Trading Updates: We Recommend A Sell, But Are Not Selling Ourselves

The share price of ERHC Energy (OTC BB symbol: ERHE) broke away from yesterday's close and began climbing this morning after Nigerian and Sao Tome officials indicated they had finally reached agreement on block awards and were awaiting signatures from Nigerian President Olusegun Obasanjo and Sao Tome and Principe's President Fradique de Menezes.

A story from UpstreamOnline like one from Reuters said the awards meeting of the Nigeria-DRSTP Joint Ministerial Council ended yesterday with the delegates from both countries, who are slated to share oil royalties from their Joint Development Zone in the Gulf of Guinea on a 60:40 basis, "harmonized" on who wins and sending the awards document to their respective leaders for signatures.

A two-page communique from the parties says the same thing. Here is Page 1:


JDA Communique on Block Awards
Right-click on Page 1, above, and select "Open Link" to view it in a larger size. Page 2 says the delegates from both countries "harmonized" on all the blocks, and asks "more patience" of stakeholders as it makes "spirited efforts" to obtain signatures.

Trading Updates
Update, 5/27/05, 5:33pm EDT: The sellers obviously dominated today, but in the last 41 trades the Buys outpaced Sells 25 to 16, with some $88,000 Buys and 63,000 Sells. The very last trade was a Form T after-hours Sell of 9,500 shares, and the preceding two last trades in normal trading were Buys of 3,000 and 1,000. The Buys for the day totaled 1,062,027 shares, and the Sells totaled 1,645,291 shares, with 69,908 unidentified. It's incredible how closely this selloff resembles that of the collapse at this time last year, although this time around the share price ended on an uptick at $0.63. The one after-hours Form T sale went off at $0.62, however; the low of the day was $0.60, while the high reached $0.70 early in the day.

Update, 5/27/05, 4:02pm EDT: The closing price is $0.63, the Ask, and the Bid is at $0.62. Final volume sounds lucky, but it isn't: 2,777,100 shares.

Update, 5/27/05, 3:55pm EDT: A major selloff is underway, with 2,658,500 shares traded and the price at $0.625, the Bid at $0.62 and the Ask at $0.625.

Update, 5/27/05, 2:38pm EDT: The 3:15 Surge has brought some trades, with volume climbing to 1,429,500 even though most brokers are trying to get home for the holiday weekend ahead. The price is $0.65 and we recommend selling if you need the money anytime soon. The Bid and Ask are $0.64 x $0.655. Our explanation for the recommendation, which supersedes the the article on top of this one, appears immediately below. Note: I am not selling anything other than the 3,040 shares I already sold to raise some money to pay June bills. I still have 120,000 shares.

The latest news from Homeport is decidedly bad and could produce a late-trade selloff, as it suggests that MLSTP Prime Minister Damaio Vaz d'Almeida is amenable to starving Sao Tome for a few more months to try to win his case in arbitration of the International Chamber of Commerce in Paris, which first ensured ERHC Energy its rights.

Since the process has been flawless from a technical and legal viewpoint - especially after any potential cnflicts of interest were eliminated by the firing of Patrice Trovoada and the resignations of Mateus Meira Rita and Arlindo de Carvalho (since rescinded) and of President de Menezes from the presidency of the National Petroleum Council, we see this as a delaying action that will prepare the way for a reemergence of ExxonMobil and a no-confidence vote to force elections in Parliament.
The ex-communist MLSTP leadership is still inspired by the Siege of Leningrad, where millions of Russians starved for a year to hold off the Nazis, and are willing to let Sao Tome suffer for as long as it takes to make ExxonMobil and a few of their politicians rich, in my not-so-humble opinion.

Update, 5/27/05, 2:38pm EDT: A second Investors Hub post from Homeport, in whom we detect a pro-Portuguese, pro-MLSTP bias, says the talks "were fruitless" and that nonetheless a "decision" will be made within two weeks. That looks like the long, slow arbitration route to us, at this point. In our experience, Marxists are always willing to let the people starve if it is for a good political advantage. It makes not much sense, but does anything? Here it is:

Posted by: Homeport
In reply to: None Date:5/27/2005 2:43:15 PM
Post #of 3264

ERHE: Portuguese Lusa agency reporting ex-STP that latest Abuja talks were "fruitless" and that two presidents are likely to take a decision within a fortnight. It cites Petroleum Council source who asked to remain anonymous.

Lusa quotes source as saying bilateral disagreement centered on "criteria for selection of companies competing for five blocks" with STP defending priority of signature bonuses against Nigeria's preference for proposed production timetables.

Official reportedly said one stick Nigeria was using to get its way was to press STP to pay up USD 15 Mn in expenses incurred by the JDA.

Digest and spew out some veteran analysis, folk. The story is in Portuguese at www.lusa.pt, but possibly only on reserved service.

Bests,

Homeport

Update, 5/27/05, 2:38pm EDT: According to the Portuguese news agency Lusa, all civil service unions and the teachers' union have joined in calling for a general strike beginning Mobnday, June 1, in a demand for a 340 percent increase in the minimum wage. It doesn't sound like a great week for President Fradique de Menezes, who can only give them the money if he signs the awards, and the ruling MLSTP may not allow him to sign so they can take advantage of the turmoil and the strike.

Update, 5/27/05, 2:38pm EDT: A post from Homeport On Raging Bull's ERHE message board says a "declaration" is forthcoming from Prime Minister Damiao Vaz d'Almeida of the MLSTP, the party that runs parliament in opposition to President Fradique de Menezes. The report originates with Radio Africa RDP (Radio Diffusion Portugal), which catalyzed the original problems with its report of corruption the JDZ process. The radio network may be thought of as an extension of the Portuguese government, which was upset that it came too late to the party to win a part of Blocks 2 through 6. Like other Portuguese news reports, it is suspect in that it only tells the Portuguese-speaking peoples' side, not the Nigerian or other sides of this complex, fast-moving story. The good news is that according to RDP Africa, there were no changes in the awards document; the bad news is that the delgation seemed unhappy that there were no changes.

Here is the Homeport post:

From Homeport:
ERHE: FYI, Portuguese RDP-Africa radio reporting ex-Sao Tome that JMC delegation just arrived home from Abuja - wordless, but with "preoccupation visible on their faces."

While delegation made no statement on arrival, radio reports PM Damiao Vaz d'Almeida expected to make a public declaration later today.

RDP-Africa cites an unnamed member of the delegation as telling it it "very difficult" to negotiate with the Nigerians.

In Abuja, the Nigerians had not been open to changing a single "comma" in their earlier stance on the awarding of five JDA blocs (NB: apparently a reference to the JMC decisions of late April), the unidentified official was quoted as saying.

He added that STP viewed Nigeria´s position as unfavorable to Sao Tome, while favoring Nigerian companies.

Bests,

Homeport

Update, 5/27/05, 2:09pm EDT: The price is $0.665, the Ask, while the Bid is $0.66. Volume has topped a million shares, and now stands at 1,184,200.

Update, 5/27/05, 1:37pm EDT: Here are two of the more recent Updates available, one from Markviol10 and one from Vincent Nwanma of Dow Jones Newswires.

****UPDATE****
from the "Slapper"

Just spoke with Secretary of JDA. This is the same fellow who told me what we'd have a PR yesterday and we did. He told me Obansanjo has already signed and that the STP delagation just left for home today. I asked him when Menezes will sign and all he would say is "read the press release and use your head this is done."

Basically what he is saying is that STP would not have agreed on all block winners "harmonised" if Menezes was not going to sign off on all this. Menezes will sign at any time apparently. He said he can't speak for Menezes obviously as to when he will sign but he reiterated that "all is done."

He also mentioned that both parties wanted this done as soon as possible.
Take it for what it's worth folks but this looks very good IMO. Call JDA if you want to verify.

And here's today's Dow Jones article on the awards, which takes the same tack as the Reuters and UpstreamOnline pieces. I think you are beginning to see reporters who have been burned too many times responding to new announcements with great caution. Good for them!

Here;s the Dow Jones story, courtesy of trusted poster Ruby1100:

DJ Still No Award On Nigeria-Sao Tome Oil Blocks
by Vincent Nwanma
Dow Jones Newswires

LAGOS (Dow Jones)--The Nigerian-Sao Tome Joint Development Zone failed to award oil blocks after three days of meetings that ended late Thursday.
But the group which overseas the highly prospective offshore Gulf of Guinea fields said it had reached ""a harmonized position" that would have to be approved by both countries' presidents.

The statement quashed speculation officials from Nigeria and the tiny island state of Sao Tome had been able to end five-months of haggling over the awards of the promising oil blocks.

The awards process has been marred with allegations of corruption and influence peddling. Sao Tome, an island of 170,000 people, has suffered one coup attempt in 2003 and last week the oil minister tendered his resignation, shortly after his chief advisor left his post.

This is the second licensing round for five blocks.

The first round ended with only one block awarded to a consortium led by Chevron (CVX) which bed $123 million. The second round closed Dec. 15 with bids as high as $175 million, but officials have been deadlocked ever since.

Nigeria is the world's eighth biggest oil producer.

Sao Tome currently produces no oil, but its blocks are thought to hold billions of barrels.

Nigeria and Sao Tome ended years of dispute over control of the region with a treaty in 2000, agreeing to jointly administer the area.

A Nigerian diplomat early this week said officials of the JDA should not "allow external factors" to influence their decisions on the award of the blocks.

"Now is the time for them to rededicate themselves to the objectives of the JDA," he said.

Update, 5/27/05, 1:13pm EDT: The price is $0.66 as Sao Tome time hits 6pm without any word of a signature from President de Menezes. The Dow Jones story is out and also toes the line established by Reuters that the talks ended in failure. Oops - now it's $0.65, the Bid, and the Ask is $0.66, with volume leaping to 866,334 shares. I hope my sale didn't scare anyone, as I simply ran out of dough, not out of confidence.

Update, 5/27/05, 12:47pm EDT: I just sold 3,040 shares to pay my June bills and carry me through the Memorial Day weekend. I continue to hold 120,000 shares, and since I sold the expensive ones ($0.58 and $0.59), my average cost ought to go down below the former $0.4394. I hated to do it because the $2,057 I got would have been worth about $9,000 in a few weeks, I think. I got $0.68 for the shares after waiting a few minutes at the Ask. The price is now $0.671, the Bid, and the Ask is $0.675, with volume now at 717,614 shares.

And E*Trade, by the way, gets some big props from me today: Without even telling us customers, they lifted the limit on the number of transfers you can make on a given day. They formerly had a limit of one transfer a day, so you could transfer from your brokerage to your E*Trade Bank (you couldn't transfer directly to your home bank) and then the next day could transfer to your outside bank. Now they let you send money back and forth to your outside bank directly from your brokerage account as often as you want, so long as the transfers don't exceed $25,000. This is great, and I thanked Robert, the brokerage aide, and the company for making my life a lot easier.


Update, 5/27/05. 12:30pm EDT: The price is $0.68, the Ask, and the Bid is better at $0.675 as volume hits 652,414.

I got the following interesting note from a French journalist whose name I recognize, and well link to his stories when they are published:

Dear Joe,
thanks for your blog
one of the very fews french journalists regularly
assigned in Nigeria, and more globally in the Gulf of
Guinea, I'm regularly reading with great interest your
site

I'm presently back from stp, where I was at the core
of the crisis which finally push OBJ to make a 4 hours
visit to STP. And from hallmark to Equador, as from
Patrice Trovaoda to Exxon Mobil, or Emeka Offor to
alhadji dangote via Wabara it was a very interesting
trip.

As a desillusionment. After two weeks of intense
interviews and travel into this so beautiful little
big country, looks like stp in falling into the same
problematics of the oil curse than its
neighbours...Money and indies oil companies for a
few, despair for the majority
a majority of sao tomean which show, since a couple of
months, their first signs of angryness. Just before
leaving, I attend to the first protest in the stp
history of students from the national high school

so, my point of view is that stp, in between Naija and
Angola, and under high scrutiny of your country (
and let's not forget China which could come back after
the next elections) is really at a turning point....

anyway, It was just to keep in touch with you
you can check my last articles ( some in english) via
my name + africa on google, and please, let's stay
tuned, my articles should be soon published in french
daily Liberation as in monthly magazines

yours, sincerely
Jean Christophe Servant

Update, 5/27/05, 12:03pm EDT: The price is $0.671, the Bid, and the Ask is still at $0.68 as volume closes in on 600K at 594,414 shares. If President de Menezes meets the plane, gets the document and signs it, we would see action before the close. I am not sure how unlikely or not that scenario may be. There seems to be substantial anxiety to get the deal done on all sides.

Update, 5/27/05, 11:47am EDT: The Bid and Ask are $0.671 x $0.68, and volume has climbed to 594,099 going into the lunch hour, so it's likely we'll hit 1 million or more - unless President De Menezes signs the awards document, in which case we'll hit 3 million if news comes after 3pm.

Update, 5/27/05, 11:05am EDT: The price is still $0.675, after having fallen to $0.66, and volume is a healthy 474,766 shares. Bid and Ask remain $0.67 x $0.675.

Update, 5/27/05, 10:13am EDT: The price slips to $0.675 on volume of 346,146 shares, while the Bid falls to $0.67 and the Ask slips to $0.68.

Update, 5/27/05, 10:07am EDT: Reading the Communique with a magnifying glass, page 1 says that the due diligence from the 2004 round was scrutinized and more analysis was done, and the JMC concluded that everything had been done in conformity with the Abuja Declaration. We're waiting for Page 2.

The price is $0.685, the Ask, while the Bid is $0.68. Volume is 336.146 shares.

Update, 5/27/05, 10:02am EDT: The price is $0.69, the Bid, and the Ask is $0.695, with volume at 271,146 shares.

Update, 5/27/05, 9:52am EDT: The price is $0.699, the Ask, with the Bid at $0.69 and volume 219,508 shares.

Update, 5/27/05, 9:48am EDT: An Update from the JMC is circulating, per a Comment below this post:

There is a PDF of the communique from the JMC. Looks positive, says heads of state have to approve 'per the treaty'.

Will try and get whole thing here soon.

Update, 5/27/05. 9:42am EDT: The price is $0.699 as the Bid rises to $0.695 and then falls to $0.69 on 196,508 shares.

Update, 5/27/05. 9:41am EDT: The price is $0.69 as volume moves to 169,008.

Update, 5/27/05. 9:40am EDT: The price is $0.699, up $0.034 on 164,508 shares of volume. The Bid and Ask are $0.69 x $0.699.