below an estimated 3 million shares.
That is good news for longs as they await three key developments:
1. The release of a Dow Jones News Service story by staff reporter Norval Scott. While no one will get to see a preview he is luiklely to note the good prospects for the stock based on its preferential rights and striong partnertships ibn the Gulf of Guinea's Nigeria-Sao Tome Joint Development Zone.
With short interest reduced and less likely to impede the flow of buy orders, investors could see as much as a $0.10 improvement from the story. The hold-up? ERHC is not responding to Scott's phone calls, leading some to believe that company insiders may be among the short-sellers who fear a price rise. Even if they are doing so, it would appear they may have taken care of business this week.
2. The signing of a Production Sharing Contract (PSC) between ExxonMobil (XOM), ChevronTexaco (CVX) and Norway's Energy Equity Resources (EEQ). While it was not addressed yesterday except generally by Dr. Edmund Daukoru, the principal energy advisor to the Nigerian government in his statement to the News Agency of Nigeria (NAN), it is believed from an earlier statement that the the PSC may yet be signed sometime next week.
Again, with short interest not playing such a major role, the PSC signing could produce a $0.03 to $0.05 gain as it reassures investors that the Nigeria-Sao Tome awards process is on track and will "bear fruit," as ERHC President Ali Memon said in early December.
3. The announcement of the winners among some 26 bidders for Blocks 2, 3, 4, 5 and 6. This is the key event of ERHC's rocky, on-again, off-again six-year journey to paydirt. It is by no means certain that all blocks will be awarded, but Dr. Daukoro's recent statement to NAN suggests they may be.
ERHC is well-positioned to win Block 3 with its partners Devon Energy (DVN) and Pioneer Natural Resources (PXD), and is solidly in the running for Block 4 despite a slightly lower bid than Anadarko, which last week said it is cutting back its buget for its drilling program worldwide.
Block 4 is a good possibility for us because our partner there, Noble Drilling, has promised to sink three wells within one year if it and ERHC win the block. Competition is toughest for Block 2, where our bid is far short of that by Conoil - but Conoil's finances were discredited this week in a scathing storm of publicity about its financial troubles.
That still leaves us well short of Equator Exploration Ltd.'s (EEL) bid, but they are a new company with powerful players who nonetheless have little offshore experience, as ERHC's partners do. It would seem unlikely from a political standpoint that ERHC would command majority positions with its partners in all three blocks, but that remote possibility remains.
On top of that, of course, are the preferential rights ranging from 15 percent in Block 6 to 30 percent in Block 2, and the possibility that ERHC may buy some of the two 25 percent entitlements ExxonMobil is reportedly trying to farm out to other operators in any two of the five blocks offered in this second round.
The likely boost in share price from awards of all our preferential rights and one operatorship would likely be in the $0.75 range. If we get operatorship with our partners in two blocks, look for a solid $1 gain. If we get all three operatorships with our partners, however unlikely it may seem today, our share price could end up in the $3 range within two days following awards.
With my 123,000 shares now valued at $57,810 and purchased at an average of .441, I obviously would prefer to win all three blocks. In fact I am expecting to win one (Block 3), but also to get a nice surprise in Block 4.
That combination would be worth about $0.60, I think, which married to the profits from the Dow Jones story and the PSC siging, $75,000 - $80,000 ahead of my current standing.
In the event that the blocks get rebid, or an act of God or man impinges on the events in Abuja - such as a coup or an assassination, which I always fear in this violent milieu - I see the downhill slide for ERHC stopping at about $0.25.
While the former outcome may seem like easy money to some, it certainly hasn't been. I've had to stick with this stock through all manner of shocks, from the short-lived coup in Sao Tome to the decision not to award eight of the nine blocks offered last April.
On top of that have been the relentless bashers and hyped-up pumpers on Raging Bull, who collectively have not helped the share price one iota. And worst of all have been the short-sellers armed with non-existent stock, the naked short crew that has attacked the stock at every turn, but are now - we hope - on the decline.
Needless to say, i am also awaiting fourth reason to cheer: the possibly buyout or merger first predicted by the Los Angeles Times when I bought into this issue in May, 2003. There is no telling where we might go in that eventuality, but I've gone out on a limb and said our price would likely be in the $6 range shortly after the awards due to a buyout occasioned by the end of the awards process and the costly onset of exploration.
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