A lot of readers have been writing me at amreporter(at)aol.com to ask when and what the price after the block awards might be. For me, the more important question is: "Who is going to win the blocks?"
After a lot of thought about the whole context of the awards - the relative financial needs of Sao Tome and Nigeria, the political influence of the competitors, the timing of LNG projects, the offer of other blocks outside the Nigeria-Sao Tome and Principe Joint Development Zone and Exclusive Economic Zones, even the potential for a collapse of the process if awards are repeatedly delayed - I have come to the conclusion that they are likely to be announced this coming week, and probably on Feb. 4.
In fact, I have made a $1,000 bet on that date - and more about that later. Also, more about my expectations as to price.
I have examined the best I can, largely from an intuitive point of view informed by a lot of reading, the issue of who the winners will be, and list them, below. I will certainly welcome the Comments of ERHC On The Movereaders on my selections.
A caveat: The Academy Awards have probably not generated quite so much speculation among ERHC and other JDZ investors, and as with the Oscars someone is certainly going to be wrong. It may well be me.
Here, in reverse order (just like the Oscars), we go:
Block 6 - I do not believe Block 6 will be awarded. ERHC's 15 percent piece of this block will have to await a third licensing round.
Block 5 - I do not believe Block 5 will be awarded, either. If oil is found in the Blocks 2, 3 and 4, the price for which Blocks 5 and 6 will go may be much higher. This is bad news (if it comes to pass) for the ICC-OEOC consortium, which I think are going to be shut out, but I believe Sahara Energy fields will get a deal (see below) based on their other Sao Tome interests.
Block 4 - I believe Anadarko Petroleum will capture operatorship and 51 percent of Block 4, but the interesting thing, I think, is that four other players may participate (and most will think that's too many). In descending order of percentages of the pie, I think the other explorers in Block 4 will be Noble/ERHC, Hercules Oil/Centurion Energy/Stratar Energy, and Energy Equity Resources.
This block will be awarded on the basis of two things, I think: 1) The perceived ability to pay, which high bidders Conoil and ECL do not have, and 2), the ability to bring deepwater wells online rapidly, which is why the ERHC/Noble venture is likely to gain a 30 percent share.
Block 3 - Anadarko will lose the top spot in this block to the solid Devon Energy/Pioneer Natural Resources/ERHC bid, giving us a 61 percent operatorship. Anadarko will get 20 percent, and Energy Equity Resources and Sahara Energy Fields will walk away with two sub-10 percent portions.
This block allotment would satisfy both political and financial needs, while also getting the job done for the national treasuries of both nations. It is also a great win for us.
Block 2 - The Indians will be 51-percent victors in this one. Credit their long ties to Nigeria, their coming purchase of three state-owned refineries, and their determination to be players in the African fields - and a wise, timely tie-up with the well-connected Wade Cherwayko of Equator Exploration, backed by the fat bankroll of South African gold magnate Sir Sam Jonah.
The fact that Equator's stock has fallen rather hard in the past two days of trading signals less an unsuccessful outcome than a costly deal with the Indians, since EEL brings little to the table. The Indians have Reliance Industries behind them, and coffers do not come deeper than those.
But this doesn't mean ERHC is out: We'll get a second minority share here with our Devon Energy/Pioneer Natural Resources partners, and probably 40 percent.
I suspect Foby Engineering will also get a 9 percent piece of this block, signalling the owner's coming-of-age as an investor in First Atlantic Bank PLC, whose 60 million shares of ERHC will prosper mightily - and very suddenly - if the block awards are announced as I predict. The bank stands to make $60 million or more in a single day. Foby's cost to play is high, though, and it might be unwise for him to hold his portion much beyond the signing of the PSC.
So where does that leave ERHC? In very good shape, if short of cash.
And where does that leave our share price? At the aforementioned (in an earlier post, that is) $1.78 immediately (i.e., in three days) after the awards. But last night I had a dream in which the price on the OTC BB hit $2.799. Wouldn't that be nice? It would be, indeed, and not at all undeserved.
And my bet? Well, I bet against myself in giving my wife a $1,000 check for Christmas, post-dated to Feb. 4. You know what they say about a woman scorned, so I am very hopeful awards will occur on that day or before.
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6 comments:
ERHC will get a "clean sweep" in Blocks 2,3 and 4. Good Luck.
Joe,
You have the same percentage chance of being right as any of the rest of us. That said, I think you've done well in our analysis considering the mix of money, skill and politics required in this process. That's a good observation about Block 5 and I think that will be your best prediction in the long term. Hopefully the ERHC team will do an outstanding job with their lots and make a case to be the front runners for Block 5. As a matter of fact, such a process will place pressure on all concerned to be just that in the next round, "the front runner", judged by their level of performance in their respective blocks. Of course all that hinges on some level of drilling being accomplished before the next round. Want to take a shot at guessing the time span between awards?
My target price has always been $2.50 for the short term high (over a few weeks), before any pullback and correction. As for now, consider it spliting the diffence between your analyzed price and your dream price.............JB
If ERHC were to get a clean sweep of block 2, 3, and 4 then I think the share prices many are guestimating would be very conservative. I would guess at least the $5 range with a clean sweep of all three blocks. Remember, once ERHC wins block awards, it not only justifies ERHC in those blocks. But it will also justify and give credibility to ERHC in the remaining blocks that they have rights in. The investment community would know for example that the two 100% blocks in the Sao Tome EEZ that ERHC has rights to is not ficticious. Not only that but you would have to believe after block victories in the JDZ that ERHC will bid for blocks in the Nigerian EEZ.
What about the rumor you posted more than 2 weeks ago of ERHC getting operatorship for the blocks 2 and 4?
It'sa fluid situation, Tradertrades. I had posted an article talking about the predictions of two other journalists and a third person as to what we would win, and we have yet to see who's won what.
A "fluid' situation is an understatement. This process doesnt seem to have any structure to it at all. And that is very frustrating for all companies involved. Exxon should have been given a deadline. And that deadline should have been stuck to. And if they dont respond within the given deadline then they lose their rights. That is the way business is done. Once you allow fluidity into a situation, then the process never gets completed. Because something will always come up. Other companies will see this and then respond accordingly. They are not setting a good example.
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