Bridge Financing Next Likely Step For ERHC Energy

Based on its completed Production Sharing Contracts and cash payments totalling nearly $50 million covering its equity in Blocks 2, 3 and 4 of the Nigeria-Sao Tome and Principe Joint Development Zone, ERHC Energy is likely to seek about $100 million in bridge financing to extend its operations in Nigeria and the Sao Tome and Principe Exclusive Economic Zone, ERHC On The Move predicts.

ERHC's parent Chrome Energy is a leading bidder for the purchase of the Port Harcourt Refining Co., Nigeria's largest refinery, which has been running at less than 70 percent capacity. Chrome has done turnaround maintenance on the refinery in the past, and partnered with an Indian and a Chinese firm to bid for the facility earlier this year. Bids had to be resubmitted, however, after they failed to meet technical standards.

The new bids will be opened in the next week, the daily Vanguard of Nigeria reported today. Sgould Chrome win, it may be in the early stages of becoming a vwertically integrated oil company with operations in every sector of the industry, a la John D. Rockefeller's Standard Oil Co. of the 19th Cenury.

That prospect would be fueled by the company's strong position in the Gulf of Guinea. Official projections from the U.S. Energy Information Administration say that its West African waters will produce a quarter of the U.S. demand within a decade.

Earlier, when prospects were not nearly as bright as they are now for a quick return, ERHC chairman Sir Emeka Offor borrowed about $54 million from First Atlantic Bank, which has now merged with other banks and ultimately had to accept some $24 million in shares priced at $0.40 to settle the outstanding loan. The bank has seen that asset increase by $30 million in recent weeks.

Whatever credit issues arose from that debacle, however, are likely to have been resolved with the signings Tuersday and Wednesday by the the Nigeria-DRSTP Joint Ministerial Council. Two more blocks await signatures.

Newly consolidated banks in Nigeria are likely to look on ERHC's prospects with a lot more favor than formerly, when Offor's empire seemed to be destined to turn to dust. He has backed out of the airline and banking business, and his remaining interests in a newspaper and insurance company are not publicized enough to know anything about.

Beyond Nigeria, however, there are a dozen major banks around the globe that would likely be willing to advance financing to Offor to help exploit rights that now seem to represent billions of dollars of future oil income.

Several global lenders already have long relationships with ERHC's partners, Addax Petroleum and Sinopec, providing them with confidence that whatever resources lie beneath the waters of the Gulf of Guinea will be well managed.

The distance from Nigeria's onshore difficulties will also have a strong appeal to lenders. The JDZ waters are believed effectively beyond reach of the Ijaw militants and others who might want to disrupt production as they have in the Niger Delta.

Most appealing, of course, is the high prospectivity of the blocks ERHC has acquired. Most have enough seismic and 3D data to persuade banks that the likelihood of a substantial oil strike is in the 70 percent region. The odds may be even better for Block 2, where a rumored Chevron discovery in Block 1 is though to extend. An announcement from Chevron is expected in April.