RNS Number : 1467X
Ascent Resources PLC
30 April 2021
 

30 April 2021                                      

Ascent Resources plc

("Ascent" or the "Company")

Final Results

 

Ascent Resources Plc (LON: AST), the onshore Caribbean, Hispanic American and European focused energy and natural resources company, announces its final results for the year ended 31 December 2020.

Highlights:

Corporate

·    New Board and Senior executive team appointed in March, April and October 2020

·    Initiation of new international growth strategy targeting resource opportunities in Hispanic Americas, Caribbean, and  Europe

·    Entry into Cuba through the acquisition of Energetical Limited in April 2020, securing the exclusive rights to negotiate the production sharing contract ('PSC') for the incremental production rights to the Cuban onshore oil production block 9B

·    Entry into direct memorandum of understanding with CUPET (Cuba's national oil company), to secure the exclusive rights to negotiate the PSCs for onshore exploration blocks 9A, 12 and 15, which in aggregate cover over 7,000km2 of license area which include historic wells with oil shows and discoveries

·    Strategic review of Slovenian position resulting in work towards concession extension renewal and review and update of field development plan along with preparation for submission of an environmental impact assessment to perform routine mechanical stimulation techniques  

·    Initiation, in July 2020, of a process to seek redress from the Republic of Slovenia with the serving of a formal Notice of Dispute over certain actions by Slovenia, in breach of their obligations under the UK-Slovenia bilateral investment treaty and the Energy Charter Treaty, which have caused considerable harm to the Company's investments in Slovenia

·    Entered into direct negotiations with the Republic of Slovenia in October, with a view to agreeing a mutually acceptable way to resolve the dispute.

 

Post Balance Sheet Events

·    Launched Environmental, Social and Governance ('ESG') Metals strategy which includes secondary mining and metal recovery opportunities which the Company see as being consistent with ESG principles. In particular the Company believes there are good opportunities in precious, base and battery metals, where the economics are especially attractive and the opportunity set has the ability of delivering lowest cost quartile sustainable metal production from legacy mining tailings. Such opportunities have the potential to provide strong cash returns without exploration risk and only require modest upfront capital.

·    Raised £1.01 million before expenses in February 2021 through share placing, extending funding runway for the Company through to at least the end of the calendar year

·    Announced on 19 March 2021 that an amicable settlement with the Republic of Slovenia is presently not achievable and the Company expects to commence arbitration proceedings shortly

·    Extended the Company's MOUs with CUPET over Cuban oil production and exploration blocks 9A, 9B, 12 and 15 by six months from the 29 April

Enquiries:

Ascent Resources plc

Andrew Dennan

Via Vigo Communications

 

WH Ireland, Nominated Adviser & Broker

James Joyce / Chris Savidge

0207 220 1666

Novum Securities, Joint Broker

John Belliss

 

0207 399 9400

 

 

STATEMENT FROM THE CHAIRMAN

This has been a very challenging but ultimately transformational year for your company.

During 2020, and despite the inevitable challenges of the global pandemic, Ascent Resources plc made significant progress restructuring its Board, strategy and portfolio.  The Company's primary focus has been seeking redress for damages suffered in the development of its flagship asset in Slovenia, alongside diversifying its strategy to exploit select Special Situations across Hispanic America, the Caribbean and Europe. This includes Cuba, one of the few remaining unexploited hydrocarbon systems globally, and a specific ESG Metals focus positioning the company to access low risk and low capital intensity opportunities in the metals and minerals processing arena. Having laid some important foundations in 2020, we look forward to progressing the business this year.

LEGACY SLOVENIAN ASSET

In June 2020, the Administrative Court of the Republic of Slovenia published its decision in relation to Ascent's JV partner's appeal against the Slovenian environmental agency ARSO's decision to require an Environmental Impact Assessment ("EIA") in order to re-stimulate the PG-10 and PG-11A wells. Work towards the concession renewal remains in progress.

In July 2020, the Company and its subsidiary, Ascent Slovenia Limited, served a Notice of Dispute to the Republic of Slovenia (the "State") under the Energy Charter Treaty ("ECT") and UK-Slovenia Bilateral Investment Treaty ("BIT") over damages suffered as a result of the State's failures to administer normal procedure and political bias expressed against the Company and the Petišovci gas project. In particular, the Government of Slovenia were notified of the fact that certain actions which had caused considerable harm to the Group's investments in Slovenia constitute breaches by the State of the protections established by the UK-Slovenia BIT and ECT, including, inter-alia, the guarantee that the investments would be accorded fair and equitable treatment and Slovenia's guarantee that the management, maintenance, use, enjoyment or disposal of the investments would not be impaired by arbitrary, unreasonable or discriminatory measures. On serving of the Notice of Dispute the Company triggered an automatic three month cooling off period, designed to allow the parties to attempt to resolve their dispute ahead of arbitration proceedings.

NEW ESG METALS STRATEGY

During the year, the Company launched an international growth strategy focused on unlocking Special Situations across Hispanic America, the Caribbean and Europe. This strategy was introduced counter cyclically against the backdrop of dynamic commodity markets and post period in review the Company confirmed that it would focus its efforts specifically towards Environmental, Social and Governance ("ESG") Metals within its resource focused business.

ESG Metals includes secondary mining and recovery opportunities typically involving the reclassification, through highly efficient recovery techniques, of stockpiled surface mining waste (often previously viewed as a liability for mining companies) as a valuable asset for reprocessing and commercial sale to industry, governments and metals traders. The Company sees waste management, remediation and restoration of land impacted by historic and on-going mining activities as a critical element in the global ESG agenda and integral to the transition to a low carbon economy. The Company is looking at a number of potential projects in Hispanic America and South Africa as well as Europe. In particular, the Company believes that there are good opportunities in gold, silver, platinum, base metals and ferrochrome, where the economics are especially attractive and the opportunity set has the ability to deliver lowest cost quartile sustainable metal production from legacy mining tailings, with low geological risk. Such opportunities have the potential to provide strong cash returns without exploration risk and only require modest upfront capital outlay.

CUBA MARKET ENTRY

The Republic of Cuba is one of the few remaining world- class, yet largely unexploited, hydrocarbon systems. The Company sees clear first mover opportunity for a European quoted oil and gas Company to counter cyclically deploy its operational skill and access to capital in a country which has been starved of investment and technology and impacted by US Sanctions.

As the first step in advancing its international growth strategy the Company announced on 14 April 2020 the acquisition of Energetical Limited ("Energetical") for a total consideration of £652,500 of which £202,500 has been satisfied by the issue of 6 million new shares  and, subject to the Company signing a production sharing contract ("PSC") over Cuban onshore producing block 9B, deferred consideration of £450,000 which will be satisfied by way of a cash payment of £100,000 and the issue of new shares for a consideration of £350,000 to be issued at the 30 day volume weighted average share price of the Company at the time of PSC signature.

 

BOARD RESTRUCTURING

In March 2020, several new Board members joined to strengthen the management of the Company while bringing significant international oil, gas and mining experience and access to capital in order to take the Company forward including James Parsons as Executive Chairman, Ewen Ainsworth as Non-executive Director and Chairman of the Audit Committee and Leonardo Salvadori as Non-executive Director. In April 2020, the Company announced the appointment of Andrew Dennan as Chief Executive Officer. In October 2020, Leonardo Salvadori stepped down from the board in order to contribute on an executive basis in his capacity as Technical Director. At the same time Stephen Birrell was appointed to the Board as Non-executive Director and Chairman of the Remuneration and HSE/Technical Committees and Malcolm Graham-Wood was appointed as Non-executive Director and is a member of the Audit Committee.

FUNDING

The Equity Sharing Agreement with RiverFort, as announced on 20 September 2019, was cancelled alongside the initial changes to the Board, effective February 14, 2020. The outstanding US $468,776 loan (as of the restructuring date and inclusive of fees and commission) with Riverfort was re-negotiated into a two-year, coupon free, bullet loan with a GBP denominated principle of £375,020. Repayment is due at maturity in February 2022, and there are 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 Company has a right to buy out up to 50% of the loan prior to its expiry at nil premium whilst the share price is below the conversion price. If the Company does exercise this right, then the conversion price is adjusted upwards to 0.0875 pence (8.75 pence post re-organisation) per conversion share. The 43 million warrants initially to be awarded to Riverfort, as announced on 20 September 2019, were also now not awarded.

In March 2020, shareholders approved a share re-organisation, including a 100:1 consolidation, with the nominal value of the shares to be set to 0.5 pence. Further to the successful passing of the resolutions at the Company's General Meeting held on 5 March 2020 and despite the market volatility at the time, the Company completed a fundraising for gross proceeds of £685,000 at 5 pence per share. Furthermore, in support of funding work streams associated with advancing the Company's entry into Cuba the Company raised a further £212,500 by the issuance of new shares at 2.75 pence being a nil premium to the closing bid price at the time of issue in April.

In August the Company announced it had secured a new funding package totalling £700,000 in support of the Company's continued progress across both Cuba and Slovenia as well as the execution of its special situations international growth strategy. The Company raised £300,000 in new equity at a price of 2 pence per new share, being a nil discount to the spot price at the time, with one warrant attached for every two shares subscribed for exercisable at 4 pence per new warrant share, of which the Company has received some cash through subsequent exercises. Additionally, the Company announced a £400,000 unsecured loan facility with an 8% fixed coupon payable on redemption or conversion through the exercise of all the warrants which were issued attached to the loan notes at 2.5 pence per new warrant share. This conversion subsequently took place. As part of this funding the Company agreed with RiverFort to repay certain amounts of their debt obligation which has subsequently been reduced from £375,020 to £270,020.

In December, the Company secured additional funding of £500,000 in a new loan facility with warrants attached exercisable at 7.5 pence per share, being a 41.5% premium to the share price at the time. Subsequently and post period end the Company has drawn down part of this loan facility and agreed with the lenders to extend the drawdown date for the remaining balance available. Under this facility the Company has drawn down £250,000 of which £125,000 has been converted into equity pursuant to warrant exercises as well as receipt of a further £70,000 by way of further warrant exercises.

 

GOING CONCERN

The Company has raised £1.01 million in new equity since the balance sheet date from new and existing investors. Under the Group's forecasts, the funds raised together with existing bank balances provide sufficient funding for at least until the end of the calendar year, as of the date of the publication of this report, based on anticipated outgoings and in the absence of the receipt of revenues from production.

COVID-19 has had limited direct impact on Ascent's assets in Slovenia but there may be delays in obtaining the necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date.

The forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and discretionary spend incurred with executing on the ESG Metals Strategy through acquisition and advancing the Cuban initiative, including deferred consideration that would become payable if the Company elects to enter a PSC for Block 9b. As such, the Company will need to raise new capital within the forecast period to fund such discretionary spend.

Based on historical and recent support from new and existing investors the Board believes that such funding, if and when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds is not guaranteed at the date of signing these financial statements. As a consequence, the auditors have specified a material uncertainty related to going concern.

 

James Parsons
Executive Chairman

Andrew Dennan
Chief Executive Officer

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

 


Notes

Year ended

Year ended



31 December

31 December



2020

2019



£ '000s

£ '000s





Revenue

2

298

Cost of sales

2

(120)

(462)

Depreciation of oil & gas assets

10

 (397)

(440)

Gross loss


(517)

(604)





Administrative expenses

3

 (2,279)

(2,132)

Operating loss


(2,796)

(2,736)





Finance cost

5

(35) 

(924)

Net finance costs


(35)

(924)





Loss before taxation


(2,831)

(3,660)





Income tax expense

6

-

-

Loss for the year


(2,831)

(3,660)





Other comprehensive income




Items that may be reclassified to profit and loss




Exchange differences on translation of foreign operations


1,327

(1,700)

Total comprehensive income for the year


(1,504)

(5,360)





Earnings per share




Basic & fully diluted loss per share (Pence)

8

(4.66) 

(14.00)


The consolidated balance sheet should be read in conjunction with the accompanying notes.

 

Consolidated Statement of Financial Position

Company Number: 05239285
As at 31 December 2020


Notes

31 December

31 December



2020

2019

Assets


£ '000s

£ '000s

Non-current assets




Property, plant and equipment

10

22,783 

22,069

Exploration and evaluation costs

11

18,753 

18,576

Goodwill

9

653

-

Prepaid abandonment fund

12

300 

240

Total non-current assets


42,489

40,885

Current assets




Trade and other receivables

13

 66

254

Cash and cash equivalents

25

 115

77

Total current assets


181

331

Total assets

42,670

41,216





Equity and liabilities




Attributable to the equity holders of the Parent Company




Share capital

20

7,928 

7,604

Share premium account


73,863 

72,330

Merger reserve


570 

570

Equity reserve


73

-

Share-based payment reserve

24

2,129 

1,873

Translation reserves


1,027 

(300)

Retained earnings


(44,595) 

(41,964)

Total equity attributable to the shareholders


40,995

40,113

Total equity


40,995

40,113





Non-current liabilities




Borrowings

15

 197

-

Provisions

16

 328

255

Total non-current liabilities


525

255

Current liabilities




Borrowings

15

385

Contingent consideration on acquisition

17

450

-

Trade and other payables

18

695

463

Total current liabilities


1,150

848

Total liabilities


1,675

1,103

Total equity and liabilities


42,670

41,216


The consolidated balance sheet should be read in conjunction with the accompanying notes.

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020


Share capital

Share premium

Merger Reserve

Equity reserve

Share based payment reserve

Translation reserve

Retained earnings

Total


£ '000s

£ '000s

£ '000s

£ '000s

£ '000s

£ '000s

£ '000s

£ '000s

Balance at 1 January 2019

6,146

71,648

570

16

1,657

1,400

(38,357)

43,080

Comprehensive income









Loss for the year

-

-

-

-

-

-

(3,660)

(3,660)

Other comprehensive income









Currency translation differences

-

-

-

-

-

(1,700)

-

(1,700)

Total comprehensive income

-

-

-

-

-

(1,700)

(3,660)

(5,360)

Transactions with owners









Issue of ordinary shares

1,458

738

-

-

-

-

-

2,196

Costs related to share issues

-

(56)

-

-

-

-

-

(56)

Expiry on loan note conversion rights

-

-

-

(16)

-

-

-

(16)

Share-based payments and expiry of options

-

-

-

-

216

-

53

269

Total transactions with owners

1,458

682

-

(16)

216

-

53

2,393

Balance at 31 December 2019

7,604

72,330

570

-

1,873

(300)

(41,964)

40,113

Balance at 1 January 2020

7,604

72,330

570

-

1,873

(300)

(41,964)

40,113

Comprehensive income









Loss for the year

-

-

-

-

-

(2,831) 

(2,831)

Other comprehensive income









Currency translation differences

-

-

-

-

-

1,327 

-

1,327

Total comprehensive income

-

-

-

-

1,327 

(2,831)

(1,504)

Transactions with owners









Issue of ordinary shares

324

1,713 

-

-

-

-

2,037

Costs related to share issues

-

(180)

-

-

-

-

-

(180)

Equity value of convertible loan note

-

-

-

73

-

-

-

73

Share-based payments and expiry of options

-

-

-

256 

-

200

456

Total transactions with owners

324

1,533

-

73

256

-

200

2,386

Balance at 31 December 2020

7,928

73,863

570

73

2,129

1,027

(44,595)

40,995

 

The consolidated balance sheet should be read in conjunction with the accompanying notes.

 

Consolidated Cash Flow Statement

For the year ended 31 December 2020


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Cash flows from operations



Loss after tax for the year

(2,831) 

(3,660)

Depreciation

397 

440

Change in inventory

(3)

Change in receivables

188 

152

Change in payables

232 

71

Increase in share-based payments

456 

269

Exchange differences

212 

(40)

Finance income

-

Finance cost

-

924

Transfer to / from restricted cash

180

Net cash generation used in operating activities

(1,346)

(1,667)




Cash flows from investing activities



Interest received

(3)

Payments for fixed assets

(3)

Net cash used in investing activities

-

(6)



                     

Cash flows from financing activities



Interest paid and other finance fees

(35)

(67)

Loans advanced

300 

410

Loans repaid

(417) 

(27)

Interest paid

-

Proceeds from issue of shares

1,648 

1,114

Share issue costs

(180) 

(55)

Net cash generated from financing activities

1,386

1,375



                     

Net increase in cash and cash equivalents for the year

38

(299)

Effect of foreign exchange differences


-

Cash and cash equivalents at beginning of the year

77

376

Cash and cash equivalents at end of the year

115

77

 

The consolidated balance sheet should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

1.   Accounting policies

Reporting entity

Ascent Resources plc (Company no: 05239285) ('the Company' or 'Ascent') is a company domiciled and incorporated in England. The address of the Company's registered office is 5 New Street Square, London, EC4A 3TW. The consolidated financial statements of the Company for the year ended 31 December 2020 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in associates and joint ventures. The Parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Company is admitted to AIM, a market of the London Stock Exchange.

Statement of compliance

The financial statements of the Group and Company have been prepared in accordance with international accounting standards and IFRIC interpretations and the requirements of the Companies Act 2006 applicable to companies reporting under IFRS.

The Group's and Company's financial statements for the year ended 31 December 2020 were approved and authorised for issue by the Board of Directors on 29 April 2021 and the Statements of Financial Position were signed on behalf of the Board by James Parsons.

Both the Parent Company financial statements and the Group financial statements give a true and fair view and have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('IFRSs').

Basis of preparation

In publishing the Parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in Section 408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements. The Company loss for the year was £2,060,000 (2019: loss of £8,362,000).

The presentational currency of the Group is British Pounds Stirling ("GBP") and the functional currency of the Group's subsidiaries domiciled outside of the UK in Malta, Slovenia and Netherlands are in Euros ("EUR").

Measurement Convention

The financial statements have been prepared under the historical cost convention. The financial statements are presented in sterling and have been rounded to the nearest thousand (£'000s) except where otherwise indicated.

The principal accounting policies set out below have been consistently applied to all periods presented.

Going Concern

The Financial Statements of the Group are prepared on a going concern basis as detailed in Note 1.to the financial statements.

The Company has raised £1.01 million in new equity since the balance sheet date from new and existing investors. Under the Group's forecasts, the funds raised together with existing bank balances provide sufficient funding for at least until the end of the calendar year, as of the date of the publication of this report, based on anticipated outgoings and in the absence of the receipt of revenues from production.

COVID-19 has had limited direct impact on Ascent's assets in Slovenia but there may be delays in obtaining the necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date.

The forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and discretionary spend incurred with executing on the ESG Metals Strategy through acquisition and advancing the Cuban initiative, including deferred consideration that would become payable if the Company elects to enter a PSC for Block 9b. As such, the Company will need to raise new capital within the forecast period to fund such discretionary spend.

Based on historical and recent support from new and existing investors the Board believes that such funding, if and when required, could be obtained through new debt or equity issuances. However, the ability to raise these funds is not guaranteed at the date of signing these financial statements.

 

 

New and amended Standards effective for 31 December 2020 year-end adopted by the Group:

i.      The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

 

Standard

Description

IAS 1 and IAS 8 amendments

Definition of a material

IFRS 3

Business Combinations

Amendments to IFRS 9, IFRS 17 and IAS 39

Interest rate benchmark reform

N/A

Amendments to References to the Conceptual Framework in IFRS Standards

 

ii. Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early:

Standard

Description

Effective date

IAS 1 amendments

Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date:

1 January 2023

IFRS 3 amendments

Business Combinations - Reference to the Conceptual Framework

1 January 2022

IAS 16 amendments

Property, Plant and Equipment: Effective 1 January 2022

1 January 2022

IAS 37 amendments

Provisions, Contingent Liabilities and Contingent Assets:

1 January 2022

N/A

Annual Improvements to IFRS Standards 2018-2020 Cycle:

1 January 2022

 

There are no IFRS's or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company or Group.

Estimates and judgments

Exploration and evaluation assets (Note 11) - exploration and evaluation costs are initially classified and held as intangible fixed assets rather than being expensed. The carrying value of intangible exploration and evaluation assets are then determined. Management considers these assets for indicators of impairment under IFRS 6 at least annually based on an estimation of the recoverability of the cost pool from future development and production of the related oil and gas reserves which requires judgement. This assessment includes assessment of the underlying financial models for the Petišovci field and requires estimates of gas reserves, production, gas prices, operating and capital costs associated with the field and discount rates (see Note 10) using the fair value less cost to develop method which is commonplace in the oil and gas sector. The forecasts are based on the JV partners submitting and obtaining approval for an environmental impact assessment, which the Board considers to be an ordinary risk for oil and gas developments, and other environmental permits which the Board anticipate being issued. In forming this judgment, the Board considered all facts and circumstances including the IPPC award in 2019, the Court ruling regarding the environmental permit applications and noting the recent amendments to both the Nature Preservation Act as well as law regarding building permits for facilities that could be considered relevant. The carrying value of exploration assets at 31 December 2020 was £18,753,000 (2019: £18,576,000).

Reserves - Reserves are proven, and probable oil and gas reserves calculated on an entitlement basis and are integral to the assessment of the carrying value of the exploration, evaluation and production assets. Estimates of commercial reserves include estimates of the amount of oil and gas in place, assumptions about reservoir performance over the life of the field and assumptions about commercial factors which, in turn, will be affected by the future oil and gas price.

Carrying value of property, plant and equipment (developed oil and gas assets) (Note 10) - developed oil and gas assets are assessed for indicators of impairment and tested for impairment at each reporting date when indicators of impairment exist. An impairment test was performed based on a discounted cash flow model using a fair value less cost to develop approach commonplace within the oil and gas sector. Key inputs requiring judgment and estimate included gas prices, production and reserves, future costs and discount rates. Gas prices in the near term are forecast based on management's expectation of market prices less deductions under the INA contract, before reverting to market prices with reference to the forward curve following the approval of the IPPC permit and transition to gas sales taking place into the Slovenian market. The forecasts include future well workovers to access the reserves included in the model together with the wider estimated field development costs to access field reserves. Refer to Note 9. The impairment test demonstrates significant headroom despite the underperformance of the wells given the delays obtaining permits for well stimulation. As with the exploration and evaluation assets, judgment was required regarding the likelihood of the necessary environmental permits being granted, which are key to the commercial value of the assets.

Depreciation of property, plant and equipment (Note 10) - Upon commencing commercial production we began to depreciate the assets associated with current production. The depreciation on a unit of production basis requires judgment and estimation in terms of the applicable reserves over which the assets are depreciated and the extent to which future capital expenditure is included in the depreciable cost when such expenditure is required to extract the reserve base. The calculations have been based on actual production, estimates of P50 reserves and best estimate resources the estimated future workover costs on the producing wells to extract this reserve. The depreciation charge for the year was £397,000 (2019: £434,000) including both depreciation associated with the unit of production method and straight-line charges for existing processing infrastructure. This is included in Notes 9 and 10 below.

Deferred tax (Note 6) - judgment has been required in assessing the extent to which a deferred tax asset is recorded, or not recorded, in respect of the Slovenian operations. Noting the history of taxable losses and the initial phases of production, together with assessment of budgets and forecasts of tax in 2019 the Board has concluded that no deferred tax asset is yet applicable. This is included at Note 7.

Intercompany receivables (Note 22) - In line with the requirements of IFRS 9 the Board has carried out an assessment of the potential future credit loss on intercompany receivables under a number of scenarios. Arriving at the expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan receivables, the possible credit losses that could arise and the probabilities for these scenarios. The Company would suffer a credit loss where the permits necessary for the development of the field are not obtained and a court case for damages against the Republic of Slovenia is unsuccessful. Based on legal advice received in relation to the permit process and the strength of our case we consider the risk of credit loss to be relatively limited. A provision of £nil (2019: £4.8 million) has been recognised in the Company accounts against a receivable of £32 million (2019: £32 million).

Investments (note 12) - Judgement has been made in respect of the carrying value of the Company's carrying value of its investments in the subsidiaries. The process for this is the same as the consideration given in respect of both Intangible Assets and Property, Plant and Equipment (see above).

Basis of consolidation (Note 12) - Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Group. The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Income Statement from the date that control commences until the date that control ceases.

Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into line with those used by the Group.

Business combinations (Note 9) - Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary comprises the:

·      fair value of assets transferred;

·      liabilities incurred to the former owners of the acquired business;

·      equity instruments issued by the Group;

·      fair value of any asset or liability resulting from contingent consideration arrangement; and

·      fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any noncontrolling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the noncontrolling interest's proportionate share of the acquired entity's net identifiable assets. Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred, amount of any non-controlling interest and fair value of pre-existing equity interest over the fair value of net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets acquired, the difference is recognised immediately in profit or loss as a gain on bargain purchase.

Joint arrangements - The Group is party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

The Group classifies its interests in joint arrangements as either joint ventures, where the Group has rights to only the net assets of the joint arrangement, or joint operations where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.

All of the Group's joint arrangements are classified as joint operations. The Group accounts for its interests in joint operations by recognising its assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.

The Group has one joint arrangement as disclosed on page 9, the Petišovci joint venture in Slovenia in which Ascent Slovenia Limited (a 100% subsidiary of Ascent Resources plc) has a 75% working interest.

Oil and Gas Exploration Assets

All licence/project acquisitions, exploration and appraisal costs incurred or acquired on the acquisition of a subsidiary, are accumulated in respect of each identifiable project area. These costs, which are classified as intangible fixed assets are only carried forward to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Pre-licence/project costs are written off immediately. Other costs are also written off unless commercial reserves have been established or the determination process has not been completed. Thus, accumulated cost in relation to an abandoned area are written off in full to the statement of comprehensive income in the year in which the decision to abandon the area is made.

Transfer of exploration assets to property, plant and equipment - Assets, including licences or areas of licences, are transferred from exploration and evaluation cost pools to property, plant and equipment when the existence of commercially feasible reserves have been determined and the Group concludes that the assets can generate commercial production. This assessment considers factors including the extent to which reserves have been established, the production levels and margins associated with such production. The costs transferred comprise direct costs associated with the relevant wells and infrastructure, together with an allocation of the wider unallocated exploration costs in the cost pool such as original acquisition costs for the field. The producing assets start to be depreciated following transfer.

Depreciation of property plant and equipment - The cost of production wells is depreciated on a unit of production basis. The depreciation charge is calculated based on total costs incurred to date plus anticipated future workover expenditure required to extract the associated gas reserves. This depreciable asset base is charged to the income statement based on production in the period over their expected lifetime P50 production extractable from the wells per the field plan. The infrastructure associated with export production is depreciated on a straight-line basis over a two-year period as this is the anticipated period over which this infrastructure will be used.

Impairment of oil and gas exploration assets

Exploration/appraisal assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6 'Exploration for and Evaluation of Mineral Resources' and tested for impairment where such indicators exist.

In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether the Group's oil and gas exploration assets may be impaired:

•      whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

•      whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;

•      whether exploration for and evaluation of oil and gas reserves in a specific area have not led to the discovery of commercially viable quantities of oil and gas and the Group has decided to discontinue such activities in the specific area; and

•      whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale.

If any such facts or circumstances are noted, the Group, as a next step, perform an impairment test in accordance with the provisions of IAS 36. In such circumstances the aggregate carrying value of the oil and gas exploration and assets is compared against the expected recoverable amount of the cash generating unit. The recoverable amount is the higher of value in use and the fair value less costs to sell.

The Group has identified one cash generating unit, the wider Petišovci project in Slovenia. Any impairment arising is recognised in the Income Statement for the year.

Where there has been a charge for impairment in an earlier period that charge will be reversed in a later period where there has been a change in circumstances to the extent that the discounted future net cash flows are higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be increased to the lower of its original carrying values or the carrying value that would have been determined (net of depletion) had no impairment loss been recognised in prior periods.

Impairment of development and production assets and other property, plant and equipment

At each balance sheet date, the Group reviews the carrying amounts of its PP&E to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell (otherwise referred to as fair value less cost to develop in the oil and gas sector) and value in use. Fair value less costs to sell is determined by discounting the post-tax cash flows expected to be generated by the cash-generating unit, net of associated selling costs, and takes into account assumptions market participants would use in estimating fair value including future capital expenditure and development cost for extraction of the field reserves. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Decommissioning costs

Where a material obligation for the removal of wells and production facilities and site restoration at the end of the field life exists, a provision for decommissioning is recognised. The amount recognised is the one off amount to the Company's JV partner as per the Revised Joint Venture Agreement.

Foreign currency

The Group's strategy is focussed on developing oil and gas projects across Europe funded by shareholder equity and other financial assets which are principally denominated in sterling. The functional currency of the Company is sterling.

Transactions in foreign currency are translated to the respective functional currency of the Group entity at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional currency at the rates prevailing on the reporting date. Exchange gains and losses on short-term foreign currency borrowings and deposits are included with net interest payable.

The assets and liabilities of foreign operations are translated to sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at the average rate ruling during the period. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity. Foreign exchange differences arising on inter-company loans considered to be permanent as equity are recorded in equity. The exchange rate from euro to sterling at 31 December 2020 was £1: €1.1192 (2019: £1:€1.1755).

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.

Exchange differences on all other transactions, except inter-company foreign currency loans, are taken to operating loss.

Taxation (Note 6)

The tax expense represents the sum of the tax currently payable and any deferred tax.

The tax currently payable is based on the estimated taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the expected tax rate applicable to annual earnings.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Equity-settled share-based payments

The cost of providing share-based payments to employees is charged to the income statement over the vesting period of the related share options or share allocations. The cost is based on the fair values of the options and shares allocated determined using the binomial method. The value of the charge is adjusted to reflect expected and actual levels of vesting. Charges are not adjusted for market related conditions which are not achieved. Where equity instruments are granted to persons other than directors or employees the Consolidated Income Statement is charged with the fair value of any goods or services received.

Grants of options in relation to acquiring exploration assets in licence areas are treated as additions to Slovenian exploration costs at Group level and increases in investments at Company level.

Provisions (Note 16)

A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by estimating the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Convertible loan notes

Upon issue of a new convertible loan, where the convertible option is at a fixed rate, the net proceeds received from the issue of CLNs are split between a liability element and an equity component at the date of issue. The fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the CLNs and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity and is not remeasured.

Subsequent to the initial recognition the liability component is measured at amortised cost using the effective interest method.

When there are amendments to the contractual loan note terms these terms are assessed to determine whether the amendment represents an inducement to the loan note holders to convert. If this is considered to be the case the estimate of fair value adjusted as appropriate and any loss arising is recorded in the income statement.

Where there are amendments to the contractual loan note terms that are considered to represent a modification to the loan note, without representing an inducement to convert, the Group treats the transaction as an extinguishment of the existing convertible loan note and replaces the instrument with a new convertible loan note. The fair value of the liability component is estimated using the prevailing market interest rate for similar nonconvertible debt. The fair value of the conversion right is recorded as an increase in equity. The previous equity reserve is reclassified to retained loss. Any gain or loss arising on the extinguishment of the instrument is recorded in the income statement, unless the transaction is with a counterparty considered to be acting in their capacity as a shareholder whereby the gain or loss is recorded in equity.

Where the loan note is converted into ordinary shares by the loan note holder; the unaccreted portion of the loan notes is transferred from the equity reserve to the liability; the full liability is then converted into share capital and share premium based on the conversion price on the note.

Non-derivative financial instruments

Non-derivative financial instruments comprise of investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Financial instruments

Classes and categories

Financial assets that meet the following conditions are measured subsequently at amortised cost using effective

interest rate method:

•      The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and,

•      The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets for which the amount of future receipts are dependent upon the Company's share price over the term of the instrument do not meet the criteria above and are recorded at fair value through profit and loss.

Measurement

Financial assets at amortised cost

A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.

Impairment

For trade receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The Group's trade receivables are generally settled on a short time frame without material credit risk.

The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a twelve-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next twelve months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.

Lifetime expected credit losses (ECLs) for intercompany loan receivables are based on the assumptions that repayment of the loans are demanded at the reporting date due to the fact that the loan is contractually repayable on demand. The subsidiaries do not have sufficient funds in order to repay the loan if demanded and therefore the expected manner of recovery to measure lifetime expected credit losses is considered. A range of different recovery strategies and credit loss scenarios are evaluated using reasonable and supportable external and internal information to assess the likelihood of recoverability of the balance under these scenarios.

Financial liabilities at amortised cost

Financial liabilities are initially recognised at fair value net of transaction costs incurred. Subsequent to initial measurement financial liabilities are recognised at amortised costs. The difference between initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms using the effective interest rate method. This category includes the following classes of the financial liabilities, trade and other payables, bonds and other financial liabilities. Financial liabilities at amortised costs are classified as current or non-current depending whether these are due within 12 months after the balance sheet date or beyond.

Financial liabilities are derecognised when either the Group is discharged from its obligation, they expire, are cancelled, or replaced by a new liability with substantially modified terms.

Warrants

Warrants granted as part of a financing arrangement which fail the fixed-for-fixed criteria as a result of either the consideration to be received or the number of warrants to be issued is variable, are initially recorded at fair value as a derivative liability and charged as transaction cost deducted against the loan and subsequently amortised through the effective interest rate. Subsequently the derivative liability is revalued at each reporting date with changes in the fair value recorded within finance income or costs.

Equity

Share capital is determined using the nominal value of shares that have been issued.

Share based payments relate to transactions where the Group receives services from employees or service providers and the terms of the arrangements include payment of a part or whole of consideration by issuing equity instruments to the counterparty. The Group measures the services received from non-employees, and the corresponding increase in equity, at the fair value of the goods or services received. When the transactions are with employees, the fair value is measured by reference to the fair value of the shares issued. The expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied

Equity-settled share-based payments are credited to a share-based payment reserve as a component of equity until related options or warrants are exercised or lapse

The Translation reserve comprises the exchange differences from translating the net investment in foreign entities and of monetary items receivable from subsidiaries for which settlement is neither planned nor likely in the foreseeable future

Retained losses includes all current and prior period results as disclosed in the income statement.

Investments and loans

Shares and loans in subsidiary undertakings are shown at cost. Provisions are made for any impairment when the fair value of the assets is assessed as less than the carrying amount of the asset. Inter-company loans are repayable on demand but are included as non-current as the realisation is not expected in the short term.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer ("CEO").

Revenue recognition

Sales represent amounts received and receivable from third parties for goods and services rendered to the costumers. Sales are recognised when control of the goods has transferred to the customer, which is at the border to Croatia under the contract and is recorded at this point. Condensate, which is collected at a separating station and transported via trucks to a customer in Hungary is recorded on delivery according the terms of the contract. At this point in time, the performance obligation is satisfied in full with title, risk, entitlement to payment and customer possession confirmed. Revenue is measured as the amount of consideration which the Group expects to receive, based on the market price for gas and condensate after deduction of costs agreed per the Restated Joint Operating Agreement ("RJOA") and sales taxes.

Revenue is derived from the production of hydrocarbons under the Petišovci Concession, which Ascent Slovenia Limited holds a 75% working interest. Under the terms of the RJOA, and in accordance with Slovenian law, the concession holder retains the rights to all hydrocarbons produced. The concession holder enters into sales agreements with customers and transfers the relevant portion of hydrocarbon sales to Ascent Slovenia Limited for the services it provides under the RJOA.

Payments are typically received around 30 days from the end of the month during which delivery has occurred. There are no balances of accrued or deferred revenue at the balance sheet date.

Under the RJOA, the Group is entitled to 90% of the revenues until 25% of Investments in the Petišovci area have been recovered and the Group records revenue on the entitlement basis accordingly.

Credit terms are agreed per RJOA contract and are short term, without any financing component.

The Group has no sales returns or reclamations of services since it has only one costumer. Sales are disaggregated by geography.

Goodwill

Goodwill arising from business combinations is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Contingent Consideration

Contingent consideration is measured at fair value at the time of the business combination and is considered in the determination of goodwill.

2.   Segmental Analysis

The Group has two reportable segments, an operating segment and a head office segment, as described below.  The operations and day to day running of the business are carried out on a local level and therefore managed separately.  The operating segment reports to the UK head office which evaluates performance, decide how to allocate resources and make other operating decisions such as the purchase of material capital assets and services.  Internal reports are generated and submitted to the Group's CEO for review on a monthly basis.

The operations of the Group as a whole are the exploration for, development and production of oil and gas reserves.

The two geographic reporting segments are made up as follows:

Slovenia           -        exploration, development and production

UK                    -        head office

The costs of exploration and development works are carried out under shared licences with joint ventures and subsidiaries which are co-ordinated by the UK head office.  Segment revenue, segment expense and segment results include transfers between segments.  Those transfers are eliminated on consolidation.  Information regarding the current and prior year's results for each reportable segment is included below.

 


UK

Slovenia

Elims

Total

2020

£ '000s

£ '000s

£ '000s

£ '000s






Hydrocarbon sales

-

-

-

Intercompany sales

-

267

(267)

-

Total revenue 

-

-

-

-

Cost of sales

(10)

(111)

-

(121)

Administrative expenses

(2,013)

(506)

240

(2,279)

Material non-cash items




-

Depreciation

(2) 

(395)

-

(397)

Net finance costs

(35)

-

-

(35)

Reportable segment profit/(loss) before tax

(2,060)

(745)

(27)

(2,831)

Taxation

-

-

-

Reportable segment profit/(loss) after taxation

(2,060)

(745)

(27)

(2,831)

Reportable segment assets





Carrying value of exploration assets

-

18,576

-

18,576

Additions to exploration assets

-

-

-

-

Effect of exchange rate movements

-

177

-

177

Total plant and equipment

-

22,783

-

22,783

Prepaid abandonment fund

-

300

-

300

Investment in subsidiaries

16,096 

-

(15,443)

653

Intercompany receivables

27,447

-

(27,447)

-

Total non-current assets

43,543

41,836

(42,890)

42,489

Other assets

175

6

-

181

Consolidated total assets

43,718

41,842

(42,890)

42,670

Reportable segmental liabilities





Trade payables

(417)

(278)

-

(695)

External loan balances

(202)

-

-

(202)

Inter-group borrowings

-

(35,083)

35,083

-

Other liabilities

(450)

(328)

-

(778)

Consolidated total liabilities

(1,069)

(35,689)

35,083

(1,675)


UK

Slovenia

eliminations

Total

2019

£ '000s

£ '000s

£ '000s

£ '000s






Hydrocarbon sales

-

298


298

Intercompany sales

1,187

232

(1,419)

-

Total revenue 

1,187

530

(1,419)

298

Cost of sales

-

(462)


(462)

Administrative expenses

(8,660)

(1,236)

7,764

(2,132)

Material non-cash items




-

Depreciation

-

(440)

-

(440)

Net finance costs

(889)

(1,178)

1,144

(924)

Reportable segment profit/(loss) before tax

(8,362)

(2,786)

7,489

(3,660)

Taxation

-

-

-

-

Reportable segment profit/(loss) after taxation

(8,362)

(2,786)

7,489

(3,660)

Reportable segment assets





Carrying value of exploration assets

-

18,968

-

18,968

Additions to exploration assets

-

52

-

52

Effect of exchange rate movements

-

(444)


(444)

Total plant and equipment

-

22,069

-

22,069

Prepaid abandonment fund

-

240

-

240

Investment in subsidiaries

15,443

-

(15,443)

-

Intercompany receivables

27,180


(27,180)

-

Total non-current assets

42,623

40,885

(42,623)

40,885

Other assets

260

71

-

331

Consolidated total assets

42,883

40,956

(42,623)

41,216

Reportable segmental liabilities





Trade payables

(115)

(277)

-

(392)

External loan balances

(385)

-

-

(385)

Inter-group borrowings

-

(33,986)

33,986

-

Other liabilities

(60)

(266)

-

(326)

Consolidated total liabilities

(560)

(34,529)

33,986

(1,103)

 

Revenue from customers

Revenue was earned by the Slovenian segment through the joint venture structure; sales were made to end customers in Slovenia £nil; Croatia £nil and Hungary £nil (2019: £99,000; Croatia £160,000 and Hungary £39,000). Gas sales comprised £nil (2019: £259,000) whilst condensate sales totalled £nil (2019: £39,000).  The performance obligations are set out in the Group's revenue recognition policy and no outstanding performance obligations existed at year end. The price for the sale of gas and condensate is set with reference to the market price at the date the performance obligation is satisfied.

3.   Operating loss is stated after charging:


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Employee costs

729 

693

Share based payment charge

456

269

Depreciation

397 

440




Auditor's remuneration:



Audit Fees - BDO

Audit Fees - PKF

-
43 

70
-

Fees payable to the company's auditor other services

-


43

70

4.   Employees and directors

a.  Employees

The average number of persons employed by the Group, including Executive Directors, was:


Year ended

Year ended


31 December

31 December


2020

2019




Management and technical

10 

8

 

The average number of personal employed by the Company, including Executive Directors, was:


Year ended

Year ended


31 December

31 December


2020

2019




Management and technical

7

5

 

b.  Directors and employee's remuneration


Year ended

Year ended


31 December

31 December


2020

2019

Employees & Directors



Wages and salaries

628 

611

Social security costs

56 

27

Pension costs

53

Bonuses

38

-

Share-based payments

456

269

Taxable benefits

2


1,185

962

 

c.  Directors remuneration
Please see Remuneration report on pages 31 - 33

5.   Finance income and costs recognised in the year

Finance costs



Accretion charge on convertible loan notes

(3)

Interest charge on loans

(24) 

(40)

Change in fair value of receivable under Equity Sharing Agreement

(814)

Bank charges

(11) 

(67)


(35)

(924)

 

Please refer to Note 15 for a description of financing activity during the year.

6.   Income tax expense


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Current tax expense

-

Deferred tax expense

-

Total tax expense for the year

-

-

 

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the loss before tax is as follows:


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Loss for the year

(2,831) 

(3,660)




Income tax using the Company's domestic tax rate at 19% (2019: 19%)

(537)

(696)




Effects of:



Net increase in unrecognised losses c/f

537 

2,816

Effect of tax rates in foreign jurisdictions

32

Other non-taxable items

(537) 

(2,152)

Other non-deductible expenses

 -

-

Total tax expense for the year

-

-

 

7.   Deferred tax - Group & Company


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Group



Total tax losses - UK and Slovenia

(51,255) 

(48,424)

Unrecorded deferred tax asset at 17% (2019:  17%)

8,713

8,232




Company



Total tax losses

(13,632) 

(11,772)

Unrecorded deferred tax asset at 17% (2019:  17%)

2,317

2,001

 

No deferred tax asset has been recognised in respect of the tax losses carried forward, due to the uncertainty as to when profits will be generated. Refer to critical accounting estimates and judgments.

 

8.   Earnings per share


Year ended

Year ended


31 December

31 December


2020

2019


£ '000s

£ '000s

Result for the year



Total loss for the year attributable to equity shareholders

(2,831) 

(3,660)




Weighted average number of ordinary shares

 Number

 Number

For basic earnings per share

60,693,793 

26,590,316


                         

                         

Loss per share (Pence)

(4.66)

(14.00)

As the result for the year was a loss, the basic and diluted loss per share are the same.  At 31 December 2020, potentially dilutive instruments in issue were 65,868,482 (2019: 145,076,254).  Dilutive shares arise from share options and warrants issued by the Company.

9.   Business Combinations

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 31 December 2020 were:

Energetical Limited (renamed to Ascent Hispanic Resources Limited)

As a first step towards building its Cuban portfolio, the Company acquired 100% of the share capital of Energetical Limited on 13 April 2020. Energetical Limited is a UK Company with exclusive rights to secure a Production Sharing Contract ('PSC') on a producing onshore Cuban oil licence, and this was the primary reason for acquisition. 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 contingent 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:




Fair Values

 Recognised amounts of net assets acquired and liabilities assumed

£ '000s

Identifiable net assets

-

Goodwill

653

 Total Consideration

653

 

Satisfied by:

 

 

 

Consideration - new ordinary shares issued at 3.38p

203

Contingent consideration

450

 Total Consideration

653

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. 

10. Property, Plant & Equipment - Group


Computer Equipment

Developed Oil & Gas Assets

Total

Cost

£ '000s 

£ '000s

£ '000s 

At 1 January 2019

6

24,808

24,814

Additions

-

3

3

Effect of exchange rate movements

-

(1,328)

(1,328)

At 31 December 2019

6

23,483

23,489

At 1 January 2020

23,483 

23,489

Additions

 -

-

-

Effect of exchange rate movements

-

1,111

1,111

At 31 December 2020

6

24,594

24,600





Depreciation




At 1 January 2019

-

(1,035)

(1,035)

Charge for the year

(6)

(434)

(440)

Effect of exchange rate movements


55

55

At 31 December 2019

(6)

(1,414)

(1,420)

At 1 January 2020

(6)

(1,414)

(1,420)

Charge for the year

(397)

(397)

Effect of exchange rate movements

-

-

-

At 31 December 2020

(6)

(1,811)

(1,817)





Carrying value




At 31 December 2020

-

22,783

22,783

At 31 December 2019

-

22,069

22,069

At 1 January 2019

6

23,773

23,779

 

No impairment has been recognised during the year as an independent experts NPV model values the assets higher than the carrying amounts; this assumes that the Group can obtain the necessary environmental permits and the concession extension due in 2022 to continue with the planned development of the Petišovci field. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as set out in Note 1.  Should the permits not be granted, nor the concession extension confirmed, the carrying value of these assets would be impaired.

11. Exploration and evaluation assets - Group


Slovenia

Total

Cost

£ '000s

£ '000s

At 1 January 2019

18,968

18,968

Additions

52

52

Effects of exchange rate movements

(444)

(444)

At 31 December 2019

18,576

18,576

At 1 January 2020

18,576

18,576

Additions

-

Effects of exchange rate movements

177

177

At 31 December 2020

18,753

18,753




At 31 December 2020

18,753

18,753

At 31 December 2019

18,576

18,576

At 1 January 2019

18,968

18,968

For the purposes of impairment testing the intangible oil and gas assets are allocated to the Group's cash-generating unit, which represent the lowest level within the Group at which the intangible oil and gas assets are measured for internal management purposes, which is not higher than the Group's operating segments as reported in Note 2. Details of the impairment judgments and estimates and the fair value less cost to develop assessment as set out in Note 1.

The amounts for intangible exploration assets represent costs incurred on active exploration projects.  Amounts capitalised are assessed for impairment indicators under IFRS 6 at each period end as detailed in the Group's accounting policy.  In addition, the Group routinely reviews the economic model and reasonably possible sensitivities and considers whether there are indicators of impairment.  As at 31 December 2020 and 2019 the net present value significantly exceeded the carrying value of the assets.  The key estimates associated with the economic model net present value are detailed in Note 1.  The outcome of ongoing exploration, and therefore whether the carrying value of intangible exploration assets will ultimately be recovered, is inherently uncertain.

12. Investment in subsidiaries - Company


2020

2019


£ '000s

£ '000s

Cost

 

 

At 1 January

15,443

15,443

Additions

653

-

At 31 December

16,096

15,443

Accumulated impairment



At 1 January

-

-

Impairment

-

-

At 31 December

-

-

Net book value



At 31 December

16,096

15,443

 

The Company's subsidiary undertakings at the date of issue of these financial statements, which are all 100% owned, are set out below:

Name of company & registered office address

Principal activity

Country of incorporation

% of share capital held 2020

% of share capital held 2019

Ascent Slovenia Limited

Tower Gate Place

Tal-Qroqq Street

Msida, Malta

Oil and Gas exploration

Malta

100%

100%

Ascent Resources doo

Glavna ulica 7

9220 Lendava

Slovenia

Oil and Gas exploration

Slovenia

100%

100%

Trameta doo

Glavna ulica 7

9220 Lendava

Slovenia

Infrastructure owner

Slovenia

100%

100%

Ascent Resources Netherlands BV

c/o Ascent Resources plc

5 New Street Square

London EC4A 3TW

Oil and Gas exploration

 

Netherlands

100%

100%

Ascent Hispanic Resources UK Limited

5 New Street Square

London EC4A 3TW

Oil and Gas exploration

England and Wales

100%

100%

All subsidiary companies are held directly by Ascent Resources plc.

13. Trade and other receivables - Group


2020

2019


£ '000s

£ '000s

Trade receivables

54

VAT recoverable

49

27

Prepaid abandonment liability

300

240

Amounts receivable on ESA

-

173

Prepayments & accrued income

17

-


350

494

Less non-current portion

(300)

(240)

Current portion

66

254

 

14. Trade and other receivables - Company


2020

2019


£ '000s

£ '000s

VAT recoverable

21 

16

Amounts receivable on ESA

173

Prepayments & accrued income

47

7


68

196

15. Borrowings - Group & Company


2020

2019


£ '000s

£ '000s

Group

Current



Borrowings

368

Convertible loan notes

5

17

Non-current



Borrowing

197

-


202

385

Company



Current



Borrowings

368

Convertible loan notes

5

17

Non-current



Borrowing

197

-


202

385

The non-current borrowings relate to the loan arrangement with Riverfort Global opportunities that was refinanced in February 2020. The outstanding loan of £375,020 as at February 2020 was 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 Group made convertible loan note repayments in the year of £105,000 to Riverfort Global opportunities, resulting in an ending convertible loan note balance of £270,000, comprising £197,000 recognised as the debt component and a further £73,000 recognised in Equity Reserve.

The current convertible loan was due from redemption on 19 November 2019 and at the balance sheet date £5,625 remain unclaimed.

 

16. Provisions - Group



£000s

At 1 January 2019


263

Foreign exchange movement


(8)

At 31 December 2019


255

At 1 January 2020


263

Foreign exchange movement


Provision


60

At 31 December 2020


328

 

The amount provided for decommissioning costs represents the Group's share of site restoration costs for the Petišovci field in Slovenia.  The most recent estimate is that the year-end provision will become payable after 2037. During 2017 the Company has placed €300,000 (£268,000) on deposit as collateral against this liability see Note 13.

17. Contingent Consideration due on Acquisition


2020

2019

 Group

£ '000s

£ '000s

Non-current



Ascent Hispanic Limited (formerly Energetical Limited)

450

-


450

-

The contingent consideration is based on the defined contingent consideration in the acquisition of Energetical Limited, comprising £100,000.00 in cash and a further £350,000,00 in shares. The Company has not discounted the contingent consideration since the impact would not be material. Please refer to note 9 of the financial statements for the consideration in the acquisition of Ascent Hispanic Limited. 

18. Trade and other payables - Group


2020

2019


£ '000s

£ '000s

Trade payables

573 

392

Tax and social security payable

56

5

Accruals and deferred income

66 

66


695

463

 

19. Trade and other payables - Company


2020

2019


£ '000s

£ '000s

Trade payables

295 

115

Tax and social security payable

56 

6

Other payables

-

Accruals and deferred income

66 

54


417

175

 

20. Called up share capital

 

2020

2019


£ '000s

£ '000s

Authorised



2,000,000,000 ordinary shares of 0.5p each

10,000

10,000




Allotted, called up and fully paid



3,019,648,452 deferred shares of 0.195p each

5,888

5,888

1,737,110,763 deferred shares of 0.09p each

1,563

1,563

95,283,281 ordinary shares of 0.5p each (2019: 3,019,452 ordinary shares of 0.2p each)

477

153





7,928

7,604




Reconciliation of share capital movement

2020

2019


Number

Number

At 1 January

3,019,648,452

2,291,310,686




Share consolidation

(2,989,451,968)

-

Issue of Trameta consideration shares

91,167

-

Issue of shares during the year

64,995,630

728,337,766                     




At 31 December

95,283,281

3,019,648,452

 

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 2020, 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.

·      On 6 August 2020 the Company raised £300,000 via the placing of 15,000,000 Ordinary shares with investors

·      On 6 August 2020 the Company issued 1,500,000 ordinary shares at a placing price of 2p per share relating to the settle amounts with creditors.

·      On 15 October 2020 the Company issued 525,090 ordinary shares in lieu of payment of consultancy fees at a price of 4p per share

·      On 23 October 2020 the Company received £50,000 in respect of a warrants exercise of 2,000,000 ordinary shares

·      On 26 October 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for consideration of £100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8% cash coupon on the convertible loan amount

·      On 5 November 2020 the Company issued 457,720 ordinary shares to a supplier for financial and economic modelling services rendered in the months of September and October

·      On 19 November 2020 the Company received notice in respect of warrants exercised in the amount of 1,250,00 ordinary shares

·      On 1 December 2020 the Company received notice of the exercise of warrants of 4,000,000 ordinary shares for consideration of £100,000 and agreed to issue 320,00 ordinary shares at a price of 2.5p per share in lieu of the 8% cash coupon on the convertible loan amount

·      On 1 December 2020 the Company issued 480,000 ordinary shares at a price of 7.5p per share in respect of a supplier invoice

Shares issued during the prior year

The Company raised funds through placings during the prior year:

·      On 25 January 2019, the Company raised £363,156 (£345,703 net of costs) via the Placing of 121,052,097 Ordinary Shares with investors using the PrimaryBid.com platform.

·      On 24 April 2019, the Company raised £750,000 (£708,950 net of costs) via the Placing of 214,285,669 Ordinary Shares with various institutional investors.

·      On 23 September 2019, the Company raised £1,080,750 (£1,071,744 net of costs) via the Placing of 393,000,000 Ordinary Shares with Riverfort Global Investors.

Reserve description and purpose

The following describes the nature and purpose of each reserve within owners' equity:

·      Share capital:  Amount subscribed for share capital at nominal value.

·      Merger reserve: Value of shares, in excess of nominal value, issued with respect of the Trameta acquisition in 2016.

·      Equity reserve:  Amount of proceeds on issue of convertible debt relating to the equity component and contribution on modification of the convertible loan notes, i.e. option to convert the debt into share capital.

·      Share premium:  Amounts subscribed for share capital in excess of nominal value less costs of shares associated with share issues.

·      Share-based payment reserve:  Value of share options granted and calculated with reference to a binomial pricing model.  When options lapse or are exercised, amounts are transferred from this account to retained earnings.

·      Translation reserve:  Exchange movements arising on the retranslation of net assets of operation into the presentation currency.

·      Accumulated losses:  Cumulative net gains and losses recognised in consolidated income.

21. Exploration expenditure commitments

In order to maintain an interest in the oil and gas permits in which the Group is involved, the Group is committed to meet the conditions under which the permits were granted and the obligations of any joint operating agreements.  The timing and the amount of exploration expenditure commitments and obligations of the Group are subject to the work programmes required as per the permit commitments.  This may vary significantly from the forecast programmes based upon the results of the work performed.  Drilling results in any of the projects may also cause variations to the forecast programmes and consequent expenditure.  Such activity may lead to accelerated or decreased expenditure.  It is the Group's policy to seek joint operating partners at an early stage to reduce its commitments.

At 31 December 2020, the Group had exploration and expenditure commitments of £ Nil (2019 - Nil).

22. Related party transactions

Group companies - transactions


2020

2019


Cash

Services

Total

Cash

Services

Total

Ascent Slovenia Limited

267 

-

267

111

1,858

1,969

Ascent Resources doo

-

-

-

(9)

(5)

(14)

Trameta doo

-

-

-

2

-

2


267

-

267

102

1,853

1,955

 

Group companies - balances




2020



2019


Cash

Services

Total

Cash

Services

Total

Ascent Slovenia Limited

17,351 

5,404 

22,755 

17,084

5,404

22,488

Ascent Resources doo

 2,951

1,730 

4,681 

2,951

1,730

4,681

Trameta doo

 11

11 

11

-

11


20,313 

7,134 

27,447

20,046

7,134

27,180

 

Cash refers to funds advanced by the Company to subsidiaries.  Services relates to services provided by the Company to subsidiaries.  The loans are repayable on demand but are classified as non-current reflecting the period of expected ultimate recovery.

Following the introduction of IFRS 9 Management have carried out an assessment of the potential future credit loss the loans classified as 'stage 3' under IFRS 9 and assessed for lifetime expected credit loss given their on-demand nature under a number of scenarios.  The Company would suffer a credit loss where the permits necessary for the development of the field are not obtained and a court case for damages against the Republic of Slovenia is unsuccessful.  Based on legal advice received in relation to the permit process and the strength of our case we consider the risk of credit loss to be relatively remote.  A provision of £nil (€4.8 million) has been recognised in the Company accounts.






2020

2019






£ '000s

£ '000s

Expected credit loss provision start of the year


6,500

1,700

Change in expected credit loss





4,800

Expected credit loss provision at the end of year





6,500

6,500

 

Directors

Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group.  In the opinion of the Board, the Group's key management are the Directors of Ascent Resources plc.  Information regarding their compensation is given in Note 4.

2020

There were no transactions involving directors during the year.

2019

There were no transactions involving directors during the year.

23. Events subsequent to the reporting period

COVID-19 has had limited direct impact on Ascent's assets in Slovenia but there may be delays in obtaining the necessary governmental approvals and processes. Production operations in Slovenia have been unaffected to date.

On 6 January 2021 the Company issued 208,991 ordinary shares to a supplier for financial modelling and business development services rendered in the months of November and December at an average issue price of 5.74p per share calculated as the monthly volume weighted average price

On 11 January 2021 the Company received a warrant exercise notice of 833,333 ordinary shares for consideration of £62,500, additionally the Company has agreed to issue 66,667 new ordinary shares of 7.5p being the coupon conversion price in lieu of the 8% cash coupon that is incurred on the converted loan amount

On 4 February 2021 the Company received a warrant exercise notice of 833,333 ordinary shares for consideration of £62,500, additionally the Company has agreed to issue 66,667 new ordinary shares of 7.5p being the coupon conversion price in lieu of the 8% cash coupon that is incurred on the converted loan amount

On 5 February 2021 the Company received a warrant exercise notice of 900,000 new ordinary shares for consideration of £67,500

On 11 February 2021 the Company raised £1m before expense for the placing of 9,997,032 ordinary shares of 0.5p each at a price of 10.1p per share.

 

24. 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:

 

Shares

Weighted Average price (pence)

Outstanding at 1 January 2019

     152,576,254

2.46

Outstanding at 31 December 2019

     152,576,254

2.46

Exercisable at 31 December 2020

84,513,744

2.86




Outstanding at 1 January 2020

     152,576,254

2.46

Consolidation of existing shares

(151,050,492)


Granted during the year

5,897,379


Expired during the year

(75,000)


Outstanding at 31 December 2020

7,348,142

253.72

Exercisable at 31 December 2020

1,450,763

248.72

 

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. 

Share price at grant date

2.9p - 778p

Exercise price

5.0p - 2000p

Volatility

50%

Expected life

3-5 years

Risk free rate

0.5%

Expected dividend yield

0%

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 31 December 2020 have an exercise price in the range of 2.9p and 778p (31 December 2019: 1.58p and 20.00p) and a weighted average contractual life of 5.5 years (31 December 2019: 9.9 years). The amount recognised in the income statement for the year ended 31 December 2020 was £456,000 (2019: £269,000).

Details of the warrants issued in the year are as follows:

Issued

Exercisable from

Expiry date

Number outstanding

Exercise price

24 March 2020

Anytime until

24 March 2025

225,000

5.00p

24 March 2020

Anytime until

24 March 2025

199,482

5.00p

30 April 2020

Anytime until

30 April 2022

8,727,272

5.50p

6 August 2020

Anytime until

5 August 2022

7,500,000

4.00p

11 August 2020

Anytime until

6 August 2023

16,000,000

2.50p

30 November 2020

Anytime until

30 November 2023

6,666,666

7.50p

 

 

Warrants

Weighted Average price (pence)




Outstanding at 1 January 2020

     -

-

Granted during the year

39,318,420

4.33

Exercised during the year

(17,250,000)

3.36

Outstanding at 31 December 2020

22,068,420

5.44

Exercisable at 31 December 2020

22,068,420

5.44

 

The warrants outstanding at the period end have a weighted average remaining contractual life of 1.8 years. The exercise prices of the warrants are between 4.00 - 7.50p per share.

25. Notes supporting the statement of cash flows

Group

2020

2019


£ '000s

£ '000s

Cash at bank and available on demand

                     115

                   77

Cash held on deposit against bank guarantee

                       -

                   -


                     115

                   77




Company

2020

2019


£ '000s

£ '000s

Cash at bank and available on demand

                   107

                   63

Cash held on deposit against bank guarantee

                       -

                   -


                   107

                   63

 

Significant non-cash transactions are as follows:


2020

2019


£ '000s

£ '000s

Conversion of loan notes

-

-

Interest charged on loans

-

40

Accretion charge on convertible loan notes

-

3

26. Financial risk management

Group and Company

The Group's financial liabilities comprise CLNs, borrowings and trade payables.  All liabilities are measured at amortised cost.  These are detailed in Notes 15, 0 and 18.

The Group has various financial assets, being trade receivables and cash, which arise directly from its operations.  All are classified at amortised cost.  These are detailed in Notes 13, 14 and 25.

The main risks arising from the Group's financial instruments are credit risk, liquidity risk and market risk (including interest risk and currency risk).  The risk management policies employed by the Group to manage these risks are discussed below:

Credit risk

Credit risk is the risk of an unexpected loss if a counter party to a financial instrument fails to meet its commercial obligations. The Groups's maximum credit risk exposure is limited to the carrying amount of cash of £115,000 and trade and other receivables of £49,000. Credit risk is managed on a Group basis. Funds are deposited with financial institutions with a credit rating equivalent to, or above, the main UK clearing banks. The Company's liquid resources are invested having regard to the timing of payment to be made in the ordinary course of the Group's activities. All financial liabilities are payable in the short term (between 0 to 3 months) and the Group maintains adequate bank balances to meet those liabilities.

The Group makes allowances for impairment of receivables where there is an ECL identified. Refer to Note 22 for details of the intercompany loan ECL assessment.

The credit risk on cash is considered to be limited because the counterparties are financial institutions with high and good credit ratings assigned by international credit rating agencies in the UK.

The carrying amount of financial assets, trade receivables and cash held with financial institutions recorded in the financial statements represents the exposure to credit risk for the Group.

At Company level, there is the risk of impairment of inter-company receivables if the full amount is not deemed as recoverable from the relevant subsidiary company.  These amounts are written down when their deemed recoverable amount is deemed less than the current carrying value.  An IFRS 9 assessment has been carried out as per Note 1.

Market risk

(i)     Currency risk

Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Company.

The Group's operations are predominantly in Slovenia.  Foreign exchange risk arises from translating the euro earnings, assets and liabilities of the Ascent Resources doo and Ascent Slovenia Limited into sterling.  The Group manages exposures that arise from receipt of monies in a non-functional currency by matching receipts and payments in the same currency.

The Company often raises funds for future development through the issue of new shares in sterling.  These funds are predominantly to pay for the Company's exploration costs abroad in euros.  As such any sterling balances held are at risk of currency fluctuations and may prove to be insufficient to meet the Company's planned euro requirements if there is devaluation.

The Group's and Company's exposure to foreign currency risk at the end of the reporting period is summarised below. All amounts are presented in GBP equivalent.

 

Group

Company


2020

2019

2020

2019


£ '000s

£ '000s

£ '000s

£ '000s

Trade and other receivables

-

58

-

-

Cash and cash equivalents

8

13

-

-

Trade and other payables

(279)

(288)

-

-

Net Exposure

(271)

(217)

-

-

 

 

Foreign currency sensitivity analysis

The Group is mainly exposed to the currency of the European Union (the euro).

The Group operates internationally and is exposed to currency risk on sales, purchases, borrowings and cash and cash equivalents that are denominated in a currency other than sterling.  The currencies giving rise to this are the euro.

Foreign exchange risk arises from transactions and recognised assets and liabilities.

The Group does not use foreign exchange contracts to hedge its currency risk.

Sensitivity analysis

The following table details the Group's sensitivity to a 10% increase and decrease in sterling against the stated currencies.  10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the management's assessment of the reasonably possible change in foreign exchange rates.  The sensitivity analysis comprises cash and cash equivalents held at the balance sheet date.  A positive number below indicates an increase in profit and other equity where sterling weakens 10% against the relevant currency.


Euro currency change


Year ended 31 December 2020

Year ended 31 December 2019

Group

Profit or loss



10% strengthening of sterling

135

33

10% weakening of sterling

(9)

(55)




Equity



10% strengthening of sterling

(3,839)

(3,897)

10% weakening of sterling

4,693

4,764




Company



Profit or loss



10% strengthening of sterling

-

(123)

10% weakening of sterling

-

151




Equity



10% strengthening of sterling

(4,070)

(4,542)

10% weakening of sterling

4,832

5,551

(ii)    Interest rate risk

Interest rate risk refers to the risk that fluctuations in interest rates cause losses to the Company.  The Group and Company have no exposure to interest rate risk except on cash and cash equivalent which carry variable interest rates.  The Group carries low units of cash and cash equivalents and the Group and Companies monitor the variable interest risk accordingly.

At 31 December 2019, the Group and Company has GBP loans valued at £270,000 rates of 12% per annum.  At 31 December 2019, the Group and Company had GBP loans valued at £385,000 rates of 12% per annum.

(iii)   Liquidity risk

Liquidity risk refers to the risk that the Company has insufficient cash resources to meet working capital requirements.

The Group and Company manages its liquidity requirements by using both short- and long-term cash flow projections and raises funds through debt or equity placings as required.  Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity management requirements.

The Group closely monitors and manages its liquidity risk.  Cash forecasts are regularly produced, and sensitivities run for different scenarios (see Note 1). For further details on the Group's liquidity position, please refer to the Going Concern paragraph in Note 1 of these accounts.

 

Group

Company


2020

2019

2020

2019


£ '000s

£ '000s

£ '000s

£ '000s

Less than six months - loans and borrowings

-

385

-

385

Less than six months - trade and other payables

-

392

-

392

Between six months and a year

-

-

-

-

Over one year

197

-

197

-

 

Capital management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the balance between debt and equity. The capital structure of the Group as at 31 December 2020 consisted of equity attributable to the equity holders of the Company, totalling £41,069. The Group reviews the capital structure on an on-going basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through new share issues and the issue of new debt or the repayment of existing debt.

There are no externally imposed capital requirements. 

Fair value of financial instruments

Set in the foregoing is a comparison of carrying amounts and fair values of the Group's and the Company's financial instruments:

Categorisation of Financial Assets and Liabilities - Group

Carrying amount

Fair Value

Carrying amount

Fair Value


Year ended

31 December 2020

Year ended

31 December 2020

Year ended

31 December 2019

Year ended

31 December 2019

Financial assets





Cash and equivalents - unrestricted

115

115

77

77

Cash and equivalents - restricted

-

-

-

-

Trade receivables

66

66

54

54

Prepaid abandonment fund (refundable)

240

240

240

240






Financial liabilities





Trade and other payables

695

695

392

392

Loans at fixed rate

197

197

385

385











Capital management - Company






Carrying amount

Fair Value

Carrying amount

Fair Value


Year ended

31 December 2020

Year ended

31 December 2020

Year ended

31 December 2019

Year ended

31 December 2019

Financial assets





Cash and equivalents - unrestricted

107

107

63

63

Trade receivables

68

68

-

-






Financial liabilities





Trade and other payables

417

417

175

175

Loans at fixed rate

197

197

385

385

 

Convertible loan at fixed rate

Fair value of convertible loans has been determined based on tier 3 measurement techniques.  The fair value is estimated at the present value of future cash flows, discounted at estimated market rates.  Fair value is not significantly different from carrying value.

Trade and other receivables/payables & inter-company receivables

All trade and other receivables and payables have a remaining life of less than one year.  The ageing profile of the Group and Company receivable and payables are shown in Notes 13, 14, 14, 18 and 19.

Cash and cash equivalents

Cash and cash equivalents are all readily available and therefore carrying value represents a close approximation to fair value.

27. Commitments & contingencies

As at 31 December 2020, the Company recognises £450,000 in contingent consideration relating to the acquisition of Energetical Limited (renamed to Ascent Hispanic Resources UK Limited).

Post period in review, as announced on 10 March 2021, the Company's JV Service Provide, Petro Geo, issued a local enforcement order attempting to claim payment for an unsubstantiated amount of €662,288.63 plus interest of €12,103.19.

 

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