ERHC was often compared to another small Oil and Gas asset holding company which also explores in West Africa.
ERHC's non-operator model for deepwater exploration was called into question, and we learned that the other company had replaced their CEO with a "real oilman" and they were going to become a deepwater operator and go it alone.
ERHC chose the other route, instead farming-in actual operators with deep pockets who gave ERHC $45 million in cash and a free carry.
Both companies had disappointing drill results, but with a major difference.
ERHC saw 5 wells drilled at zero cost, on-time and on-budget, and received $45 million. They are now in between exploration phases on that asset, with all cost carried.
Since then ERHC has gained good standing with the SEC after a difficult 6 year battle, and succeeded in major diversification, gaining additional huge deepwater assets in the EEZ, and additional huge onshore assets in Chad and also in Kenya.
The other company decided to play at becoming a deepwater operator, and only managed 1 well which was a fiasco. Rather than operate it, they subcontracted the work and failed to even supervise, resulting in a 500% cost overrun. Now they have no money for even a second well on their single asset and must desperately try to follow ERHC's example and farm-in a qualified operator at a position of weakness. Their future is in doubt.
The other company also did not diversify, and now that their single asset looks less promising with a duster, with a 4 year expiration, they now have a very questionable future and their shareprice collapsed from $7.78 to .76 cents today. Their expenses and salaries are about $1 million per month, and they refuse to cut back despite the failure of their deepwater operator model.
ERHC is able to run their company, and even grow their assets on about a third of the costs.
For 2012 ERHC is up 100% from its low.
For 2012 the other company is down 79% from its high.
ERHC has proven that having a CEO who understands the importance of diversifying risks, building the asset portfolio, and not playing at being a deepwater operator is the superior model. Period.
