Thoughts On The Meltdown

It's almost midnight, and I plan to leave soon on a week-long trip that even at this late hour has no destination. I do plan to post as often as I can access wireless hot spots along the route.

I am afraid I have gotten myself into the position of having learned a lot that I cannot share with you directly.

A post from Africa early this afternoon helped me turn around some of the mad optimism I may have engendered when I "advanced" the post about the signing at 4 a.m. Friday morning. I was afraid I'd be asleep and unable to post if, as expected, the Production Sharing contract for Block 4 was signed at 2 p.m. As Kobiashi and many other trusted posters said during the day, the Block 4 PSC seemed to be a "100%" sure thing.

Instead, it was "the axe in the neck" I warned about last week. More on that later. At any rate, I had repeatedly said that we'd be at $0.73 after PSCs, and once again, we are (the last sale was $0.74 and E*Trade shows $0.75, but the closing Bid and Ask were $0.732 x $0.733). That made me feel slightly better.

Given the burden of confidentiality, my 2:15 p.m. post was the best I could do to warn readers that things were not going to turn out as expected. Quite a lot of selling started just then, so I think many got the message.

Unfortunately, I had allowed myself to become widely disparaged due to my earlier post, and I'm afraid not everyone took that later post to heart; a few I-Hub posters treated it as a bad joke.

Like many others, I tried to sell on the Reuters story. That came out at 3:39 p.m., but didn't show up on I-Hub until precious minutes later, and in my rush to preserve some of my gains this time, I didn't get it posted here until 3:59. Of my 70,000 shares offered at market, only 8,200 sold by the close. I cancelled other sales, and had a gain of $3,737 on those and still have $28,000 more in profits to pull down if the situation in Abuja is not quickly turned around. I will probably only realize about $18,000 of that, however, if I do keep my Sell order in the hopper monday morning, which I hate to do.

I have entered a Sell order for all my shares Monday morning, but reserve the right to revise it if good news appears. I expect the share price to open near $0.63 if there is no news.

Many people are trying to put a bright face on the STP demand that they be allowed to review the ERHC/ADDAX Joint Operating Agreement. I think that was spelled out in the Canadian IPO Addax launched two weeks ago, and many noted that those shares were still rising at Friday's Toronto close.

It seems very probable to me that Sao Tome wants that CDN$18 million Addax promised ERHC Energy on completion of the PSC; they may also want any money ChevronTexaco will advance to us (up to the balance) against a possible arrangement with them in Block 2 for the oil already discovered under our Block 2 and their Block 1.

If that were agreed to, while it would put us deeply in debt for a while it might be well worth it in the long run - especially if they discounted the $58 million by the $6 million we paid for initial seismic - and would make for smooth sailing throughout the Joint Development Zone awards and the Sao Tome Exclusive Economic Zone awards to come. While it is a sacrifice and a big one, we are asking that Sao Tome forgo the same amount, and they surely need it more than we do.

Beyond that, if there is a genuine fire - as there certainly seemed to be in the words of Dr. Edmund Daukoru, Nigeria's oil minister and current President of OPEC - it may take time to douse. A lot of feelings were hurt by Mr. SDaukoru's words, even though they were aimed at just a couple of oppositionists on the Sao Tome delegation. They could have been influenced by other players to resist signing, although I think it was probably a purely political play aimed at the upcoming mid-March Sao Tome elections.

If, however, President Olusegun Obasanjo and President Ferdinand de Menezes agree to meet in the next three days and decisively resolve any outstanding issues, as they alone have the power to do under the Abuja Declaration, and particularly if that resolution involves a healthier payment to Sao Tome, the PSC process will be back on track by April, when I have long expected PSCs to be signed.

I must try to convey to you a warning I have received from a source I implicitly trust (even when I cannot believe what I am told, so bizarre have been so many of the developments in this process). Here it is, and mark it well (there's no levity intended): Be very cautious of sourcing, announcements and deadlines, but perhaps not so worried about the overall project.

Lots Of Readers

Not surprisingly, today was an enormously busy day on the blog:

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