Final Results

RNS Number : 8324T

Ascent Resources PLC

12 June 2009

 



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

12th June 2009

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

Final Results

Ascent Resources plc, the AIM-traded oil and gas production and exploration company with assets in five countries across Europe, announces its Final results for the year ended 31 December 2008.

Highlights

• Commenced gas production at the PEN-104 well in the Penészlek area of the Nyírség permits, Hungary 

• Drilling of Gazatta-1 exploration well underway in Po Valley, Italy

• Pre-tax loss £2.8 million (2007: £2.1 million)

• Fully diluted loss per share of 0.94p (2007: 0.74p)

• Nine well potential for 2009 - 2010 period

• Continues to develop existing portfolio of exploration, appraisal and production projects across Europe 

• Signed asset management joint venture with Swiss investment company, San Severina. Initial investment of €100 million committed to the joint venture

Ascent Resources Managing Director Jeremy Eng said, '2008 was a pivotal year for Ascent as we moved from being a pure exploration play into a producer, with the commencement of gas production at the PEN-104 well in Hungary. Whilst our focus remains on the development of our diverse portfolio, which continues to mature through sustained exploration and appraisal drilling programmes, we are also exploring new opportunities for investment and acquisition. In line with this, we established an asset management joint venture agreement with San Severina , which has committed an initial €100 million to the joint venture. Our relationship with San Severina enables us to utilise our team's extensive knowledge and expertise in the field as leverage to acquire positions in potentially high value projects through the joint venture. Furthermore, we have been able to strengthen and add flexibility to our existing financing strategy by agreeing a £5 million credit facility with GEM Global Yield Fund.'

For further information please visit www.ascentresources.co.uk or contact:

Jeremy Eng	Ascent    Resources plc	Tel: [phone]
Hugo de Salis Chris Welsh	St Brides Media & Finance Ltd St Brides Media & Finance Ltd	Tel: [phone] Tel: [phone]
Max Hartley	Cenkos Securities plc	Tel: [phone]

CHAIRMAN'S STATEMENT

This has been an eventful period for the Company as we continue to move our business forward and mature our portfolio, encompassing over 20 oil and gas production, exploration and appraisal projects across Europe.  

In spite of these uncertain economic times, I am pleased to report that Ascent has performed well this year. The recent period has been distinguished by knock-on effects from the global financial crisis on the wider economy, resulting in what has been a difficult time for many companies operating in the oil and gas sector. In spite of this, the Company has been able to draw on its experience and skills-base to advance its portfolio and expand its activities.  

Our established strategy of participating in low cost onshore assets with high upside potential gives us a degree of flexibility and mobility that has proved invaluable given the fall in commodity prices. Indeed, the diversity of our portfolio has become one of our key strengths in such a volatile market. The signing of an oil and gas asset management joint venture with San Severina has also enabled us to expand our activities and increase the potential for shareholder returns in other jurisdictions outside our traditional European focus area.

The Company intends to drill at least nine wells in the near future, and it is continuing development work on existing projects to increase production volumes and revenues.

In August 2008 we announced the commencement of gas production from the PEN-104 well in the Penészlek area of the Nyírség permits in Hungary. This project is demonstrative of our ability to carry out the full cycle of the exploration and production process, from the preliminary geological analysis and the acquisition of seismic through drilling and construction of facilities and, in due course, to gas sales. The project also highlighted our adaptability when, during a shutdown of production whilst repairs to a compressor were underway at Penészlek, the decision was made to sidetrack the well in order to substantially increase the amount of recoverable gas. Drilling of a complex sidetrack well commenced in March 2009 and was completed in April on schedule and below budget, with production recommencing shortly thereafter. 

In Italy, we are currently drilling the Gazatta-1 gas exploration well in the Po Valley. The drilling contractor, Perazzoli, is 22.5% owned by Ascent and the drilling rig is a new build, low environmental impact, HH-200. The Gazatta-1 prospect is well defined by seismic data acquired and has the potential to be a valuable discovery for Ascent. 

With a portfolio of European assets and a technical team with in-depth experience both operationally and corporately, we have a structure that can be utilised to generate substantial additional shareholder value. To facilitate this, in October 2008, we announced the signature of an oil and gas management joint venture with San Severina.  The joint venture was established to acquire minority positions and provide investment funding for producing and development or appraisal stage oil and gas projects. Ascent provides management services in return for carried equity positions in each project. San Severina has committed an initial tranche of €100 million.  In addition to new acquisitions, they have the option of investing in Ascent's existing projects. As a new business line, we believe this joint venture holds much potential.  

In May 2009 GEM agreed to make available an equity line of credit of up to £5 million for Ascent.  This facility adds an additional layer of flexibility and funding certainty to the Company's overall financing strategy.  

Outlook

I believe that the Company is in a strong position moving forward. We have a diverse portfolio of assets with a good balance of development, appraisal and exploration projects. Development of these assets continues at a steady pace and our efforts have been bolstered with the new asset management relationship with San Severina, its commitment to our business model and faith in Ascent's management team to deliver quality returns.  

Finally I would like to take this opportunity to thank everyone involved in the Company for their continued hard work and the part they have all played in moving Ascent further towards achieving its goals this year. We continue, as ever, to remain thorough in our assessment of future opportunities to generate genuine shareholder value and I look forward to updating you with further developments, during, what I believe, will be a bright year for the Company.

John Kenny

Chairman

  OPERATIONS REVIEW

Ascent has continued in the improvement of the European portfolio, making significant progress in a number of its project areas. The portfolio of some twenty projects in Hungary, Slovenia, Italy, Switzerland and offshore the Netherlands is well balanced and this review, rather than by geographical location, will consider the assets according to their status as producing, development or redevelopment, appraisal and exploration. The Company also has an oil and gas asset management joint venture with Swiss fund, San Severina, as well as a minority interest in Italian drilling contractor, Perazzoli Drilling.

Development Projects

At the present time, the Company has one producing asset, the Penészlek PEN-104 gas field. The primary objective of the Company is to move assets up the value chain and ultimately for those assets to join the ranks of the revenue generating Development and Production Projects.

Hungary, Nyírség - Penészlek Area Development

(45.23% interest through PetroHungaria kft ('PetroHungaria')) 

Discovered by the 2006 PEN-104 well drilled by the Ascent subsidiary PetroHungaria, this well commenced gas sales in August 2008. This development involved the rehabilitation of an existing but abandoned pipeline and the construction of a purpose-made production and gas processing facility. In addition to the prematurely abandoned Penészlek gasfield, which had produced gas between 1983 and 1989, there were two undeveloped gas discoveries, namely PEN-12 and PEN-9. In November 2008, PetroHungaria acquired a 100 square km 3-D seismic survey with a view to assessing these discoveries and to determine the remaining potential of the Penészlek gasfield.

The results of the 3-D seismic were very encouraging, not only did they confirm the potential of the PEN-9 and PEN-12 discoveries but also confirmed new prospects south of the PEN-12 discovery and south east of the PEN-102 suspended well drilled by PetroHungaria in 2006. The analysis of the structurally complex Penészlek gasfield is still on-going.

In January 2009 a compressor failure in the Hungarian gas supply infrastructure caused high pipeline pressure and consequently production was put on hold. Whilst repairs to the compressor were underway, the Company took the opportunity to sidetrack the PEN-104 well as 3-D seismic indicated that a 450m sidetrack would substantially increase the potential recoverable gas in addition to reducing the amount of water produced. The drilling of this sidetrack was completed very efficiently and production recommenced at PEN-104A sidetrack well in April.

It is intended to mobilise a rig into the area later this year to drill another three wells and permitting for these wells and for pipelines, in order to put them immediately on production, is underway.

The geological and geophysical work necessary to justify the redevelopment of the Penészlek gasfield and the exploration of the other prospects identified by the 3-D seismic is nearly complete.

Redevelopment Projects

In the region formed by south west Hungary and south east Slovenia, Ascent is working on three redevelopment projects and in Italy's Latina Valley, the Company is working with Pentex on the permitting and future acquisition of a shallow high resolution seismic survey as a precursor to a redevelopment of the Ripi oilfield.

Hungary, Bajcsa Gasfield Redevelopment

(38.73% interest through a 77.46% holding in ZalaGasCo kft ('ZGC'))

The Bajcsa redevelopment project involves the rehabilitation of a low permeability gasfield that has been partially depleted by using conventional vertical wells. Following the completion of extensive geological, petrophysical, core analysis and reservoir engineering studies over the past 18 months a decision on the drilling of a horizontal well as a horizontal sidetrack of an existing well will be made shortly.

The project is a 50:50 joint venture with MOL RT, Hungary's leading oil and gas company, and the project is operated by them with technical input from ZGC. As a redevelopment project, any production can be immediately transported to market through the existing facilities and pipelines with no investment required.

Work on the Bajcsa field has confirmed gas in at least two of seven identified reservoirs and considerable effort has been spent in the planning stages of this project in order to establish the most efficient way to develop these gasfields. It is now the Company's expectation that drilling will commence in the second half of 2009. Following the analysis of the results of the first well, a number of similar wells are envisaged.

Slovenia, Petişovci Redevelopment

(45% interest in Dolina and 15.75% interest in Globoki through Nemmoco Slovenia Corporation ('NSC'))

Operations in Slovenia are conducted through Ascent's wholly owned subsidiary NSC, which maintains an office in Lendava, the closest town to the projects. The Petişovci Dolina Project comprises a series of shallow oil and gas bearing reservoirs that have been extensively developed of the past 50 years.  The Petişovci Globoki Project, which lies beneath the Petişovci Dolina, comprises deeper low permeability gas reservoirs that have been partially developed over the past 30 years.

The next phase of the work programme will be the acquisition of a 3-D seismic survey over these fields and extending to the south over nearby prospects. Some of the joint venture partners have declined to participate in this work and so NSC has a 75% participating interest with the remaining 25% with Geoenergo who is the concession holder.

Permitting of the seismic is in progress and operations are planned to commence during the summer. Further work will be decided depending on the results of the seismic although the workover of existing wells and the drilling of new wells both for the deep gas and the shallow targets are both planned.

Italy, Strangolagalli, Ripi Redevelopment

(50% interest through Ascent Resources Italia s.r.l)

The Ripi field is an oilfield which has produced oil for more than 50 years from shallow flysch sediments between 400m and 800m deep. The development of the field has never relied on seismic as the original wells were drilled before seismic was generally available.

Ascent and field operator Pentex Italia Ltd has designed and commissioned a special high resolution seismic survey which targets the shallow layers. The permitting for this survey is nearly complete and the acquisition is planned to commence shortly. The seismic will also provide information about the deeper underlying structures. The results will determine the future work programme which is planned to include the deepening of existing wells, short horizontal recompletions as well as new shallow producers.

Appraisal Projects

Switzerland, Frienisberg-Seeland Permit

(90% interest through wholly owned subsidiary PEOS AG )

The Hermrigen-1 well was drilled by Elf Aquitaine in 1982 and discovered and tested gas in a secondary target. The well never reached its deeper primary target due to mechanical problems in the thick layer of Triassic salt and anhydrite that lie between. The well had been designed as an oil exploration well and Elf did not pursue the gas discovery.

Following extensive analysis of the geological and seismic data and further geochemical analyses, Ascent has designed an appraisal well for the original gas discovery which will also have the capability to drill down to the primary target of the Hermrigen-1 well. The well location has been presented to the local administration and, subject to construction consent, the drilling can proceed. It is planned to use the Perazzoli, low environmental impact, HH-200 drilling rig. The Company is currently seeking joint venture partners for this project.

Italy, Latina Valley Frosinone Exploration Permit

(80% interest through Ascent Resources Italia s.r.l. )

Ascent acquired over 30km of 2-D seismic data in June 2008 following the drilling of Anagni-1 well, which penetrated a porous, reservoir quality carbonate structure. The interpretation and mapping of the seismic data has provided an appraisal well location for the Anagni-1 discovery. This will be relatively shallow and having located a suitable drillsite, drilling can proceed as soon as the construction permits are issued.

The Anagni-1 well had extensive shows in Miocene and Cretaceous dolomitised carbonate formations but was abandoned after extensive testing had only produced very small quantities of oil in conjunction with large volumes of formation water.

Netherlands, Blocks M10/M11.

(27% interest through Ascent Resources (Netherlands) B.V.)

Geological, geophysical and reservoir engineering studies have confirmed the prospectivity of a number of structures in addition to the two gas discovery wells which tested gas from Rotliegendes sandstones with the bock boundaries. Appraisal wells for the M10-1, the M11-1 or the nearby TEN-1 gas discoveries are being considered.

Exploration Projects

Italy, Po Valley, Cento and Bastiglia Exploration Permit.

(50% interest through Ascent Resources Italia s.r.l.)

Located in the prolific Po valley, the Gazatta-1 well, targeting the Gazzata gas structure, was spudded in May 2009 with drilling expected to be completed shortly. Gazatta-1 is funded and, under the terms of the farm-out agreement with Otto Energy Limited ('Otto'), funding for a second well will be provided if a significant discovery of hydrocarbons is made. Otto has taken a 50% interest in the project in return for paying the costs of one firm and one follow-up contingent well.

The region between Milan to the west and between Venice and Ravenna to the east is the second largest onshore gas producing area in Europe, with some 130 oil and gas fields already discovered. The vast majority of these fields are in the Pliocene sandstones which are the target of the Gazzata-1 well.  

Recent discoveries nearby have relied on the AVO (amplitude versus offset) processing of the seismic data and the Gazzata prospect seismic exhibits these attributes over a large area. The Italian gas market is strong and prices achieved are some of the highest in Europe. A discovery here would be particularly valuable to the Company.

The Cento and Bastiglia Permit is one of the largest in the region and there are a variety of different targets for the on-going exploration work for which additional seismic will need to be acquired.

Hungary, Nyírség - Panhandle

(15.08% interest through wholly owned Ascent Hungary Ltd)

3-D seismic has already been acquired and processed for this exploration project in the western 'panhandle' of the Nyírség permits. The results indicate a prospect for which the well permitting process is on-going and for which a rig is expected to be available to drill in the 3rd Quarter 2009. The prospect has multiple stacked targets in the Pannonian sands and Miocene tuffaceous sediments, the producing reservoirs in the nearby Penészlek area, and in the close-by Hajdúnánás discoveries a few kilometres to the north.

Slovenia, East Slovenian Exploration Project

(40% interest through wholly owned Nemmoco Slovenia Corporation)

The East Slovenia exploration project lies to the north of the Petişovci oil and gas redevelopment projects. Encompassing 864 square km in three blocks within the Pomurje Regional Exploration Area, some 65 exploration wells have been drilled in the past 50 years with nearly half of then reporting good shows of oil or gas. The acquisition of a 200 square km seismic survey is in tender and permitting is underway. It is expected that the acquisition will take place this summer and at least one exploration and one appraisal well to be drilled subsequently.

Switzerland, Bern Canton, Linden Exploration Permit

(90% interest through wholly owned subsidiary PEOS AG )

The Linden-1 well was drilled by Elf Aquitaine in 1972 and tested gas at the time. Ascent was awarded the permit in August 2005 and in April 2008 the permit was extended to 2011. The Company is currently considering an appraisal well at this location.

Switzerland, Vaud Canton, Gros de Vaud Exploration Permit

(90% interest through wholly owned subsidiary PEOS AG )

The Vaud Concession is situated north of Lausanne and was awarded to Ascent in May 2006 and an extension to June 2010 was granted earlier this year. Previous drilling in the area includes the Essertine-1 discovery in 1962, which produced small amounts of oil on test. Ascent remains open to the possibility of drilling an appraisal well in this location and is also considering the exploration of nearby Triassic gas prospects. 

Italy, Latium Coast, Fiume Arrone Exploration Permit

(56% interest through Ascent Resources Italia, s.r.l.)    

Arrone-1, which was drilled in August 2007, found sub-commercial gas and the well was subsequently abandoned. An application for a licence extension has been submitted to the authorities. 

Netherlands, Blocks P4, M8

(27% interest held through Ascent Resources (Netherlands) B.V.)

Situated offshore of the Netherlands, Ascent was awarded exploration licences for these blocks in November 2006. The Company has since completed a preliminary geoscience programme to establish the hydrocarbon potential of the area.

Other Enterprises

San Severina Asset Management

This joint venture with the Swiss fund, targets minority (25%) interests in worldwide producing and development projects, particularly where there is the opportunity of exploration upside. Ascent receives a 20% carry in project invested.  

Perazzoli Drilling

(22.5% interest held through 50% owned subsidiary Ascent Drilling Limited)

Ascent's 22.5% stake in Perazzoli Drilling allows preferential access to rigs in Europe. Perazzoli currently operates three rigs with various capacities - 40 tonne, 100 tonne and a 200 tonne HH200 hydraulic rig. This rig fleet has the depth range capable of drilling three quarters of the exploration and development type wells for oil, gas and coal bed methane in Europe.

CONSOLIDATED INCOME STATEMENT

for the year ended 31 DECEMBER 2008 

		Year ended 31 December 2008		Year ended 31 December 2007
	Notes	£ 000's		£ 000's
Revenue		1,475		253
Cost of sales		(4,328)		(2,225)
Impairment of exploration assets		(3,240)		(1,335)
Operating expenditure		(1,088)		(890)
Gross loss		(2,853)		(1,972)
Other operating income		-		35
Administrative expenses		(1,727)		(2,939)
Operating loss		(4,580)		(4,876)
Finance income		160		756
Finance expense		(473)		(123)
Profit on sale of investments		1,985		2,113
Share of profit of associate companies		88		-
Loss before tax		(2,820)		(2,130)
Taxation		-		-
Loss for the year		(2,820)		(2,130)
Attributable to:
Equity holders of the Company		(2,860)		(2,130)
Minority interests		40		-
Loss for the year		(2,820)		(2,130)
Loss per share
From total operations	2
Basic and fully diluted loss per share		(0.94p)		(0.74)p
Fully diluted loss per share		(0.94p)		(0.70)p

CONSOLIDATED BALANCE SHEET 

as at 31 DECEMBER 2008

		31 December 2008		31 December 2007
	Notes	£ 000's		£ 000's
Non-current assets
Property, plant and equipment		266		13
Exploration and decommissioning costs	3	13,146		9,591
Investments in equity-accounted investees		1,300		918
Total non-current assets		14,712		10,522
Current assets
Inventories		609		647
Trading investments		145		500
Trade and other receivables	4	3,582		3,142
Cash and cash equivalents		1,236		1,323
Total current assets		5,572		5,612
Current liabilities
Trade and other payables	5	(4,515)		(2,131)
Borrowings	6	(562)		(448)
Total current liabilities		(5,077)		(2,579)
Net current assets		495		3,033
Non-current liabilities
Borrowings	6	(4,525)		(3,468)
Provisions		(32)		(247)
Total non current liabilities		(4,557)		(3,715)
Net assets		10,650		9,840
Equity
Attributable to:
Share capital		305		305
Equity reserve		84		84
Share premium account		13,067		13,067
Share based payment reserve		1,042		1,191
Translation reserves		3,928		149
Retained loss		(7,816)		(4,956)
Total equity attributable to shareholders of the Company		10,610		9,840
Minority interest	27	40		0
Total equity		10,650		9,840

CONSOLIDATED CASH FLOW STATEMENT 

for the year ended 31 DECEMBER 2008 

	Year ended 31 December 2008		Year ended 31 December 2007
Cash used in operations	£ 000's		£ 000's
Loss before tax	(2,860)		(2,130)
Depreciation charge	560		1
Increase in receivables	(369)		(688)
(Decrease)/increase in payables	103		(350)
Increase in inventories	-		(196)
Profit on sale of tangible fixed assets	-		(3)
Profit on sale of subsidiary	(1,363)		(2,113)
Profit on sale of current asset investments	(621)		-
Revaluation of quoted securities	454		60
Impairment of asset held for sale	-		148
Impairment of exploration expenditure	3,240		1,331
Amortisation of decommissioning costs	336		4
(Increase)/decrease in decommissioning provision	(214)		-
Share-based payment charge	(149)		398
Exchange differences	611		(649)
Share of profit of associate undertakings	(88)		-
Cash used in operations	(360)		(4,187)
Financial income	(160)		(107)
Financial expense	374		123
Net cash used in operating activities	(146)		(4,171)

Cash flows from investing activities
Finance income	160		107
Payments for investing in exploration	(4,602)		(5,915)
Increase in payables	2,282		-
Acquisition of property, plant and equipment	(813)		(14)
Proceeds from disposal of subsidiary	1,582		944
Proceeds from disposal of current asset investment	659		1,399
Proceeds from sale of plant and equipment	-		159
Acquisition of associated undertaking	-		(918)
Acquisition of subsidiaries	(20)		-
Cash acquired with subsidiaries	-		(25)
Net cash received from a minority shareholder of a subsidiary  undertaking	40		-
Net cash flows used in investing activities	(712)		(4,263)
Cash flows from Financing activities
Finance expense	(374)		(123)
Proceeds from loans	2,103		3,388
Loans repaid	(1,070)		(305)
Proceeds from issue of shares	-		5,047
Share issue costs	-		(190)
Net cash flows from financing activities	659		7,817
Net decrease in cash and cash equivalents for the year	(199)		(617)
Net foreign exchange differences	110		-
Cash and cash equivalents at beginning of the year	1,324		1,941
Cash and cash equivalents at end of the year	1,235		1,324

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 DECEMBER 2008

Reporting entity

Ascent Resources plc ('the Company') is a company domiciled and incorporated in England. The address of the Company's registered office is One America Square, Crosswall, London, EC3N 2SG. The consolidated financial information of the Company as at 31 December 2008 comprises 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.

Statement of compliance

The Group's and Company's financial statements for the year ended 31 December 2008 were authorised for issue by the Board of Directors on 12 June 2009 and the Balance Sheets were signed on behalf of the Board by Jeremy Eng

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 ('Adopted IFRSs'). 

1    Accounting policies

Basis of preparation

On publishing the Parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and related notes that form a part of these approved financial statements. 

Going Concern

The financial statements of the Group and Company are prepared on a going concern basis. 

In common with many similar companies, the Group and Company raise finance for their exploration and appraisal activities in discrete tranches. Ultimately, the Group and Company must either raise additional tranches of funding and/or generate sufficient net cash flows from operations.

The directors are of the opinion that the Group and Company will have sufficient cash to fund its activities based on forecast cash flow information for a period in excess of twelve months from the date of these financial statements. Management continues to monitor all working capital commitments and balances on a weekly basis and believe that they have secured appropriate levels of financing for the Group and Company to continue to meet their liabilities as they fall due for at least the next twelve months.

In preparing base and sensitised cash flow forecasts the directors have identified a number of cash receipts and cash payments where they have had to use their best judgement to make certain estimates. 

The most significant of these judgements and estimates relates to the ability of the Company to raise funds, when needed, under the terms of the £5m Equity Credit Facility signed 13 May 2009. The facility allows the Company, at its sole discretion (but subject to certain conditions), to issue capital for payment in accordance with the terms of the agreement. To date the Company has issued shares and received £1.3m under this Facility. The number of shares that can be issued and their issue price (and therefore the total amount of funding receivable) is determined based on a formula utilising the price and trading volumes of the Company's shares in the period leading up to the issue of the requested capital draw down. In this respect there is uncertainty as to the amount of additional funding that the company can draw down. 

For the purposes of assessing going concern the directors have considered long term historic trading volumes and a share price significantly less than that at the date of signing the accounts as this basis of assumptions for the usage of the facility. However, a significant reduction in trading volumes or a significant fall in share price below the discounted price assumed in the forecast could adversely affect the timing or availability of additional funding under this facility. Whilst the Directors consider the assumptions to be suitably prudent and that it is unlikely that movements in volumes or share price will adversely affect the timing or availability of additional funding, there can be no certainty in this matter. If the company is unable to draw down funds under this agreement in the amounts and at the times forecast it will be necessary to raise additional funds and / or achieve asset disposals, and therefore the Group and Company may not be able to meet its liabilities as they fall due.

The base forecasts are based upon estimates of planned production from existing producing fields, future gas prices and estimates of costs for planned exploration activities. On a number of projects certain assumptions have also been made with regard to working capital management and matching cash inflows from cash calls to cash outflows. 

Accordingly, the directors have also prepared sensitised forecasts to reflect the risk that production volumes and gas prices may be lower than estimated and exploration costs may be higher. These forecasts indicate that the Group and Company can continue to operate within existing facilities (including the Equity Credit Facility) for the foreseeable future, though, in the absence of asset divestments, additional farm-in agreements and exploration success, the headroom is limited. If the amount or timing of forecast inflows and outflows were to change adversely the Group and Company may be required to reconsider discretionary exploration activity and/or seek additional bridging finance to meet any shortfall. 

These matters indicate the existence of a material uncertainty which may cast significant doubt on the Group's and Company's ability to continue as a going concern. However, at the date of approving these financial statements the Group's and Company's cash position is positive, the Company has in place facilities to raise additional funds and it is trading as a going concern.

2	Loss per share	Year ended 31 December 2008		Year ended  31 December 2007
	Losses	£ 000's		£ 000's
	Losses for the purposes of basic and diluted earnings per share being net profit attributable to equity shareholders	2,860		2,130
	Number of shares	Year ended 31 December 2008		Year ended  31 December 2007
		Number		Number
	Weighted average number of ordinary shares for the purposes of basic earnings per share	304,782,042		289,478,538

					Number of shares	Year ended 31 December 2008		Year ended  31 December 2007
						Number		Number
					Weighted average number of ordinary shares for the purposes of dilutive earnings per share	304,782,042		303,210,722
						The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.

3	Exploration costs - Group
	Group		Italy		Hungary		Other locations		Total
			£ 000's		£ 000's		£ 000's		£ 000's
	Cost
	At 1 January 2007		2,543		1,246		682		4,471
	Additions		4,718		69		1,391		6,178
	Additions relating to decommissioning asset		246		-		-		246
	Disposals relating to decommissioning asset		(121)		-		-		(121)
	Transfers between areas		397		-		(397)		-
	Net exchange differences		304		107		-		411
	At 31 December 2007		8,087		1,422		1,676		11,185
	At 1 January 2008		8,087		1,422		1,676		11,185
	Additions		2,361		1,772		115		4,248
	Disposals		-		-		(1,028)		(1,028)
	Additions to decommissioning asset		54		32		-		86
	Net exchange differences		1,967		448		204		2,619
	At 31 December 2008		12,469		3,674		967		17,110
	Impairment
	At 1 January 2007		10		243		-		253
	Charge for the year		-		303		1,028		1,335
	On disposals		(14)		-		-		(14)
	Decommissioning charge for the year		4		20		-		20
	Net exchange differences		-		-		-		-
	At 31 December 2007		-		566		1,028		1,594
	At 1 January 2008		-		566		1,028		1,594
	Charge for the year		1,574		1,666		-		3,240
	On disposals		-		-		(1,028)		(1,028)
	Decommissioning charge for the year		315		22		-		337
	Net exchange differences		-		(178)		-		(179)
	At 31 December 2008		1,889		2,076		-		3,964
	Net book value
	At 31 December 2008		10,581		1,598		967		13,146
	At  1 January 2008 and 31 December 2007		8,087		855		648		9,591
	At 1 January 2007		2,930		1,004		284		4,219

Other locations include: the Netherlands, Slovenia, Spain and Switzerland. 

The impairment charge for the year relates to the Szolnok site in Hungary and the Arrone site in Italy. A decommissioning charge has been made in the year in respect to the PEN-104 site in Hungary and the Anagni and Arrone sites in Italy.

4	Trade and other receivables - Group	2008		2007
		£ 000's		£ 000's
	Trade receivables	31		361
	VAT recoverable	880		1,281
	Other receivables	160		285
	Prepayments & accrued income	1,555		97
	Bond	956		1,118
		3,582		3,142
	A bond is held with the Cento Bank Italia as security for a bank loan. The original loan was for €2,000,000. During the year this loan was repaid and another loan for €2,500,000 was taken out. This is set out in Note 6.
	The trade and other receivables, cash and trading investments represent the maximum credit exposure to the Group and Company. The aging of unimpaired trade receivables were:

		2008		2007
		£ 000's		£ 000's
	Not past due	-		211
	Past due 0-30 days	-		-
	Past due 31-120 days	31		150
	Total	31		361
	There was no bad debt provision as at 31 December 2008 (2007: £nil)

5	Trade and other payables - Group	2008		2007
		£ 000's		£ 000's
	Trade payables	3,867		1,580
	Tax and social security payable	107		277
	Accruals and deferred income	541		274
		4,515		2,131
As at 31 December 2008, there is no tax and social security payable on share based payments (2007: £229,358).

6	Borrowings	2008		2007
	Group	£ 000's		£ 000's
	Current  Bank loans	562		448
	Non-current
	Convertible loan note	2,416		2,416
	Bank loan	1,512		593
	Other loans)	597		459
		5,087		3,916
	Group non-current borrowings are repayable as follows:
	In the second year	3,928		3,468
	In the second year	597		-
		4,525		3,468

The Directors consider that the carrying amount of the bank and other loans approximates to their fair value. The weighted average interest rate of the bank loan is 5.2% (2007: 4.8%).

Bank loan 

The Group has a loan outstanding with Cassa Di Risparmio de Cento Bank. The Loan expires on 5 June 2012, the interest is calculated by reference to the three month Euribor rate plus a margin of 1%. The loan is secured by a long term bond (see Note 4).

Convertible loan note

On 14 November 2007 the Company issued 2,500,000 £1 loan notes at par to finance further working capital requirements of the Group. The term of the loan notes is three years and the debt is unsecured. The conversion price into ordinary shares is fixed at 20p and interest is calculated at a fixed 8.5% to be paid bi-annually on 1 January and 1 July each year.

The Company has the option to settle the accrued interest in shares and should this be exercised, a 10% discount on market value would apply. The loan note holders can elect to convert the note at any time. The Company may elect to convert the notes at any time after the first anniversary of the loan notes being issued, if the value of the share is equal to or above 20p.

	£ 000's
Nominal value of the loan notes issued	2,500
Equity component	(84)
Total liability component at 31 December 2007 and 2008	2,416

 

END

 

 

FR SFAFEESUSESM