Well, of course we are very pleased to have made this agreement with San Severina. We believe it’s an extremely positive step and this gives us the ability to significantly expand outside of our core business area in Central and Eastern Europe. The concept of the asset management agreement is to leverage off our expense within our traditional business.
Although we plan to continue our traditional business very much as before; our traditional business is operated and managed projects with a careful balance of production, appraisal, redevelopment and exploration projects and where we have the majority interest, or the largest equity part of, and all are located in Europe. The new asset management business, on the other hand, will concentrate more on minority interests in producing or near producing projects preferably with exploration upside. Ideally we would have about a quarter of the equity, although we do have the possibility to provide partial debt finance under that frame agreements that are in place with San Severina. Projects in the asset management business would generally be outside of our core areas.
In practice, how will the asset management business work? I’m thinking from the point of view of how the projects will be chosen, what are the criteria for inclusion in the asset management program and is there any scope for the inclusion of Ascent’s existing projects?
We expect that the projects will originate both from our own network and from our contacts within the oil industry, but also through San Severina’s contacts which are mainly financial. Once the projects have been sourced it will be our job, Ascent’s job, to assess the opportunity and to develop the investment plan and business model. Due to the complexity and the variety of the projects that we expect to see, each one will be treated uniquely and each will have a bespoke and tailored development plan. This development plan will be the basis of the investment decision that will be jointly made by both ourselves and San Severina.
With regards to Ascent’s existing projects or new projects within Ascent’s core area, San Severina will always be offered the opportunity to participate and we would of course welcome their participation.
What are the benefits for Ascent in this arrangement and will Ascent be providing additional funding towards some of the projects in the asset management program?
Is there a time scale for investing the €100 million fund and what happens once the initial 100million is invested?
The asset management program is not restricted, neither in time nor in the funds to be invested. Once the first €100 million has been invested there is definitely the possibility for more funding. Obviously some of the investments will take longer to conclude than the others so really we don’t have a time frame in mind either. And, although we are already looking at a number of opportunities, it may be some weeks before we can bring any of them to a conclusion.
So Jeremy, what is Ascent Resources current financial situation?
So, what is the future work programme for Ascent?
Probably it’s better to discuss it country by country. Firstly in Hungary: on one of our projects we have just completed a 3-D seismic acquisition in the Szolnok exploration project. This is the Endrŏd seismic. We are currently about halfway through the Penészlek area 3-D seismic. This survey is in the area around our producing PEN-104 well and in the area where there have been two other unproduced gas discoveries. Also in the same area, the area of the 3D seismic, there’s the partially depleted Penészlek Field which was produced in the 80s and is a redevelopment candidate. On our third Hungarian project, the Bajcsa redevelopment, we have just completed some laboratory tests on core samples and an operational plan should be in place in the next few weeks.
In Slovenia in the Petisovci region of the projects we are planning a new 3-D acquisition there also and also a programme of well re-entries in the first half of 2009. In the new eastern area exploration project we are constructing the geological model and we are considering a farm out for the seismic and drilling that we anticipate doing next year.
In Switzerland we continue to discuss farm out possibilities. Unfortunately one partner who was in advanced discussions with us has now withdrawn after the events of the last few weeks.
But, lastly and by no means least, in Italy we expect to spud the Gazzata-1 gas exploration well in January. This is a very important well that targets a large gas prospect in northern Italy’s Po Valley. It is to be drilled by the new Perazzoli rig. The rig has just discovered gas on the first well that it has ever drilled and is performing well beyond expectation.
The preliminary results of the seismic that was shot in the summertime in the Anagni area is very encouraging and we are now looking at future drilling possibilities there.
So all in all, a very busy year ahead and with the asset management program now underway, the possibility is for lots of news flow.
Are you still particularly keen on gas in Europe in the longer term?
I think that the profitability of our Hungarian operation just demonstrates that our original decision to concentrate on the European gas market was absolutely right. We are spending less than 1 percent of revenues as an operating cost on our currently producing project in Hungary.
Liquidity – or the lack of – is the problem, certainly on the Aim market. I think everybody has been talking consolidation for a couple of years, I think that is almost inevitable now. The question really is who goes with whom, and at the end of the day I think there will be a lot of people leaving the market as well. I think in a year’s time everything will look very, very different to what it looks like now.
Not at the moment. We did consider it a couple of years back but I think absolutely not at the moment.