Saturday, June 04, 2005

ERHC 'Hit The Jackpot', Houston Chronicle Says; An Explanation Is Offered For Week's Selloff

There;s a new and very upbeat story from this weekend's Houston Chronicle by David Ivanovich, the writer whom we contacted earlier this year and persuaded to write the front-page piece that ran in early February,

The story accomplishes something very important: It tells us that the firms we partnered with and ERHC Energy ahave agreed to pay much higher signature bonus fees than we first bid. We bid $57 million for Block 4, which we won, but we agreed to pay what Anadarko bid, which was $90 million; likewise, we bid $50 million for Block 2 but with our partners Devon Energy and Pioneer Natural Resources will have to pay $71 million instead.

That combined $53 million in additional signature bonus fees - which will be less onerous for ERHC because its options on part of each block were bonus-free - may account for much of the the very substantial selloff we experienced over the past week. The money will have to be paid soon.

ERHC Energy has a 30 percent bonus-free option in Block 2, meaning we may have to split the remaining 35 percent, or $24,950,000, with Devon Energy and Pioneer Natural Resources, and our share of a three-way split would be $8,283,333.

Similarly, we would have to pay half of the additional 35 percent, or $31,500,000, of Block 4 we acquired with Noble Energy, which would be $15,750,000. The total ERHC Energy has to pay for Blocks 2 and 4, if this reasoning accurately reflects the circumstances, is $24,033,333.33, or roughly 36,974,358 shares at an average value of $0.65, or 40,055,555 shares at an average value of $0.60.

In addition, we have to pay 5,550,000 for our 15 percent share of the winning Block 5 bid of $37 million.

That brings our total requirement to $29,583,333, or 49,305,555 shares at an average of $0.60 and 45,443,589 shares at an average of $0.65. We probably have about 26 million shares to go, or some 10 to 25 days of trading, before the price will rise significantly - barring exceptionally good news.

The past week some 31 million shares traded. Some of them could be the 25,407,122 shares Offor purchased at market at around $0.40 each on December 21, 2004. From the SEC filings, I believe these are control but not restricted securities and can be sold freely at a $5 million profit at the current price.


If recent history is any guide, ERHC Energy will bounce sharply back from this last selloff once the news of the larger block payments has been absorbed and the cash has been raised to pay them. We should be grateful to David Ivanovich for being the first reporter to clarify this thorny issue for all of us.

Here is his story:

June 4, 2005, 11:21AM

Unknown hits offshore jackpot
Obscure local oil firm is chosen to work leases off Nigeria, São Tomé
By DAVID IVANOVICH

Houston Chronicle Washington Bureau

WASHINGTON - An obscure Houston oil company cleaned up in the bidding for some potentially lucrative blocks off Nigeria and São Tomé and Príncipe.

ERHC Energy has been awarded equity stakes in five different blocks in West Africa's oil-rich Gulf of Guinea, in waters believed to hold more than 11 billion barrels of crude.

"ERHC is now in league with the big boys," said Phil Nugent, an ERHC investor.

But the bidding process run by Nigeria and São Tomé and Príncipe's Joint Development Authority has been mired in controversy, helping to spark a political crisis in the tiny, turbulent nation.

ERHC, controlled by a wealthy Nigerian businessman, began talks with São Tomé and Príncipe's government about a possible oil deal long before other companies would give the twin-island nation a second glance.

Those roller-coaster negotiations were marked by corruption accusations, international arbitration and threats of arrest. But eventually the outfit with no experience in the offshore was granted preferential rights in the offshore acreage of the two countries' joint development zone.

Realizing ERHC could open the door to waters where they might make a blockbuster discovery, U.S. independents Devon Energy Corp., Pioneer Natural Resources and Houston's Noble Energy Corp. agreed to team up with the virtual unknown.

TIMELINE
A short history of ERHC Energy:

• 1986: Colorado-based Regional Air Group Corp. is formed. The company later evolves into an environmental cleanup firm known as Environmental Remediation Holding Corp.

• 1996: The company reinvents itself again as an oil and gas producer.

• 1997: ERHC officials explore oil opportunities in São Tomé and Príncipe, an island nation off the West African coast.

• 1998: ERHC helps establish a state-owned oil company in São Tomé and takes a 49 percent stake in the entity. What's now Exxon Mobil provides technical assistance and earns its own special rights.

• 1999: The deal collapses. ERHC CEO Geoffrey Tirman accuses São Tomé's lead negotiator of demanding bribes. The government cries "sedition," and Tirman is forced to flee.

• 2001: Nigeria and São Tomé sign a treaty to create a joint development zone. Tirman sells his stake to wealthy Nigerian businessman Emeka Offor, who negotiates a new deal. ERHC moves its headquarters to Houston.

• 2002: São Tomé's new president, Fradique de Menezes, again demands a new agreement.

• 2003: ERHC successfully negotiates current agreement. De Menezes acknowledges Offor made a $100,000 campaign contribution. A coup attempt in São Tomé fails.

• 2004: ERHC teams up with Pioneer Natural Resources, Devon Energy and Noble Energy to bid on three offshore blocks.


Source: Chronicle research
And this week, a Devon-Pioneer-ERHC consortium won a 65 percent stake and was named operator of the development zone's Block 2, while a Noble-ERHC alliance was awarded rights to explore the much-sought-after Block 4.

Devon, Pioneer and ERHC also will be minority partners in a block operated by Houston-based Anadarko Petroleum Corp., while ERHC will enjoy stakes in two other blocks.

Like ERHC, super-major Exxon Mobil Corp. had preferential rights to claim stakes in two of the offshore blocks. But the Irving-based company decided not to exercise those rights.

The bid results were controversial because the winners weren't always the parties that had initially agreed to pay the highest upfront payments, known as "signature bonuses."

Anadarko, for instance, had agreed to pay a $90 million signature bonus for the rights to explore for Block 4, while Noble-ERHC had agreed to pay only $57 million, International Oil Daily reported. The Noble-led group was then asked to submit a new bid to match Anadarko's proposal.

Likewise, the Devon-led group was asked to submit a new bid to match a higher bonus offered by an Indian oil company, Oil Daily reported.

A statement from the Joint Development Authority announcing the winners, said the winning signature bonus for Block 4 was $90 million and the winning bonus for Block 2 was $71 million.

Officials from Devon and Anadarko declined to comment. A spokesman for Noble could not be reached for immediate comment.

Stung by accusations of corruption, the Joint Development Authority issued a statement, noting: "Other details pertaining to the commercial and technical aspects, including the work program, ... were given due consideration during the exhaustive bid evaluation process."

On Thursday, São Tomé and Príncipe's prime minister, Damiao Vaz de Almeida, abruptly resigned, accusing the government of signing deals with companies "of doubtful credibility and inadequate technical ability," the Associated Press reported.


david.ivanovich@chron.com

21 comments:

Anonymous said...

Joe,
Are you proposing that the company has a trteasure trove of shares on the shelf registration that they are selling into the market, or that the chairman is selling his position in the stock so he has the cash to loan the company for the bonus options? These are both pretty far out in left field dont you think.
Dont most think that our partners are going to carry our part of the bonus for a larger part of the award.

...Joe Shea said...

I think the fact that Sir Emeka Offor transferred his shares to a company based on Grand Caymans Island relieved that company of the obligation to report sales to SEC. So the answer to your question is Yes, they have a treasure trove, and No, it's not registered. And of course, he has loaned the company money all along, and made huge profits on the interest, so I don't see why he would not do it again. I certainly do not think Noble, Devon or Pioneer are going to pay our tab for us, not on this kind of speculative deal, no. Their shareholders wouldn't stand for it.
Good question, though.

Anonymous said...

Joe,

Will the stock witness a pretty pop once Offor or Nugent or their friends finish selling to each other?

Anonymous said...

If so, then put 2 and 2 together and were could be in the middle of a private placement IMO for our share of the signature bonuses. That explains who the sellers and buyers are. JMO

Anonymous said...

Our parnters bid for addition acreage for themselves. ERHE does not owe the signature bonuses you are talking about, and Offor hasn't sold 1 share, get your facts straight before you start spewing this non-sense.

Anonymous said...

Oops I meant additional percentage not acreage.

Anonymous said...

Nugent does not give a sh-t about stock price. One of his friend lies about selling millions of shares but does nothing. Joe wrote some article about Nugents other company and his lawyer writes a letter. His friend lies about the company to make the price go down but he does nothing. Maybe his friend isnt lieing.

Anonymous said...

***ALSO THE LA TIMES ASSURED A FOLLOW UP AFTER I TALKED TO EDITOR JAMES T. MIKEALS.*** TAKE CARE EVERYONE AND I'LL KEEP YOU POSTED!

Anonymous said...

the attack dog sent out on blogland and investor hub. bring the pooper scooper. who signs your paycheck i'm jealous.

Anonymous said...

Joe,

As usual, if it weren't for your effort I'd never be reading this news out of the Houston papers. Those who bitch about someone giving them information appear to be in two classes:

(1) Self-deceived, greedy idiots who looked to you for more than just information--they wanted to be told what to do. These people are clearly fools in that they appear to think that a lone blogger can not just predict market movements but can actually affect share prices. Losers, in other words.

(2) People who are intent on the deception of the idiots above. The category one fools do things like enter market sell orders or panic at drops, all because of these sharks in category two.

Actually, I much more comfortable with the sharks. Their actions don't cost me as much as the idiots who fall for the sharks' games and actually become the ones who push the market lower.

I read on RB where someone's position was liquidation in a margin call. Sounds like he took it like a man. But, still, his margin call did some damage, if only to the psychological effect that ultimately pushed the SP lower in the market. Maybe you should recommend a couple of good books on investing to the many here who don't appear to know what the hell they're doing. I doubt if they can find them on their own.

Anonymous said...

10:02 poster,
I agree, oiljunior is a fool. He deserves to lose his money with a margin call on an OTC penny. Countless otherS probably did the same. But WE'RE GOLDEN!!!!!!

Rumpelstiltskin

Anonymous said...

A good book for oiljunior

Stock Market Basics, Insider's Guide for the Online Investor

Never put all your eggs in one basket. Tough luck oiljunior Hope to see ya soon.

Anonymous said...

oiljunior I feel for you! do another margin call! honestly...now where to go but up! sorry man! thanks for all your efforts you deserve to make some money!

Anonymous said...

If Sir Emeka is in charge of oil crafts, we should rise in share price next week. Why else would we win all these lucrative blocks?

Anonymous said...

WHAT A BUNCH OF STRANGE POSTS!

Anonymous said...

i also think gap up on monday! any thoughts joe?

Anonymous said...

The liers on ragingbull become worse with time a billion shares bought on margin calls cause the drop but they are sold after the price drop. can't be. lol

richard nixon
lol

Anonymous said...

A=B=C = $$$$

A] Nigerian EEZ
Devon Pioneer Submit Bids [known] with ERHC [not yet known]
http://ragingbull.lycos.com/mboard/
boards.cgi?board=ERHE&read=52197

The registration profile further showed that six major oil companies including Shell, ExxonMobil, Total and Agip had turned in their applications while 22 multinational independent oil companies including Occidental, ConocoPhillips, Devon Pioneer and Noble, seeking to break into the Nigerian petroleum sector have picked up bid packages.


B] Connections and Palm Grease Set
Dr Uzoigwe was recently named to the ERHC Board of Directors
http://www.erhc.com/pdfs/
ERHC%20Announces%20Appointment%20of%
20New%20Directors%20Apr%2025%2005.pdf

Dr Andrew Uzoigwe Sits on the Board of Governors on Nigerian [CPI] Center of Petroleum Information
http://www.petroinfonigeria.com/about.
html#bog

C Look for a new Participation Agreement[s] with Devon Pioneer / Noble on Nigerian EEZ

Bid Round is scheduled to end June 17th

5:30 PM

...Joe Shea said...

Prove that they will pay, Art. Would you, as a shareholder, permit your company to loan money to our company based solely on the possibility they may hit oil? What I have penciled out takes into account and discounts all the bonus-free rights, and divides the signature bonus fees remaining among the participants on an equal basis.

Anonymous said...

I would like to know where oiljunior is permitted to buy a penny stock on margin? Furthermore, why would someone get so overextended in one stock that they were not able to provide the extra capital to meet the minimum maintenance requirement.

Anonymous said...

...At least they can't short the stock on margin...then we'd be in trouble...