Annual Report and
Financial Statements
2020
Company Number: 05239285
Ascent Resources plc
Ascent Resources Plc is a London
Stock Exchange AIM listed natural
resources operating company
focused on unlocking latent
value and capturing growth in
special situations across the
resource space while executing
an international growth strategy
initially targeting the Hispanic
Americas and Caribbean.
Contents
Ascent Resources plc ..............................................................................................................................................................................................B
Chairman’s Statement ............................................................................................................................................................................................2
Chief Executive Officer’s Statement ...................................................................................................................................................................2
Strategic Report ..........................................................................................................................................................................................................6
Summary of Group Net Oil and Gas Reserves as of 31 Dec 2020 ....................................................................................................... 15
Directors’ Report ....................................................................................................................................................................................................... 16
Board of Directors .................................................................................................................................................................................................... 19
Directors and Advisers .......................................................................................................................................................................................... 20
Corporate Governance Report........................................................................................................................................................................... 21
Audit Committee Report ...................................................................................................................................................................................... 26
Remuneration Committee Report ....................................................................................................................................................................27
Statement of Directors’ Responsibilities ....................................................................................................................................................... 30
Independent Auditor’s Report to the members of Ascent Resources plc ....................................................................................... 31
Consolidated Statement of Comprehensive Income ............................................................................................................................. 36
Consolidated Statement of Financial Position ........................................................................................................................................... 37
Company Statement of Financial Position .................................................................................................................................................. 38
Consolidated Statement of Changes in Equity ......................................................................................................................................... 39
Company Statement of Changes in Equity .................................................................................................................................................40
Consolidated Cash Flow Statement ................................................................................................................................................................ 41
Company Cash Flow Statement ...................................................................................................................................................................... 42
Notes to the Accounts ........................................................................................................................................................................................... 43
Ascent Resources plc Annual Report and Financial Statements 2019 I 1
Chairman’s Statement
This has been a very challenging but
ultimately transformational year for
your company.
During 2020, and despite the inevitable challenges
of the global pandemic, Ascent Resources plc made
significant progress restructuring its Board, strategy
and portfolio. The Company’s primary focus has
been seeking redress for damages suffered in the
development of its flagship asset in Slovenia, alongside
diversifying its strategy to exploit select Special
Situations across Hispanic America, the Caribbean and
Europe. This includes Cuba, one of the few remaining
unexploited hydrocarbon systems globally, and a
specific ESG Metals focus positioning the company to
access low risk and low capital intensity opportunities in
the metals and minerals processing arena. Having laid
some important foundations in 2020, we look forward to
progressing the business this year.
Chief Executive Officer’s Statement
Legacy Slovenian Asset
2020 was again a challenging year for the Petišovci
tight gas project in Slovenia as regional gas prices fell
dramatically in the first half of the year. Production at
PG-10 continued to produce a small volume of gas
whilst PG-11A remained suspended due to the inability
to address natural well decline with mechanical
stimulation (despite operations of such a nature
having been carried out in Slovenia more than 30 times
since the 1950’s). Total production in 2020 was 1,852.74
thousand standard cubic metres (“scm”) of gas and
48,148 litres of condensate with all production being
sold to local buyers. Gas sales via the export pipeline
to INA in Croatia remained suspended throughout the
period in review as the wellhead pressure was below
the pipeline pressure.
In May 2020, the Company announced that it had
reviewed its Slovenian position and had contracted a
new expert consultancy team to prepare a new field
development plan in preparation for receipt of permits
to re-stimulate PG-10 and PG-11A. The Company also
submitted multiple proposals to its JV partners with
a view to establishing a cost-effective and industry-
standard JV structure as well as settling alleged
amounts historically claimed to be owed. Furthermore,
during the year, the Company engaged legal advisors
to prepare the claim against the Republic of Slovenia
under the Energy Charter Treaty and UK-Slovenia
Bilateral Investment Treaty.
In June 2020, the Administrative Court of the Republic of
Slovenia published its decision in relation to Ascent’s JV
partner’s appeal against the Slovenian environmental
agency ARSO’s decision to require an Environmental
Impact Assessment (“EIA”) in order to re-stimulate the
PG-10 and PG-11A wells. Work towards the concession
renewal remains in progress.
2 I Ascent Resources plc Annual Report and Financial Statements 2020
In July 2020, the Company and its subsidiary, Ascent
Slovenia Limited, served a Notice of Dispute to the
Republic of Slovenia (the “State”) under the Energy
Charter Treaty (“ECT”) and UK-Slovenia Bilateral
Investment Treaty (“BIT”) over damages suffered as
a result of the State’s failures to administer normal
procedure and political bias expressed against the
Company and the Petišovci gas project. In particular,
the Government of Slovenia were notified of the fact
that certain actions which had caused considerable
harm to the Group’s investments in Slovenia constitute
breaches by the State of the protections established
by the UK-Slovenia BIT and ECT, including, inter-alia, the
guarantee that the investments would be accorded
fair and equitable treatment and Slovenia’s guarantee
that the management, maintenance, use, enjoyment or
disposal of the investments would not be impaired by
arbitrary, unreasonable or discriminatory measures. On
serving of the Notice of Dispute the Company triggered
an automatic three month cooling off period, designed
to allow the parties to attempt to resolve their dispute
ahead of arbitration proceedings.
In October, ninety days after the servicing of the Notice
of Dispute, the Company announced that it was
entering into direct negotiations with the Government
of Slovenia, with a view to potentially settling the claim
in an amicable manner. Post period in review the
Company announced that at the request of the State
it would not initiate arbitration proceedings prior to
19 March 2021. On that date the Company received a
further letter from the State which failed to set forward
a damages proposal and confirmed that an amicable
settlement was presently not achievable, and the
Company therefore announced its expectations to
initiate arbitration proceedings shortly.
Post period in review, PG-11A well was put back into
production as an initial investigation into pressure
anomalies which were detected in both the tubing and
casings annuli. The well initially flowed with production
rates of circa 20,000 scm/day, allowing for sale of gas
to INA. However, production thereafter declined and is
currently producing sporadic gas along with PG-10. The
sales gas proceeds since mid-2019 have continued to
be less than the fixed plus varable operating costs of
the field and therefore the Company is not currently
receiving any cash revenues.
New ESG Metals Strategy
During the year, the Company launched an
international growth strategy focused on unlocking
Special Situations across Hispanic America, the
Caribbean and Europe. This strategy was introduced
counter cyclically against the backdrop of dynamic
commodity markets and post period in review
the Company confirmed that it would focus its
efforts specifically towards Environmental, Social
and Governance (“ESG”) Metals within its resource
focused business.
ESG Metals includes secondary mining and recovery
opportunities typically involving the reclassification,
through highly efficient recovery techniques, of
stockpiled surface mining waste (often previously
viewed as a liability for mining companies) as a
valuable asset for reprocessing and commercial sale
to industry, governments and metals traders. The
Company sees waste management, remediation
and restoration of land impacted by historic and
on-going mining activities as a critical element in the
global ESG agenda and integral to the transition to
a low carbon economy. The Company is looking at
a number of potential projects in Hispanic America
and South Africa as well as Europe. In particular, the
Company believes that there are good opportunities
in gold, silver, platinum, base metals and ferrochrome,
where the economics are especially attractive and
the opportunity set has the ability to deliver lowest
cost quartile sustainable metal production from
legacy mining tailings, with low geological risk. Such
opportunities have the potential to provide strong cash
returns without exploration risk and only require modest
upfront capital outlay.
Cuba Market Entry
The Republic of Cuba is one of the few remaining world-
class, yet largely unexploited, hydrocarbon systems.
Cuba currently produces approximately 45,000 bopd
of mostly heavy oil with c. 100 mscf/d of gas with clear
targets for growth in their E&P sector to fuel electricity
generation. Cuba also has the world’s fourth largest
Nickel reserves and offers good infrastructure and
an educated workforce alongside significant under
exploited resource potential. To promote international
investment Cuba enacted a new law in 2014 to offer
protections to foreign investors, allowing payments
in foreign currency and withdrawal of funds from the
country. Cuba currently offers excellent fiscal and
commercial terms for oil and gas operators, including
foundational entries into PSCs and the right to sell
all crude at the wellhead priced in foreign currency,
thereby securing oil commercialisation.
The Company sees clear first mover opportunity for
a European quoted oil and gas company to counter
cyclically deploy its operational skill and access
to capital in a country which has been starved
of investment and technology and impacted by
US Sanctions.
As the first step in advancing its international growth
strategy the Company announced on 14 April 2020 the
acquisition of Energetical Limited (“Energetical”) for a
total consideration of £652,500 of which £202,500 has
been satisfied by the issue of 6 million new shares and,
subject to the Company signing a production sharing
contract (“PSC”) over Cuban onshore producing block
9B, deferred consideration of £450,000 which will
be satisfied by way of a cash payment of £100,000
and the issue of new shares for a consideration of
£350,000 to be issued at the 30 day volume weighted
average share price of the Company at the time of
PSC signature.
The acquisition of Energetical has secured the rights for
the Company to exclusively negotiate the production
sharing contract for Block 9B which is expected to give
the Company an entitlement to incremental barrels
produced above the existing base of circa 190 bbls/day
from three wells. The Company has initially assessed
that recovery rates could be significantly rejuvenated
with the simple and relatively low-cost addition of
basic equipment and reservoir management. It is also
assessing the viability of new highly deviated onshore
wells designed to intercept the crest of multiple fault
blocks expected to flow with an initial production rate in
excess of 1,000 bopd.
Ascent Resources plc Annual Report and Financial Statements 2020 I 3
Chief Executive Officers’ Statement continued
None of these operations require new seismic and none
of the wells have yet to produce any water and no oil
water contact has been identified. There are another
three wells at Majaguillar and the San Anton field that
are shut in at this time mainly due to the lack of basic
equipment such as pumps.
Building momentum on this new market entry into
Cuba, the Company announced the signature of a
binding MOU with the Cuban national oil company
CUPET over Cuban onshore exploration blocks 9A, 12
and 15 which covers an aerial extent over 7,000 km2
along the northern coast. The combination of Blocks
9A, 9B, 12 and 15 positions the Company with exclusive
negotiating rights to potentially one of the largest
non-state-owned, onshore Cuban portfolios. The
portfolio provides a blend of existing production for
low-risk redevelopment with significant upside potential
for both appraisal and exploration. The portfolio is
consistent with the Company’s strategy of counter
cyclical acquisitive growth with a focus on low-cost
production, manageable initial capital commitments
and near- term high growth potential.
In August 2020, the Company announced that it had
sent its draft application to become an operator
in Cuba to Oficina Nacional de Recursos Minerales
(“ONRM”) and Union Cuba-Petroleo (“CUPET”), Cuba’s
national oil company, alongside its negotiations on the
production sharing contracts. Whilst both workstreams
are progressing positively, they have not yet been able
to be completed due to restrictions on travel caused by
COVID-19. Consequently, the Company has agreed a six
month extension to the MOU that gives the Company
the exclusive right to negotiate the PSCs for the onshore
producing Block 9B and onshore exploration Blocks 9A,
12 and 15.
This targeted portfolio consists primarily of low-cost
barrels with a blend of development, appraisal and
exploration potential, representing a balance of
opportunities across the cycle. Selective mining assets
will also be considered with a focus on Copper and
Gold as well as Nickel and Cobalt ore bodies and
associated tailings that would be consistent with the
Company’s ESG Metals Strategy.
Board Restructuring
In March 2020, several new Board members joined to
strengthen the management of the Company while
bringing significant international oil, gas and mining
experience and access to capital in order to take
the Company forward including James Parsons as
Executive Chairman, Ewen Ainsworth as Non-executive
Director and Chairman of the Audit Committee and
Leonardo Salvadori as Non-executive Director. In April
2020, the Company announced the appointment of
Andrew Dennan as Chief Executive Officer. In October
2020, Leonardo Salvadori stepped down from the
Board in order to contribute on an executive basis in
his capacity as Technical Director. At the same time
Stephen Birrell was appointed to the Board as Non-
executive Director and Chairman of the Remuneration
and HSE/Technical Committees and Malcolm Graham-
Wood was appointed as Non-executive Director and is
a member of the Audit Committee.
Funding
The new Board and Executive team have reduced
operating costs through the year, managed various
historical outstanding balances and raised additional
funds to enable the new Cuban initiative to be
delivered and associated work programme to be
prepared. This has now positioned the company as a
clean vehicle with a strong board and management,
access to capital and a clear growth trajectory.
The Equity Sharing Agreement with RiverFort, as
announced on 20 September 2019, was cancelled
alongside the initial changes to the Board, effective
February 14, 2020. The outstanding US$468,776 loan
(as of the restructuring date and inclusive of fees
and commission) with Riverfort was re-negotiated
into a two-year, coupon free, bullet loan with a GBP
denominated principle of £375,020. Repayment
is due at maturity in February 2022, and there are
conversion rights for the lender at 7.5 pence per
share. No conversion can occur until the share price
exceeds 10 pence per share for five consecutive days.
The Company has a right to buy out up to 50% of the
loan prior to its expiry at nil premium whilst the share
price is below the conversion price. If the Company
does exercise this right, then the conversion price
is adjusted upwards to 0.0875 pence (8.75 pence
post re-organisation) per conversion share. The 43
million warrants initially to be awarded to Riverfort,
as announced on 20 September 2019, were also now
not awarded.
4 I Ascent Resources plc Annual Report and Financial Statements 2020
COVID-19
Other than through the significant fall in gas prices in
the first half of 2020, COVID-19 has had limited direct
impact on Ascent’s assets in Slovenia but there may
be delays in obtaining the necessary governmental
approvals and processes. COVID-19 has also impacted
the Company’s ability to travel which in turn has a
consequence on ability to execute on certain business
development activity. Finally, COVID-19 has had an
impact on the Company’s ability to execute on its
MOUs over Cuban onshore exploration blocks 9A, 12
and 15. Production operations in Slovenia have been
unaffected to date, with the assets being managed
through a combination of on-site working within social
distancing guidelines or remote oversight, with all
appropriate safety procedures remaining in place to
protect staff and local communities, although the risk
of future disruption remains
Summary
Despite a challenging 2020, the Company has
broadened from a single asset Slovenian story to a
Special Situations focused vehicle with a particular
focus on Cuba and ESG Metals, alongside the claim
against the Slovenian State. As a Board we are
determined to protect the Company’s investment in
Slovenia whilst we expand our international footprint.
Andrew Dennan
Chief Executive Officer
James Parsons
Executive Chairman
29 April 2021
In March 2020, shareholders approved a share re-
organisation, including a 100:1 consolidation, with the
nominal value of the shares to be set to 0.5 pence.
Further to the successful passing of the resolutions
at the Company’s General Meeting held on 5 March
2020 and despite the market volatility at the time, the
Company completed a fundraising for gross proceeds
of £685,000 at 5 pence per share. Furthermore, in
support of funding work streams associated with
advancing the Company’s entry into Cuba the
Company raised a further £212,500 by the issuance of
new shares at 2.75 pence being a nil premium to the
closing bid price at the time of issue in April.
In August the Company announced it had secured a
new funding package totalling £700,000 in support of
the Company’s continued progress across both Cuba
and Slovenia as well as the execution of its special
situations international growth strategy. The Company
raised £300,000 in new equity at a price of 2 pence
per new share, being a nil discount to the spot price
at the time, with one warrant attached for every two
shares subscribed for exercisable at 4 pence per new
warrant share, of which the Company has received
some cash through subsequent exercises. Additionally,
the Company announced a £400,000 unsecured
loan facility with an 8% fixed coupon payable on
redemption or conversion through the exercise of
all the warrants which were issued attached to the
loan notes at 2.5 pence per new warrant share. This
conversion subsequently took place. As part of this
funding the Company agreed with RiverFort to repay
certain amounts of their debt obligation which has
subsequently been reduced from £375,020 to £270,020.
In December, the Company secured additional
funding of £500,000 in a new loan facility with warrants
attached exercisable at 7.5 pence per share, being
a 41.5% premium to the share price at the time.
Subsequently and post period end the Company
has drawn down part of this loan facility and agreed
with the lenders to extend the drawdown date for the
remaining balance available. Under this facility the
Company has drawn down £250,000 of which £125,000
has been converted into equity pursuant to warrant
exercises as well as receipt of a further £70,000 by way
of further warrant exercises.
Ascent Resources plc Annual Report and Financial Statements 2020 I 5
Strategic Report
Section 414C of the Companies Act 2006 (“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 which includes a fair review of
the business, an analysis of the development and
performance of the business and analysis of financial
position and key performance indicators.
We have incorporated these requirements into the
information set out below.
Company Overview
Ascent Resources plc (“Ascent” or “the Company”)
is a natural resources operating company that was
admitted to trading on AIM in November 2004 (AIM:
AST). Ascent has been involved in Slovenia for just
over 11 years where it operates the Petišovci gas
project. To date it has invested around €50 million in
this project. This asset, despite significant legal and
permitting complexity, has significant oil and gas
reserves and resources and an established, local
production infrastructure with connections to local and
export customers.
During 2017, the Company brought two Petišovci field
wells into production and started export production to
INA in Croatia. In 2019 sales of gas to INA stopped as a
result of wellhead pressure falling below the pipeline
pressure. The PG-10 well continued to produce gas for
the local industrial buyers whereas PG-11A remained
on suspended production throughout the year due to
uneconomic gas rates. The revenues from annual sales
gas are below the operational fixed costs of the field
therefore no revenue has been invoiced.
During this reporting period, the Company has
undergone a transformation including the appointment
of a new Board of Directors and new initial funding
alongside a strategic review of its Slovenian portfolio
and the implementation of a new international growth
strategy focused on Hispanic Americas, the Caribbean
and Europe which has already resulted in the
announcement of a new market entry into Cuba.
Post this period in review, the Company has also as
part of an expanded international strategic review
announced the launch of its ESG* Metals strategy. This
strategy will look at opportunities to secure and develop
low-cost method of sustainable metal production from
legacy mining waste through economic rehabilitation.
The Company is looking at a number of potential
projects in Hispanic America and South Africa as well
as Europe.
*Environmental, Social, and Governance
6 I Ascent Resources plc Annual Report and Financial Statements 2020
Asset Overview
Slovenia - Petišovci Tight Gas Project
The Petišovci gas project is in an area that has
been exploited since 1943. The project targets the
significant deeper gas reserves and resources in the
Middle Miocene Badenian or Petišovci-globoki (“Pg”)
gas reservoirs.
Using the results of an extensive 3D seismic survey
conducted in 2009 by Ascent and its partners, the
locations of two new wells were determined. These
wells, Pg-11A and Pg-10 were successfully drilled,
completed and stimulated between 2010 and 2012.
During 2017 the Company brought both of these
wells into production and started exporting gas from
Petišovci to INA in Croatia.
Cumulative gas production from the Pg gas field since
1963, including fuel and flare use and accounting
for the gas equivalent of the historical condensate
production, is 12.7 Bcfe (360.1 MMsm3). This is 3% of
the currently estimated gas initially in place (“GIIP”)
of 430 Bcfe, (12.2 Bsm3), based on independent third-
party estimates.
Further details of the asset and current reserves and
resources can be found on page 15.
Ascent manages the Petišovci project on behalf of
the Joint Venture between Ascent Slovenia Limited
and Geoenergo. Ascent has a 75% working interest in
the project and carries 100% of the costs. Until Ascent
has recovered its costs in full it will receive 90% of the
net revenues.
Cuba – MOUs blocks 9A, 9B, 12 and 15
In April, the Company announced the acquisition of
Energetical Limited (name changed to Ascent Hispanic
Resources UK Limited) which has secured the rights for
the Company to exclusively negotiate the production
sharing contract for Cuban onshore producing oil
block 9B which is expected to give the Company an
entitlement to incremental barrels produced above the
existing base of circa 190 bbls/day from three wells.
The Company has initially assessed that recovery
rates could be significantly rejuvenated with the simple
and relatively low-cost addition of basic equipment
and reservoir management. It is also assessing the
viability of new deviated onshore wells drilled into the
crest of the fields which it expects to flow with an initial
production rate in excess of 1,000 bopd. None of these
operations require new seismic and none of the wells
have yet to produce any water and no oil water contact
has been identified. There are another three wells at
Majaguillar and the San Anton field that are shut in at
this time mainly due to the lack of basic equipment
such as pumps.
Additionally, the Company has also secured a binding
MOU with the Cuban national oil company CUPET
over Cuban onshore exploration blocks 9A, 12 and 15
which covers an aerial extent over 7,000 km2 along the
northern coast. The combination of Blocks 9a, 9b, 12 and
15 positions the Company with exclusive negotiating
rights to potentially one of the largest non-state owned,
onshore Cuban portfolios. The portfolio provides a
blend of existing production for low-risk redevelopment
with significant upside potential for both appraisal
and exploration. The portfolio is consistent with the
Company’s strategy of dynamic acquisitive growth with
a focus on low-cost production, manageable initial
capital commitments and near-term inflection points.
The exclusive rights in these areas covered by the
MOUs were originally expected to have been executed
upon within the reporting period, but due to travel
restrictions and other delays in response to COVID-19.
Since 10 January 2021, non-residents traveling to Cuba
are required to stay in a designated isolation centre
until two negative PCR test results have been achieved,
making travel for work unfeasible and risky. The
Company now expects this to occur in 2021.
Our Strategy
Historically the Company has focussed all of its
resources on its Slovenian project, directing available
funding towards bringing Petišovci into production.
The commencement of production during 2017
was a significant milestone. The development of
the project stalled during 2018 due to the Slovenian
environmental permitting process. The appointment
of a new government and the award of the IPPC
Permit in April 2019 gave some optimism, which was
removed in June 2020 with the Administrative Court
of Slovenia upholding the environmental agency
ARSO’s delayed view that an EIA would be required in
order to re-stimulate the wells. In 2020 we have also
observed recent changes being introduced by the
new Slovenian Government including proposals to
make amendments to the Nature Preservation Act and
Environment Protection Act intended to better facilitate
the development of industrial projects. Post period end
we have observed a challenge with a failed vote of no
confidence against the current Slovenian government.
Following a strategic review in Q1 2020 the new Board
identified that the successful commercialisation of
the Petišovci field could be economic at the prevailing
2021/2022 gas future prices of circa Euro 13-15/Mwh,
but that stimulation is required to materially increase
and sustain production at the field. The Company
has started work towards compiling information to be
able to submit an EIA and contracted a new expert
consultancy team of professionals to review the historic
stimulation data at Petišovci, design the detailed
forward stimulation programme so that equipment can
be procured without delay as and when concession
extension is granted and permits are received, and
prepare a full field development plan.
In tandem with its continuing position in Slovenia, the
Company has launched a process to seek redress
over damages suffered as a result of the Republic
of Slovenia’s breaches under the Energy Charter
Treaty (“ECT”) and UK-Slovenia Bilateral Investment
Treaty (“BIT”). Whilst the Company initially entered into
settlement negotiations with the Republic of Slovenia in
October 2020, the Company subsequently announced
on 19 March 21 that Slovenia had failed to put
forward a damages offer and that a settlement was
presently not achievable. Consequently, as previously
announced, the Company expects to initiate arbitration
proceedings shortly.
Additionally, the new Board of Directors have launched
an international growth strategy focused on unlocking
latent value in special situations across Hispanic
America, the Caribbean and Europe. This will see the
Company diversify and evolve into a portfolio of assets.
This strategy is being introduced counter cyclically
against the backdrop of dynamic commodity markets.
The Board believe that this volatile pricing environment
provides a unique window of opportunity to expand the
Company’s asset footprint at favourable prices. The
strategy is focused on securing low-cost barrels with
manageable capital commitments.
Post period in review the Company announced the
launch of its Environmental, Social and Governance
(“ESG”) Metals strategy. ESG Metals includes secondary
mining and recovery opportunities which the Company
sees as being consistent with Environmental, Social and
Governance (“ESG”) principles. Typically, these involve
the reclassification, through highly efficient recovery
techniques, of stockpiled surface mining waste
(previously viewed as a liability for mining companies)
as a valuable asset for reprocessing and commercial
sale to industry, governments and metals traders.
The Company sees waste management, remediation
and restoration of land impacted by historic and
ongoing mining activities as a critical element in the
global ESG agenda and integral to the transition to
a low carbon economy. The Company is looking at
a number of potential projects in Hispanic America
and South Africa, as well as Europe. In particular, the
Company believes there are good opportunities in
gold, silver, platinum, base metals and ferrochrome,
where the economics are especially attractive and
the opportunity set has the ability of delivering lowest
cost quartile sustainable metal production from
legacy mining tailings, with low geological risk. Such
opportunities have the potential to provide strong cash
Ascent Resources plc Annual Report and Financial Statements 2020 I 7
Strategic Report continued
returns without exploration risk and only require modest
upfront capital outlay.
d) the impact of the Company’s operations on the
community and environment,
Our markets
Dependency on imported gas is very high throughout
the EU, particularly in Slovenia. This, and the history of
relatively stable gas prices in Europe, has underpinned
our historic strategy of exploration, development and
production in this region. Our wells are connected
to existing processing facilities, intra-field and
international pipelines, ensuring low-cost connection
and easy access to the market.
The Board recognises the attractiveness of the region
for oil and gas development and many countries
outside of Slovenia have well organised regulatory
frameworks and a history of oil and gas development.
The Company has identified the Caribbean and
Hispanic America region as highly prospective for oil
and gas, even when taking into consideration current
volatile commodity markets.
The Republic of Cuba is one of the few remaining
world-class, yet largely unexploited hydrocarbon
systems. Additionally, Cuba is the nation with the
fourth largest Nickel reserve by country and offers an
attractive proposition in primary and secondary mining.
The Company sees clear first mover opportunity for a
quoted resource company to deploy its operational
skill and access to capital in a country which has
been starved of investment and technology and
impacted by US Sanctions. Cuba currently produces
approximately 45,000 bopd of mostly heavy oil with c.
100 mscf/d of gas with clear targets for growth in their
E&P sector to fuel electricity generation. Cuba has the
advantage of offering an international investor access
to good infrastructure and an educated workforce
alongside significant under exploited hydrocarbon
resource potential.
Directors’ Statement under Section 172 (1) of
the Companies Act 2006
The Section 172 (1) of the Companies Act obliges the
Directors to promote the success of the Company for
the benefit of the Company’s members as a whole.
The section specifies that the Directors must act
in good faith when promoting the success of the
Company and in doing so have regard (amongst other
things) to:
a) the likely consequences of any decision in the
long term,
b) the interests of the Company’s employees,
c) the need to foster the Company’s business
relationship with suppliers, customers and others,
8 I Ascent Resources plc Annual Report and Financial Statements 2020
e) the desirability of the Company maintaining
a reputation for high standards of business
conduct, and
f)
the need to act fairly as between members of
the Company.
The Board of Directors is collectively responsible for
the decisions made towards the long-term success of
the Company and how the strategic, operational and
risk management decisions have been implemented
throughout the business is detailed in this Strategic
Report on pages 6-14.
The Company went through significant change
during 2020. The previous Board worked with the
new directors and management team to provide
a transition across to the new management for the
benefit of all stakeholders of the Company. The Board
has taken the important strategic decision to continue
its commitment in Slovenia and to try and work with
the Government and authorities in moving the business
forward alongside addressing the past with an ECT and
UK-Slovenia BIT investor claim against the Republic of
Slovenia. At the same time steps have been taken to
develop an ESG Metals growth strategy and developing
an onshore oil and gas portfolio in Cuba. This has been
combined with capital raises to fund the business
moving forward for the benefit of all stakeholders:
shareholders, employees and suppliers alike.
Stakeholder engagement
The Board recognises that our employees are one
of the key resources of our business which enables
delivery of Company’s vision and goals. Annual pay
and benefit reviews are carried out to determine
whether all levels of employees are benefited equally
and to retain and encourage skills vital for the business.
The Remuneration Committee oversees and make
recommendations of executive remuneration and
any long-term share/option awards. A scorecard is
prepared annually and reviewed half yearly. Bonus
awards are based on achievement of scorecard
targets. Employees are informed, both of results and
important decisions, and are encouraged to feel
engaged and to improve career potential.
In light of COVID-19 all employees within the business
are working from home, this situation will continue to be
monitored and at a point when it is considered right to
return to work will be managed and considered by the
Company with full consultation of its employees.
The Board acknowledges that a strong business
relationship with suppliers and customers is a vital part
of the growth. Whilst day to day business operations
are delegated to the executive management, the
Board sets directions with regard to new business
ventures. The Board uphold ethical business behaviour
and encourages management to seek comparable
business practices from all suppliers and customers
doing business with the Company. We value the
feedback we receive from our stakeholders and we
take every opportunity to ensure that where possible
their wishes are duly considered.
The Board considers that relationships and dealings
with host Governments plays an integral part of
developing oil and gas and mining ventures and
accordingly interacts with host Governments and the
respective authorities.
Policies and processes
The Board considered a number of governance
matters during the year. These included amongst other
a review of a number of existing group policies which
were commenced and completed during 2020 and
the adoption a new Sanctions Policy given the Group’s
operations in Cuba.
The Group Policies review is still ongoing and in
particular the HSE Committee is currently leading
a thorough review of the current HSE policies
and procedures.
The Board is responsible overall for reviewing the
effectiveness of the policies and processes, while the
role of senior management is to implement Board
policies and processes.
Maintaining High Standards of Business
Conduct
The Company is incorporated in the UK, governed by
the Companies Act 2006 and carries out its business in
Slovenia as well as having interests in Cuba. The Board
guides management and the employees to conform
with relevant statutory and regulatory provisions in the
United Kingdom and any other prevailing regulations
and best practices at other operative locations.
The Company has adopted the Quoted Companies
Alliance Corporate Governance Code 2018 and the
Board recognises the importance of maintaining a
good level of corporate governance, which together
with the requirements to comply with the AIM
Rules ensures that the interests of the Company’s
stakeholders are safeguarded. The Board receives
training periodically, including Anti Bribery and
Corruption training in Q4 2020 and in early 2021 the
Company’s external lawyers gave the directors a
refresher on the requirements around disclosure of
inside information.
The Board has prompted that ethical behaviour and
business practices should be implemented across the
business. Anti-corruption and anti-bribery training are
provided to staff and contractors and the anti-bribery
statement and policy is contained in the Company’s
Employee Manual. The Company’s expectation of
honest, fair and professional behaviour is reflected by
this and there is zero tolerance for bribery and unethical
behaviour by anyone relating to the Company.
The importance of making all employees feel safe in
their environment is maintained and a Whistleblowing
policy is in place to enable staff to confidentially raise
any concerns freely and to discuss any issues that
arise. Strong financial controls are in place and are
well documented.
Shareholders
The Board places equal importance on all shareholders
and recognises the significance of transparent and
effective communications with shareholders. As an
AIM listed company there is a need to provide fair and
balanced information in a way that is understandable
to all stakeholders and particularly our shareholders.
The Company values the views of its shareholders, the
directors are keen to engage with shareholders and
work with them so that they are aligned to the strategy
and growth of the business. Once the restrictions in
place with the COVID-19 pandemic have been lifted
the Company will seek to engage with shareholders
in person.
The primary communication tool with our shareholders
is through the Regulatory News Service, (“RNS”) on
regulatory matters and matters of material substance.
The Company’s website provides details of the
business, investor presentations and details of the
Board and Board Committees, changes to major
shareholder information, QCA Code disclosure updates
under AIM Rule 26. Changes are promptly published
on the website to enable the shareholders to be kept
abreast of Company’s affairs. The Company’s Annual
Report and Notice of Annual General Meetings (AGM)
are available to all shareholders. The Interim Report
and other investor presentations are also available on
our website.
The AGM is an annual opportunity for shareholders to
meet with the Company and receive a full update of
the business from both the Board and management.
Covid-19 has restricted the ability to hold face to face
meetings with shareholders, however the Company
intends to keep shareholders engaged through the
Company’s website. There will be full transparency
of the voting on the resolutions at the AGM, with the
Company disclosing the proxy votes received on each
resolution in the RNS released shortly after the AGM.
Ascent Resources plc Annual Report and Financial Statements 2020 I 9
Strategic Report continued
In order to increase shareholder awareness, the Company has recorded a number of media interviews which
are available to download on leading investor- focused websites and from the media section of the Company’s
website. An email alert service has also been established to which shareholders can subscribe to receive company
announcements as and when they are released.
Community and Environment
The Board places utmost importance of matters pertaining Environmental, Health, Safety and Social Responsibility
and guides the Company on following due policies and processes in order to protect the Community the Company
operates within. The Company is working to implement a new management system with a set of clearly defined
objectives of the Environmental, Health, Safety and Social Responsibility Policy.
Health and Safety measures are reviewed periodically and the necessary improvements are recommended for
better practices. The Company recognises its role as an oil and gas exploration and production company and
is aware of the potential impact that it may have on the environment. The Company ensures that its subsidiary
companies comply with the local regulatory requirements with regard to the environment.
Financial Report
Revenue for 2020 was nil, down from £0.298 million in the prior year due to a cease in joint venture commercial
production.
Overall, operating costs have reduced, but administrative expenses increased slightly from £2.132 million in 2019 to
£2.279 million in 2020. Administrative costs principally comprise staff costs, overheads and listing related expenses
with the increase in 2020 being attributable to non-cash related long-term employment incentive charges.
Finance costs decreased from £924k in 2019 to £35k, principally due to the successful re-financing of the equity
sharing agreement from 2019 to an interest free, bullet loan.
The loss for the year totalled £2.831 million versus £3.660 million in 2019, with the decrease in loss most notably due to
the reduction in finance expenses.
Operating cash flow was an outflow of £1.346 million In 2020 versus an outflow of £1.668 million in 2019. This reflects
the reduction in revenue, the reduction in finance costs, and an increase in expenditures to the overall accounting
loss represented by non-cash long-term employment incentive charges.
Cash at the end of the period was £115k versus £77k at the end of 2019.
Borrowings at the end of the year were £203k mostly constituted of the Riverfort Investment Agreement announced
in March 2020 which was a result of the re-financing of the Equity Sharing Agreement and financing from
September 2019.
Financial KPIs
Revenue
Administrative Expenses
Operating Cash Flow
Cash Balance
2020
–
2,279
2019
298
2,132
(1,346)
(1,668)
115
77
Variance
(298)
147
322
38
10 I Ascent Resources plc Annual Report and Financial Statements 2020
Operational Performance
The Company produced 1,852,740 cubic metres of gas and 48,148 litres of condensate during the year. Production
has declined further over the period.
Production KPI's
Total gas (k scm)
Total gas (M scf)
Average daily gas (k scm)
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
238.26
194.70
198.08
176.47
177.49
152.57
8.41
7.69
6.88
6.71
7.00
6.39
6.23
5.88
6.27
5.73
5.39
5.09
Average daily gas (k scf)
271.42
237.10
225.65
207.73
202.19
179.60
Total condensate (liters)
8,692.00
5,436.00
4,752.00
4,698.00
3,780.00
3,672.00
CGR (liters per 1000 scm gas)
BOE - gas
BOE - condensate
Total BOE
Production KPI's
Total gas (k scm)
Total gas (M scf)
Average daily gas (k scm)
Average daily gas (k scf)
36.48
1450.28
54.59
27.92
1185.14
34.14
23.99
1205.69
29.84
26.62
1074.17
29.50
1504.87
1219.28
1235.54
1103.68
21.30
1080.38
23.74
1104.12
24.07
928.69
23.06
951.75
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
24.86
0.88
0.80
28.32
145.97
5.15
4.71
121.20
4.28
4.04
166.29
142.68
119.22
4.21
3.85
135.81
147.29
156.63
5.20
4.91
5.53
5.05
173.38
178.43
Total condensate (liters)
864.00
3,672.00
2,862.00
2,376.00
3,348.00
3,996.00
CGR (liters per 1000 scm gas)
BOE - gas
BOE - condensate
Total BOE
34.75
151.32
5.43
156.75
25.16
888.52
23.06
911.58
23.61
737.77
17.97
755.74
19.93
725.69
14.92
740.61
22.73
896.55
21.03
917.58
25.51
953.41
25.09
978.50
M= Million k= Thousand scm= standard cubic meter scf= standard cubic foot
Our Principal risks and uncertainties
Commodity Prices
The Group is exposed to risks arising from fluctuations in the demand for, and price of,
hydrocarbons. Oil and gas prices depend on numerous factors over which the Group
does not have any control, including global supply, international economic trends
(such as the current downturn caused by COVID-19), currency exchange fluctuations,
inflation, consumption patterns and global or regional political events. This risk impacts
revenues from the Group’s existing asset portfolio in Slovenia, projects under development
including the Cuban MOUs, and evaluation of business development opportunities where
commerciality depends on assumptions around future commodity prices.
In terms of evaluating and sanctioning new investments, the Group adopts a conservative
price forecast to ensure capital is allocated to projects with robust economics, even in lower
commodity price environments.
Ascent Resources plc Annual Report and Financial Statements 2020 I 11
Strategic Report continued
Permitting risk
The single biggest issue when carrying out operations in Slovenia over the past six years has
been the environmental permitting process. The Company was made aware in June 2020
that the Administrative Court of the Republic of Slovenia had ruled that an EIA would be
required to enable the re-stimulation of PG-10 and PG11A wells. This is not unique to Ascent
and it is our opinion that inefficiencies and uncertainties within the environmental permitting
process are a significant hurdle to economic growth in Slovenia.
Permitting risk exists for any element of the field development plan which requires an
environmental permit; mainly well stimulation and the installation of processing equipment.
This risk is managed by our detailed understanding of the process and our actions to ensure
Slovenian and EU regulations are followed properly by Slovenian officials. The company has
issued a notice of dispute against the Government of Slovenia and further irregularities in
the processes and unnecessary delays will also be legally pursued.
Concession
extension risk
The date when the concession is due to be renewed is now less than one year away which
means that before any further significant investment is made the Company and its partners
will need to have obtained an early extension of the concession.
Sanctions Risk
COVID-19 Risk
The Company and its partners are currently in the process of completing the work required
to seek an extension of the concession which is due to expire in May 2022. While we are
confident that an extension will be granted as a matter of course, based on the provisions
under Slovenian Mining Law, there is no guarantee that this will be the case. On the other
hand the Slovenian Government would not have discretion to refuse the extension if all
the criteria set out in law are fulfilled and we therefore believe it should be awarded in
due course.
Ascent Resources Plc (“Ascent”) and all subsidiaries and members of its global corporate
group (collectively the “Ascent Group”) are committed to ensuring that all parts of our
business and all our employees fully comply with all sanctions laws applicable to our work.
These include all applicable European Union (“EU”) and United Kingdom (“UK”) sanctions
laws and associated regulations. The Ascent Group is generally not subject to US sanctions
laws; if Ascent Group’s operations in Cuba came under US jurisdiction they would be
prohibited according to US sanctions laws. Ascent Group seeks to comply with US sanctions
laws where applicable and therefore the group should ensure it is only subject to US law in
set circumstances where agreed by Ascent’s Board.
In order to mitigate this risk the company approved in November 2020 an International
Sanctions Compliance Policy (“Policy”) that aims to ensure that the group has effective
procedures and resources in place to determine what sanctions laws apply to its activities
and to implement a clear and robust approach to ensuring sanctions compliance. The
Articles of Association (the “AoA”) were also amended in July 2020 to prevent U.S. Persons
(as defined in the AoA) from becoming shareholders or directors of the Company. The
Company is also structuring its Cuba entry in a way to ensure it benefits from EU legislation
protection on Sanctions.
Other than through the significant fall in gas prices in the first half of 2020, COVID-19 has had
limited direct impact on Ascent’s assets in Slovenia but there may be delays in obtaining
the necessary governmental approvals and processes. Production operations in Slovenia
have been unaffected to date, with the assets being managed through a combination of
on-site working within social distancing guidelines or remote oversight, with all appropriate
safety procedures remaining in place to protect staff and local communities, although the
risk of future disruption remains.
COVID-19 has impacted the Company’s ability to travel which in turn has a consequence on
ability to execute on certain business development activity, in particular in relation to Cuba.
Covid-19 has restricted the ability to hold face-to-face meetings with shareholders, however
the Company intends to keep shareholders engaged through the Company’s website.
12 I Ascent Resources plc Annual Report and Financial Statements 2020
COVID-19 Risk
continued
The Company is currently following the government guidelines and all employees within the
business are working from home, this situation will continue to be monitored and at a point
when it is considered right return to work will be managed and considered by the Company
with full consultation of its employees.
Failure to qualify
as an Onshore Oil
and Gas Operator
in Cuba Risk
As announced 6 August 2020 the Company transmitted its operating credentials to
Union Cuba-Petroleo (“CUPET”), Cuba’s national oil company, and the Oficina Nacional de
Recursos Minerales (“ONRM”) and since then has received positive initial feedback towards
accreditation as an onshore operator subject to funding. However whilst these work-
streams are still being advanced remotely, finalisation of the qualification process and
negotiations of the PSCs are pending the lifting of COVID-19 related travel restrictions.
Slovenia Disputes
Risk
The Company hired an in-house Spanish speaking qualified lawyer with previous Cuba
experience to manage the qualification process and expects to be able to travel to Cuba as
soon as the border restrictions are lifted and obtain the necessary funding in order to obtain
the qualification as an onshore oil and gas operator.
The Company is also reviewing in parallel a number of ESG Metal and mining opportunities
in Cuba (alongside other jurisdictions) across a range of base, precious and battery metal
primary mining projects as well as gold, silver and copper secondary mining/re-treatment
of surface stockpiled tailing opportunities that are consistent with the Company’s recently
announced ESG Metals strategy, which do not require of any qualification process.
Dispute with the Republic of Slovenia
As announced on 24 July 2020, the Company formally notified the Government of Slovenia
of the existence of disputes under the UK-Slovenia Bilateral Investment Treaty (the “BIT”) and
the Energy Charter Treaty (the “ECT”). Following the issuance of the Notice of Dispute, the
Company triggered a compulsory minimum three month ‘cooling-off’ period, designed to
allow the parties to attempt to resolve their dispute ahead of arbitration proceedings.
On 22 October 2020, ninety days after the serving of the Notice of Dispute, the Company
announced that it was entering into direct negotiations with the Government of Slovenia,
with a view to potentially settling the claim in an amicable manner. Furthermore, on 22
February 2021, the Company confirmed that, at the request of the State, it would not initiate
arbitration proceedings prior to 19 March 2021.
The Company announced on 19 March 2021 that, following a letter received from the
State, an amicable settlement was presently not achievable and it expects to commence
arbitration proceedings shortly. As part of direct pre-arbitration settlement discussions the
Company had submitted a damages calculation to the State totalling significantly in excess
of €100 million which it hopes to be able to recover.
Although the Company is aware that it has a strong claim, there is an inherent risk when
carrying arbitration proceedings that the full amount of damages might not be recovered.
The Company is planning to mitigate such risk by instructing a reputed London based
law firm specialised in investment treaty arbitration to manage such claim together with
local Slovenia counsels with previous arbitration experience once the necessary funding is
secured, with the internal support of the Company’s recently hired inhouse lawyer.
JV Contractor Update
As announced on 28 May 2020, the Company’s subsidiary Ascent Slovenia Limited has been
managing a planned contractual default with its joint venture partner Geoenergo* and the
local service provider Petrol Geo*, in relation to historic amounts claimed of circa €235k
(which are provided for in the Company accounts) in connection with the joint venture
arrangements. Despite multiple offers by the Company to settle matters, including to
restructure the JV arrangements, no amicable settlement with either Geoenergo* or Petrol
Geo* has been reached to-date.
Ascent Resources plc Annual Report and Financial Statements 2020 I 13
Strategic Report continued
Slovenia Disputes
Risk continued
In the meantime, Petrol Geo issued a local enforcement order attempting to claim payment
for an unsubstantiated amount of €662,288.63 plus interest of €12,103.19. The Company
appointed a local counsel and immediately rejected this claim. The Company received
confirmation from the Local Court in Ljubljana that it has annulled the enforcement order
filed by Petrol Geo against its subsidiary, Ascent Slovenia Ltd.
Whilst the matter will now be referred to the District Court in Ljubljana, this Court also is
not the correct jurisdiction for any disputes under the relevant agreements in place and
accordingly the Company expects it will also be rejected by this court.
The Company continues to believe that this claim is incorrect and totally without merit nor
substance and that an amicable settlement will be achieved eventually. The Board will
continue to defend its investments in Slovenia and reserves its right to pursue all available
remedies and actions and in order to mitigate such risk has appointed a local counsel to
defend its position.
* The JV partner Geoenergo is 50% owned by Nafta Lendava (which itself is an entity 100% owned by the
Republic of Slovenia) and 50% owned by Petrol (30% of which is directly and indirectly controlled by the Republic
of Slovenia). The JV Service Provider, Petrol Geo, is a 100% subsidiary of Petrol.
How we operate
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 Petišovci project is operated through a local entity in a joint venture.
Our people
Ascent has a small executive team implementing a clear growth strategy. 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 local employer in our area of operation we take our environmental and social
responsibilities seriously and always strive to be a good corporate citizen.
Approved for issue by the Board of Directors and signed on its behalf
James Parsons
Executive Chairman
29 April 2021
14 I Ascent Resources plc Annual Report and Financial Statements 2020
Summary of Group Net Oil and Gas Reserves as of 31 Dec 2020
Net Reserves and Resources
Net Attributable Producing Reserves
(bcf gas)
Net Attributable Non-producing Reserves
(bcf gas)
Total Net Attributable Reserves
(bcf gas)
P90
Net Ascent
41
P50
84
P10
162
P90
35
P50
73
P10
145
P90
76
P50
157
P10
307
These figures are based on RPS Energy “Updated Independent Volumetric Review of the Petišovci Area” gas-in-place
estimates with a management assumption of a 50% recovery factor and Ascent’s 75% participation.
Tested and/or producing commercial sands are included as Producing Reserves while untested and unproduced
sands remain as non-Producing Reserves. The condensate content of gas is not included.
Remaining gas reserves have been adjusted to take into account historic field production since 1963, including
estimates of process flare and fuel, which to the end of 2020 were 12.7 bcf.
Proven Reserves (P90) 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.
Proven + Probable Reserves (P50) includes those unproven reserves which are more likely than not to be
recoverable.
For the P90 (P50 and P10) Reserves there is at least a 90% (50%; 10%) probability that the quantities actually
recovered will equal or exceed the estimate.
The range of estimates shown for each category of reserves is a measure of the uncertainty inherent in
the estimation of producible volumes and includes the current perceptions of geological, operational and
commercial risk.
Ascent Resources plc Annual Report and Financial Statements 2020 I 15
Directors’ Report
The Directors present their Directors’ Report and Financial Statements for the year ended 31 December 2020
(“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 quoted on the AIM Market of the London Stock Exchange.
The Group’s corporate management is in London and its oil and gas interests are in Slovenia and Cuba. The Group
operates its own undertakings both through subsidiary companies and joint ventures. The subsidiary undertakings
affecting the Group’s results and net assets are listed in Note 12 to the Financial Statements.
Future developments
The Company has identified the Caribbean and Hispanic America region as highly prospective for oil and gas
as well as base, battery and precious metals and is a region where the team’s industry experience, existing
relationships and skill set can add value for shareholders. The Company is focused initially on attractive production
and appraisal portfolios which have the potential to generate cashflows to fund the further development of
synergistic high impact exploration targets. It also notes recent legislative and licence changes to encourage
foreign investment with attractive fiscal terms, reduced tax rates and tax holidays in some jurisdictions. We expect
Ascent will benefit from being an active participant as one of the few active foreign independent E&P companies in
the region. With respect to the Energetical acquisition, the Company expects to sign the Production Sharing Contract
under which it has exclusive rights to do so, in 2021.
The Company has announced its continued intention to claim damages from the Republic of Slovenia in respect of
the delays suffered in the development of the Petišovci field. The Petišovci field in Slovenia has the potential to supply
a significant proportion of the country’s gas requirement for many years.
Post period in review, as part of an expanded international strategic review the Company announced the launch
of its ESG metals strategy, a method of low-cost sustainable metal production from legacy mining waste. The
Company is looking at a number of potential projects in Hispanic America and South Africa as well as Europe.
Financial risk management
Details of the Group’s financial instruments and its policies with regard to financial risk management are given in
Note 26 of the Financial Statements.
Results and dividends
The loss for the year after taxation was £2.8 million (2019: £3.7 million). The Directors do not recommend the payment
of a dividend (2019: Nil).
Post balance sheet events
Post year in review, in February 2021, the Company announced the launch of its ESG metals strategy together with
completing a fundraising for gross proceeds of £1m before expenses at an issue price of 10.1 pence per share,
representing a discount of approximately 12.5 per cent to the closing bid price of 11.5 pence.
For further information on post balance sheet events please see note 23.
Directors
The Directors of the Company that served during the year were as follows:
James Parsons (appointed 5 March 2020)
Ewen Ainsworth (appointed 5 March 2020)
Andrew Dennan (appointed 5 May 2020)
Stephen James Birrell (appointed 1 October 2020)
Malcolm Graham-Wood (appointed 1 October 2020)
Leonardo Salvadori (appointed 4 April 2020, resigned 1 October 2020)
Louis Castro (resigned 5 March 2020)
16 I Ascent Resources plc Annual Report and Financial Statements 2020
John Buggenhagen (resigned 14 April 2020)
Colin Hutchinson (resigned 5 March 2020)
Relevant details of the Directors, which include committee memberships, are set out on page 19 and 24–25.
Directors’ interests
The beneficial and non-beneficial interests in the issued share capital of the Company were as follows:
Ordinary shares of 0.5p each
James Parsons
Ewen Ainsworth
Andrew Dennan
Stephen Birrell
Malcolm Graham-Wood
Directors’ emoluments
At 31 December 2020
At 31 December 2019
341,947
454,545
1,900,000
–
–
Details of Directors’ share options and remuneration are set out in the Remuneration Committee report on pages
27-29.
Third party indemnity provision
The Company has provided liability insurance for its Directors. The annual cost of the cover is not material to the
Group. The Company’s Articles of Association allow it to provide an indemnity for the benefit of its Directors which is
a qualifying indemnity provision for the purposes of the Companies Act 2006.
Share capital
Details of changes to share capital in the period are set out in Note 20 to the Financial Statements.
As at 21 April 2021 the Company has been notified of the following significant interests in its ordinary shares, being a
holding of 3% and above:
Align Research Limited & Related parties RS & CA Jennings
Directors
Hargreaves Lansdown Private Clients*
Interactive Investor Clients*
Jamieson Principal Pension Fund
*Private client holdings
Shareholder communications
Number of ordinary shares
10,950,000
2,696,492
4,876,998
3,715,063
3,400,000
%
10.01
2.46
4.45
3.39
3.10
The Company’s website, www.ascentresources.co.uk, provides a platform 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
Ascent Resources plc Annual Report and Financial Statements 2020 I 17
Directors’ Report continued
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 as detailed in Note 1. to the financial
statements.
The Company has raised £1.01 million in new equity since the balance sheet date from new and existing investors.
Under the Group’s forecasts, the funds raised together with existing bank balances provide sufficient funding for
at least until the end of the calendar year, as of the date of the publication of this report, based on anticipated
outgoings and in the absence of the receipt of revenues from production.
COVID-19 has had limited direct impact on Ascent’s assets in Slovenia but there may be delays in obtaining the
necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date.
The forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and
discretionary spend incurred with executing on the ESG Metals Strategy through acquisition and advancing the
Cuban initiative, including deferred consideration that would become payable if the Company elects to enter
a PSC for Block 9b. As such, the Company will need to raise new capital within the forecast period to fund such
discretionary spend.
Based on historical and recent support from new and existing investors the Board believes that such funding, if and
when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds
is not guaranteed at the date of signing these financial statements. As a consequence, the auditors have made
reference to going concern by way of a material uncertainty.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the reappointment of PKF Littlejohn 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
James Parsons
Chairman
29 April 2021
18 I Ascent Resources plc Annual Report and Financial Statements 2020
Board of Directors
James Parsons
Executive Chairman (5 March 2020 to present)
In addition to his role as Executive Chairman at Ascent Resources plc, which is
part time, James is currently Executive Chairman of Corcel Plc and Non-Executive
Chairman at both Echo Energy Plc and Coro Energy Plc. James has over 20
years’ experience in the fields of strategy, management, finance and corporate
development in the energy industry. He started his career with the Royal Dutch
Shell Group where he spent 12 years working in Brazil, the Dominican Republic,
Scandinavia, the Netherlands and London. James was previously Chief Executive at
Sound Energy Plc for eight years, is a qualified accountant and has a BA Honours in
Business Economics.
Andrew Dennan
Chief Executive Officer/Executive Director (5 May 2020 to present)
Andrew has a wealth of corporate finance, merger, asset funding and corporate
transaction experience on AIM. Throughout his career he has been involved in
stockbroking and asset management in prominent roles, leading proprietary
investment decisions, capital raising, risk oversight and portfolio management. He
was formerly Chief Financial Officer of Coro Energy Plc where he retains the position
of Non-Executive Director and he is also a Non- Executive Director of Nu-Oil and Gas
Plc. Andrew holds the CFA Investment Management Certificate and has a BA(Hons) in
Actuarial Science from City University.
Ewen Ainsworth
Non-Executive Director (5 March 2020 to present)
Ewen is an experienced AIM company director. He is currently a non-executive
director of Corcel plc and CEO of Discovery Energy Limited, an advisory, consultancy
and Investment Company and has worked in a variety of senior and board-level roles
in the natural resource sector for over 30 years, most recently as Finance Director for
Gulf Keystone Petroleum Ltd. He qualified as a chartered management accountant,
before moving into leading commercial roles. He holds a degree in Economics and
Geography from Middlesex University, and is a member of the Energy Institute.
Stephen Birrell
Non-Executive Director (1 October 2020 to present)
Stephen is a Spanish speaking, geoscientist who has worked in the upstream oil and
gas industry for over 35 years with a deep focus on Central Eastern Europe. He has
operated across multiple jurisdictions including the Caribbean and CEE with Britoil,
BP and Elf. He is currently a Director of Ossian Energy Ltd and up until 2020 was the
President of ROPEPCA, the upstream oil and gas operator association of Romania.
Stephen has a BSc Honours in Applied Geology.
Malcolm Graham-Wood
Non-Executive Director (1 October 2020 to present)
Malcolm has over 40 years’ experience in the energy business and is a well known
corporate broker and market commentator to both private and institutional
audiences. Malcolm is a Founding Partner of HydroCarbon Capital which provides
independent advisory services to the oil & gas sector and is also a Director of the
Maven Income and Growth VCT 4 PLC, a venture capital trust listed on the premium
sector of the London Stock Exchange where he chairs the risk committee.
Ascent Resources plc Annual Report and Financial Statements 2020 I 19
Directors and Advisers
Company’s registered number
05239285
Directors
Company Secretary
Registered Office
Nominated Adviser Joint Broker
Joint Broker
Auditors
Solicitors
Bankers
Share Registry
PR & IR
James Parsons
Andrew Dennan
Ewen Ainsworth
Stephen Birrell
Malcolm Graham-Wood
AMBA Secretaries Limited
5 New Street Square
London EC4A 3TW
WH Ireland Corporate Brokers
24 Martin Lane
London EC4R 0DR
Novum Securities
Novum Securities Limited
8-10 Grosvenor Gardens
London SW1W 0DH
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
United Kingdom
Fieldfisher LLP
Riverbank House
2 Swan Lane
London EC4R 3TT
Barclays Corporate Banking
1 Churchill Place
London E14 5HP
Computershare Investors Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Vigo Communications
Sackville House
40 Piccadilly
London W1J 0DR
20 I Ascent Resources plc Annual Report and Financial Statements 2020
Corporate Governance Report
Chairman’s Corporate Governance Statement
As your Chairman, I can assure you that I place emphasis on ensuring that an effective and focused Board
leads the Company and builds success. My first year as Executive Chairman of the Company has certainly seen
challenging times, with the effects of a global pandemic affecting the economy worldwide. However, the Company
has continued to work hard to drive forward its strategy and to deliver for its stakeholders. We at Ascent believe
that a solid corporate governance structure is critical in achieving our strategic goals and creating value for
our shareholders.
The Company formally adopted the Quoted Companies Alliance corporate governance code in September 2018,
which was revised in April 2018 (QCA Code). The Board believes that QCA Code is the most appropriate recognised
corporate governance code for the Company.
The Company saw significant change during 2020, with a new Board of Directors, Executive Management team,
the launch of an international growth strategy and new funding brought into the business. The Company has an
Executive Chairman and Chief Executive Officer, which the Board recognises does not comply with the requirements
of the QCA Code. The reasons for this are to provide the skills and expertise to grow the business and deliver the
strategy for the benefit of the Company’s shareholders. The Board currently has three non-executive directors, of
which Ewen Ainsworth and Stephen Birrell are considered to be independent.
As the Chairman of the Board, it is my duty to ensure that appropriate standards of governance are delivered and
cascaded down throughout the organisation. The Directors recognise the importance of and are committed to
delivering high standards of corporate governance. The corporate governance framework within which Ascent
operates, including Board leadership and effectiveness, Board remuneration and internal control is based upon
practices which the Board believes are proportional to the size, risks, complexity and operation of the business.
The Board not only sets expectations for the business but works towards ensuring that its values are set and carried
out across the business.
The importance of engaging with our shareholders underpins the essence of the business, ensuring that there are
numerous opportunities for investors to engage with both the Board and executive team.
James Parsons
Executive Chairman
29 April 2021
Ascent Resources plc Annual Report and Financial Statements 2020 I 21
Corporate Governance Report continued
Quoted Companies Alliance Corporate Governance Code
Since September 2018 all AIM companies have been required to comply with a recognised corporate governance
code and to disclose how the implementation of the governance code has been applied or to explain any areas
of departure from its requirements. Ascent carefully reviewed and then resolved to apply the Quoted Companies
Alliance Corporate Governance Code (“QCA Code”) published in April 2018 which is constructed around ten broad
principles. This report sets out our approach to the QCA Code and governance. Our compliance with the ten
principles is also available to view on the Company’s website: www.ascentresources.co.uk.
The Company’s statement in relation to the QCA Corporate Governance code can be found on the Company’s
website at https://www.ascentresources.co.uk/wp-content/uploads/2020/05/2020-05-22-Ascent-Corporate_
Governance_Code.pdf
QCA Code
Principle
Required Disclosure
Reference
One
Two
Establish a strategy and business model which
promote long-term value for shareholders.
See pages 6-14 of the Annual Report, the
‘Strategic Report’
See website disclosures at the above link
Seek to understand and meet shareholder needs
and expectations.
See page 6-14 of the Annual Report, the ‘Strategic
Report’ See website disclosures at the above link
Explain the ways in which the Company seeks to
engage with shareholders.
Three
Take into account wider stakeholder and social
responsibilities and their implications for long
term success.
See website disclosures at the above link
Four
Five
Six
Seven
Explain how the business model identifies the key
resources and relationships on which the business
relies. Explain how the Company obtains feedback
from stakeholders.
Embed effective risk management, considering
both opportunities and threats, throughout
the organisation.
See pages 21-25 of the Annual Report – Corporate
Governance Report
Maintain the board as a well-functioning, balanced
team led by the Chair.
See page 23 of the Annual Report ‘Board Composition’,
and 21-25 Corporate Governance Report.
Ensure that the Directors have the necessary
experience, skills and capabilities.
See page 23 of the Annual Report
See website disclosure at the above link.
Evaluate board performance based on clear and
relevant objectives, seeking continuous
improvement.
A description of the Board performance
evaluation process.
See page 23 of the Annual Report ‘Board Composition’
See website disclosures at the above link
Eight
Promote a corporate culture that is based on ethical
values and behaviours.
Explain how the Board ensures that the Company
has the means to determine ethical values
and behaviours.
The Board firmly believes that sustained success
will best be achieved by adhering to our corporate
culture of treating all our stakeholders, including
our employees, fairly and with respect. Accordingly,
in dealing with each of the Company’s principal
stakeholders, we encourage our staff to operate in an
honest and respectful manner.
See page 23 of the Annual Report ‘Board Composition’
See website disclosures, Principle Eight for
further detail.
22 I Ascent Resources plc Annual Report and Financial Statements 2020
Nine
Ten
Maintain governance structures and processes
that are fit for purpose and support good decision-
making by the Board.
Roles and responsibilities of the Chair, CEO and other
directors with commitments. Describe the roles of
the Committees.
Communicate how the Company is governed
and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
Outcomes of votes cast by shareholders to be
disclosed in a clear and transparent manner. If a
significant number of votes were cast against a
resolution put to a general meeting (20%) explain
the reasons behind the votes cast.
See website disclosures Principle Nine under
AIM Rule 26
See page 24 of the Annual Report, ‘Communication
with Shareholders’, Corporate Governance Report.
See website disclosures Principle Ten under
AIM Rule 26
Board Composition
Membership of the Board and information on each member can be found in the Directors’ Report. During 2020, the
Company appointed a completely new Board of directors appointed. The changes to the business are explained in
the Chairman’s and CEO’s statement of this Annual Report.
During the first quarter of 2020 John Buggenhagen, Louis Castro and Colin Hutchinson stepped down from the
Board. James Parsons, a qualified Accountant with over 20 years’ experience in the energy industry was appointed
as the Executive Chairman of the Board. In addition, Andrew Dennan was appointed as the Chief Executive Officer
(CEO) together with Ewen Ainsworth and Leonardo Salvadori as Independent Non-Executive Directors. On 1 October
2020, Leonardo Salvadori stepped down from the Board to assume his role as Technical Director and Stephen Birrell
and Malcolm Graham-Wood were appointed as Non-Executive Directors.
James Parsons, Executive Chairman
James Parsons is the Group’s Executive Chairman and chairs the Board, setting high standards of good corporate
governance throughout the business. He leads in the development of strategy and setting objectives and oversees
communication between the Group and its shareholders.
Andrew Dennan, Chief Executive Officer
Andrew Dennan is the Chief Executive Officer and has overall responsibility for managing the day-to-day operations
of the Company and is responsible for implementing the Company’s strategy.
Whilst the Board recognises that having an Executive Chairman is not considered best practice under the QCA code,
it has been identified that the role of the Chairman in an executive capability is extremely important to the Company
in leading the business forward. The Board has two independent non-executive directors which provides a strong
balance of independence on the Board.
Ewen Ainsworth, Stephen Birrell and Malcolm Graham-Wood are all non-executive directors. Ewen Ainsworth and
Malcolm Graham-Wood are members of the Audit Committee. Ewen Ainsworth and Stephen Birrell are members of
the Remuneration Committee. Stephen Birrell is a member of the Technical/HSE Committee.
Each director is committed to spending sufficient time to enable them to carry out their duties as a director.
Skills and competencies of the Board
The Chairman believes that, as a whole, the Board has a suitable mix of skills and competencies in order to drive
the Group’s strategy and is best placed to secure the future of the Company and create long-term value for all
stakeholders. The Board has significant industry, financial, public markets and governance experience, possessing
the necessary mix of experience, skills, personal qualities and capabilities to deliver the strategy of the Company for
the benefit of the shareholders over the medium to long-term.
The Board updates its operational skills through active involvement in the industry. In addition, the Board keeps
abreast of ongoing changes relating to governance and compliance, the AIM Rules for companies, QCA Code, the
UK Market Abuse Regulations and other statutory and regulatory developments. All directors have access to the
Company’s Nomad, Company Secretary, lawyers and auditors and are able to obtain advice from other external
bodies as and when required.
Ascent Resources plc Annual Report and Financial Statements 2020 I 23
Corporate Governance Report continued
The Company embraces diversity and is dedicated to encouraging inclusion without compromising professionalism,
experience and expertise.
The Board is supported by its Audit Committee, Remuneration Committee and HSE/Technical Committee. The
number of Board and Committee meetings held throughout the course of the financial year is set out at the end of
this Corporate Governance Report.
The Group’s culture
The Board firmly believes that sustained success will best be achieved by adhering to our corporate culture of
treating all our stakeholders, including our employees, fairly and with respect. Accordingly, in dealing with each of
the Company’s principal stakeholders, we encourage our staff to operate in an honest and respectful manner. This is
monitored on an ongoing basis by the Company’s executive directors. Compliance with this principle is considered
an important part of the annual assessment of staff and in setting their pay for future periods.
Communications with stakeholders
The Board places a high priority on transparent and effective communications with shareholders. As an AIM
listed company there is a need to provide fair and balanced information in a way that is understandable to all
stakeholders. The Board recognises the importance of engaging with all stakeholders including employees, investors,
partners, suppliers, media and communities.
The primary communication tool with our shareholders is the Company’s website, https://www.ascentresources.
co.uk. The shareholders are also kept up to date through Regulatory News Service, (“RNS”) on regulatory matters and
matters of material substance.
The Company reports formally to its shareholders and the market twice each year with the release of its interim
and full year results. The Company’s Annual Report and Notice of Annual General Meetings (AGM) are published for
all shareholders. These reports contain full details of all the principal events of the relevant period together with an
assessment of current trading and future prospects. The Reports together with other investor presentations are also
available on the website. The Company has full electronic communications in place, so that shareholders (unless
they elect otherwise) will have access to communications through the Company’s website. A much more effective
and environmentally friendly way of interacting with shareholders.
Upon conclusion of Shareholder meetings arrangements are made that the outcomes of votes cast by shareholders
can be disclosed in a clear and transparent manner. If a significant proportion of votes (20%+) was ever cast
against a resolution, the Company would provide, on a timely basis, an explanation of what actions it intends to take
to understand the reasons behind that vote result, and, where appropriate, any different action it has taken, or will
take, as a result of the vote.
The Board is mindful that, due to the global pandemic, face to face communication with shareholders has not been
possible during 2020 and into 2021. The Board has worked to ensure that communication through electronic means
has been maintained to keep stakeholders abreast with the on-going developments of the business and it is hoped,
that once safe to do so, there will be an opportunity to meet with shareholders in person.
Board and committee meetings
The Board holds five scheduled board meetings or conference calls throughout the year and ad-hoc calls are
scheduled as and when the business demands.
Attendances of Directors at board and committee meetings convened in the year, and which they were eligible to
attend, are set out below:
24 I Ascent Resources plc Annual Report and Financial Statements 2020
Director
Number of meetings in year – Attendance
James Parsons (appointed 5 March 2020)
Andrew Dennan (appointed 5 March 2020)
Ewen Ainsworth (appointed 5 March 2020)
Stephen Birrell (appointed 1 October 2020)
Malcolm Graham-Wood (appointed 1 October 2020)
Leonardo Salvadori
John Buggenhagen
Louis Castro
Colin Hutchinson
Board Meetings
(29 in total – scheduled
and ad hoc)
Remuneration
Committee
(0 meetings
Audit Committee
Attended (3 in total)
–
–
–
–
–
–
31
3
0
0
3
26
19
25
11
11
13
6
3
3
Committees of the Board
The Committees of the Board comprise of non-executive directors.
Audit Committee
The Audit Committee which comprises Ewen Ainsworth (Chairman) and Malcolm Graham-Wood determines
and examines any matters relating to the financial affairs of the Group including the terms of engagement of the
Group’s auditors and, in consultation with the auditors, the scope of the audit.
The Report of the Audit Committee for 2020 is set out on page 26.
Remuneration Committee
The Remuneration Committee, which comprises Stephen Birrell (Chairman) and Ewen Ainsworth is responsible for
reviewing the performance of the Executive Chairman and the Executive directors, for setting the scale and structure
of their remuneration, paying due regard to the interests of shareholders and the performance of the Group. It also
reviews the performance of the senior management, sets and reviews their remuneration and the terms of their
service contracts and considers the Group’s bonus and option schemes, determining targets for any performance-
related pay schemes operated by the Company.
The Report of the Remuneration Committee for 2020 is set out on pages 27-29.
The terms of reference of the Audit Committee and the Remuneration Committee are set out on the
Company website.
The appropriateness of the Group’s governance structures will be reviewed annually in light of further developments
of accepted best practice and the development of the Company.
HSE/Technical Committee
The HSE/Technical Committee is chaired by Stephen Birrell. The Committee meets as and when required. The
Committee did not meet during 2020.
Internal controls
The Board acknowledges responsibility for maintaining appropriate internal control systems and procedures to
safeguard the shareholders’ investments and the assets, employees and the business of the Group.
The Board has established and operates a policy of continuous review and development of appropriate financial
controls together with operating procedures consistent with the accounting policies of the Group.
Internal audit
The Board does not consider it appropriate for the current size of the Group to establish an internal audit function.
Bribery and corruption
The Bribery Act 2010 came into force on 1 July 2011. The Company is committed to acting ethically, fairly and with
integrity in all its endeavours and compliance with legislation is monitored. The Company has a zero-tolerance
approach to bribery and corruption and has an anti-bribery policy in place to protect the Company, its employees
and those third parties to which the business engages with.
Ascent Resources plc Annual Report and Financial Statements 2020 I 25
Audit Committee Report
Committee composition
The Audit Committee is chaired by Ewen Ainsworth. During 2020 Leonardo Salvadori and Ewen Ainsworth were
appointed as members of the Audit Committee. Mr Salvadori stepped down on 1 October 2020 and Malcolm
Graham-Wood was appointed to the Committee. Ewen chairs the Committee.
The role of the Audit Committee includes:
•
•
Financial reporting – integrity of the financial statements including the annual and interim reports.
Internal controls and Risk Management Systems – review the effectiveness of internal controls and risk
management systems.
•
Review the need for an internal audit function.
• Monitor and review the external audit, including their independence.
• To review the annual audit plan.
• To approve fees in respect of non-audit services.
Terms of reference of the Audit Committee are available on the Company’s website.
During 2020 the Audit Committee met to review and approve the 2019 year-end financial results and the 2020
interim results. The Committee also approved the appointment of PKF Littlejohn LLP as auditors for the Company in
place of BDO LLP. The terms of reference of the Committee were reviewed during the year.
Key matters considered
• Assessment of going concern forecasts and associated disclosures.
• Assessment of oil and gas assets for impairment and the underlying assumptions used by management.
• Reports of the external auditor concerning its audit and review of the financial statements of the Group.
• Corporate governance practice and disclosure
Going concern
The Financial Statements of the Group are prepared on a going concern basis as detailed in Note 1. to the financial
statements.
The Company has raised £1.01 million in new equity since the balance sheet date from new and existing investors.
Under the Group’s forecasts, the funds raised together with existing bank balances provide sufficient funding for
at least until the end of the calendar year, as of the date of the publication of this report, based on anticipated
outgoings and in the absence of the receipt of revenues from production.
COVID-19 has had limited direct impact on Ascent’s assets in Slovenia but there may be delays in obtaining the
necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date.
The forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and
discretionary spend incurred with executing on the ESG Metals Strategy through acquisition and advancing the
Cuban initiative, including deferred consideration that would become payable if the Company elects to enter
a PSC for Block 9b. As such, the Company will need to raise new capital within the forecast period to fund such
discretionary spend. Based on historical and recent support from new and existing investors the Board believes that
such funding, if and when required, could be obtained through new debt or equity issuances. However, the ability
to raise these funds is not guaranteed at the date of signing these financial statements. As a consequence, the
auditors have specified a material uncertainty related to going concern.
Approved for issue by the Board of Directors and signed on its behalf
Ewen Ainsworth
Chairman of the Audit Committee
29 April 2021
26 I Ascent Resources plc Annual Report and Financial Statements 2020
Remuneration Committee Report
The Remuneration Committee, which comprises of Stephen Birrell (chairman) and Ewen Ainsworth, both
independent non-executive directors. The Committee is responsible for reviewing the performance of the Executive
Chairman and the executive directors, for setting the scale and structure of their remuneration, paying due regard
to the interests of shareholders and the performance of the Group. It also reviews the performance of the senior
management, sets and reviews their remuneration and the terms of their service contracts and considers the
Group’s bonus and option schemes, determining targets for any performance-related pay schemes operated by
the Company.
The Remuneration Committee has amongst its main functions the review of the structure, size and composition of
the Board based upon the skills, knowledge and experience required to ensure that the Board operates efficiently
and effectively. It will also identify and nominate suitable candidates to the join the Board when vacancies arise and
make recommendations to the Board for the re-appointment of directors. Given the size of the Company the Board
do not feel that it is necessary at present to have a separate Nominations Committee and currently matters relating
to nominations are dealt with by either the Remuneration Committee or the Board as a whole.
The Remuneration Committee will keep the remuneration of the Executive directors and members of the executive
team under review and ensure that they are remunerated at the right levels taking into account delivery of strategy
and growth of the business. The Committee will seek external advice if necessary.
During 2020 the membership of the Committee changed with Leonardo Salvadori being appointed as Chair of the
Committee in March 2020 and stepping down in October 2020, at which point Stephen Birrell was appointed Chair
of the Committee. The terms of reference of the Remuneration Committee are set out on Ascent’s website. As a
result of the significant Board changes during the year the Committee did not meet during 2020 and matters of
remuneration were dealt with by the full Board. The Committee has met in 2021 and intends to meet at least twice a
year to deal with remuneration.
Remuneration policy
The Group’s and the Company’s policy is to provide remuneration packages that will attract, retain and motivate
its executive directors and senior management. This consists of a basic salary, ancillary benefits and other
performance-related remuneration appropriate to their individual responsibilities and having regard to the
remuneration levels of comparable posts. The Remuneration Committee determines the contract term, basic salary,
and other remuneration for the members of the Board and the senior management team.
Executive Directors – Remuneration package
The Company offers a remuneration package which consists of basic salary, bonus payments, share options
or other incentive plan awards and a pension to Executive Directors. The level of bonus is based on individual
performance and that of the Group as a whole. A Company scorecard with performance targets, which are set by
the Remuneration Committee, is agreed and upon which the level of bonus award is judged. The scorecard is set at
the beginning of the year and reviewed mid-year and at the end of the year. The target bonus range is up to 100% of
base salary.
The executive directors have a six month notice period and upon change of control would receive a payment
equivalent to 18 months base salary.
Non - Executive Directors – Fees
The Company pays non-executive directors fees which are set at a level in line with market and appropriate to
the size of the business. Fees are paid monthly in cash and include the payment for chairing a Board Committee.
Ewen Ainsworth received a small share option award in 2020, which was set at a level not considered to affect his
independence as a non-executive director.
Ascent Resources plc Annual Report and Financial Statements 2020 I 27
Remuneration Committee Report continued
Remuneration of Directors
The following remuneration table comprises Directors salaries and benefits in kind that were payable to Directors
who held office during the year ended 31 December 2020:
Executive Directors
2020
J Parsons
J Buggenhagen2
A Dennan
C Hutchinson2
Non-Executive
Directors
E Ainsworth
L Castro2
L Salvadori
S Birrell
M Graham-Wood
Salary/fees
benefits
£
133,3381
37,442
136,2001
5,000
Salary/fees
benefits
£
24,692
-
41,731
7,500
7,500
Bonus
£
12,500
-
15,000
Pensions
£
Benefits
in Kind
£
Severance
Payments
£
Share Based
Payments
Expense
£
Total
£
Employers
NI
£
-
-
5,961
329
2,565
-
148,404
-
15,500
52,942
1,847
159,008
6,879
6,879
4,075
-
15,000
20,329
84,082
17,089
-
18,317
1,696
Bonus
£
Pensions
£
Benefits
in Kind
£
Severance
Payments
£
Share Based
Payments
Expense
£
Total
£
Employers
NI
£
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,692
1,605
2,096
16,042
16,042
-
-
41,731
7,500
7,500
-
1,738
-
-
2,115
4,951
732
732
Total
393,403
27,500
6,290
4,413
46,542
478,148
105,258
47,727
1 Salary/fee benefits for Andrew Dennan and James Parsons includes 8% pension payment
2 John Buggenhagen resigned on 14 April 2020 and Colin Hutchinson and Louis Castro resigned on 5 March 2020
The following remuneration table comprises Directors salaries and benefits in kind that were payable to Directors
who held office during the year ended 31 December 2019:
Executive Directors
2019
J Buggenhagen
C Hutchinson
Non-Executive
Directors
L Castro
C Carver
C Davies
N Moore
Total
Salary/fees
benefits
£
155,372
182,673
Salary/fees
benefits
£
48,556
-
29,167
-
415,768
Bonus
£
Pensions
£
Benefits
in Kind
£
Severance
Payments
£
Share Based
Payments
Expense
£
Total
£
Employers
NI
£
-
-
-
1,947
-
-
-
-
155,372
-
-
184,620
133,223
23,756.56
Bonus
£
Pensions
£
Benefits
in Kind
£
Severance
Payments
£
-
-
-
-
-
-
-
-
-
1,947
-
-
-
-
-
-
-
-
-
-
Share Based
Payments
Expense
£
-
-
Total
£
48,556
-
Employers
NI
£
3,640.65
-
29,167
26,645
2,833.79
-
-
-
417,715
159.868
30,231.00
28 I Ascent Resources plc Annual Report and Financial Statements 2020
The following table sets out the Directors’ incentive share options awarded to directors who held office at
31 December 2020:
2019
Opening
Granted/
(Lapsed)
Closing
Date
Granted
Share Price
at Grant
Exercise
Price
Exercise Period
End
Start
James Parsons
Andrew Dennan
Ewen Ainsworth
Leonardo Salvadori
Leonardo Salvadori
John Buggenhagen
0
0
0
0
0
0
1,385,894
1,385,894
05.03.2020
£0.045
£0.05
05.03.2023
04.03.2025
1,385,894
1,385,894
14.04.2020
£0.034
£0.05
13.04.2023
12.04.2025
323,375
323,375
05.03.2020
£0.045
£0.05
05.03.2023
04.03.2025
323,375
323,375
05.03.2020
£0.045
£0.05
05.03.2023
04.03.2025
692,947
692,947
21.12.2020
£0.052
£0.05
21.12.2023
20.12.2025
1,385,894
1,385,894
05.03.2020
£0.045
£0.05
05.03.2023
04.03.2025
The following table sets out the Directors’ incentive share options awarded to directors who held office at
31 December 2019:
2019
C Hutchinson
C Hutchinson
C Hutchinson
Opening
2,657
349,647
34,0313
Granted/
(Lapsed)
Closing
Date
Granted
Share Price
at Grant
Exercise
Price
Exercise Period
End
Start
–
–
–
2,657
23 May 13
1,640p
2,000p
23 May 16
23 May 23
349,647
05 May 16
158p
158p
05 May 19
06 May 26
34,0313
07 Nov 17
197.5p
197.5p
06 Nov 20
08 Nov 27
Approved for issue by the Board of Directors
and signed on its behalf
Stephen Birrell
Chairman of the Remuneration Committee
29 April 2021
Ascent Resources plc Annual Report and Financial Statements 2020 I 29
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report 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
accounting standards in conformity with the Companies Act 2006 and, as regards the Company financial
statements, as applied in accordance with the Companies Act 2006. 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 international accounting standards in conformity
with the Companies Act 2006, subject to any material departures disclosed and explained in the financial
statements; and
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 (www.ascentresources.co.uk) 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.
30 I Ascent Resources plc Annual Report and Financial Statements 2020
Independent Auditor’s Report to the members of Ascent Resources plc
Opinion
We have audited the financial statements of Ascent Resources Plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 December 2020 which comprise the Consolidated Income Statement & Statement of Other
Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company
Statements of Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial
statements, including significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and international accounting standards in conformity with the requirements of the Companies
Act 2006 and as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31
December 2020 and of the group’s and parent company’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
•
the parent company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 1 in the financial statements, which indicates that the group will require additional funding within
12 months from the date on which the financial statements are authorised for issue in order to meet the working capital
cashflow requirements . The ability of the group to meet its cashflow requirements is therefore dependent on successfully
raising additional funds. The total comprehensive loss for the group during 2020 was £1.50m and the year-end cash position
was £115k. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a
material uncertainty exists that may cast significant doubt on the group & company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and
parent company’s ability to continue to adopt the going concern basis of accounting included a review of budgets for 12
months from the sign off date including checking the mathematical accuracy of the budgets and discussion of significant
assumptions used by the management and comparing these with current year and post year end performance. We have
also reviewed the latest available post year end management accounts, bank statements, regulatory announcements,
board minutes and assessed any external industry wide factors which might affect the group and the company.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality
applied to the group financial statements was set at £640,000, with performance materiality set at £448,000.
Materiality has been calculated as 1.5% of the benchmark of Gross Assets, which we have determined, in our professional
judgement, to be one of the principal benchmarks within the financial statements relevant to members of the group in
assessing financial performance.
The materiality applied to the company financial statements was £448,000 for balance sheet testing and £57,000 for income
statement testing. The performance materiality was £313,600 and £39,000 respectively. For each component in the scope
Ascent Resources plc Annual Report and Financial Statements 2020 I 31
Independent Auditor’s Report continued
of our group audit, we allocated a materiality that was less than our overall group materiality. We agreed with the Audit
Committee that we would report to them misstatements identified during our audit above £32,000 (group audit) and
£22,400 & £2,850 for company balance sheet and company income statement respectively.
Our approach to the audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the Financial
Statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors
and considered future events that are inherently uncertain such as the impairment of intangible assets and assumptions
used in calculating the fair value of financial assets. We also addressed the risk of management override of internal
controls, including among other matters consideration of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
The Group holds six companies that are consolidated within these financial statements, two based in the UK and four based
in Europe. We identified two significant components, being the parent company, Ascent Resources Plc and Ascent Slovenia
Limited, which were subject to a full scope audit by a team with relevant sector experience from the PKF London office. No
component auditors were engaged.
In addition, we identified components which were not significant to the group and performed an audit of specific
account balances and classes of transactions to ensure that balances which were material to the group were subject to
audit procedures.
The approach gave the audit team 96% coverage on gross assets and 99% coverage on loss for the year.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current year and include the most significant assessed risks of material misstatement (whether
or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty related to going concern section
we have determined the matters described below to be the key audit matters to be communicated in our report.
Key audit matter
How our scope addressed this matter
Carrying Value of Exploration Assets (Note 11)
The group has intangible assets in relation to
capitalised exploration costs of its Slovenian amounting
to £18.7m. There is the risk that these assets have
been incorrectly capitalized in accordance with IFRS
6 and that there are indicators of impairment as at 31
December 2020.
Particularly for early stage exploration projects where
the calculation of recoverable amount via value in use
calculations is not possible, management’s assessment
of impairment under IFRS 6 requires estimation and
judgement. For this reason along with the financial
significance of the account balance, we have assessed
this to be a key audit matter.
32 I Ascent Resources plc Annual Report and Financial Statements 2020
Our work in this area included:
•
Confirmation that the Group has good title to the
applicable licences.
• Review of capitalised costs including consideration of
appropriateness for capitalisation under IFRS 6.
• Obtaining copies of any available Technical Reports and
challenge the inputs into the report against the carrying
value of the assets.
• Assessment of progress at the individual projects during
the year and post year-end and management intentions
thereon.
• Consideration of management’s impairment reviews,
including challenge to all key assumptions and sensitivity
to reasonably possible changes.
Based on the audit work performed, we do not consider
exploration assets as at 31 December 2020 to be materially
misstated. It is however important to draw users attention to
the fact that the recoverable value of the exploration assets is
dependent on the Group obtaining the necessary concession
renewals and permit approvals and a positive outcome of the
dispute with the Slovenian government.
Failure to obtain the concessions and renewals and/or
an unfavourable outcome in the dispute with Slovenian
government may result in an impairment to the carrying value
of the exploration and evaluation assets held.
Key audit matter
How our scope addressed this matter
Carrying Value of Producing Assets (Note 10)
At 31 December 2020, the carrying value of the
producing assets in relation to the group’s Petišovci
project in Slovenia are £22.8m.
Management are required to assess the producing
assets for impairment indicators under IAS 36. In case
Ascent Resources Plc, impairment indicators include
but not limited to decline in revenue generated
from assets, disruption in operations due to dispute
in Slovenia. We noted that the production levels in
Slovenia have not yet reached the desired levels
and no additional work has been undertaken in the
year due to ongoing dispute with the government of
Slovenia. The carrying value and ultimate recoverability
of the assets is linked to outcome of the dispute with
Slovenian government and renewal of concession
contract. There is a risk that the carrying value of these
assets is overstated as management’s assessment
of carrying value is based on management estimates
and judgements regarding future cashflows. Therefore,
for this reason along with the financial significance of
the account balance, we have assessed this to be a
key audit matter.
Our work in this area included:
• Review of capitalised costs including consideration of
appropriateness for capitalisation under IAS 16.
•
•
•
Consideration of management’s impairment reviews,
including challenge to all key assumptions and sensitivity
to reasonably possible changes in the impairment model.
Obtaining a copy of the most recent Competent Person
Report and ensuring key inputs used in the discounted
cash flow model are consistent with the report (e.g.
reserves). Assessing the competence and independence
of the expert.
Reviewing the latest developments regarding the permit
applications, including obtaining relevant correspondence
where appropriate and any legal advice obtained by
the Group.
• Contacting the company’s legal advisers involved in
assisting with dispute in Slovenia and obtaining their
opinion regarding the outcome of the case.
Whilst based on the audit work performed, we do not consider
production assets as at 31 December 2020 to be materially
misstated, it is however important to draw user’s attention to
the fact that the recoverable value of the production assets is
dependent on the Group’s JV partner obtaining the necessary
renewals of concession contract and positive outcome of the
dispute in Slovenia enabling the group to obtain the necessary
permit approvals.
Failure to obtain the necessary concession contract renewal
or unfavourable outcome in the dispute with Slovenian
government is likely to result in an impairment to the carrying
value of production assets held.
Recoverability of investments and intragroup balances (Parent Company) (Note 12)
Investments in subsidiaries and intragroup loans are
significant assets in the parent Company’s financial
statements. Their recoverability is directly linked to the
recoverability of tangible and intangible assets in those
entities, and hence may not be fully recoverable.
Our work in this area included:
• Confirmation of ownership of investments
• Assessment of expected credit losses against intragroup
balances in accordance with IFRS 9 criteria.
• Consideration of recoverability of investments and
intragroup loans by reference to underlying net asset
values and projects.
Based on the audit work performed, we do not consider
investments as at 31 December 2020 to be materially
misstated. It is however important to draw users attention
to the fact that the recoverable value of the investments is
dependent on the Group obtaining the necessary concession
renewals and permit approvals in respect of its Slovenian
operations and a positive outcome of the dispute with the
Slovenian government.
Failure to obtain the concessions and renewals and/or
an unfavourable outcome in the dispute with Slovenian
government may result in an impairment to the carrying value
of investments held.
Ascent Resources plc Annual Report and Financial Statements 2020 I 33
Independent Auditor’s Report continued
Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the group and parent company financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors Responsibilities , the directors are responsible for the preparation of
the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s
and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
34 I Ascent Resources plc Annual Report and Financial Statements 2020
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We obtained an understanding of the group and parent company and the sector in which they operate to identify laws
and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management, application of audit knowledge and experience of
the sector.
Our audit procedures were designed to ensure the audit team considered whether there were any indications of non-
compliance by the group and parent company with those laws and regulations. The group and parent company is subject
to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation
legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the
related financial statement items.
In addition, the group and parent company are subject to many other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through
the imposition of fines or litigation. Relevant laws and regulations include AIM Rules, local employment law and relevant
industry regulations. Auditing standards limit the required audit procedures to identify non-compliance with these laws and
regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if
any. During our audit we did not identify actual or suspected non-compliance with laws and regulations.
We also identified the risks of material misstatement of the financial statements due to fraud. Other than the non-
rebuttable presumption of a risk of fraud arising from management override of controls, we have not identified any further
significant risks relating to fraud.
As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit
procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course
of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases
the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding
irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission
or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone, other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP, Statutory Auditor
15 Westferry Circus, Canary Wharf, London E14 4HD
29 April 2021
Ascent Resources plc Annual Report and Financial Statements 2020 I 35
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Revenue
Cost of sales
Depreciation of oil & gas assets
Gross loss
Administrative expenses
Operating loss
Finance cost
Net finance costs
Loss before taxation
Income tax expense
Loss for the year
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Earnings per share
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
Notes
2
2
10
3
5
6
–
(120)
(397)
(517)
298
(462)
(440)
(604)
(2,279)
(2,796)
(2,132)
(2,736)
(35)
(35)
(924)
(924)
(2,831)
(3,660)
–
–
(2,831)
(3,660)
1,327
(1,700)
(1,504)
(5,360)
Basic & fully diluted loss per share (Pence)
8
(4.66)
(14.00)
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
36 I Ascent Resources plc Annual Report and Financial Statements 2020
Consolidated Statement of Financial Position
Company Number: 05239285
As at 31 December 2020
Assets
Non-current assets
Property, plant and equipment
Exploration and evaluation costs
Goodwill
Prepaid abandonment fund
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
Merger reserve
Equity reserve
Share-based payment reserve
Translation reserves
Retained earnings
Total equity attributable to the shareholders
Total equity
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Current liabilities
Borrowings
Contingent consideration on acquisition
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2020
£ ’000s
31 December
2019
£ ’000s
Notes
10
11
9
12
13
25
20
24
15
16
15
17
18
22,783
18,753
653
300
22,069
18,576
–
240
42,489
40,885
66
115
181
254
77
331
42,670
41,216
7,928
73,863
570
73
2,129
1,027
7,604
72,330
570
–
1,873
(300)
(44,595)
(41,964)
40,995
40,995
40,113
40,113
197
328
525
5
450
695
1,150
1,675
–
255
255
385
–
463
848
1,103
42,670
41,216
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 29 April 2021 signed
on its behalf by:
James Parsons
Executive Chairman
29 April 2021
Ascent Resources plc Annual Report and Financial Statements 2020 I 37
Company Statement of Financial Position
Company Number: 05239285
As at 31 December 2020
Assets
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 and liabilities
Share capital
Share premium account
Merger reserve
Equity reserve
Share-based payment reserve
Retained loss
Total equity
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Borrowings
Contingent consideration on acquisition
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2020
£ ’000s
31 December
2019
£ ’000s
Notes
10
22
14
25
16,096
27,447
43,543
68
107
175
–
15,443
27,180
42,623
196
64
260
43,718
42,883
20
7,928
7,604
73,863
72,330
570
73
2,129
570
–
1,873
(41,914)
(40,054)
42,649
42,323
15
15
17
19
197
197
5
450
417
872
1,069
–
–
385
175
560
560
43,718
42,883
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company has not
been separately presented in these accounts. The Company loss for the year was £2,060,000 (2019: loss of £8,362,000).
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 29 April 2021 and
signed on its behalf by:
James Parsons
Executive Chairman
29 April 2021
38 I Ascent Resources plc Annual Report and Financial Statements 2020
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
£ ’000s
Share
premium
£ ’000s
Merger
Reserve
£ ’000s
Equity
reserve
£ ’000s
Share based
payment
reserve
£ ’000s
Translation
reserve
£ ’000s
Retained
earnings
£ ’000s
Total
£ ’000s
Balance at 1 January 2019
6,146
71,648
570
16
1,657
1,400
(38,357)
43,080
Comprehensive income
Loss for the year
Other comprehensive income
Currency translation
differences
Total comprehensive income
Transactions with owners
–
–
–
Issue of ordinary shares
1,458
Costs related to share issues
Expiry on loan note conversion
rights
Share-based payments and
expiry of options
–
–
–
–
–
–
738
(56)
–
–
Total transactions with
owners
1,458
682
Balance at 31 December 2019
7,604
72,330
Balance at 1 January 2020
7,604
72,330
Comprehensive income
Loss for the year
Other comprehensive income
Currency translation
differences
Total comprehensive income
Transactions with owners
–
–
–
Issue of ordinary shares
324
Costs related to share issues
Equity value of convertible
loan note
Share-based payments and
expiry of options
Total transactions with
owners
–
–
–
324
1,533
–
–
–
1,713
(180)
–
–
–
–
–
–
–
–
–
–
570
570
–
–
–
–
–
–
–
–
Balance at 31 December 2020
7,928
73,863
570
–
–
–
–
–
(16)
–
–
–
–
–
–
–
216
(16)
216
–
(3,660)
(3,660)
(1,700)
–
(1,700)
(1,700)
(3,660)
(5,360)
–
–
–
–
–
–
–
–
2,196
(56)
(16)
53
269
53
2,393
–
–
–
–
–
–
–
73
–
73
73
1,873
1,873
(300)
(41,964)
40,113
(300)
(41,964)
40,113
–
–
–
–
–
–
256
256
–
(2,831)
(2,831)
1,327
–
1,327
1,327
(2,831)
(1,504)
–
–
–
–
–
–
–
–
2,037
(180)
73
200
456
200
2,386
2,129
1,027
(44,595)
40,995
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
Ascent Resources plc Annual Report and Financial Statements 2020 I 39
Company Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
£ ’000s
Share
premium
£ ’000s
Merger
Reserve
£ ’000s
Equity
reserve
£ ’000s
Share based
payment
reserve
£ ’000s
Retained
earnings
£ ’000s
Total
£ ’000s
Balance at 1 January 2019
6,146
71,648
570
16
1,657
(31,745)
48,292
Comprehensive income
Profit and comprehensive profit
for the year
Total comprehensive income
Transactions with owners
–
–
Issue of ordinary shares
1,458
Share issuance costs
Expiry on loan note conversion
rights
Share-based payments and
expiry of options
Total transactions with owners
Balance at 31 December 2019
Balance at 1 January 2020
Comprehensive income
Profit and comprehensive profit
for the year
Total comprehensive income
Transactions with owners
–
–
–
–
–
1,458
7,604
7,604
682
72,330
72,330
Issue of ordinary shares
324
Share issuance costs
Expiry on loan note conversion
rights
Equity value of convertible loan
note
Share-based payments and
expiry of options
–
–
–
–
–
–
738
(56)
–
–
–
–
1,713
(180)
–
–
–
–
–
–
–
–
–
570
570
–
–
–
–
–
–
–
–
–
–
–
(16)
–
(16)
–
–
–
–
–
–
–
73
–
73
73
–
–
–
–
216
216
(8,362)
(8,362)
(8,362)
(8,362)
–
–
53
53
2,196
(56)
(16)
269
2,393
1,873
(40,054)
42,323
1,873
(40,054)
42,323
–
(2,060)
(2,060)
(2,060)
(2,060)
–
–
–
–
2,037
(180)
–
73
–
–
–
–
–
–
256
256
200
456
200
2,386
2,129
(41,914)
42,649
Total transactions with owners
324
1,533
Balance at 31 December 2020
7,928
73,863
570
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
40 I Ascent Resources plc Annual Report and Financial Statements 2020
Consolidated Cash Flow Statement
For the year ended 31 December 2020
Cash flows from operations
Loss after tax for the year
Depreciation
Change in inventory
Change in receivables
Change in payables
Increase in share-based payments
Exchange differences
Finance income
Finance cost
Transfer to/from restricted cash
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
(2,831)
(3,660)
397
–
188
232
456
212
–
–
–
440
(3)
152
71
269
(40)
–
924
180
Net cash generation used in operating activities
(1,346)
(1,667)
Cash flows from investing activities
Interest received
Payments for fixed assets
Net cash used in investing activities
Cash flows from financing activities
Interest paid and other finance fees
Loans advanced
Loans repaid
Interest paid
Proceeds from issue of shares
Share issue costs
Net cash generated from financing activities
–
–
–
(35)
300
(417)
–
1,648
(180)
1,386
(3)
(3)
(6)
(67)
410
(27)
–
1,114
(55)
1,375
Net increase in cash and cash equivalents for the year
38
(299)
Effect of foreign exchange differences
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
77
115
–
376
77
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
Ascent Resources plc Annual Report and Financial Statements 2020 I 41
Company Cash Flow Statement
For the year ended 31 December 2020
Cash flows from operations
Profit after tax for the year
Adjustments for:
Change in receivables
Change in payables
Expected credit loss charge
Change in intercompany receivables
Increase in share-based payments
Exchange differences
Finance cost
Transfer to/from restricted cash
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
(2,060)
(8,362)
–
(12)
51
4,796
(1,853
269
2,692
853
180
128
242
–
(302)
456
130
–
–
Net cash generation used in operating activities
(1,006)
(1,386)
Cash flows from investing activities
Advances to subsidiaries
Investment in subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Interest paid and other finance fees
Loans advanced
Loans repaid
Interest paid
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
The Notes on pages 43 to 72 are an integral part of these consolidated financial statements.
42 I Ascent Resources plc Annual Report and Financial Statements 2020
(267)
–
(267)
(35)
300
(417)
–
1,648
(180)
1,316
43
–
64
107
(102)
–
(102)
(5)
410
(27)
–
1,114
(55)
1,438
(50)
2
112
64
Notes to the Accounts
1. Accounting policies
Reporting entity
Ascent Resources plc (Company no: 05239285) (‘the Company’ or ‘Ascent’) is a company domiciled and
incorporated in England. The address of the Company’s registered office is 5 New Street Square, London, EC4A
3TW. The consolidated financial statements of the Company for the year ended 31 December 2020 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.
Statement of compliance
The financial statements of the Group and Company have been prepared in accordance with international
accounting standards and IFRIC interpretations and the requirements of the Companies Act 2006 applicable to
companies reporting under IFRS.
The Group’s and Company’s financial statements for the year ended 31 December 2020 were approved and
authorised for issue by the Board of Directors on 29 April 2021 and the Statements of Financial Position were signed
on behalf of the Board by James Parsons.
Both the Parent Company financial statements and the Group financial statements give a true and fair view and
have been prepared and approved by the Directors in accordance with 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 £2,060,000 (2019: loss of £8,362,000).
The presentational currency of the Group is British Pounds Stirling (“GBP”) and the functional currency of the Group’s
subsidiaries domiciled outside of the UK in Malta, Slovenia and Netherlands are in Euros (“EUR”).
Measurement Convention
The financial statements have been prepared under the historical cost convention. The financial statements are
presented in sterling and have been rounded to the nearest thousand (£’000s) except where otherwise indicated.
The principal accounting policies set out below have been consistently applied to all periods presented.
Going Concern
The Financial Statements of the Group have been prepared on a going concern basis. The Directors consider the
Group to be a going concern and therefore that it is appropriate to prepare the accounts on said basis..
The Company has raised £1.01 million in new equity since the balance sheet date from new and existing investors.
Under the Group’s forecasts, the funds raised together with existing bank balances provide sufficient funding for
at least until the end of the calendar year, as of the date of the publication of this report, based on anticipated
outgoings and in the absence of the receipt of revenues from production.
COVID-19 has had limited direct impact on Ascent’s assets in Slovenia but there may be delays in obtaining the
necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date
directly by the pandemic.
The forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and
discretionary spend incurred with executing on the ESG Metals Strategy through acquisition and advancing the
Cuban initiative, including deferred consideration that would become payable if the Company elects to enter
a PSC for Block 9b. As such, the Company will need to raise new capital within the forecast period to fund such
discretionary spend.
Based on historical and recent support from new and existing investors the Board believes that such funding, if and
when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds
is not guaranteed at the date of signing these financial statements. The auditors have made reference to going
concern by way of a material uncertainty.
Ascent Resources plc Annual Report and Financial Statements 2020 I 43
Notes to the Accounts continued
1. Accounting policies continued
New and amended Standards effective for 31 December 2020 year-end adopted by the Group:
i.
The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January
2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these
financial statements:
Standard
Description
IAS 1 and IAS 8 amendments
Definition of a material
IFRS 3
Business Combinations
Amendments to IFRS 9, IFRS 17 and IAS 39
Interest rate benchmark reform
N/A
Amendments to References to the Conceptual Framework in IFRS Standards
The new standards effective from 1 January 2019, as listed above, did not have a material effect on the Group’s
financial statements.
Management have undertaken a review of contracts for potential lease arrangements. Based on the analysis the
Group does not have any leases requiring recognition and therefore IFRS 16 has had no impact on the Group. The
Group applied the modified retrospective approach to adoption of IFRS 16. The Group has taken the exemption within
IFRS 16 not to record leases for low value items and arrangements with a term of less than 12 months.
The Group has adopted IFRIC 23 Uncertainty over Income Tax Treatments which is effective for accounting periods
beginning on or after January 1, 2019. The interpretation is applied to the determination of taxable profit (tax loss), tax
bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments
under IAS 12. The adoption of this interpretation has not had a material impact on the financial statements of the
Group.
ii. Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of
these financial statements which have not been adopted early:
Standard
Description
IAS 1 amendments
Presentation of Financial Statements: Classification of Liabilities as Current
or Non-Current and Classification of Liabilities as Current or Non-current –
Deferral of Effective Date:
Effective date
1 January 2023
IFRS 3 amendments
Business Combinations – Reference to the Conceptual Framework
1 January 2022
IAS 16 amendments
Property, Plant and Equipment: Effective 1 January 2022
IAS 37 amendments
Provisions, Contingent Liabilities and Contingent Assets:
N/A
Annual Improvements to IFRS Standards 2018-2020 Cycle:
1 January 2022
1 January 2022
1 January 2022
There are no IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material
impact on the Company or Group.
44 I Ascent Resources plc Annual Report and Financial Statements 2020
1. Accounting policies continued
Estimates and judgements
Exploration and evaluation assets (Note 11) – exploration and evaluation costs are initially classified and held as
intangible fixed assets rather than being expensed. The carrying value of intangible exploration and evaluation
assets are then determined. Management considers these assets for indicators of impairment under IFRS 6 at least
annually based on an estimation of the recoverability of the cost pool from future development and production of
the related oil and gas reserves which requires judgement. This assessment includes assessment of the underlying
financial models for the Petišovci field and requires estimates of gas reserves, production, gas prices, operating
and capital costs associated with the field and discount rates (see Note 10) using the fair value less cost to develop
method which is commonplace in the oil and gas sector. The forecasts are based on the JV partners submitting
and obtaining approval for an environmental impact assessment, and also the renewal of the concessions that
are currently scheduled to expire in May 2022. The Board considers these factors to be an ordinary risk for oil and
gas developments, and other environmental permits which the Board anticipate being issued. In forming this
judgment, the Board considered all facts and circumstances including the IPPC award in 2019, the Court ruling
regarding the environmental permit applications, the timing and potential success of licence renewals and noting
the recent amendments to both the Nature Preservation Act as well as law regarding building permits for facilities
that could be considered relevant. The carrying value of exploration assets at 31 December 2020 was £18,753,000
(2019: £18,576,000).
Reserves – Reserves are proven, and probable oil and gas reserves calculated on an entitlement basis and are
integral to the assessment of the carrying value of the exploration, evaluation and production assets. Estimates
of commercial reserves include estimates of the amount of oil and gas in place, assumptions about reservoir
performance over the life of the field and assumptions about commercial factors which, in turn, will be affected by
the future oil and gas price. (See page 17)
Carrying value of property, plant and equipment (developed oil and gas assets) (Note 10) – developed oil and
gas assets are assessed for indicators of impairment and tested for impairment at each reporting date when
indicators of impairment exist. An impairment test was performed based on a discounted cash flow model using a
fair value less cost to develop approach commonplace within the oil and gas sector. Key inputs requiring judgment
and estimate included gas prices, production and reserves, future costs and discount rates. With regard to the
financial inputs, a weighted average cost of capital (“WACC”) was used as the discount rate, and calculated as 12.0%
(post-tax, nominal) and for gas prices, the Company has used a combination of futures rates for the local region.
Gas prices in the near term are forecast based on management’s expectation of market prices less deductions
under the INA contract, before reverting to market prices with reference to the forward curve following the approval
of the IPPC permit and transition to gas sales taking place into the Slovenian market. The forecasts include future
well workovers to access the reserves included in the model together with the wider estimated field development
costs to access field reserves. Refer to Note 9. The impairment test demonstrates significant headroom despite the
underperformance of the wells given the delays obtaining permits for well stimulation. As with the exploration and
evaluation assets, judgment was required regarding the likelihood of the necessary environmental permits being
granted and the status of legal matters which are key to the commercial value of the assets.
Depreciation of property, plant and equipment (Note 10) – Upon commencing commercial production we began
to depreciate the assets associated with current production. The depreciation on a unit of production basis requires
judgment and estimation in terms of the applicable reserves over which the assets are depreciated and the extent
to which future capital expenditure is included in the depreciable cost when such expenditure is required to extract
the reserve base. The calculations have been based on actual production, estimates of P50 reserves and best
estimates of the future workover costs on the producing wells to extract this reserve. The depreciation charge for the
year was £397,000 (2019: £434,000) including both depreciation associated with the unit of production method and
straight-line charges for existing processing infrastructure. This is included in Notes 9 and 10 below.
Deferred tax (Note 6) – judgment has been required in assessing the extent to which a deferred tax asset is
recorded, or not recorded, in respect of the Slovenian operations. Noting the history of taxable losses and the initial
phases of production, together with assessment of budgets and forecasts of tax in 2019 the Board has concluded
that no deferred tax asset is yet applicable. This is included at Note 7.
Ascent Resources plc Annual Report and Financial Statements 2020 I 45
Notes to the Accounts continued
1. Accounting policies continued
Intercompany receivables (Note 22) – In line with the requirements of IFRS 9 the Board has carried out an
assessment of the potential future credit loss on intercompany receivables under a number of scenarios. Arriving
at the expected credit loss allowance involved considering different scenarios for the recovery of the intercompany
loan receivables, the possible credit losses that could arise and the probabilities for these scenarios. The Company
would suffer a credit loss where the permits necessary for the development of the field are not obtained and a court
case for damages against the Republic of Slovenia is unsuccessful. Based on legal advice received in relation to the
permit process and the strength of our case we consider the risk of credit loss to be relatively limited. A provision
of £nil (2019: £4.8 million) has been recognised in the Company accounts against a receivable of £32 million (2019:
£32 million).
Investments (note 12) – Judgement has been made in respect of the carrying value of the Company’s carrying
value of its investments in the subsidiaries. The process for this is the same as the consideration given in respect of
both Intangible Assets and Property, Plant and Equipment (see above).
Basis of consolidation (Note 12) - Where the Company has control over an investee, it is classified as a subsidiary.
The Company controls an investee if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable
returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of
these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a
single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.
The results of undertakings acquired or disposed of are consolidated from or to the date when control passes
to or from the Group. The results of subsidiaries acquired or disposed of during the period are included in the
Consolidated Income Statement from the date that control commences until the date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into
line with those used by the Group.
Business combinations (Note 9) - Business combinations are accounted for using the acquisition method. The
consideration transferred for the acquisition of a subsidiary comprises the:
•
•
fair value of assets transferred;
liabilities incurred to the former owners of the acquired business;
• equity instruments issued by the Group;
•
•
fair value of any asset or liability resulting from contingent consideration arrangement; and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any
noncontrolling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the
noncontrolling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs
are expensed as incurred.
The excess of the consideration transferred, amount of any non-controlling interest and fair value of pre-existing
equity interest over the fair value of net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets acquired, the difference is recognised immediately in profit or
loss as a gain on bargain purchase.
Joint arrangements - The Group is party to a joint arrangement when there is a contractual arrangement that
confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint
control is assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either joint ventures, where the Group has rights to only
the net assets of the joint arrangement, or joint operations where the Group has both the rights to assets and
obligations for the liabilities of the joint arrangement.
46 I Ascent Resources plc Annual Report and Financial Statements 2020
1. Accounting policies continued
All of the Group’s joint arrangements are classified as joint operations. The Group accounts for its interests in
joint operations by recognising its assets, liabilities, revenues and expenses in accordance with its contractually
conferred rights and obligations.
The Group has one joint arrangement as disclosed on page 9, the Petišovci joint venture in Slovenia in which Ascent
Slovenia Limited (a 100% subsidiary of Ascent Resources plc) has a 75% working interest.
Oil and Gas Exploration Assets
All licence/project acquisitions, exploration and appraisal costs incurred or acquired on the acquisition of a
subsidiary, are accumulated in respect of each identifiable project area. These costs, which are classified as
intangible fixed assets are only carried forward to the extent that they are expected to be recovered through the
successful development of the area or where activities in the area have not yet reached a stage which permits
reasonable assessment of the existence of economically recoverable reserves.
Pre-licence/project costs are written off immediately. Other costs are also written off unless commercial reserves
have been established or the determination process has not been completed. Thus, accumulated cost in relation
to an abandoned area are written off in full to the statement of comprehensive income in the year in which the
decision to abandon the area is made.
Transfer of exploration assets to property, plant and equipment - Assets, including licences or areas of licences,
are transferred from exploration and evaluation cost pools to property, plant and equipment when the existence
of commercially feasible reserves has been determined and the Group concludes that the assets can generate
commercial production. This assessment considers factors including the extent to which reserves have been
established, the production levels and margins associated with such production. The costs transferred comprise
direct costs associated with the relevant wells and infrastructure, together with an allocation of the wider
unallocated exploration costs in the cost pool such as original acquisition costs for the field. The producing assets
start to be depreciated following transfer.
Depreciation of property plant and equipment - The cost of production wells is depreciated on a unit of production
basis. The depreciation charge is calculated based on total costs incurred to date plus anticipated future workover
expenditure required to extract the associated gas reserves. This depreciable asset base is charged to the income
statement based on production in the period over their expected lifetime P50 production extractable from the wells
per the field plan. The infrastructure associated with export production is depreciated on a straight-line basis over a
two-year period as this is the anticipated period over which this infrastructure will be used.
Impairment of oil and gas exploration assets
Exploration/appraisal assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6
‘Exploration for and Evaluation of Mineral Resources’ and tested for impairment where such indicators exist.
In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether
the Group’s oil and gas exploration assets may be impaired:
• whether the period for which the Group has the right to explore in a specific area has expired during the period or
will expire in the near future, and is not expected to be renewed;
• whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area
is neither budgeted nor planned;
• whether exploration for and evaluation of oil and gas reserves in a specific area have not led to the discovery
of commercially viable quantities of oil and gas and the Group has decided to discontinue such activities in the
specific area; and
• whether sufficient data exists to indicate that although a development in a specific area is likely to proceed,
the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful
development or by sale.
If any such facts or circumstances are noted, the Group, as a next step, perform an impairment test in accordance
with the provisions of IAS 36. In such circumstances the aggregate carrying value of the oil and gas exploration and
assets is compared against the expected recoverable amount of the cash generating unit. The recoverable amount
is the higher of value in use and the fair value less costs to sell.
Ascent Resources plc Annual Report and Financial Statements 2020 I 47
Notes to the Accounts continued
1. Accounting policies continued
The Group has identified one cash generating unit, the wider Petišovci project in Slovenia. Any impairment arising is
recognised in the Income Statement for the year.
Where there has been a charge for impairment in an earlier period that charge will be reversed in a later period
where there has been a change in circumstances to the extent that the discounted future net cash flows are
higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be
increased to the lower of its original carrying values or the carrying value that would have been determined (net of
depletion) had no impairment loss been recognised in prior periods.
Impairment of development and production assets and other property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its PP&E to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to
sell (otherwise referred to as fair value less cost to develop in the oil and gas sector) and value in use. Fair value
less costs to sell is determined by discounting the post-tax cash flows expected to be generated by the cash-
generating unit, net of associated selling costs, and takes into account assumptions market participants would use
in estimating fair value including future capital expenditure and development cost for extraction of the field reserves.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
Decommissioning costs
Where a material obligation for the removal of wells and production facilities and site restoration at the end of the
field life exists, a provision for decommissioning is recognised. The amount recognised is the one-off amount to the
Company’s JV partner as per the Revised Joint Venture Agreement.
Foreign currency
The Group’s strategy is focussed on developing oil and gas projects 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
reporting date. Exchange gains and losses on short-term foreign currency borrowings and deposits are included
with net interest payable.
The assets and liabilities of foreign operations are translated to sterling at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are translated to sterling at the average rate
ruling during the period. Foreign exchange differences arising on retranslation are recognised directly in a separate
component of equity. Foreign exchange differences arising on inter-company loans considered to be permanent
as equity are recorded in equity. The exchange rate from euro to sterling at 31 December 2020 was £1: €1.1192
(2019: £1 :€1.1755).
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve
relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of
the profit or loss on disposal.
48 I Ascent Resources plc Annual Report and Financial Statements 2020
1. Accounting policies continued
Exchange differences on all other transactions, except inter-company foreign currency loans, are taken to
operating loss.
Taxation (Note 6)
The tax expense represents the sum of the tax currently payable and any deferred tax.
The tax currently payable is based on the estimated taxable profit for the period. Taxable profit differs from net profit
as reported in the income statement because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using the expected tax rate applicable to annual earnings.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the corresponding tax bases used in the computation
of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised
for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be utilised. The carrying
amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is charged to the income statement over the vesting
period of the related share options or share allocations. The cost is based on the fair values of the options and
shares allocated determined using the binomial method. The value of the charge is adjusted to reflect expected
and actual levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Where
equity instruments are granted to persons other than directors or employees the Consolidated Income Statement is
charged with the fair value of any goods or services received.
Grants of options in relation to acquiring exploration assets in licence areas are treated as additions to Slovenian
exploration costs at Group level and increases in investments at Company level.
Provisions (Note 16)
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to
settle the obligation. If the effect is material, provisions are determined by estimating the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the liability.
Convertible loan notes
Upon issue of a new convertible loan, where the convertible option is at a fixed rate, the net proceeds received from
the issue of CLNs are split between a liability element and an equity component at the date of issue. The fair value
of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt.
The difference between the proceeds of issue of the CLNs and the fair value assigned to the liability component,
representing the embedded option to convert the liability into equity of the Group, is included in equity and is
not remeasured.
Subsequent to the initial recognition the liability component is measured at amortised cost using the effective
interest method.
When there are amendments to the contractual loan note terms these terms are assessed to determine whether
the amendment represents an inducement to the loan note holders to convert. If this is considered to be the case
the estimate of fair value adjusted as appropriate and any loss arising is recorded in the income statement.
Where there are amendments to the contractual loan note terms that are considered to represent a modification
to the loan note, without representing an inducement to convert, the Group treats the transaction as an
extinguishment of the existing convertible loan note and replaces the instrument with a new convertible loan
note. The fair value of the liability component is estimated using the prevailing market interest rate for similar
nonconvertible debt. The fair value of the conversion right is recorded as an increase in equity. The previous equity
reserve is reclassified to retained loss. Any gain or loss arising on the extinguishment of the instrument is recorded in
the income statement, unless the transaction is with a counterparty considered to be acting in their capacity as a
shareholder whereby the gain or loss is recorded in equity.
Ascent Resources plc Annual Report and Financial Statements 2020 I 49
Notes to the Accounts continued
1. Accounting policies continued
Where the loan note is converted into ordinary shares by the loan note holder; the unaccreted portion of the loan
notes is transferred from the equity reserve to the liability; the full liability is then converted into share capital and
share premium based on the conversion price on the note.
Non-derivative financial instruments
Non-derivative financial instruments comprise of investments in equity and debt securities, trade and other
receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Financial instruments
Classes and categories
Financial assets that meet the following conditions are measured subsequently at amortised cost using effective
interest rate method:
• The financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and,
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets for which the amount of future receipts are dependent upon the Company’s share price over the
term of the instrument do not meet the criteria above and are recorded at fair value through profit and loss.
Measurement
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a
business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual
terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
Impairment
For trade receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss
allowance is available. The Group’s trade receivables are generally settled on a short time frame without material
credit risk.
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at
amortised cost. The measurement of the loss allowance depends upon the Group’s assessment at the end of
each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial
recognition, based on reasonable and supportable information that is available, without undue cost or effort to
obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a twelve-month
expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses
that is attributable to a default event that is possible within the next twelve months. Where a financial asset has
become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is
based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured
on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
Lifetime expected credit losses (ECLs) for intercompany loan receivables are based on the assumptions that
repayment of the loans are demanded at the reporting date due to the fact that the loan is contractually repayable
on demand. The subsidiaries do not have sufficient funds in order to repay the loan if demanded and therefore
the expected manner of recovery to measure lifetime expected credit losses is considered. A range of different
recovery strategies and credit loss scenarios are evaluated using reasonable and supportable external and internal
information to assess the likelihood of recoverability of the balance under these scenarios.
50 I Ascent Resources plc Annual Report and Financial Statements 2020
1. Accounting policies continued
Financial liabilities at amortised cost
Financial liabilities are initially recognised at fair value net of transaction costs incurred. Subsequent to initial
measurement financial liabilities are recognised at amortised costs. The difference between initial carrying amount
of the financial liabilities and their redemption value is recognised in the income statement over the contractual
terms using the effective interest rate method. This category includes the following classes of the financial liabilities,
trade and other payables, bonds and other financial liabilities. Financial liabilities at amortised costs are classified as
current or non-current depending on whether these are due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognised when either the Group is discharged from its obligation, they expire, are
cancelled, or replaced by a new liability with substantially modified terms.
Warrants
Warrants granted as part of a financing arrangement which fail the fixed-for-fixed criteria as a result of either the
consideration to be received or the number of warrants to be issued is variable, are initially recorded at fair value
as a derivative liability and charged as transaction cost deducted against the loan and subsequently amortised
through the effective interest rate. Subsequently the derivative liability is revalued at each reporting date with
changes in the fair value recorded within finance income or costs.
Equity
Share capital is determined using the nominal value of shares that have been issued.
Share based payments relate to transactions where the Group receives services from employees or service
providers and the terms of the arrangements include payment of a part or whole of consideration by issuing
equity instruments to the counterparty. The Group measures the services received from non-employees, and the
corresponding increase in equity, at the fair value of the goods or services received. When the transactions are with
employees, the fair value is measured by reference to the fair value of the shares issued. The expense is recognised
over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied
Equity-settled share-based payments are credited to a share-based payment reserve as a component of equity
until related options or warrants are exercised or lapse
The Translation reserve comprises the exchange differences from translating the net investment in foreign entities
and of monetary items receivable from subsidiaries for which settlement is neither planned nor likely in the
foreseeable future
Retained losses includes all current and prior period results as disclosed in the income statement.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost. Provisions are made for any impairment when
the fair value of the assets is assessed as less than the carrying amount of the asset. Inter-company loans are
repayable on demand but are included as non-current as the realisation is not expected in the short term.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer (“CEO”).
Revenue recognition
Sales represent amounts received and receivable from third parties for goods and services rendered to the
costumers. Sales are recognised when control of the goods has transferred to the customer, which is at the
border to Croatia under the contract and is recorded at this point. Condensate, which is collected at a separating
station and transported via trucks to a customer in Hungary is recorded on delivery according to the terms of the
contract. At this point in time, the performance obligation is satisfied in full with title, risk, entitlement to payment and
customer possession confirmed. Revenue is measured as the amount of consideration which the Group expects to
receive, based on the market price for gas and condensate after deduction of costs agreed per the Restated Joint
Operating Agreement (“RJOA”) and sales taxes.
Revenue is derived from the production of hydrocarbons under the Petišovci Concession, which Ascent Slovenia
Limited holds a 75% working interest. Under the terms of the RJOA, and in accordance with Slovenian law, the
concession holder retains the rights to all hydrocarbons produced. The concession holder enters into sales
agreements with customers and transfers the relevant portion of hydrocarbon sales to Ascent Slovenia Limited for
the services it provides under the RJOA.
Ascent Resources plc Annual Report and Financial Statements 2020 I 51
Notes to the Accounts continued
1. Accounting policies continued
Payments are typically received around 30 days from the end of the month during which delivery has occurred.
There are no balances of accrued or deferred revenue at the balance sheet date.
Under the RJOA, the Group is entitled to 90% of the revenues until 25% of Investments in the Petišovci area have been
recovered and the Group records revenue on the entitlement basis accordingly.
Credit terms are agreed per RJOA contract and are short term, without any financing component.
The Group has no sales returns or reclamations of services since it has only one costumer. Sales are disaggregated
by geography.
Goodwill
Goodwill arising from business combinations is included in intangible assets. Goodwill is not amortised but it is
tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units
for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-
generating units that are expected to benefit from the business combination in which the goodwill arose.
Contingent Consideration
Contingent consideration is measured at fair value at the time of the business combination and is considered in the
determination of goodwill.
Contingent Liability
A contingent liability is recognised when the group has a possible obligation (legal or constructive), as a result of
a past event, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the group, or the amount of the obligation cannot be
measured with sufficient reliability.
If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nor a contingent
liability and no disclosure is made.
Contingent Asset
A contingent asset is recognised when the group has a possible asset, as a result of a past event, and whose
existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the group.
Such contingent assets are only recognised as assets in the financial statements where the realisation of income
is virtually certain. If the inflow of economic benefits is only probable, the contingent asset is disclosed as a claim in
favour of the group but not recognised in the statement of financial position.
2. Segmental Analysis
The Group has two reportable segments, an operating segment and a head office segment, as described below.
The operations and day to day running of the business are carried out on a local level and therefore managed
separately. The operating segment reports to the UK head office which evaluates performance, decide how to
allocate resources and make other operating decisions such as the purchase of material capital assets and
services. Internal reports are generated and submitted to the Group’s CEO for review on a monthly basis.
The operations of the Group as a whole are the exploration for, development and production of oil and gas reserves.
The two geographic reporting segments are made up as follows:
Slovenia
exploration, development and production
UK
head office
The costs of exploration and development works are carried out under shared licences with joint ventures and
subsidiaries which are co-ordinated by the UK head office. Segment revenue, segment expense and segment
results include transfers between segments. Those transfers are eliminated on consolidation. Information regarding
the current and prior year’s results for each reportable segment is included below.
52 I Ascent Resources plc Annual Report and Financial Statements 2020
2. Segmental Analysis continued
2020
Hydrocarbon sales
Intercompany sales
Total revenue
Cost of sales
Administrative expenses
Material non-cash items
Depreciation
Net finance costs
Reportable segment profit/(loss) before tax
Taxation
Reportable segment profit/(loss) after taxation
Reportable segment assets
Carrying value of exploration assets
Additions to exploration assets
Effect of exchange rate movements
Total plant and equipment
Prepaid abandonment fund
Investment in subsidiaries
Intercompany receivables
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
Slovenia
£ ’000s
Elims
£ ’000s
Total
£ ’000s
–
–
–
(10)
–
267
–
(111)
–
(267)
–
–
–
–
–
(121)
(2,013)
(506)
240
(2,279)
(2)
(35)
(2,060)
–
(2,060)
–
–
–
–
–
16,096
27,447
43,543
175
(395)
–
(745)
–
(745)
18,576
–
177
22,783
300
–
–
–
–
(27)
–
(27)
–
–
–
–
–
(15,443)
(27,447)
–
(397)
(35)
(2,831)
–
(2,831)
18,576
–
177
22,783
300
653
–
41,836
(42,890)
42,489
6
–
181
43,718
41,842
(42,890)
42,670
(417)
(202)
(278)
–
–
–
–
(35,083)
35,083
(450)
(328)
–
(1,069)
(35,689)
35,083
(695)
(202)
–
(778)
(1,675)
Ascent Resources plc Annual Report and Financial Statements 2020 I 53
Notes to the Accounts continued
2. Segmental Analysis continued
2019
Hydrocarbon sales
Intercompany sales
Total revenue
Cost of sales
Administrative expenses
Material non-cash items
Depreciation
Net finance costs
UK
£ ’000s
Slovenia
£ ’000s
eliminations
£ ’000s
Total
£ ’000s
–
1,187
1,187
–
(8,660)
–
(889)
298
232
530
(462)
(1,236)
(440)
(1,178)
(1,419)
(1,419)
7,764
–
1,144
7,489
–
298
–
298
(462)
(2,132)
–
(440)
(924)
(3,660)
–
Reportable segment profit/(loss) before tax
Taxation
(8,362)
(2,786)
–
–
Reportable segment profit/(loss) after taxation
(8,362)
(2,786)
7,489
(3,660)
Reportable segment assets
Carrying value of exploration assets
Additions to exploration assets
Effect of exchange rate movements
Total plant and equipment
Prepaid abandonment fund
Investment in subsidiaries
Intercompany receivables
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
–
–
–
–
–
15,443
27,180
18,968
52
(444)
22,069
240
–
–
–
–
–
(15,443)
(27,180)
18,968
52
(444)
22,069
240
–
–
42,623
40,885
(42,623)
40,885
260
71
–
331
42,883
40,956
(42,623)
41,216
(115)
(385)
(277)
–
–
–
–
(33,986)
33,986
(60)
(266)
–
(560)
(34,529)
33,986
(392)
(385)
–
(326)
(1,103)
Revenue from customers
Revenue was earned by the Slovenian segment through the joint venture structure; sales were made to end
customers in Slovenia £nil; Croatia £nil and Hungary £nil (2019: £99,000; Croatia £160,000 and Hungary £39,000).
Gas sales comprised £nil (2019: £259,000) whilst condensate sales totalled £nil (2019: £39,000). The performance
obligations are set out in the Group’s revenue recognition policy and no outstanding performance obligations
existed at year end. The price for the sale of gas and condensate is set with reference to the market price at the
date the performance obligation is satisfied.
54 I Ascent Resources plc Annual Report and Financial Statements 2020
3. Operating loss is stated after charging:
Employee costs
Share based payment charge
Depreciation
Auditor’s remuneration:
Audit Fees – BDO
Audit Fees - PKF
Fees payable to the company’s auditor other services
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
729
456
397
–
43
–
43
693
269
440
70
–
–
70
4. Employees and directors
a) Employees
The average number of persons employed by the Group, including Executive Directors, was:
Year ended
31 December
2020
Year ended
31 December
2019
Management and technical
10
8
The average number of persons employed by the Company, including Executive Directors, was:
Year ended
31 December
2020
Year ended
31 December
2019
Management and technical
7
5
b) Directors and employee’s remuneration
Employees & Directors
Wages and salaries
Social security costs
Pension costs
Bonuses
Share-based payments
Taxable benefits
Year ended
31 December
2020
Year ended
31 December
2019
628
56
7
38
456
–
1,185
611
27
53
–
269
2
962
Ascent Resources plc Annual Report and Financial Statements 2020 I 55
Notes to the Accounts continued
4. Employees and directors continued
c) Directors remuneration
Please see Remuneration report on pages 27-29.
5. Finance income and costs recognised in the year
Finance costs
Accretion charge on convertible loan notes
Interest charge on loans
Change in fair value of receivable under Equity Sharing Agreement
Bank charges
Please refer to Note 15 for a description of financing activity during the year.
6.
Income tax expense
Current tax expense
Deferred tax expense
Total tax expense for the year
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
–
(24)
–
(11)
(35)
(3)
(40)
(814)
(67)
(924)
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’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:
Loss for the year
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
(2,831)
(3,660)
Income tax using the Company’s domestic tax rate at 19% (2019: 19%)
(537)
(696)
Effects of:
Net increase in unrecognised losses c/f
Effect of tax rates in foreign jurisdictions
Other non-taxable items
Other non-deductible expenses
Total tax expense for the year
537
-
2,816
32
(537)
(2,152)
-
-
-
-
56 I Ascent Resources plc Annual Report and Financial Statements 2020
7. Deferred tax – Group and Company
Group
Total tax losses – UK and Slovenia
Unrecorded deferred tax asset at 17% (2019: 17%)
Company
Total tax losses
Unrecorded deferred tax asset at 17% (2019: 17%)
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
(51,255)
(48,424)
8,713
8,232
(13,632)
(11,772)
2,317
2,001
No deferred tax asset has been recognised in respect of the tax losses carried forward, due to the uncertainty as to
when profits will be generated. Refer to critical accounting estimates and judgments.
8. Earnings per share
Result for the year
Year ended
31 December
2020
£ ’000s
Year ended
31 December
2019
£ ’000s
Total loss for the year attributable to equity shareholders
(2,831)
(3,660)
Weighted average number of ordinary shares
For basic earnings per share
Number
Number
60,693,793
26,590,316
Loss per share (Pence)
(4.66)
(14.00)
As the result for the year was a loss, the basic and diluted loss per share are the same. At 31 December 2020,
potentially dilutive instruments in issue were 65,868,482 (2019: 145,076,254). Dilutive shares arise from share options
and warrants issued by the Company.
9. Business Combinations
There has been one acquisition during the period.
The Board strategically expect acquisitions to be a common component of growth in the future.
Acquisitions made during the period to 31 December 2020 were:
Energetical Limited (renamed to Ascent Hispanic Resources Limited)
As a first step towards building its Cuban portfolio, the Company acquired 100% of the share capital of Energetical
Limited on 13 April 2020. Energetical Limited is a UK Company with exclusive rights to secure a Production Sharing
Contract (‘PSC’) on a producing onshore Cuban oil licence, and this was the primary reason for acquisition. The
initial consideration for the acquisition of Energetical comprised of the issue of six million new ordinary shares
(“Consideration Shares”) to the selling shareholders (“Sellers”) of Energetical. A further £450,000 of contingent
consideration will be payable on the execution of production sharing contracts covering the 9B Block, of
which £350,000 will be satisfied by the issue of new ordinary shares (“Deferred Consideration Shares”), priced at the
30-day VWAP at the time of issue and £100,000 will be paid in cash. The Sellers have agreed not to dispose of any
of the Consideration Shares for a period of one year. The Company has agreed to a carve-out to this lock-in which
permits the sale of up to an aggregate of one million Consideration Shares following the expiry of an initial three-
month period.
Ascent Resources plc Annual Report and Financial Statements 2020 I 57
Notes to the Accounts continued
9. Business Combinations continued
The amount of identifiable net assets assumed at the acquisition date is shown below:
Recognised amounts of net assets acquired and liabilities assumed
Identifiable net assets
Goodwill
Total Consideration
Satisfied by:
Consideration – new ordinary shares issued at 3.38p
Contingent consideration
Total Consideration
Fair Values
£ ’000s
–
653
653
203
450
653
The fair value acquired assesses the future cash flows associated with exclusive rights in securing a Production
Sharing Contract (‘PSC’) on an onshore Cuban oil licence, delivered by exclusive rights to the 9B Block in Cuba (“Block
9B”) that contains the onshore Majaguillar and San Anton fields, located on the North coast of Cuba and currently
producing 190 bbls/day gross from three wells.
10. Property, Plant and Equipment – Group
Cost
At 1 January 2019
Additions
Effect of exchange rate movements
At 31 December 2019
At 1 January 2020
Additions
Effect of exchange rate movements
At 31 December 2020
Depreciation
At 1 January 2019
Charge for the year
Effect of exchange rate movements
At 31 December 2019
At 1 January 2020
Charge for the year
Effect of exchange rate movements
At 31 December 2020
Carrying value
At 31 December 2020
At 31 December 2019
At 1 January 2019
58 I Ascent Resources plc Annual Report and Financial Statements 2020
Computer
Equipment
£ ’000s
Developed Oil
& Gas Assets
£ ’000s
Total
£ ’000s
6
–
–
6
6
–
–
6
–
(6)
(6)
(6)
–
–
(6)
–
–
6
24,808
24,814
3
3
(1,328)
(1,328)
23,483
23,489
23,483
23,489
–
1,111
–
1,111
24,594
24,600
(1,035)
(434)
55
(1,414)
(1,414)
(397)
–
(1,035)
(440)
55
(1,420)
(1,420)
(397)
–
(1,811)
(1,817)
22,783
22,069
23,773
22,783
22,069
23,779
10. Property, Plant and Equipment – Group continued
No impairment has been recognised during the year, this assumes that the Group can obtain the necessary
environmental permits and the concession extension due in 2022 to continue with the planned development of the
Petišovci field. Details of the impairment judgments and estimates in the fair value less cost to develop assessment
as set out in Note 1, including the significant judgment regarding the ability to renew the concession and obtain
required permits. Should the permits not be granted, or the concession extension confirmed, the carrying value of
these assets would be impaired as the permits are required to maintain commercial production rates at the wells
and in the absence of renewal of the concession the Company would not hold title to the asset.
11. Exploration and evaluation assets – Group
Cost
At 1 January 2019
Additions
Effects of exchange rate movements
At 31 December 2019
At 1 January 2020
Additions
Effects of exchange rate movements
At 31 December 2020
At 31 December 2020
At 31 December 2019
At 1 January 2019
Slovenia
£ ’000s
Total
£ ’000s
18,968
18,968
52
(444)
18,576
18,576
–
177
52
(444)
18,576
18,576
–
177
18,753
18,753
18,753
18,576
18,968
18,753
18,576
18,968
For the purposes of impairment testing the intangible oil and gas assets are allocated to the Group’s cash-
generating unit, which represent the lowest level within the Group at which the intangible oil and gas assets are
measured for internal management purposes, which is not higher than the Group’s operating segments as reported
in Note 2. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as
set out in Note 1.
The amounts for intangible exploration assets represent costs incurred on active exploration projects. Amounts
capitalised are assessed for impairment indicators under IFRS 6 at each period end as detailed in the Group’s
accounting policy. In addition, the Group routinely reviews the economic model and reasonably possible sensitivities
and considers whether there are indicators of impairment. As at 31 December 2020 and 2019 the net present value
significantly exceeded the carrying value of the assets. The key estimates associated with the economic model
net present value are detailed in Note 1. The outcome of ongoing exploration, and therefore whether the carrying
value of intangible exploration assets will ultimately be recovered, is inherently uncertain and is dependent on the
extension of the licence expiry dates, which is scheduled for May 2022, but work is in progress to seek extension.
Ascent Resources plc Annual Report and Financial Statements 2020 I 59
Notes to the Accounts continued
12. Investment in subsidiaries – Company
Cost
At 1 January
Additions
At 31 December
Accumulated impairment
At 1 January
Impairment
At 31 December
Net book value
At 31 December
2020
£ ’000s
2019
£ ’000s
15,443
15,443
653
–
16,096
15,443
–
–
–
–
–
–
16,096
15,443
The Company’s subsidiary undertakings at the date of issue of these financial statements, which are all 100% owned,
are set out below:
Name of company &
registered office address
Ascent Slovenia Limited
Tower Gate Place
Tal-Qroqq Street
Msida, Malta
Ascent Resources doo
Glavna ulica 7
9220 Lendava
Slovenia
Trameta doo
Glavna ulica 7
9220 Lendava
Slovenia
Ascent Resources Netherlands BV
c/o Ascent Resources plc
5 New Street Square
London EC4A 3TW
Ascent Hispanic Resources UK
Limited
5 New Street Square
London EC4A 3TW
Principal activity
Country of
incorporation
% of share capital
held 2020
% of share capital
held 2019
Oil and Gas exploration
Malta
100%
100%
Oil and Gas exploration
Slovenia
100%
100%
Infrastructure owner
Slovenia
100%
100%
Oil and Gas exploration
Netherlands
100%
100%
Oil and Gas exploration
England and Wales 100%
100%
All subsidiary companies are held directly by Ascent Resources plc.
Consideration of the carrying value of investments is carried out alongside the assessments made in respect of
the recoverability of carrying value of the group’s producing and intangibles assets. The judgements and estimates
made therein are the same as for investments and as such no separate disclosure is made.
60 I Ascent Resources plc Annual Report and Financial Statements 2020
13. Trade and other receivables – Group
Trade receivables
VAT recoverable
Prepaid abandonment liability
Amounts receivable on ESA
Prepayments & accrued income
Less non-current portion
Current portion
14. Trade and other receivables – Company
VAT recoverable
Amounts receivable on ESA
Prepayments & accrued income
15. Borrowings – Group and Company
Group
Current
Borrowings
Convertible loan notes
Non-current
Borrowing
Company
Current
Borrowings
Convertible loan notes
Non-current
Borrowing
2020
£ ’000s
2019
£ ’000s
–
49
300
–
17
350
(300)
66
54
27
240
173
–
494
(240)
254
2020
£ ’000s
2019
£ ’000s
21
–
47
68
16
173
7
196
2020
£ ’000s
2019
£ ’000s
–
5
197
202
–
5
197
202
368
17
–
385
368
17
–
385
The non-current borrowings relate to the loan arrangement with Riverfort Global opportunities that was refinanced
in February 2020. The outstanding loan of £375,020 as at February 2020 was re-negotiated to a two-year coupon
free bullet with conversion rights for the lender at 7.5 pence per share. No conversion can occur until the share price
exceeds 10 pence per share for five consecutive days. The Group made convertible loan note repayments in the
year of £105,000 to Riverfort Global opportunities, resulting in an ending convertible loan note balance of £270,000,
comprising £197,000 recognised as the debt component and a further £73,000 recognised in Equity Reserve.
The current convertible loan was due from redemption on 19 November 2019 and at the balance sheet date £5,625
remain unclaimed.
Ascent Resources plc Annual Report and Financial Statements 2020 I 61
Notes to the Accounts continued
16. Provisions – Group
At 1 January 2019
Foreign exchange movement
At 31 December 2019
At 1 January 2020
Foreign exchange movement
Provision
At 31 December 2020
£000s
263
(8)
255
263
5
60
328
The amount provided for decommissioning costs represents the Group’s share of site restoration costs for the
Petišovci field in Slovenia. The most recent estimate is that the year-end provision will become payable after 2037.
During 2017 the Company has placed €300,000 (£268,000) on deposit as collateral against this liability see Note 13.
17. Contingent Consideration due on Acquisition
Group
Non-current
Ascent Hispanic Limited (formerly Energetical Limited)
2020
£ ’000s
2019
£ ’000s
450
450
–
–
The contingent consideration is based on the defined contingent consideration in the acquisition of Ascent Hispanic
Limited (Formerly Energetical Limited), comprising £100,000.00 in cash and a further £350,000,00 in shares. The
Company has not discounted the contingent consideration since the impact would not be material. Please refer to
note 9 of the financial statements for the consideration in the acquisition of Ascent Hispanic Limited.
18. Trade and other payables – Group
Trade payables
Tax and social security payable
Accruals and deferred income
19. Trade and other payables – Company
Trade payables
Tax and social security payable
Accruals and deferred income
62 I Ascent Resources plc Annual Report and Financial Statements 2020
2020
£ ’000s
2019
£ ’000s
573
56
66
695
392
5
66
463
2020
£ ’000s
2019
£ ’000s
295
56
66
417
115
6
54
175
20. Called up share capital
Authorised
2020
£ ’000s
2019
£ ’000s
2,000,000,000 ordinary shares of 0.5p each
10,000
10,000
Allotted, called up and fully paid
3,019,648,452 deferred shares of 0.195p each
1,737,110,763 deferred shares of 0.09p each
95,283,281 ordinary shares of 0.5p each (2019: 3,019,452 ordinary shares of 0.2p each)
Reconciliation of share capital movement
At 1 January
Share consolidation
Issue of Trameta consideration shares
Issue of shares during the year
5,888
1,563
477
5,888
1,563
153
7,928
7,604
2020
Number
2019
Number
3,019,648,452
2,291,310,686
(2,989,451,968)
91,167
–
–
64,995,630
728,337,766
At 31 December
95,283,281 3,019,648,452
The deferred shares have no voting rights and are not eligible for dividends.
Shares issued during the year
Issuance of equity throughout the year:
• On 13 March 2020, the Company raised £485,000 (£445,802 net of costs) via the Placing of 9,700,000 Ordinary
shares with investors
• On 24 March 2020, the Company issued 166,666 shares at a price of 5p to exiting directors in lieu of a cash
settlement and a further 390,000 shares at a price of 5p each per share and 214,286 shares at a price of 3.5p
each to select professional advisors.
• On 8 April 2020, the Company issued 1,000,000 ordinary shares at a placing price of 5p per share in order to settle
an amount of £50,000 with a relevant investor
• On 8 April 2002, the Company issued 91,167 ordinary shares as a result of the acquisition of Trameta doo
announced on 1 August 2015. This was the final payment and no further contingent consideration of shares will be
due.
• On 14 April 2020, the Company agreed to purchase Energetical Limited for the issuance of 6,000,000 new ordinary
shares
• On 20 April 2020, the Company issued 623,777 new ordinary shares of 0.5p at a price of 3.5p to a professional
advisor in lieu of fees.
• On 30 April 2020. The Company issued 7,727,272 new ordinary shares of 0.5p at a price of 2.75p, raising gross
proceeds of £212,500
• On 4 May 2020, the Company issued 750,000 ordinary shares at a placing price of 5p per share in order to settle
an amount outstanding in the amount of £37,500.
Ascent Resources plc Annual Report and Financial Statements 2020 I 63
Notes to the Accounts continued
20. Called up share capital continued
• On 7 May 2020, the Company issued 2,250,000 ordinary shares at a placing price of 5p per share relating to a
settlement of remaining sums from a relevant investor.
• On 6 August 2020 the Company raised £300,000 via the placing of 15,000,000 Ordinary shares with investors
• On 6 August 2020 the Company issued 1,500,000 ordinary shares at a placing price of 2p per share relating to the
settle amounts with creditors.
• On 15 October 2020 the Company issued 525,090 ordinary shares in lieu of payment of consultancy fees at a
price of 4p per share
• On 23 October 2020 the Company received £50,000 in respect of a warrants exercise of 2,000,000 ordinary
shares
• On 26 October 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for
consideration of £100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8%
cash coupon on the convertible loan amount
• On 5 November 2020 the Company issued 457,720 ordinary shares to a supplier for financial and economic
modelling services rendered in the months of September and October
• On 19 November 2020 the Company received notice in respect of warrants exercised in the amount of 1,250,00
ordinary shares
• On 1 December 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for
consideration of £100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8%
cash coupon on the convertible loan amount
• On 1 December 2020 the Company issued 480,000 ordinary shares at a price of 7.5p per share in respect of a
supplier invoice
Shares issued during the prior year
The Company raised funds through placings during the prior year:
• On 25 January 2019, the Company raised £363,156 (£345,703 net of costs) via the Placing of 121,052,097 Ordinary
Shares with investors using the PrimaryBid.com platform.
• On 24 April 2019, the Company raised £750,000 (£708,950 net of costs) via the Placing of 214,285,669 Ordinary
Shares with various institutional investors.
• On 23 September 2019, the Company raised £1,080,750 (£1,071,744 net of costs) via the Placing of 393,000,000
Ordinary Shares with Riverfort Global Investors.
Reserve description and purpose
The following describes the nature and purpose of each reserve within owners’ equity:
• Share capital: Amount subscribed for share capital at nominal value.
• Merger reserve: Value of shares, in excess of nominal value, issued with respect of the Trameta acquisition in 2016.
•
Equity reserve: Amount of proceeds on issue of convertible debt relating to the equity component and
contribution on modification of the convertible loan notes, i.e. option to convert the debt into share capital.
• Share premium: Amounts subscribed for share capital in excess of nominal value less costs of shares associated
with share issues.
• Share-based payment reserve: Value of share options granted and calculated with reference to a binomial
pricing model. When options lapse or are exercised, amounts are transferred from this account to retained
earnings.
• Translation reserve: Exchange movements arising on the retranslation of net assets of operation into the
presentation currency.
• Accumulated losses: Cumulative net gains and losses recognised in consolidated income.
64 I Ascent Resources plc Annual Report and Financial Statements 2020
20. Called up share capital continued
•
Share-based payment reserve: Value of share options granted and calculated with reference to a binomial
pricing model. When options lapse or are exercised, amounts are transferred from this account to retained
earnings.
•
Translation reserve: Exchange movements arising on the retranslation of net assets of operation into the
presentation currency.
• Accumulated losses: Cumulative net gains and losses recognised in consolidated income.
21. Exploration expenditure commitments
In order to maintain an interest in the oil and gas permits in which the Group is involved, the Group is committed to
meet the conditions under which the permits were granted and the obligations of any joint operating agreements.
The timing and the amount of exploration expenditure commitments and obligations of the Group are subject
to the work programmes required as per the permit commitments. This may vary significantly from the forecast
programmes based upon the results of the work performed. Drilling results in any of the projects may also cause
variations to the forecast programmes and consequent expenditure. Such activity may lead to accelerated or
decreased expenditure. It is the Group’s policy to seek joint operating partners at an early stage to reduce its
commitments.
At 31 December 2020, the Group had exploration and expenditure commitments of £ Nil (2019 - Nil).
22. Related party transactions
a) Group companies – transactions
Ascent Slovenia Limited
Ascent Resources doo
Trameta doo
b) Group companies – balances
Ascent Slovenia Limited
Ascent Resources doo
Trameta doo
2020
Cash
Services
267
–
–
267
–
–
–
–
Total
267
–
–
267
2019
Cash
Services
111
(9)
2
1,858
(5)
–
Total
1,969
(14)
2
102
1,853
1,955
2020
2019
Cash
Services
Total
Cash
Services
Total
17,351
2,951
11
5,404
22,755
1,730
4,681
–
11
17,084
2,951
11
20,313
7,134
27,447
20,046
5,404
1,730
–
7,134
22,488
4,681
11
27,180
Cash refers to funds advanced by the Company to subsidiaries. Services relates to services provided by the
Company to subsidiaries. The loans are repayable on demand but are classified as non-current reflecting the
period of expected ultimate recovery.
Following the introduction of IFRS 9 Management have carried out an assessment of the potential future credit loss
the loans classified as ‘stage 3’ under IFRS 9 and assessed for lifetime expected credit loss given their on-demand
nature under a number of scenarios. The Company would suffer a credit loss where the permits necessary for
the development of the field are not obtained and a court case for damages against the Republic of Slovenia is
unsuccessful. Based on legal advice received in relation to the permit process and the strength of our case we
consider the risk of credit loss to be relatively remote. A provision of £nil (€4.8 million) has been recognised in the
Company accounts.
Ascent Resources plc Annual Report and Financial Statements 2020 I 65
Notes to the Accounts continued
22. Related party transactions continued
Expected credit loss provision start of the year
Change in expected credit loss
Expected credit loss provision at the end of year
2020
£ ’000s
6,500
–
6,500
2019
£ ’000s
1,700
4,800
6,500
c) Directors
Key management are those persons having authority and responsibility for planning, controlling and directing
the activities of the Group. In the opinion of the Board, the Group’s key management are the Directors of Ascent
Resources plc. Information regarding their compensation is given in Note 4.
2020
There were no transactions involving directors during the year.
2019
There were no transactions involving directors during the year.
23. Events subsequent to the reporting period
On 6 January 2021 the Company issued 208,991 ordinary shares to a supplier for financial modelling and business
development services rendered in the months of November and December at an average issue price of 5.74p per
share calculated as the monthly volume weighted average price
On 11 January 2021 the Company received a warrant exercise notice of 833,333 ordinary shares for consideration
of £62,500, additionally the Company has agreed to issue 66,667 new ordinary shares of 7.5p being the coupon
conversion price in lieu of the 8% cash coupon that is incurred on the converted loan amount
On 4 February 2021 the Company received a warrant exercise notice of 833,333 ordinary shares for consideration
of £62,500, additionally the Company has agreed to issue 66,667 new ordinary shares of 7.5p being the coupon
conversion price in lieu of the 8% cash coupon that is incurred on the converted loan amount
On 5 February 2021 the Company received a warrant exercise notice of 900,000 new ordinary shares for
consideration of £67,500
On 11 February 2021 the Company raised £1m before expense for the placing of 9,997,032 ordinary shares of 0.5p
each at a price of 10.1p per share.
66 I Ascent Resources plc Annual Report and Financial Statements 2020
24. Share based payments
The Company has provided the Directors, certain employees and institutional investors with share options and
warrants (‘options’). Options are exercisable at a price equal to the closing market price of the Company’s shares on
the date of grant. The exercisable period varies and can be up to seven years once fully vested after which time the
option lapses.
Details of the share options outstanding during the year are as follows:
Outstanding at 1 January 2019
Outstanding at 31 December 2019
Exercisable at 31 December 2020
Outstanding at 1 January 2020
Consolidation of existing shares
Granted during the year
Expired during the year
Outstanding at 31 December 2020
Exercisable at 31 December 2020
Weighted
Average price
(pence)
Shares
152,576,254
152,576,254
84,513,744
2.46
2.46
2.86
152,576,254
2.46
(151,050,492)
5,897,379
(75,000)
7,348,142
253.72
1,450,763
248.72
The value of the options is measured by the use of a binomial pricing model. The inputs into the binomial model
made in 2020 were as follows.
Share price at grant date
Exercise price
Volatility
Expected life
Risk free rate
Expected dividend yield
2.9p – 778p
5.0p – 2000p
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 2020 have an exercise price in the range of 2.9p and 778p (31 December 2019:
1.58p and 20.00p) and a weighted average contractual life of 5.5 years (31 December 2019: 9.9 years). The amount
recognised in the income statement for the year ended 31 December 2020 was £456,000 (2019: £269,000).
Details of the warrants issued in the year are as follows:
Issued
Exercisable from
Expiry date
Number outstanding
Exercise price
24 March 2020
Anytime until
24 March 2025
24 March 2020
Anytime until
24 March 2025
225,000
199,482
30 April 2020
Anytime until
30 April 2022
8,727,272
6 August 2020
Anytime until
5 August 2022
7,500,000
11 August 2020
Anytime until
6 August 2023
16,000,000
30 November 2020
Anytime until
30 November 2023
6,666,666
5.00p
5.00p
5.50p
4.00p
2.50p
7.50p
Ascent Resources plc Annual Report and Financial Statements 2020 I 67
Notes to the Accounts continued
24. Share based payments continued
Outstanding at 1 January 2020
Granted during the year
Exercised during the year
Outstanding at 31 December 2020
Exercisable at 31 December 2020
Weighted
Average price
(pence)
Warrants
–
39,318,420
(17,250,000)
22,068,420
22,068,420
–
4.33
3.36
5.44
5.44
The warrants outstanding at the period end have a weighted average remaining contractual life of 1.8 years. The
exercise prices of the warrants are between 4.00 – 7.50p per share.
25. Notes supporting the statement of cash flows
Group
Cash at bank and available on demand
Cash held on deposit against bank guarantee
Company
Cash at bank and available on demand
Cash held on deposit against bank guarantee
Significant non-cash transactions are as follows:
Conversion of loan notes
Interest charged on loans
Accretion charge on convertible loan notes
2020
£ ’000s
2019
£ ’000s
115
–
115
77
–
77
2020
£ ’000s
2019
£ ’000s
107
–
107
63
–
63
2020
£ ’000s
2019
£ ’000s
-
-
-
-
40
3
68 I Ascent Resources plc Annual Report and Financial Statements 2020
26. Financial risk management
Group and Company
The Group’s financial liabilities comprise CLNs, borrowings and trade payables. All liabilities are measured at
amortised cost. These are detailed in Notes 15, 0 and 18.
The Group has various financial assets, being trade receivables and cash, which arise directly from its operations. All
are classified at amortised cost. These are detailed in Notes 13, 14 and 25.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and market risk (including
interest risk and currency risk). The risk management policies employed by the Group to manage these risks are
discussed below:
Credit risk
Credit risk is the risk of an unexpected loss if a counter party to a financial instrument fails to meet its commercial
obligations. The Groups’s maximum credit risk exposure is limited to the carrying amount of cash of £115,000 and
trade and other receivables of £49,000. Credit risk is managed on a Group basis. Funds are deposited with financial
institutions with a credit rating equivalent to, or above, the main UK clearing banks. The Company’s liquid resources
are invested having regard to the timing of payment to be made in the ordinary course of the Group’s activities. All
financial liabilities are payable in the short term (between 0 to 3 months) and the Group maintains adequate bank
balances to meet those liabilities.
The Group makes allowances for impairment of receivables where there is an ECL identified. Refer to Note 22 for
details of the intercompany loan ECL assessment.
The credit risk on cash is considered to be limited because the counterparties are financial institutions with high and
good credit ratings assigned by international credit rating agencies in the UK.
The carrying amount of financial assets, trade receivables and cash held with financial institutions recorded in the
financial statements represents the exposure to credit risk for the Group.
At Company level, there is the risk of impairment of inter-company receivables if the full amount is not deemed
as recoverable from the relevant subsidiary company. These amounts are written down when their deemed
recoverable amount is deemed less than the current carrying value. An IFRS 9 assessment has been carried out as
per Note 1.
Market risk
i) Currency risk
Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Company.
The Group’s operations are predominantly in Slovenia. Foreign exchange risk arises from translating the euro
earnings, assets and liabilities of the Ascent Resources doo and Ascent Slovenia Limited into sterling. The Group
manages exposures that arise from receipt of monies in a non-functional currency by matching receipts and
payments in the same currency.
The Company often raises funds for future development through the issue of new shares in sterling. These funds are
predominantly to pay for the Company’s exploration costs abroad in euros. As such any sterling balances held are
at risk of currency fluctuations and may prove to be insufficient to meet the Company’s planned euro requirements
if there is devaluation.
The Group’s and Company’s exposure to foreign currency risk at the end of the reporting period is summarised
below. All amounts are presented in GBP equivalent.
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net Exposure
Group
Company
2020
2019
2020
2019
-
8
(279)
(271)
58
13
(288)
(217)
-
-
-
-
-
-
-
-
Ascent Resources plc Annual Report and Financial Statements 2020 I 69
Notes to the Accounts continued
26. Financial risk management continued
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the European Union (the euro).
The Group operates internationally and is exposed to currency risk on sales, purchases, borrowings and cash and
cash equivalents that are denominated in a currency other than sterling. The currencies giving rise to this are the
euro.
Foreign exchange risk arises from transactions and recognised assets and liabilities.
The Group does not use foreign exchange contracts to hedge its currency risk.
Sensitivity analysis
The following table details the Group’s sensitivity to a 10% increase and decrease in sterling against the stated
currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management
personnel and represents the management’s assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis comprises cash and cash equivalents held at the balance sheet date. A positive number
below indicates an increase in profit and other equity where sterling weakens 10% against the relevant currency.
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
ii) Interest rate risk
Euro currency change
Year ended
31 December
2020
Year ended
31 December
2019
135
(9)
33
(55)
(3,839)
(3,897)
4,693
4,764
–
–
(123)
151
(4,070)
(4,542)
4,832
5,551
Interest rate risk refers to the risk that fluctuations in interest rates cause losses to the Company. The Group and
Company have no exposure to interest rate risk except on cash and cash equivalent which carry variable interest
rates. The Group carries low units of cash and cash equivalents and the Group and Companies monitor the variable
interest risk accordingly.
At 31 December 2020, the Group and Company has GBP loans valued at £270,000 rates of 12% per annum. At 31
December 2019, the Group and Company had GBP loans valued at £385,000 rates of 12% per annum.
70 I Ascent Resources plc Annual Report and Financial Statements 2020
26. Financial risk management continued
iii) Liquidity risk
Liquidity risk refers to the risk that the Company has insufficient cash resources to meet working capital
requirements.
The Group and Company manages its liquidity requirements by using both short- and long-term cash flow
projections and raises funds through debt or equity placings as required. Ultimate responsibility for liquidity
risk management rests with the Board of Directors, which has built an appropriate liquidity risk management
framework for the management of the Group’s short-, medium- and long-term funding and liquidity management
requirements.
The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced, and sensitivities
run for different scenarios (see Note 1). For further details on the Group’s liquidity position, please refer to the Going
Concern paragraph in Note 1 of these accounts.
Less than six months - loans and borrowings
Less than six months - trade and other payables
Between six months and a year
Over one year
Capital management
Group
Company
2020
£ ’000s
2019
£ ’000s
2020
£ ’000s
2019
£ ’000s
–
–
–
197
385
392
–
–
–
–
–
197
385
392
–
–
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the balance between debt and equity. The capital structure of
the Group as at 31 December 2020 consisted of equity attributable to the equity holders of the Company, totalling
£41,069. The Group reviews the capital structure on an on-going basis. As part of this review, the directors consider
the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital
structure through new share issues and the issue of new debt or the repayment of existing debt.
There are no externally imposed capital requirements.
Fair value of financial instruments
Set in the foregoing is a comparison of carrying amounts and fair values of the Group’s and the Company’s financial
instruments:
Categorisation of Financial Assets and Liabilities - Group
Carrying
amount
Year ended
31 December
2020
Fair Value
Year ended
31 December
2020
Carrying
amount
Year ended
31 December
2019
Fair Value
Year ended
31 December
2019
Financial assets
Cash and equivalents – unrestricted
Cash and equivalents - restricted
Trade receivables
Prepaid abandonment fund (refundable)
Financial liabilities
Trade and other payables
Loans at fixed rate
115
–
66
240
695
197
115
–
66
240
695
197
77
–
54
240
392
385
77
–
54
240
392
385
Ascent Resources plc Annual Report and Financial Statements 2020 I 71
Notes to the Accounts continued
26. Financial risk management continued
Capital management - Company
Financial assets
Cash and equivalents - unrestricted
Trade receivables
Financial liabilities
Trade and other payables
Loans at fixed rate
Carrying
amount
Year ended
31 December
2020
Fair Value
Year ended
31 December
2020
Carrying
amount
Year ended
31 December
2019
Fair Value
Year ended
31 December
2019
107
68
417
197
107
68
417
197
63
–
175
385
63
–
175
385
Convertible loan at fixed rate
Fair value of convertible loans has been determined based on tier 3 measurement techniques. The fair value
is estimated at the present value of future cash flows, discounted at estimated market rates. Fair value is not
significantly different from carrying value.
Trade and other receivables/payables and inter-company receivables
All trade and other receivables and payables have a remaining life of less than one year. The ageing profile of the
Group and Company receivable and payables are shown in Notes 13, 14, 14, 18 and 19.
Cash and cash equivalents
Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation
to fair value.
27. Commitments & contingencies
As at 31 December 2020, the Company recognises £450,000 in contingent consideration relating to the acquisition of
Energetical Limited (renamed to Ascent Hispanic Resources UK Limited).
Post period in review, as announced on 10 March 2021, the Company’s JV Service Provide, Petro Geo, issued a local
enforcement order attempting to claim payment for an unsubstantiated amount of €662,288.63 plus interest of
€12,103.19.
72 I Ascent Resources plc Annual Report and Financial Statements 2020
Ascent Resources plc
5 New Street Square
London
EC4A 3TW
ascentresources.co.uk