Is A $2 Buyout Offer From Pioneer Depressing ERHE's Share Price?

Is ERHC Energy's share price falling because Pioneer Natural Resources is proposing a $2 buyout for 51 percent of the company, at or shortly before the signing of our Production Sharing Contracts for Blocks 2, 3 and 4?

That is the tricky question posed by a series of email and telephone exchanges between ERHC On The Move and its readers today that collectively suggest a strong certainty that such a deal is in the offing.

The problem is, if that is the case, why is someone else selling shares in lots of 50,000 to 90,000 shares as though the company has no tomorrow?

Another problem is, would that $2 go to the Nigerians who own 51 percent of the company, leaving the rest of us grasping at straws? Or would the fact that half the companis worth $2 drive the price for the remaining company to $4?
As communications now stand, the Nigeria-Sao Tome and Principe Joint Development Authority hopes to conclude the PSCs for Blocks 2 through 6 no later than October 1, and through its spokesman Sam Dimka has said that PSCs for some of the blocks - and presumably those major blocks where the PSCs can be modeled on the Block 1 PSC for Chevron and ExxonMobil - would be signed much sooner.

In the context of the buyout offer, which would amount about $1.4 billion for company that has many billions of dollars worth of oil in its sights, the PSC signings don't seem like an especially opportune moment to sell itself.

Yet, the email exchanges - with a well-known, often reliable and very respected source on the telling end - reiterate that the signing will bring the $2 offer from Pioneer, and probably some joy to the hearts of ERE shareholders.

The question is, How much joy? The $2-a-share is certainly more than anyone has paid for shares in the past five years, but it seems far less than the company's future worth.

There may be a seller as highly motivated as the one who is unloading hundreds of thousands of shares in today's trading at bargain-basement prices, where most of it is purchased by market makers, or that seller may be sourcing the rumors our well-placed friend has heard. You can't tell.

But there is a lot of talk of a buyout, $2 is the rumored price, and Pioneer - as suggested in print by some of the trade journals - is the rumored buyer.

But you can't take that to the bank.