Afren obvious target for T5 reverse takeover – T5 MD
T5 Oil & Gas, the Africa-focused exploration and production firm, is seeking a reverse takeover, and views Afren [LON:AFR] as a possible target, T5 Managing Director Gerry Sheehan said.
T5, which has hired Hannam Partners to advise on the potential deal, has short-listed up to four companies that it is in discussions with; all are distressed. The firm hopes to finalise a deal within the next three months, Sheehan added.
“Afren is an obvious target. It has a lot of strong assets, although they would take a bit of fixing. Afren is on everybody’s list,” he said.
Hit by a series of scandals, Afren recently fired its CEO and COO over the receipt of unauthorised payments. Its share price was further dented earlier this month when it announced it has overestimated the oil reserves at its licenses in Kurdistan. The company’s share price has plummeted by 83% in the last 12 months. On Monday afternoon its shares were trading down 9.09% at GBP 0.27, giving it a market capitalisation of GBP 308.5m.
On 8 January SEPLAT [LON:SEPL] confirmed it had approached Afren over a potential takeover. The group has until 5pm today, 19 January, to make an offer or walk away, unless it secures a deadline extension from the Takeover Panel. This news service has previously reported that other firms have also expressed interest in acquiring Afren.
T5, which is looking to spend up to USD 800m on the reverse takeover, is looking at firms that have producing assets of about GBP 1500bbl/day in North Africa and Sub-Saharan Africa.
T5, formed in 2013, has one asset; a 90% stake in the Louga block onshore Senegal. The remaining 10% is held by Petrosen, the Senegalese national oil company. T5’s board comprises of a number of former executives from Tullow [LON:TLW].
Last year T5 said it intended to list on London’s AIM exchange either in 4Q14 or 1Q15. The crash in oil prices, however, spurred the firm to pursue a reverse takeover instead.
“There are a lot of good companies that cannot access funding to develop good assets,” Sheehan said. “The oil price is giving lots of opportunity; there are a lot of targets that are cheap.”
T5 is also looking to reduce its stake in the 27,000-sq-km Louga licence. T5 is hoping to complete a seismic survey of the licence by the end of the first half of the year, and would like to find a partner to do this. The firm would like to reduce its stake to about 50%, and is in discussions with two companies. T5 is hoping to finalise the deal by the end of 1Q15.
T5 plans to farm down Louga again at the drilling stage, which would leave the firm with an equity stake of between 25% and 30%, Sheehan said.