Interim results for the period ended 30 June 2018
Ascent Resources plc, the AIM quoted European oil and gas exploration and production company is pleased to report its interim results for the six months ended 30 June 2018.
· Record production volumes and income generated from Phase 1 of the Petišovci project.
· Company close to breakeven EBITDA for the period.
· GMP FirstEnergy engaged to run a Strategic Review incorporating a formal sale process.
Post Period Highlights:
· The board looks forward to the outcome of the strategic review now drawing to a close
· Based on representations from the Slovenian Authorities the board continues to expect the near-term award of the permits sought to develop its Petišovci asset.
Colin Hutchinson, CEO of Ascent, commented:
"We continue to expect the award of the outstanding permits at Petišovci and also look forward to the strategic review drawing to a close."
Throughout the period under review and subsequently we had only one asset to develop, Petišovci, in eastern Slovenia.
At the start of the period under review income from production at these wells covered the Group's operating costs in Slovenia and the UK. However, despite increases in European gas prices, by Q2 2018 interruptions in production, particularly at Pg-11A and the steady decline in production at Pg-10 indicated that, in the absence of fresh capital, the cashflows from production would be unlikely to meet the Group's projected costs by the end of the year.
Without new permits we are limited at Petišovci to operating Pg-10 & Pg-11A. The CEO's report provides further information on the permits applied for and the responses received from ARSO, the relevant Slovenian regulatory authority, to date.
In summary, by early August it was clear to the board the only way to get the permit process moving was to make our case more publicly in Slovenia. Thankfully this has resulted in a significant change of approach from ARSO, such that we now expect to receive the much-heralded IPPC permit in the near future and hope that the permit to re-stimulate the existing wells follows shortly thereafter.
We intend to maintain the high public profile of the project and highlight the benefits of the project for Slovenia to the new government which is currently being formed.
The decline in production from our two operational wells and the continued failure of the Slovenian authorities to process our outstanding permits at the pace we expected led the board to conclude the best opportunity to preserve shareholder value was by a corporate transaction.
The overwhelming feedback from shareholders during the period under review, was there was no support for attempts to diversify by the issue of new shares at the share prices then prevailing. Given our lack of cash this ruled out any acquisitions so it was clear that the further development of the Petišovci project would require the involvement of a better funded partner.
In April 2018, we therefore initiated a strategic review, which allowed the canvassing of likely partners without falling foul of recent UK Takeover Panel rules, which can lead to the early identification and resultant departures of otherwise interested parties.
The option of raising additional funding without a General Meeting disappeared following the failure to pass the relevant 75% resolution at the Annual General Meeting in June 2018. This and the expected impending cash flow pressures and with no certainty on the outcome of the strategic review led the board in early August to its decision to reduce expenditure to the minimum required to maintain our interest in the Petišovci asset.
There was limited scope to make significant savings in Slovenia, where costs are relatively low.
In the UK non-executive directors have agreed to take no further payment from the business until the cash position of the company improves. The only executive director, Colin Hutchinson our CEO, agreed from the end of August to move to a part-time basis. Our office manager has also agreed to take redundancy. We thank them both for their continued hard work in difficult circumstances over a prolonged period.
These actions extend the date by which either new funding needs to be raised or a deal with a better funded partner is completed.
To be clear Colin Hutchinson remains CEO and our lead in Slovenia, albeit now on a part time basis. We expect in the near future he will take up part-time employment outside the group.
We draw shareholders attention to the Company's website www.ascentresources.co.uk which includes a full response to the new QCA Corporate Governance Code.
Petišovci remains a very attractive project in the longer run. However, to reach the longer run we need to deal with the position as it is now. We would also benefit from successfully diversifying into other projects.
Having articulated the need for a better funded partner to achieve these objectives we look forward to the outcome on the strategic review currently drawing to a close.