Ascent Resources Regulatory News (AST)

28 Sep 2007 15:43

Ascent Resources PLC28 September 2007 Ascent Resources plc / Epic: AST / Index: AIM / Sector: Oil and Gas Ascent Resources plc ('Ascent' or the 'Company') Interim Results Ascent Resources plc, the AIM-traded oil and gas exploration and productioncompany with assets in six countries across Europe, announces its results forthe six months ended 30 June 2007. Overview • Advanced pan-European exploration and production portfolio with over 20 projects across six countries • Since the period-end, the group has agreed to acquire a strategic interest in Italian drilling contractor to provide priority access to rigs in a busy and highly competitive market • Continued to realise value across portfolio as exemplified by the Hungarian gas discovery and the Italian farm-out • Completed seven wells to date in Hungary, Italy and Spain with two discoveries - gas in Hungary and oil in Italy CHAIRMAN'S STATEMENT During this period Ascent has continued to advance its pan European explorationand production portfolio. The Company, with over 20 projects across sixcountries, maintains a high level of activity with its on-going programme. TheCompany's strategy remains unchanged and the rationale for the strategy isclearly demonstrated by the recently announced farm-out in Italy and the jointdevelopment project in Hungary. During the period four wells have been drilled by the Company bringing the totalto date to seven. All of these seven wells are in just four of the 20 projectsin Ascent's portfolio. Ten further wells are planned over the next two years atwhich point just over half of the portfolio will have seen drilling activity.The portfolio is continually reviewed both for the evaluation of suitable newopportunities and for timely divestments. The Company retains operator status in the majority of its projects. The Boardbelieves this to be an important factor in controlling the projects and itallows Ascent to optimise work programmes. In this regard, Ascent has acquireda strategic interest in an Italian drilling contractor. This will provide theCompany with priority access to rigs in a busy and highly competitive market. Ascent continues to realise value across the portfolio as exemplified by theHungarian gas discovery and the Italian farm-out. The Board is encouraged bythe potential of the portfolio and by the early results and given the highactivity levels planned, is looking forward to further enhancement of portfoliovalue. In line with expectations we are reporting a pre-tax loss of £1,355,000 for thesix months to 30 June 2007 and cash reserves of £2,676,976. Finally I would like to thank everyone involved with the Company for their hardwork and dedication in moving Ascent forward. The Board looks forward to furthergrowth in the coming months. The indications from work-in-progress areencouraging and I look forward to developments over the next period. John Kenny Chairman OPERATIONS REVIEW Ascent's strategy is focused on developing oil and gas projects in Europe whereit can take advantage of multi-fold benefits including developed infrastructure,deregulated local market access and political and financial stability. Itoperates a portfolio approach with no single project dominating either a countryor the Company. Risk is further minimised by targeting working petroleum systemsand operating in each country with in-country management or equity partners.With the stable European gas market, Ascent's portfolio favours gas over oil.With the exception of the Netherlands, all of its projects are located onshorewhere operating and development costs are substantially lower than they areoffshore. The seven wells that have been completed by Ascent to date in Hungary, Italy andSpain, were drilled first as they were all shallow wells, less than 2,000m deepand as such, less challenging operationally. From these seven wells, twodiscoveries have been made: gas in Hungary and oil in Italy. The next series of10 wells are generally deeper and target substantially larger prospects. Thestrategic interest in Perazzoli Drilling, an Italian drilling contractor is animportant aspect of the future drilling plan because drilling rigs and theancillary equipment for exploration projects are in short supply with highactivity levels continuing to be experienced throughout Europe. Ascent believes that the value of the Company will be advanced in the short-termand underpinned for the main part by proving hydrocarbon reserves and thecurrent activities are designed to achieve this primarily with an activedrilling programme. SPAIN: Production continues and on-going maintenance and efficiency programmesincluding the introduction of new artificial lift technology have maintainedproduction without decline at about 110 barrels of oil per day net to Ascent's88.75% interest. In exploration, the drilling of the Hontomin-4 appraisal well was disappointingwith the reservoir present but faulted deeper and therefore below the oil-watercontact. The new Rocamundo exploration permit is expected to be issued shortlyand this brings important gas exploration opportunities close to our existingoil production operations. HUNGARY: The field rehabilitation joint development project in the south western part ofHungary has completed its technical feasibility stage and the drilling of thefirst horizontal wells is planned for December. The development activities for the three productive wells in the eastern Nyirsegpermit continue. Contracts for the construction of the facilities and pipelinesare being prepared and completion work on the wells may start before the end ofthe year. The exploration work in Nyirseg continues. The PEN-102 well was suspended andthe VAM-1 well abandoned. A 3-D seismic survey has been approved by partnersand it will encompass the PEN-102 location as well as the area around all theproven productive wells. SLOVENIA: Ascent now has interests in two projects by the acquisition of NSC the operatorof a joint venture with a 45% interest in the Petisovci Dolina ("P-D") oilfieldand a 15.75% interest in the underlying Petisovci Globocki ("P-G") gasfield,which is the subject of the MOL Tight Gasfield Re-development project. In the P-G gasfield which is in similar formations to the reservoirs of southwest Hungary, field operations are on-going to assess the future potential ofthe D-14 well and in the shallower P-D oilfield, a work programme to initiatejoint venture oil production is being prepared. SWITZERLAND: Following the completion of the prospectivity reports that have comprehensivelyre-evaluated the hydrocarbon potential of Ascent's three exploration permits,farm-out discussions are underway with prospective farm-in partners. NETHERLANDS: On the Company's exploration permits, exploration activity, notably theinterpretation of the 3-D seismic, is at an advanced stage. The choice ofdrilling locations both for the appraisal of the M11-1 gas discovery and newexploration prospects are under evaluation. Ascent has applied for new exploration permits and decisions on theseapplications in the northern part of the Dutch offshore are expected to be madesoon. ITALY: The Anagni-1 oil discovery in the Latina Valley south-east of Rome is onproduction test and is recovering drilling fluids lost during the drilling anddeepening operations. The work to date confirms excellent reservoircharacteristics with high productive capacity. The current permit for testingoperations has been extended to the end of October. Two appraisal welllocations are being chosen and geophysical surveys to determine the extent ofthe structure are being planned. In the Po Valley, the farm-out of the acreage with the provision for one or twowells to be fully funded by the in-coming party demonstrates the excellentprospectivity of this exploration area. The Arrone-1 gas exploration well to the south west of Rome was abandoneddespite a strong gas kick in the secondary target. Testing was not undertakenbecause the log data indicated the reservoirs were not of commercial potential. FINANCIAL OVERVIEW • Overall loss of £1.4m (H1 2006: £0.6m) mainly due to write down of the Hontomin 4 Well in Spain (£0.84m) and VAM 1 Well in Hungary (£0.14m) • A profit of £0.7m realised on the disposal of Millennium International Resources Corporation Ltd in January for €2m • Funding of £3.3m net of expenses secured through the issue of 25,000,000 new ordinary shares of 0.1p each at 14p per share • Acquisition of an additional 10% interest in the Frosinone licence in Italy satisfied by cash and the issue of 300,000 new ordinary shares The financial results of the Group for the six months ended 30 June 2007 havebeen prepared on a basis which is consistent with the recognition andmeasurement principles of IFRS as adopted by the EU ('Adopted IFRS') expected tobe applied when the group IFRS consolidated financial statements for the yearending 31 December 2007 are prepared. Where appropriate comparative numbershave been restated. Previously the Group had reported under United Kingdom Generally AcceptedAccounting Principles (UK GAAP). The impact of moving to IFRS on the GroupsFinancial Statements are set out in note 9. In preparing the consolidated interim financial information management haverevisited the assumptions and treatment of the Group's activities. As a resultmanagement have corrected errors under previous GAAP in the consolidated interimfinancial information. These adjustments have not been audited and a fullreconciliation to the audited position previously disclosed is set out in note8. CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2007 Six months Six months Eighteen months ended 30 June ended 30 June ended 31 December 2007 2006 2006 £ £ £ Restated Restated (unaudited) (unaudited) (unaudited) Revenue 152,652 232,130 384,499Cost of sales (1,406,165) (140,067) (870,215) Gross (loss)/profit (1,253,513) 92,063 (485,716) Other operating income - - 85,993 Administrative expenses (779,295) (797,614) (1,929,745) Operating loss (2,032,808) (705,551) (2,329,468) Finance income 19,724 51,332 129,117Finance expense (29,966) - (11,514)Profit on sale of investments held for sale 695,550 - 57,858Share of results of associates - 59,045 - Loss before taxation from continuing operations (1,347,500) (595,174) (2,154,007)Taxation (7,529) (716) - Loss for the period attributable to equity shareholders (1,355,029) (595,890) (2,154,007)Profit attributable to minority interests - - - Loss for the period (1,355,029) (595,890) (2,154,007) Loss per shareBasic 2 0.50 0.23 0.94Diluted 0.50 0.23 0.94 CONSOLIDATED BALANCE SHEET as at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 £ £ £ Restated Restated (unaudited) (unaudited) (unaudited)Non-current assetsInvestments in associates - 338,448 -Tangible assetsOil and gas assets 169,396 44,040 176,788Intangible assetsExploration and appraisal 6,919,937 3,712,748 4,218,918 Total non-current assets 7,089,333 4,095,236 4,395,706 Current assetsAssets held for sale 148,217 - 805,303Inventories 603,856 491,794 450,774Trading investments 58,524 44,675 50,482Trade and other receivables 2,311,349 563,623 2,121,568Cash and cash equivalents 2,676,976 2,327,653 1,941,044 Total current assets 5,798,922 3,427,745 5,369,171 Current liabilitiesTrade and other payables (2,929,861) (984,329) (2,481,122) Net current assets 2,869,061 2,443,416 2,888,049 Non-current liabilitiesBank loans (1,168,921) - (917,721)Provisions (197,943) (215,075) (194,995) Net assets 8,591,530 6,323,577 6,171,039 EquityAttributable to:Share capital 292,946 256,671 264,825Share premium account 11,688,209 7,524,123 7,943,786Share based payment reserve 769,710 344,149 793,060Translation reserves 13,814 1,949 (4,472)Retained earnings (4,173,518) (1,803,684) (2,826,529) Total equity attributable to shareholdersof the Company 8,591,161 6,323,208 6,170,670 Minority Interest 369 369 369 Total Equity 8,591,530 6,323,577 6,171,039 Six months ended Six months ended Eighteen months 30 June 30 June ended 31 December 2007 2006 2006 £ £ £ Restated Restated (unaudited) (unaudited) (unaudited) Loss for the period before taxation (1,347,500) (595,174) (22,154,007)Adjustments for:Financial income (19,724) (51,332) (129,117)Financial expense 29,966 - 11,514Profit on sale of investments held for sale (695,550) - (57,858)Profit on disposal of current asset (56,357) -investments -Share of results of associate - (59,045) -Depreciation 15,937 14,103 26,110Impairment of exploration expenditure 979,299 - 242,708Amortisation of decommissioning costs 2,948 - 10,281Share based payment charge - 85,611 576,380Revaluation of investment (8,042) (2,073) -Exchange differences 15,862 9,290 (5,247) (1,026,804) (654,977) (1,479,236) (Increase)/decrease in debtors (194,086) 558,175 (908,410)Increase in creditors 464,937 183,852 1,503,910Increase in inventories (153,083) - (450,773) Net cash from operating activities (909,036) 87,050 (1,334,509) Six months ended Six months ended Eighteen months 30 June 30 June ended 31 December Restated Restated (unaudited) (unaudited) (unaudited)Investing activitiesFinancial income 19,724 51,332 129,117Payments for investing in exploration (3,387,792) (732,029) (3,120,155)Acquisition of property, plant and equipment (4,268) (5,832) -Acquisition of subsidiaries held for resale - - (855,786)Proceeds from disposal of current asset 1,352,637 206,549 -investments Proceeds from disposal of subsidiary held for resale - - 987,629 Acquisition of associated undertaking - (100,995) -Acquisition of subsidiaries - (388,343) (158,144)Cash acquired with subsidiaries - 24,922 77,533 Net cash from investing activities (2,019,699) (944,396) (2,939,806) Financing activities - - -Financial expense (29,966) - (11,514)Loans received/ paid 251,199 - 1,346,620Loan to an associated undertaking - (131,902) -Cash proceeds from issue of shares 3,618,434 10,500 1,282,515Share issue costs (175,000) - (75,615) Net cash from financing activities 3,664,667 (121,402) 2,542,006 Net increase / (decrease) in cash and cash equivalents 735,932 (978,748) (1,732,309) Cash and cash equivalents at beginning of 1,941,044 3,306,401 3,673,353period Cash and cash equivalents at end of period 2,676,976 2,327,653 1,941,044 NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2007 1 Accounting policies Reporting Entity Ascent Resources plc ("the Company") is a company domiciled in England. Theaddress of the Company's registered office is 30 Farringdon Street, London, EC4A4HJ. The consolidated interim financial information of the Company as at and forthe six month period ended 30 June 2007 comprise the Company and itssubsidiaries (together referred to as the "Group") and the Group's interest inassociates. The consolidated financial statements of the Group for the 18 months ended 31December 2006 are available from the Company's website atwww.ascentresources.co.uk. Non-statutory accounts The comparative figures for the period ended 31 December 2006 are not thecompany's statutory accounts for that financial year. Those accounts, which wereprepared under UK GAAP, have been reported on by the company's auditors anddelivered to the registrar of companies. The report of the auditors was (i)unqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report, and(iii) did not contain a statement under section 237(2) or (3) of the CompaniesAct 1985. In preparing the consolidated interim financial information management haverevisited the assumptions and treatment of the Group's activities. As a resultmanagement have corrected errors under previous GAAP and have been restated inthe condensed consolidated interim financial information. These adjustmentshave not been audited and a full reconciliation to the audited positionpreviously disclosed is set out in note 8. The financial information for the 6 months ended 30 June 2007 and 30 June 2006is unaudited. Basis of Preparation The next annual consolidated financial statements of the Ascent Resources plc ("the Group") will be prepared in accordance with International FinancialReporting Standards as adopted for use in the EU (IFRS). The financial results of the Group for the six months ended 30 June 2007 havebeen prepared on a basis which is consistent with the recognition andmeasurement principles of IFRS as adopted by the EU ('Adopted IFRS') expected tobe applied when the Group IFRS consolidated financial statements for the yearending 31 December 2007 are prepared. The financial information has been prepared under the historical cost conventionusing a fair value measurement of available-for-sale investments. The principalaccounting policies set out below have been consistently applied to all periodspresented. The financial information has been prepared on a going concern basis. This consolidated interim financial information was approved by the board ofDirectors on 28 September 2007. Errors under previous GAAP In the course of the IFRS conversion management reviewed the assumptions made indetermining the fair value of key acquisitions that make up the Group. As aresult management have restated the transactions recorded in the UK GAAPposition as at 31 December 2006, a full reconciliation has been provided innote 8. Transition arrangements IFRS 1 permits companies adopting IFRS for the first time to take certainexemptions from the full requirements of IFRS in the transition period. Theinterim financial information has been prepared on the basis of the followingmaterial exemptions: • Business combinations prior to 1 July 2005 have not been restated tocomply with IFRS 3 "Business Combinations" • IFRS 2 "Share-based Payments" has been applied retrospectively tothose options that were issued after 7 November 2002 and not vested by 1 July2005. • IFRS 1 "First time adoption of International accounting standards"translation differences have been deemed to be zero at the IFRS transition date. The disclosures required by IFRS 1 concerning the transition from UK GAAP toIFRS are given in note 10. Estimates and judgements The preparation of the consolidated interim financial information requiresmanagement to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets andliabilities, income and expense. Actual results may differ from these estimates. The key estimates and assumptions made by management in applying the Group'saccounting policies are set out below: • The fair value of the licences and geophysical data acquired duringthe period ended 31 December 2006 and 30 June 2007, £2,999,919 and £848,722respectively have been determined by management and are supported by referenceto similar transactions and managements experience and understanding of theindustry and local markets. • The Group has continued to account for its operations under thesuccessful efforts method previously reported in the financial statements forthe 18 months ended 31 December 2006. Management have reviewed the oil and gasexploration costs for possible impairment, as a result management considered itappropriate to write off £979,000 of capitalised costs (31 December 2006:£242,000, 30 June 2006 £ nil). • Management have made use of reports for estimating the group's provedand probable reserves prepared by an external consultant for the calculation ofits depletion of oil and gas interest charge. Reports are made annually andused as the basis for the years charge. During the period ended 30 June 2007depletion costs totalled £11,660 (31 December 2006, £219,787, 30 June 2006,Nil). • Management has estimated the useful economic lives of its plant andmachinery based on their experience and knowledge of these assets. • On 7 March 2007 the Company acquired Nemmeco Slovenia Corporation, acompany incorporated in the British Virgin Islands for €150,000 and contingentconsideration dependent on the future resources confirmed within the licences. • Management have been provided with a written estimate ofdecommissioning costs and have applied a cost of capital of 5% and inflationrate of 2.5% to calculate the decommissioning asset and matching liability whichis unwound over the life of the project. As at 30 June 2007 management recordeda decommissioning asset of £107,000 (31 December 2006 £121,000; 30 June 2006£111,000) and decommissioning liability of £124,023 (31 December 2006, £121,075,30 June 2006 £121,023). Basis of consolidation The financial information incorporates the results of the Company and entitiescontrolled by the Company (its subsidiaries). Control is achieved where theCompany has the power to govern the financial and operating policies of aninvestee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the period areincluded in the consolidated income statement from date that control commencesuntil the date that control ceases. Where necessary, adjustments are made to the results of subsidiaries to bringthe accounting policies used into line with those used by the Group. Where the Group has significant influence over entities, but not control overthe operating financial and operating policies. The consolidated interimfinancial information include the Group's share of the total recognised gainsand losses of associates on an equity accounted basis, from the date thatsignificant influence commences until the date that significant influenceceases. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Business combinations and goodwill On acquisition, the assets and liabilities and contingent liabilities ofsubsidiaries are measured at their fair values at the date of acquisition. Anyexcess of cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to profit and loss in the period ofacquisition. Goodwill arising on consolidation is recognised as an asset andreviewed for impairment at least annually. Any impairment is recognisedimmediately in profit or loss and is not subsequently reversed. Oil & Gas Exploration Assets All licence/project acquisitions, exploration and appraisal costs incurred oracquired on the acquisition of subsidiary are accumulated in respect of eachidentifiable project area. These costs, which are classified as non-currentassets are only carried forward to the extent that they are expected to berecouped through the successful development of wells in the area or whereactivities in the area have not yet reached a stage which permits reasonableassessment of the existence of economically recoverable reserves (successfulefforts). Pre-licence/project costs are written off immediately. Other costsare also written off unless commercial reserves have been established or thedetermination process has not been completed. Thus accumulated cost in relationto an abandoned area are written off in full against profit in the year in whichthe decision to abandon the area is made. When production commences the accumulated costs for the relevant area ofinterest are transferred from exploration and appraisal intangible assets to oiland gas tangible assets as developed oil and gas assets. Impairment of oil and gas exploration assets The carrying value of oil and gas exploration assets is assessed on at least anannual basis or when there has been an indication that impairment in value mayhave occurred. The impairment of oil and gas exploration assets is assessedbased on the Directors' intention with regard to future exploration anddevelopment of individual significant areas and the ability to obtain funds tofinance such exploration and development. Impairment of developed oil and gas assets When events or changes in circumstances indicate that the carrying amount ofexpenditure attributable to a successful well may not be recoverable from futurenet revenues from oil and gas reserves attributable to that well, a comparisonbetween the net book value of the cost attributable to that well and thediscounted future cash flows from that well is undertaken. To the extent thatthe carrying amount exceeds the recoverable amount, the cost attributable tothat well is written down to its recoverable amount and charged as animpairment. Depletion of developed oil and gas assets Costs carried in each well are depreciated on a unit of production basis usingthe ratio of oil and gas production in the period to the estimated quantity ofcommercial reserves at the end of the period plus production in the period.Costs in the unit of production calculation include the net book value ofcapitalised costs plus estimated future development costs. Changes in estimatesof commercial reserves or future development costs are dealt with prospectively. Decommissioning costs Where a material liability for the removal of production facilities and siterestoration at the end of the field life exists, a provision for decommissioningis recognised. The amount recognised is the present value of estimated futureexpenditure determined in accordance with local conditions and requirements. Anasset of an amount equivalent to the provision is also added to oil and gasexploration assets and depreciated on a unit of production basis. Changes inestimates are recognised prospectively, with corresponding adjustments to theprovision and the associated asset. Revenue recognition Oil sales revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for the Group's share of oil andgas supplied in the period. Inventories Inventories, including inventories of gas and oil held for sale in the ordinarycourse of business are stated at weighted average historical cost less provisionfor deterioration and obsolescence or, if lower net realisable value. Foreign currency The company's strategy is focussed on developing oil and gas projects acrossEurope funded by shareholder equity and other financial assets which areprincipally denominated in Sterling. The functional currency is Sterling. The assets and liabilities of foreign operations, including fair valueadjustments arising on consolidation, are translated to Sterling at foreignexchange rates ruling at the balance sheet date. The revenues and expenses offoreign operations are translated to Sterling at the average rate ruling duringthe period. Foreign exchange differences arising on retranslation arerecognised directly in a separate component of equity. Transactions in foreign currency are recorded at the rates of exchangeprevailing on the dates of the transactions. At each balance sheet date,monetary assets and liabilities that are denominated in foreign currencies areretranslated at the rates prevailing on the balance sheet date. Exchange gainsand losses on short-term foreign currency borrowings and deposits are includedwith net interest payable. Exchange differences on all other transactions, except relevant foreign currencyloans, are taken to operating profit. Dividends Dividends are recognised as a liability in the period in which they aredeclared. Taxation The tax expense represents the sum of the tax currently payable and any deferredtax. The tax currently payable is based on the estimated taxable profit for theperiod. Taxable profit differs from net profit as reported in the incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are never taxableor deductible. The Group's liability for current tax is calculated using theexpected tax rate applicable to annual earnings. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities for financial reportingpurposes and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at eachbalance sheet date and reduced to the extent that it is no longer probable thatsufficient taxable profits will be available to allow all or part of the assetto be recovered. Share-based payments The cost of providing share-based payments to employees is charged to the incomestatement over the vesting period of the related share options or shareallocations. The cost is based on the fair values of the options and sharesallocated determined using the Black-Scholes method. The value of the charge isadjusted to reflect expected and actual levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. Non- current assets held for sale Immediately before classification as held for sale, the measurement of theassets ( and all assets and liabilities in a disposal group) is brought up todate in accordance with applicable IFRSs. Then on initial classification asheld for sale, non current assets and disposal groups are recognised at thelower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included inprofit or loss, even when there is a revaluation. The same applies to gains andlosses on subsequent remeasurement. Financial instruments Financial assets and financial liabilities are recognised on the balance sheetwhen the Group becomes a party to the contractual provisions of the instrument. Investments are classified as either held-for-trading or available for sale atinitial recognition and this designation is re-evaluated at each balance sheetdate. Trading investments are initially measured at cost, including transactioncosts. At subsequent reporting dates trading investments are measured at fairvalue or at cost where fair value is not readily ascertainable. Gains and lossesarising from changes in fair value are recognised directly to the incomestatement. Trade and other receivables are measured at initial recognition at fair value,and are subsequently measured at amortised cost using the effective interestmethod. A provision is established when there is objective evidence that theGroup will not be able to collect all amounts due. The amount of any provisionis recognised in the income statement. Cash and cash equivalents comprise cash held by the Group and short-term bankdeposits with an original maturity of three months or less. Trade and other payables are initially measured at fair value, and aresubsequently measured at amortised cost, using the effective interest ratemethod. Financial liabilities and equity instruments issued by the Group are classifiedin accordance with the substance of the contractual arrangements entered intoand the definitions of a financial liability and an equity instrument. Equityinstruments issued by the company are recorded at the proceeds received, net ofdirect issue costs. Interest bearing bank loans, overdrafts and other loans are recorded at theproceeds received, net of direct issue costs. Finance costs are accounted for onan accruals basis in the income statement using the effective interest method. Cash and cash equivalents comprise cash balances and call deposits. Financial Risk management The Group's financial risk management objectives and policies are consistentwith that disclosed in the consolidated financial statements for the 18 monthsended 31 December 2006. Segmental Analysis The Group has one business segment: oil and gas exploration and production. All exploration and production activities are conducted in Europe. There is onlyone geographic segment. Six months ended Six months Eighteen month 30 June ended 30 June ended 31 December2 Loss per share 2007 2006 2006 £ £ £ (unaudited) (unaudited) (unaudited) Loss per share 0.50 0.23 0.94 Loss Loss for the purposes of basic and diluted 1,355,029 595,890 2,154,007 earnings per share being net profit attributable to equity shareholders Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 272,431,166 256,266,227 229,697,066 Number of dilutive shares under option - - - Weighted average number of ordinary shares for the purposes of dilutive earnings per share 272,431,166 256,266,227 229,697,066 The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options. 3 Acquisition of subsidiary On 7 March 2007 the Group acquired 100 per cent of the issued share capital of Nemmeco Slovenia Corporation (NSC) for consideration of €150,000 satisfied by shares and deferred contingent consideration NSC holds two licences in North Western Slovenia. This transaction has been accounted for by the purchase method of accounting. The fair value adjustments and the consideration paid for Nemmeco Slovenia Corporation are provisional figures, being the best estimate currently available. Further adjustments may be necessary when additional information is available concerning some of the judgemental areas. 4 Share capital The movements in the share capital are summarised below: Number of shares As at 1 July 2005 208,518,168 Shares issued in lieu of services provided 1,011,816 Shares issued on acquisition of PEOS AG 1,175,100 Shares issued on acquiring 50% of Northern Petroleum Exploration Limited 370,370 Shares issued on acquisition of Teredo Oils Limited 1,500,000 Shares issued on acquisition of Millennium International Resources Corporation Limited 678,906 Shares issued for cash 100,000 Shares issued to GTO Limited Joint Venture for funding exploration 814,941 Shares issued for acquisition of 25% interest of La Lora field by NPEL 562,967 Exercise of warrants for cash 50,092,418 At 31 December 2006 264,824,686 Shares issued on acquisition of Nemmeco Slovenia Corporation Ltd 680,205 Placing of new shares 25,000,000 Exercise of warrants for cash 1,049,451 Shares issued on acquisition of additional 10% of Frisinone Licence 1,391,408 At 30 June 2007 292,945,750 5. Share capital and reserves Share Share Trans- Share Retained Total Minority Total Capital premium lation based earnings parent interest equity reserve payment equity reserve £ £ £ £ £ £ £ £ Balance at 1 July 2005 208,518 5,020,634 -- 290,600 (691,732) 4,828,020 369 4,828,389 Loss for the period - - - - (2,154,007) (2,154,007) - (2,154,007)Assets available for sale - - - - 19,210 19,210 - 19,210Issue of shares during the period 56,307 2,998,767 - - - 3,055,074 - 3,055,074Share issue costs - (75,615) - - - (75,615) - (75,615)Exchange differences on translation - - (4,472) - - (4,472) - (4,472)of foreignOperationsEquity-settled share based payment - - - 502,460 - 502,460 - 502,460transactions Balance at 1 January 2007 264,825 7,943,786 (4,472) 793,060 (2,826,529) 6,170,670 369 6,171,039 Issue of shares during the period 28,121 3,744,423 - - - 3,772,544 - 3,772,544Loss for the period - - - - (1,355,029) (1,355,029) - (1,355,029)Assets available for sale - - - - 8,040 8,040 - 8,040Exchange differences on translation - - 18,286 - - 18,286 - 18,286of foreign operationsEquity-settled share based payment - - - (23,350) - (23,350) - (23,350)transactions Balance at 30 June 2007 292,946 11,688,209 13,814 769,710 (4,173,518) 8,591,161 369 8,591,530 6 Events after the balance sheet date • Progressed testing operations in the Anagni-1 in the Latina Valley, Italy following further deepening of the well to 1,355 metres. Recovered fluids are sampled daily and show traces of oil in over 65% of the samples • Signed an agreement with Deltana Energy Limited to farm-out a 50% interest in the 1,113 sq km Cento and Bastiglia exploration permits in the Po Valley of Italy • Plugged and abandoned its 56% owned Arrone-1 well in the Fiume Arrone Exploration Permit in Italy after receiving log results which deemed it not to be commercial • Finalised Hungarian joint venture with MOL for the redevelopment of the Bajcsa Gasfield in south western Hungary • Purchased a 22.5% interest in Italian drilling contractor Perazzoli Drilling Limited, enabling it to more efficiently schedule its exploration and appraisal drilling programmes 7 Errors under previous GAAP In preparing the condensed consolidated interim financial information,management have revisited the assumptions and treatment of the Group's accounts. As a result, management have corrected several errors under previous GAAP.The impact of which is summarised below for 30 June 2006 and 31 December 2006. i) In respect of the acquisitions of the acquisitions of Ascent ResourcesItalia srl on 19 July 2005 and Teredo Limited on 4 October 2005, managementinappropriately assessed the fair values of the assets, liabilities andcontingent liabilities acquired as being equal to the previous carrying value.Management have determined that this was an inappropriate basis and haveidentified the assets and liabilities acquired and attributed a fair value tothem on a line by line basis. The resulting effect is to attribute thepreviously recorded negative goodwill to assets and liabilities acquired. Thenet effect of these adjustments is to increase net assets by £166,000 as at 31December 2006 (30 June 2006 £43,000) and to decrease the Group's retainedearnings for the period ended 31 December 2006 by £166,000 (30 June 2006£43,000) being the reversal of the negative goodwill previously amortisedthrough the income statement. In addition the charges associated with thepositive good will have been reversed out ii) Management identified consideration received in March 2007 in respectof the disposal of the remaining licence interest disposed of by Ascent Gabonlimited in July 2005 amounting to £24,000. The consideration was not accountedfor in the 18 months ended 31 December 2006 in error. iii) Management identified £492,000 inventory previously disclosed astangible fixed assets as at 30 June 2006. The effect of this restatementbetween tangible fixed assets and inventory has no impact on total equity or theloss for the period. iv) Management have identified a brought forward adjustment in respect ofshare based payments as at 30 June 2006. Previously the share based paymentreserve had been understated by £291,000 and retained earnings had beenoverstated by the same amount representing vested share options as at 1 January2006. v) A decommissioning asset was not set up for the period ended 30 June 2006in accordance with UK GAAP. The effect of this restatement to set up adecommissioning asset and matching liability is to gross up assets andliabilities by £285,000. vi) In the course of their investigation management have reallocatedexpenses between administration costs and cost of sales to ensure that thepresentation is consistent to prior years and most truly represent the business,there is no impact on retained earnings or equity as a result of this adjustment The following tables identify the impact on the previously reported numbers. 7 Errors under previous GAAP (continued) Restated consolidated Profit and loss account Eighteen months ended Errors under Ref Eighteen months 31 December 2006 previous GAAP ended 31 December 2006 Audited Unaudited Restated Unaudited £ £ £ Group turnover 384,499 - 384,499Cost of sales ( 320,343) (549,872) vi (870,215) Gross profit/(loss) 64,156 (549,872) (485,716) Administrative expenses beforeamortisation of goodwill (1,652,726) 307,164 vi (1,345,562)Impairment of exploration assets (242,708) 242,708 vi -Amortisation of goodwill 142,071 (142,071) i -Share based payments (576,380) - (576,380)Other operating income 139,180 23,881 ii 163,061 Group operating loss (2,126,407) (118,190) (2,244,597)Interest receivable 129,117 - 129,117 Interest payable (11,514) - (11,514) Loss on ordinary activitiesbefore taxation (2,008,804) (118,190) (2,126,994) Taxation - - - Loss on ordinary activitiesafter taxation (2,008,804) (118,190) (2,126,994)Minority interest 30,678 - 30,678 Loss for the period (1,978,126) (118,190) (2,096,316) 7 Errors under previous GAAP (continued) Restated consolidated Balance sheet as at 31 December 2006 31 December Errors under Ref 31 December 2006 previous GAAP 2006 Unaudited Audited Restated Unaudited £ £ £Fixed assetsIntangible assets 4,807,400 (699,276) i 4,108,124Decommissioning asset 110,794 - 110,794 Goodwill (863,369) 863,369 i -Tangible assets 198,215 (21,427) i 176,788 4,253,040 142,666 4,395,706Current assetsCurrent assets investments 855,786 - 855,786 Stocks 450,773 - 450,773 Debtors 2,097,687 23,881 ii 2,121,568Cash at bank and in hand 1,941,044 - 1,941,044 5,345,290 23,881 5,369,171Creditors: amounts fallingdue within one year (2,196,384) (284,737) i (2,481,121) Net current assets 3,148,906 (260,856) 2,888,050 Total assets less current 7,401,946 (118,190) 7,283,756liabilities Creditors: amounts falling due (917,722) - (917,722)after one year 6,484,224 (118,190) 6,366,034Provision for liabilities andCharges (194,995) - (194,995) 6,289,229 (118,190) 6,171,039Minority interest 30,309 - 30,309 Net assets 6,319,538 (118,190) 6,201,348 Capital and reservesCalled up share capital 264,825 - 264,825Share premium account 7,943,786 - 7,943,786Share based payment reserve 793,060 - 793,060Profit and loss account (2,682,133) (118,190) i, ii (2,800,323) Shareholder's funds 6,319,538 (118,190) 6,201,348 Consolidated profit and loss account Six months Errors under Ref Six months ended 30 June previous GAAP ended 30 2006 June 2006 Unaudited Restated Unaudited £ £ £ Group turnover 232,130 - 232,130Cost of sales (140,067) - (140,067) Gross profit 92,063 - 92,063Other Operating IncomeAdministrative expenses before (801,512) 1,949 (799,563)amortization of goodwillAmortisation of goodwill - - -Other operating income 59,045 - 59,045 Group operating loss (650,404) 1,949 (648,455)Interest receivable 51,332 - 51,332 Interest payable - - - Loss on ordinary activitiesbefore taxation (599,072) 1,949 (597,123)Taxation (716) - (716) Loss on ordinary activitiesafter taxation (599,788) 1,949 (597,839) Minority interest 3,994 - 3,994 Loss for the period (595,794) 1,949 (593,845) Restated consolidated balance sheet as at 30 June 2006 30 June 2006 Errors under Ref 30 June 2006 previous GAAP Restated Unaudited Unaudited Unaudited £ £ £Fixed assetsIntangible assets 3,722,435 (130,710) i,iii,vi 3,591,725Decommissioning asset - 121,023 v 121,023Goodwill 35,965 (35,965) i -Tangible assets 65,467 (21,427) i 44,040Investments in associated undertakings 338,448 - 338,448 4,162,315 (67,079) 4,095,236Current assetsCurrent assets investments 44,675 - 44,675 Stocks - 491,794 iii 491,794Debtors 563,623 - 563,623 Cash at bank and in hand 2,327,653 - 2,327,653 2,935,951 491,794 3,427,745Creditors: amounts falling due within (699,592) (284,737) i (984,329)one year Net current assets 2,236,359 207,057 2,443,416 Total assets less current liabilities 6,398,674 139,978 6,538,652 Creditors: amounts falling due after - - -one year 6,398,674 139,978 6,538,652 Provision for liabilities andcharges (94,052) (121,023) v (215,075) 6,304,622 18,955 6,323,557Minority interest 3,890 - 3,890 Net assets 6,308,512 18,955 6,327,467 Capital and reservesCalled up share capital 256,671 - 256,671Share premium account 7,524,123 - 7,524,123Share based payment reserve 53,549 290,600 iv 344,149 Profit and loss account (1,525,831) (271,645) i, iv (1,797,476) Shareholder's funds 6,308,512 (18,955) 6,327,467 8 Transition to IFRS Ascent Resources plc reported under UK GAAP in its previously published financial statements for the 18months ended 31 December 2006. The analysis below shows a reconciliation of the restated net assets andprofit under UK GAAP as at 31 December 2006 to the revised net assets and profit under IFRS as reported inthis consolidated interim financial information. In addition, there is a reconciliation of net assets underUK GAAP to IFRS at the transition date for this company, being 1 July 2005 . There is also a reconciliationof net assets and profit under UK GAAP to IFRS at the comparative interim date, being 30 June 2006. Re-stated Effect of transition toReconciliation of equity at 31 December previous GAAP IFRS2006 Notes IFRS £ £ £Non-current assetsIntangible assets - exploration costs 4,108,124 - 4,108,124 - decommissioning costs 110,794 - 110,794Tangible assets 176,788 - 176,788 Current assetsSubsidiary undertakings held for resale 805,304 - 805,304Inventories 450,773 - 450,773Trading investments 50,482 - 50,482Trade and other receivables 2,121,568 - 2,121,568Cash and cash equivalents 1,941,044 - 1,941,044 Current liabilitiesTrade and other payables (2,481,122) - (2,481,122) Non-current liabilitiesBank loans (917,722) - (917,722)Provisions (194,995) - (194,995) Net assets 6,171,039 - 6,171,039 EquityAttributable to:Minority interest C (30,309) 30,678 369Share capital 264,825 - 264,825Share premium account 7,943,786 - 7,943,786Share based payment reserve 793,060 - 793,060Translation reserves A (12,275) 7,803 (4,472)Retained earnings ABC (2,788,048) (38,481) (2,826,529) 6,171,039 - 6,171,039 Effect of transition toReconciliation of equity at 1 July 2005 Previous GAAP IFRS Notes IFRS £ £ £ Non-current assetsIntangible assets - exploration costs 164,973 - 164,973 Current assetsSubsidiary undertakings held for resale 987,629 - 987,629Inventories 57,418 - 57,418Cash and cash equivalents 3,673,353 - 3,673,353 Current liabilitiesTrade and other payables (54,984) - (54,984) Net assets 4,828,389 - 4,828,389 EquityAttributable to:Minority interest 369 - 369Share capital 208,518 - 208,518Share premium account 5,020,634 - 5,020,634Share based payment reserve 290,600 - 290,600Retained earnings (691,732) - (691,732) 4,828,389 - 4,828,389 Re-stated Effect of previous GAAP transition to IFRSReconciliation of equity at 30 June 2006 Notes IFRS £ £ £Non-current assetsIntangible assets - exploration costs 3,591,725 - 3,591,725 - decommissioning costs 121,023 - 121,023Tangible assets 44,040 - 44,040 Current assetsInvestment in an associated undertaking 338,448 - 338,448Inventories 491,794 - 491,794Trading investments 44,675 - 44,675Trade and other receivables 563,623 - 563,623Cash and cash equivalents 2,327,653 - 2,327,653 Current liabilitiesTrade and other payables (984,329) - (984,329) Non-current liabilitiesProvisions (215,075) - (215,075) Net assets 6,323,577 - 6,323,577 EquityAttributable to:Minority interest C (3,890) 4,259 369Share capital 256,671 - 256,671Share premium account 7,524,123 - 7,524,123Share based payment reserve 344,149 - 344,149Translation reserves A - 1,949 1,949Retained earnings ABC (1,797,476) (6,208) (1,803,684) 6,323,577 - 6,323,577 Re-stated Effect of IFRS transition toReconciliation of loss for the period previous GAAP IFRSended 31 December 2006 Notes £ £ £ Revenue 384,499 - 384,499Cost of sales (870,215) - (870,215) Gross loss (485,716) - (485,716) Other operating income 85,993 - 85,993 Administrative expenses A (1,345,562) (7,803) (1,353,365)Share based payments (576,380) - (576,380) Operating loss (2,321,665) (7,803) (2,329,468) Interest receivable 129,117 129,117Interest payable (11,514) - (11,514)Profit on sale of investments held for 57,858 - 57,858saleOther gains and losses B 19,210 (19,210) - Loss before taxation from continuing (2,126,994) (27,013) (2,154,007)operations Taxation - - - Loss for the period attributable to equity (2,126,994) (27,013) (2,154,007)shareholders Profit attributable to minority interests 30,678 (30,678) - Loss for the period (2,096,316) (57,691) (2,154,007) Re-stated Effect of IFRS transition toReconciliation of loss for the period previous GAAP IFRSended 30 June 2006 Notes £ £ £ Revenue 232,130 - 232,130Cost of sales (140,067) - (140,067) Gross profit 92,063 - 92,063 Administrative expenses (799,563) 1,949 (797,614) Operating loss (707,500) 1,949 (705,551) Finance Income 51,332 - 51,332Share of results of associates 59,045 - 59,045 Loss before taxation from continuing (597,123) 1,949 (595,174)operations Taxation (716) - (716) Loss for the period attributable to equity (597,839) 1,949 (595,890)shareholders Profit attributable to minority interests 3,994 (3,994) - Loss for the period (593,845) (2,045) (595,890) A IAS 21 - An average rate is used to translate the income statements of foreign subsidiaries, whereas previously under UK GAAP, the foreign subsidiaries were translated at closing rate.B IAS 39 - Investment in Afren Plc will be classified as a financial instrument available for sale, and will have to be carried at fair value with the re-measurement gain or loss posted through equity. Previously under UK GAAP, this was held at cost.C Under International accounting standards losses that exceed minority interest in the Equity of a subsidiary may create a debit balance on minority interests only if the minority has a binding obligation to fund the losses. Cash flow statement The Group's consolidated cash flow statements are presented in accordance with IAS 7. The statements present substantially the same information as that required under UK GAAP, with the following principal exceptions: 1. Under UK GAAP, cash flows are presented under nine standard headings, whereas IFRS requires the classification of cash flows resulting from operating, investing and financing activities. 2. The cash flows reported under IAS 7 relate to movements in cash and cash equivalents, which include cash and short term liquid investments. Under UK GAAP, cash comprises cash in hand and deposits repayable on demand. Independent review report to Ascent Resources plc by KPMG Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises Consolidated Income Statement,Consolidated Balance Sheet, Consolidated Cash flow Statement and the relatednotes We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the company's annual accountshaving regard to the accounting standards applicable to such annual accounts. As disclosed in note 1 to the financial information, the next annual financialstatements of the group will be prepared in accordance with IFRSs as adopted bythe European Union. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with IFRSs as adopted by the European Union. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the UK. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Standards onAuditing (UK and Ireland) and therefore provides a lower level of assurance thanan audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. KPMG Audit PlcChartered Accountants 28 September 2007 This information is provided by RNS The company news service from the London Stock Exchange