That advance comes after EEL alerted investors Thursday (see press release below Updates) that it had won a 15 percent allotment in Block 2 of the Nigeria-Sao Tome and Principe Joint Development Zone - far less than the 35 percent it was rumored to have won before awards were announced. The stock was trading as low as 73.5 pence in the weeks before the June 1 awards.
In contrast, ERHC Energy (OTC BB symbol: ERHE), which won 25.64 percent of the entire acreage offered in the round two JDZ auction of five blocks, may open at $0.60 or lower on the Over the Counter Bulletin Board after an extended selloff from a pre-awards high of $0.89. a price lower than the 52-week high of $0.95 that came when hoped-for awards were due last year but did not come.
Some say the difference in price is due to EEL's having $100 million in cash as opposed to cashless ERHC Energy's estimated $8 billion in oil rights.
So why are the miniscule rights of EEL pushing up its stock price when despite the mammoth rights won by ERHC its share price has been pushed down by 32.5 percent?
ERHC On The Move believes the answer is that ERHC Chairman Sir Emeka Offor has been selling 25 million shares he purchased for $0.40 kast Fall to raise cash to pay an additional $25 million in unexpected signature bonus fees.
The extra fees resulted from the unwillingness of Sao Tome and Principe Presdent Fradique de Menezes to accept lower bonus fees than higher bidders had offered, no matter how good their technical bid was.
That move netted his country an additional $21.6 million - its shares of the 54 million increase based on their 60:40 sharing arrangement - but apparently exceeded the budget of ERHC Energy and its partners, Noble Energy in Block 4 and Devon Energy and Pioneer Natural Resources in Block 2 and 3 - for the bonus fees, which were raised after a planned payment of $57 million for Block 4 and $50 million for Block 2 were found unacceptable by Sao Tome and Principe during three hellish weeks of political resignations, firings and recantations generated by the awards.
ERHC On The Move believes that it will take another couple of weeks to raise the total of $29 million ERHC Energy must pay to participate with its partners in the exploration stage of development - unless, that is, investors react even more strongly to the very upbeat article in Saturday's Houston Chronicle about the block awards (see story in post below, "Unknown hits offshore jackpot; Obscure local oil firm is chosen to work leases off Nigeria, São Tomé."
More cash, higher volume, higher price and excited investors is what we need right now; all are in the works.
Update, 6:02am EDT, 6/6/05: I began working at a new job today, so I have been unable tpost as usual. We lost $).0615, or 10.17 percent in today's action, closing at a Bid of $0.537 and an Ask of $0.539. The final volume was 3,579,642 shares.
Update, 11:32am EDT, 6/6/05: The price is $0.59, the Bid, and the Ask is $0.595 as we approach a million shares traded. Volume is currently 972,530 shares.
Update, 10:21am EDT, 6/6/05: With 681,347 shares sold, the price is $0.60, the Bid, and the Ask is at $0.61. No one has yet produced evidence that ERHC Energy will not have to pay the increased signature bonus fees, but Mabenn has an interesting Comment (below this post) on why they may be less than we thought.
Update, 9:44am EDT, 6/6/05: ERHE opened at $0.61 on the good news from the Houston Chronicle but promptly fell to $0.60 on volume of 452,267 shares. The Bid and Ask are $0.60 x $0.605.
Update, 7:54am EDT, 6/6/05: The Bid is $0.596 and the Ask $0.60 before trading begins in the extended hpurs market, where ERHE rarely trades. Investors await the interest of the market following the terrific story on ERHC Energy's "jackpot" in Saturday's Houston Chronicle by Washington staff writer David Ivanovich.
Here is the EEL press release issued last Thursday:
2 JUNE 2005
EQUATOR EXPLORATION LIMITED
(Equator, or “the Company”)
Equator - ONGC Videsh Consortium Awarded Allocation In Block 2 Of Nigeria-São Tomé Joint Development Zone (“JDZ”)
JDZ Block 2 is adjacent to Nigerian Block OPL 246 which hosts the 800 million barrel Akpo discovery and another series of discoveries totalling 600 million barrels
JDZ Block 2 will be operated by major U.S. independents Devon Energy and Pioneer Natural Resources
The Nigeria-Sao Tome and Principe Joint Development Authority (“JDA”) announced on 31st May 2005 that a 15% interest in the highly sought after Block 2 of the Joint Development Zone has been awarded to a consortium comprising Equator, an oil and gas company with exploration interests in the highly prospective waters of the Gulf of Guinea, and ONGC Videsh (“OVL”), the international exploration subsidiary of Oil and Natural Gas Corporation of India (“ONGC”), India’s largest energy company.
Based on a 3D seismic survey funded by Petroleum Geo-Services (“PGS”) and Equator in 2003, recoverable reserves are estimated at over 1 billion barrels. JDZ Block 2 is adjacent to Nigerian Block OPL 246 which hosts the 800 million barrel Akpo field and another series of discoveries totalling 600 million barrels. A consortium, led by U.S. independents Devon Energy, Pioneer Natural Resources and ERHC Energy Inc., was awarded a 65% interest in JDZ Block 2 and will act as operator.
Under terms of the JDZ joint bidding agreement between Equator and OVL (“the OVL/Equator Venture”), any allocations will be shared on a 60%-OVL and 40%-Equator basis. This results in a net 6% participation in the block for Equator’s account. The signing bonus for JDZ Block 2 is US$71 million. Equator’s share of the signing bonus is US$4.3 million which will be funded from Equator’s existing cash reserves.
Mr. Wade Cherwayko, CEO of Equator stated “We are pleased to be among the small number of companies worldwide to be awarded participation in a block in this highly prospective deep water exploration basin offshore Nigeria and Sao Tome. The allocation further expands Equator’s portfolio of high potential exploration acreage in the Gulf of Guinea, the world’s premier deep water basin.”
The JDZ was created through an agreement between the governments of Nigeria and Sao Tomé and Principe in 2001 whereby revenues derived from the JDZ will be shared 60:40 between these governments respectively. There were 5 blocks (Blocks 2, 3, 4, 5 and 6) on offer in the most recent licensing round, with Block 1 having been signed earlier this year by a consortium which comprised ChevronTexaco, ExxonMobil and Energy Equity Resources, for a signature bonus of US$123 million.
The OVL/Equator Venture had submitted bids for two blocks in the JDZ, namely Block 2 and Block 4. OVL’s parent company ONGC has considerable experience in deepwater drilling, and is credited with successfully drilling the second deepest well in the world in water depth of 3008 meter by its drill ship Sagar Vijay, on the east coast of India. ONGC has one of the world’s largest deepwater drilling programmes underway in offshore India.
For further information, contact:
Wade Cherwayko, Chief Executive Officer
020 7235 2555
Bobby Morse / Ben Willey, Buchanan Communications
020 7466 5000
Background information:
Equator
Equator (www.equatorexploration.com) was founded in December 2000 and listed on the Alternative Investment Market of the London Stock Exchange in December 2004, raising £60 million to fund its exploration activities in the highly prospective waters of the Gulf of Guinea.
Equator’s objective is to build a diversified portfolio of exploration, appraisal and production assets in the region. The Company is focusing its efforts in West Africa, in particular the JDZ, the territorial waters of Nigeria where it recently acquired rights in Nigeria Block OML 122 and in São Tomé and Príncipe where Equator has been active since 2001. Equator is also currently evaluating other opportunities in West Africa, including Nigeria, Congo and Equatorial Guinea.
In recent years West Africa has become one of the most prolific offshore deepwater exploration and production regions. Deepwater discoveries in Equatorial Guinea and Nigeria, coupled with hydrocarbon finds offshore Gabon, suggest geological extensions into the JDZ and the territorial waters of São Tomé and Príncipe. In addition, seismic data for the region indicate widespread prospectivity in the waters of the JDZ and São Tomé and Príncipe.
OVL
ONGC Videsh Limited (OVL) is the international arm and a wholly owned subsidiary of the Oil and Natural Gas Corporation (ONGC), which is the fully integrated National Oil Company of India. ONGC Group (which also comprise of a 12 MMTPA refinery at Mangalore) had a turnover of more than $10 billion in the financial year 2004 and made a post tax profit of over $3 billion. The company has a market capitalization in excess of $30 billion.
Currently, OVL has interests in 15 oil and gas projects, which are located in 12 countries including: Egypt, Qatar, Vietnam, Sudan, Russia, Iraq, Iran, Myanmar, Libya, Australia, Ivory Coast and Syria. The Vietnam project is producing natural gas and the Greater Nile Oil Project in Sudan is producing oil. The project in Russia is in advance stages of development and this project is expected to commence oil production in the fourth quarter of 2005. OVL is a joint operator in the GNOP project in Sudan and is operator in Farsi in Iran. The projects in Iraq, Iran and Syria are in various stages of exploration. In the Myanmar project a significant gas discovery was made in January 2004.
The current production of oil and gas of ONGC in India is in excess of 53 MMTPA (O+OEG) and current production of the company from its foreign oil & gas acreages is close to 4 MMTPA (O+OEG). The company has aligned strategic plans to elevate the current production levels from its overseas oil & gas assets to reach 20 million tons of equity oil and oil equivalent gas by year 2010, through strategic acquisitions of overseas oil and gas assets.
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