Following our announcement on 30 October 2018, Board of Ascent would like to update the market on the status of its IPPC Permit application.
Last week the Board of Ascent was made aware of the apparent decision by the Environment Minister to carry out an internal review of both the IPPC Application and our application to re-enter wells Pg-10 and Pg-11A.
Since this news was made public the Company has been unable to contact the Minister; last week most offices in Slovenia were partially closed for public holidays.
It is unlikely that there will be any substantive developments this week, as people key to the process are not available to meet. We hope to bring an update to shareholders once we have some clarity on the situation next week.
The Company has been in regular contact with our partners and with officials from the British Chamber of Commerce and the British Embassy to understand the reasons for the intervention and to assess what the likely impact will be on our permit applications.
The Board of Ascent shares the deep frustration felt by shareholders at the speed of the permitting process and this latest intervention by the Minister. However, we would again ask shareholders to show restraint and refrain from directly contacting elected officials and public servants in Slovenia.
The volume of communications received, and the occasionally aggressive tone of communications does nothing to further our cause and could be taken by some as a reason to delay the process further.
Benefit of the project to Slovenia
The apparent lack of support for the project by those in power in Slovenia for the project is hard to reconcile with the clear benefits to the country from the project:
1. Increased & secured employment
The Company and its partners, suppliers and customers are important employers in the region. If the project develops as planned, it is envisaged that employment would increase significantly providing hundreds of well-paid engineering jobs. Any further delays to the project will put current employment in the region at risk.
2. Increase in tax revenues
The project will also generate meaningful tax revenues for the government through the payment of corporate income tax, concession fee's, employment tax and value added tax.
3. Provides energy independence
The estimated reserves and resources of the Petišovci field are very significant in the context of Slovenia's national annual natural gas consumption while the country currently imports a large majority of its natural gas requirement. The project offers the country the opportunity to gain a meaningful degree of energy independence which is currently enjoyed by its neighbours on all sides.
4. Facilitate a transition to a lower carbon economy
Currently Slovenia generates over 20% of its electricity by burning coal and lignite while less than 1% comes from natural gas. By transitioning to a cleaner fossil fuel, as articulated in the country's strategic energy plan, Slovenia could reduce its carbon emissions.
Misplaced environmental concerns
There is a long history of Oil and Gas production in the concession area and it is important to stress that the IPPC application relates solely to the installation of a new treatment facility. The installation of such a facility would enable gas produced in the concession area to be sold into the Slovenia natural gas network, rather than exported, untreated, to Croatia as is currently the case.
The Company realises that as it is involved in production which involves low volume fracture stimulation there are some parties who raise environmental concerns. The gas is contained in sandstone reservoirs and therefore these reservoirs need to be stimulated, in the same way as has been done many times in the history of the Petišovci field.
The first operation of this kind at Petišovci was carried out in 1956 and, prior to Ascent's participation in the project, there had been over one hundred such operations carried out with no recorded negative environmental impact. Following the operations to stimulate Pg-10 and Pg-11A the impact was studied in detail by independent third parties in Slovenia and no causes for concern were raised.
Whilst the process is compared to the hydraulic fracturing carried out on a large scale in North America and elsewhere, the practice is so different as to render such comparisons irrelevant.
The gas in Slovenia is contained within sandstone rather than shale. As sandstone is much more brittle than shale significantly less water is needed at much lower pressures and far fewer stimulations are required. In addition, the maximum number of wells at Petišovci is expected to be a small fraction of standard North American developments. The proposed development in Petišovci is therefore not comparable to projects in North America.
While environmental scare stories may sell newspapers and generate website traffic, they are not supported by the facts. Any environment concerns raised during the permitting process by the Slovenian Environment Agency have been answered to their satisfaction.
Ascent and the partners continue to produce gas from the concession and production in October was around three times higher than September which had been impacted by planned maintenance.
Total production for September was 232,228 cubic metres (8,201 Mcf) an average of 1.1 MMscfd, and revenue for the month was €69,559.
Total production in October has increased to 679,191 cubic metres (23,866 Mcf) an average of 0.9 MMscfd and revenue for the month is expected to be €149,000.
Cash generated in Slovenia from operations currently more than covers all of our local operating costs while expenditure in the UK has been reduced significantly.
At 30 June 2018 we reported cash of £577,000 of which £226,000 was reported as cash and £351,000 was restricted cash held on deposit under the terms of our Gas Sales Agreement. At 30 September 2018 we have cash of £579,000, of this £401,000 is reportable as cash and £178,000 is restricted cash held on deposit under the terms of the Gas Sales Agreement.
Colin Hutchinson, CEO if Ascent Resources plc, commented:
"I ask again for shareholders to show restraint at what we appreciate is a difficult time, we look forward to meeting with those responsible for the process to address any concerns they may have and hopefully find a way forward."