One poster responded by saying they are difficult to answer without the knowledge of a true insider, but it may be - as it often is in the world of finance - that the imponderables are just that. With apologies to Norval Scott, here are the questions he is reportedly asking:
1) What happens now to the ERHC stock (in near term, if awards go ahead as expected)?
2) Do you see there being any scenarios where the share price doesn't jump (or ERHC doesn’t get its awards), or is this a “sure thing”?
3) What happens next? Will Offor/Chrome sell up, or do you think they’re in this for the long haul?
4) If they are going long-term, where will the money come from to meet, for example, E&P commitments?
5) Can ERHC become a company that actually produces oil?
One poster on RB, inadvertently funny, asked prior to Mark's post, "What is the story going to say?" It reminds us how clueless some are about the media and its SOPs. The story is going to report the response of the various interviewees, plus whatever information the reporter has been able to dig up on his own, plus whatever canned information the tight-lipped ERHC public relations person, John Coleman, may deign to offer - usually nothing. Even the writer can't tell you in advance what he is going to say.
But on to these searching questions. They reveal no bias, asking both what-ifs: If we get awards and if we don't. The most interesting question for me is No. 3, because to date - other than my own assertions that there will be a buyout in March - there has been no printed or broadcast speculation outside the message boards that a merger or buyout may be in the works. Private correspondence has suggesed there may be, however.
Scott's question certainly does not suggest there will be a buyout or merger, but merely that it is a topic which reasonable people ought to discuss. It seems to be a very painful one for some ERHC investors, judging from their harsh statements on the RB board, although that may be because they are company insiders operating under anonymous handles who fear the rumors may get out of hand and cost them money. I am not sure exactly how that would happen - especially if they are longs and are not allied with the potential purchaser or merger partner - but just asking that question seems to be pouring lye on their imagined wounds.
The second question is also a vital one, revealing that the questioner has observed the phenomenon most of us have noticed, which is that when good news arrives the price goes down. Few have attributed that phenomenon to the old Wall Street saw, "Buy on the bad news and sell on the good." Surely the vast amount of speculation that has occurred in this stock has discounted some of the possible good news that may come with awards, yet the memory persists of better times when an LA Times story or a forthcoming awards announcement has generated huge price spikes. Then there is the underlying value of the treaty-protected preferential rights, which have never been reflected in the share price but suddenly may be when the awards are announced - if ERHC is granted substantial rights beyond the preferential.
Strictly limiting us to the preferential rights wouild be a negative outcome for the share price, I think, even though it would mean we are suddenly and concretely worth billions of dollars instead of being deeply in debt. It would not be a negative outcome for any interested and more sophisticated parties that then might want to acquire the company, however, and "Aye, there's the rub," as Shakespeare wrote in Hamlet.
All of us longs hope the JDA selections will drive our price into the $2 range, although I am prepared for a spike to about $1.20, which even now seems optimistic because of the concerted effort to keep the price down that has been so successful thus far. I have attributed that price suppression to an unnamed merger or buyout group, and have said that they keep the price down to accumulate a majority interest now that Offor, after his settlement with First Atlantic Bank, no longer has one.
Many have noted that the price moves down on very little sell volume, while hundreds of thousands of shares must be purchased to drive it up even a cent. I have attributed that to the accumulators' willingness to sell a few shares every so often just to keep the price down so that they can accumulate more shares cheaply. I have also opined that the buyer is fairly close to ERHC, and may be some of the original investors who were paid with 116 million shares of stock, or our own MOU partners Devon, Pioneer or Noble, or persons allied with First Atlantic Bank and its 60 million share block, or some combination thereof that will come to Offor to purchase control when they have accumulated nearly enough for a majority interest on the open and private market (First Atlantic cannot trade its shares under SEC rules, and it is the transfer agent, not the bank, who will permit a transfer when these restricted shares shares may be sold). I have further suggested that the price would be in the $6 range, and that the buyout or merger will be finalized and become public after the awards are done and most of the puzzle has fallen into place, and while the great expense of developing the oil resources still lies ahead.
How do I come to these conclusions? I derive them from all the information available, from my own "deconstructive" analysis of the price behavior, and my fertile imagination - no one has ever made a cent without at least one of the three. I offered all of these ideas, I might add, before the First Atlantic transfer became known and before the many amendments and filings that have come in recent weeks. For them, I was roundly denounced.
Here's my response to the questions, at least that part of it not incorporated in the comments above:
1) What happens now to the ERHC stock (in near term, if awards go ahead as expected)?
A sharp spike to $1.20 over the three days following the awards. and a retracement to .80 in the short term, possibly to .60 until March. I am predicting, based on intuition, that the highest near-term (i.e., one-month) post-awards price will be $1.28 on Feb. 22. I believe the awards will become known on a day the market is closed, and will begin to spike the day after. Those who keep the stock will be rewarded with very long, sustained price rise, possibly to a level well above $10, within a few months of the awards, I believe.
2) Do you see there being any scenarios where the share price doesn't jump (or ERHC doesn’t get its awards), or is this a “sure thing”?
There is great potential for no price spike, including the possibility that all the insiders who have filed Form 144s may now sell.
Nothing short of explosive publicity, a great awards outcome and huge (13 million-plus) volume can overwhelm the ability of sellers to drive the price down. There is - based on past patterns - a likelihood of a reporting error by the JDA, the press or the company regarding the bids that will likely drive the price down in the opening moments post-awards. But i for one remain positive in my outlook. I expect to double my money in a few short days.
3) What happens next? Will Offor/Chrome sell up, or do you think they’re in this for the long haul?
Offor will take a backseat position and use the cash from a buyout or merger to purchase one or more of the refineries now on offer from the government of Nigeria. His companies has done the turnaround maintenance on the refinery in Port Harcourt, and since Fobi Engineering (whose principal sits on the First Atlantic Bank board) may - at least I suspect so - be a secret ally of his, and has the same experience, I think the two may raise the money together to buy it. That is a far wiser and less risky use of his capital than prospecting in the deep waters of the Gulf of Guinea, especially if he can control both the refinery and some part of the company producing the oil. It is an excellent position to be in, and I wish he would sell stock in Chrome or let it be taken over by ERHC Energy.
4) If they are going long-term, where will the money come from to meet, for example, E&P commitments?
With his other operations not neraly as profitable in this economy as they perhas should be, Offor's ability to loan himself E&P money is limited. And "smart money," as we all know, always uses someone else's. The consolidation of the four banks including First Atlantic that is coming in May will create an institution that has a substantial interest in the welfare of ERHC, and it may be willing to make an arms-length loan to ERHC Energy to support its own shares. The newly consoliodated bank is one possible source of funds, then; another remains the MOU partners in their respective blocks, Noble Drilling, Pioneer Exloration and Development, and Devon Energy. The latter has the deepest pockets. That money would not come cheaply, however, and look less attractive as time wears on. A fourth possibility is a loan from the government of Nigeria in the interest of encouraging indigenous operators. That would cause a huge outcry, but could well be a very savvy investment for Nigeria, which has a very handsome budget surplus and probably could afford the outlay and the risk. That loan would likely come be mediated by the NNPC, which is headed by Offor's former top aide at Afex Bank, Stanley Lawson.
5) Can ERHC become a company that actually produces oil?
Yes, it can, as described above. The more important question is, "Should it?" It would be in Offor's best interest to spread the risk by taking a strong minority position in ERHC and getting into the refinery and other service-related business in Sao Tome and Nigeria. Those will produce vast fortunes for the few who risk the large initial capital outlay that he can generate with the sale of some of his 246 million shares.
What are your thoughts?
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