Page 6 - Euroil Week 38 2019

EurOil COMMENTARY EurOil
Slovenia-focused Ascent’s troubles mount amid regulatory obstacles
The company’s development plans are now up in the air after regulators denied it fracking permits
SLOVENIA
WHAT:
Ascent Resources is reviewing its strategy.
WHY:
The firm’s financial losses are mounting and its output is falling.
WHAT NEXT:
Ascent is considering conventional plays
in Slovenia and opportunities overseas.
EMBATTLED gas producer Ascent Resources has said it is reviewing its strategy in Slovenia while looking for opportunities elsewhere, after booking greater losses for the first half.
The London-listed company has reported a net loss to shareholders of GBP994,000 ($1.24mn) in the six months ending June 30, versus a loss of GBP611,000 a year earlier. Its revenues tumbled to GBP242,000 in the period, from GBP1.28mn, largely because of production decline.
Output at Ascent’s flagship Petisovci gas pro- ject in eastern Slovenia has been steadily falling for much of this year, averaging just 230,000 cubic metres in June, compared with 413,000 cubic metres in January. Ascent has provided bullish forecasts for Petisovci’s potential in the past, estimating its in-place gas resources at as high as 13bn cubic metres. But since it began drilling work in 2011, development has been blighted by a series of regulatory headaches.
Ascent had intended to boost gas recovery by carrying out hydraulic fracturing at its two Petisovci wells, but it was denied permits to do so by Slovenian authorities in June. The company has pledged to fight the government’s decision in court.
“Without such permits, we will be unable to develop and deliver the full potential of the deeper tight gas reservoir within the Petisovci field,” Ascent said on September 20.
Amid these difficulties, Ascent undertook a managerial shake-up in July, replacing its CEO and several members of its board. The new team has pledged to make cost control a priority, out- lining plans to cut net monthly cash outflow by more than 50%. It has also set out to consider alternative methods for developing Petisovci’s resources, and search for new opportunities outside Slovenia.
“We continue to search for new opportunities
in the region that will take reliance away from Slovenia and diversify the opportunities for find- ing new reserves,” newly appointed CEO John Buggenhagen said in a statement on September 20. Buggenhagen was selected for his knowledge of possible takeover targets in the broader Cen- tral and Eastern European (CEE) region.
With its development plans up in the air, Ascent has said it will also look at targeting conventional oil and gas resources within the Petisovci contract area to realise value. It com- missioned a report earlier this year that reviewed existing 3D seismic data of the site’s conventional plays. Results from this study are “highly encour- aging”, according to the company. Over the next six weeks it intends to assess shallow conven- tional targets and identify possible drilling sites.
Ascent has also tapped London-based inves- tor RiverFort Global Opportunities to help finance its development plans. RiverFort has subscribed for 393mn shares in Ascent at a 10% premium to the closing share price on Septem- ber 19.
“This is the next step in reinventing Ascent and is necessary to move forward toward new producing wells while continuing to focus on capturing significant value that the company and its partners have already created at Petis- ovci,” Ascent said.
Petisovci enjoys a ready market for gas at its doorstep. Slovenia covers almost all its gas demand of around 1 bcm per year with imports and the country is surrounded by larger markets also reliant on foreign supply, including Croatia, which consumes 3 bcm per year. But until Ascent can overcome the regulatory obstacles that come with targeting unconventional resources, it will struggle to unlock the project’s full potential. There is rising opposition to hydraulic fracturing across Europe, making it difficult for operators to move forward with development.™
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