Company Announcements

30 June 2022                                     

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 2021.

Highlights:

Corporate

·   Signature of "no win-no fee" style funding for the international arbitration proceedings against the Republic of Slovenia

·     Production of 1.53 million scm of gas and 52,196 litres of condensate from PG-10 and PG-11A wells

·   Expansion of Latin & Hispanic Americas strategy to include onshore gas production and development strategy alongside new Environment, Social and Governance ('ESG') Metals

·     Continued engagement with joint venture partners with a view to resolve legacy commercial disputes

·     Raised £1 million in new equity by way of oversubscribed subscription and placing

 

Post Balance Sheet Events

·    Completion of "no win-no fee" Slovenia damages claim funding

·    Peru identified as country of initial focus for the Company to pursue new industrial ESG Metal projects

Publication of the Annual Report

·    The Company confirms that the Company's annual report for the year ended 31 December 2021 (the "Annual Report") will be posted to shareholders today and a copy of the Annual Report will shortly be available on the Company's website, www.ascentresources.co.uk/investors/reports-accounts.  

 

Enquiries:

Ascent Resources plc Andrew Dennan	Via Vigo Communications
WH Ireland, Nominated Adviser & Broker James Joyce / Sarah Mather	0207 220 1666
Novum Securities, Joint Broker John Belliss	0207 399 9400

STATEMENT FROM THE CHAIRMAN

Following the completion of the "no win-no fee" style funding agreement for our international arbitration proceedings against the Republic of Slovenia, the Company is now positioned with upside exposure from a monetary damages claim significantly in excess of €100 million.  These arbitration proceedings alone, we believe, already make Ascent Resources plc a unique and compelling proposition for shareholders.

The Company is also pursuing an industrial growth strategy across both onshore gas and ESG Metals where it has, for some time now, been preparing for its maiden transaction with a near term focus on Peru.  Underpinning its growth strategy is its gas production at the Petisovci project in Slovenia, which continues and is of course buoyed by the strong European gas market backdrop.

Our vision remains, by the end of 2022, to have finalised this transformation of Ascent such that the Company has both sustainable cash flow generation from its operations and compelling upside exposure from a funded claim, all supported by an "on the money" ESG compatible strategy in an exciting, growth focused, part of the world.

We thank our shareholders for their support and look forward to achieving success together.

STATEMENT FROM THE CHAIRMAN

Legacy Slovenian Asset

2021 remained a challenging year for the Petišovci tight gas project in Slovenia, with ongoing disputes between the Company and its joint venture ("JV") partner Geoenergo as well as the JV's service provider Petrol Geo resulting in a continuing commercial stalemate and as such the Company has not recognised any revenue for the year. In March 2022, the Company announced that it had now elected to invoice for its share of production revenues for the months of April 2020 through to February 2022. Regional gas prices experienced an increase of nearly 500%, having started in January 2021 with an average monthly gas price of €18.75 / MWh and ending the year in December 2021 with an average monthly price of €112.11 / MWh. Production at PG-10 continued to produce a consistent volume of gas whilst a pressure anomaly was observed at PG-11A, leading to the well being put back into production with initial flow rates of circa 20,000 standard cubic metres ("scm") /day allowing production to be exported via the pipeline to INA in Croatia. However, production thereafter declined, as anticipated, and PG-11A is currently producing sporadic gas along with PG-10 which is sold locally to industrial buyers. Total production from the PG-10 and PG-11A wells in 2021 was 1.53 million scm of gas and 52,196 litres of condensate with the majority of the annual production being sold to local buyers.

The year started with the Company continuing to remain engaged in direct negotiations with the State Attorney's Office of the Republic of Slovenia in relation to pre-arbitration settlement discussions, following the Company having received a response in Q4 2020 to its Notice of Dispute to the Republic of Slovenia dated 23 July 2020. The Company entered into these discussions in good faith with a view to potentially settling the Company's claim in an amicable manner in the short term. In February 2021, the Company announced that the Republic of Slovenia had notified the Company that it shall be in a position to respond formally to the proposed settlement terms by the 19 March 2021 and Slovenia accordingly requested that the Company did not initiate any arbitration proceedings before such date to which the Company agreed. On 19 March 2021, the Company announced receipt of a further letter from the Republic of Slovenia claiming that an amicable settlement was not achievable.

On 8 November 2021, the Company announced the signature a binding damages-based agreement with Enyo Law LLP, a specialist arbitration and litigation legal firm who had previously filed the Notice of Dispute and represented the Company in the pre-arbitration negotiations, to commence proceedings against the Republic of Slovenia under the Energy Charter Treaty and the UK-Slovenia Bilateral Investment Treaty.  In May 2022 the 'no win-no fee' style arrangement completed and allows the Company to securely initiate arbitration proceedings against the Republic of Slovenia under the ECT and BIT. Enyo are funding the payment of advanced disbursements which are expected to be incurred in the pursuit of the claim, and these disbursements along with the time of Enyo's lawyers will only be paid out of the proceeds of the arbitration in the event of a successful damages award or execution of a binding settlement agreement (if achieved sooner).

As referenced in the first paragraph, commercial disputes between the Company and its JV partner Geoenergo and JV service provider Petrol Geo continued throughout the year. The Company has rejected all invoices received by Petrol Geo on the basis of a fundamental change in circumstances, with the project now only producing a fraction of the production volumes it expected to be producing when it signed the relevant contracts back in 2013, amongst a number of other matters that Ascent has highlighted to its counterparties and which remain under discussion, including the Company's Gas Sale revenues entitlement under the joint operating agreement.  In October 2021 the Company announced that following a recent stakeholder engagement process in Slovenia and a productive Operating Committee Meeting between the partners, that the JV was aligned on key future workstreams relating to the long-term concession renewal, environmental impact assessment and permitting. The Company also announced that it was in constructive dialogue with its JV partners regarding resolution of all disputed legacy matters and the restructuring of certain production costs.

During the year the concession holder, Geoenergo, filed the requested documents ahead of the deadline to be granted an automatic 18-month concession extension pursuant to Article 11 of the Act on Intervention Measures implemented in Slovenia to assist the economy in mitigating the consequences of the COVID-19 pandemic. Accordingly, the concession expiry date will now be 25 November 2023. Post period in review, the Company announced in March 2022 that it had now elected to invoice for its share of production revenues for the months of April 2020 through to February 2022. The Company remains hopeful that working with its partners they can agree terms to resolve the historic disputes and allow all the parties to begin to recognise monthly cash revenue streams from the remaining production.

Post period under review, in April 2022 the Republic of Slovenia approved amendments to its Mining Law which now include a total ban on exploring and/or producing hydrocarbons with the use of any form of mechanical stimulation, furthermore the Company understands it is now no longer possible to have a mining concession approved if stimulation is included in the extraction plan. Accordingly, the Company does not expect to complete the workstreams relating to the EIA and re-stimulation of the PG-10 and PG-11A wells, given that the Company has subsequently been deprived of its reasonable expectation to continue the historic practice of undertaking low volume mechanical stimulation to produce the tight rock gas reservoir, as has been done over thirty times in the last fifty years. In light of these legislative changes, which the Company believes are specifically targeted to preclude Ascent's investment in Slovenia from succeeding and amount to a form of expropriation, the Company notified the Republic of Slovenia of a second notice of dispute on 5 May 2022 and that such latest actions constitute a loss of the full investment value. The Company is currently reviewing future field development plans that do not involve any form of stimulation, such that a concession renewal may be possible before or on the extended expiry date.

New Environment, Social & Governance ('ESG') Metals Strategy & Peru Market Entry

In February 2021 the Company announced, following a period of reviewing different special situations, that it was now focusing its strategy to include ESG Metals as a new target sector 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.

Post the period under review the Company updated investors on its ESG Metals Strategy, confirming that whilst the Company continues to evaluate a number of ESG Metal transactions across Latin and Hispanic America, it has now identified Peru as its primary target geography. Peru is widely recognised as one of the largest and most diversified mineral producers with some of the most extensive reserves in the world with mining the most important sector in the Peruvian economy (some 10% of national GDP).   Peru is currently the world's second largest Copper and Silver producer and Latin America's largest Gold, Zinc, Tin and Lead producer. Peru's Long-Term Credit Rating is rated as BBB by most agencies, which is amongst the strongest in the region.  The country also benefits from a long history of mining, a robust mining legal framework and a significant pool of local expertise. Most recently, the Country enacted a new law that extends the process of formalisation of artisanal miners to 31 December 2024 alongside a law that establishes a national policy for small-scale and artisanal mining.

The Company sees significant opportunity for attractive entry points in mining following the global pandemic which has triggered international capital flight and significant capital constraints for small-scale miners.  The Company therefore initially expects to focus its attention on small-scale operations (up to 350 tpd), which the Company considers affordable, of an efficient operational scale and which have multiple local operating and permitting benefits.

To accelerate the Company's entry into Peru, the Company also announced in February 2022 the signature of a new joint venture agreement with Blanco Safi SAC ("Blanco"), based in Lima.  Blanco was founded in 2010 and is a Peruvian registered professional investment manager which arranges and invests discretionary funds and third-party investment monies in a variety of Peruvian businesses, where it currently manages over $150 million in assets, including specifically a number of direct investments in Peru's small-scale mining sector. The Blanco team has over 50 years' combined experience in the banking, finance, mine and resource sectors and is present across offices in five regions throughout Peru, consequently Blanco have access to a number of high-quality precious metal small-scale mineral processing operations throughout Peru.

The joint venture will focus its attention initially on the identification, screening and then subsequent negotiation and potential acquisition of small-scale yet sustainable ESG metals processing businesses in Peru, ideally adjacent to surface stockpiled materials for processing. Blanco and the Company already have a number of attractive prospective leads, as well as an active network in the small and medium scale miner sector of Peru.

Cuba MOU

The Company maintained its MOU giving it exclusive rights to negotiate the production sharing contracts over onshore blocks 9a, 9b, 12 and 15 throughout the year, with extensions being required due to inability to travel to Cuba during the COVID-19 pandemic which remained throughout the majority of the year. Consequently, the Company successfully attained extensions in both April and then again in November, with exclusivity on the blocks lapsing on 31 December and the memorandum of understanding ("MOU") remaining on a non-exclusive basis through to end of April 2022.  Although Cuba will remain on the Company's watchlist and CUPET have offered an extension, the Company has elected not to sign a further extension to the non-exclusive MOU, primarily driven by the exciting opportunities it has originated in Peru and the lack of softening of US Sanctions in recent years.

Funding

The Board have continued to manage costs and relationships with JV parties while its legacy disputes continue to be resolved, managing various historical outstanding balances and raising additional funds to enable the pursuit of the Company's damages claim against Slovenia and for the new ESG Metals initiative to be instigated. The Company remains positioned as a clean vehicle with a strong Board, access to capital and a clear growth trajectory.

In December 2020, the Company announced it had signed a new £500,000 unsecured loan facility with warrants attached exercisable at 7.5 pence per new warrant share, representing a 41.5% premium to the prevailing share price at the time. This transaction was a structure designed to mitigate dilution with an equity component at higher prices, these equity warrants were mostly exercised throughout the year which resulted in the Company repaying £175,000 of drawn-down debt to Align Research Ltd ("Align") as well as receiving a further £75,000 in cash warrant exercises throughout the year and extinguishing any monies owed to Align, with the balance of £250,000 under the December facility remaining owed to Riverfort Global Opportunities ("Riverfort") (the other lender in that transaction).

In February 2021, alongside and in support of the Company's new ESG Metals strategy, the Company successfully raised £1 million at an issue price of 10.1 pence per new placing share, representing a 12.5% discount to the closing bid price from the day before, by way of oversubscribed subscription and placing of new shares to institutional investors and existing shareholders.

In December 2021 the Company successfully announced the restructuring of its two debts to Riverfort, with the legacy debt of £275,000 (pursuant to a financial transaction agreed in 2019 and restructured in 2020) would be extended out in Maturity from the initial maturity date of 14 February 2022 to the date falling on 14 February 2023, following which the Company is expected to pay Riverfort a cash monthly sum of £45,003 over the next six months such that the debt is repaid fully in cash by 14 July 2023. The Company also agreed with Riverfort to amend the maturity date of the £250,000 loan outstanding under the December 2020 funding such that it is now repayable on the 31 December 2022. As part of the loan maturity extension agreements, the Company issued Riverfort with 3,600,000 new warrants with an initial exercise price of 7.5 pence per new warrant share.

In January 2022 the Company successfully raised a further £600,000 by the issue of new equity shares at an issue price of 3.3 pence per new ordinary share, representing a nil discount to the closing bid price from the day before, with warrants attached at 5 pence per new warrant share. The Company also agreed with the holders of the remaining 4p new equity warrants issued in August 2020 to the accelerated exercise of the remaining warrants for a cash exercise consideration of £242,500 in exchange for being issued 1.5 new warrants for each August 2020 Warrant exercised with the new warrants being exercisable at 5 pence per new warrant share at any time over the next three years.

COVID-19

COVID-19 has had relatively limited direct impact on Ascent's assets in Slovenia, save as potentially being a catalyst to the increasing gas price environment thought the second half of the year as well as providing for receipt of an 18-month automatic concession extension pursuant to Slovenia COVID-19 disruption legislation, as announced by the Company post period in review.

COVID-19 has however impacted the Company's ability to travel through the majority of the year, which in turn has a consequence on ability to execute on certain business development activities. Finally, COVID-19 has had an impact on the Company's ability to execute on its MOU over Cuban onshore blocks 9A, 9B, 12 and 15. Production operations in Slovenia have been unaffected to date, with the assets being managed through a combination of on-site working within social distancing guidelines or remote oversight, with all appropriate safety procedures remaining in place to protect staff and local communities, although the risk of future disruption remains.

Summary

Set against the backdrop of improving commodity prices  the Company has made progress with JV partner dialogues in relation to historical disputes and the completion (post period in review) of the 'no win - no fee' arrangement to fund the Company's significant monetary damages claim under the ECT and BIT against the Republic of Slovenia, this allows the Company to widen its reach away from the dependency on a single asset as the Company evolves to focus on the Latin and Hispanic Americas and executing on its new ESG Metals growth initiative along with onshore gas development opportunities. As a Board we remain resolved to protect the Company's investment in Slovenia whilst we expand our international footprint and diverse our commodity exposures.

GOING CONCERN

The Company has raised £0.6 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 the least next two months, 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.

In addition to the need to raise additional funding in the next two months, the forecasts are sensitive to the timing and cash flows associated with the continuing situation in Slovenia, and discretionary spend incurred with executing the ESG Metals Strategy through acquisition. 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 made reference to going concern by way of a material uncertainty.

 

James Parsons
Executive Chairman

Andrew Dennan
Chief Executive Officer

 

Independent Auditor's Report to the members of Ascent Resources plc

 

Opinion

We have audited the financial statements of Ascent Resources Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Cash Flow Statements and notes to the accounts, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

•    the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;

•    the group financial statements have been properly prepared in accordance with international accounting standards in

conformity with the requirements of the Companies Act 2006;

•    the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and

•    the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty relating to going concern

We draw attention to note 1 in the financial statements, which indicates that the group and parent company will require additional funding within 12 months from the date on which the financial statements are authorised for issue in order to meet its working capital cashflow requirements. The ability of the group to meet its cashflow requirements is therefore dependent on successfully raising additional funds. The total comprehensive loss for the group for the year ended 31 December 2021 was £3.592m and the year end cash position was £97k. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a material uncertainty exists that may cast significant doubt on the group's and company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group's and parent company's ability to continue to adopt the going concern basis of accounting included a review of budgets for 12 months from the date of approval of these financial statements including checking the mathematical accuracy of the budgets and discussion of significant assumptions used by the management and comparing these with current year and post year end performance. We have also reviewed the latest available post year end management accounts, bank statements, regulatory announcements, board minutes and assessed any external industry wide factors which might affect the group and the company. 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Our application of materiality

The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the group financial statements was set at £564,000 (2020: £640,000), with performance materiality set at £394,800 (2020: £448,000).

Materiality has been calculated as 1.5% of the benchmark of Net Assets (2020: 1.5% of Gross Assets), which we have determined, in our professional judgement, to be one of the principal benchmarks within the financial statements relevant to members of the group in assessing financial performance. Net Assets benchmark was used for the group and all significant components as it reflects key balances including Exploration and evaluation assets, Property, plant and equipment ('PPE'), Investments and intragroup receivables (parent company only) and borrowings.

The materiality applied to the company financial statements was £394,800 for balance sheet testing and £69,000 for income statement testing. The performance materiality was £276,360 and £48,300 respectively. For each component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality and materiality for the significant components ranged between £339,000 to £394,800. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £28,200 (group audit) and £19,740 for the parent company, respectively.

Our approach to the audit

As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the group and company financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain such as the impairment of intangible assets, PPE and investments in subsidiaries (parent company only). We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

The group holds five (active) companies that are consolidated within these financial statements, two based in the UK and three based in Europe. We identified two significant components, being the parent company, Ascent Resources Plc and Ascent Slovenia Limited, which were subject to a full scope audit by a team with relevant sector experience. No component auditors were engaged.

In addition, we identified components which were not significant to the group and performed an audit of specific account balances and classes of transactions to ensure that balances which were material to the group were subject to audit procedures.

The approach gave the audit team 96% coverage on gross assets and 97% coverage on loss for the year.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty related to going concern section we have determined the matters described below to be the key audit matters to be communicated in our report.

 

Key Audit Matter	How our scope addressed this matter
Carrying Value of Exploration Assets (Note 11)   The group holds intangible assets of £18.5m in relation to capitalised exploration costs in respect of its projects in Slovenia. There is the risk that these assets have been incorrectly capitalized in accordance with IFRS 6 and that there are indicators of impairment as at 31 December 2021.   Particularly for early-stage exploration projects where the calculation of recoverable amount via value in use calculations is not possible, management's assessment of impairment under International Financial Reporting Standard ('IFRS') 6 requires estimation and judgement. For this reason, along with the financial significance of the account balance, we have assessed this to be a key audit matter.   In addition there are a number of disputes ongoing in relation to Slovenian assets, including claims brought by the company against the Republic of Slovenia under the Energy Charter Treaty and the UK-Slovenia Bilateral Investment Treaty, and commercial disputes between the company and its JV partner Geoenergo and JV service provider Petrol Geo. These disputes present a further risk of overstatement of these assets.	Our work in this area included:   ·      Confirmation that the group has good title to the applicable licences. ·      Review of capitalised costs including consideration of appropriateness for capitalisation under IFRS 6. ·      Assessment of progress at the individual projects during the year and post year-end and discussions with management surrounding their intentions thereon; ·      Consideration of management's impairment reviews, including challenge to all key assumptions and sensitivity to reasonably possible changes; and ·      Review of disclosures made surrounding exploration assets to ensure compliance with IFRS.   Based on the audit work performed, we do not consider exploration assets as at 31 December 2021 to be materially misstated. It is however important to draw user's attention to the fact that the recoverable value of the exploration assets is dependent on the group's JV partner obtaining the necessary renewals of concession contract beyond November 2023, the current expiry date, and positive outcome of the disputes in Slovenia enabling the group to obtain the necessary permit approvals going forward.   Failure to obtain the necessary concession contract renewal, or unfavourable outcome in the disputes mentioned is likely to result in an impairment to the carrying value of exploration assets held.   We also draw attention to post balance sheet events as disclosed in the Chief Executive Officer's statement in relation to amendments to Slovenian Mining Law. While we are satisfied these conditions did not exist at the year end, and therefore that exploration assets are not materially misstated in the financial statements, we note that the outcome of these changes could result in impairment to these assets in subsequent periods.
Carrying Value of Producing Assets (Note 10)   At 31 December 2021, the carrying value of the producing assets in relation to the group's Petisovci project in Slovenia are £21.1m.   Management are required to assess the producing assets for impairment indicators under IAS 36. In this case, impairment indicators include but are not limited to disruption in operations due to disputes in Slovenian as detailed above. The production levels in Slovenia have not yet reached the desired levels and no significant progress has been made in relation to the ongoing dispute with the Republic of Slovenia, as well as continue disputes between the company and its JV partner.   The carrying value and ultimate recoverability of the assets is linked to outcome of these disputes and appropriate renewal of the concession contract. There is a risk that the carrying value of these assets is overstated as management's assessment of carrying value is based on estimates and judgements regarding future cashflows. For this reason along with the financial significance of the account balance, we have assessed this to be a key audit matter.	Our work in this area included:   ·      Review of capitalised costs including consideration of appropriateness for capitalisation under IAS 16.; ·      Consideration of management's impairment reviews, including challenge to all key assumptions and sensitivity to reasonably possible changes in the impairment model; ·      Reviewing the latest developments regarding the permit applications, including obtaining relevant correspondence where appropriate and any legal advice obtained by the group; ·      Contacting the company's legal advisers involved in the disputes in Slovenia and obtaining their opinion regarding possible outcome and status; and ·      Review of disclosures made surrounding producing assets to ensure compliance with IFRS.   Based on the audit work performed, we do not consider producing assets as at 31 December 2021 to be materially misstated. It is however important to draw user's attention to the fact that the recoverable value of the producing assets is dependent on the group's JV partner obtaining the necessary renewals of concession contract beyond November 2023, the current expiry date, and positive outcome of the disputes in Slovenia enabling the group to obtain the necessary permit approvals going forward.   Failure to obtain the necessary concession contract renewal, or unfavourable outcome in the disputes mentioned is likely to result in an impairment to the carrying value of producing assets held.   We also draw attention to post balance sheet events as disclosed in the Chief Executive Officer's statement in relation to amendments to Slovenian Mining Law. While we are satisfied these conditions did not exist at the year end, and therefore that producing assets are not materially misstated in the financial statements, we note that the outcome of these changes could result in impairment to these assets in subsequent periods.
Recoverability of investments and intragroup receivables (Parent Company) (Note 12)   At 31 December 2021, the Investments in subsidiaries are £16.1m and intragroup receivables are £27.5m. These balances are the most significant assets in the parent company's financial statements. The recoverability of these balances is directly linked to the recoverability of the tangible and intangible assets held by those entities, and hence there is a risk these are not be fully recoverable.   The recoverability of the underlying assets are subject to significant management estimate and judgement regarding future cashflows as noted above. For this reason along with the financial significance of the account balance, we have assessed this to be a key audit matter.	Our work in this area included:     ·      Confirmation of ownership of investments; ·      Consideration of recoverability of investments and intragroup loans by reference to underlying net asset values and projects; and ·      Review of disclosures made surrounding investments in subsidiaries to ensure compliance with IFRS.   Based on the audit work performed, we do not consider investments and intragroup receivables as at 31 December 2021 to be materially misstated.   We draw attention to the findings disclosed within the other Key audit matters above which are also relevant to the future recoverability of these balances.

 

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•    the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•    the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

•    adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

•    the parent company financial statements are not in agreement with the accounting records and returns; or

•    certain disclosures of directors' remuneration specified by law are not made; or

•    we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Statement of Directors Responsibilities, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the group and parent company financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

·      We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, application of cumulative audit knowledge and experience of the sector. This is evidenced by discussion of laws and regulations with the management, reviewing minutes of meetings of those charged with governance and Regulatory News Service (RNS) and review of legal or professional expenditures. As for the Slovenian company, which is a key component, we have obtained an understanding of local laws and regulations as they apply to the group through industry knowledge, discussion with management, liaising with external lawyers engaged by the company in respect of specific matters, and review of relevant correspondence and documentation relating to exploration and producing assets.

·      We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from Companies Act 2006, AIM rules, and local laws and regulations in Slovenia relating to exploration and production.

·      We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:

o  Discussion with management regarding potential non-compliance;

o  Review of legal and professional fees to understand the nature of the costs and the existence of any non-compliance with laws and regulations; and

o  Review of minutes of meetings of those charged with governance and RNS announcements.

·      We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, we did not identify any significant fraud risks.

As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business and review of the bank statements during the year to identify any large and unusual transactions where the business rationale is not clear.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Joseph Archer (Senior Statutory Auditor)                                                                                                                       15 Westferry Circus

For and on behalf of PKF Littlejohn LLP                                                                                                                                    Canary Wharf

Statutory Auditor                                                                                                                                                                  London E14 4HD

30 June 2022

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

	Notes	Year ended 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Revenue	2	-	-
Cost of sales	2	(19)	(120)
Depreciation of oil & gas assets	10	(328)	(397)
Gross loss		(347)	(517)
Administrative expenses	3	(1,596)	(2,279)
Operating loss		(1,943)	(2,796)
Finance cost	5	(28)	(35)
Net finance costs		(28)	(35)
Loss before taxation		(1,971)	(2,831)
Income tax expense	6	-	-
Loss for the year		(1,971)	(2,831)
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations		(1,621)	1,327
Total comprehensive income for the year		(3,592)	(1,504)
Earnings per share
Basic & fully diluted loss per share (Pence)	8	(1.83)	(4.66)

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 2021

Assets	Notes	31 December 2021 £ '000s	31 December 2020 £ '000s
Non-current assets
Property, plant and equipment	10	21,111	22,783
Exploration and evaluation costs	11	18,463	18,753
Goodwill	9	653	653
Prepaid abandonment fund	12	300	300
Total non-current assets		40,527	42,489
Current assets
Trade and other receivables	13	8	66
Cash and cash equivalents	25	97	115
Total current assets		105	181
Total assets		40,632	42,670
Equity and liabilities
Attributable to the equity holders of the Parent Company
Share capital	20	7,998	7,928
Share premium account		75,021	73,863
Merger reserve		570	570
Equity reserve		-	73
Share-based payment reserve	24	2,129	2,129
Translation reserves		(594)	1,027
Retained earnings		(46,566)	(44,595)
Total equity attributable to the shareholders		38,558	40,995
Total equity		38,558	40,995
Non-current liabilities
Borrowings	15	536	197
Provisions	16	312	328
Total non-current liabilities		848	525
Current liabilities
Borrowings	15	5	5
Contingent consideration on acquisition	17	450	450
Trade and other payables	18	770	695
Total current liabilities		1,225	1,150
Total liabilities		2,073	1,675
Total equity and liabilities		40,632	42,670

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 2021

	Share capital £ '000s	Share premium £ '000s	Merger reserve £ '000s	Equity reserve £ '000s	Share based payment reserve £ '000s	Translation reserve £ '000s	Retained earnings £ '000s	Total £ '000s
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
Balance at 1 January 2021	7,928	73,863	570	73	2,129	1,027	(44,595)	40,995
Comprehensive income
Loss for the year	-	-	-	-	-	-	(1,971)	(1,971)
Other comprehensive income
Currency translation differences	-	-	-	-	-	(1,621)	-	(1,621)
Total comprehensive income	-	-	-	-	-	(1,621)	(1,971)	(3,592)
Transactions with owners
Issue of ordinary shares	70	1,216	-	-	-	-	-	1,286
Costs related to share issues	-	(58)	-	-	-	-	-	(58)
Equity value of convertible loan note	-	-	-	(73)	-	-	-	(73)
Total transactions with owners	70	1,158	-	(73)	-	-	-	1,155
Balance at 31 December 2021	7,998	75,021	570	-	2,129	(594)	(46,566)	38,558
Notes	20				24

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

 

Consolidated Cash Flow Statement

For the year ended 31 December 2021

	Year ended 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Cash flows from operations
Loss after tax for the year	(1,971)	(2,831)
Depreciation	328	397
Change in receivables	42	188
Change in payables	75	232
Increase in share-based payments	12	456
Exchange differences	42	212
Net cash used in operating activities	(1,472)	(1,346)
Cash flows from investing activities
Payments for fixed assets	(3)	-
Net cash used in investing activities	(3)	-
Cash flows from financing activities
Interest paid and other finance fees	-	(35)
Loans advanced	375	300
Loans repaid	-	(417)
Interest paid	-	-
Proceeds from issue of shares	1,140	1,648
Share issue costs	(58)	(180)
Net cash generated from financing activities	1,457	1,386
Net (decrease) / increase in cash and cash equivalents for the year	(18)	38
Effect of foreign exchange differences		-
Cash and cash equivalents at beginning of the year	115	77
Cash and cash equivalents at end of the year	97	115

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 2021 comprise the Company and its subsidiaries (together referred to as the 'Group'). 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 UK-adopted international accounting standards and with the requirements of the Companies Act 2006.

The Group's and Company's financial statements for the year ended 31 December 2021 were approved and authorised for issue by the Board of Directors on 30 June 2022 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 UK-adopted international accounting standards and with the requirements of the Companies Act 2006.

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 £1,550,000 (2020: loss of £2,060,000).

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 have been prepared on a going concern basis. The Directors consider the Group to be a going concern and therefore that it is appropriate to prepare the accounts on said basis.

The Company has raised £0.6 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 the next two months, 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.

In addition to the need to raise additional funding in the next two month, 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. 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. The auditors have made reference to going concern by way of a material uncertainty.

New and amended Standards effective for 31 December 2021 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 2021. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

Standard	Description
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16	Interest rate benchmark reform - Phase 2

 

The new standards effective from 1 January 2021, as listed above, did not have a material effect on the Group's financial statements.

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
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*
IAS 1 amendments	Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies	1 January 2023*
IAS 8 amendments	Accounting policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates	1 January 2023*
IAS 12 amendments	Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2023*

*Subject to UK endorsement

 

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 judgements

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 development 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, and also the renewal of the concessions that are currently scheduled to expire in November 2023. The Board considers these factors to be an ordinary risk for oil and gas developments. In April 2022, the Republic of Slovenia approved amendments to its Mining Law which include a total ban on hydraulic stimulation. Consequently, the Company does now nor expect to be able to complete certain workstreams pertaining to existing wells and is now reviewing future field development. The carrying value of exploration assets at 31 December 2021 was £18,463,000 (2020: £18,753,000) and as at the reporting date when the Company conducted its impairment review, fully expected any revision of the Mining Law to continue to permit low volume hydraulic stimulation.

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. (See page 15)

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. With regard to the financial inputs, a weighted average cost of capital ("WACC") was used as the discount rate, and calculated as 12.0%  (post-tax, nominal) and for gas prices, the Company has used a combination of futures rates for the local region.

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. As with the exploration and evaluation assets, judgment was required regarding the likelihood of the necessary environmental permits being granted and the status of legal matters which are key to the commercial value of the assets. In April 2022, the Republic of Slovenia approved amendments to its Mining Law which include a total ban on hydraulic stimulation. Consequently, the Company does now nor expect to be able to complete certain workstreams pertaining to existing wells and is now reviewing future field development. The impairment test conducted as at the reporting date fully expected any revision of the Mining Law to continue to permit low volume hydraulic stimulation, and as such demonstrates significant headroom.

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 estimates of the future workover costs on the producing wells to extract this reserve. The depreciation charge for the year was £328,000 (2020: £397,000) 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 2021 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 £4.8 million has been recognised in the Company accounts against a receivable of £32 million (2020: £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, the Petišovci joint venture in Slovenia in which Ascent Slovenia Limited (a 100% subsidiary of Ascent Resources plc) has a 75% working interest, however whilst in a cost recovery position the Company is entitled to 90% of hydrocarbon revenues produced.

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 has 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 and ESG metals 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 2021 was £1: €1.1900 (2020: £1:€1.1192).

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 on 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 financial liability and charged as transaction cost deducted against the loan and held subsequently at fair value. 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 customers. Sales are recognised when control of the goods has transferred to the customer. Condensate, which is collected at a separating station and transported via trucks to a customer in Hungary is recorded on delivery according to 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. The Company follows the five step process set out in IFRS 15 for revenue recognition.

Revenue is derived from the production of hydrocarbons under the Petišovci Concession, which Ascent Slovenia Limited holds a 75% working interest, however whilst in a cost recovery position the Company is entitled to 90% of hydrocarbon revenues produced. 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.

During the year the information required to determine the transaction price of the revenues relating to producing assets under the Petišovci Concession was not available. The contractual terms under the Joint arrangement in Slovenia are under dispute and it was therefore unclear at the year end whether the performance obligations had been met. For these reasons, no revenue has been recognised during the year in accordance with IFRS 15.

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 hydrocarbon revenues produced whilst in a cost recovery position in the Petišovci area 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.

Contingent Liability

A contingent liability is recognised when the group has a possible obligation (legal or constructive), as a result of a past event, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group, or the amount of the obligation cannot be measured with sufficient reliability.

If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nor a contingent liability and no disclosure is made.

Contingent Asset

A contingent asset is recognised when the group has a possible asset, as a result of a past event, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group.

Such contingent assets are only recognised as assets in the financial statements where the realisation of income is virtually certain. If the inflow of economic benefits is only probable, the contingent asset is disclosed as a claim in favour of the group but not recognised in the statement of financial position.

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.

 

2021	UK £ '000s	Slovenia £ '000s	Elims £ '000s	Total £ '000s
Hydrocarbon sales	-	-	-	-
Intercompany sales	-	13	(13)	-
Total revenue	-	13	(13)	-
Cost of sales	-	(19)	-	(19)
Administrative expenses	(1,520)	(89)	13	(1,596)
Material non-cash items
Depreciation	(0)	(328)	-	(328)
Net finance costs	(27)	(1)	-	(28)
Reportable segment profit/(loss) before tax	(1,547)	(424)	-	(1,971)
Taxation	-	-	-	-
Reportable segment profit/(loss) after taxation	(1,547)	(424)	-	(1,971)
Reportable segment assets
Carrying value of exploration assets	-	18,753	-	18,753
Additions to exploration assets	-	-	-	-
Effect of exchange rate movements	-	(290)	-	(290)
Total plant and equipment	-	21,111	-	21,111
Prepaid abandonment fund	-	300	-	300
Investment in subsidiaries	16,099	-	(15,446)	653
Intercompany receivables	27,526	-	(27,526)	-
Total non-current assets	43,625	39,874	(42,972)	40,527
Other assets	115	(10)	-	105
Consolidated total assets	43,740	38,694	(42,972)	40,632
Reportable segmental liabilities
Trade payables	(494)	(277)	-	(771)
External loan balances	(541)	-	-	(541)
Inter-group borrowings	-	(32,677)	32,677	-
Other liabilities	(450)	(312)	-	(762)
Consolidated total liabilities	(1,485)	(33,266)	32,677	(2,074)

 

 

 

2020	UK £ '000s	Slovenia £ '000s	eliminations £ '000s	Total £ '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	(42,8900	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)

Revenue from customers

Revenue for 2021 was nil (2020: nil). During the year under review and the prior year, the Company has not recognised revenue due to the ongoing dispute over revenue entitlement with its JV partner Geoenergo. The Company announced in March 2022 that it had elected to invoice for its share of production revenues for the months April 2020 through to February 2022. The performance obligations are set out in the Group's revenue recognition policy. 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 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Employee costs	1,067	729
Share based payment charge	-	456
Depreciation	328	397
Auditor's remuneration:
Audit Fees - PKF	45	43
Fees payable to the company's auditor other services	-	-
	45	43

 

4.                 Employees and directors

a)  Employees

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

 

	Year ended 31 December 2021	Year ended 31 December 2020
Management and technical	7	10

 

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

 

	Year ended 31 December 2021	Year ended 31 December 2020
Management and technical	7	7

 

b)  Directors and employee's remuneration

 

	Year ended 31 December 2021	Year ended 31 December 2020
Employees & Directors
Wages and salaries	826	628
Social security costs	145	56
Pension costs	2	7
Bonuses	86	38
Share-based payments	-	456
Taxable benefits	8	-
	1,067	1,185

 

c)   Directors' remuneration

Please see Remuneration report on pages 28-30.

 

5.    Finance income and costs recognised in the year

 

Finance costs	Year ended 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Interest charge on loans	(26)	(24)
Bank charges	(2)	(11)
	(28)	(35)

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

 

6.    Income tax expense

 

	Year ended 31 December 2021 £ '000s	Year ended 31 December 2020 £ '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 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Loss for the year	(1,971)	(2,831)
Income tax using the Company's domestic tax rate at 19% (2020: 19%)	(375)	(537)
Effects of:
Net increase in unrecognised losses c/f	375	537
Effect of tax rates in foreign jurisdictions	-	-
Other non-deductible expenses	-	-
Total tax expense for the year	-	-

7.  Deferred tax - Group and Company

 

	Year ended 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Group
Total tax losses - UK and Slovenia	(53,227)	(51,255)
Unrecorded deferred tax asset at 19% (2020: 19%)	9,049	8,713
Company
Total tax losses	(15,080)	(13,632)
Unrecorded deferred tax asset at 19% (2020: 19%)	1,548	2,317

 

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 31 December 2021 £ '000s	Year ended 31 December 2020 £ '000s
Result for the year
Total loss for the year attributable to equity shareholders	(1,971)	(2,831)
Weighted average number of ordinary shares	Number	Number
For basic earnings per share	108,007,151	60,693,793
Loss per share (Pence)	(1.83)	(4.66)

 

As the result for the year was a loss, the basic and diluted loss per share are the same. At 31 December 2021, potentially dilutive instruments in issue were 29,262,396 (2020: 65,868,482). Dilutive shares arise from share options and warrants issued by the Company.

 

9.    Business Combinations

There have been no acquisitions 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.