Monday, August 20, 2007

ERHC Share-Price Gain Probably Will Not Last

There's probably nothing I can say that will please all ERHC Energy investors - and one of the things I can't say is that the stock is headed straight up from $0.295, where it ended on Friday. Or, I should say, is not headed up for long.

Two days after the news that CEO Sir Emeka Offor had resigned his posts - but held onto his stock - and sent it leaping from an $0.215 Bid to $0.295, the company has not yet announced its replacement for the irreplaceable Offor, an incredibly astute former truck driver whose tiny firm wrestled away some of the world's most sought-after oil concessions from the biggest oil companies in the world.

And for better or worse, the U.S. Attorney has not yet obtained indictments from a Federal Grand Jury looking into allegations that he bribed the President of Sao Tome and possibly others to gain our lucrative oil concessions in Blocks 2, 3 and 4 of the Nigeria-Sao Tome and Principe Joint Development Zone.

Personally, I think the stock will start sinking again, even if it trades in an upward rush later this morning (I'm writing at 3:12 a.m. EST, 6 hours before the markets open). Whether it takes a day or two weeks, the weight of the the possible pending indictments will continue to exert their gravitational effect on ERHE, probably pulling it back down to the $0.245 level by next Friday.

Painful to think about, isn't it? But not to worry.

I believe that once the indictments are handed down - if indeed they ever are (and dragging them out is the U.S. Attorney's clever strategy) - the stock can seek new levels that are unconnected to the historic price since 1999, when it was around a dollar a share (it was at $6 a share as Environmental Remwediation Holding Corp., its predecessor Colorado entity, back in 1996, but that's another, duller story).

But what if the indictments never come? How long will it take investors to feel confident enough to move the price back up to the levels we enjoyed after the concessions were granted?

And will there be any fallout from Nigeria or Sao Tome if the indictments do come down, now that Sir Emeka Offor is no longer at our helm?

Well, as to the first two questions, the legal issues can weigh down the stock for as much as another year, I think, at which point the foot-dragging would probably be interrupted by a judge, if an honest one can be found in Texas.

As for the second, whatever Sir Offor's current role with the company, so long as he and First Atlantic Bank are substantial stockholders - together they now control slightly more than 51 percent of the outstanding shares of ERHC - there will be no substantial change in the posture - which has been characterized by outrage and indifference, depending on the way the issue is presented - of either government.

No cooperation is likely to be forthcoming from either country, and no evidence is likely to support the U.S. Attorney's effort on behalf of ExxonMobil and ChevronTexaco to redistribute our (potential) wealth. However, Anadarko will be slightly stronger in the event of a Democrat taking the White House, as they are a source for Energy Department appointees, and they may be able to extend the various "investigations" into 2009 and beyond, or until ExxonMobil or Chevron get our rights, which is the goal of the entire charade.

I do have some self-interest here - I own 15,000 shares and last week hoped to buy 200,000 more at $0.245 but was frustrated by the timing rules at E*Trade.
Therefore, I am hoping that the price will sink four or five cents and that I can buy the stock more cheaply.

Yet that is also my expectation; I have seen this stock rise and fall a dozen times, and it seems to me that absent important news about the new CEO, we have no particular rerason to expect a share-price improvement until we begin drilling in 2008. Any old CEO is not going to make much difference; a great one might.

This may outrage those who would boost the stock to get rid of their cheap shares, or disappoint those who have purchased shares at a higher price and are waiting to see some green in their portfolios, but it's my best guess that the stock will slowly sink back to $0.24 or so. I can't guarantee that I'm going to spend my $50,000 at that level - especially if there's no news about the SEC case - but I still like our prospects a whole lot.

This morning, take a look at the share price at the opening, and then take a look at 10:30 a.m EST. If we get an announcement about a new CEO, there may be an additional spike, perhaps worth three or four cents at the close, but failing that the share price will likely turn downward around 10:30 a.m. and dip below the open.

Write me at if you have a different perspective.

FOLLOW UP (08/21/2007):

I was wrong about the stock's behavior on Monday, when it traded up to $0.35 Ask (momentarily) and closed up $0.02 at $0.32. Today, however, my general impression was proved right when it traded back to down to $0.26 Bid and $0.24 Ask. As I write this, it's 3:28 p.m. EST here in Florida, and the bid is $0.265 and the Ask is $0.27. Volume is under 500,000 shares after the big spike to 1.4 million yesterday.

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