Wednesday, January 30, 2008

Where Are All The Sellers?

Yestersday's blockbuster announcement that Addax has set a firm date to begin drilling in Block 4 of the Nigeria-Sao Tiome Joint Development Zone was expected to start a wave of selling this morning, but just the opposite has happened. Buyers are coming in, although in modest numbers, apparently attracted by the lure of certainty at last on an issue that has long inspired doubt.

While one Investor's Hub poster suggested the share price might fall to $0.12 today, it actually jumped two cents - which can be many thousands of dollars for a large number of ERHE investors, before settiling back near yesterday's close.

The two biggest trades of the day have been an 82,000 sale literally 3 seconds after the open at 9:30:03, and then what appear to be paired buys of 15,000 and 65,000 three minutes later at 9:33:05 and :026, respectively. Four SEC Form T sales also went off in the three minutes off before the open, probably all from the same person, in two buys of 10,000 and two buys of 20,000. The buyers and sellers are likely to be the same person in at least two of these trades.

The net effect has been to raise the Ask to $0.19, slightly down from a high generated by the 65,000 buy at $0.195. What's not to like?

I contemplated selling some of my 75,000 $0.25 shares, but strong gains in Rite-Aid (RAD) leave me in the flowers for now. That stock dropped like a rock over the holidays from a high over $5 to under $2, but it fell way too far for a consumer basics retailer with lots of new stores that's just started selling a do-it-yourself paternity kit! They've bought out the Thrifty chain and closed the losing stores, so they've grabbed more revenue and dumped some downside, giving me better than a 15% gain with quite a bit yet to come.

So, poised as I was to push the panic button, I decided that with a date certain - June 2009 for drilling in Block 4 with a newly refitted Adan Abraham, the drillship, the longer-term investors who like this stock will probably stick around and I will, too.

But there remains the worry over indictments; that bears looking at. However, since my sources tell me ERHE will play no role in he Rep. Jefferson case, and that's the major play for the Justice Dept. insofar as West African oil for now, I'm not that worried. They've got as lot of FBI agents out scouring the subprime market and better minnows to fry, I think.

Certainty also has one other boon: any potential bidders for the company now have something to sell their own investors on. There's lots of oil down there,. folks, and we're sitting on it.

Tuesday, January 22, 2008

Egyptian Driller Buys 10% Of Block 4

Egypt's sixth-largest natural gas producer, which is currently producing 32,000bpd of crude, announced this morning that it has acquired 10% of Block 4 from the troubled Hercules/Centurion joint venture that lacked the money to reap the oil riches believed to await explorers in the most sought-after property in the Nigeria-Sao Tome & Principe Joint Development Zone.

The development puts drilling plans on a more secure footing, and promises an improvement in share price for companies that own an interest in the block.

ERHC Energy currently owns 26.7% of Block 4.

Here is the press release from Egypt's Dana Gas:

Dana Gas share ownership in West Africa officially approved

Dana Gas, the first and largest regional private-sector natural gas company in the Middle East, with activities in the Middle East, North Africa and South Asia (MENASA) region, announced that it now officially owns a share in one of the blocks of an oil and gas rich offshore province in West Africa's Gulf of Guinea, one of the richest hydrocarbon sources in the world.

The Nigeria-São Tomé and Príncipe Joint Development Authority (JDA) have formally approved the change in share ownership of Hercules/Centurion interest in the Joint Development Zone (JDZ) Block 4, to Dana Gas. Based upon this approval, Dana Gas currently holds 10% participating interest in Block 4.

The JDZ is an emerging hydrocarbon province with world class prospects and moderate risk, located in the vicinity of several of the deep water Nigeria giant oilfields. Block 4 covers an area of 212,000 acres (857 km²) and is situated 10 km southwest of the recently announced OBO-1 discovery. Block 4 is operated by Addax, which is actively pursuing various drill ship options to secure a slot to spud the first of three commitment wells prior to the end of 2008. Dana Gas' share of the well cost is budgeted at $6.1m.

The 2008 Budget has been approved by the partners and final approval by the JDA was granted at the Management Committee Meeting held December 11, 2007 in Abuja, Nigeria.

'This is a major development for Dana Gas in Africa,' said Rahid Saif Al Jarwan, Dana Gas General Manager. 'We are very pleased that we have obtained the approval of JDA, which will have a significant impact on our business in the African Continent.'

The Nigeria-São Tomé & Príncipe Joint Development Zone (JDZ) is an area of overlapping maritime boundary claims that is being jointly developed by the two countries. The Heads of State of Nigeria and of São Tomé & Príncipe agreed on the joint development of resources in this region, with agreements ratified in February 2001.

Dana Gas, currently the sixth largest gas producer in Egypt, has recently exceeded 2007 production goals by producing 32 thousand barrels of oil per day equivalent, which continuous to bring significant development potential to Egypt.

Reporter Says ERHC No Factor So Far In Jefferson Trial

A journalist whom I cannot name, but who is well-known to ERHC Energy investors for his coverage of the Rep. William Jefferson case and its ties to Florida investor Noreen Wilson, a former ERHC Energy executive, says that to his surprise there is no indication that the company will play any role at all in the Jefferson case.

Instead, he said, the only Jefferson-related link between Wilson and the case is through Procura, a South African firm about which little is known. Another one-time ERHC consultant is also expected to testify, but his relationship with Wilson is the probative element in his testimony, not his ties to ERHC Energy. He noted that none of the upcoming testimony, to the degree it may have been discernible to him from filings and interviews, touches on ERHC.

Earlier speculation and numerous articles in the general press led many investors to believe the Jefferson case was inextricably tied to ERHC through Wilson or others. I warned repeatedly that such specualtion was groundless, and that the company's ties to Jefferson were unsupported in any potential evidence taken from ERHC's offices late last Spring.

That estimate could change as the trial progresses, but if the ERHC matter remains severed from Rep. Jefferson's woes, it may well indicate a loss of interest in ERHC on the part of the U.S. Dept. of Justice. The department has gone out on a limb in trying to establish answers to questions raised in a report paid for by Pioneer Natural Resiources investor and billionaire George Soros.

Soros' credibility has been brought into sharp focus in recent days by a study he funded of Iraq War casualties that suggested more than 600,000 deaths had been caused by the war. A careful follow-up study revealed the number was closer to 100,000, and Soros'es veracity took a major hit.

Soros funded the study by the Senior Lawyer Project that formed the basis of a report by the Sao Tome Attorney General's office that suggested but did not offer evidence for claims that the company had bribed officials of Sao Tome & Principe in its 13-year pursuit of rights to offshore oil concessions in what is now the Nigeria-Sao Tome and Principe Joint Development Zone, an oil-rich region of the Gulf of Guinea.

Both the Nigerian and Sao Tomean governments have formally rejected the report, claiming its allegations were false. The indictment of another study paid for by Soros only reinforces the conclusion that it was spurred more by competitive forces - Pioneer became a disaffected partner of ERHC Energy in 2005 - than by actual wrongdoing.


BRADENTON, Fla., Jan. 21, 2008 [Updated 1/22/08, 5:07AM ET]--
Anyone with money in the U.S. stock market has a debt of gratitude due and payable today to Dr. Martin Luther King, Jr., and to the much-criticized members of Congress who supported making his birthday a national holiday that closed banks, schools, government offices and stock markets.

For the second time in 14 years, Monday's holiday honoring the assassinated civil rights leader spared Americans what could have been hundreds of billions of dollars in losses.

The U.S. is not out of the woods yet, by any means. Near midnight Monday evening, Dow Jones futures were trading down nearly 492 points, possibly portending one of the worst one-day losses in stock market history. There is no indication of an official reaction yet from the White House or the Federal Reserve.

The Story So Far...

LONDON (MarketWatch) -- Futures contracts were pointing to a sharply weaker start for U.S. markets Tuesday against a grim backdrop of big losses on European markets and a second consecutive day of massive selling in Asia.

By early afternoon in central Asia, the Dow Jones Industrial Average futures contract was down 491 points at 12,130, Nasdaq futures were at 1774.25, down 75.25, and the Standard & Poor's 500 futures were at 1265.10, down 60.2.

Futures contracts don't always move in perfect lockstep with the underlying indexes, but by comparison, the Dow industrials fell 382 points on Sept. 20, 2001, just days after the terrorist attack on the Twin Towers, and by 387 points on Aug. 9, 2007, shortly after the recent credit crunch first emerged.

-- MarketWatch, 12:20AM ET, Jan. 22, 2008

Given further inaction by the principal policy-makers for the U.S. economy, and the crash reflected in the second-day decline of world markets Monday night, Tuesday morning could see tens of billions of dollars in shareholders' equity vaporize at the opening bell.

[Update, 1/22/08, 12:17PM ET -- U.S. markets fell steeply at the opening bell as the Dow Jones Industrial Average slid nearly 500 points, but the announcement of a 0.75 percent cut in the federal funds rate - the rate the Federal Reserve charges major banks - spurred a 440-point rebound. At one point the DJIA was down just 60 points, buoying European markets that were still open, while German markets declined an additional 3 percent; France's CAC and the British FTSE indices closed substantially up after wild swings during the day. Among other things, the rate cut will allow many to refinance their homes, and led a recovery in the gold and silver markets; copper continued to fall as was down more than $2. Meanwhile, a midday downturn saw a 200-point decline that subsequently eased, leaving the Dow slightly below the 12,000 level, off roughly 130 points at 12:12PM ET.]

In Australia alone overnight, investors lost more than $60 billion, but similar losses hit Japan's Nikkei, China's Shanghai-based CSI 300, Hong Kong's Hang Seng Index, Korea's KOSPI and other major indices throughout the world. It was the worst day for the ASX since a 1989 "mini-crash," Bloomberg News reported.

"About $490bn was wiped off the market value of Europe’s FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany’s Xetra Dax slumped 7.2 per cent to 6,790.19 and France’s CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001," the staid, London-based Financial Times said.

But the Martin Luther King Day bank holiday staved off the worst on what is already known as the world's "Black Monday."

The Story So Far...

HONG KONG — Stock markets across Asia plunged even farther and faster on Tuesday than they had on Monday, as anxious sellers dumped huge numbers of shares on worries that an economic slowdown in the United States could drag down growth around the world.

A decade after a credit crisis in Southeast Asia triggered an Asian contagion of stock market declines around the world, the credit crisis in the United States is now producing an American contagion to which no stock market seems immune.

Heavy selling hit each Asian market as soon as it opened. Some of the region's easternmost exchanges, which had closed on Monday before the sharpest declines occurred in India and then Europe, suffered particularly steep drops, but some exchanges rebounded slightly by mid-afternoon from their lowest levels of the day.

By mid-afternoon, the Nikkei 225 index in Tokyo had dropped 5.65 percent and the All Ordinaries index had plunged 7 percent in Australia. The Hang Seng index had plummeted 6.77 percent, after being off more than 8 percent earlier in the day. The Shanghai market closed with a loss of 7.22 percent.

One of the biggest losers on Monday and again on Tuesday was India. Trading on the Bombay Stock Exchange was halted for an hour after the Sensex index dropped 11.5 percent shortly after the opening.

-- Keith Bradsher, The New York Times, 4:40AM ET, Jan. 22, 2008

In 1994, the powerful Northridge Earthquake that struck on Monday, Jan. 17 at 4:19 in the morning spared thousands who might otherwise have been at work during the quake and the powerful tremors that followed throughout the day. It killed 57 people and injured 9,000.

Even at that early hour, the freeways in the northern part of Los Angeles County are normally jammed with people heading south ; one LAPD traffic officer was killed when he plunged off a broken Antelope Valley Freeway overpass as he rushed to work on his motorcycle.

Officials estimated at the time that more than a thousand lives could have been lost had Los Angeles been at work as normal, and liability claims would have dwarfed the $12.5 billion loss insurance companies suffered that day amid overall losses of $20 billion, experts say.

On Monday, the holiday spared Americans a global stock market panic after massive and frightening drops in stock market indices in England, France, Germany, India, Hong Kong and Brazil.

Even though U.S. markets were closed, Dow Jones futures suffered their worst drop since 2002 as global investors saw the worst one-day plunge since Sept. 11, 2001, and around midnight Monday were set to open some 500 points lower than Friday's close, a decline of more than 4 percent.

The "Panic of '08," as online pundit Matt Drudge's Website termed it, was averted for long enough to allow investors to adjust their holdings before Tuesday's opening and prepare themselves for fallout from the global crash. Investors outside the United States did not have that luxury.

"It's the worst I've ever seen," Swedish asset manager Johan Stein told Bloomberg News. "The financial system is in terrible shape, and no one knows where this will end." Stein helps manage $14 billion in assets for Nordea Asset Management in Stockholm.

The Financial Times reported in early online editions Tuesday that Credit Suisse warned in a research note to bank customers on Monday, "What we are seeing now has the hallmarks of both a financial shock and the beginning of a [US] recession, or at least of growth grinding to a halt.”

The global plunge followed the worst weekly decline in U.S. markets since 2002, climaxed by a substantial sell-off on Friday after President George W. Bush's "stimulus" package failed to allay fears the economy is stuck in a swift downward plunge that will bankrupt millions of people and thousands of companies as unemployment also falls and inflation is on the rise.

The main culprit in the global decline has been the price of oil, which reached its lowest price in a month today, ironically. Rather than fleeing to hard metals as they often do, investors also bailed out of gold, silver and copper, whose prices have been soaring to record levels over the past year as a hedge against inflation and credit woes, and moved instead to government bonds.

Fears that insurers like ACA Capital Holdings and Ambac, the second-largest re-insurer of bond debt, would suffer drastic losses also fueled the global panic, while U.S. markets had a 24-hour exemption that may permit the Federal Reserve to slash interest rates and invoke other controls that may stem a cataclysmic U.S. market slide. As much as $1 trillion is at risk today.

It remains to be seen, however, whether the foreign nations that hold much of America's debt will accept further reductions in interest rates or call in trillions of dollars of U.S. debt the Bush Administration has piled up during the Iraq war and as it failed to act until last Friday against the year-old sub-prime mortgage crisis.

China, in particular, is likely to be resistant to further rate cuts that may devalue the dollar against the Chinese yuan, with cheaper dollars and heightened price sensitivity creating reduced demand and possibly cutting deeply into China's vast income from goods exported to the United States.

Never before in American history has the U.S. economy been put so much at risk by its exposure to foreign nations and companies that control so much American debt, and never before has so much of that debt been so close to default.

Only a day has spared many Americans from bankruptcy, and it is ironic in the extreme that so many states, counties, cities and towns. along with ordinary people, opposed the creation of Monday's holiday. For the second time, it has proved immensely fortunate for all of them.
Tuesday holds no such promise.

AR Editor-in-Chief Joe Shea has written on U.S. banks, securities and Asian banking for the Village Voice, LA Weekly and other publications.