Ascent Resources Regulatory News (AST)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

24 September 2020

FOR IMMEDIATE RELEASE

Ascent Resources plc

("Ascent" or "the Company")

Interim results for the period ended 30 June 2020

Ascent Resources plc, the AIM quoted onshore Caribbean, Hispanic American and European energy and natural resources focussed company is pleased to report its interim results for the six months ended 30 June 2020.

Summary:

· New Board appointed

· Restructuring of existing RiverFort debt and cancellation of equity swap agreement

· New market entry into Cuba with MOUs over producing Block 9B and Blocks 9A, 12 & 15

· Strategic review of Slovenian investment and proposal submitted to restructure Joint Venture arrangements

· Instigation of new Special Situations growth strategy

Post Period Highlights:

· Legal claim against Republic of Slovenia progressed with serving of Notice of Dispute under Bilateral Investment Treaty and Energy Charter Treaty

Enquiries:

Chairman and CEO's statement

Ascent has already undergone significant change following the appointment of the new Board of Directors and executive team who took their seats in March and April this year. The change has included the planned introduction of a Cuban portfolio, taking concrete steps to sort out the Slovenian legacy asset and, most importantly, the initiation of a countercyclical growth strategy focused on identifying Special Situation opportunities. We expect to be in a position to reveal our first Special Situation transaction later this year.

Cuba Market Entry

The Company announced in April a broadening of its portfolio with a new market entry into Cuba with the acquisition of Energetical Limited securing the MOU to onshore Block 9B which contains the producing Majaguillar and San Anton fields. This initial action was quickly followed with a further signature of a binding memorandum of understanding directly with The Cuban National Oil Company ("CUPET"), over onshore Blocks 9A, 12 and 15 which represent over 7,000km2 of exploration acreage with each license having had prior oil shows or discoveries made. This presents the Company with a unique position to enter the highly prospective Cuban upstream space centred around a production lead strategy initially focused on 9B and dovetailing with significant exploration upside. The Company is also reviewing potential investments in battery metals mining noting that Cuba has one of the largest deposits of Nickel worldwide. Nickel, as a battery metal, has the major advantage of helping to deliver high energy density and greater storage capacity at lower cost and with continuing advancements in nickel battery technology the metal is positioned to have an increasing role in global energy storage systems.

Slovenia

During the period, the new Board conducted a technical and economic review of the Petisovci asset and concluded that i) Forward gas prices are sufficiently high for the development to be cash generative; ii) Continued material production from the tight gas project would require regular stimulation activity; and iii) Further stimulation of PG-10 and PG-11A wells should have a material positive impact on production levels. Following the submission of a proposal by the Company, the JV partner has expressed willingness to enter into discussions to restructure the JV arrangements for the benefit of all parties. Following the Administrative Court of the Republic of Slovenia's recent confirmation of its decision to require an Environmental Impact Assessment ("EIA") in order to re-stimulate the PG-10 and PG-11A wells, a new technical team has been contracted to prepare a detailed stimulation plan and updated Field Development Plan. These plans will form the basis of an EIA application in due course.

The Company is also progressing its legal claim against the Republic of Slovenia, to be brought under the Bilateral Investment Treaty and Energy Charter Treaty. The Company instructed a specialist legal advisor to advance towards International Arbitration which resulted in the serving of a Notice of Dispute to the Republic of Slovenia which formally sets out the breaches Slovenia have made under the BIT and ECT.

Corporate

During the period in review the Company has successfully restructured its financing arrangements with RiverFort with both the cancellation of the Equity Swap Agreement and reprofiling of the short term loan repayable on demand to a convertible instrument at a premium to the prevailing share price and maturing in 2022. This provides the Company with the runway to resolve its position in Slovenia and develop the business outside of Slovenia. The Company has also successfully raised new equity in support of their appointments and to advance their new initiatives in Cuba. Post period in review a further financing package has been secured which will allow the company to accelerate its Special Situations strategy which should see us add further commodity and geographic diversification as well as hopefully provide for a pathway to material cash generation within 12 months of a transaction.

In March and April of this year, the prior Board of Directors exited and James Parsons took the seat of Executive Chairman, Andrew Dennan was appointed as Chief Executive Officer and Ewen Ainsworth and Leonardo Salvadori both joined as Non-Executive Directors of the Company. Post period in review the Company has also announced further changes to its Board and Senior Executive team with Leonardo Salvadori moving from his Plc Non-Executive Director position to step up and join the executive team as Technical Director. Two new appointments have been announced with Mr Malcolm Graham-Wood joining as Non-Executive Director and Mr Stephen Birrell joining the Company as Independent Non-Executive Director, both effective as of October. The Board would then be composed of two Independent Directors and a majority of Non-Executives as suggested by the Quoted Companies Alliance Corporate Governance Code, the corporate governance code that the Company has chosen to adopt.

Outlook

Following a phase of legacy clean up, the Company is now poised for success with a new energised team, a new countercyclical growth strategy, dual legal and industrial routes being pursued in Slovenia in addition to the entry into the highly prospective Cuban upstream space pre US Elections.

We wish our shareholders safe passage through these turbulent times and look forward to, perhaps long overdue, success at Ascent Resources plc on multiple fronts.

James Parsons Andrew Dennan

Executive Chairman Chief Executive Officer

23 September 2020 23 September 2020

CEO's report

Financial performance

Revenue for the first six month of 2020 was £nil, down from £242,000 in the prior period due to declining production volumes and revenues versus fixed operating costs.

Closing cash at 30 June 2020 was £304,000 compared to £77,000 in the prior period.

During the period the Company raised £848,000 before costs in two equity placings in March and May 2020. There was a cash outflow from operations of £536,000 and an inflow of £766,000 from financing activities which resulted in a net cash inflow for the six months of £227,000.

Operational performance

Total production for the six months to 30 June 2020 was 1.14 million cubic metres of gas and 30,940 litres of condensate.

Gas sales to INA remain suspended as wellhead pressure is below the export pipeline pressure. The sales contract remains valid and should the Company increase production gas sales may be able to be resumed. The Company produced gas in the year to date which was sold locally to an industrial buyer through a low pressure pipeline, however the revenue from this is less than the fixed costs of the field and pursuant to a deal agreed in Q4 2019 the Company is not currently receiving any revenue from this declining production, with the proceeds being retained by the operating service provider to pay towards their fixed costs.

Consolidated Income Statement

for the Period ended 30 June 2020

Consolidated Statement of Comprehensive Income

for the Period ended 30 June 2020

Consolidated Statement of Changes in Equity

for the Period ended 30 June 2020

Consolidated Statement of Financial Position

As at 30 June 2020

Consolidated Statement of Cash Flows

for the six months ended 30 June 2020

Notes to the Interim Financial Statements

For the six months ended 30 June 2020

1. Accounting Policies

Reporting entity

Ascent Resources plc ('the Company') is a company domiciled in England. The address of the Company's registered office is 5 New Street Square, London EC4A 3TW. The unaudited consolidated interim financial statements of the Company as at 30 June 2020 comprise the Company and its subsidiaries (together referred to as the 'Group').

Basis of preparation

The interim financial statements have been prepared using measurement and recognition criteria based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted for use in the EU. The interim financial information has been prepared using the accounting policies which were applied in the Group's statutory financial statements for the year ended 31 December 2019.

New Standards adopted as at 1 January 2020

Accounting pronouncements which have become effective from 1 January 2020 are:

· IFRS 3 Business Combinations - definition of a business

· IAS 1 and IAS 8 - definition of material

· IFRS 9, IFRS 7 and IAS 39 - interest rate benchmark

· IFRS 7 - Insurance contracts

These accounting pronouncements do not have a significant impact on the Group's financial results or position.

All amounts have been prepared in British pounds, this being the Group's presentational currency.

The interim financial information for the six months to 30 June 2020 and 30 June 2019 is unaudited and does not constitute statutory financial information. The comparatives for the full year ended 31 December 2019 are not the Group's full statutory accounts for that year. The information given for the year ended 31 December 2019 does not constitute statutory financial statements as defined by Section 435 of the Companies Act. The statutory accounts for the year ended 31 December 2019 have been filed with the Registrar and are available on the Company's web site www.ascentresources.co.uk. The auditors' report on those accounts was unqualified. It did not contain a statement under Section 498(2)-(3) of the Companies Act 2006.

Going Concern

The Financial Statements of the Group are prepared on a going concern basis.

Production from Pg-10 and Pg-11A has declined and anticipated production revenue is not expected to cover anticipated costs until the Company has the funding and the permits required for further well re-entries.

On 5 August 2020, the company completed a £0.3 million subscription and agreed a definitive loan agreement with Align Research Limited to provide £0.4 million through an unsecured loan facility. These funds will be used for working capital and project costs; however, the Company may require further funding to cover further development projects over the next twelve months.

The Directors have a range of different options including, but not limited to new borrowings, corporate transaction or new equity placings.

However, there can be no guarantee over the outcome of these options and as a consequence there is a material uncertainty of the Group's ability to raise the necessary finance, which may cast doubt on the Group's ability to operate as a going concern. Further, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

Principal Risks and Uncertainties:

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 11-12 of the Annual Review 2019, a copy of which is available on the Company's website at www.ascentresources.co.uk. 

2. Operating loss is stated after charging

3. Acquisitions

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 30 June 2020 were:

Energetical Limited

As a first step towards building its Cuban portfolio, the Company acquired 100% of the share capital of Energetical Limited. 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 deferred 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.

The amount of identifiable net assets assumed at the acquisition date is shown below:

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. 

4. Earnings per share

5. Property, plant & equipment and Exploration and Evaluation assets

6. Trade & other receivables

7. Trade & other payables

8. Borrowings

The non-current convertible loan notes relate to the loan arrangement with Riverfort Global opportunities that was refinanced in February 2020. The outstanding loan of £375,020 has been 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 current convertible loan notes were due from redemption on 19 November 2019 and at the balance sheet date £5,625 remain unclaimed.

9. Contingent consideration due on acquisitions

The fair value of contingent consideration was based on the present value of cash flows and the market value of the shares to be issued.

10. Share Capital

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.

· On 7 May 2002, 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.

11. 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:

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.

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 June 2020 have an exercise price in the range of 1.58p and 20.00p (and a weighted average contractual life of 7.5 years.

Details of the warrants outstanding are as follows:

The warrants outstanding at the period end have a weighted average remaining contractual life of 1.9 years. The exercise prices of the warrants are 5.00p per share.

12. Events after the reporting period

On 24 July 2020, the Company formally notified the Government of the Republic of Slovenia of the existence of disputes under the UK - Slovenia bilateral investment treaty ("BIT") and the Energy Charter Treaty ("ECT"). Notifying in particular the fact that certain actions have caused considerable harm to the Investors' investments in Slovenia constitute breaches by the Government of Slovenia of the protections established by the BIT and ECT.

On 27 July 2020, the company announced that Stephen Birrell and Malcolm Graham-Wood would be joining the board as non-executive directors with effect from 1 October 2020. It was also announced that Leonardo Salvadori would be assuming the role of part time Technical Director.

On 6 August 2020, the Company raised gross proceeds of £300,000 from the issue of 15,000,000 ordinary shares of 0.5p at 2p per share. The Company also agreed to issue 1,500,000 ordinary shares of 0.5p at a placing price of 2p per share in respect of an invoice received from a supplier who has agreed to receive the payment in lieu of their fees.

On 6 August 2020, the Company entered into a definitive loan agreement with Align Research Limited to provide, in aggregate, £400,000 through an unsecured loan facility for working capital purposes in support of the execution of the Special Situations strategy. The loan is to be drawn down in three tranches being £100,000 on 15 August 2020, £100,000 on 3 September 2020 and £200,000 on 4 October 2020. The loan plus a fixed coupon of 8% is repayable in full on maturity which is the 31 March 2021.

Additionally, the Company has agreed to repay a total of £135,000 of the total outstanding Riverfort loan of £375,020, which will be reduced to £240,020 and due to mature on the 11 February 2022.