Friday, January 14, 2005

Opening Hour Sees Slow Trading In ERHC; Updates Show Strong Volume, Including Large Blocks of 93K and 100,000

In one of the slowest days of trading in recent memory, only 25,701 shares of ERHC in seven trades had moved on the OTC BB by 10:50am, apparently because of concern that ExxonMobil may drop out of the bidding and that the awards promised for the end of January may be further delayed.

There is very little information coming out of the Nigeria-Sao Tome Joint Development Authority that can be relied upon to establish positions in stock issues affected by the delayed awards decisions. The JDA has been unable to fix any dates certain for awards. Why this might be so is a matter of conjecture.

Among the affected parties, ERHC investors were expecting an article to be published by the Dow Jones News Service that many hoped would boost the share price. With the uncertainty now prevailing, ERHC officials have been able to delay the story by not responding to requests for comment by the reporter, DJNS staff writer Norval Scott. With ERHC officials in charge of timing the story's release, it may never appear.

On the other hand, there has been a pattern of "bad news" appearing just before JDA announcements and ERHC developments, and also a pattern of errors in late-breaking wire service stories that affect the stock. Those are usually corrected within hours of the initial error but after a drop in share price.

The slow volume also speaks to the uncertainty over ExxonMobil's decisions regarding its two 25 percent preferential rights in any two of Blocks 2, 3, 4, 5 and 6 offered in round two. The company has apparently been put on notice by the JDA that it will not get an extension on its choices.

It is unclear if it would get any choices at all if it fails to participate in Block 1, where it won 40 percent in a bid that has not been consumnated by a contract.

Under terms of the bidding, the JDA can revoke any bidder's rights at any time with little recourse. Aware that many other blocks in nearby regions and in Libya are also on offer, the authorities would presumably be reluctant to dampen its image by doing so.

Earlier this week, the Nigerian government's national oil agency, the NNPC, revoked rights to 63 blocks that are currently producing more than $1 billion of oil annually. Not all of the blocks were being explored, however.

The 63 blocks, leased by Royal/Dutch Shell, ChevronTexaco and smaller indigenous and foreign companies, were subject to similar contract provisions, including one that they may be revoked after 10 years.

Royal/Dutch Shell has called on Nigeria to reconsider its action, which was likely to have rattled oil company officials around the globe.

Update By 11:28am, volume reached 182,601. More than 20 trades were recorded. The share price fell two cents to $0.45 after opening up one cent at $0.47, and at 11:28am was at $0.47, a cent above yesterday's close following one purchase of 35,000 shares.

Update No. 2, 11:55am: A regular poster on the RB ERHC message board, swinging ---k, claims in a post at 10:54am this morning that a meeting in Abuja yesterday afternoon between JDA chairman Carlos Gomes of Sao Tome and a "major" oil firm represented by his attorney source, Nigerian President Olusegun Obasanjo (identified only by his initials) strode into the conference room and began to berate Gomes for "the unprofessional manner in which these auctions are being run." It is unusual for attorneys to disclose information gleaned from meetings of their clients with government officials without permission. The outcome, the poster said, did not result in a different timetable for awards, which remain scheduled for "the end of January." The share price moved up one cent, from .45 to .46, after the post.

Update No. 3, 1pm EST: Volume and share price has climbed to 458,735 and $0.47, respectively. Whatever uncertainty may have bothered investors this morning has apparently been overcome.

Update No. 4, 1:25pm EST: Three blocks, one of 100,000 at $0.46 and two of 93,000, at .469 and .465 respectively, moved between 1:24 and 1:26pm. Volume at 1:31pm EST stoodat 757,235, and the share price at $0.47.

Update No. 5, 8:59pm EST: Rumors are flying that ERHC has won Blocks 2 and 4 in the Joint Development Zone. No confirmation yet.

Update No. 6: We were startled by these trades late yesterday morning our time on the London Exchange of our rival for Block 2, Equator Exploration (EEL):

16:36:53 15-Jan-2005 100.74 1,170,000 1,178,704.80 Single protected transaction
16:35:01 15-Jan-2005 99.75 1,000,000 997,500.00 Single protected transaction
16:22:34 15-Jan-2005 100.00 100,000 100,000.00 Single protected transaction
16:21:48 15-Jan-2005 100.90 1,500 1,513.50 Ordinary Trade
13:13:18 15-Jan-2005 100.90 1,500 1,513.50 Ordinary Trade

Note that even after two blocks of 1 million shares traded, the price was only one pence higher, and it dropped on an earlier trade of 100,000 shares, then rose on the last purchase of 1,170,0000 shares. The trades are a clue to the outcome of the awards, we think. I also note the date of the trades is given as 1/15, inexplicably.

This data is based comes from the London Exchange's AIM site:


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