ERHC only gets a brief mention at the end of the article in connection with alleged bribes paid to Sao Tome officials, but the equity we have won in five blocks goes unmentioned.
It is unclear how much or whether the mention will boost share price, which zoomed $0.03 to $0.775 in last-minute trading. While any publicity is usually good publicity, the sole mention of ERHC in connection with the Sao Tome attorney general's probe and his incomplete request for SEC and FBI investigations in that a response from those agencies was never reported - is touchy stuff for the Journal's audience.
Sinopec's Block 2 win is mentioned, but the fact that it is in a consortium with ERHC is not. But again, it is political, not financial, commentary. Addax, which is in Blocks 2, 3 and 4, is not mentioned at all. It will be hard for investors reading the story to make sense of it.
Just below is the latest on the expected Chevron annuncement; two mentions of it are separated by most of the story. The entire story follows these brief excerpts:
ANY DAY NOW, Chevron Corp. is expected to disclose the results of an
exploration well the company drilled off the West African coast, perhaps opening a new oil frontier and unleashing a gusher of revenue in the tiny island nation of Sao Tome and Principe. ...
... Chevron said it finished its first exploration well, called Obo-1, last week and is currently appraising samples from the well to determine if it contains commercial quantities of oil.
And here is the full story from tomorrow's editions:
DOW JONES) DJN: WSJ(3/23) Africa Experiments With Oil
DJN: WSJ(3/23) Africa Experiments With Oil
(From THE WALL STREET JOURNAL)
By Chip Cummins
ANY DAY NOW, Chevron Corp. is expected to disclose the results of an exploration well the company drilled off the West African coast, perhaps opening a new oil frontier and unleashing a gusher of revenue in the tiny island nation of Sao Tome and Principe.
A significant discovery would further underscore the growing importance of African oil supplies at a time when President Bush has vowed to cut U.S. reliance on the volatile Middle East. But it would also be the first real test of a sweeping revenue-management law passed by Sao Tome lawmakers hoping to avoid the so-called oil curse, whereby new oil wealth fails to improve living standards and instead leads to more poverty.
Aside from questions of simple fairness, how resource wealth is shared can greatly affect the reliability of energy supplies. The instability that stems from inequitable revenue allocation can jeopardize the flow of oil, as evidenced by recent events in places as disparate as Ecuador, Nigeria and the Caucuses.
Sao Tome's measure, signed into law in 2004, requires transparent accounting of oil revenue and establishes an investment fund for a chunk of the money for the day when oil inevitably runs out. The World Bank, the International Monetary Fund and experts from Columbia University all helped to craft the measures.
"We're certainly hoping they'll be a good example for the region," said Dorsati Madani, the World Bank's country economist for Sao Tome. There is no guarantee Chevron will find oil this time. But industry experts agree the acreage off Sao Tome's coast holds huge potential. In addition to Chevron, top-tier oil companies such as Anadarko Petroleum Corp. of Houston and China Petroleum & Chemical Corp., or Sinopec, have won exploration rights.
That has international development officials banking on the former Portuguese colony as a model for how countries can avoid the corruption and mismanagement that newly discovered oil can often bring -- especially in Africa, where petroleum riches have been squandered for decades in places such as Nigeria. Sao Tome's two principal islands are home to about 160,000 mostly poor inhabitants living amid dilapidated cocoa plantations, lush hills and pristine beaches. The country had a gross national product of just over $60 million in 2004, according to the World Bank.
Scrutiny of Sao Tome will be especially intense after the failure earlier this year of similar revenue-management measures put in place in Africa's newest oil player, Chad. That country, amid a growing rebellion and government cash crunch, reneged on a World Bank deal designed to funnel oil revenue into development.
Even if Chevron does find oil, significant government revenue wouldn't start pouring into Sao Tome for several years. So far, the nation has taken in just about $50 million of signing bonuses paid by the consortium led by Chevron.
In 2001, Sao Tome signed a deal with Nigeria, a giant oil producer to its north, setting up a joint-development zone in the deep and oil-rich waters of the Gulf of Guinea. Nigeria and other Western Africa countries such as Equatorial Guinea have attracted billions of dollars of investment in recent years for offshore oil development in nearby waters.
As part of the deal, Sao Tome gets 40% of all government revenue from the area, with Nigeria getting 60%. The countries set up a Joint Development Authority to handle licensing. A consortium led by Chevron, and including Exxon Mobil Corp., won the bidding for the first exploration block. The group started drilling earlier this year.
Chevron said it finished its first exploration well, called Obo-1, last week and is currently appraising samples from the well to determine if it contains commercial quantities of oil. This month, Sao Tome and Nigeria signed new exploration agreements with a handful of other companies, including a consortium co-led by Sinopec, which agreed to hand over a signing bonus of $71 million to the development authority. A third successful consortium is led by Anadarko.
But the road to development is already pocked with potholes. Sao Tome's relations with Nigeria -- and with some of the oil companies involved in recent auctions -- have been tense at times. Sao Tome and Nigerian officials publicly squabbled over some details of the recent pacts, delaying their signing. But now "there is no problem," said Deolindo Costa, Sao Tome's minister of natural resources.
Sao Tome's attorney general also launched an investigation into the most recent bidding rounds and alleged the process was "subject to serious procedural deficiencies and political manipulation," according to a report by his office.
In the report, the attorney general singled out Houston's ERHC Energy Inc. for special scrutiny, alleging it may have provide bribes to hold on to longstanding exploration rights it won in the late 1990s. "There is no basis to any of the allegations," said Walter Brandhuber, ERHC's chief executive. ERHC shares trade on the OTC Bulletin Board, but its majority shareholder is a Nigerian oil concern. Sao Tome's attorney general forwarded the report to Nigerian authorities and to the U.S. Securities and Exchange Commission and the U.S. Justice Department. It isn't clear if any of these agencies have taken up the matter.
(END) Dow Jones Newswires
March 22, 2006 19:41 ET (00:41 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
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