Thursday, January 06, 2005

Down Again On Good News

Even with the good news that a respected financial reporter, Norval Scott of the Dow Jones News Service, is preparing a substantial story for Monday, ERHC Energy fell again today by .015. Those adverse to good news have again demonstrated their control of the stock and (or so it seems) the RB message board.

It was a little disconcerting to see several posters regaling RB with positive messages about the DJNS interview even as the stock price slowly, slowly slipped. The high for the day was .47, where it opened, but it closed a half cent higher than its .45 low.

The story, if it is merely neutral but appears on the wire service, should generate tremendous one-day volume and then some residual heat the following day. From a neutral story I foresee a price rise over the day (i.e., excluding transient highs) of about .03, back to the vaunted and desirable .50.

While it unlikely to get any play in the print edition of the Wall Street Journal, which owns the DJNS, it may get some additional help from a limited play in the online paper, www.wsj.com. That site is only accessible via subscription, which is currenlty $75.

The other good news today is an RB post that says the redoubtable Barry Morgan is writing again on the JDZ and the awards process. Barry has tried to penetrate the veil of secrecy and confusion that permeates everything concerning the JDZ - despite its utter lack of promised transparency, even a politician can see through it - and has failed. Regrettably, this prize-winning reporter has lost credibility with many investors after predicting, wrongly, that awards would be forthcoming "in two weeks" or "a fortnight" so many times that everyone stopped believing him and Upstream Online. The paper then launched a new strategy: Let's ignore it and avoid further mistakes.

We believe that Barry Morgan is the victim of his sources, who apparently are few in number (they're hard to find) but substantial in their JDA presence. There has been a lot of speculation about his possible motives for being so wrong so many times, and I imagine if he finds it personally hurtful, he must also find it infuriating that his sources have repeatedly misled him, either deliberately - which seems to be the case, after it's happened so often - or as innocently as he has then misled us. Unfortunately, I was unable to commission a story by him for The American Reporter. I would really like to know how he feels.

After he reported that we had a bid on Block 6, which was not apparent to anyone else after the bids were opened on Dec. 15, Barry responded to my query about the comment by saying that we had preferential rights there, implying that they were essentially a free bid. He is correct about the rights, of course, and yet I cannot see the logic of the preferential rights in the absence of a sealed envelope constituting a "bid." At best, he defended a precarious position, as he should.

What will the latest Upstream news be? Probably that following XOM's sale of its 25 percent preferential rights in two blocks - likely 2 and 4 - to Devon Energy, that awards will be announced some time after Jan. 31.

Devon is one of XOM's partners in Equatorial Guinea, where both - along with our prospective partner Noble Drilling and also Marathon Oil, whose operations there until recently were steered by ERHC's new president, Ali Memon - are under investigation by the U.S. Senate for allegedly bribing the country's president and his family members and close associates.

Ken Silverstein of the Los Angeles Times recently did a substantial piece on that situation for the Times that drew little notice from the RB crew. If indictments follow the the Senate hearings, we may experience some fallout from the our association with Devon and Noble Drilling, which are otherwise fortunate.

I am expecting a conditional awards announcement on Feb. 5 (i.e., after the market closes on Friday, Feb. 4), and I again emphasize the "probably," as this is strictly my own guess). The announcement would coincide with the stockholder meeting. It would be followed (in my view, again) by a second announcement two weeks later actually implementing the news of Feb. 4-5, and I expect the price to reach its highest point in the near term on Tues., Feb. 22.

And what will be the tenor of the Dow Jones story? I suspect it will be mildly positive, recounting some of the internecine squabbling that has taken place on RB and the hopes of some investors, and noting the lack of transparency at the JDZ and the sealed lips of our PR person, John Coleman - himself a substantial stockholder who last January filed a notice that he was preparing to sell 1 million shares.

There is no indication the Coleman sale took place, and he wouldn't tell you if he did (and may not have fulfilled all his filing obligations if indeed he did so), but the Form 144 he filed announcing the sale has now expired. There are no new Form 144s regarding ERHC, which insiders must file days in advance of any sale. However, an alert poster on RB noted several weeks ago, during the recent rash of SEC filings, that Coleman was no longer listed as a company officer. It is unclear whether he may now be operating as an outside consultant providing public relations services, which in some circumstances could exempt him from SEC insider filing requirements.

The coming price spike expected from a favorable awards process is always compromised by the possibility he and other insiders will suddenly unload into the buying pressure and ultimately discourage it. Coleman will be facing many tough questions on Feb. 4, when the annual stockholders meeting takes place. Answers will be sparse, I'd guess.





1 comment:

RUBY1100 said...

UPDATE ***** Nigeria and Sao Tome targeting 10 January as date for signatures

JDA gets set to sign over block-1 PSC





00:15 GMT





OFFICIALS of the Joint Development Authority set up by Nigeria and Sao Tome & Principe to manage exploitation of the Joint Development Zone in the deep-water Gulf of Guinea are hinting the delayed PSC for block-1 will be signed on 10 January.





Both governments are also hoping to reveal the winners of at least two more blocks next week.

Blocks 2, 3, 4, 5 & 6 were put up for grabs in the JDZ-II Round with JDA officials insisting that sums bid would be no more important than technical competence and work programmes submitted.

Substantial progress has yet to be made by ExxonMobil in farming out its 25% priority stake in two of these blocks, although contact has been made with both Devon Energy and Pioneer Natural Resources for this purpose. US minnow ERHC Energy, Pioneer and Devon Energy are seeking to secure joint operatorship in blocks-2 & 3, although several consortia bid higher, and the same line-up is tipped to secure block-3 where competition was more muted.

Meanwhile, the struggle over block-4 is heating up with Anadarko Petroleum insisting its $90 million bid would be paid upfront and not staggered. Its main contender is Noble, in partnership with ERHC, which is bidding just $60 million.

It is believed Anadarko's bid proposes a commitment to one well in three years as against Noble's three wells in one year, and the JDA must now decide which is more tempting.

Equator Exploration and its Indian partner ONGC Videsh also bid blocks-2 & 4 and would likely compete with Nigerian independents for a junior equity stake.

Little discussion of blocks 5 & 6 emerged over the holiday period, raising the spectre of both being held over once again for a third round later in the year.

Several companies involved in bidding acreage in the second round were not included in the JDA's initial anouncement last month. Among these were the UK's Wood Group, Mitsui, Sojitz, IMT, DNO and several indies with international connections such as Arcadia, Denham and Broadlink.

barry.morgan@upstreamonline.com