Saturday, April 01, 2006

Meridian, Once Lionized, Is Bashed On I-Hub

The poster who just a month ago galvanized interest on the ERHC Energy message board on investor-s Hub - which is controlled by Norma Reynolds (chcr), the accountant for ERHC's largest American shareholder, Houston oilman Phil Nugent, is now being bashed by some of the same people who lionized him a month ago.

The change of mood came as Meridian suggested that it might take two or three years or more to get the share price of ERHC up to $2, and noting that the stock would only earn investors 2.4 percent interest as against a savings account yielding 4.5 percent.

He also came under fire for pointing out that after taxes, royalties, costs and other deductions, ERHC's share of oil produced in Blocks 2, 3 and 4 of the Nigeria-Sao Tome and Principe Joint Development Zone will be miniscule, at least as percentages.

According to Meridian, whose numbers were endorseded by another accountant, magicatlast, ERHC Energy's share of the three blocks will be 1.9%, 0.90% and 1.6%, respectively.

But much of the criticism, we noted, comes from new posters who were nowhere to be seen as little as a month ago. We wonder where they all came from.

Typical of the outrage was this restrained comment from the civilized poster oilman57:

Meridian are you saying anything different today?

Why are you being disingenuous?

Three weeks ago you stated that the share price should be $2 to $3 a share the day that PSC's are signed.

Tonight you stated the the share price should be $2 to $3 dollars in 2 to 3 years.

See the difference??

More typical was this from a dimwit new poster named instructmba:

It's best not to respond to Meridiumb anymore... he is a FUDster planted to create Fear, Uncertainty, and Doubt. Here we are at 90 cents with $45.9 million of inked contracts and money in the bank... and Meridiumb telling us you can't make money in the JDZ even at $70 a barrel because the more you make the more you lose. LOL

And Spec 29 pleaded for understanding:

Fellas, I think Meridian's $2 to $3 dollar...

valuation is based on the original expected reserves in blocks 2, 3 and 4. He's not basing his numbers on a Ghawar sized field. Management's original valuation of ERHE's shares was $2 to $3. The current thought is a "possible" valuation of around $9.

Give the guy a break!

And Frank Puleo, the Brooklyn investor known as walldog0, teried to explain him:

Meridian's figures appear to be correct.....

as he breaks down the costs,tax, profit oil,etc,etc. You really can't argue with his math on those accounts.

Now, everybody seemed to be asking him the value of ERHE,and what the share price should be, or ERHE's future valuation....and I sensed that particular area was not his expertise and he was uncomfortable responding to those questions.

Once you figure in a P/E ratio, on royalty income, you get a much better picture of share price,imo...and then you can see ERHE's real value.

ERHE will be valued on how much oil profit it controls over a 25-35 year basis...thus the P/E multiplier.

You don't buy a milk cow for $3...because thats how much milk you can squeeze of of it in a day.

Another new poster, the blithering idiot tryot, blamed it all on me:

Watch the blog...

Meridian is smellin of JS tactics.

A Meridian attempted to explain himself:

OK but then roughly.

All contractor basis

Oil produced and saved = 100%

minus royalty = 5%

Available crude oil = 95%

Minus Taxes (roughly) = 47.5%

Profit oil = 47.5%

Profit oil is shared 20% contractors and 80% jda (after contractor recoverd 2.5 times their costs)

So (all) contractor profit oil shares is 9.5%

ERHC share of 9.5% is times 22%,10%, 17.7%.

The bottom line, from a new poster named LowFloatGoat:

Based on the model PSC and starting from 100%, subtract 5% royalty, 25% cost oil and you are left with taxable oil.
(I'm not sure what the cost oil percentage is)

50% of taxable oil goes to JDA
50% of taxable oil is profit oil.
70x50% = 35.

The JDA gets 20% to 75% of profit oil based on the R factor.
That leaves a range for the companies to split of:
35x25% to 35x80% = 8.75 to 28.

Apply ERHE's share for each block to that range and you end up with Meridian's "Net Entitlement":

Block 2: .22x8.75 to .22x28 = 1.9% to 6.2%
Block 3: .10x8.75 to .10x28 = 0.90% to 2.8%
Block 4: .18x8.75 to .18x28 = 1.6% to 5.0%

Prayers For Pup

Well, the Great Debate pales in contrast to the concerns of the well-known poster named Pup, whose daughter is undergoing a third surgery this morning to correct heart problesms.

OT: For several individuals who post here which I have enjoyed communicating with over the past year + - I've just been informed from my Wonderful, Beautiful 22 year old daughter (in San Antonio) that she has to undergo a third surgical procedure to repair her heart on the 13th. I will be traveling with the rest of my family next week to be with her in the US. I'd certainly appreciate your thoughts and prayers for her.

Our prayers are very much with her and your family, Pup.

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