ERHC Holdings Attractive Element In Addax Buyout Plan, Report Says

We got strong support for our commentary published Sunday night on the proposed buyout of Addax and the role of ERHC Energy in that possible deal. This report from Nigerian's Guardian has to be taken with a grain of salt, though, as the newspaper may well be subject to corrupt influences endemic to Nigeria.

On the downside, the article quotes an Addax statement as saying it will "commence drilling later in the year," while many shareholders have been led to believe that drilling will commence this month or next, ERHC On The Move warned two weeks ago that that would not happen. When "later in the year" might be is open to speculation.

Here is the Guardian's latest:

Wednesday, June 10, 2009

Asian oil firms scramble for Addax Petroleum
By Yakubu Lawal with agency reports

THERE is strong indication that the Canadian quoted oil and gas exploration and production company, Addax Petroleum, may have attracted a buyout interest from two major Asian oil energy firms - China National Offshore Oil Corporation (CNOOC) and ONGC of India.

Already, discussion has commenced between the companies willing to buy over Addax and the management of the Toronto and London quoted oil firm.

But authorities of the Nigerian oil and gas industry including the Nigerian National Petroleum Corporation and Department of Petroleum Resources (DPR) who spoke with The Guardian over the issue said that though it had been on front burner for months now but denied any knowledge of the buyout plan as the Addax, which operate mainly Production Sharing Contracts (PSC) in Nigeria have not informed the authority of any move to divest its interest in the holding both in Nigeria and the emerging new frontier of Nigeria-Sao Tome and Principe joint development zone.

The Toronto and London-listed Addax, whose market value estimated at $2.9billion, has projects in Nigeria, Cameroon, Gabon and licenses in the Kurdistan region of Iraq where it is exploring the Taq Taq field.

"It is true that Addax will commence drilling in JDZ later in the year," a source said. "It is also true that Chinese investors are jostling to buy Addax."

According to source in NNPC, Addax had not informed the corporation or any other agencies of the government on the issue of a buyout.

"As far as government of Nigeria is concerned today, Addax's status in the country has not changed" adding, "there is no way the company will take such step without informing it officially."

According The Guardian source, what is today known as Addax used to be Ashland Petroleum, whose assets the former bought after stressing that there were several issuesm including workers welfare, that must be resolved under the existing PSC )production sharing contract) before it can actually get a nod from the authority to sell.

But in a statement pasted on its website Monday, Addax admitted that it had commenced discussion with a third party, but no details were given.

"Addax Petroleum Corporation has been made aware of press speculation involving the corporation and the interest in it by third parties with respect to a possible acquisition or business combination. In response to that press speculation, Addax Petroleum acknowledges that it has held preliminary discussions with third parties expressing an interest in a potential transaction with the corporation. While such preliminary discussions are ongoing, no assurance can be given that a transaction will be completed. Addax Petroleum does not intend to make further comment unless or until there is a transaction to announce," the company stated.

Addax and its key partner Houston-based ERHC Energy in the JDZ had acquired a deepwater Pathfinder drillship on location where four wells are to be drilled commencing with the Kina prospect in Block 4.

A source at ERHC Energy meanwhile dismissed rumours that the company planned to divest its equity in JDZ blocks to Addax or any other company.

"I can tell you that ERHC has no intention of divesting its interest in JDZ blocks to Addax or any other company," said the source. "I believe this claim might have originated from earlier rumours that our former chairman Sir. Emeka Offor was to sell his shares in ERHC."

The source explained that Offor served on the ERHC board from 2001 until he resigned in 2007.

"His (Offor) shares in ERHC arem however, intact and he is not interested in divesting; neither is he discussing with anyone whatsoever the sale of his interest in ERHC," said the source. "So we are not discussing with anyone to buy out ERHC outright from JDZ blocks."

Industry sources said that Addax was keen to build up its reserves by buying out ERHC's interests in JDZ blocks, making it more of an attractive buy for the Chinese.

ERHC holds a 19.5per cent share in Block 4, in which Addax is operator and also owns a 22 per cent participating interest in JDZ Block 2, in which China Petroleum & Chemical Corp, known as Sinopec, is the operator and Addax holds a 14.33 per cent interest.

Sinopec is said to be working on a bid of up to $8 billion to acquire the company. The largest refinery in China is believed to be the latest to join a list of companies said to be interested in buying out Addax.