Days Away, Doubters Dally

Just days from the award of lucrative oil concessions in the Gulf of Guinea, investors continue to teeter back and forth on the merits of ERHC Energy (OTC BB symbol: ERHE), while in Abuja officials of the Nigeria-Sao Tome Joint Development Authority put the finishing touches on an announcement that will bring the company more than $81 billion worth of undersea oil and a share price that is likely to double and then some.

Despite the front-page headline in last Sunday's Houston Chronicle that presented the awards as a fait accomplis - which by all indications it is - sellers in the last 15 minutes of trading moved more than 450,000 shares to leave the price where it started the day 1.7 million shares earlier: at $0.63.

The process of pushing the share price up the hill to $0.65, only to watch it roll down again to $0.61 before the final burst of trading, was exhausting to watchers who were aware of the last-minute preparations in Abuja and the looming Friday deadline for ExxonMobil to make its move on the 25 percent allocations it holds.

Repeatedly assured at the highest levels that awards will immediately follow XOM's decision, one would think investors would be striving mightily to firm up their positions before the announcement, which ERHC On The Move expects will come after the closing bell on Monday. But in the last five minutes of trading, several blocks of 100,000 and one of 90,000 shares were asserting that some holders didn't know what to believe - and some buyers did.

The Chronicle article proved to be too attractive for day traders, who swung in and out of the stock on Monday as it first climbed 20 percent and then fell back to settle for an 11 percent gain. Admittedly, the day traders made out like bandits - in the very short run. But those who have held on until payday and beyond will make those daily profits look like chump change, we feel. ERHE's share price by the end of next week could well be over $2, and even far higher, we believe, and we have staked our $123,040 shares on that prospect.

There is an interesting parallel to the day-traders and the longs at the craps table. Smart craps players sometimes make a lot more money on their side bets - getting odds that someone will roll a six or right or nine, for instance - than they do at the line, especially when the shooter is hot, hitting lots of 7s or shooting 10 or 15 times before he makes his number or craps out. Day traders make lots of side bets, while the high-rolling longs play the front line, the main chance, the Come line.

Over the years that we high rollers have played ERHE (and its predecessor symbol, ERHC), we've seen a lot of those side bets go very, very bad, very, very suddenly. One day there's a coup; one day a contract written in stone has to be renegotiated; one day the awards process is indefinitely postponed; one day the Los Angeles Times or the Houston Chronicle comes out with a major front-page article. For the day traders, the sudden turnabouts have thrown a wrench into their carefully polished strategies time and again; for patient longs, no loss was involved, just more days of waiting. And we are nothing if not patient.

That's why it is hard to understand such the short-sighted strategies so evident on Tuesday. A half-dozen major and many minor newspapers and wire services, and some very high-level officials, have assured the world that when the awards come, ERHC Energy's rights to about 14 percent of 11 billion barrels of oil will be awarded; those rights today at about $81 billion, and after exploitation and all associated costs and taxes, about $10 billion, or aroundt $14 a share. The awards are imminent, meaning they will be here within 10 days, and probably much sooner.

So who in their right mind - if not a prospective takeover artist that wants to get shares cheap and so plays the weak bid against the strong askto drive his price down - would sell 100,000 shares today? We don't know, but we sincerely doubt their sanity.