With the widespread coverage of the ExxonMobil decision not to exercise its rights in the current round of Nigeria-Sao Tome and Principe Joint Development Zone licensing, ERHC Energy's share price (OTC BB symbol: ERHE) has taken a minor drubbing, losing a total of five cents since last Thursday's close at $0.745.
Now, having absorbed this latest shock, it is time for the share price to again start moving upwards.
However, there may be yet one more "delay," insofar as the Friday, April 22 Joint Ministerial Council meeting is concerned.
The JMC is scheduled to convene on that day, but it may or may not release its decision on awards. If the meeting goes beyond Friday, that would allow awards to occur on Saturday, April 23, or Monday, April 25 at the earliest, and possibly as late as Friday, April 29.
Currently, the best thinking is that the awards have been decided for months, and that ExxonMobil's decision merely makes the process easier to resolve. That thinking endorses a decision on Friday morning, U.S. time. If it is released to the press at the Friday meeting, it should hit the wires no later than noon EST, and traders will have a full four hours to gauge the quality of the reaction.
As always, there is a strong probability that there will be mistakes in the earliest reporting from Dow Jones, Reuters and the Nigerian press. They have never gotten it right, not once, the first time around.
The typical error would be to omit our name as a junior partner of Devon Energy or Pioneer Natural Resources or Noble Energy, to refer to us by our former name, Environmental Remediation Holding Corp., or to cite our old OTC symbol, ERHC.
Investors should immediately flood the wire services with complaints and telephone calls if this is again the case. We will provide the contact information at this site if such mistakes occur.
Those who have stated their decision to sell if another delay arises should think carefully about doing so if the delays are merely due to the JMC's deliberations; the gains so far are not worth the potential loss of much greater gains a few days later.
The plain truth about the decision by ExxonMobil to reserve their rights for a later round is that it gives ERHC a much greater chance, if not a certainty, of winning operatorships in two or three blocks on top of their guaranteed preferential rights, which range from 15 to 30 percent in each of the five blocks on offer.
That said, you have to admire the people who have supported this stock through thick and thin as problem after problem arose, was faced, and was vanquished. Their reward will be well worth the pain.
Update, 4/13/05, 2:25pm EST: Despite sales outpacing buys by a ratio of 2.7:1, ERHE has been above the opening price by about half a cent for virtually the entire day on slow volume of 409,438 shares. The high of the day so far was $0.715, an $0.02 gain, and the low was our Monday close of $0.695. Currently, with 100 trades registered at 2:05pm EST, there is new buying activity at $0.70, suggesting that late trades today may continue to support the price. There were 281,150 shares sold and 101,033 purchased as of 2:14pm EST, and at 2:32pm EST the price stands at $0.701, up $0.006 on the day. The bid is at $0.70 and the ask at $0.75.
Update, 4/13/05, 3:15pm EST: There must be some awfully frustrated short-sellers out there, because despite what is now a 3.8:1 ratio of sells to buys (387,222 to 101,033) and very few purchases for a full hour, the price nudged down just $0.001 to $0.70, and the ask still stands at $0.704. Usually, the reverse is true, with just a few or even one sell order able to move the price down instantly. Market makers are likely aware of the true meaning of the ExxonMobil decision and don't want to be caught short when demand for ERHE shoots through the roof next week.
Update, 4/13/05, 7pm EST: With a surge of 318,550 shares being purchased in the last 12 minutes, most between $0.71 to $0.72, ERHE eked out a $0.015 gain after a day of relentless selling when longs stayed out of the market until late in the day and then poured in money to bulk up portfolios with the cheapest shares available.
For the day, there were 536,602 shares sold and 460,383 bought in 183 trades, so the last 12 minutes accounted for just under 60 percent of all the day's buys. Three of the last buys were blocks of 50,000, 52000 and 55,000.
All in all, it was a remarkable day in which news wore out its welcome and sellers lost money despite producing heavier volume.
Market makers, knowing that awards are only days away, refused to reduce the price even half a cent - despite, at one point, at least 18 straight sales at bid. Most ERHE longs will remember when even a thousand shares traded at ask would drop the price a full cent. This sticking power bodes mighty well for longs in coming days.
P.S. Please click on our ads. It's a great incentive to me to stay up all night and search the world for stories and news for you. Thanks!
Subscribe to:
Post Comments (Atom)
20 comments:
This is a question. When you say that xom has reserved their rights to bid on another round, does that mean that when other blocks are offered they can bid on those blocks, but that they are totally out of contention for the blocks that are currently being offered ?
What is the exact nature of the rights they have ?
It is my understanding that XOM has basically reserved their rights (25% in 2 blocks), which they can choose to exercise when blocks are offered in the future. By choosing not to exercise, they have taken themselves out of contention for any of the current blocks.
They are totally out of the blocks now being offered, yes. There are three more blocks to dispose of, and they can use their rights there if they choose, or in the Sao Tome EEZ round late this year.
Joe are you sure Exxon could use their two 25% blocks in the Sao Tome EEZ?
I had never heard that before. I was under the impression that they could only use them in the JDZ licensing rounds.
Of course they could always negotiate with the govt.s of Nigeria and Sao Tome to trade rights from the JDZ to one of the respective EEZ's
Here is an exerpt from a post on RB from Swinging K. Dont know if accurate or not. Im sure we will soon find out.
"Let's see there are scheduled JMC meeting for the 18th & 19th.(confirmed) There are ceremonies planned for the 22...(confirmed)
SO lets see, the JDA typically meets for a day or two, irons out whatever details it has to, as shown by the Block 1 award, & block 1 PSC signing ceremony.
So if they meet on the 18th & 19th, it would make complete sense, that all the legwork would be hammered out before the actual ceremony. Why have a ceremony with all the Nigerean Pomp & circumstance, if there is nothing to have a ceremony about.... "
I hope Orangeandwhite0 will confirm that information from Swinging K, as it would be good news indeed.
As for the Sao Tome EEZ question, I spoke too soon. However, since Sao Tome granted those rights, any round Sao Tome offers is potentially one for the exercise of those rights. I suspect that in exchange for getting out of the picture, Exxon got assured it could use the rights in that future EEZ round.
JOE any idea why sao tome and exxon are in love with each other?
I am not sure they are. I suspect Sao Tome regrets its deal with Exxion as much as they regret their deal with ERHC. I think the better question is, why doesn't the Exxon deal get as much bad press as the ERHC deal?
Joe,
I disagree with this part of your statement:
"I suspect that in exchange for getting out of the picture, Exxon got assured it could use the rights in that future EEZ round."
Such actions would have huge ramifications; not only for XOM and STP, but also for ERHC and other existing rights holders and potential EEZ investors. The topic should not be taken lightly, nor discussed unknowingly, i.e., "suspect". The agreements governing these rights were negotiated long ago by and between multiple parties. No party can decide to change the agreement, without negotiations/agreement of all involved, and we all know that did not happen.
STP has seen by the occurrence of JDZ rounds 1 and 2 that preimptive rights can not only deter potential investors but also greatly delay the process and influence the final results. STP surely would not take such matters lightly, and I seriously doubt they would even consider trying to allow XOM to move their rights to the EEZ.
In fact, as I see it, STP did everything they could to get XOM to exercise their rights in the JDZ, so I see no incentive whatsoever to allow them a conditioned "out". If XOM went so far as to blackmail via threats of further delays, then perhaps, but I doubt things went that far. As BM says, they don't want to "blot their copybook", I think is the phrase...
The last thing ERHC needs is for Exxon to gain any type of influence over what happens in the EEZ. Would you not agree?
SH70
my opinion:
Exxon did not exercise for business expense reasons according to the media.
They are looking for bigger fish to catch with their percentages, most likely an operatorship(s) in the remaining blocks of the JDZ.
I can see now they are not going to rush into any business dealings as they have their hands full now around the world.
All in all, it's good for the other suitors anxious to get to work in the JDZ.
FRYCHEF
I would agree, SH70, but I have to ask you another question: Aside from the expense of development and the issue of how probable a profit is, can XOM realistically expect to make money - or more money than it would have - in those three remaining blocks? I find it really hard to believe that they think there is big money in 7, 8 and 9, and that's what all the smart money seemed to be saying in Round 1. If your belief is correct, though, they walked away from the table with no promises except that they could exercise later in 7, 8 and 9. And as far as we know, the rights were only "portable" for the first nine blocks. I just think that they may have gotten a little more out of the deal, but as you say, that's just a suspicion and not a fact.
I would agree with the last two posts. I would also state that ERHC's rights in the Sao Tome EEZ have not even been reflected in the share price.
After JDZ awards this will vaildate ERHC as a major player in the Gulf of Guinea. Not only in the JDZ but in the Sao Tome EEZ as well.
It might take some time, but once the investment community becomes aware of what large percentages ERHC has in the EEZ, then the share price valuation should go much higher.
I am not insinuating that Exxon wanted 7/8/9 over 2/4. I am saying that given the situation, that is what they were left with. They may decide NOT to exercise their rights in any blocks, and I think that decision will depend in part upon the the additional geological and geographical data available to them at the time, as well as who the players are in those blocks.
If the new seismic reveals good prospects, perhaps they will decide to actually bid in round 3. However, I read a very good article long ago, stating that the supers are rarely the first to do prospecting in new areas such as the JDZ. They prefer to let smaller players get a "lay of the land", then farm-in or buyout the proven fields. I don't know the logic behind this, but it struck me as very important to our current situation.
Exxon's rights are nothing more than an option to participate. They're not free and don't entitle the company to anything more than what they could have secured via bid - in fact, less, because by bidding they had a chance to increase their percentages and perhaps decrease the sig bonus (big guys pay less). I have a hard time understanding why Exxon accepted these rights in the first place, as I would much rather have a larger percentage in less blocks, thereby gaining some control. Perhaps at the time these were negotiated for, their position of power led them to make some false assumptions...
Being a jr. partner means Exxon cannot control the activity nor the costs, and we've seen overruns in the billions with Bonga - so this is very significant. As operator, Exxon knows what they costs will be and can make decisions accordingly. As jr. partner, they cannot. Again, if the deal does not fit their mold, they will pass, which they have. I think giving up their rights in these prime blocks is like losing another battle in the GOG war. They're not surrendering but I think they just lost a significant stronghold. And, ERHC just got a lot stronger...
YOUR NO SWINGING K ..thetuneman
That was a brilliant comment, Anonymous 3:04. Many thanks.
Not only was it a brilliant comment, it is also true to your disadvantage
thanks to everyone who responded to my question this am. There was some good discussion about what xom can and can't do.
anonymous 9.37 am
Thanks for the enlightening exchanges, gents. As a new partner, I have everything to learn and today's swapping back and forth was helpful.
Bests
Be sure to check out the 7pm EST Update. It was one hell of a strange trading day, and yet a very positive one for us longs.
Just get the damn thing DONE!
All right already!
Post a Comment