A Spectacular Dive, And A Stunning Swift Climb

The extraordinary performance of ERHC Energy (OTC BB symbol: ERHE) on Tuesday will become folklore as this company moves forward. A massive selloff sparked by a news article in The Punch of Nigeria was dramatically stopped and then almost completely reversed, in one of the most stunning, action-filled spikes investors have ever seen - and resilient ERHE investors have seen it all.

The events began with the appearance of an article early Tuesday evening New York time in the Nigerian daily The Punch. The two authors reported on a statement purportedly from Nigeria-Sao Tome and Principe Joint Development Authority chairman Carlos Gomes of Sao Tome, relayed to them through a mid-level JDA official named Sam Obiora, whom investors had not heard of before.

Obiora told the two reporters, they said, that ExxonMobil had been granted an extension of time to April 19 in which to make two choices in the five blocks on offer to exercise their 25 percent preferential rights in the JDZ. Based on that report, ERHC On The Move, lacking other information, decided that it was wiser to sell and recover profits before buying back in at a lower price, and well after midnight we entered a sell order for 50,000 shares at $0.685.

Staing up all night, we searched Nigerian newspapers and magazines for more information, and finally found it buried in a short article not accessible from the main page or even the main business page of This Day Online.

There, according to reporter Mike Oduniyi, we heard a differing account that originated with the JDA over the weekend in which awards would only be delayed until next week by the apparent failure of ExxonMobil to exercise their rights within a supposed 30-day deadline.

This informaion was found well after 3am EST, and the search went on until dawn. At about 9am, we got a call from a regular reader who informed us that an email was waiting for us that had originated with the JDA's official spokesman, Sam Dimka, in which Dimka stated flatly that the article in The Punch was wrong. Based on that, at about 9:05am EST we cancelled all our sell orders, and waited for the opening bell with some confidence and a lot of anxiety.

Here's the way we saw it: First, we believed the article in The Punch was essentially correct, although perhaps not about the April 19 date when ExxonMobil had to make its choices. In fact, Sam Dimka's notes affirmed, the actual date was April 9.

To our mind, both dates were a disappointment after the high expectations that awards would come this week, but the psychological impact of a new 30-day delay was far more harsh than that of the new "official" deadline, April 9. We felt that the new evidence produced by orangeandwhite0 and ArtK4K when coupled with the article by Oduniyi and a new conversation between orangeandwhite0 and a different JDA official would blunt the impact of The Punch article.

It also raised a bright new possibility: With a two-week delay until April 9, the strong buying interest that has characterized ERHE trading for more than a week would be allowed to continue and carry the share price to a substantial high before the awards. We cancelled our sell order with some trepidation, but by then we believed that the plunge would be short-lived and somewhere in the $0.06 range.

The opening bell brought an immediate and dramatic selloff, with more than 500,000 shares selling in the first minute. The price fell rapidly, hitting $0.645, a loss of $0.06 and $7,380 for our portfolio of 123,040 shares.

As the morning progressed and the four new pieces of information from This Day and the JDA became available, they began to have the desired effect. The price started recovering, and by 3pm EST a trend towards yesterday's highs was becoming pronounced. At the end of the day, the ERHE stood at $0.695, just a cent off after one of the worst scares investors have gotten so far. Volume topped 3.3 million shares, about two-thirds of it on the down side.

As wiser heads have opined, newspaper articles should not be uncritically accepted, and according to Sam Dimka's notes the Punch article was substantially closer to the truth than the This Day article. In fact, I see little that bars ExxonMobil from delaying as long as they like, despite all the protests, and yet I am persuaded that the initial legal terms of the licensing round are still intact.

But the underlying message of Tuesday's incredible performance is that ERHE is a winner. It has solid rights guaranteed by treaty, and it has no debt. It will be awarded its options and possibly one or more operatorships, and a few weeks here or there - or even a few months in an investment that still will take years to mature, is nearly meaningless beside the prospect of stunning gains over the coming months.

One other note: For the first time on Monday, and then again on Tuesday, ERHC On The Move welcomed more than 2,000 readers each day. Yesterday's deep anxiety was evident in the fact that only two readers took time to click on ads, earning us a total of $0.07 for a day and night of hard work. Nonetheless, with the help of Sam Dimka, and especially the efforts of orangeandwhite0 and ArtK4K, we saved our investments and won the day - and that's what really counts.