Thursday, February 28, 2008

ERHC Makes A Showing At Nigeria Oil & Gas Conference

The Company produced a modest photo album after its successful exhibition and sponsorship of the Nigeria Oil & Gas Conference last week in Abuja. The conference was at least partly responsible for a substantial recovery of the stock's share price, which went from $0.175 to $0.25 in a few days.
Mr. Ntephe and Mr. Odobulu

ERHC Energy's Peter Ntephe (left) and Sylvan Odobulu had a busy week telling ERHC's story and answering questions at Nigeria Oil & Gas 200.

Sunday, February 24, 2008

What would Addax Buy From ERHC? A Sad Scenario

The news that Addax, our operating partner in several blocks of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) has squirre;ed away $1.5 billion for acquisitions has stirred anticipation that a $2 per share offer may be forthcoming from the Swiss drillers whose fortunes, for better or worse, have been allied with ours for more than a year.

That amount - $2 per share x 722,239,000 shares outstanding, conveniently adds up to $1,444,478,000, and leaves $55 million on the table for legal bills, accounting and ERHC debts.

And it seems a reasonable amount for a stock that is currently selling at $0.22, or $158,889,580 of market cap (although the last sale of 1,000 shares at $0.235 x $0.22 was a valiant effort to shore up prices that had fallen all day).

But as usual, I see things a little differently. My guess is that the reason we have no employees to speak of, even a permanent CEO, is that the company is meant to be sold and easily transferable to the buyer.

A buyer won't have a lot of pensions, salaries and severance obligations with a three-person staff, one of whom is part-time. Of course, the company doesn't have any physical operations, either - just signatures of the Joint Ministerial Council on a sheaf of paperwork granting us rights to billions of barrels of oil 10,000 feet under the sea. You could carry the whole company on a CD in a briefcase, because at the end of the day, that's all there is.

But the company is the end-product of the vision of just one man, Sir Emeka Offor, who is no longer controlling the company directly and is no longer on its board. He has transferred 303,000,000 of his shares, or 42% of our outstanding stock, to Chrome Energy LLC, a Cayman Islands bank account which, like the company, amounts to no more than a sheaf of stock and incorporation certificates in a safe deposit box.

If I were Sir Emeka Offor, though, being the one who has been pilloried, sued, accused, smeared, shamed, scarred, castigated, condemned and cheated - and congratulated, at least once - ad infinitum for the past 5 years, I might have other ideas for that $1.5 billion.

I might say to myself, well, let Addax pay me an approximation of what my shares are worth - $5 a share for the entire Chrome Energy LLC holding - and let the shareholders hope it floats their boat, too.

And to some degree it would. While Offor's shares would not give Addax control of the company, it's been able to pick up 50,000 or so a day at $0.20 - $$0.25 a share for some time now without tipping the SEC threshold for an 8-K report. At that rate, it would need 144 trading days (28 weeks) for each 7.22 million shares, or each 1% of the company. A separate deal for 3% or so with the First Atlantic Bank of Nigeria, which holds another 8%, is probably doable, and would yield for majority control.

Now, let's see:

$1.5 billion for 303,000,000 shares amounts to $4.95 a share; maybe, as a sweetener, Offor would keep 3 million (or 1%) to make it a nice round $5 per share. The shareholders will have gotten their $0.20 - $0.25 per share when they sold in the past year. And Addax would be the majority owner of a company that will probably be worth about $14 a share two years from now. Sounds good to me!

Who would deal with the SEC indictments, if they ever come? Well, to the best of my knowledge, it would be the shareholders of ERHC Energy, not Addax or Sir Emeka Offor. If they ever come.

That's why you should sell your shares today. The sooner Addax gets all they need, the sooner you will get screwed. Of course, if you wanted to make them wait closer to drilling, they might sweeten the pot a few cents, but they don't really need you. They need Offor's shares, some of the bank's shares, and the shares you've already sold them.

Congratulations - they're rich!

Tuesday, February 19, 2008

New Brochure Touts ERHC's JDZ Holdings

Taking advantage of new visibility it's gotten by sponsorsing an exhibition at the Nigeria Oil & Gas Conference this week, the company released a brochure it's developed to highlight its strong opportunities in the Nigeria-Sao Tome Joint Development Zone.

The brochure is available as for download as a PDF file, and is to my knowledge one of the first ERHC Energy has produced for general distribution in a long time.

Unfortunately, the word "corporate" is misspelled in the first line of the brief press release, a minor oversight yet one with an embarrassing tinge for those who study etymological origins.

The release comes as volume continues to be stong but share price is slipping from recent highs in the $0.25 - $0.26 region it enjoyed for a day or two. Perhaps a better understanding of the value of ERHC Energy's assets will again propel the price upwards - we hope so!

Here is the release, and the PDF can be downloaded from the "here" link below:

19-Feb-08 11:00 AM CST

New ERHC Energy Corporate Brochure Describes Company's Deep Opportunity

ABUJA, NIGERIA, Feb 19, 2008 - ERHC Energy (OTCBB: ERHE) has begun to distribute its new coprorate brochure, which advances the company's theme: "Deep Opportunity." The brochure is being distributed at the Nigeria Oil & Gas 2008 conference at which ERHC is a sponsor and exhibitor. Nigeria Oil & Gas 2008 continues through February 21, 2008 at the International Conference Centre in Abuja, Nigeria.

The new brochure can be downloaded by clicking here. It features background about ERHC Energy and its operations. Its four inserts describe company milestones, its activities in the Joint Development Zone (JDZ) and the Sao Tome & Principe Exclusive Economic Zone, and ERHC's commitment to community outreach.

The Company's sponsorship of Nigeria Oil & Gas 2008 is part of the ERHC's efforts to raise awareness about our ongoing operations and the progress being made toward eventual drilling in the JDZ. ERHC Energy has a visible presence among the more than 4,000 corporate executives, vendors and service partners in the region’s oil industry, as well as the more than 600 senior delegates who are participating

Friday, February 15, 2008

PGS, EEL And Cherwayko Get Bad Press On Sao Tome Deals

An article posted on the market-watching site ADVFN (we have had an account there for three years - just $6.99 a month - and highly recommend) spells out in a lot of detail the contracts with Sao Tome & Principe, the tiny island nation that may hold the key to untold oil riches in the near future, and where ERHC Energy's rights had long been a political football. It may be the first time that someone other than ERHC came under fire its dealings with the country's top officials.

The article was produced by a human rights organization called Norwatch, which usually is focused on wrongdoing involving Norwegian companies. The issue in this case is the chain of custody of PGS copntracts negotiated with the island. Norwatch says Wade Cherwayko, a onetime associate of former ERHC Energy chair Sir Emeka Offor and now the CEO of Equator Exploration (EEL), which prospered mightily on the London AIM exchange when it first started trading there in 2004.

Norwatch says that Cherwayko negotiated the agreements on 3D resource mapping that is Norwegian-owned Petroleum-Gas Services' main business, and payment in the form of three blocks of their choice and 10 percent of tall future signature bonuses the nation would receive. Cherwayko says he did not negotiate the contracts; a former oil minister who negotiated the contracts for Sao Tome says Cherwayko did.

That wildly generous payment was substantially revised, but EEL still ended up with two blocks to be chosen just ahead of ERHC Energy's choices in the country's Exclusive Economic Zone - and 10 percent of the first signature bonus. That meant Sao Tome realized about $2 million, but EEL took its contracts to the stock markets, where investors bet $100 million on them, money Cherwayko can probably take home.

All of this has occurred before a single drop of oil has been produced.

The big question, though, is whether Sao Tome & Principe can ultimately renege on its various contracts, which iobservers say are marred by both internal corruption and inexperience.

Here is the Norwatch article from ADVFN's EEL board:

Posted on the ADVFN EEL board by jimtid

jimtid - 15 Feb'08 - 09:02 - 37432 of 37434


Petroleum Geo-Services (PGS) obtained extremely good production agreements with the authorities in the island state of São Tomé e Príncipe in 2001. Many wondered how.

This past summer Norwatch visited the tiny state in the Gulf of Guinea – one of Africa’s poorest states – to get to the bottom of PGS’s activities in the country. In São Tomé Norwatch discovered several of the secret agreements as well as correspondence between PGS and the authorities.

The story of how PGS obtained their oil agreements and what happened to the rights during the years after the contract was entered into is long and intricate. One thing is certain: what happened in São Tomé e Príncipe could never have happened in Norway.

From what Norwatch understands, PGS utilized a Canadian intermediary as a bridgehead on the island. The Canadian had close contacts all the way inside the country’s presidential family, and this is how PGS succeeded in landing its contracts – without having been through a bidding round.

And that’s not all. When PGS was criticised for its involvement by the Norwegian press in 2003, the company explained that it wanted to get out of one of the two criticised contracts. But the buyer wasn’t just anyone. What Norwatch now can reveal is that the company that bought the production agreement that PGS had in São Tomé is run by none other than the same man who negotiated the contract on behalf of PGS. Transfer of the rights from PGS to the Canadian intermediary was even carried out without the authorities being able to intervene. Consequently, São Tomé is saddled with a partner it did not want. Now the new company is expecting to become an operator in the most promising areas in the country’s shelf.

PGS denies to Norwatch that the Canadian businessman is supposed to have represented the Norwegian company in negotiations with the country’s authorities and claims that its involvement in the island is completely in accordance with standards in the field.

Lucrative Agreements

The two agreements that PGS signed in 2001 were criticised as being unreasonable. A World Bank-supported report prepared by an American law firm considered them “extremely one-sided” to São Tomé’s disadvantage. One of the agreements concerned seismic surveys in which PGS received the right to map the sea floor of the country’s territorial waters and to sell the data to the international oil industry. The second agreement gave PGS rights to three oil blocks in the country’s territorial waters, in areas that PGS could choose freely. According to the critics, the PGS conditions were much too generous. After the Norwegian newspaper “Dagens Næringsliv” in 2003 published a long article series about the contents of the contracts, PGS chose to get out of the contract with regard to oil production.

It was the newly established company of the Canadian oil adventurer Wade Cherwayko that took over control of the contracts. Norwatch has now learned from the country’s previous petroleum minister that it is this same Cherwayko who negotiated the gilt-edged agreements as intermediary for PGS in São Tomé. Cherwayko’s Caribbean-registered company Equator Exploration has thereby obtained the right to choose freely the best blocks in the whole island state’s territorial waters.

According to several sources Norwatch has spoken to, Wade Cherwayko is a close friend and business partner of Patrice Trovoada, son of the president at that time. The president’s son was called into the negotiations on behalf of the authorities in the middle of the negotiations with PGS. Norwatch has learned this from someone who participated in the negotiations.

With the production agreement from PGS as its only asset, Equator Exploration was soon after the transfer registered at the Alternative Investment Market (AIM) in London, in December 2004. In this operation Cherwayko’s company gained $100 million in share capital. But the only thing São Tomé is left with from the options agreement is $2 million in signature bonus from when PGS entered into its production agreement in 2001. So far, much money has been made as a result of the transaction in oil rights in poverty-stricken São Tomé, but the country itself has received limited earnings.

Impossible in Norway

The authorities in São Tomé are the losers in the game. They signed an agreement with the Norwegian PGS but ended up with a newly established firm they never asked for. Such unanticipated transfer of rights between companies can only occur in inexperienced countries that have not developed petroleum legislation.

According to Erling Kvadsheim, a geologist in The Norwegian Petroleum Directorate it would be impossible to transfer agreements between parts in the manner in which it was done in São Tomé. It is the strict Norwegian legislation that prevents potentially unqualified companies from buying rights in the North Sea.

“I am afraid such transfers have been common in some parts of the world. It is at any rate something we warn against when we give advice to other countries’ authorities,” Kvadsheim told Norwatch.

In 2001, when the agreements were first signed, the authorities had only little experience in oil matters. São Tomé has not found a single drop of oil yet, but great possibilities for rich oil deposits are envisioned. And buying and selling of test drilling rights are already in full force

Retained the Seismic Services Agreement

In São Tomé Norwatch succeeded in finding two of the original agreements from 2001 and one of the renegotiated agreements from 2003. It is clear that only small adjustments were made when the country’s newly elected president demanded a renegotiation of the agreements in 2003.

The renegotiated production agreement, which was later transferred to Equator Exploration, resulted in two changes. The number of blocks was reduced from three to two, and the signature bonus that PGS was under obligation to pay the day the final contract was to be signed was – perhaps surprisingly – reduced from $5 million to $2 million. Even though PGS lost an oil block, they negotiated an agreement that constituted less risk for the company than earlier. If the future oil wells should prove to be empty, the company would not lose as much as it otherwise would have done.

In the seismic services agreement the authorities got a better deal. At the start PGS was supposed to receive 10% of all signature bonuses that São Tomé was to receive in the future. During the renegotiations, however, this was reduced to 10% of the signature bonus from the first licensing round. According to what Norwatch has learned, PGS is still waiting to receive its share. The amount is supposed to constitute $4.92 million.

PGS has nevertheless retained most of the rights in the seismic services agreement. Up to 2011 the company has in practice monopoly with regard to seismic surveys in the country.

Cherwayko Never Negotiated

PGS claims that its involvement in São Tomé is wholly in line with what the company does elsewhere in the world and that the criticism of its involvement in the island state is history. “It is a completely ordinary multi-client seismic services agreement,” Ola Bøsterud, Vice President Group Communication, informed Norwatch.

PGS says that there is nothing unusual about the seismic services agreement it has with São Tomé today and that it was completely within its rights in selling the agreement on to Equator. The company denies, moreover, that Wade Cherwayko is to have been a PGS representative in the country or that he negotiated on behalf of the company. “Our negotiations were led by our Africa Asset Manager,” Ola Bøsterud told Norwatch. “In negotiations about agreements like this it is quite common for the negotiations to be carried out at the highest level, since these are important negotiations about a country’s future oil and gas activities. This agreement was negotiated with the prime minister and the minister of petroleum of São Tomé e Principe as the other party”, said Bøsterud.

“But Luis Prazeres, Director Executive of The National Petroleum Agency in São Tomé e Principe, who at that time was the petroleum minister, perceived Cherwayko as the PGS representative on the island and says it was Cherwayko who negotiated?,” said Norwatch.

“What we are saying is that we negotiated ourselves and that Cherwayko has never been our representative.”


Tuesday, February 12, 2008

ERHE Investors Jubilant As Price Improves 16%%

ERHE's share price - as is customary in February - took a nice forward leap today, rising from yesterday's close of $0.195 to as high as $0.23 before settling back after 3:30PM ET to $0.225, a 16% gain. The stock could still move before the bell, but Buys were still outstripping Sells by about 2.5:1, with 537.376 Buys to 198,652 Sells as the closing bell approached. At 3:52pm ET, there had been 111 trades, a big jump from normal, and a lot of buying - about 135,000 shares - in the last hour.

My 75,000 shares improved by $2,346.70.

The catalyst for the price improvement was attributed to an upcoming conference, Nigeria Oil & Gas, where ERHC Energy is a presenter, and to healthy interest income of close $431,000 touted in a news release today.

My speculation would be that it is due less to either of those than to the traditional February bump this stock always seems to get - I made $27,0000 on it last year - and if not that, to the lack of any indication that SEC or DOJ indictments will emerge from a Houston federal grand jury that is studying ERHC issues amid an apparent absence of evidence.

Here is the Press Release:

02/12 ERHC Energy Inc. Reports First Quarter 2008 Financial Results

ERHC Energy Inc. Reports First Quarter 2008 Financial Results

HOUSTON, TX, Feb 12, 2008 (MARKET WIRE via COMTEX) -- ERHC Energy Inc. (ERHE) today reported financial results for the first quarter ended December 31, 2007.

As of December 31, 2007, ERHC reported cash assets totaling $33,870,197, compared to $38,030,673 one year ago.

During the three months ended December 31, 2007, ERHC's interest income totaled 431,863. ERHC's net loss totaled $586,765, which was up slightly from $522,142 for the three months ended December 31, 2006. General and administrative expenses during the first quarter decreased by approximately $320,000, or 24 percent, compared the same period a year ago.

"The quarter saw a significant reduction in expenses incurred in connection with the Justice Department and SEC investigations of the Company," said Acting Chief Executive Officer Nicolae Luca. "By restructuring operations and implementing strict cost controls, we continue to strengthen the Company's financial position."

To date, the Gulf of Guinea, off the coast of West Africa, has been ERHC Energy's primary focus. The Company's consortium partners, Addax Petroleum and Sinopec Corp., are preparing to begin exploration activities in two blocks of the Joint Development Zone (JDZ) between Nigeria and the Democratic Republic of Sao Tome & Principe.

Wednesday, February 06, 2008

EEL, Our Neighbor In Block 2, Sees 2008 Drilling And EEZ Oil

An insightful investor found some new EEL data and argumentation on ADVFN for the quality of our JDZ investment in Block 2 and posted a link to Investor's Hub. But the site requires login and payment, and since I use ADVFN for my own trading I thought I should share it with you.

The link, if you want to sign up for ADVFN's excellent and very low-cost services, is:

Read on:

(2) Joint Development Zone (JDZ) Block 2. 8.75% WI. Operator Sinopec

The JDZ is the boundary between Sao Tome and Principe and Nigeria, divided into Blocks. An EEL/ONGC JV was awarded 15% of Block 2 (EEL effective interest 6%). EEL subseuqently increased their stake to 9% but 0.25% was aside for a "partner". Total cost to EEL was US$9.05M and is fully paid. 3D seismic is already available for the block. Gross prospective recoverable resources are stated in the NSAI report (Click here) to be 1,349 mmbbls oil and 1.9 Tcf gas from 4 prospects (unrisked). Unrisked resources net to EEL are 121 mmbbls oil and 168 bcf gas (based on 9% share). A rig has been contracted to drill a well in 2009, with US$3M set aside as their share of costs (max rig cost is US$410K/day, or $37K/day net). The Obo-1 well recently drilled in JDZ Block 1 encountered hydrocarbons.

(4) Sao Tome Exclusive Economic Zone (STP EEZ)

EEL have the right to acquire 100% interest in 2 blocks of its choice in Sao Tome EEZ, plus they can take 15% of government interest in any further Blocks in the EEZ. Note that US group ERHC have a similar option, but EEL have first rights. Initial cost of the 2 EEZ blocks will be US$2M and US$2.5M licence fees. Further "signature bonuses" are payable upon commercial discoveries and production, with aggregate not to exceed US$77M for each Block. PGS/EEL acquired and interpreted ~13,000km 2D seismic data. They will use this to select their 2 blocks (possibly early 2008), then perform 3D seismic. There is various evidence for significant hydrocarbons in the STP EEZ - latest PGS flier.

Monday, February 04, 2008

ERHC Update Promises Help To Charities

Is ERHC Energy turning over a new leaf, or just renewing old commitments? A Jan. 31 letter from CEO Nicolae Luca to shareholders says the company has contributed to orphans in Nigeria, an anti-drug campaign in Houston and other projects.

To date, that has included token contributions to an orphanage in Nigeria, a conference by Let's GoAfrica (an Africa-focused charity in Washington, D.C.) and support for an anti-drug radio campaign targeting inner-city youths in Houston. We also are working toward identifying appropriate charity initiatives in Sao Tome & Principe to which we will lend our support.

In the past, the company paid a heavy price for offering scholarships to students in Sao Tome, which were ultimately given to the children of a Sao Tome oil official and became part of the bill of fare on an everything-on-the-menu smear of the company performed for Big Oil interests by the Sao Tome Attorney General.

The letter (a new format for these updates) touches on a number of other points that ought to keep investor enthusiasm afloat in the choppy waters of the Gulf of Guinea oil scramble.

Among those are a renewed commitment to avoiding and/or mitigating delay in drilling in Blocks 2 and 4 by the Adan Abraham, which Luca said is expected to leave the drydocks in Singapore after refurbishment there "within the coming months." The announcement hasn't really budged the share price, though, and may not have reached many investors as trades and volume indicate few are participating in the stock's day-to-day fortunes for now.

Here's the letter:

ERHC Energy Inc. Interim CEO Updates Shareholders

Jan 31, 2008 16:25:54 (ET)

HOUSTON, TX, Jan 31, 2008 (MARKET WIRE via COMTEX) -- The following update on Company activities was issued by Nicolae Luca, interim chief executive officer of ERHC Energy Inc. (ERHE, Trade ), after the market close on Thursday, January 31, 2008.

"To ERHC Shareholders:

"I am pleased once again to provide an update on the recent progress of ERHC Energy Inc.

"I hope you had an opportunity to participate in our January 15th investor conference call. Corporate Secretary Peter Ntephe updated everyone on ERHC's financial position and ongoing operations. The Company's Vice President, Technical, Jim Ledbetter weighed in on progress toward drilling in the Joint Development Zone (JDZ). A replay of the entire call is available at

"There is more progress to report toward drilling in the JDZ. The Joint Development Authority (JDA), which was set up by the governments of Nigeria and Sao Tome & Principe to administer the JDZ, has approved the budgets for JDZ Blocks 2, 3 and 4 in which ERHC has interests. The JDA also has approved well locations in two of those Blocks.

"These approvals open the door for the relevant consortia to order the custom drilling materials necessary to drill in the JDZ's deepwater. The custom order will take up to nine months to deliver.

"Meanwhile, the Aban Abraham deepwater drill-ship, which has already been jointly contracted by the operators in JDZ Blocks 2 and 4, Sinopec and Addax Petroleum, remains under refurbishment in Singapore. It is expected out of dry dock and into sea trials within the coming months, before it can be transported to West Africa.

"We continue to support Addax's efforts to secure a drilling rig of opportunity to avert delay or at least mitigate its impact. Addax has disclosed that it still plans to commence drilling of the Kina prospect in JDZ Block 4 as early as the fourth quarter of 2008.

"ERHC is continuing to assess the feasibility of acquisition prospects to diversify its asset portfolio. We seek opportunities that will produce significant enough revenue in the short-term to justify expenditures.

"Work is also underway on ERHC's first quarter financial report for the period that ended December 31, 2007.

"ERHC's executives are making final preparations for participation in the Nigeria Oil and Gas Conference 2008 in Abuja, Nigeria. ERHC is the registration sponsor for the event, which will give us a highly visible presence among the more than 4,000 corporate executives, vendors and service partners in the region's oil industry, as well as the more than 600 senior delegates who will participate. Our sponsorship of Nigeria Oil & Gas 2008 is part of the Company's efforts to raise awareness about our ongoing operations and the progress being made toward eventual drilling in the JDZ. The conference takes place from February 18-21 at the International Conference Centre in Abuja.

"ERHC also is continuing to implement a careful, cost-efficient community relations strategy. It is our intent to be a good corporate citizen by contributing our energies and resources to helping each local community to be a better place to live. To date, that has included token contributions to an orphanage in Nigeria, a conference by Let's GoAfrica (an Africa-focused charity in Washington, D.C.) and support for an anti-drug radio campaign targeting inner-city youths in Houston. We also are working toward identifying appropriate charity initiatives in Sao Tome & Principe to which we will lend our support. Each of these localized grass roots initiatives makes a small, yet profound impact. When you put them together, they represent a true commitment to community outreach.

"Finally, we hope you can join us for ERHC's next annual shareholders' meeting on Tuesday, April 22, 2008 in Houston, Texas. Shareholders of record as of March 14, 2008 will be eligible to receive notice of and vote at the meeting.

"ERHC Energy remains focused on building positive momentum and values your ongoing trust and support."


Nicolae Luca

Acting Chief Executive Officer