Revenue Recognition & Slovenia UpdateSource: RNS
2 August 2022
Ascent Resources plc
("Ascent" or the "Company")
Revenue Recognition & Slovenia Partner Disputes Update
Ascent Resources Plc (LON: AST), the onshore Hispanic America and European focussed energy and natural resources company, is pleased to announce an agreement of PG-10 and PG-11A hydrocarbon revenues and update on its previously announced JV and operator disputes in Slovenia.
- Agreement with JV partner for Ascent to recognise €1.68 million of hydrocarbon revenues from the PG-10 and PG-11A wells for the period April 2020 through to June 2022
- Mediation scheduled for September to resolve Ascent's claim to significant additional hydrocarbon revenues produced in the concession area
- JV partners seeking to resolve a dispute with JV service provider in relation to disputed fixed fee operating invoices
As previously announced on 26 April and 4 July, the Company is seeking to resolve its disputes with its Joint Venture partner, Geoenergo*, in relation to different interpretations of the Restated Joint Operating Agreement (the governing document and rules for the JV as amended in 2013, "RJOA") with regard to Ascent's entitlement to hydrocarbon production revenues generated from within the Petisovci concession area.
Following the appointment of a High Court Ljubljana Judge as a mediator, as announced on 4 July, the parties have been in constructive dialogue (on the executive level and outside of mediation) and have now agreed to Ascent's entitlement to 90% of the hydrocarbons produced from the PG-10 and PG-11A wells. Accordingly, the Company has issued new invoices for the period of April 2020 through to June 2022 for a total gross invoiceable amount of €1.688 million (including VAT) which the Company's 100% owned subsidiary, Ascent Slovenia Limited, is expected to receive imminently.
Following receipt of the production revenues, the Company expects to recognise historic costs relating to an historic liability owed to the field operator (as explained below), the annual concession fee (approximately €0.2 million for the whole concession area) and potentially other costs. The recognition of historic revenues and costs for financial years ending 31 December 2020, 2021 and 2022 is expected to be reflected in the Company's financial statements when the Company produces its final results following the end of the 2022 financial year.
Dispute with JV Partner, Geoenergo
Furthermore, the parties are still in dispute with regard to a difference in interpretations of the RJOA relating to which wells Ascent is entitled to revenues from whilst it is in a preferential cost recovery position (i.e. until it has received cash flows in excess of its €50 million historic investment). The different interpretations hinge on which wells produced above a baseline production profile (defined in the RJOA) should be included in the calculation. Depending on the interpretation this could result in significant additional revenues for the period in question.
Dispute with Field Operator
As previously announced, the Company is managing a planned contractual default with the JV's field operating service provider, Petrol Geo (which is a 100% owned subsidiary of Petrol, with Petrol itself a 50% stakeholder of Geoenergo) in relation to a significant change in circumstances which impacts the fixed service fee invoices received since at least 2019.
Ascent has so far recognised a total outstanding liability to the operator of some €0.23 million, whilst amounts claimed by Petrol Geo in relation to rejected invoices are significantly higher. The Company remains hopeful of resolving the JV's dispute with Petrol Geo and is in dialogue with its JV partner, Geoenergo, to put forward a productive detailed settlement proposal.
Further updates on resolution of both these matters will be announced in due course.
*Geoenergo is a jointly owned company, with 50% owned by Nafta Lendava (a 100% Government controlled entity) and with 50% owned by Petrol (a 30% Government-controlled entity).
Andrew Dennan, Chief Executive Officer, commented:
"We are very pleased to have agreed recognition of seven figure historic production revenues from the PG-10 and PG-11A wells. This is a material development for the Company as we continue to unlock the legacy commercial stalemate with our partners in Slovenia."
Ascent Resources plc
Via Vigo Communications
WH Ireland, Nominated Adviser & Broker
James Joyce / Sarah Mather
0207 220 1666
Novum Securities, Joint Broker
0207 399 9400