Barry Morgan: ERHC & Cos. Get Blocks 2 and 4, And 35 Percent of Block 3; World Bank Advised JDA On Awards

There's great, solid news from Barry Morgan at UpstreamOnline, who has been silent for two weeks until the paroxysm of political puerility passed in Sao Tome.

Morgan, a reliable veteran of the oil industry press, says ERHC and its partner Noble Energy have captured 70 percent of Block 4 by promising to fast-track three wells in a year as against Anadarko's vow to slow-track one well in three years.

The World Bank is said to have approved of the outcome in Block 4 and two other key blocks.

In Block 2, ERHC and its partners Devon Energy and Pioneer Natural Resources win 70 percent, Morgan said, while in Block 3 ERHC's patience and the same partnership is rewarded with 35 percent of the block.

The outcome should please even the most dispirited investor, and ERHC On The Move predicts it will quickly move the stock above $1. I still see $1.28 as a bottom post-awards price, and will settle on $3.58 as the top (and I believe the price will rise to that number from Monday all the way through Thursday morning).

Here is the new Barry Morgan story, with thanks again to Ruby1100:

New fish on hook for JDZ awards

The second licensing round in the Joint Development Zone (JDZ) administered in disputed waters in the Gulf of Guinea by Nigeria and Sao Tome&Principe is finally drawing to a close.

At stake are five deep-water licences for blocks 2, 3, 4, 5 and 6 of varying prospectivity. It is understood all will be awarded before the end of this week.

The Joint Ministerial Council is constrained by bilateral treaty provision to conclude the round within a set period and this has long since expired, according to Nigerian officials. Abuja is keen to see the gridlock resolved.

Equity stakes in the three most attractive blocks have been agreed and some minor details are being finalised for the less popular blocks 5 and 6, but latest indications are that the two presidents Olusegun Obasanjo of Nigeria and Fradique de Menezes of Sao Tome are agreed on the main players.

Nigeria in particular is keen to see the operatorship of Block 2 go to US explorer Pioneer Natural Resources. Pioneer bid with Devon Energy and US minnow ERHC Energy, linked to Nigerian indie Chrome Energy, which also bid directly and already enjoyed preferential equity rights on this and several other blocks.

The Pioneer group as a whole will likely be awarded 70% of Block 2 with 10% going to Bermuda-registered Equator Exploration (EEL), recently listed on London's Alternative Investment Market, which also enjoys entitlement to a share of licensing fees from JDZ seismic data sales under a joint operating agreement with Petroleum Geo-Services. Another 20% will be awarded to two unidentified Nigerian indies.

An operating stake of 50% in Block 3 will be awarded to Anadarko Petroleum, with ERHC landing 35% and EEL 10%. Spare equity on the block will go to a Nigerian indie.

Noble Energy, in partnership with ERHC, also fought hard for Block 4 where Noble has now convinced the Joint Development Authority that its drilling budget and clear commitment to three wells outplays Anadarko's one-well bid. The Noble/ERHC tie-up will likely be rewarded with a 70% stake, with Noble operating and a minimum of 20% awarded to local indies.

It is understood the PSCs will bear a strong resemblance to terms signed earlier this year for Block 1 with operator ExxonMobil, Chevron and Dangote-Energy Equity Resources. All players want to drill without delay and even the World Bank is understood to have advised Sao Tome that the above line-up was the best commercial deal.

Hardest to convince was Houston-based Patrice Trovoada, the son of former Sao Tomean President Miguel Trovoada and until last week Menezes' Special Adviser on Oil Affairs. Patrice Trovoada was ousted from office last week after pushing hard for EEL and its partner ONGC Videsh to operate Block 4, but to no avail.

Meanwhile, Sao Tome's Natural Resources Minister Arlindo Carvalho tendered his resignation this week, citing pressure over delays in concluding the round amid allegations of "irregularities" in negotiating awards.

Photo caption: Catch of the day: Nigeria and Sao Tome are set to reel in big exploration players on blocks to be awarded under the second JDZ licensing round. Photo: ELIN HOYLAND