Caution And Gains Side-By-Side On Critical Day

With ExxonMobil's critical day of decision looming tomorrow, the debate over the destiny of ERHC Energy (OTC BB symbol: ERHE)turned less to whether that decision had already been made than to the consequences of it. The decision on which two blocks it will exercise its 25 percent preferntial options, if any, must be made by April 9 or the company will lose the rights.

While the funeral of Pope John II is expected to distract many traders today, this particular day well may represent the very last opportunity to buy the stock below a dollar.

That is because first, numerous sources have said ERHC will win one or two of the five blocks on offer, catapulting the tiny company overnight into the ranks of the world's major oil firms.

Moreover, the company will at last have control over what is widely believed to be at least $28 billion worth of oil lying beneath the floor of the Gulf of Guinea, which is expected to produce some 10 percent of all the world's oil by 2010.

Yet yesterday's disappointing performance of the stock, which opened at $0.748 but closed at Wednesday's closing price of $0.74 on less than a million shares of volume - half of Wednesday's total - suggests caution.

That is because veteran investors in ERHC have largely spent themselves into a corner and are unable to buy more, while those who would buy if awards were announced remain outside the gates, awaiting news from the Nigeria-Sao Tome and Principe Joint Development Authority.

That conundrum may dog the stock throughout the day, but late trading nonetheless should sharply lift the price. It is believed that awards may come as early as Tuesday or Wednesday of next week.

The Joint Ministerial Council meeting that will precede the awards ceremony may not rquire the presence of Nigerian President Olusegun Obasanjo, who is in Rome, but it is a virtual certainty that the ceremony itself will. The meeting is thought to be something of a formality, as officials of the Joint Development Authority who have analyzed the bids are believed to have made their recommendations some time ago.

What may also invoke a cautious mood among traders is the JDA's famous penchant for delays. There appears to be no statutory or contractual limit to the the time the JMC can consider the JDA recommendations before issuing their final decision.

Finally, the remarkable similarities in trading patterns that accompanied the end of the first bidding round for nine blocks - only one of which was awarded - in May of 2004 give pause to those who worry about history repeating itself. Assurances that they will not have been frequent and fervent, however, and are widely believed.

ERHC On The Move predicts today that there will be slightly more than usual interest in ERHC at the start of trading, driving it up beyond $0.75, and that after that interest fades the price will not rise substantially until after 3pm EST. We still epxect a close at or higher than $0.80, and volume of perhaps 3 million shares.