Ascent Resources Regulatory News (AST)

Ascent Resources plc / Epic: AST / Index: AIM / Sector: Oil and Gas

9 August 2018

Ascent Resources plc

("Ascent" or the "Company")

Permitting update

Following the operational update on Monday 6 August 2018, the Board of Ascent is pleased to provide an update on the positive outcome of recent discussions with the Slovenian authorities. The Company has been assured the required permits will be processed without undue, further delay, which the Company takes to mean they should be issued in final form in the next two months.

The Company sets out at the end of this announcement, for completeness, the background to the permits and the permitting process, including the current position and a detailed timeline of events dating back to the summer of 2014.

Background

The need for the permits

The IPPC Permit ("The Permit") is required to enable Ascent (and its partners in Slovenia) to construct a processing plant adjacent to the Petišovci gas field near Lendava in Slovenia.

The processing plant is required for phase two of the development plan, and the anticipated increased production from the field. The Company is currently exporting production (raw natural gas) from the first two wells, Pg-10 and Pg-11A, via an export pipeline to INA in Croatia. Average monthly production from these wells over the first nine months of export production has been between 1.0 and 2.4 MMscfd.

While there is capacity to significantly increase production through the existing export facilities, with the levels of production projected in the field development plan, it would be more economic to treat these through a facility in Slovenia. This facility would allow Slovenian gas to be treated in Slovenia and sold to Slovenian customers thereby ensuring that the country captures the maximum amount of added value from the resource. 

The estimated reserves and resources of the Petišovci field are very significant in the context of Slovenia's national, annual natural gas consumption while the country currently imports a large majority of its natural gas requirement.

Progress since summer 2014

The permit was first applied for in mid-2014 and within 6 months received initial approval from the Slovenian Environmental Agency ("ARSO") subject to a public consultation.

Since then however the pace at which the permit has moved through the regulatory process has slowed dramatically. Initially this was due to the time taken by ARSO and later the Slovenian courts in dealing with repeated appeals against the permit by one particular non-governmental organisation ("NGO"). More recently the delays have been the result of repeated requests for additional information from ARSO.

On each occasion that the Slovenian courts or the Environment Ministry have reviewed the application it has been approved.

Following the court decision in November 2017, the Company and its partners anticipated that the permit would be awarded in full within a short period of time. It was expected that a request for amendments to the original application would be made to ensure that the application complied with any new regulations enacted in the interim.

The Board has been frustrated by the length of time it has taken for ARSO to prepare the requests for amendments and the multiple different requests for amendments that have been received.

Recent developments

On 2 June 2018, the Ascent CEO (Colin Hutchinson) gave an interview with the major Slovenian newspaper 'Delo' in which he was highly critical of the permitting process in Slovenia and the detrimental impact this was having on the project and further investment in the country.

Ascent, together with the Joint Venture partners, developed a strategy with the British Chamber of Commerce in Slovenia and the British Embassy in Ljubljana to raise the issue of permitting delays in Slovenia with the relevant authorities.

It is therefore pleasing to report that at a meeting this week between staff from the British Chamber of Commerce in Slovenia, the Environment Ministry and officials from ARSO, undertakings were made by ARSO to review the outstanding amendments as a priority, in a timely fashion, once they are submitted by the Joint Venture partners.

Shareholder restraint now required

It was noted that ARSO has been receiving a considerable volume of emails from people claiming to be Ascent shareholders, the content of some of these emails was felt to be inappropriate. While the Company understands shareholders' frustrations, it does not believe that shareholders contacting ARSO directly can have any positive impact on the process and has apologised to ARSO, in particular for those emails which have been threatening and abusive.

Current position

As at today's date there are two open amendments; the response to the first, which can be prepared by Ascent and its partners will be submitted by 17 August 2018. The response to the second, which is reliant on information from a third party, should be submitted at the beginning of September.

Based on the assurances received by ARSO this week, the Company believes that the permit should finally be awarded in September 2018, although there can be no guarantee of this.

Additional permits

In addition to the permit required for the processing plant, Ascent and its partners have also submitted applications to carry out additional stimulation procedures on Pg-10 and Pg-11A, which are expected to significantly increase the flow of gas by accessing additional gas bearing reservoirs.

The procedures which the Company intends to carry out are almost identical to those already performed on the wells in 2011. The impact of this activity was analysed in detail by independent parties immediately following the work and no negative consequences were noted.

These procedures are, in the opinion of the Company, clearly covered by preliminary screening legislation. The Company and its partners submitted the preliminary screening application in May 2017. In January, May and June 2018, ARSO requested amendments to the application which were all submitted by the partners in due time (the last one on 5 July which was supported by expert opinions from the Geological Survey of Slovenia and the Ljubljana Faculty of Mining). 

The Company has not currently had any feedback on its last amendments but are encouraged by recent communications and hope that this permit can also be moved forward in a timely fashion.

Summary

The announcement of 6 August seems to have provoked action in Slovenia, which, in the Company's opinion, should result in the permits being awarded in the next two months. The recent measures to reduce administrative expenditure ensure that the Company has sufficient income and cash resources to maintain operations in Slovenia and meets its listing obligations in London in the interim.

The permits are crucial to the future development of the Company and once these permits are received it will be possible for the Company, either as it currently exists or potentially with a new partner coming through the strategic review, to take the project forward.

Colin Hutchinson, CEO of Ascent Resources plc, commented:

"Following the assurances that have been made over the past few days we have fresh optimism that the long-awaited permits should be delivered in short order."

Detailed Timeline in relation to the IPPC application

As described above, the application process has now taken over four years. Notable events along the way are set out in the table below. 

Process for amendments

When a request for amendment is requested by ARSO a notification is posted to the Consultant who is managing the process for Ascent and the partners. They then have 15 days to formally sign for the post. Once the post has been signed for the partners usually have a deadline of around 30 days (depending on the complexity of the amendments requested) to submit their response. The dates used in the table above relate to the date the amendments were notified to the partners, in some cases the date on the official document will be different.