Ascent Resources Regulatory News (AST)

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

17 March 2011

Ascent Resources plc ('Ascent' or 'the Company')

Placing to raise £17 million to develop Slovenian/Hungarian gas project

Ascent Resources plc, the AIM listed oil and gas exploration and production company, announces that it has raised £17 million, before expenses, by way of a Firm Placing of 100,000,000 New Ordinary Shares at a price of 5p per share and a Conditional Placing of a further 240,000,000 New Ordinary Shares at a price of 5p per share (together the 'Placing'). The funds raised will primarily be used to advance the Company's flagship Petišovci/Lovási/Ujfalu project, through the drilling and completion of the Pg-11 sidetrack, the Pg-10 and Ujfalu-III wells, and capitalise on the areas P50 estimated gas in place of 412 Bcf..

Ascent's Managing Director, Jeremy Eng commented, "With the finance in place from a series of high quality institutional investors, we can rapidly advance the Petišovci/Lovási/Ujfalu project area through the implementation of the three well campaign, which we believe will unlock the project areas potential, allow us to reach operating cash generation and capitalise on the strong pricing environment for European gas. Recent results from the Pg-11 well highlighted the area's prospectivity with the six middle Miocene reservoirs, all gas bearing and revealed that the Lower Miocene Karpatian reservoir was potentially naturally fractured and could contain additional resource potential of over 100 Bcf., on top of RPS's 412 Bcf. P50 estimates. We are looking to implement the drilling campaign next month, starting with the Pg-11 sidetrack and thereafter expect strong news flow as we look to unlock the value of our assets."

The Firm Placing has been arranged using the authority granted to Directors at the Company's annual general meeting held on 28 June 2010. The Conditional Placing remains subject to shareholder approval at a General Meeting convened for 6 April 2011. 

The New Ordinary Shares will, following allotment, rank pari passu with the Existing Ordinary Shares. Application will be made for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission of the Firm Placing Shares will become effective and dealings in the Firm Placing Shares will commence on 23 March 2011. It is expected that Admission of the Conditional Placing Shares will become effective and dealings in the Conditional Placing Shares will commence on 7 April 2011.

The Company has agreed to grant to finnCap, with effect from Admission of the Conditional Placing Shares, as part of their fee on the Placing, a warrant to subscribe for 1,500,000 Ordinary Shares, exercisable at any time within 3 years from Admission at 7p per share. This additional incentive is to reflect their performance on the placing.

Reasons for the Placing and use of Proceeds

Slovenia

The Company announced on 16 February 2011 the results of its first appraisal well in the Petišovci project area in Slovenia in which the Company has a 75% working interest. RPS, independent reservoir engineers, have estimated P50 gas in place for the Petišovci/Lovási/Ujfalu project of 412 Bcf.. The Pg-11 well, the first drilled in the Petišovci-Globocki field in 22 years, targeted six middle Miocene reservoirs, all of which were intersected and found to be gas bearing which, in the Directors' opinion, underpins the commercial potential of the project. In addition, Pg-11 encountered the Lower Miocene Karpatian reservoir from which gas and condensate were sampled and flared. The Directors expect that this additional, potentially naturally fractured reservoir, could contain additional resource potential of over 100 Bcf..

As a result of the encouraging results from Pg-11, which decreases the project risk, the Company intends to progress to the second phase of the well programme which will be to drill a horizontal production sidetrack well on Pg-11 after more fully evaluating the Karpatian reservoir. The Crosco Cardwell-1 rig has remained on location in Slovenia and the second phase of operations on the Pg-11 well is planned to commence during April.

In addition a further well, Pg-10, is planned to be drilled in the Petišovci-Globocki field with drilling expected to commence in June. Both the Pg-11 sidetrack and the Pg-10 well are expected to commence production in late 2011 utilising local infrastructure and national gas grid connections in the field area.

Hungary

The Ujfalu project area in Hungary lies less than 10km from the Petišovci-Lovászi field which straddles the Slovenia and Hungary border. The Ujfalu project is believed to be a look-a-like structure to the Petišovci structure. The last well drilled in 1977 encountered gas shows in the Miocene section. The Company is targeting dual prospects on this project area with the Miocene prospects as well as a deeper amplitude anomaly driven prospect.

The Directors believe there is the potential for additional reserves at Petišovci with the additional deep amplitude prospect independently estimated to hold 39 Bcf but not including any additional resources that may be shown to be in the Middle Miocene formations. The 3-D seismic data over the project area identifies other exploration and appraisal opportunities.

The Company intends to drill the Ujfalu-III exploration well in August 2011.

By way of a participation agreement entered into between Ascent Resources Hungary Limited, a wholly owned subsidiary of the Company, and MOL Hungarian Oil and Gas plc ("MOL") (the "Participation Agreement"), the Company currently holds a 50% participating interest in parts of two licences in Hungary: 122 Kerkerbarabas and 133 Bazakerettye. The primary licence area, the 133 Bazakerettye Licence, covering approximately 95% of the relevant acreage the subject of the Participation Agreement, was granted for an initial 4 year period and is due to expire on 14 May 2011. MOL, as the legal holder of the licences, has confirmed to the Company that it intends to apply for an extension to this licence for a period of two years as allowed by the Hungarian Mining Act (ACT XLVIII of 1993). The Company and MOL know of no reason why this extension would not be granted.

Licence 122 Kerkerbarabas, which covers approximately 5% of the acreage covered by the Participation Agreement, is due to expire on 14 August 2011. MOL is entitled to apply for a "mining plot" 12 months after the expiration of the licence but the Directors believe it is unlikely that a mining plot will be applied for. This licence area is not the focus of the work programme or future development strategy of the Hungarian prospects.

Use of Proceeds

The Company intends to allocate the proceeds of the Placing in the following manner:

In the event that the Petišovci and Ujfalu drilling campaigns are successful, the Company will need to raise further funds for an accelerated field development programme. The Company intends to examine the use of leverage and farm-in potential in preference to equity issuance to minimise dilution, however, the Company cannot rule out a further equity issue to fund field development. The development plan for Petišovci envisages between 10 and 15 wells over a three to four year period. The Company may also choose, given the right market conditions, to raise further funds (possibly through the issue of further Ordinary Shares or otherwise) to develop its other projects.

The Company retained a 45% back in right on three appraisal projects and a 22.5% back in right on three secondary prospects in Switzerland which were sold by Ascent to eCORP in April 2010. If Ascent were to exercise its back in rights, the Company would be required to pay for its apportioned costs of any wells drilled. The Hermrigen-2 well in Switzerland is due to drilled later this year.

Trading Update

Following the receipt of an exceptional non-operating profit on the sale of the Company's Swiss subsidiary to eCorp, announced on 22 April 2010, the Directors expect the results for the year ended 31 December 2010 to be approximately break-even after administration costs, operating expenses, impairment provisions and foreign exchange adjustments are taken into account.

Share Capital and Placing Statistics

A circular, containing notice of the General Meeting ("Circular") to be held at the offices of finnCap, 60 New Broad Street, London, EC2M 1JJ at 9.00 a.m. on 6 April 2011 has today been posted to shareholders and will be available on the Company's website www.ascentresources.com. Defined terms used in this announcement are the same as those defined in the Circular.

 For further information visit www.ascentresources.co.ukor contact:

 Notes:

Ascent Resources plc has a diversified portfolio of hydrocarbon exploration and development interests across five countries in Europe: Italy, Switzerland, Hungary, Slovenia and Netherlands. Its portfolio contains a solid base of field redevelopment projects with selected exposure to exploration upside. The portfolio is focussed on gas and with the exception of the shallow water Netherlands project, all of its projects are located onshore where operating and development costs are substantially lower than they would be offshore.