Rare, semi annual post……..
1. Drilling Schedules
It is not unusual for an oil company to adjust priorities and timings in its drilling schedule as more information comes available on a particular prospect(s) in the portfolio. Wells themselves in new areas can have problems in drilling causing delays, causing shifts in spud dates for later in the program. In the current market, rebuilding a MODU (like the 30 year old drillship for Addax’s contract) can easily be seriously late beyond promised delivery. And although it is not talked about, the lack of experienced hands means that a rebuilt MODU coming out of a yard often does have delays in the first 1-3 wells as equipment and drilling teams shake out. Long story to say that the first wells on ERHC blocks could quite easily be in 2009 and today we just cannot predict that closely.
2. Conjectures and probability
The oil industry is famous for its P10, P50 and so on. Suppose four independent factors each have an even shot of happening (probability of 0.50) and it takes them all to reach the conjectured outcome, then the probability of the conjectured outcome is 0.5 x 0.5 x 0.5 x 0.5 or 0.0625, i.e. no longer a 50% shot but a 6% shot! Add a couple more factors and it goes to a 1:64 bet! I risk the possibility of boring you all with what you already know but mention it as I admit to getting weary with the dot connecting on the board when they often don’t connect, felt it appropriate to add a little balance to the situation, pun intended. The fact is with ERHE we just don’t have a basis to know what is going on most of the time.
But hey, I understand all the conjectures and oilygrams provide entertainment for some, to while away the boredom, it’s a free country!
3. ExxonMobil
It was revealing to me that with all their talent, time and money and full knowledge of OBO 1 that XOM bailed. Had it really looked like a probable huge find at OBO 1 as the boards chatter indicated at the time, then XOM could have just done nothing and waited for the elephant to mature, then sold or kept the interest. But they bailed and salvaged what they could, moved on. I got my intel wrong 1-1/2 years ago!
[Not the only guy from Texas that that happened to, LOL]
4. Indigenous oil cos.
IMO, these guys can be an FCPA trap, don’t have resources to follow through, need carries, don’t really understand the game, oftentimes are basically traders. Hence ERHC’s past potential partners - and XOM - did not bail like petulant children as some posters would have you to believe, just chose a route of sensible business. Anyone remember the grief of Texaco and Famfa? It does not take away from the value astute traders can create (which is why investors are here) but does argue for buyout at the right time.
5. ERHC PR
ERHC is a holding co., not even a royalty trust, so IMO it’s nonsense to imply being an operating oil co., e.g. don’t have the directors, leadership and staff to be taken seriously as a non op. But still a juicy buyout target.
6. What’s ahead
Despite the dose of FPCA leprosy bestowed by DOJ, that cannot go on forever IMO and ERHC may rise from its sickbed, maybe crippled and maybe not. IMHO the SP is about right for all the uncertainties. Anticipating the squeals from the cheerleaders, please relax. It seemed to me that a voice of caution from the oilpatch was again in order. I apologize being a month late in posting – said last time I’d post in six months. Last posts remain valid, timing has now slipped. Cannot rely on buyout miracles - geez, underwater and I have to keep all this stock for another two or three years for payout..….
Thus wondering about changing my IHUB ERHC handle from Stay the Course to Rip van Winkle……..
It does seem there’s more realism on the board now, and I do wish to thank posters for their wisdom.
Best to all
AI
