This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

23 April 2024

Ascent Resources plc

("Ascent" or the "Company")

Onshore US Gas Investment, New Funding, Board Changes, Director Dealings and Total Voting Rights

Ascent Resources Plc (LON: AST) is pleased to announce it has made an investment into a private US holding company, GNG Partners LLC, that has been formed to acquire onshore US midstream gas distribution and processing facilities which includes helium purification and liquefaction. This is the first shaping move for the Company following a period of deal origination / screening and the recent ECT claim distribution which cements the Company's new forward US onshore gas and helium strategy.  The Company is also pleased to announce that, to fund the investment, it has raised gross proceeds of approximately $1.7 million via an equity fundraise and loan note issue, further details are set out below.

James Parsons, the Company's Chair, commented:

"We are delighted to share our forward strategy for the business, centred around the highly profitable US onshore gas markets and the short supplied, high value and exponentially growing global Helium market.  Helium is a key requirement for many aspects of modern life including medical devices, super computers and data centres.  We also expect a significant increase in demand for natural gas in the US and elsewhere to generate electricity to feed data centres and to power the artificial intelligence revolution.

Our initial investment in GNG and strategic relationship with American Helium provides Ascent with access to a sizeable midstream business in a safe jurisdiction with significant upside, alongside potential future equity upstream production and operations.  The world class GNG and American Helium teams are highly synergistic with Ascent's executive and we look forward to success together.

Simultaneous to this first shaping move post the recent ECT claim distribution, and with a view to prepare for our new US onshore strategy, we have decided to review our Board composition.  On behalf of the Board, I would like to welcome David and Edouard as proposed directors and thank Malcolm Graham Wood and Marco Fumagalli for their invaluable contributions to the business over recent years, without which this first transaction would not have been possible."

Investment into GNG Partners LLC

The Company has today provided a convertible loan of US$1 million to GNG Partners LLC ("GNG"), a newly formed private US holding company, formed to acquire the assets of Paradox Resources LLC ("Paradox Estate") out of Chapter 11 Bankruptcy.

The Paradox Estate, according to the Chapter 11 documentation, comprises primarily a midstream gas processing and helium purification business with a liquefaction unit and access to over 500 miles of gas gathering pipelines as well as a downstream helium truck distribution business. Most notably this includes the 60MMcfd Lisbon Plant, in Utah's Lisbon Valley (35 miles southeast of Moab).

GNG has acquired the Paradox Estate for a total consideration of US$16.5M plus cure costs relating to the assigned contracts and leases related to the continuing operations of approximately US$2M ("Consideration"). The Consideration has been paid via a 7-year loan note for an amount of US$10.5M with interest accruing at 6% per annum (payable in kind) ("PIK Note") provided by some of the Paradox pre-insolvency creditors alongside new equity capital for the balance. Post disposal of the upstream assets (as set out below) the balance of the PIK Note relating to the remaining midstream and downstream business units owned by GNG will be approximately US$7 million.

Alongside this GNG acquisition, Ascent has provided an initial investment of US$1 million into GNG via a zero coupon unsecured two-year convertible loan note which converts, exclusively at the election of Ascent, into 1 million membership units of GNG, which would represent 10% of the issued member units of GNG if converted at the same time as subscription today.  Ascent will collaborate with GNG to potentially provide further capital over time to accelerate the business into a premium US liquefied helium producer and distributor. GNG also has options for a further US$8.9 million of new capital which may be exercised at any time before 25 April 2024. Ascent shall have a right of refusal to subscribe for unexercised options at its sole discretion.

Gas processing & Helium purification and liquification business

The Chapter 11 documentation sets out that the Lisbon Plant is the sole operating natural gas processing plant in the Paradox Basin and is 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 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 (million cubic feet per day) gas treatment plant which has a 1.1 MMcfd processing capacity for helium, a 45 MMcfd cryogenic plant and 10 MBpd (thousand 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 US liquid helium production (or 1.7% of the World's liquid helium). The Lisbon Plant is currently operational and processing gas and purifying helium which is 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).

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.

The Paradox Estate also includes an upstream business which is simultaneously being onward sold to American Helium Holdings LLC and its affiliates ("American Helium"), a qualified operator in the region and affiliate of one of the major shareholders of GNG.  According to the Chapter 11 documentation, the upstream element of the business spans 119,00 acres in the helium-rich Paradox Basin in South Utah and Colorado and includes 39 Bcf of net natural gas resources with significant upside both from exploration and the deepening of existing wells.  Ascent and American Helium are in discussions regarding Ascent's potential involvement in the upstream portfolio which will be the subject of a further announcement.

The Chapter 11 documents on the Paradox Estate can be found at https://www.donlinrecano.com/Clients/prl/Index

Board Changes

To further reinforce Ascent's local helium operations / markets expertise and with a view to both cement the relationship and alignment between the parties and to strategically align the interests of Ascent and GNG, the Company intends to appoint Mr David Bullion (CIO of American Helium and CEO of GNG) as a non-executive director of the Company, subject to the completion of regulatory checks. David is a 34 year seasoned oil and gas professional, who has previously held senior positions at BP during a 20 year career there spanning the globe, before becoming the CIO of American Helium and now CEO of GNG Partners LLC.

The Company also intends to appoint Mr Edouard Etienvre as an independent non-executive director, subject to completion of regulatory checks. Edouard is an energy and natural resources finance and commercial executive with over 18 years of experience in the oil and gas sector. He is a Non Executive Director of ASX listed ADX Energy Ltd.

Mr Malcolm Graham Wood and Mr Marco Fumagalli, both non-executive directors of the Company have advised the Company of their intention to step down from the Board and will leave the company at the end of May 2024.

New Funding, Director Dealings and Director cash for equity swap

In support of the Company's shaping move into the onshore US gas and helium space, the Company has raised in aggregate £555,000 through the issue of 24,130,435 new ordinary shares of 0.5p each in the Company ("Fundraise Shares") at a price of  2.3 pence per new share ("Issue Price") with a one for three warrants attached exercisable at 140% of the Issue Price at any time in the next four years.

The Issue Price is equal to the closing bid price on 22 April 2024, being the latest practicable date prior to the publication of this announcement.

The Fundraise comprises a placing of 16,956,522 new ordinary shares of 0.5p each in the Company ("Placing Shares") at the Issue Price, raising gross proceeds of £390,000 (the "Placing") and a subscription of 7,173,913 new ordinary shares of 0.5p each in the Company ("Subscription Shares") at the Issue Price, raising gross proceeds of £165,000 (the "Subscription").

In order to minimise dilution at the current share price, the Company has entered into a new US$2 million senior secured fixed coupon loan facility with institutional investor RiverFort Global Opportunities PCC Ltd, with an initial US$1 million loan amount issued ("Initial Loan"). The Initial Loan has an 12-month term, during which it is convertible at a fixed price of 3.22 pence, being a 40% fixed premium to the Issue Price. The convertible price is adjustable downwards (to a 40% premium on any future fundraise price) in the event of a future fundraise below the Issue Price. The Initial Loan has a 15% fixed coupon attached to it, payable on redemption, and has warrants attached equal to 33% of the Initial Loan amount exercisable at 140% of the Issue Price at any time during the next four years. The Company has the option to extend the Facility beyond the initial 12 month term for a further 6 months, at 1.5% interest per month. If the Company chooses to extend the Facility in this manner, then after the initial 12 month term has expired the Lender will be entitled to convert any principal or other amount outstanding into new ordinary shares of 0.5p each in the Company ("Ordinary Shares"), in one or more tranches, at a price equal to a 10% discount to the lowest VWAP in the ten days prior to conversion. There is a 7% drawdown fee plus transaction closing costs which is payable in new ordinary shares of the Company at the Issue Price, a total of 2,962,426 new ordinary shares of 0.5p each in the Company ("Loan Shares") will be issued. The Loan is secured by way a company debenture and includes customary loan terms which include typical warranties and terms including events of default.

The Fundraise and the Initial Loan will be used to fund the investment into GNG alongside the Company's ongoing costs to build out the new strategy.

C4 Energy Limited, a company where Andrew Dennan (CEO of Ascent), James Parsons (Chairman of Ascent) and Marco Fumagalli (NED of Ascent) each have a 25% beneficial interest, has subscribed for 2,173,913 Subscription Shares at the Issue Price. Future trading decisions relating to C4 Energy Limited will be taken independently by the sole Director of C4 Energy Limited, who is not associated with the Company.

James Parsons, the Chairman of Ascent, has elected to receive a portion of his salary for the next six months in the form of new ordinary shares in the Company ("Salary Sacrifice Shares").   Accordingly, 678,261 new ordinary shares of the Company (reflecting the net of tax balance) have today been issued to Mr Parsons at the Issue Price. 

The arrangements with C4 Energy Limited and James Parsons, set out above, constitute related party transactions under the AIM Rules. Malcolm Graham-Wood and Jean-Michel Doublet whom are considered independent directors for these purposes, consider having consulted with WH Ireland, the Company's nominated adviser, that the terms of these arrangements are fair and reasonable insofar as the Shareholders are concerned.   

Following the subscription by C4 Energy Limited Andrew Dennan is beneficially interested in 2,683,478 Ordinary Shares, representing 1.13% of the enlarged issued share capital of which 543,478 Ordinary Shares are indirectly held through C4 Energy Limited. James Parsons is beneficially interested in 1,722,639 Ordinary Shares, representing 0.72% of the enlarged issued share capital of which 543,478 Ordinary Shares are indirectly held through C4 Energy Limited. Marco Fumagalli is beneficially interested in 543,478 Ordinary Shares, representing 0.23% of the enlarged issued share capital of which 543,478 Ordinary Shares are indirectly held through C4 Energy Limited.

MBD Partners SA ("MBD"), a substantial shareholder in the Company, has subscribed for 5,000,000 Subscription Shares, pursuant to the Subscription. This subscription constitutes a related party transaction under the AIM Rules as MBD currently holds approximately 20.54 per cent. of the Existing Ordinary Shares and is therefore a "substantial shareholder" under the AIM Rules. Malcolm Graham-Wood and Jean-Michel Doublet whom are considered independent directors for these purposes, consider having consulted with WH Ireland, the Company's nominated adviser, that the terms of MBD's subscription are fair and reasonable insofar as the Shareholders are concerned.

Furthermore the Company is also issuing 1,743,348 new ordinary shares of 0.5p each in the Company ("Arranger Shares") as deal fees to an arranger of the GNG investment transaction. The Arranger Shares are subject to a 90-day lock-up period. The Company is also issuing 1,017,391 broker warrants in relation to the New Funding exercisable at the Issue Price at any time over the next three years.

Admission and Total Voting Rights

Application has been made to the London Stock Exchange for the Fundraising Shares, the Arranger Shares, the Salary Sacrifice Shares and the Loan Shares (together the "New Ordinary Shares") to be admitted to trading on AIM ("Admission") and it is expected that such Admission will occur at 8.00 a.m. on 13 May 2024. The New Ordinary Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of the New Ordinary Shares, respectively and will otherwise be identical to and rank on Admission pari passu in all respects with the existing Ordinary shares.

Following Admission of the New Ordinary Shares, expected to occur at 8:00 a.m. on 13 May 2024, the Company will have 238,122,961 Ordinary Shares in issue, none of which will be held in treasury. Accordingly, the total number of voting rights in the Company will be 238,122,961 and shareholders may use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

Enquiries:

 Notification and public disclosure of transactions by persons discharging managerial responsibilities and persons closely associated with them.