Two New Articles Suggest Awards Are Near, Or Nearer

Two new articles Tuesday morning in the Nigerian press suggest awards in the Nigeria-Sao Tome and Principe Joint Development Zone are closer than April 15, but still offer no date certain.

After yesterday's 12 percent selloff, they may bring a slight boost to the price, which is otherwise expected to continue to fall.

During Monday's big day-long selloff that took the price down from a high of $0.65 at opening to a $0.56 close on high volume, traders suggested fears of a long delay in awards - as has become customary with the JDZ - will tie up funds for the next several months.

At a minimum, both articles corrected yesterday's erroneous reports from This Day saying "ExxonMobil has 45 days from the time of the notification to exercise its rights or forfeit same," and The Punch of Nigeria that also said ExxonMobil has 45 days in which to exercise its preferential rights. The company has only 30 days to select its rights, which would trigger the convocation of the Joint Ministerial Council to award the blocks. If ExxonMobil used the full 30 days, the earliest awards could be held would be the first week of April.

In a new wrinkle added in the Vanguard article, ExxonMobil can reportedly forego its two 25 percent choices in any of the five blocks on offer in the current round for blocks on offer in any future round. This is the first time that the possibility has been suggested that ExxonMobil would neither exercise its rights nor farm them out, but use them instead in a third licensing round or in the Sao Tome and Principe Exclusive Economic Zone licensing rounds that follow.

But without spelling out a new award date, or even suggesting one, the two new articles from the Vanguard and the Daily Independent - the latter paraphrasing remarks allegedly made by Sir Emeka Offor, who has not been quoted directly in recent years - by their very timing suggest awards may be closer than ERHC On The Move, and more openly state that ERHC is in line to receive its preferential choices in five blocks, or that at least ERHC officials want the process to bear "fruit," as the Independent article put it.

The second article, paraphrasing Offor and quoting ERHC Energy CEO Ali Memon, says Offor believes the company may "grab an operatorship" in one of the blocks, and also recycled outdated information about Mr. Offor's holdings and a quote from investor Phil H. Nugent that last appeared in the Dow Jones News Service Report by Norval Scott on Jan. 24.

Hopes had been high that the company could even sweep three of the blocks with its strong mid-tier partners, Devon Energy and Pioneer Natural Resources in Blocks 2 and 3 and Noble Energy in Block 4. There was no hint of that optimism in Tuesday's news reports.

The first article is from Vanguard:

Nigeria-Sao Tome: JDA asks ExxonMobil to exercise preference rights
by Emma Ujah
Tuesday, March 01, 2005

ABUJA -- The Nigerian-Sao Tome and Principe Joint Development Authority (JDA) has formally requested ExxonMobil to exercise its preference rights on the five blocks in the Nigerian-Sao Tome and Principe Joint Development Zone (JDZ) for which licensing rounds commenced in November last year.

ExxonMobil has the third party right to exercise the right of options in any two of the affected blocks, to the level of 25 percent.

JDA letter to ExxonMobil, which sources said was sent last weekend, followed the approval obtained from the "highest levels" by the Joint Ministerial Council (JMC) in order to fast track the licensing round which was originally planned to have blocks awardees announced at the end of last year.

Nigeria’s Presidential Adviser on Petroleum and Energy, Dr. Edmund Daukoru had announced at a press conference in November last year, that the results of the round were to be announced on December 31, 2004, but officials said ""certain factors"" made the initial date unrealistic.

According to the resolution of the agreements, ExxonMobil and the Environmental Remediation Holding Corporation (ERHC), a company quoted on the New York Stock Exchange, were to have the privilege of investing in any block they may so choose before the award of the remaining stake to other oil companies bidding for the blocks. [Editor's Note: The company's name is now ERHC Energy, Inc., and it is traded on the Over The Counter Bulletin Board, not the NYSE, under the symbol ERHE.]

ExxonMobil has three such rights to exercise. It has already exercised one of such rights in Block 1 in which it took 40 percent. Other companies to jointly develop Block 1 are ChevronTexaco with 51 percent and the operator, as well as Dangote/Energy Equity Resources with 9 percent.

According to the rules, ExxonMobil has up 30 days from the day it was notified to exercise its preference rights in any blocks of its choice among the five currently on offer. The Blocks are 2, 3, 4, 5 and 6.

It was learnt that as soon as ExxonMobil exercised its rights, the JMC would meet to set the final stage for the award of the remaining stakes in the blocks as the case may be. Officials said it was not compulsory for ExxonMobil to exercise the remaining two rights in any of the current five blocks if it wanted another block yet to be put on offer.

ERHC which has a Nigerian Business mogul, Sir Emeka Offor, as Chairman has already fully exercised its preference rights in the six of the blocks in the zone, as provided for in the agreement.

The development of the JDZ recorded a milestone when Block 1 Production Sharing Contract (PSC) was signed between the oil companies and the JDA on behalf of the governments of Nigeria and Sao Tome and Principe.

Only Block 1 was awarded in the first Licensing Round which was flagged off in April, 2003. there were nine blocks in all originally. Five of the remaining blocks were thus readvertised in 2004 which the rest three were put on hold pending the generation of further data on them.

With the first PSC in place, it is expected that the entire zone would soon come alive with serious exploration and production activities sine other PSCs to be signed on each of the blocks would follow the block 1 model. Tax regulations in the zone have also been adequately addressed.

Here is the article from the Daily Independent:

ExxonMobil, ERHC may secure equity in five JDZ oil blocs
by Bassey Udo, Energy Editor
and Charles Okonji, Senior Business Correspondent
March 1, 2005

ABUJA -- ExxonMobil and Environmental Remediation Holding Corporation (ERHC) may be granted equity to participate in the operation of the five offshore oil blocks offered in the 2004 Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) licensing round.

Following the 2001 treaty signed between Nigeria and Sao Tome creating the JDZ, multi-national exploration and production (E&P) companies that operated in the territorial waters in years predating the agreement were assumed to possess pre-emptive rights over the area, an arrangement that conferred on them substantial rights of preference on some of oil blocks in the zone.

While ExxonMobil is said to possess pre-emptive rights in any three of the blocs on offer in the 2004 round provided it matched the highest price offered by the bona-fide bidders, ERHC has preferential option rights in the country’s Exclusive Economic Zone (EEZ).

Last week, in a bid to round off the proceedings on the 2004 licensing round Exxon Mobil was notified to move within 30 days to exercise its preferential rights in the five blocs in line with the decision of the Joint Ministerial Council (JMC) of Nigeria-Sao Tome and Principe to revalidate revalidated options already exercised by the ERHC following the 2003 Licensing Round.

ExxonMobil’s response is expected to pave the way for the meeting of the JMC to carry out the final appraisal and announce the winners out of the 26 bids collected at the end of the bids opening exercise last December.

Daily Independent, however, gathered that ERHC might eventually emerge one of the major players among the companies that will develop the six to 14 billion crude oil reserve capacity JDZ and an important supplier of crude to the United States of America.
The United States, the world's largest crude oil consumer, meets about 12 percent of its crude needs with supplies from the West African region, hopes to increase the volume to about 20 percent in 2010 and 25 percent by 2015.

ERHC’s Chairman, Mr. Emeka Offor, with 34.98 percent controlling shares said the company might grab the operatorship status of one of the blocks in the zone. ERHC submitted joint bids with established US companies (Devon Energy and Pioneer Natural Resources) for Blocks 2 and 3, and Noble Energy for Block 4. [Editor's Note: With the recent issuance of 73 million shares to cancel all outstanding debt of ERHC Energy, Mr. Offor's stake has rise to 43 percent.]

Offor, who is also Chief Executive, Chrome Energy, said though ERHC had endured a painful wait to allow for the resolution of the dispute with Sao Tome, which almost made it lose its rights in the zone, its preferential rights of between 15 and 30 percent in all five blocks stands it in good stead to reap the fruits.

“When the awards in the current JDZ bid round are finalised, it will be a significant step forward,” ERHC Chief Executive Officer, Mr. Ali Memon, said, pointing out that the conclusion of the licensing process has been continually delayed, leading to some disquiet among shareholders and keeping ERHC's stock price range-bound near the 50 cent mark.

A Houston-based oil and gas consultant and long-time ERHC shareholder, Mr. Phil Nugent, had said: “We're due our day in the limelight. At some time the dust will settle and ERHC will be recognized as a viable entity in one of the most prospective oil and gas regions in the world.”