests in Hungary and the Netherlands.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Of the total £10m that was raised:
£3.5m was spent directly on the Petišovci project.
£3.0m was spent on debt repayments and servicing; this debt had been incurred prior to 2012 largely
in relation to operations in Slovenia.
£3.1m was spent on group costs; the annual cost has been reduced by 30% between 2013 and 2014
due to a reduction in headcount and administrative expenses.
£0.4m was spent on former operations in Italy, Netherlands and Hungary.
Variation of loan note terms
The £8.5 million of convertible loan notes issued in 2013 and 2014 were due for repayment by the end of
January 2015. Despite vigorous efforts by the Board to attract alternative sources of funding, Ascent did not
have the funds required to pay the amounts due. The Board therefore agreed with Henderson Global
Investors Limited and Henderson Alternative Investment Advisor Limited (together, ‘Henderson’), being the
majority holder of the convertible loan notes, to adjust the conversion price of all the convertible loan notes to
0.1 pence, in return for extending the maturity date of the convertible loan notes and terminating the accrual
of interest on them. Accordingly, on a fully diluted basis, the ordinary shareholders’ interest in Ascent, other
than Henderson, fell from 28.7% to 13.7%.
Henderson’s ability to convert the loans without being obliged to make a general offer to all remaining
shareholders was approved by independent shareholders on 19 February 2015.
Recent funding
Short term funding of £550,000 was secured on 1 May 2015 through a placing of 275,000,000 new ordinary
shares via the crowdfunding Primary Bid platform.
Additionally the Company has agreed terms on a new £7 million loan facility with Henderson, demonstrating
their continued support. The loan can be drawn at any time from signing to the 30 June 2016 at the discretion
of the lender. The loan accrues interest at the rate of 7.5% per annum on the amount drawn and this is added
to the amount of the loan. The loan is subject to a drawdown fee of 1.75% per drawdown, which is deducted
from the funds advanced. The loan is also subject to a repayment fee of 1.25% on any amounts repaid by the
Company. The balance outstanding is repayable on demand at any time.
Project funding
For many years the bank most closely associated with the Petišovci project was BNP Paribas. During 2014 we
widened the banking pool to include The European Bank for Reconstruction and Development (‘EBRD’), which
has identified Slovenia as a country for increased engagement. We expect in the coming weeks to receive a
conditional offer of project funding for the development of the first phase of the Petišovci project jointly from
EBRD and BNP Paribas.
Operational issues at Petišovci
Power lines
Most of the delays experienced in 2014 stemmed from the decision of the state-owned electricity company to
route a new high-tension power line directly over the existing gas gathering and separation station (the ‘Plant’
or ‘GGSS’). The field development plan had, from the outset, proposed the construction of an expanded gas
processing facility on this site, to handle production from Pg-10, Pg-11A and subsequent wells, primarily but
not exclusively to reduce the CO2 content to meet national transmission pipeline specifications. Studies were
commissioned to evaluate the impact of the high-voltage line on the proposed facility and it was concluded
that electromagnetic and other effects of the power line presented an unacceptable safety hazard.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
As a result of the above, the initial plans had to be abandoned and the Company and its partners commenced
a search for an alternative site for the GGSS. Eventually, a range of suitable, nearby land plots was identified
and after extended negotiations with the owners, a commercially acceptable transaction was entered into for
the acquisition of the land by the partners.
IPPC permits
In conjunction with the above, Ascent had to redesign the GGSS and related infrastructure for the new site,
which was a time-consuming process. These designs were incorporated into the application for an Integrated
Pollution Prevention and Control (‘IPPC’) permit, required under the terms of EU directives adopted by the
Slovenian government. Again, this was a very complex and extended process. In July 2014 the application was
completed and submitted to the Environmental Agency for approval. Encouragingly the application was
processed without undue delay and was approved, subject to public consultation, in December 2014.
At the close of the public consultation phase, comments had been received from two potential stakeholders.
These objectors have now had an opportunity to present their cases and while it is not possible to predict
when this consultation process will conclude we continue in the expectation that the economic interest of the
country and its inhabitants will prevail.
Nafta Petrochem
In September 2014 Nafta Petrochem, a leading subsidiary of Nafta Lendava, entered into a voluntary
liquidation process. Ascent was in the process of negotiating certain easement rights with this subsidiary for
the routing of its 8” gas delivery pipeline. The liquidation has disrupted this process and new negotiations now
need to be concluded with the administrator.
Field development programme
While the above problems have resulted in significant delays, other aspects of the field development
programme have progressed satisfactorily. For example, the specification and design of the measuring and
metering station for delivery of processed gas to the national transmission system was completed and the
related contract with the transmission operator was negotiated and signed.
GPS
A significant effort was made during 2014 in first negotiating and then attempting to enforce the Subscription
Agreement with Global Power Sources s.r.l. (‘GPS’) under which GPS would have invested some £11.7 million
in Ascent by way of a subscription for new ordinary shares in the Company at a price of 0.8p per share.
As set out in the circular to shareholders dated 6 February 2015, since the failure of GPS to honour its
commitment to subscribe for new ordinary shares, the Board has worked hard with GPS to try to find an
alternative way forward. However, GPS informed the Company towards the end of 2014 that it has
experienced further significant issues as the result of its acquisition of Ascent Resources Italia in 2013, which
made the completion of any alternative transaction highly unlikely.
Your Board is of the view that pursuing GPS through the UK and Italian courts to seek redress for GPS’s failure
to perform under the Subscription Agreement does not make commercial sense.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Outlook
As set out in the Operations Review, the Petišovci project continues to be a very positive opportunity.
This, in the opinion of the Board, is supported by the continuing interest in the farm-out process that is
currently in progress, the recent funding transactions and the progression of the formal bank led project
finance.
Based on the recent actions of the Slovenian Government we remain optimistic of an early award of the IPPC
permit.
Clive Carver
Chairman
11 May 2015
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Operations Review
The Petišovci Project, Slovenia
Ascent Slovenia Ltd 75% (operator), Geoenergo d.o.o. 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 Upper Miocene and the deeper Middle Miocene. The
Middle Miocene Badenian 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 Badenian ‘L’ to ‘Q’ sands. 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 ‘L’ to ‘Q’ sands. Both wells were successfully
fracture stimulated resulting in flow rates of 8 MMscfd from the ‘F’ sands and 2 MMscfd from the ‘L, M and N’
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 will require further recompletions in preparation for a production testing phase which will help to
better understand the long-term productivity performance of the reservoirs. The test production results will
inform decisions regarding a possible full field Petišovci development. The north east region 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 newly constructed 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 approximately 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. There is scope for it to be sold to new owners. 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 early income from
associated gas sales .
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 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 Company has recently completed a fully revised field development plan and strategy for the
further expansion of this significant Petišovci gas field complex.
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.
- 8 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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
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 2014 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.
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.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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
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).
The projected NPV of the Petišovci project has been reassessed during the year and offers a significant
premium to the current market capitalisation of the Company.
Approved for issue by the Board of Directors
and signed on its behalf
Clive Carver
Chairman
11 May 2015
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Directors’ Report
The Directors present their Directors’ Report and Financial Statements for the year ended 31 December 2014
(‘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 9 to the Financial Statements.
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 Petišovci field in Slovenia has the potential to supply a
significant proportion of the country’s gas requirement for many years.
Financial risk management
Details of the Group’s financial instruments and its policies with regard to financial risk management are given
in Note 24 of the Financial Statements.
Results and dividends
The loss for the year after taxation was £5.6 million (2013: £3.5 million). The Directors do not recommend the
payment of a dividend (2013: Nil).
Post balance sheet events
On 2 February 2015 the Company announced the variation of the terms of the 2013 and 2014 Loan notes. To
date £5 million has been drawn under the 2013 CLNs and £4 million has been drawn under the 2014 CLNs. In
total, including accrued interest, some £10 million in aggregate was due for repayment under the 2013 and
2014 CLNs, in part on 23 December 2014 and in part on 31 January 2015.
In return for extending the maturity date of the Loan Notes and terminating the accrual of further interest, the
Board of Ascent has agreed to adjust the conversion price in respect of both the 2013 and 2014 Convertible
Loan Notes from 0.5p and 0.2p respectively to 0.1p for all Loan Notes. On a fully diluted basis and assuming
only Henderson convert this would take them to 88.6 per cent of the Company and accordingly the consent of
the Company’s shareholders was required.
On 20 February 2015 at a General Meeting of the Company, the shareholders approved the Whitewash and
associated resolutions.
On 9 March 2015, the Company joined PrimaryBid.com, the online platform dedicated to equity crowdfunding
for AIM-listed companies. On 1 May 2015 the Company has raised £550,000 via the placing of 275,000,000
ordinary shares in the capital of the Company at a price of 0.2p per Ordinary Share with investors using the
Primarybid.com platform. The Company received £525,250 net of costs which will provide the Company with
additional working capital to be used over as it concludes advanced negotiations with potential sources of
additional financing. The Directors are confident that they will receive significant further funds as a result of
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
such negotiations that will allow the Company to develop the project for the foreseeable future, towards cash
flow.
On 1 May 2015 the Company announced that it had received a notice of exercise to convert 420 convertible
loan notes of £1 each which were issued in May 2013 as part of an open offer to all shareholders (the ‘Loan
Notes’) and the terms of which were amended in February 2015. The Loan Notes, including rolled up interest,
are convertible into new ordinary shares of 0.1 pence each in the capital of the Company (‘Ordinary Shares’) at
a price of 0.1 pence per Ordinary Share. Consequently a total of 473,030 new Ordinary Shares (‘the
Conversion Shares’) were issued pursuant to the Notice.
In May 2015 the Company agreed terms on a £7million loan facility with Henderson Global Investors Limited.
The loan can be drawn at any time from signing to the 30 June 2016 at the discretion of the lender. The loan
accrues interest at the rate of 7.5% per annum on the amount drawn and this is added to the amount of the
loan. The loan is subject to a drawdown fee of 1.75% per drawdown which is deducted from the funds
advanced. The loan is also subject to a repayment fee of 1.25% on any amounts repaid by the Company. The
balance outstanding is repayable on demand at any time.
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
Colin Hutchinson (appointed 20 August 2014)
Relevant details of the Directors, which include committee memberships, are set out on page 15.
Directors’ interests
The beneficial and non-beneficial interests in the issued share capital and convertible loan notes of the
Company were as follows:
Ordinary shares of 0.1p each.
Convertible loan notes.
At
31 December 2014
At
31 December 2013
At
31 December 2014
At
31 December 2013
Leonard Reece
Clive Carver
Nigel Moore
Cameron Davies
Colin Hutchinson
-
-
119,500
150,000
-
-
-
119,500
150,000
-
63,444
17,500
-
-
-
63,444
17,500
-
-
-
Details of Directors’ share options and remuneration are set out in Note 4 to the Financial Statements under
the heading ‘Directors’ remuneration’.
Directors’ emoluments
For details of Directors’ emoluments and share options please see Note 4 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.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Share capital
Details of changes to share capital in the period are set out in Note 18 to the Financial Statements.
As at 11 May 2015 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
307,126,793
185,325,944
160,903,958
100,412,944
%
17.71
10.69
9.28
5.79
The Company has a website, www.ascentresources.co.uk, for the purposes of improving information flow to
shareholders, as well as potential investors.
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 audit 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.
The Company has sufficient cash to fund its current trading obligations but further funding will be required for
working capital through the year and to finance work programmes in Slovenia. In addition both the 2013 &
2014 Convertible Loan notes become due in November 2015 and the £3m due to EnQuest becomes payable in
December 2015. 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.
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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.
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
11 May 2015
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Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Board of Directors
Clive Carver
Non-executive Chairman
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 a
Non-executive Director of Fastjet PLC, a low cost airline operating in Africa; Non-executive Chairman of Iafyds
PLC, an AIM listed investment company; and also a Non-executive Director of unlisted Darwin Strategic
Limited, a company which funds many AIM listed businesses. 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.
Colin Hutchinson
Finance Director
Colin Hutchinson is a fellow of the Institute of Chartered Accountants in Ireland and holds an MBA from
Warwick Business School. He has over fifteen years international experience gained in commercially
orientated finance roles. Colin previously served as the Company's Financial Controller. Prior to joining
Ascent, he was Financial Controller at Lochard Energy plc and Finance Director at Samba Communications Ltd.
He is also a Non-executive Director of Iafyds plc.
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 thirty 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. During the last 12 years Nigel has been a member of a number of Boards focussed on
extractive industries and is currently on the Board and Chairman of the Audit Committee of Hochschild Mining
PLC and Chairman of JKX Oil & 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 thirty-five 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. 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.
- 15 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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
Colin Hutchinson
5 New Street Square
London EC4A 3TW
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
- 16 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Summary of Group Net Oil and Gas Reserves
Net Reserves and Resources by country
Net Attributable
Net Attributable
Net Attributable
Reserves
(Bcfe)
Contingent Resources
Prospective Resources
(Bcfe)
(Bcfe)
Slovenia
P90
41
P50
88
P10
174
Low
Best
High
Low
Best
High
42
76
140
-
-
-
These figures are based on RPS gas-in-place estimates with a management assumption of a 50% recovery
factor and Ascent’s 75% participation.
Tested and/or produced commercial sands are included as reserves while untested and unproduced sands
remain as resources. The condensate content of gas is not included.
Remaining reserves have been adjusted to take account of historic field production, which to the end of
2014 was 8.7 Bcfe.
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.
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.
- 17 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Summary of Ascent Resources plc’s Licence Interests as at 31 December 2014
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
Switzerland
Seeland-Frienisberg
Linden
Gros de Vaud
The Netherlands
M10/M11
Ascent Resources plc
Ascent Resources plc
Ascent Resources plc
364
330
736
-
-
-
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
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
Miocene: a geological epoch of the Neogene Period that extended from about 13 to 25 million years ago.
- 18 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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.
internationally recognised standards, procedures and specifications for design,
The use of
construction, commissioning, modifications and decommissioning activities are 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 2014
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 2014, the Group was Operator of one exploration project which was 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 2014
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 2014
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 2014 which
comprise the consolidated income statement and consolidated statement of comprehensive income, the
consolidated and company statements of financial position, the consolidated and company statement 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 2014 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 – Going concern
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 will be 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 both capital and administrative obligations and liabilities as they fall due, the necessary 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. The financial statements do not include the adjustments
that would result if the Company was unable to continue as a going concern.
- 22 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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
11 May 2015
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 2014
Consolidated Income Statement
For the year ended 31 December 2014
Administrative expenses
Aborted transaction costs
Loss from operating activities
Finance income
Finance cost
Net finance 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
Notes
3
5
5
6
Year ended
Year ended
31 December
31 December
2014
£ ’000s
(1,879)
(228)
2013
£ ’000s
(1,924)
-
(2,107)
(1,924)
3
(3,519)
(3,516)
1,423
(1,266)
157
(5,623)
(1,767)
-
(5,623)
-
(1,767)
-
(1,825)
(5,623)
(3,592)
(5,623)
-
(5,623)
(3,587)
(5)
(3,592)
Basic & fully diluted loss per share (Pence)
7
(0.39)
(0.32)
- 24 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Loss for the year
Other comprehensive income
Foreign currency translation differences for foreign
operations *
Recycling of foreign exchange on disposals *
Total comprehensive loss for the year
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive loss for the year
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
£ ’000s
(5,623)
(3,592)
(1,248)
-
(1,276)
(1,324)
(6,871)
(6,192)
(6,871)
-
(6,871)
(6,187)
(5)
(6,192)
* 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 2014
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
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
Issue of shares during the year net of costs
Share-based payments
Balance at 31 December 2013
Balance at 1 January 2014
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
Conversion of loan notes
Issue of shares during the year net of costs
Share-based payments and expiry of options
Balance at 31 December 2014
Translation
reserve
Retained
earnings
£ ’000s
2,102
£ ’000s
(30,684)
-
(3,587)
(1,276)
(1,324)
(2,600)
-
-
-
(498)
(498)
-
-
(3,587)
-
-
100
(34,171)
(34,171)
-
(5,623)
(1,248)
-
(1,248)
-
-
(5,623)
-
-
-
-
-
-
-
84
-
84
84
-
-
-
-
-
-
-
-
-
-
-
(5)
1,896
1,896
-
-
-
-
-
(84)
-
-
-
(1,035)
861
-
-
(1,746)
-
1,181
(38,613)
Total
£ ’000s
26,543
-
(3,587)
(1,276)
(1,324)
(6,187)
-
518
4,144
95
25,113
25,113
-
(5,623)
(1,248)
-
(6,871)
-
2,058
2
-
146
20,448
Non-
Controlling
interest
5
(5)
-
(5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£ ’000s
26,548
-
(3,592)
(1,276)
(1,324)
(6,192)
-
518
4,144
95
25,113
25,113
-
(5,623)
(1,248)
-
(6,871)
-
2,058
2
-
146
20,448
Share
capital
Share
premium
Equity
reserve
Shares to
be issued
£ ’000s
1,026
£ ’000s
52,198
£ ’000s
-
£ ’000s
-
Share
based
payment
reserve
£ ’000s
1,901
-
-
-
-
-
425
-
1,451
1,451
-
-
-
-
-
-
8
-
1,459
-
-
-
-
-
3,635
-
55,833
55,833
-
-
-
-
-
2
76
-
55,911
-
-
-
-
518
-
-
518
518
-
-
-
-
2,058
-
-
2,576
- 26 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Company Statement of Changes in Equity
For the year ended 31 December 2014
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
Balance at 1 January 2014
Comprehensive income
Loss and total comprehensive income for the year
Transactions with owners
Issue of convertible loan notes
Conversion of loan notes
Issue of shares during the year net of costs
Share-based payments
Balance at 31 December 2014
Share
capital
£ ’000s
Share
premium
£ ’000s
Equity
reserve
£ ’000s
Shares to
be issued
£ ’000s
Share based
payment
reserve
£ ’000s
Retained
earnings
£ ’000s
Total
parent
equity
£ ’000s
1,026
52,198
-
-
425
-
1,451
1,451
-
-
-
8
-
1,459
-
-
3,635
-
55,833
55,833
-
-
2
76
-
55,911
-
-
518
-
-
518
518
-
2,058
-
-
-
2,576
-
-
-
84
-
84
84
-
-
-
(84)
-
-
1,901
(28,599)
26,526
-
(6,190)
(6,190)
-
-
(5)
1,896
1,896
-
-
100
(34,689)
(34,689)
518
4,144
95
25,093
25,093
-
(6,058)
(6,058)
-
-
-
(1,035)
861
-
-
-
1,181
(39,566)
2,058
2
-
146
21,241
- 27 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Consolidated Statement of Financial Position
As at 31 December 2014
Assets
Non-current assets
Property, plant and equipment
Exploration and evaluation costs
Total non-current assets
Current assets
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
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2014
31 December
2013
Notes
£ ’000s
£ ’000s
8
10
18
13
14
16
13
15
2
33,166
33,168
98
456
554
33,722
1,459
55,911
2,576
-
861
(1,746)
(38,613)
20,448
-
20,448
-
410
410
647
9,624
2,593
12,864
13,274
33,722
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
5,394
409
754
2,255
3,418
8,812
33,925
The notes on pages 32 to 52 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 11 May 2015 and signed
on its behalf by:
Clive Carver, Chairman
11 May 2015
- 28 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Company Statement of Financial Position
As at 31 December 2014
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
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2014
31 December
2013
Notes
£ ’000s
£ ’000s
21
11
18
13
17
13
15
1
14,340
19,045
33,386
62
439
501
2
14,340
18,815
33,157
71
175
246
33,887
33,403
1,459
55,911
2,576
-
861
(39,566)
21,241
-
-
429
9,624
2,593
12,646
12,646
33,887
1,451
55,833
518
84
1,896
(34,689)
25,093
4,957
4,957
344
754
2,255
3,353
8,310
33,403
The notes on pages 32 to 52 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 11 May 2015 and signed
on its behalf by:
Clive Carver
Chairman
11 May 2015
- 29 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Consolidated Cash Flow Statement
For the year ended 31 December 2014
Cash flows from operations
Loss after tax for the year
DD&A charge
Decrease in receivables
Increase / (Decrease) in payables
Increase in share based payments
Exchange differences
Finance income
Finance cost
Loss on the sale of discontinued operations (net of tax)
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
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
(5,623)
2
12
238
146
(42)
(3)
3,516
-
(1,754)
3
(773)
-
(1)
(771)
(60)
3,650
(761)
(32)
-
-
2,797
272
-
184
456
£ ’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
- 30 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Company Cash Flow Statement
For the year ended 31 December 2014
Cash flows from in operations
Loss for the year
Depreciation charge
Increase in receivables
Increase in payables
Increase in share based payments reserve
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
Net cash flows used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from loans
Repayment of loan
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
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
(6,058)
2
(662)
85
146
-
-
1,533
(3)
3,499
(1,458)
3
(1,094)
(1)
(1,092)
(43)
3,650
(761)
(32)
-
-
2,814
264
175
-
439
£ ’000s
(6,190)
2
(14)
114
96
3,300
79
(73)
(5)
1,183
(1,508)
(47)
(2,449)
-
(2,496)
(143)
2,061
(1,775)
(20)
887
(44)
966
(3,038)
3,211
2
175
- 31 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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 New Street Square, London EC4A 3TW. The consolidated financial statements
of the Company for the year ended 31 December 2014 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 2014 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 2014 were approved and
authorised for issue by the Board of Directors on 11 May 2015 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 £6.2 million.
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.
The Company has sufficient cash to fund its current trading obligations but further funding will be required for
working capital through the year and to finance work programmes in Slovenia. In addition, both the 2013 & 2014
Convertible Loan notes become due in November 2015 and the £3m due to EnQuest becomes payable in December
2015. 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.
New and amended Standards effective for 31 December 2014 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
the financial year beginning 1 January 2014. The adoption of these standards and amendments has had no
material effect on the Group’s accounting policies.
- 32 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Standard
Effective date
IAS 32
IFRS 10
IFRS 11
IFRS 12
IAS 28
IAS 36
IFRS 10, IFRS 12, and
IAS 27
Amendment – Offsetting Financial Assets and Financial Liabilities
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Investments in Associates and Joint Ventures
Recoverable amounts disclosures for non-financial assets
Investment Entities
Impact on initial
application
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
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
IFRS 11
IAS 16 and IAS 38
IAS 1
IAS 19
IFRS 9
Description
Accounting for Acquisitions of Interests in Joint Operation
Clarification of Acceptable Methods of Depreciation and
Amortisation
Amendments to presentation of financial statements
Defined Benefit Plans: Employee Contributions
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
Financial instruments
Effective date
1 January 2016
1 January 2016
1 January 2016
1 February 2015
1 February 2015
1 January 2015
1 January 2016
1 January 2018
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 indicators of impairment at least annually based on an
estimation of the recoverability of the cost pool from future development and production of the related oil
and gas reserves (see Note 8);
(b) Decommissioning provision – the cost of decommissioning is estimated by reference to operators and internal
specialist staff (see Note 14);
(c) Convertible loan notes – management assessed the fair value of the liability component at issue and the
appropriateness of the amortisation period (see Note 13);
(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;
- 33 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
(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 0);
(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
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if
all three of the following elements are present: power over the investee, exposure to variable returns from the
investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries (‘the Group’) as if they
formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated
in full.
The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or
from the Group. The results of subsidiaries acquired or disposed of during the period are included in the consolidated
income statement from the date that control commences until the date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into
line with those used by the Group.
Business combinations
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.
Joint arrangements
The Group is party to a joint arrangement when there is a contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the
same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either joint ventures, where the Group has rights to only the
net assets of the joint arrangement, or joint operations where the Group has both the rights to assets and obligations
for the liabilities of the joint arrangement.
All of the Group’s joint arrangements are classified as joint operations. The Group accounts for its interests in joint
operations by recognising its assets, liabilities, revenues and expenses in accordance with its contractually conferred
rights and obligations.
Oil and Gas Exploration Assets
All licence/project acquisitions, exploration and appraisal costs incurred or acquired on the acquisition of a subsidiary,
are accumulated in respect of each identifiable project area. These costs, which are classified as intangible fixed
assets are only carried forward to the extent that they are expected to be recovered through the successful
development of the area or where activities in the area have not yet reached a stage which permits reasonable
assessment of the existence of economically recoverable reserves.
- 34 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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.
In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether
the Group’s oil and gas exploration assets may be impaired:
whether the period for which the Group has the right to explore in a specific area has expired during the
period or will expire in the near future, and is not expected to be renewed;
whether substantive expenditure on further exploration for and evaluation of mineral resources in a
specific area is neither budgeted nor planned;
whether exploration for and evaluation of oil and gas reserves in a specific area have not led to the
discovery of commercially viable quantities of oil and gas and the Group has decided to discontinue such
activities in the specific area; and
whether sufficient data exists to indicate that although a development in a specific area is likely to proceed,
the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from
successful development or by sale.
If any such facts or circumstances are noted, the Group, as a next step, perform an impairment test in accordance
with the provisions of IAS 36. In such circumstances the aggregate carrying value of the oil and gas exploration and
assets is compared against the expected recoverable amount of the cash generating unit. The recoverable amount is
the higher of value in use and the fair value less costs to sell.
The Group has identified one cash generating unit, the Petišovci project in Slovenia. Any impairment arising is
recognised in the Income Statement for the year.
Where there has been a charge for impairment in an earlier period that charge will be reversed in a later period
where there has been a change in circumstances to the extent that the discounted future net cash flows are higher
than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be
increased to the lower of its original carrying values or the carrying value that would have been determined (net of
depletion) had no impairment loss been recognised in prior periods.
Decommissioning costs
Where a material liability for the removal of wells and production facilities and site restoration at the end of the field
life exists, a provision for decommissioning is recognised. The amount recognised is the 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 once production begins. 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.
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 reporting date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated to the functional currency at the rates prevailing on the
- 35 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
reporting date. Exchange gains and losses on short-term foreign currency borrowings and deposits are included with
net interest payable.
The assets and liabilities of foreign operations, 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 reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is charged to the income statement over the vesting
period of the related share options or share allocations. The cost is based on the fair values of the options and shares
allocated determined using the binomial method. The value of the charge is adjusted to reflect expected and actual
levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Where equity
instruments are granted to persons other than directors or employees the consolidated income statement is charged
with the fair value of any goods or services received.
Grants of options in relation to acquiring 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 statement of financial position when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are determined by 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.
- 36 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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.
When there are amendments to the contractual loan note terms these terms are assessed and the estimate of fair
value adjusted as appropriate.
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 statement of financial position 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.
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.
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’).
- 37 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
2
Segmental Analysis
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.
2014
Intercompany sales
Total revenue
Administrative expenses
Aborted transaction costs
Other Operating Income
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
Effects of exchange rate movements
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
UK
£ ’000s
276
276
(1,039)
(228)
10
(3,501)
(4,482)
-
(4,482)
-
-
-
1
1
33,886
33,887
Slovenia
£ ’000s
-
-
(1,116)
-
15
(15)
(1,116)
-
(1,116)
33,628
773
(1,235)
1
33,167
420
33,587
(429)
(9,624)
-
(2,593)
(12,646)
(217)
-
(19,319)
(411)
(19,947)
elims
£ ’000s
(276)
(276)
276
-
(25)
-
(25)
-
(25)
-
-
-
-
-
(33,752)
(33,752)
-
-
19,319
-
19,319
Total
£ ’000s
-
-
(1,879)
(228)
-
(3,516)
(5,623)
-
(5,623)
33,628
773
(1,235)
2
33,168
554
33,722
(646)
(9,624)
-
(3,004)
(13,274)
- 38 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
2013
Discontinued Operations
Continuing Operations
Total
UK
Slovenia Eliminations
Sub Total Eliminations
Group
-
3
9
-
Italy Netherlands
Hungary Eliminations
Hydrocarbons
Intercompany sales
Total revenue
Cost of sales
Profit / (Loss) from 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
£ ’000s
-
-
-
-
(1,937)
(78)
(70)
(2,085)
-
(2,085)
-
-
-
-
-
-
-
-
-
-
-
£ ’000s
-
-
-
-
£ ’000s
304
-
304
(90)
£ ’000s
-
-
-
-
100
(31)
-
69
-
69
-
-
-
-
-
-
-
-
-
-
-
45
(59)
(9)
191
-
191
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub
Total
£ ’000s
304
-
304
(90)
(1,792)
(168)
£ ’000s
-
213
213
(263)
-
(1,402)
£ ’000s
-
23
23
102
-
(684)
(79)
282
(125)
(1,825)
-
(1,170)
-
(684)
-
(1,825)
(1,170)
(684)
-
-
-
-
-
-
-
-
-
-
-
-
-
1
1
33,401
33,402
(120)
(5,711)
-
(2,479)
(8,310)
32,285
1,343
1
33,629
430
34,059
(11)
-
(18,747)
(491)
(19,249)
£ ’000s
-
(236)
(236)
161
-
162
-
87
-
87
-
-
-
-
(33,537)
(33,537)
-
-
18,747
-
18,747
£ ’000s
-
-
-
-
-
(1,924)
157
(1,767)
-
£ ’000s
(304)
-
(304)
90
1,792
168
-
79
1,825
-
£ ’000s
-
-
-
-
-
(1,924)
-
157
(1,767)
-
(1,767)
1,825
(1,767)
32,285
1,343
2
33,630
294
33,924
(131)
(5,711)
-
(2,970)
(8,812)
-
-
-
-
-
-
-
-
-
-
-
32,285
1,343
2
33,630
294
33,924
(131)
(5,711)
-
(2,970)
(8,812)
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
3 Operating loss is stated after charging:
Employee costs (see Note 4)
Share based payment charge
Foreign Exchange differences
Included within Admin Expenses
Audit Fees
Fees payable to the Company’s auditor other services
4
Employees and directors
a. Employees
Year ended
31 December
2014
£ ’000s
776
146
3
Year ended
31 December
2013
£ ’000s
1,114
96
-
51
8
59
52
7
71
The average number of persons employed by the Company and Group, including Executive Directors, was:
Year ended
31 December
2014
Year ended
31 December
2013
Management and technical
9
7
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
Share-based payments (Note 0)
£ ’000s
653
120
2
146
1
922
£ ’000s
895
123
-
96
-
1,114
Year ended
31 December
2013
Year ended
31 December
2012
£ ’000s
470
-
52
132
654
£ ’000s
415
261
65
81
822
- 40 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
c. Directors remuneration
2014
Executive Directors
L Reece
C Hutchinson 1
Non-executive Directors
C Carver
C Davies
N Moore
Total
2013
Salary/fees
£
220,000
129,551
60,000
30,000
30,000
469,551
Termination
payments
£
2014 Total
£
-
-
-
-
-
-
220,000
129,551
-
60,000
30,000
30,000
469,551
Salary/fees Termination
£
£
2013 Total
£
220,000
61,367
Executive Directors
L Reece
S Richardson Brown
Non-executive Directors
C Carver
G Cooper
C Davies
N Moore
J Kenny
J Eng
Total
1 C Hutchinson was appointed on 20 August 2014, remuneration includes period as a non-director.
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
The highest paid Director in the year ended 31 December 2014 was Leonard Reece earning £220,000 (2013: L Reece
earning £220,000).
d. Directors incentive share options
2014
N Moore
C Davies
L Reece
C Carver
C Hutchinson
2013
N Moore
C Davies
L Reece
C Carver
S Richardson-
Brown
J Kenny
As at
01-Jan-14
500,000
500,000
500,000
1,000,000
69,079,066
26,568,871
5,313,774
As at
01-Jan-13
500,000
500,000
500,000
1,000,000
-
-
1,000,000
1,000,000
2,500,000
2,500,000
500,000
500,000
Granted/
(Lapsed)
-
-
-
-
-
-
-
Granted/
(Lapsed)
-
-
-
-
69,079,066
26,568,871
As at
31-Dec-14
500,000
500,000
500,000
1,000,000
69,079,066
26,568,871
5,313,774
As at
31-Dec-13
500,000
500,000
500,000
1,000,000
69,079,066
26,568,871
Date
Granted
17-Nov-10
17-Nov-10
17-Nov-10
17-Nov-10
30-Apr-13
30-Apr-13
23-May-13
Date
Granted
17-Nov-10
17-Nov-10
17-Nov-10
17-Nov-10
30-Apr-13
30-Apr-13
-
-
-
-
-
-
1,000,000
01-Nov-10
1,000,000
2,500,000
2,500,000
500,000
500,000
01-Nov-10
07-Sep-11
07-Sep-11
17-Nov-10
17-Nov-10
Share Price
at Grant
5.25p
5.25p
5.25p
5.25p
0.82p
0.82p
0.65p
Share Price
at Grant
5.25p
5.25p
5.25p
5.25p
0.82p
0.82p
4.875p
4.875p
3.16p
3.16p
5.25p
5.25p
Exercise
Price
7.313p
15p
7.313p
15p
1p
1p
1p
Exercise
Price
7.313p
15p
7.313p
15p
1p
1p
Exercise Period
Start
17-Nov-11
17-Nov-11
17-Nov-11
17-Nov-11
30-Apr-16
30-Apr-16
23-May-16
End
17-Nov-15
17-Nov-15
17-Nov-15
17-Nov-15
30-Apr-23
30-Apr-23
23-May-23
Exercise Period
Start
17-Nov-11
17-Nov-11
17-Nov-11
17-Nov-11
30-Apr-16
30-Apr-16
End
17-Nov-15
17-Nov-15
17-Nov-15
17-Nov-15
30-Apr-23
30-Apr-23
4.875p
01-Nov-11
01-Nov-15
7.313p
5p
12p
7.313p
15p
01-Nov-12
30-Jun-12
30-Jun-12
17-Nov-11
17-Nov-11
01-Nov-15
07-Sep-16
07-Sep-16
17-Nov-15
17-Nov-15
- 41 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
5
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
Finance cost
Interest payable on borrowings
Bank Charges
Unwinding of EnQuest liability
Foreign exchange movements realised
Adjustment to equity reserve on loan note variation
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
£ ’000s
3
-
-
3
(1,211)
(17)
(338)
(3)
(1,950)
(3,519)
5
1,366
52
1,423
(1,036)
(230)
-
-
-
(1,266)
During the year the convertible loan note terms were varied such that the conversion price was reduced from 0.5p to 0.2p. As
a consequence the number of shares to be issued on conversion rises from 400m to 1 bn. In accordance with IAS 32, a charge
of £1,950,000 has been recognised to reflect the value of the additional shares.
6
Income tax expense
Current tax expense
Deferred tax expense
Total tax expense for the year
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
£ ’000s
-
-
-
-
-
-
The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK
corporation tax to the loss before tax is as follows:
Year ended
31 December
2014
Year ended
31 December
2013
£ ’000s
(5,623)
£ ’000s
(1,765)
(1,208)
(410)
936
-
50
(321)
543
-
-
915
(12)
22
(531)
63
(47)
-
Loss for the year
Income tax using the Company’s domestic tax rate at 21.5%
(2013: 23.25%)
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
- 42 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
7
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
Weighted average number of ordinary shares (000s)
For basic earnings per share
Loss per share (Pence)
Loss per share from continuing operations
Loss per share from discontinued operations
Total loss per share
31 December
2014
31 December
2013
£ ’000s
(5,623)
-
(5,623)
£ ’000s
(1,767)
(1,825)
(3,592)
Number
1,454,945
Number
1,132,820
(0.39)
-
(0.43)
(0.16)
(0.16)
(0.32)
As the result for the year was a loss no dilutive EPS is disclosed. At 31 December 2014 potentially dilutive instruments in issue
were 3,009,736,472 (2013: 1,079,918,586). Dilutive shares arise from share options and convertible loan notes issued by the
Company.
8
Exploration and evaluation costs – Group
Exploration Costs – Group
Cost
At 1 January 2013
Additions
Disposal of discontinued operations
Effects of exchange rate movements
At 31 December 2013
At 1 January 2014
Additions
Effects of exchange rate movements
At 31 December 2014
Impairment
At 1 January 2013
Charge for the year
Discontinued Operations
Effects of exchange rate movements
At 31 December 2013
At 1 January 2014
Charge for the year
Discontinued Operations
Effects of exchange rate movements
At 31 December 2014
Carrying value
At 31 December 2014
At 31 December 2013
At 1 January 2013
Italy
Hungary
Slovenia Netherlands
Total
12,525
-
(12,525)
-
-
-
-
-
-
12,525
-
(12,525)
-
-
-
-
-
-
-
5,587
-
(5,587)
-
-
-
-
-
-
5,495
-
(5,495)
-
-
-
-
-
-
-
31,918
1,343
-
367
33,628
33,628
773
(1,235)
33,166
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92
33,166
33,628
31,918
410
3
(413)
-
-
-
-
-
-
217
-
(217)
-
-
-
-
-
-
-
-
-
193
50,440
1,346
(18,525)
367
33,628
33,628
773
(1,235)
33,166
18,237
-
(18,237)
-
-
-
-
-
-
-
33,166
33,628
32,203
For the purposes of impairment testing the intangible oil and gas assets are allocated to the Group’s cash-generating unit,
which represent the lowest level within the Group at which the intangible oil and gas assets are measured for internal
management purposes, which is not higher than the Group’s operating segments as reported in Note 2.
The 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
- 43 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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.
9
Investment in subsidiaries– Company
At 1 January 2013
Disposals
At 31 December 2013
At 1 January & 31 December 2014
£000s
14,419
(79)
14,340
14,340
Name of company
Principal activity
Ascent Slovenia Limited
Oil and Gas exploration
Ascent Resources doo
Ascent Hungary Ltd
Ascent Hungary kft
Ascent Netherlands BV
Oil and Gas exploration
Holding company
Oil and Gas exploration
Oil and Gas exploration
Country of
incorporation
British Virgin
Islands
Slovenia
England
Hungary
Netherlands
% of share
capital held
2014
% of share
capital held
2013
100%
100%
-
-
100%
100%
100%
100%
100%
100%
All subsidiary companies are held directly by Ascent Resources plc.
10 Trade and other receivables – Group
VAT recoverable
Other receivables
Prepayments & accrued income
11 Trade and other receivables – Company
VAT recoverable
Other receivables
Prepayments & accrued income
12 Deferred tax – Group & Company
Group
Total tax losses
Unrecorded deferred tax asset at 20% (2013: 24%)
Company
Total tax losses
Unrecorded deferred tax asset at 20% (2013: 24%)
2014
£ ’000s
39
30
29
98
2014
£ ’000s
18
29
15
62
2013
£ ’000s
43
43
24
110
2013
£ ’000s
5
42
24
71
2014
£ ’000s
2013
£ ’000s
(26,071)
5,214
(23,907)
5,738
(8,822)
1,764
(8,460)
2,030
No deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability of this benefit is
dependent on the future profitability of the Company, the timing of which cannot reasonably be foreseen.
- 44 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
13 Borrowings – Group & Company
Group
Current
Loan with financial institution
Convertible loan note
Non-current
Convertible loan note
Company
Current
Loan with financial institution
Convertible loan note
Non-current
Convertible loan note
Non-current borrowings are repayable within:
One to two 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
Loan repaid
Converted notes
Interest expense
Exchange movements
Deferral of set up costs
Liability at 31 December
2014
£ ’000s
-
9,624
9,624
-
-
-
9,624
9,624
-
-
-
2014
£ ’000s
3,500
(107)
3,393
5,561
3,393
-
(463)
(2)
1,168
(1)
(32)
9,624
2013
£ ’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
1,750
(315)
-
-
916
14
(21)
5,561
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 convertible loan is 9% (2013: 9%).
On 1 January 2014 the Group had drawn £150,000 of a £500,000 short term borrowing facility with Darwin Strategic Limited. A
further £150,000 was drawn in January 2014. In September 2014 the balance with accrued interest was repaid in full.
14 Provisions – Group
At 1 January 2013
Disposal
Provisions made during the year
At 31 December 2013
At 1 January 2014
Foreign exchange movement
At 31 December 2014
£000s
540
(103)
-
437
437
(27)
410
The amount provided for decommissioning costs represents the Group’s share of site restoration costs for the Petišovci field in
Slovenia. The most recent estimate is that the year-end provision will become payable after 2022.
- 45 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
15 Other current liabilities – Group & Company
The other non-current liability of £2,593,000 (2013: £2,225,000) 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% (2013: 15%). The interest accreted
for the period was £338,074 (2013: interest of £154,008 and a credit of £205,982 was recognised due to the change in
estimate).
16 Trade and other payables – Group
Trade payables
Tax and social security payable
Other payables
Accruals and deferred income
17 Trade and other payables – Company
Trade payables
Tax and social security payable
Accruals and deferred income
18 Called up share capital
Authorised
10,000,000,000 ordinary shares of 0.10p each
Allotted, called up and fully paid
1,458,507,909 (2013: 1,451,114,395) ordinary shares of 0.10p
each
Reconciliation of share capital movement
At 1 January
Open Offer
Sale of Ascent Resources Italia
Warranty settlement to GPS
Loan Note Conversion
At 31 December
Shares issued during the year
Warranty settlement to GPS
2014
£ ’000s
475
-
20
152
647
2014
£ ’000s
257
20
152
429
2013
£ ’000s
131
19
-
259
409
2013
£ ’000s
116
19
209
344
2014
£ ’000s
2013
£ ’000s
10,000
10,000
1,459
1,451
2014
Number
2013
Number
1,451,114,395 1,025,509,722
-
-
7,000,000
393,514
125,477,880
32,126,793
268,000,000
-
1,458,507,909 1,451,114,395
On 18 December 2014 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 the
balance of 7 million issued in June 2014 following shareholder approval at General Meeting of the Company.
- 46 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Loan note conversion
On 26 March 2014 the Company received a notice of exercise to convert 1,848 convertible loan notes of £1 each which were
issued in May 2013 as part of an open offer to all shareholders. The Loan Notes, including rolled up interest at the rate of 9%
per annum, are convertible into new ordinary shares of 0.1 pence each in the capital of the Company (‘Ordinary Shares’) at a
price of 0.5 pence per Ordinary Share. Consequently a total of 393,514 new Ordinary Shares were issued.
Equity instruments issued during the year
Convertible Loan Note
On 5 February 2014 the Group agreed with Henderson to create a new £5 million class of 9 per cent. convertible loan notes,
convertible at any time at the discretion of the holder, into Ordinary Shares at 100 Ordinary Shares per £1 principal of loan
note, an effective conversion price of between 1p and 0.5pence per Ordinary share depending on whether the balance could
be sold to independent third party investors. The first £2 million available under these 2014 CLNs was drawn immediately with
the balance intended for sale to independent third party investors, with the intention that the pricing of all the 2014 CLNs
would be reset to the lowest price paid by these new investors.
On 8 September 2014, by when it had become clear that it would not be possible to secure investment from new third party
subscribers for the £3 million balance outstanding under the 2014 CLNs, the Company agreed with Henderson a variation to the
terms of the 2014 Convertible Loan Note Instrument whereby Henderson agreed to subscribe for a further £2 million in
principal of 2014 CLNs convertible into Ordinary Shares at 500 Ordinary Shares per £1 principal of loan note, an effective
conversion price of 0.2p. Additionally, Henderson was granted security in the form of a charge over the Company’s assets. The
variation to the loan note terms has resulted in a one-off charge to the P&L of £2,520,000.
The loan notes issued in February and September 2014 fell due for repayment on 23 December 2014. At that time the
Company was in discussions with Henderson about restructuring the 2014 notes and the 2013 notes which were to fall due on
31 January 2015. Given the advanced stage of negotiations no additional interest was charged between the 23 December 2014
and the 2 February 2015 when the restructuring was finalised.
On 2 February 2015 the Company agreed a variation in the terms of all of the 2013 & 2014 Loan Notes whereby the redemption
date was extended to 19 November 2015, interest ceased to accrue and the pricing changed to 1,000 Ordinary Shares per £1
principal of loan note.
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. The Company has not drawn on this facility since it was put in place.
Ascent is under no obligation to make a drawdown 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.
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.
- 47 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
19 Operating lease arrangements
At the balance sheet date, the Group had no outstanding commitments under non-cancellable operating leases (2013: £nil).
20 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 2014 the Group had exploration and expenditure commitments of £Nil (2013 - Nil).
21 Related party transactions
a. Group companies – transactions
Ascent Slovenia Limited
Ascent Resources doo
b. Group companies – balances
Ascent Slovenia Limited
Ascent Resources doo
c. Directors
2014
Cash
627
467
1,094
2014
Services
27
644
671
2013
Cash
743
1,183
1,926
2013
Services
296
418
714
2014
Cash
13,705
1,563
15,268
2014
Services
2,761
1,016
3,777
2013
Cash
14,319
1,183
15,502
2013
Services
2,895
418
3,313
Key management are those persons having authority and responsibility for planning, controlling and directing the activities
of the Group. In the opinion of the Board, the Group’s key management are the Directors of Ascent Resources plc.
Information regarding their compensation is given in Note 4.
2014
Clive Carver is a director of Darwin Strategic Limited, with whom the Company agreed a £500,000 short term facility during
2013. At the beginning of 2014 this had been drawn to £150,000 and a further £150,000 was drawn in February 2014.
The balance including accrued interest of £326,807 was repaid in full in September 2014.
Aside from Darwin there were no related party transactions related to Directors other than their remuneration in 2014.
The Loan notes purchased by Len Reece in 2013 are being paid for through salary; at the year-end £34,429 had been
recovered from salary (2013: £21,015) (Note 4) and the balance of £29,215 (2013: £42,430) is included within other
receivables (Note 10).
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 2014. 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%.
d. Henderson Global Investors
Henderson Global Investors, who are a substantial shareholder in the Company, issued £8.5m of convertible loan notes to
Ascent in 2013 and 2014. For further details see Note 13.
- 48 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
Subsequent to the year end the Company raised £550,000 through PrimaryBid.com. PrimaryBid is a trading name of
Darwin Strategic Limited (‘Darwin’) which is regulated and authorised by the Financial Conduct Authority (FCA). Darwin is
an investment held by funds managed by Henderson. Further details are included in Note 22 below.
Also subsequent to the year end and outlined in Note 22 below, the Company agreed a £7million loan facility with
Henderson.
22 Events subsequent to the reporting period
On 2 February 2015 the Company announced the variation of the terms of the 2013 and 2014 Loan notes. To date £4.95
million has been drawn under the 2013 CLNs and £4 million has been drawn under the 2014 CLNs. In total, including accrued
interest, some £10 million in aggregate was due for repayment under the 2013 and 2014 CLNs, in part on 23 December 2014
and in part on 31 January 2015.
In return for extending the maturity date of the Loan Notes and terminating the accrual of further interest, the Board of Ascent
has agreed to adjust the conversion price in respect of both the 2013 and 2014 Convertible Loan Notes from 0.5p and 0.2p
respectively to 0.1p for all Loan Notes. On a fully diluted basis and assuming only Henderson convert this would take them to
88.6 per cent of the Company and accordingly the consent of the Company’s shareholders was required.
On 20 February 2015 at a General Meeting of the Company, the shareholders approved the Whitewash and associated
resolutions.
On 9 March 2015, the Company joined PrimaryBid.com, the online platform dedicated to equity crowdfunding for AIM-listed
companies. On 1 May 2015 the Company has raised £550,000 via the placing of 275,000,000 ordinary shares in the capital of
the Company at a price of 0.2p per Ordinary Share with investors using the Primarybid.com platform. The Company received
£525,250 net of costs which will provide the Company with additional working capital to be used over as it concludes advanced
negotiations with potential sources of additional financing. The Directors are confident that they will receive significant further
funds as a result of such negotiations that will allow the Company to develop the project for the foreseeable future, towards
cash flow.
On 1 May 2015 the Company announced that it had received a notice of exercise to convert 420 convertible loan notes of £1
each which were issued in May 2013 as part of an open offer to all shareholders (the ‘Loan Notes’) and the terms of which were
amended in February 2015. The Loan Notes, including rolled up interest, are convertible into new ordinary shares of 0.1 pence
each in the capital of the Company (‘Ordinary Shares’) at a price of 0.1 pence per Ordinary Share. Consequently a total of
473,030 new Ordinary Shares (‘the Conversion Shares’) were issued pursuant to the Notice.
In May 2015 the Company agreed terms on a £7million loan facility with Henderson Global Investors Limited. The loan can be
drawn at any time from signing to the 30 June 2016 at the discretion of the lender. The loan accrues interest at the rate of
7.5% per annum on the amount drawn and this is added to the amount of the loan. The loan is subject to a drawdown fee of
1.75% per drawdown which is deducted from the funds advanced. The loan is also subject to a repayment fee of 1.25% on any
amounts repaid by the Company. The balance outstanding is repayable on demand at any time.
- 49 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
23 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 2014
Granted during the year
Expired during the year
Exercised during the year
Outstanding at 31 December 2014
Exercisable at 31 December 2014
Outstanding at 1 January 2013
Granted during the year
Expired during the year
Outstanding at 31 December 2013
Exercisable at 31 December 2013
Shares
152,414,768
-
(18,200,000)
-
134,214,768
20,500,000
40,475,000
113,714,768
(1,775,000)
152,414,768
38,700,000
Weighted
Average
price
(pence)
3.18
-
9.49
-
1.98
9.92
9.69
1.00
9.11
3.18
3.29
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 2014 have an exercise price in the range of 1p and 15p (31 December 2013: 1p and 15p)
and a weighted average contractual life of 7.2 years (31 December 2013: 7.3 years).
24 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.
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.
- 50 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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
Company
Profit or loss
10% strengthening of sterling
10% weakening of sterling
Equity
10% strengthening of sterling
10% weakening of sterling
c.
Interest rate risk
Euro currency change
US$ Currency change
Year ended
31 December
2014
Year ended 31
December
2013
Year ended
31 December
2014
Year ended 31
December
2013
103
(125)
(1)
1
(1,696)
2,073
(1,750)
2,139
(20)
24
(45)
55
(2,455)
3,001
(2,462)
3,009
2
(2)
51
(62)
2
(2)
51
(62)
(13)
16
19
(24)
(13)
16
19
(24)
The Group and Company’s exposure to interest rate risk arises from cash and cash equivalents and borrowings.
At 31 December 2014 the Group and Company has GBP loans valued at £9,624,000 rates of 9% per annum.
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.
- 51 -
Ascent Resources plc
Annual Report and Financial Statements
For the year ended 31 December 2014
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 - loans and borrowings
Less than six months - trade and other payables
Between six months and a year
Over one year
e. Capital management
2014
£ ’000s
-
647
12,217
-
2013
£ ’000s
389
409
2,158
8,860
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
2014
Fair Value
Carrying
Fair Value
Year ended
31 December
2014
Year ended
31 December
2013
Year ended
31 December
2013
457
-
475
9,624
439
24,529
257
9,624
457
-
475
9,624
439
24,529
257
9,624
184
-
128
5,560
175
19,225
116
5,560
184
-
128
5,560
175
19,225
116
5,560
Group
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Trade Creditors
Convertible loans at fixed rate
Company
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Trade Creditors
Convertible loans at fixed rate
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 10, 11, 16 and 17.
Cash and cash equivalents
Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation to fair
value.
- 52 -
ASCENT RESOURCES PLC
(Incorporated in England and Wales under the Companies Act 1985 with registered number 05239285)
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of Ascent Resources plc (the ‘Company’) will be held at the offices of finnCap
Limited, 60 New Broad Street, London EC2M 1JJ on Thursday 11 June 2015 at 10.00 a.m. for the following purposes:-
Ordinary Business
To consider and, if thought fit, to pass the following resolutions, numbered 1, 2, 3 and 4, which are proposed as Ordinary
Resolutions:-
1.
2.
3.
4.
To receive and adopt the report of the Directors and the financial statements for the year ended 31 December 2014 and
the report of the auditors thereon.
To re-appoint, as a director of the Company, Mr Nigel Moore, who retires in accordance with Article 25.2 of the Company’s
Articles of Association and offers himself for re-election.
To re-appoint, as a director of the Company, Mr Colin Hutchinson, whose office terminates at the AGM and who becomes
eligible for re-appointment pursuant to Article 20.2 of the Company’s Articles of Association and offers himself for re-
election.
To re-appoint BDO LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which
accounts are laid before the Company and that their remuneration be determined by the Directors.
Special Business
To consider and, if thought fit, to pass the following resolution numbered 5 which is proposed as an Ordinary Resolution
and the following resolution, numbered 6, which is proposed as a Special Resolution:-
5.
THAT the Directors be and they are hereby generally and unconditionally authorised pursuant to Section 551 of the
Companies Act 2006 (‘the Act’), in substitution for all previous powers granted to them (other than those powers set out in
resolutions 5 and 6), to exercise all the powers of the Company to:
(a) allot and make offers to allot shares in the Company up to an aggregate nominal amount of £486,169.30; and
(b) allot and make offers to allot equity securities (within the meaning of the Act) up to an aggregate nominal amount of
£972,338.61 (such amount to be reduced by the nominal amount of any shares allotted or rights granted under
paragraph (a) of this resolution 7) in connection with an offer by way of a rights issue to:
(i)
(ii)
the holders of ordinary shares in the Company in proportion (as nearly as may be practicable) to the
respective numbers of ordinary shares held by them; and
holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the
Directors otherwise consider necessary,
and subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation
to fractional entitlements or legal or practical problems under the laws of, or the requirements of, any recognised
regulatory body or any stock exchange, in any territory.
Such authority shall, unless previously revoked or varied by the Company in general meeting, expire on the conclusion of
the Annual General Meeting of the Company to be held in 2016 provided that the Company may, at any time before such
expiry, make an offer or enter into an agreement which would or might require relevant securities to be allotted after such
expiry and the Directors may allot relevant securities pursuant to any such offer or agreement as if the authority conferred
hereby had not expired.
6.
THAT the Directors be and they are hereby empowered pursuant to Section 570 of the Act to allot equity securities (as
defined in Section 560 of the Act) for cash pursuant to the authority conferred by Resolution 5 above as if Section 561(1) of
the Act did not apply to any such allotment, provided that this power shall be limited to:-
(a) the allotment of equity securities in connection with an issue in favour of shareholders (but in the case of an allotment
pursuant to the authority granted under paragraph (b) of resolution 7, such power shall be limited to the allotment of
equity securities in connection with an offer by way of a rights issue only) where the equity securities respectively
attributable to the interests of all such shareholders are proportionate (or as nearly as may be practicable) to the
respective number of Ordinary Shares in the capital of the Company held by them on the record date for such
allotment, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in
relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of, any
recognised regulatory body or any stock exchange, in any territory; and
(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of further equity securities up to an aggregate
nominal amount of £218,776.19.
This power shall, unless previously revoked or varied by special resolution of the Company in general meeting, expire at the
conclusion of the Annual General Meeting of the Company to be held in 2016. The Company may, before such expiry,
make offers or agreements which would or might require equity securities to be allotted after such expiry and the
Directors are hereby empowered to allot equity securities in pursuance of such offers or agreements as if the power
conferred hereby had not expired.
BY ORDER OF THE BOARD
C Hutchinson,
Company Secretary
18 May 2015
Notes
5 New Street Square
London EC4A 3TW
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A
proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the Annual General Meeting
provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. To appoint more
than one proxy you may photocopy the form of proxy. Please indicate the proxy holder’s name and the number of shares in relation to which
they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the
proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. To
be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of such power or
authority must be lodged at the offices of the Company’s registrars, Computershare Investor Services plc, PO Box 82, The Pavilions, Bridgwater
Road, Bristol, BS99 6ZZ by hand, or sent by post, so as to be received not less than 48 hours before the time fixed for the holding of the meeting
or any adjournment thereof (as the case may be).
2. The completion and return of a form of proxy will not preclude a member from attending in person at the meeting and voting should he wish to
do so.
3. The Company has specified that only those members entered on the register of members at 6.00pm on 9 June 2015 shall be entitled to attend
and vote at the meeting in respect of the number of ordinary shares of £0.001 each in the capital of the Company (‘Ordinary Shares’) held in their
name at that time. Changes to the register after 6.00pm on 9 June 2015 shall be disregarded in determining the rights of any person to attend
and vote at the meeting.
4. Resolution 2 – Article 25.2 of the Company’s Articles of Association requires that one third of the Directors of the Company who have held office
since the last Annual General Meeting must retire and, if they are eligible, may offer themselves for re-election.
5. Resolution 5 – This resolution, to be proposed as an Ordinary Resolution, relates to the grant to the Directors of authority to allot unissued
Ordinary Shares until the conclusion of the Annual General Meeting to be held in 2016, unless the authority is renewed or revoked prior to such
time. This authority in paragraph (a) is limited to a maximum of 486,169,303 Ordinary Shares and the authority in paragraph (b), which only
applies to the allotment of Ordinary Shares in connection with a rights issue, is limited to a maximum of 972,338,606 Ordinary Shares (less any
Ordinary Shares allotted pursuant to the authority in paragraph (a)).
6. Resolution 6 – The Act requires that if the Directors decide to allot unissued Ordinary Shares in the Company the shares proposed to be issued
must be first offered to existing shareholders in proportion to their existing holdings. This is known as shareholders’ pre-emption rights.
However, to act in the best interests of the Company, the Directors may require flexibility to allot shares for cash without regard to the provisions
of Section 561(1) of the Act. Therefore this resolution, to be proposed as a Special Resolution, seeks authority to enable the Directors to allot
equity securities up to a maximum of 218,776,186 Ordinary Shares. This authority expires at the conclusion of the Annual General Meeting to be
held in 2016.