Saturday, April 29, 2006

An Urgent Note From Doc: Offor Has Carved A Deal Of 'Truly Extraordinary Magnitude'; A P.S. Is Added

One of our two reliable African informants, Doc, has a follow-up today to his message on Wednesday (which arrived Tuesday). Again, however, I did not see the message until 4:13am Saturday morning, as I write this, but I am posting it immediately. The message arrived at 12:18:13pm Friday (Note: A P.S. to this first note arrived Sunday and appears below, after the Friday post):

Dear Mr. Shea,

First, just one small but amusing correction about my last email to you: it was sent April 25 at 1:59 PM my time, which is why I wrote "about 7 AM your time". If you were *West* of me I would be living somewhere in the middle of the Pacific Ocean!

On March 6, I wrote "Mr. Shea, please keep in mind that it is only *one* possible scenario in a very tangled web of power and control with half a trillion dollars at stake, and possibly much more." We now know that the value of O&G in the JDZ is most certainly on the "more" side. For the past six weeks the web has been slightly "untangled" - as I had announced, at least two of the smaller indies have sold out. Note who they sold out to... it was most likely all pre-arranged.

Looking further back, if things had not gone Chief Offor's way with Pioneer, Devon or Noble (which proved true) or even Addax (although this was much more unlikely; again, their CEO Mr. Gandur was born in Egypt and "knows the African ways"), two of my sources had told me that he would simply turn to the Chinese. Why? First, the Chinese have been courting both Aso Rock and a number of Nigerian businessmen for *several years*.

Many important things were discussed during President's Obasanjo's visits to China in 2005 and culminated with *very* strong activity in the fall. And second, right around the same time Chief Offor was being very cordial with Chinese oil representatives - and as you may have surmised, he is not known for being much of a cordial man. In any case, the recent developments seem to completely confirm my earlier information.

On March 20 I wrote:

"*Everything* I have heard *confirms* the mammoth discovery by operator CVX at the edge of block 1, the one I referred to - and gave the exclusivity to your blog - on March 6. Expect, however, that CVX will also use every trick in the book to minimize it and disclose as little as possible to the JDA and to outsiders, at least in the near future."

While this has proved abundantly true, I must say I am absolutely shocked that six weeks later Chevron apparently still has not released to their shareholders even the smallest bit of factual information on this gigantic discovery. Are they not required to do so by law in your country?

Regardless, the information is filtering out. Negotiations have been intense, especially between mid-March and mid-April and from what I heard again this Friday morning, are supposed to be concluded "by month's end at the latest."

What should Chevron "get"? I would venture to say a very large large amount of oil that should look quite good on their Reserves List, but *NOT* the lions' share as far as the JDZ as a whole.

I would expect them or Exxon to go to plan B and absorb Anadarko by year's end in order to somewhat save face for America and show a higher overall percentage in the GOG. It will still be a very poor showing compared to Europe's and China's.

What should ERHE "get"? Whatever the final details, it is very obvious that in the current energy crisis context, and with the patient, clever help of very high-ranking Nigerian and Chinese officials, Chief Offor & Co have carved a deal of truly extraordinary magnitude. I do not know when or in what form the final deals and drilling schedules for each round 2 block will be made known, (official? leak? probably the latter from within one of the companies) but it is now clear that it could not have been this week with Big American Oil releasing already enormous profit reports. Perhaps that was the real reason. I expect that the news will come, as you Americans like to say, "out of left field," that is to say, probably anytime starting Monday.

In the Spirit of Respect and Friendship,


I got a follow-up to the first note yesterday, and although it references a P.S. below, there was none in the orginal message.

Dear Mr. Shea,

I have been on the road again and I just now had a chance to look at your Website on this Sunday nite. For some reason the Post Scriptum of the last email I sent you on April 28 vanished. I am not sure what happened, but here it is again.

PS: Assuming the Chinese take a significant stake in ERHE, at what price level would that be, and how would this happen? These are legitimate questions at this point in time.

As to the former, I would say that the $8-9 per share I had conservatively advanced in a previous email that analysed share price would still stand - please be so kind as to re-post this for your readers. I am between airports and I do not have a copy of it right now, I believe it was sometimes in early March.

One should adjust these figures up (presumably) or down as per one's own interpretation of what has transpired since, of course. As to the latter, it is much a more difficult question, and as a businessman myself I am sorry to have to say that the Brandhuber era has brought no sign whatsoever of changes in the company's secretive ways. I can only conclude that the Offor clan is still completely in control of all PRs and such.

As a result shareholders would be wise to keep a close eye on their portfolio. Looking at past history, what a trusted advisor says is most likely to happen is that those who did favors to Chief Offor will know ahead of time when the Chinese deal will *officially* be in place and released. The price will most likely experience a sudden and enormous increase and I would expect them to then immediately sell very large amounts of shares to realize the profits they have long been promised. Whether the new share price would withhold such an assault is anyone's guess and could also largely depend on a true, detailed business plan being announced or not. Again, I do *not* know when this might happen; it could be Monday morning, or in weeks or months.

I would like to add one new thought if I may. Some, both in Nigeria and America, seem to want to make the current situation far more potentially conflictual than it really is. It is not all just about big money, it is also about finite amounts of resources.

I would urge people to remember three things. First, both Mr. President and Dr. Daukoru have stated many times that they want to reshuffle the cards so that Nigeria
can proudly develop its own O&G industry. *They* are holding the key cards and I am quite certain that they will have their way - China understands this and has brilliantly played along, America doesn't.

Second, regardless of post obo-1 negotiations the GOG's mammoth field(s) will translate into mammoth revenues for *all* parties involved. But this planet is running very short on oil and finds of this magnitude do change a lot of things (look at how life has changed in Qatar or Saudi Arabia over the last 50 years) and little could be gained by Chevron and Exxon keeping with their usual arrogance and disastrous one-sided ways of doing business.

And third, as a Nigerian-owned American company that may very soon also be partly Chinese-owned, ERHC Energy *may* consequently become the poster child for international cooperation betwen Africa and superpowers in the energy sector. The company has the making of such a new model, we shall know fairly shortly if it is just one man's vehicle for extreme enrichment or if higher powers decide that it should live up to this historic opportunity.

On another note, I would like to kindly remind your readers that it was *after* Mr. Shea smartly asked if it would be alright with me to simplify my complicated initials into "Doc" that I agreed and signed my emails accordingly. It would be very unwise of me to sign my name, and I would dare say that with the exception of perhaps a few of your African readers no one could pronounce it correctly anyway.

In the Spirit of Respect and Friendship,


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