AST Ascent Resources Plc

CEO's statement

Shareholder Distribution

H1 2024 has seen the Company implement a shareholder distribution with rights to redeemable preference share which enfranchises the holder to receive their relevant pro rata portion of 49% of the net economic proceeds which may be realised in the Company's significant and funded ECT damages claim against the Republic of Slovenia ("ROS"). The Company still retains 100% ownership and decision making control in relation to the claim and retains a direct 51% economic interest in the net amounts received in the event of a successful claim and payment of damages award. This distribution was completed following engagement with shareholders and to enfranchise those that held the Company's shares on the record date with a ring-fenced access to a portion of the proceeds to be received in the event of a positive claim outcome, that would not be diluted in the event of any future changes in the Company's issued ordinary share capital.

Energy Charter Treaty Claim Progress

The ECT claim has continued to proceed in accordance with the timetable previously agreed at the opening of the arbitration proceedings. Notably, during H1 2024, the Company and its lawyers successfully rebutted the ROS's application for security of costs.

The ECT claim continued with production of documents ordered to be exchanged by the Tribunal. The Company has also, in July 2024, post Period in review, successfully filed its reply memorial alongside producing further witness statements including independent expert witness statements in the fields of technical, environmental and damages quantum analysis. It should be cautioned that in the event the Company is successful in its claim any amount actually receivable by the Company may be significantly lower than the amount sought.

Entry into U.S. Onshore Natural Gas and Helium Purification & Liquefaction Sector

In April 2024, the Company announced its maiden investment away from Slovenia, which provides the Company and its shareholders with exposure to new growth in the U.S.A. (a stable jurisdiction) and a cash generative asset via an investment into GNG Partners LLC ("GNG") which had just acquired the "Lisbon Valley" with a 60 mmscfd nameplate gas processing facility (the "Lisbon Plant") out of Chapter 11 bankruptcy. The Lisbon Plant has helium purification and liquidation facilities and is fed by over 500 miles of gas gathering pipeline which spans the Paradox Basin and flows through the Four Corners region of America.

On 23 April 2024, the Company provided a convertible loan of US$1 million to GNG Partners LLC ("GNG") which gives the Company conversion rights into 1 million new GNG membership units, which at the time of investment represented 10% of the post conversion share capital of GNG. Since the date of this investment GNG founders have exercised 3.1 million founder options, resulting in GNG receiving further equity capital of US$3.1 million in cash.

GNG has acquired the Paradox Estate for an effective consideration of approximately US$12.5 million plus cure costs relating to the assigned contracts and leases related to the continuing operations of approximately US$2 million ("Consideration"). The Consideration has been paid via a 7-year loan note for an amount of c.US$7 million with interest accruing at 6% per annum (payable in kind) ("PIK Note") provided by some of the pre-insolvency creditors alongside new equity capital for the balance.

The Lisbon Plant is the sole operating independent natural gas processing plant in the Paradox Basin and fed by over 500 miles (of which 279 miles are wholly-owned by GNG) of helium rich gas gathering pipelines which have access to helium rich gas sources with up to 7-8% He concentration in the Four Corners region, most notably in SE Utah and NW New Mexico. The Lisbon Plant is a 60 mmcfd gas treatment plant which has a 1.1 mmscfpd processing capacity for helium, a 45 mmcfd cryogenic plant and 10,000 Bpd (barrels per day) fractionation train. The plant was built specifically to process the Paradox Basin natural gas that often has high CO₂, H₂S, N₂ and He content. GNG believe that the Lisbon Plant can produce approximately 3.4% of the U.S. liquid helium production (or 1.7% of the world's liquid helium). The Lisbon Plant is currently operational and processing gas, the plant has helium purifying capability to process a five9's grade (99.999%) helium which can be sold as gaseous helium directly to industrial consumers via truck. The Lisbon Plant has a liquification unit which has been in care and maintenance since around 2013 (when the liquified helium price was only ~US$62.25 /Mcf versus the US$750-1,250 /Mcf range available today). The liquefaction unit is undergoing some maintenance and upgrade works and expected to be recommissioned by the year end.

Underpinning the acquisition of the Paradox Estate and Ascent's investment in GNG is a plan to quickly recommission the liquification unit to rapidly move back into premium markets of producing and selling liquified helium, as well as further opportunity to invest in iso-containers which would provide the business with even greater price command. Ascent and GNG have agreed to work together with a view to Ascent potentially providing capital for this critical value enhancing development.

Slovenian Joint Venture Partner Insolvency & Termination of Slovenian RJOA

In Q4 2023 the Company's wholly owned subsidiary Ascent Slovenia Limited ("ASL") received a favourable tribunal interim decision in relation to ASL's Slovenian arbitration claims for payment of 90% of the proceeds received by its JV partner, Geoenergo d.o.o., from production in excess of the baseline production profile for all wells on the concession area (except for Pg-1 which is wholly included as baseline production) whilst ASL is still in a preferential recovery position (i.e. until it has earned back through production revenues its initial sunk investment costs of  approx. €50 million). Further to ASL securing this decision, the JV partner filed for self-appointed insolvency at the start of this year. The Company and its Slovenian legal advisors quickly moved to file a petition on the basis that this motion was an abuse of the insolvency system by a solvent company attempting to dispose of ASL's valid claim against them and that Geoenergo had not engaged with ASL, its main creditor, to understand if a settlement was possible to avoid an insolvency, such as Ascent taking ownership of Geoenergo's assets. Whilst the relevant court did not immediately approve the Geoenergo self-declared insolvency application and scheduled a hearing to decide on ASL's petition, in a sudden turn of events the hearing that was scheduled to happen in February was cancelled, a decision to initiate bankruptcy proceeding against Geoenergo was issued, and an administrator was appointed to Geoenergo on the 19 January 2024.

The administrator took the position, that the RJOA (the JV agreement) was terminated by the operation of law (ex lege) on the day of commencement of the bankruptcy procedure (19 January 2024). Subsequently, the insolvency court confirmed Geoenergo's right to unilaterally terminate the contract in accordance with insolvency law. In accordance with Slovenian mining law, the mining right of Geoenergo expired on 19 April 2024, since the holder of the mining right (Geoenergo) did not ensure a bank guarantee in the amount of the difference between the cost of the final rehabilitation and the reserved funds for the rehabilitation already paid into the relevant fund, in three months from the commencement of the insolvency proceeding. Ascent had already provided the agreed funds on account for the JV wells in 2014 in accordance with the terms of the RJOA, but subsequently Geoenergo failed to provide the additional monies owed relating to the other wells on the concession area before the expiry of the three months. Accordingly the Company has no further interest in the production of hydrocarbons in Slovenia and as a consequence of these actions and in accordance with the RJOA, ASL has transferred the assets it held on its balance sheet prior to the signature of the RJOA in October 2013 to Geoenergo on an "as-is" basis; these assets substantially include the Pg-10 and Pg-11a wells. ASL has filed a claim in the insolvency proceedings for approx. €11 million which is comprised of a claim for €8 million relating to hydrocarbon proceeds received by Geoenergo and owed to ASL as well as a precautionary claim of approx. €3 million relating to ASL's 75% share of the JV assets which were invested into after the signature of the RJOA. Whilst the Company is confident that ASL is substantially the largest creditor of Geoenergo, there can be no certainty of recovery of all or any amounts claimed at present.

Delta Energy SARL Strategic Collaboration

In June 2024, the Company announced that it has signed a strategic collaboration agreement with Delta Energy SARL ("Delta"), which is a private oil and gas company co-founded by Mr Eric Faillenet (former managing director at Carlyle International Energy Partners and prior to that, a senior executive at Perenco) and Mr Ibrahim Diab to take advantage of hydrocarbon opportunities where Delta have multiple mature relationships and unique access.  Any transactions under the collaboration agreement are expected to be classified a related party transaction.  Further announcements will be made as appropriate.

Corporate

In April 2024, in support of the Company's new investment in U.S. onshore gas and helium processing, the Company successfully announced a new funding package of up to US$2.7 million via a £550,000 (US$700,000) new equity placing at the closing bid price on the day before, being 2.3 pence per new share, and a new senior secured loan facility for up to US$2 million with an initial US$1 million drawn down to fund the GNG investment (as set out above). The equity subscribers and loan holder were also issued with 33% warrant coverage which are exercisable by paying a cash exercise price of 3.22 pence per new warrant share (being a 40% premium to placing price). The equity placing was supported by major existing shareholders, including cornerstone investor MBD Partners S.A. and C4 Energy Ltd, a company in which the CEO Andrew Dennan has a 25% beneficial interest in. The loan is for a fixed term of 12 months and has a 15% annual coupon, the loan plus coupon is convertible at a fixed conversion price of 3.22 pence throughout its term. In the event any loan is outstanding on the 12-month maturity date then the Company can elect to redeem this in cash or extend the maturity by a further six months. After the one year anniversary of the loan, the lender would have conversion rights over the loan and accrued coupon into new equity at a price equal to 90% of the lowest VWP in the ten (10) days prior to conversion.

In tandem with the Company announcing its new investment and new funding, the Company also announced new changes to its board with the standing-down of non-executive directors Mr Marco Fumagalli and Mr Malcolm Graham-Wood and the appointments of new non-executive directors Mr David Bullion and Mr Edouard Etienvre. David has over 30 years' experience in the oil and gas industry and is currently the CIO of American Helium LLC and CEO of GNG where the Company has made its new investment. David is a trained geologist who has previously enjoyed a 20 year career with BP holding various senior positions spanning the globe before moving to independent oil and gas companies where he has focused leading operations for the last ten years. Edouard is a seasoned executive with over 18 years of experience in the natural resources sector initially in banking (reserve-based lending) and more recently with private and public E&P companies as well as commodities trading, shipping and infrastructure companies. Edouard has extensive project management, risk assessment, commercial, business development and financing expertise. Edouard holds a MSc in Management from KEDGE Business School and is a non-executive director of ADX Energy Ltd (listed on the ASX) and Rome Resources Plc (listed on the LSE AIM).

Additionally, the Company has announced the former Executive Chairman Mr James Parsons elected to stand-down from the Board and the Company intends to appoint Mr Ibrahim Diab as Chairman. Ibrahim is a serial entrepreneur and natural resources expert who led MBD Partners S.A.'s cornerstone investment into Ascent. The appointment is subject to completion of customary regulatory on-boarding checks and mutual agreement of a suitable service contract. The Company also appointed Mr Lionel Therond as Chief Financial Officer (non-board). Lionel has 30 years of experience in the oil and gas sector and banking and has an MBA from INSEAD, a DEA in Geology and Geophysics from Institut National Polytechnique de Lorraine and a Diplôme Ingénieur Géologue from Ecole Nationale Supérieure de Géologie (Nancy, France). He is a CFA Charter holder and a Fellow of the Geological Society of London.

For the Period to 30 June 2024, the Company was not able to recognise production revenues from Slovenia due to the Company's Slovenian joint venture partner filing for insolvency and the subsequent unilateral termination of the JV by the administrator. Administrative costs for H1 2024 were higher than the H1 2023 costs, most notably due to exceptional one-off workstreams relating to the shareholder distribution and costs of initiating the Company's insolvency claim in against its former JV partner.

Outlook

The Company has orientated itself quickly to expose shareholders to new growth in U.S. onshore gas and helium processing via an initial investment into an operational and cash generative midstream business in the He rich Paradox Basin; as it continues to vigorously defend its legacy flagship investment in Slovenia and pursue its significant damages claims. The Company has updated its Board to accelerate its journey away from Slovenia and focus further on onshore oil and gas and helium production and processing in the Americas and the Company is excited about achieving further progress as the year continues and updating shareholders as further key milestones are achieved.

Andrew Dennan

Chief Executive Officer

19 September 2024                           

Consolidated Income Statement

for the Period ended 30 June 2024

Consolidated Statement of Comprehensive Income

for the Period ended 30 June 2024

Consolidated Statement of Financial Position

As at 30 June 2024