I need some # crunching from the gang - been tied up on other biz projects and haven't looked at the Board in days - just looked at Canaccord's 9/25 Addax writeup. Here's some excerpts from the report - can't believe ERHE is at $.25 and not $2.50 minimum 'cause blocks 2 & 4 purportedly hold the bulk of the resources:
"ADDAX TO AQUIRE 40% OF JDZ BLOCK 1
In a press release this morning, Addax announced an agreement to acquire a 40% working
interest in the JDZ block 1. The block, located offshore West Africa, lies in the deepwater
between Nigeria and Sao Tome and Principe in the Gulf of Guinea. JDZ block 1 is located
in water depths of around 1,500-1,900 metres and covers an area of 704km.
Chevron, with a 51% interest in the block and operatorship, has significant deep water
development experience, lowering any development risks. As shown in figure 1, block 1
lies within the East Niger Delta basin, in a zone of minor thrusting and shale swelling, very
rich in hydrocarbons. In addition to the Obo-1 oil and gas discovery made on block 1 in
2006, this zone contains large discoveries such as the Akpo field. According to Afren, a
partner on the block, 13 prospects have been identified on the block, with Exploration
Consultants (ECL group company), a third-party engineering firm, estimating an unrisked
mean prospective resource of 3,843 million barrels (1,168 million barrels risked) on the
block. This would equate to 1,537 million barrels on an unrisked basis (467 million barrels
risked) net to the acquired 40% interest.
Figure 1: Niger Delta regional geology
Source: Nigeria - São Tomé & Príncipe Joint Development Authority
As per our 7 August 2007 Afren Initiation Report, we currently estimate the PV of a JDZ
discovery at US$4 per barrel. While Addax does not currently provide any resource
estimates on the block, a 40% interest in the block, based on the ECL resource estimates,
would thus equate to US$6.1 billion on an unrisked mean basis (US$1.9 billion on a mean
risked basis). As such, we believe that the above transaction metrics represent a fair risk
reward proposition for Addax shareholders, with the potential for a significant return on
initial investment.
Project update
While it is our understanding that Chevron remains the operator on the block, note that
Addax has previously secured drilling days on a deep water drill ship for up to 10 wells in
the area. As such, in addition to the proven deep water expertise provided by Chevron, we
believe Addax’s existing access to deep water drilling could potentially be used to
accelerate the exploration work on this block."
Besides the Nigerian scam dismissal of ERHE, what am I missing?
