ERHC Seeks New Opportunities In Nigeria

The 10-K filed with the U.S. Securities Exchange Commission late yesterday (reprinted in the preceding post) reveals that ERHC Energy (OTC symbol: ERHE) has hired several consultants (they are unnamed, so we make a presumption that there is more than one person involved) to help it identify existing and potential oil and gas opportunities in Nigeria.

While the 10-K goes to great lengths to point out the many grave risks associated with its business and the enormous cash outlay it has incurred in perfecting its right to equity in the Nigeria-Sao Tome and Principe Joint Development Zone, the tenor of the new consultant relationships entered into in the past year suggest a more positive outlook. Not only does the company have the cash and stock to pay the consultants, but company officials apparently believe they can translate any found opportunities into revenue-producing projects.

The consultancies appear to be a bright spot in the grim but comprehensive tabulation of risk and the 10-K's faint promise of reward. Investors in ERHC have for the most part long realized that perfection of its rights in the Gulf of Guinea is a decidedly complex and difficult affair subject to challenges and compromise throughout its inordinate length.

Now, however, as the final signing of Production Sharing Contracts (PSCs) beckons in the first weeks of the New Year, the consultancies point the way to a future beyond the JDZ, and we think that is a very hopeful, optimistic signal from its top officials, Chairman Sire Emeka Offor and CEO Ali Memon.

Here are the consultancy arrangements as reported in the 10-K:

"Effective January 1, 2005, the Company entered into a consulting agreement with an individual which requires payment of cash and the issuance of options for a total of 500,000 shares of common stock upon a full year of service (This agreement was signed September 1, 2005, but was effective at January 1, 2005). These options have an exercise price of $0.20 per share and will vest immediately upon issuance and will have no expiration date. Either party may terminate these consulting agreements with 30 days notice. The options issued under these consulting agreements include provisions for cashless exercise.

In August 2005, the Company entered into an agreement with a consulting group to identify and introduce to the Company oil and gas acquisition opportunities in Nigeria. The Company is required to pay a base fee of $1,000 per month. In addition the Company shall pay a success fee of $75,000 per successful acquisition, as defined. The agreement has a term of one year but expires immediately upon the 30 day written notice of termination by either party, without penalty to either party.

In August 2005, the Company entered into an agreement with a consulting group to identify and introduce to the Company oil and gas acquisition interests in oil/mining leases granted by the government of the Federal Republic of Nigeria. The Company is required to pay a base fee of $1,000 per month. In addition the Company shall pay a success fee of $80,000 per successful acquisition, as defined. The agreement also provides for the payment of legal fees per successful transaction, as defined. The agreement has a term of one year but expires immediately upon the 30 day written notice of termination by either party, without penalty to either party."