Irish-led T5 Oil & Gas warns of business risk after aborted IPO

T5 Oil & Gas, an Africa-focused explorer founded by a group of Tullow Oil veterans, has warned there is a "material uncertainty" over its ability to stay in business for the next year if it fails to raise money to complete a key deal in Gabon after aborting a $45 million (€40.2 million) initial public offering (IPO) in 2018.

In spite of this, the UK-based company, led by Irishman Pat Plunkett, said in its 2018 report there was a "reasonable expectation" of carrying out an IPO or finding alternative funding in the first half of this year. The report was signed off by the board on December 18th.

“At present, valuations of quoted oil shares are extremely depressed relative to other sectors for a variety of reasons, including ongoing nervousness about the level of oil prices and the impact of climate change policies on investor sentiment,” said Mr Plunkett, who is also chairman of embattled Irish oil explorer Providence Resources and was previously chair of Tullow Oil, in the report.

“It is quite likely that sentiment will in due course recover but for T5 to avail of the immediate project opportunities, we are now looking to alternative funding models to allow the business move forward.”

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T5, founded in 2013, planned an IPO in the second half of 2018 to fund the transformative purchase of a 45 per cent stake in the so-called Owali oil permit in Gabon. However, it has so far only been able to complete on a 1.7 per cent interest.

The asset consists of one producing field pumping between 400 and 500 barrels of oil per day (bopd), two proven offshore fields with the potential to boost production to 6,000-7,000 bopd, and four onshore prospects requiring appraisal.

Strategic investor

In the T5 report, Mr Plunkett said that since the end of 2018, “we have focused our attention on securing a strategic investor to either provide a cornerstone investment or a revived IPO, or to fund T5 privately to build a much larger entity capable of attracting public investor interest in the company”.

“We have been working with one particular potential partner who is keen to enter the Africa market and who has undertaken comprehensive due diligence on the Owali asset already. We have also shown them other opportunities to allow them build a portfolio but their slow decision making has made the process very protracted.”

Mr Plunkett declined to disclose the identity of the potential investor to The Irish Times, other than to say that it had an Asian background. T5 has between 40 and 50 private investors, mainly based in Ireland.

T5's management team, including exploration director Gerard Sheehan and chief operating officer Philip Crookall, were paid only 50 per cent of their salary during 2018, with the remainder being accrued. Mr Plunkett's $134,000 salary was accrued but not paid.

Open offer

The company sought in September to raise $490,000 from existing shareholders to provide money to operate through the middle of this year. As of December 18th, it had raised $370,000 from the open offer.

T5 sold $4.45 million of loan notes at the end of 2017 that are convertible into equity in the event of an IPO or sale of the company. As neither had happened by June 2018, interest has been chargeable since then at an annual rate of 7 per cent.

The company is in technical default on these notes as it has not made quarterly interest payments since August 2018. However, holders of the notes remain supportive and have not enforced default provisions as the company continues to focus on an IPO, according to the report.