Ascent Resources Regulatory News (AST)

Ascent Resources plc

("Ascent" or "the Company")

Convertible Loan Note Issue, appointment of Director and Update on Strategic Review

Ascent announces that it has entered into an agreement with Henderson Global Investors Limited and Henderson Alternative Investment Advisor Limited (together, "Henderson") for the subscription by Henderson of convertible loan notes of up to £5.5 million in principal amount. In addition, the Company is pleased to announce that Clive Carver has joined the board as non-executive director with immediate effect.

Background to and details of the Convertible Loan

Ascent currently has various obligations that it needs to meet in 2013 in order to progress its asset base and most importantly to move its Petišovci Project towards production. A key cash requirement is the repayment of its one year loan facility of £2.3 million with YA Global Master SPV Ltd ('Yorkville'), an investment fund managed by Yorkville Advisors LLC. The Yorkville loan facility bears interest at a rate of 9% per annum and by 31 December 2012 circa £1.9 million of this loan will be outstanding, in addition to approximately £0.8m of debt that is payable through to 1 July 2015 to Cento Bank in the Company's Italian subsidiary.

As noted in the Company's interim results announcement on 27 September 2012, and in a further announcement on 3 December 2012, Ascent currently has sufficient cash resources to meet its overheads until the end of 2012. In 2013, the Company has to continue making interest payments and loan repayments to Yorkville and Cento bank of circa £1.9m and cira £350k respectively as well as meeting its monthly overheads and to fund its modest 2013 capex programme. Monthly revenues from the sale of hydrocarbons are declining, as expected, as the field nears towards the end of its life over the next 12 to 18 months and hence the Company does not currently have the capital resources to make its loan repayments and also meet its other obligations. The Company has therefore sought other sources of financing, including additional loans from major shareholders and other third parties.

Having reviewed a large number of different funding options, Ascent believes that the Convertible Loan being offered provides it with the greatest opportunity to generate shareholder value in the next twelve months, particularly from the Petišovci Project in Slovenia, which has been stalled awaiting various signatures that have been unreasonably withheld. Ascent has therefore agreed terms, pursuant to an agreement dated 23 December 2012 ("the Subscription Agreement") for the issue of an unsecured convertible loan notes repayable 31 January 2015 (the "Convertible Loan" or "Convertible Loan Notes") for £5.5 million to be underwritten by Henderson, subject to the terms and conditions of the Subscription Agreement ("the Proposal").

The Convertible Loan will be issued in units of £1 and interest will be at a fixed rate of 9% per annum, which will be rolled up quarterly in arrears and included as principal to be repaid or converted. It is not currently intended that the Loan Notes be listed on any stock exchange or other market although Henderson may elect to seek a listing of the Convertible Loan Notes at its discretion. The Convertible Loan will be unsecured (although security may be sought subject to the consent of the Company's other secured lenders) and the Loan Notes will be convertible at any time, when pursuant to the terms upon which they are issued they are capable of conversion, prior to repayment or subject to automatic conversion into ordinary shares of 0.1 pence each in the share capital of the Company ("Ordinary Shares") at the holder's option, at a conversion price, fixed at 0.5 pence ("the Conversion Price"). Each Convertible Loan Note of £1 will therefore be convertible into 200 Ordinary Shares.

The Company's obligation to convert the Convertible Loan Notes is subject to the Company having the appropriate shareholder authorities to permit conversion.

Use of Proceeds

It is proposed that the first tranche of £3 million of the Convertible Loan will be drawn immediately ("the First Drawdown") in order to make interest payments and a partial repayment of the Yorkville loan, make interest payments and capital repayments to Cento bank, meet certain capital expenditure requirements and to provide Ascent with on-going working capital.

It has been decided that the second tranche of £2.5 million (being the aggregate proceeds of the Open Offer of Convertible Loan Notes or Ordinary Shares) of the Convertible Loan Notes will be placed with Henderson subject to clawback from investors in an open offer ("the Open Offer") to all Ascent shareholders. The Open Offer will be made to shareholders on the register on the record date, which will be announced at the time of announcing the full details of the Open Offer, currently anticipated to be in early February 2013. It is currently anticipated that the Open Offer will provide shareholders with the option to subscribe for Convertible Loan Notes, or for new Ordinary Shares at a price of 0.5 pence per Ordinary Share. Investors' entitlements to apply in the Open Offer will be pro-rata to their holdings of Ordinary Shares in the Company at the record date.

The obligation on Henderson to subscribe for Convertible Loan Notes in the second tranche is conditional upon there being no material adverse change to the Ascent Group or the Petišovci project. Subject as mentioned, Henderson has agreed to subscribe for and underwrite any Convertible Loan Notes not taken up by shareholders in the Open Offer. It is expected that the second tranche of £2.5 million will, when received, be used to make interest payments and a final repayment of the Yorkville loan, to meet certain capital requirements and to provide Ascent with ongoing working capital.

It is currently anticipated that the net proceeds from the issue of the Convertible Loan Notes and the Open Offer, alongside forecast net revenues from hydrocarbon sales, will provide the Company with sufficient working capital to meet its capital requirements for 2013 and therefore provide more time for the Company to focus its efforts on unlocking the potential for the Petišovci project to generate significant cashflow.

Any participation in the Open Offer by existing shareholders will reduce Henderson's underwriting commitment. The Company will pay Henderson an underwriting fee of 2% of the aggregate amount of the Convertible Loan Notes. Henderson also have the right, whilst the Convertible Loan Notes are outstanding, to appoint two non-executive directors to the Board of Ascent, one of whom shall be the Chairman. To that end, Clive Carver has been appointed to the Board as a non-executive director, further details of whom can be found below.

The Subscription Agreement also contains certain negative pledges, providing Henderson with certain rights of consent in relation to certain matters concerning the Company and its business, including in relation to acquisitions or disposals, the conduct of the business of the Company and its group and incoming indebtedness. Furthermore, it should be noted that it is a term of the Subscription agreement that Len Reece, CEO, and Scott Richardson Brown, Finance Director, will enter into a binding commitment to invest by way of convertible loan notes on the same terms as the Convertible Loan Notes the equivalent of 50% and 25% respectively of one year's annual post tax salary over a 24 month period, to be invested on a monthly basis commencing on 31 January 2013.

Rule 9 Whitewash

The City Code on Takeover and Mergers ("the Takeover Code") governs, inter alia, transactions which may result in a change of control of a public company to which the Takeover Code applies. Under Rule 9 of the Takeover Code any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested or in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, that person is normally required to make a general offer to all the remaining shareholders to acquire their shares.

Similarly, Rule 9 of the Takeover Code also provides that when any person, together with persons acting in concert with him, is interested in shares which, in aggregate, carry more than 30 per cent. of the voting rights of such company, but does not hold shares carrying 50 per cent. or more of such voting rights, a general offer will normally be required if any further interest in shares is acquired by any such person.

Rule 9 of the Takeover Code further provides, among other things, that where any person who, together with persons acting in concert with him holds over 50 per cent. of the voting rights of a company, then they will not generally be required to make a general offer to the other shareholders to acquire the balance of their shares.

An offer under Rule 9 must be in cash and must be at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company in question during the 12 months prior to the announcement of the offer.

It is therefore proposed that simultaneously with the Open Offer, Ascent will publish a circular seeking shareholder approval for (i) the issue of the new shares required on conversion of the loan notes; and (ii) a whitewash resolution waiving the requirement for a Rule 9 offer to be made by Henderson pursuant to the Takeover Code if Henderson's shareholding in the Company exceeds 30% of the total voting rights (the Whitewash"). If the loan instrument were to be fully converted by Henderson, Henderson would hold approximately 1.25 billion Ordinary Shares, representing 58 per cent. of the total voting rights of Ascent at that time.

As noted above, the record date for the Open Offer will be announced at the time of publishing the circular. Unless the Whitewash has been approved by independent shareholders or unless Henderson makes a takeover offer as required by the Takeover Code, Henderson will not be able to convert any of the Loan Notes if as a result of such conversion, Henderson would hold more 30% or more of the total voting rights of Ascent.

If the appropriate shareholder approvals are not received by 31 March 2013, the Convertible Loan Notes and interest thereon will become repayable at any time thereafter at the election of Henderson. In such circumstances, on redemption a further sum will be payable as compensation for the loss of the conversion right calculated as the value (if any), determined in accordance with the provisions of the Convertible Loan Note instrument, attributable to the shares into which the Convertible Loan Notes would have converted had conversion taken place. The Convertible Loan Notes will be repayable immediately if the Company enters into any formal winding up or insolvency process, stops or suspends payment of all or a material part of its indebtedness, or seeks to reschedule all or a material part of its indebtedness.

The Board, having been so advised by finnCap, believe that the Proposal is in the best interests of shareholders and do not believe that the Whitewash can be sought before the First Drawdown as the funds are required immediately in order to adhere to deadlines in relation to loan repayments, capital expenditure requirements and ongoing working capital. Without the monies from the First Drawdown, the Company will not have adequate working capital or the funds to meet loan repayments and thus would not be able to continue as a going concern. In providing advice to the Board, finnCap has taken into account the Board's commercial assessment. The Whitewash will be sought simultaneously with the open offer as soon as is reasonably practicable and will be recommended by the Directors of Ascent.

Darwin Facility

Following the subscription by Henderson for the first tranche of the Convertible Loan, the Company has agreed, subject to termination of the Yorkville standby equity distribution agreement ("the SEDA"), to enter into a standby equity distribution facility with Darwin Strategic Limited, majority owned by a subsidiary of Henderson, AlpahGen Volantis Fund ("the Darwin Facility"). The Darwin Facility will be substantially identical in terms to, and in any event on terms no less favourable to the Company than, the SEDA. The Company has also undertaken to make no further drawdown on the SEDA whatsoever and whensoever.

Related Party Transactions

Henderson is a substantial shareholder in Ascent, holding approximately 14% of the voting rights of the Company and, Len Reece and Scott Richardson Brown, by virtue of being directors of the Company, are all considered to be related parties of the Company as defined by the AIM Rules. The issue of the Convertible Loan Notes and the participation by Len Reece, CEO and Scott Richardson Brown, Finance Director, and the Darwin Facility are therefore related party transactions pursuant to AIM Rule 13. The independent directors of the Company, having consulted with the Company's nominated adviser, finnCap Limited, consider that the terms of the Convertible Loan and the Darwin Facility, and the participation by Len Reece and Scott Richardson Brown are fair and reasonable insofar as the Company's shareholders are concerned.

Appointment of Non Executive Director

Clive Nathan Carver, aged 51, is the Executive Chairman of Roxi Petroleum plc, an AIM listed oil and gas exploration and production company operating in Kazakhstan, where he served as non Executive Chairman from 2006 to May 2012. He is also Non-Executive Chairman of Lochard Energy Group plc. He has worked in the City since 1986 and focused exclusively on the small cap sector since 1994. Mr. Carver is a Fellow of the Institute of Chartered Accountants in England and Wales and is a qualified Corporate Treasurer.

Mr Carver currently holds, and has held (including all appointments during the five years preceding the date of this announcement), the following directorships and partnerships, other than the Company:

There is no further information to be disclosed under Schedule Two (g) of the AIM Rules for Companies.

Update on Strategic Review

Ascent has a clear near term objective, which is to obtain the necessary consents from signatories to the Joint Venture and other contracts required to progress and complete the Petišovci project in Slovenia. Parallel to this the Board is also looking at maximising the long-term value of the Company's portfolio for shareholders by undertaking a formal strategic review, as was announced on the 3rd December.

The strategic review is being undertaken by FirstEnergy Capital LLP ("FirstEnergy") who is assessing a wide range of options for the Company. The strategic review is in a very early stage of the process and so there can be no certainty that any discussions will lead to an agreement.

The aggregate proceeds from the Convertible Loan Note and Open Offer of £5.5m before fees and expenses will provide the Company with sufficient working capital to meet its expected needs in 2013 and therefore provide more time for the Company to focus its efforts on unlocking the potential for the Petišovci project to generate significant cashflow. Ascent is very pleased with the support that Henderson has provided the Company, underpinning our belief in the potential to deliver meaningful shareholder value from our assets. Crucially it will give Ascent a significant opportunity, and importantly the necessary time, to find solutions to solve our problems in Slovenia. Developing the Petišovci Project would be hugely beneficial for all concerned given the significant continued investment we are looking to make in Slovenia, the associated employment and expected revenue generation.

The Board, having been so advised by FirstEnergy, does not believe that the Proposal will result in any offer or bona fide possible offer being frustrated or in shareholders being denied the opportunity to decide on its merits.

Enquiries:

Ascent Resources plc

Scott Richardson Brown, Finance Director

Tel: +44 (0)20 7251 4905

finnCap (Nominated Adviser and Broker)

Tel: +44 (0) 20 7220 0500

FirstEnergy Capital LLP (Financial Adviser)

Hugh Sanderson / Travis Inlow

Tel: + 44 (0) 20 7448 0200

Press Enquiries - Cardew Group

Tel: +44 (0) 20 7930 0777

A copy of this announcement will be available on the Company's website at www.ascentresources.co.uk as soon as possible.

Rule 2.10 Disclosure:

In accordance with Rule 2.10 of the Code, the Company confirms that it has 1,025,509,722 ordinary shares of GBp 0.10 each in issue and admitted to trading on the AIM Market of the London Stock Exchange with the ISIN GB00B03W6Y84.

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.