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Ascent Resources plc - Final Results



Ascent Resources plc / Epic: AST / Index: AIM / Sector: Oil and Gas 18 May 2010 Ascent Resources plc (‘Ascent’ or ‘the Company’) Final Results
Ascent Resources plc, the AIM-traded oil and gas production and exploration company, announces its final results for the year ended 31 December 2009.
Overview
* Active technical programme scheduled for 2010; core focus on the Petišovci-Lovsázi project in Slovenia and Hungary where substantial gas reserves are estimated following positive 3-D seismic processing and interpretation * Gross loss of £219,000 (2008: Gross profit of £387,000) * Cash at period end of £4.6 million * Sale of Swiss subsidiary for €8 million cash consideration, along with various participation options (post-period end) * Sale of share in Perazzoli Drilling; combined with partner’s share, generating cash of €1.85 million (post-period end) * Production on-line from Penészlek Project, in the Nyírség exploration permits of eastern Hungary * Identified potential prospect in Italy’s Latina Valley following completion of the Fontana-1 well
Ascent Resources Managing Director Jeremy Eng said, “2010 holds many opportunities for Ascent and could prove instrumental; we have an extensive work programme targeting a number of considerable prospects and funding in place as a result of our efforts to realise the value inherent within our portfolio.


“Our team has demonstrated the ability to execute on the full cycle of the exploration and production process, and with gas production on-line in Hungary providing underpinning revenues, we can dedicate our focus to developing the exciting opportunities we have identified within our portfolio.”
For further information please visit www.ascentresources.co.uk or contact: Jeremy Eng Ascent Resources plc Tel: 020 7251 4905 Simon Cunningham Ascent Resources plc Tel: 020 7251 4905 Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7236 1177 Paul Youens St Brides Media & Finance Ltd Tel: 020 7236 1177 Shane Gallwey Astaire Securities Tel: 020 7448 4400 Jerry Keen Astaire Securities (Corporate Broking) Tel: 020 7448 4492 Toby Gibbs Astaire Securities Tel: 020 7448 4400 Daniel Fox-Davies Fox-Davies Capital Ltd Tel: 020 7936 5200 James Hehn Fox-Davies Capital Ltd Tel: 020 7936 5200
CHAIRMAN’S STATEMENT
This has been a year of great progress for Ascent.

We have advanced a number of our key projects with production from new wells in Hungary, sizeable new prospects identified from new 3-D seismic in both Slovenia and Hungary, and of course the recent sale of our Swiss subsidiary for €8 million post period end.

The fact that we were able to obtain such a strong price for our Swiss subsidiary, while retaining the opportunity to participate in any conventional development in the Swiss permits, illustrates the inherent value in our portfolio of multiple oil and gas production, exploration and appraisal assets across Europe.


Our established strategy of participating in low-cost onshore assets with high upside potential gives us a degree of flexibility and mobility that has proved invaluable given the recent market uncertainty.

Indeed, the diversity of our portfolio has become one of our key strengths in such a volatile market and has allowed us to schedule a very active technical programme for 2010.

This programme is intended to enhance our asset base by increasing reserves and generating additional production volumes and revenues.
During the year we continued gas production from the Penészlek area of the Nyírség permits in Hungary.

We also announced additional discoveries that will provide a valuable revenue stream in the coming years that will enable us to pursue a number of larger opportunities across our portfolio.

The Penészlek project, although small in size, demonstrates our ability to accomplish the full cycle of the exploration and production process, from the preliminary geological analysis and the acquisition of seismic, through to the drilling and construction of facilities and in due course, to gas sales.


Slovenia and Hungary remain the core focus for 2010 in particular the Petišovci-Lovsázi project which covers an area of 178 square kilometres, about 90 km2 in either country.

120 km2 of 3-D seismic data has already been acquired and the interpretation of this seismic data has revealed a number of new drilling targets mapped outside the area of the core deep gas field.

In addition to the substantial deep gas reserves, independently estimated as greater than 300bcf only on the Slovenian part of the project, our estimates for these newly identified prospects show a combined potential of over 75 Bcf of additional recoverable gas and it is likely that successful drilling of some of these prospects could lead to further follow-on targets.

Slovenia, like Hungary, has a strong demand for domestic gas production and with this in mind, planning is now underway for a number of wells to be drilled both in 2010 and in 2011 and discussions are on-going with project partners to prioritise the drilling of identified prospects.


Acquisition of a further 65 km2 of 3-D seismic in the adjacent Lovaszi field area across the Hungarian border has been completed and an initial two exploration wells in this area are planned and possible locations have been identified.
In Italy’s Latina Valley our project partners agree that the results of the Fontana-1 well are sufficiently encouraging to proceed with the permitting of a hydrocarbon appraisal well, the Anagni-2, located within 1 km of the Fontana-1 location, targeting an adjacent structure.


As previously referenced, in April Ascent sold its 100% owned Swiss subsidiary, PEOS AG, to eCORP Europe International Ltd., for a cash consideration of €8 million along with various participation options.

We believe this was an outstanding transaction, having retained, without obligation, the opportunity to participate in the development of fields within the permits whilst simultaneously realising €8 million from our investment in the Swiss assets.

We expect that the drilling of the Hermrigen-2 appraisal well will commence later this year.

Our estimates of reserves is 150 Bcf in the Muschelkalk and Bunter layers of the Hermrigen prospect and Ascent has the right to a 45% interest in the development of these reserves by choosing to pay 45% of the well cost after discovery.
With a portfolio of European assets and a technical team with in-depth experience both operationally and corporately, we believe we have a structure that can be utilised to generate substantial additional shareholder value.


Outlook
I believe that the Company has never been in a stronger position to move forward.

We have a diverse portfolio of assets with a healthy balance of development, appraisal and exploration projects.

We have a significant amount of work scheduled across the portfolio for 2010 with our priority being the Petišovci-Lovsázi project in Slovenia and Hungary.

We believe this to be a potentially sizable onshore European project and we look forward to accelerating the development of this exciting opportunity in the coming period.
Finally I would like to take this opportunity to thank everyone involved in the Company for their continued hard work and the part they have all played in moving Ascent further towards achieving its goals this year.

We continue to place significant belief in the value of our assets to generate genuine returns to shareholders and I look forward to updating you with further developments, during what I believe, will be a year of great activity for the Company.
John Kenny
Chairman
OPERATIONS REVIEW
Ascent Resources Plc (’Ascent’ or ’the Company’) is a multi-project oil and gas exploration company, operating in five countries with a focus on Europe.

The Company has a balanced portfolio of hydrocarbon exploration and development projects located in Italy, Switzerland, Hungary, Slovenia and the Netherlands.


The Company’s assets are categorised according to their status and risk profile as producing, development or redevelopment projects or appraisal and exploration projects.

The Company funds its activities through a combination of debt and equity funding for lower risk development projects and farm-outs for higher risk exploration projects.
The Company continues to focus on low cost onshore oil and gas assets with high upside potential.

This potential is realised by advancing projects from the exploration and appraisal stages, through to development and cash generating production.

Modern exploration and development techniques such as 3-D seismic are utilised; with a proven success record within the Company’s portfolio.
The scale of Ascent’s European portfolio and an improved financial position resulted in 2009 being an active year, with a number of key successes and continuous progress made across the Company’s projects.


Production, Development & Redevelopment Projects
Hungary, Nyírség - Penészlek Area - Development (48.78% interest through PetroHungaria kft (‘PetroHungaria’))
The Penészlek area has seen a number of successes for the Company, with gas production from shallow Miocene reservoirs in the first half of 2009 from the PEN-104 site and PEN-105 beginning production at a rate of over 2 MMscfd in March 2010.

Gas from the Penészlek area is sold via a dedicated automated facility directly into the high pressure Hungarian gas pipeline network.


The PEN-101 well has been successfully drilled and tested and is ready for the production and sale of gas.

It is anticipated the revenues generated from the producing wells in Penészlek will provide the Company with positive cash flow during the remainder of 2010 and through to 2011.
The PEN-104 well site which started production in 2008 is to be restored following the depletion of commercially available gas.

Further exploration and appraisal prospects exist in both Pannonian clastic and Miocene tuffaceous formations.


Since the year end, Leni Gas & Oil (LGO) has relinquished its interest in the Penészlek project (announced by LGO on 5 March 2010), The LGO interest has been distributed among the remaining project partners in proportion to their prior interest in the project, at no additional cost.
Following the reallocation of LGOs interest and the conversion of Geomegas interest in the PEN-101 and PEN-106 wells from a working to a carried interest, the partners interests in the project are now:
Project Interest PEN-101 & PEN-106 Revenue Interest Cost Share Ascent Resources plc 48.776% 51.654% 53.381% DualEx 40.440% 42.826% 44.258% Swede Resources 2.157% 2.285% 2.361% Geomega kft 8.627% 3.235% 0%
Hungary, Bajcsa Gasfield Redevelopment (49% interest through a 98%% holding in ZalaGasCo kft (‘ZGC’))
The Bajcsa gasfield was originally developed in the 1980s using vertical wells and standard completions.

Production from these low permeability sandstone reservoirs recovered only about a quarter of the gas-in-place.

Going forward, modern techniques should be able to recover substantially more of the gas and a horizontal well has been designed with the intention of substantially increasing both productivity and recovery.

The drilling of this Bj-28 well awaits final approval.

As a redevelopment project, any production can be immediately transported to market through the existing infrastructure with minimal further investment.
Work on the Bajcsa field confirmed gas in at least two of seven identified reservoirs and considerable effort has been spent in the planning stages of this project in order to establish the most efficient way to develop these gasfields.

Once the first well is drilled and the results analysed, it is envisaged that a number of similar wells will be possible.

The project is a 50:50 joint venture with MOL RT (‘MOL’), Hungary’s leading oil and gas company and the project is operated by them with technical input from ZGC.
Hungary, Nyírség – Panhandle (20.167% interest through HN Ventures Inc)
The Görbehàza-1 (GH-1) gas discovery was the first of two gas zones targeted for completion and has produced gas at over 3.5 MMscfd from the first of its two completion intervals.

The well has been completed as a gas producing well and is awaiting the construction of a 2.5km export pipeline to the Hajdúnánás Gas Production Facility for sale into the main Hungarian gas pipeline network.

Gas is reservoired in shallow Pannonian sands and there are other exploration targets in both Pannonian clastics and deeper Miocene tuffaceous formations.


Slovenia & Hungary, Petišovci & Lovsázi/Ujfalu - Development & Redevelopment (45% interest in Petišovci Dolina and 15.75% interest in Globoki with 75% interest in extended project area through Ascent Slovenia Limited (‘ASL’), formerly Nemmoco Slovenia Corporation (‘NSC’)) (50% interest in Lovászi/Ujfalu, through Ascent Hungary Limited)
The Petišovci field area in Slovenia and the immediately adjacent Lovsázi project area across the Hungarian-Slovenian border will be key to the Company’s work programme for 2010.

A substantial tight gas reserve is known to exist in the deeper part of both the Lovászi and Petišovci fields and, in addition to the shallower conventional oil and gas reservoirs already known, the successful completion of 3-D seismic undertaken late in 2009 has revealed new exploration and appraisal targets in both shallow and deep horizons.

Operations in Slovenia are conducted through the Company’s wholly owned subsidiary ASL, while MOL, partners the Company on the Hungarian side of the border.
As a result of the successful completion of 3-D seismic processing and interpretation in Slovenia announced in March 2010, 12 new drilling targets have been identified and plans have been made to drill a number of wells throughout 2010 and in 2011.

The project areas have been extended and the majority of new prospects have been identified in these new areas.

These new prospects are in addition to the reserves identified in the Independent Persons Report on the deep prospects completed in 2004 and management estimates there could be the potential for some additional 75 Bcf of recoverable gas.


Both projects are of significant importance to the Company, with ASL holding a 75% interest in both the shallow and the deep reservoirs of the 61.5 km2 extended Slovenian area and the acquisition of 65 km2 of 3-D seismic in the Lovászi field in Hungary recently completed.
This is a previously producing field with an established infrastructure which will facilitate early production.

The project could have the potential to provide a significant contribution to the local gas market.


Italy, Strangolagalli, Ripi - Redevelopment (50% interest through Ascent Resources Italia s.r.l)
The Ripi field is an oilfield which has produced oil for more than 50 years from shallow flysch sediments between 400m and 800m deep.

The first stage of the redevelopment of Ripi is the acquisition of a shallow hi-resolution 2-D seismic survey, designed and commissioned by the Company and field operator Pentex Italia Ltd.

Here, the productive horizons are clastic reservoirs within the flysh that overlies the carbonate platform that provides the reservoirs in the nearby Anagni/Fontana project.


The new seismic, which is expected to be acquired in 2010, is designed to image the reservoir units so that state-of-the-art wells can be drilled to efficiently produce the remaining oil.
Appraisal Projects
Switzerland, Frienisberg-Seeland Permit (45% optional interest from disposal of wholly owned subsidiary PEOS AG)
The Frienisberg-Seeland Hermrigen gas exploration and appraisal project follows on from a gas discovery drilled by Elf Aquitaine in 1982.

The original Hermrigen well was drilled before gas pipeline infrastructure was built in the area and consequently was not developed at this time.

Following extensive analysis of the geological and seismic data and further geochemical analyses, an appraisal well has been designed to assess the original gas discovery before going on to drill down to the primary target of the Hermrigen-1 well.

This well is planned and will confirm the commercial viability of this discovery.


In April 2010 Ascent sold its 100% owned Swiss subsidiary, PEOS AG, to eCORP Europe International Ltd.

(eCORP), for cash consideration of €8 million, together with various farm-in options on certain potentially successful discoveries (the Transaction).


Under the terms of the Transaction Ascent retains the right to acquire 45% of any conventional discovery from the Hermrigen 2, Essertines 2 and Linden 2 appraisal wells by paying 45% of drilling costs post any discovery - with no obligation to participate.

Additionally Ascent retains the right to 22.5% of any discovery from certain additional conventional prospects by paying 22.5% of the drilling costs post discovery, again with no obligation to participate.

eCORP has irrevocably committed to drill the Hermrigen-2 appraisal well with permitting underway for drilling in Q4 2010.
Italy, Latina Valley Frosinone Exploration Permit (80% interest through Ascent Resources Italia s.r.l.)
The Anagni-1 well, within the Frosinone project area was drilled by Ascent in 2006 and had strong oil shows.

Despite extensive testing, the well only produced small amounts of oil and in 2008, additional seismic was acquired and it became apparent that the well had intersected the side of the structure.


In late 2009, Fontana-1 was drilled to collect cores and appraise the shallow part of the Anagni structure, however the original well experienced mechanical problems after reaching the target depth.

A replacement Fontana well was drilled in February 2010.

A core sample taken from the limestone of the target Carbonate Platform formations contained live oil, while deeper dolomite horizons have been shown to contain water from data acquired from logging tools.

The Partners believe that the results are sufficiently encouraging to proceed with the permitting of a hydrocarbon appraisal well, Anagni-2, located within 1 km of the Fontana-1 location, which will target a smaller adjacent structure.
The Fontana well, was permitted and drilled as a geological appraisal well to collect cores from the carbonate platform identified while drilling the nearby Anagni-1 well.

The target Carbonate platform formations have been found over 300m shallower than in the original Anagni-1 well.

At the planned Anagni-2 location, it is expected that they will be even shallower still at an estimated 300m below ground level.

Importantly, the Fontana-1 well has confirmed the presence of a second thrust formation within the complex geology of this region.
Netherlands, Blocks M10/M11 (27% interest through Ascent Resources (Netherlands) B.V.)
This appraisal project is in shallow blocks M10 and M11 in the southern part of the North Sea.

The discovery well, M-11-1 was drilled by NAM in 1985.

The complete area benefits from full 3-D seismic coverage and in addition to the structure in the Rotligendes sandstones, a number of other prospects and leads have been identified.

The Company has until December 2010 to make a decision with regards the drilling of appraisal wells.


Switzerland, Bern Canton, Linden Exploration Permit (45% optional interest from disposal of wholly owned subsidiary PEOS AG)
The Linden-1 well was drilled by Elf Aquitaine in 1972 and tested gas at the time.

Ascent was awarded the permit in August 2005 and in April 2008 the permit was extended to 2011.


In April 2010 Ascent sold its 100% owned Swiss subsidiary, PEOS AG, to eCORP Europe International Ltd.

(eCORP), for cash consideration of €8 million, together with various farm-in options on certain potentially successful discoveries (the Transaction).

Under the terms of the Transaction Ascent retains the right to acquire 45% of any conventional discovery from the Linden 2 appraisal well by paying 45% of drilling costs post any discovery - with no obligation to participate.
Exploration Projects
Italy, Po Valley, Cento and Bastiglia Exploration Permit (100% interest through Ascent Resources Italia s.r.l.)
The Cento and Bastiglia exploration permits contain both shallow Pliocene and deep Miocene exploration targets and are located in the Po Valley, in the heart of the largest onshore gas producing area in Europe.

The Gazzata-1 well was spudded in May 2009.

This well was funded under the terms of a farm-out agreement with Otto Energy Limited (’Otto’).

The Gazzata-1 well was abandoned in 2009 due to a lack of commercial gas reserves.

In April 2010 the farm-out agreement was cancelled and Otto withdrew from the permit
The Cento and Bastiglia Permit is one of the largest in this prolific region.

The acquisition of new seismic data over a variety of targets should determine new drilling locations within the prospect.

The Italian gas market remains strong and a discovery here could be particularly valuable to the Company.
Slovenia, East Slovenian Exploration Project (40% interest through wholly owned Ascent Slovenia Limited, formerly Nemmoco Slovenia Corporation)
The East Slovenia Exploration project is located just to the north of the development projects at Petişovci.

This encompasses an area of 864 km2 in three blocks and is located within the Pomurje Regional Exploration Area where some 65 exploration wells have been drilled over the past 50 years.

Almost 50% of these exploration wells reported good shows of gas and oil.

3-D seismic was acquired over a 200 km2 area in the Filovci exploration area and at least two wells are planned to be drilled in this area during 2010.
Switzerland, Vaud Canton, Gros de Vaud Exploration Permit (45% optional interest from disposal of wholly owned subsidiary PEOS AG)
The Vaud Concession is an exploration project for both oil and gas and is situated north of Lausanne, it was awarded to Ascent in May 2006 and was been extended to June 2010 last year.

The Gros de Vaud exploration area includes the 1962 oil discovery at Essertines that produced several thousand barrels of oil from Jurassic aged reservoirs and surface seeps of both oil and gas are present in the area, with the sub-salt Triassic gas potential providing the biggest targets.
In April 2010 Ascent sold its 100% owned Swiss subsidiary, PEOS AG, to eCORP Europe International Ltd.

(eCORP), for cash consideration of €8 million, together with various farm-in options on certain potentially successful discoveries (the Transaction).

Under the terms of the Transaction Ascent retains the right to acquire 45% of any conventional discovery from the Essertines 2 appraisal well by paying 45% of drilling costs post any discovery - with no obligation to participate.


Italy, Latium Coast, Fiume Arrone Exploration Permit (56% interest through Ascent Resources Italia, s.r.l.)
The 2006 well, drilled by Ascent Italia at Fiume Arrone, had good gas shows but lacked adequate reservoir.

New seismic will be required to determine new drilling locations.


Netherlands, Blocks P4, M8
The licences for exploration in the M8A and P4 blocks have been relinquished.
Other Enterprises
Perazzoli Drilling
The Company, through its subsidiary company Ascent Drilling Limited (’Ascent Drilling’) originally acquired a share in Perazzoli Drilling in order to obtain priority access and ensure optimal contract terms for drilling services.

Since the year end, the Company has disposed of its stake in Perazzoli and retained these advantages through a five year service alliance with Perazzoli.


The service alliance provides a 30% discount on €10 million of drilling services to Ascent and first call on uncommitted drilling units.

In order to facilitate the transaction, Ascent first bought out their 50% partner in Ascent Drilling using equity.

The resulting 45% stake of Perazzoli was then sold generating cash of €1.85 million.
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