Ms. Moran's letter appears as the last boldfaced item in this post, below.
Readers will remember the post orior to this one in which we suggested that Ms. Moran's statement - that Addax has not been approved as a new partner for ERHC Energy in the consortium - "may be in error."
However, Jacinta Moran's statement was based on extensive interviews, and demands respect. However, she lacked three critical pieces of information, the most important of which is a conditional statement on Page 59 of the IPO prospectus issued by Addax in a $400 million stock offering on the Toronto Stock Exchange. We have assembled all three pieces of information for our readers.
The Addax prospectus, we must note, is not explicit about whether it has been substituted for Noble, as we first thought; instead, the statements appear in the subjunctive tense - i.e., "would," and "may" as opposed to "is" and "are."
Here is the prospectus statement:
JDZ Agreements
In June 2005, the Joint Development Authority announced that Block 4 would be awarded to ERHC Energy / Noble Energy JDZ (60 per cent), Conoil p.l.c. (20 per cent), Hercules Oil Ltd. / Centurion Energy (10 per cent), Godsonic Oil Co. (5 per cent) and Overt Ventures Ltd. (5 per cent). The winning bid provided for a signing bonus of $90 million and a minimum work program of three exploration wells or a minimum expenditure of $53 million. In late October 2005, Noble Energy announced that they were withdrawing from the ERHC Energy / Noble Energy JDZ consortium. ERHC Energy entered into a memorandum of understanding with Addax Petroleum in October 2005 pursuant to which Addax Petroleum replaced Noble Energy JDZ as operator for the consortium. In November 2005, Addax Petroleum entered into a participation agreement with ERHC Energy pursuant to which it may acquire up to a 33.3 per cent interest in, and become operator of, the Block 4 Property in return for a payment of up to $18 million and a full carry in respect of ERHC Energy’s retained interest. Addax Petroleum would also be required to pay a signature bonus of up to $23.4 million to the Joint Development Authority. A joint operating agreement and Production Sharing Contract would also have to be negotiated with the other participating parties and, in the case of the Production Sharing Contract, the Joint Development Authority before Block 4 is awarded.
The other missing elements are a Dow Jones article quoting authoritative Nigerian sources saying the substitution has been "approved in principle, and an article by Mike Oduniyi in ThisDay Online that indicates the Joint Ministerial Council met and formally approved the substitution.
Here is the relevant part of the Dow Jones article by Vincent Nwanma, followed by the article from ThisDay Online.
Nigeria, Sao Tome Oil Pacts Seen Before Christmas
by Vincent Nwanma
Wed, Nov. 30, 2005 16:40 GMT
LAGOS - Production sharing contracts and joint operating agreements in the oil blocks located in the Nigerian-Sao Tome Joint Development Zone will be signed before Christmas, a Nigerian government source told Dow Jones Newswires Wednesday.
The source also said that the Joint Development Authority, which manages resources in the maritime boundary shared between the two countries, has approved "in principle" Swiss energy company Addax Petroleum's role as operator of block 4 in the zone.
Here is Mike Oduniyi's article from ThisDay Online:
The Joint Ministerial Council (JMC) of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ), yesterday met to ratify a prototype of the Production Sharing Contract (PSC) agreement that will govern exploration and production activities in five oil blocks recently allocated.
The meeting, which had in attendance Nigeria’s Minister of State for Petroleum Resources Dr. Edmund Daukoru along with his counterpart from Sao Tome, considered the draft proposals on the PSC.
The PSC is a form of agreement where the operating company funds 100 percent of exploration activities in an oil block up to production level. The winners of the five oil blocks are expected to sign the agreement by mid next month.
The draft model PSC under consideration stipulates a revenue sharing procedure of 80:20 percent in favour of the oil companies while they are expected to pay five percent as royalty as well as 50 percent tax.
THISDAY gathered that the fiscal structure of the PSC is essentially the same as the one adopted for Block 1 being operated by US oil major Chevron.
Sources told THISDAY at the end of the closed-door meeting that the formalization of the choice of Swiss firm, Addax Petroleum, as replacement to US independent oil company, Noble Energy, as technical partner in Block 4 of the JDZ, was also concluded.
At an earlier meeting with officials of Chevron, operator of oil Block 1, JDA officials tried to clear all issues relating to commencement of exploration operation.
Yesterday’s meeting of the JMC also intervened in the matter regarding the disagreement between the Noble/ERHC Energy and granted Addax Petroleum Company a stake in the operation of oil Block 4 previously won by Noble/ERHC Energy in the Joint Development Zone, naming Addax Petroleum Company as the new operator.
The approval for the takeover followed disagreement between ERHC, in which Nigerian businessman Sir Emeka Offor owns major equity, and its foreign technical partner, Noble, who won the bid for the operation of Block 4 during the 2004 bid round.
Block 4 was won by the Noble/ERHC consortium. However, trouble began when Noble indicated its unwillingness to continue with the partnership and consequently withdrew from the deal.
Other companies with equity stake in Block 4 include Conoil (20 percent), Hercules Oil (10 percent), Godsonic Oil (5 percent) and Overt Oil (5 percent).
Noble/ERHC, as the operator of the oil bloc, has equity of 60 percent. The winners of the block are to pay a signature bonus of $90 million.
However, due to what officials of JDA described as irreconcilable differences, Noble Oil Company withdrew from the partnership thus paving for the authority to select another firm to take over its place.
Winners of the five oil blocks allocated in the 2004 bid rounds are scheduled to make payment of signature bonuses amounting to $283 million by December 2005.
During the 2004 bid round, Devon/Pioneer/ERHC as the operator with 65 percent equity, won Block 2. The signature bonus for the block is $71 million. Others who got equity in the block were Equator Exploration/ONGC Videsh, 25 percent; A&R Hatman, 10 percent; Foby Engineering, 5 percent and Momo Oil & Gas, 5 percent.
Anardako is the lead operator for Block 3, with 51 percent equity and a signature bonus of $40 million. Others who won equity include Devon/ERHC, 20 percent; DNO/EER, 10 percent; Equinox, 10 percent and Ophir/Broadlink, 4 percent.
ICC/OEOC Consortium is the lead operator for Block 5 with a signature bonus of $37 million. Its equity is 75 percent. ERHC has equity of 15 percent while Sahara has 10 percent.
For Block 6, the lead operator is Filtzim-Huzod Oil & Gas with equity of 85 percent. ERHC has equity of 15 percent in the block.
Of the successful bidders, Devon/Pioneer/ERHC, Devon/ ERHC and Noble/ERHC won the bids as operators including their existing rights. ERHC won their equity for Blocks 5 & 6 plus their existing rights in Blocks 2, 3 and 4.
The first process of acreage allocation in the JDZ began on August 23, 2003. That opened the 2003 JDZ Licensing Round for nine blocks (Blocks 1 to 9).
The first oil block, Block 1, with a surface area of 704 sq. km, was awarded to Chevron as the operator with 51% interest; ExxonMobil and Dangote Equity Energy Resources (DEER) won participating interests of 40 percent and 9 percent, respectively.
I should add, as I told I-Hub poster Art4K yesterday, that even with the Dow Jones story, the newspaper article that said Addax was approved, and the prospectus statement, there remains no official statement by either the JDA, Joint Ministerial Council or ERHC Energy to comfirm the substitution.
Thus, there does remain a legitimate question as to whether the Addax substitution has been or will be approved.
Four our part, based on the two stories - which quoted authoritative sources - and the Prospectus, we believe there is at least tacit approval - indeed, "approval in principle," as stated by Dow Jones' Nwanma - for the deal.
Finally, here is Ms. Moran's very detailed and forthcoming response to magicatlast, which shows that she was anything but dilatory in seeking a resolution to the question.
Posted by: magicatlast
12/23/2005 11:56:34 AM
Post #of 16583
Just got a reply from Ms. Moran:
Dear Mr [Name Withheld], thank you for your email and your interest in the story.
Firstly, let me explain the background:
Platts ran its first story on Oct 29 that ERHC Energy and
Switzerland's Addax Petroleum had tentatively agreed to replace
Noble Energy as ERHC's partner and take over as operator of ERHC's consortium.
On [Oct.] 31,I spoke to the JDA and this was confirmed.
In early November, I covered an African conference in South Africa when I interviewed Addax Managing Director (Nigeria) on Nov 7 and, indeed, [he] confirmed his company's interest in the JDZ.
However, a day later--Nov 8-- I was told by a very reliable source that the JDA had rejected the bid and withdrew its release announcing its approval.
The Joint Ministerial Council would not approve it as it had not been consulted about the decision.
I understand that Addax Petroleum has filed a preliminary prospectus with the Canadian authorities for an initial public offering and also applied to list all its common shares on the Toronto Stock Exchange and the prospectus goes into Addax's partnership with ERHC in detail. I have not been able to obtain this document.
Last week, the the JDA told Platts that the authority was "still studying the ERCH/Addax application", and that there was still no final approval on the replacement of Noble with Addax in Block 4.
I tried to contact ERHC before writing this article and calls were not returned.
All attempts by me to contact the Sao Tome authorities, Addax and the JDA were unsuccessful today - Dec 22. However, the minute I get word from either that the bid has been accepted, you can rest assured that I will go ahead a file immediately.
Jacinta Moran
We believe Ms. Moran made a credible and diligent effort to obtain the facts, but was hobbled by a lack of access to needed information.
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