Posting of Circular and Notice of General Meeting

RNS Number : 1131G

Ascent Resources PLC

02 November 2018

 

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Ascent Resources plc

("Ascent" or the "Company")

Posting of Circular and Notice of General Meeting

Ascent announces that it is posting a circular to Shareholders containing a Notice of General Meeting at which resolutions will be proposed in order to grant authority to the Directors to issue and allot equity securities of the Company and to issue and allot equity securities of the Company without being required to offer those equity securities on a pre-emptive basis.

The General Meeting is to be held at the offices of Taylor Wessing LLP, 5 New Street Square, London, EC4A 3TW at 9.30 a.m. on 20 November 2018. 

A copy of the circular will be available on the Company's website at www.ascentresources.co.uk.

The text of the Chairman's letter from the circular is included below.

Ascent Resources plc Clive Carver, Chairman Colin Hutchinson, CEO	0207 251 4905
WH Ireland, Nominated Adviser & Broker James Joyce / Chris Viggor	0207 220 1666
Yellow Jersey, Financial PR and IR Tim Thompson / Harriet Jackson / Henry Wilkinson	0203 735 8825

TIMETABLE

Announcement	02 November 2018
Dispatch of this document	02 November 2018
Latest time and date for receipt of Forms of Proxy for the General Meeting	9.30 a.m. 16 November 2018
General Meeting	9.30 a.m. on 20 November 2018

LETTER FROM THE CHAIRMAN

Dear Shareholder

Introduction

Following the decision of the Environment Minister in Slovenia to carry out an internal review into the permit applications made on behalf of the Joint Venture, it is now apparent that the date on which the permits will be finally awarded is further away than we had previously been assured.

While this is extremely disappointing the Board of Ascent is not prepared to walk away from its investment in the project and the significant natural resources contained within the Petišovci concession.  We will continue to pursue all available avenues to secure the final award of both permits and we remain committed to develop the Petišovci project to its full potential whether with a partner or independently. 

The potential future gas production from Petišovci could create significant energy independence for Slovenia which currently imports 99.9% of its gas consumption.  It would also enable the country to transition away from coal and nuclear energy as their primary source of domestic electricity generation thereby reducing carbon dioxide emissions and long-term environmental risk.

At the Annual General meeting in June 2018 the special resolution (numbered 6 in the AGM notice) seeking board authority to issue a limited number of shares non-pre-emptively for cash did not receive the 75% of votes required to be passed.  Based on the proxies submitted, 61% of shareholders attending and voting at the meeting approved the resolution.

This means that the Board cannot raise additional equity capital without a further vote by Ascent shareholders at a General Meeting.  This effectively prevents the Company from raising funds as an alternative to a carrying out a transaction from the Strategic Review, as the process of convening a General Meeting normally deters potential funders while those prepared to proceed usually seek a lower price to compensate for the risk of requiring a shareholder approval. 

This situation weakens the negotiating position of the Board with parties in the Strategic Review, since without additional funding we do not have a credible alternative in walking away and continuing to develop the field independently.   It also reduces our ability to pursue the necessary permits in Slovenia given the need to conserve cash resources.

The purpose of this circular is to set out why the Board is asking for the customary authorities to issue shares without recourse to shareholders to be reinstated, and to set out the process for achieving this. 

Strategic review

Since 17 April 2018 the board of Ascent has been in discussions with various parties under the auspices of the Strategic Review & Formal Sale process.  A significant number of companies have participated in the process and a number remain in discussions with the Company.  

One of these options has reached an advanced stage although further work remains to be done by the counterparty to create a proposal which could be reasonably put to Shareholders. 

It had been hoped that the award of the IPPC Permit would provide a catalyst either to move the Strategic Review towards a conclusion, or to interest bona fide parties deterred by the permitting uncertainties. The further delay caused by the intervention of the Environment Minister is unhelpful in this respect.

Petišovci Project

Background

Ascent Resources plc ('Ascent' or 'the Company') is an independent oil and gas exploration and production ('E&P') company that was admitted to trading on AIM in November 2004 (AIM: AST).  Ascent has been involved in Slovenia for over 10 years where it operates the Petišovci Tight Gas Project.  To date it has invested around ‎€50 million in this project, which is currently its principal asset.  This asset has significant oil and gas reserves and resources and an established, local production infrastructure with connections to local and export customers.

In November 2017 the Company brought two wells into production and started export production from the Petišovci field in Slovenia to INA in Croatia.  Over the past twelve months almost 15 million cubic metres of gas has been produced and sold in untreated form from Pg-10 and Pg-11A.

October production

During September the field was shut in for a three-week period and the wells were in production for 7 days after resuming on 24 September. 

Total production for September was 232,228 cubic metres (8,201 MCF) an average of 1.1 MMscfd, and revenue for the month was €69,559. 

Total production in October has increased to 679,191 cubic metres (23,866 MCF) an average of 0.9 MMscfd and revenue for the month is expected to be approximately €145,000.

Field development plan

The Project has only begun to realise the potential from wells Pg-10 and Pg-11A and the field itself which has P50 net attributable reserves of 88 BCF and a further best estimate net attributable resources of 76 BCF.  The net present value of the entire resource is valued by management and has also been assessed by independent third parties to be a significant multiple of the Company's current market capitalisation. 

In the short term and independent of permitting, subject to funding, the Company could seek to increase current production through a workover of Pg-11A to isolate and seal off the source of formation water and by the installation of compression equipment to prolong the life of Pg-10. 

Once the relevant permits are received the Partners plan to re-enter and re-stimulate both existing wells which, based on expert analysis, will significantly boost the long-term productivity of the wells.

The next phase of the development plan is to re-enter and bring into production all suitable existing wells.  We estimate that up to seven of the existing Pg. wells and well D14 are suitable candidates and we have begun the process required to re-enter these.

As part of the process, we plan to conventionally perforate and produce from a number of these wells; this will provide data on the pre-stimulation performance of the reservoirs, while at the same time generating revenue for the joint venture.

While the focus of the development plan is to produce the significant quantities of gas in the Pg. reservoirs, the Company has undertaken further studies of the Pontian Upper Miocene ('Pt') reservoirs where around 6 MMbls of oil has been produced in the past.  These studies have identified untapped potential in these reservoirs which could be recovered through additional drilling and enhanced recovery techniques.

In addition to the above the Company is currently assessing the feasibility of drilling deeper than the already discovered gas resources with the aim of discovering further hydrocarbon accumulations.

 

The estimated reserves and resources of the Petišovci field are very significant in the context of Slovenia's national annual natural gas consumption while the country currently imports a large majority of its natural gas requirement.  The Company is committed to ensuring that the natural resources contained within Slovenia can be extracted to the benefit of the Slovenian economy and the Slovenian people.

 

Implications of not supporting the resolutions

 

The recent Strategic Review has not yet lead to a deal with well-funded partners and without greater certainty over the IPPC permit there is a reduced chance that an offer will be made which Shareholders are likely to find acceptable. 

 

The Company continues to receive income from gas and condensate from the two producing wells, although these revenues have been gradually decreasing as production from Pg-10 has declined as anticipated and production from Pg-11A has underperformed expectations due to operational issues. Our expectation is that without further work on these wells these revenues will fall away during the first half of 2019.

 

In the event that Shareholders choose not to support the Resolutions the ability of the Board to fund the Company will be severely compromised. In such circumstances the Company may not be able to pursue all avenues open to it to have the permits confirmed by the Slovenian authorities, including, if required, action through the courts. 

 

The Proposals

The purpose of this document is to give to Shareholders notice of the General Meeting being convened to consider and, if thought fit, approve and pass the Resolutions. 

This document provides Shareholders with information about the reasons why the Board considers it appropriate to increase the Directors' ability to raise funds through the issue of Ordinary Shares, explains why the Directors consider it to be in the best interests of the Company and its Shareholders as a whole, and provides the reasons for recommending that you vote in favour of the Resolutions to be proposed at the General Meeting.

General Meeting

 

Set out at the end of this document is a Notice convening a General Meeting of the Company to be held at 9.30 a.m. on 20 November 2018 at the offices of Taylor Wessing LLP, 5 New Street Square, EC4A 3TW, at which the Resolutions will be proposed.

The Company is proposing that Shareholders pass the Resolutions in order to:

·     give the Directors general authority to allot Ordinary Shares; and

·     dis-apply statutory pre-emption rights in relation to the general authority to allot Ordinary Shares.

 

Action to be taken in respect of the General Meeting

 

Please check that you have received the following with this document:

·     a Form of Proxy for use in respect of the General Meeting; and

·     a reply-paid envelope for use in connection with the return of the Form of Proxy (in the UK only).

 

Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received by post at Computershare Investor Services Plc, Corporate Actions Project, Bridgwater Road, Bristol, BS99 6ZY or, during normal business hours only, by hand, at Computershare Investor Services Plc, The Pavilions, Bridgwater Road, Bristol, BS13 8AE by no later than 9.30 a.m. on 16 November 2018 (or, in the case of an adjournment of the General Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting).

This will enable your vote to be counted at the General Meeting in the event of your absence.  The completion and return of the Form of Proxy or the use of the CREST Proxy Voting service will not prevent you from attending and voting at the General Meeting, or any adjournment thereof.

Recommendation

The Board believes the authorities granted by the Resolutions, if passed, are required to ensure that the Company is able to challenge the current block to the issue of the IPPC permit and to fund itself independent of a positive outcome from the Strategic Review process. Accordingly, the Board urges Shareholders to vote in favour of the Resolutions as they intend to do in respect of the 7,554,676 shares they hold in aggregate.

Yours faithfully,

Clive Carver 

Chairman

 

END

 

 

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