For ERHE, The Good News And The ... Good News

Everyone gets a chance to shine sometime, and the rest of this week is that chance for ERHC Energy (ERHE) investors.

After endless months of rumors, frustrations, price dips and a toxic jellyroll of poison pens and puffery on the Raging Bull ERHE message board, a verdict of sorts is in: Awards are going to be made, and if ERHE gets only the rights it earned for services to Sao Tome before its Joint Development Zone with Nigeria was even created, investors holding hundreds of thousands of shares are likely to be on their way to real wealth.

That would include the ERHC On The Move portfolio, which gained a little more than $7,200 on yesterday's $0.06 move. Just imagine the gains of investors like First Atlantic Bank Plc of Nigeria, whose own stock has traded at a frenzied rate on the Nigerian Stock Exchange ever since the bank won 60,000,000 shares from Chrome Energy Services Chairman Sir Emeka Offor in November.

But what if gets a little more than its preferential rights? What if it gets operatorship of Block 2 or 3 with its partners Devon Energy and Pioneer Natural Resources, or Block 4, with Noble Drilling?
If 4 billion bbls of crude is the most conservative estimate of reserves in the five blocks on offer. ERHC's guaranteed preferential rights entitle it to 14 percent of the blocks, or 560,000,000 barrels of oil valued at yesterday's closing price at $28.6 billion. Even after huge discovery and exploration costs, there's an awful lot of money left over for shareholders, and an awful lot of value not reflected as yet in its $0.54 price.

With the major uncertainties behind us, the issue for investors becomes the management of their gains. Taking profits prematurely could cost holders of just 10,000 shares a substantial appreciation in the next few months - if oil prices hold, if the share price holds after an initial run-up, and if Nigeria is not broken up or besieged again by the dogs of war.

Many credible investors see a near-term high in the $3.69 range, while I have been substantially less optimistic - suggesting a near-term high of $1.78 before a buyout bid become public in March - because of the vast selling of the kind we encountered yesterday (and so many of our 1,331 readers sent that article about market makers and manipulation to the SEC yesterday that the Google mail server stopped sending it).

But at the end of the day, albeit when it counted least - when most of the real energy was gone - we came out 12 percent ahead of the opening. I am deeply wary of the ability of shortsighted profit-takers and the rumored accumulators to sell us down against a tide of positive sentiment. That countercurrent tends to grow stronger every day that passes after news. But this week, I think, we are golden. Our time to shine has come.

Only awards will tell us how bright we may finally be.

For today, I like a gain in the $0.04 range as investors look at other issues and gauge the depth of the dollar's weakness and the strength of crude's price climb. I am not gong to guestimate on volume because I was so far off yesterday. but perhaps someo of those who comment here will suggest their targets.

Update, 1:26am EST 2/24/05: The share price never got higher than $0.555, and actually closed down one-one thousandth of a cent, at $0.54. Extended hours trading at 4:02 took it down another cent, to $0.53, before the S-8 filing was announced at 4:06pm EST.