The “FEAR-GAP”
Let’s start a new phrase that has nothing to do with Kaboom nor rumors from friends of friends…….
I am not a promoter of "Kaboom". I suppose it could happen and I would certainly accept it as would any shareholder but that is not why I increased my holdings in ERHE. This investment became a two in one investment within the last year and here is why:
The first investment opportunity was simply the potential of the future oil assets were not being correctly priced into the shares. This is very typical for a company like this with no proven resources. Just like HDY as of now, or Africa Oil a few years back. The closer these companies come to drilling their oil prospects, the higher the speculation goes to start to reflect the real potential numbers from their assets. This still is yet to happen to ERHE and we are 8 months away from drilling.
The second investment opportunity is what I will now refer to as the FEAR-GAP. I will describe this below….
It really boils down to a huge over done price correction based primarily off of fear tactics employed on this board.
I agree 100% that the dilution was bad. I absolutely wish it hadn't happened the way it did. I am also fairly close to some people’s position on blaming management for mismanaging their cash to put ERHE in this dilution mode. My main difference is that I highly doubt this management will change (even with this major blunder). I neither praise nor condemn this management at this point as I see it as a futile effort and certainly not productive to my investments value.
Before the CD's were being sold, ERHE had about 730 million shares out at approximately .05. That is a $36.5 million dollar market cap for this company and it's assets. Within the last 12 months, the share price had a high of .10 which is a $73 million dollar market cap. That is all with the exact same assets and same management as the company currently has.
Two main differences are:
1) ERHE is 12 months closer to drilling than when the first CD's were sold. At that time, CEPSA/ERHE hadn't completed the studies nor made the decision to go straight to drilling. This fact alone should have a major positive effect on the market cap of this security.
2) Dilution of shares are now between 2.7 Billion and 3 Billion. Let's use 3 Billion current outstanding to compare Market Cap effect. Without the fear tactics promoted on this board, if we took the same market cap ($36.5m) the company had before dilution (and before the decision to go straight to drilling), and divided it into 3 Billion shares, the share price should be at .0122. If we looked at the high market cap in the last 12 months, that would equate to a current share price of .0243.
This FEAR-GAP between the low of a few months ago (.0003) and .0122 fully diluted shares, is the investment opportunity to regain as the fear tactics slowly prove out to be false. In fact, the current share price as of today's close (.0026) still presents a FEAR-GAP of nearly 5 fold to 10 fold based on the low and high market caps in the past year (still prior to the decision to drill). THIS HAS NOTHING TO DO WITH KABOOM or other rumors.
Now, let’s add the two investment opportunities together…… speculative growth as we close into drilling and the FEAR-GAP closing.
First, you need to make a little speculative guess as to what the now fully diluted share price or market cap will get to as the drill bit hits the ground in March 2016. If it was hovering at 36 to 73 million 1 and ½ years to drilling, where should it get to the day before drilling? Prior to the fear tactics and dilution, I would have conservatively guessed between .30 to .50 or a market cap of $219 million to $365 million. Again, this is assuming NO KABOOM deal, no Chad partner, No EEZ partner, No re-kindling of JDZ, No NGAR or TSX exchange, etc…. This equates to a share price of .073 to .1216 fully diluted to 3 Billion shares outstanding.
See, even the board of directors that fully maxed out their options and purchased more shares at .075 still have a real possibility of gains on their investment in the next 8 months. Not too shabby and still without the KABOOM effect!!!!!
Now, is there any wonder why Peter Ntephe and Sylvan Odobulu (CEO & CFO) have been purchasing over 100 million shares combined from above .01 in December down to the lows of .0004 and they still continue purchasing as of recently up to .0035?
AI
