Ascent Revives Core Slovenia Asset
The new board of UK-registered upstream minnow Ascent Resources is preparing to expand activities at Slovenia's Petisovci tight gas field, its core asset, it said May 28, and continues to weigh up the prospects of success for its legal challenge against the government.
Its output is sold to Croatia, across the border and needs a gas price above €1.80-€2.00/'000 ft³, or a Central European Gas Hub index of €10.5 ($11.40)/MWh, to be profitable. But Ascent says the 2021/22 gas futures are already around €13-15/MWh. "Hence the board sees significant core economic value at Petisovci and expects significant cash generation from the asset in the medium term with further upside if global oil and gas prices continue to recover," it said.
It says that it accepts the risk of an unfavourable environmental impact assessment given the need for hydraulic fracturing but said the government is keen to extract more value from its resources and that changes the government has made give it more confidence than before. Stimulation would sustainably and materially increase output, it said.
It said it has not yet decided to proceed with its legal claim against the government under the Energy Charter Treaty but says it has "a valid legal basis" and the company is "refining its view on the prospects of success and the likely quantum of any potential award."
Ascent has spent around €50mn over the last 11 years on this technically and politically challenging project but says that it still holds "significant oil and gas reserves and resources and benefits from an established, local production infrastructure with connections to both domestic and export markets."
Over the last two months, Ascent has initiated a review of the technical aspects of the tight gas project and seen changes introduced by the new Slovenian government that give it growing confidence that the project will receive the permits required for further stimulation.
Permits to enable re-entry and stimulation of the PG-10 and PG-11A wells which were originally submitted in May 2017 are expected to be received towards the end of this year. Ascent notes that costs for stimulation equipment have fallen dramatically in the current economic climate and is keen to take advantage of this if possible.
Ascent has contracted a consultancy team with no previous involvement in the asset to review the historic stimulation data at Petisovci, design the detailed forward stimulation programme so that equipment can be procured without delay when permits are received, and prepare a full field development plan. It has also submitted a specific proposal to the JV partners in Slovenia for a cost-effective and industry-standard JV structure, including a proposed solution for the outstanding balances.
CEO Andrew Dennan said the company's assessment has included technical, legal and economic aspects, the project's potential, and discussions with key players. We have also borne in mind the concerns and views of our shareholders. We are now delighted to share the resulting two-pronged strategy which draws a clear legal line in the sand with the new government whilst also preparing our team technically to stimulate and increase gas production at Petisovci."