ERHC Shareholders Meeting report
Preliminary vote counts.
There was a quorum, of the 737,518,835 shares issued and outstanding, 586,618,689 shares were voted, obviously far in excess of the 33% needed.
Both proposals have passed.
Proposal 1.
511,885,807 For
72,521,768 Against
2,211,105 Abstain
Proposal 2
341,858,523 For
25,394,276 Against
7.1,181 Abstain
ERHC is now authorized to proceed with the much needed fund raising which has the potential to add huge value to shareholders.
Rights Offerings to existing shareholders will be the first fund raising effort, which will allow existing shareholders to remain undiluted at favourable terms should they choose to participate. Private offerings will also be made available, as before. There are currently no plans for use of the preferred shares.
The initial Rights Offering terms could be released in a few weeks, but certainly before the end of the year as ERHC intends to move aggressively in exploiting its highly prospective assets in Kenya and Chad. Especially in Kenya for reasons I’ll explain further in future posts.
They intend to raise about $45 million, enough to cover the first two years exploration in Kenya and Chad. Not all in one tranche however. This is also a fallback amount as the entry of a Farm-in partner to either or both of Chad and Kenya could reduce greatly the need for ERHC to raise funds. But as I’ve stated in the past, ERHC wants and needs to be negotiating with potential farm-in-in partners from a position of strength, fully able to go it alone. The terms will be much better as a result should ERHC choose to have a farm-in.
There are also other exploration assets that are being bid for and could add to ERHC’s fantastically diversified portfolio of exploration blocks.
The first year work program in Kenya is estimated at $12,151,00 and the second year at $15,640,250
The first year work program in Chad is estimated at $4,504,651 for 2013 and the second year $12,764,006 for 2014.
Chad is less aggressive than Kenya because the time frames, size of the blocks and relinquishment requirements are very favourable with the unique single PSC. Kenya needs to be pounced on quickly.
Yes, the actual expert scientists confirm that both Kenya and Chad are highly prospective.
“Existing data point to prospectively of assets.”
I’ll go into more detail in the future, but my posts to date on the subject were clearly spot on and met with much confirmation and additional detail from the experienced oil and gas exploration scientists present at the meeting.
Chad has the highest probability of oil discoveries, obviously, as I have written about in the past, as two ERHC’s massive southern blocks are actually adjacent to proven petroleum systems. Also Chad has the great advantage of the advanced stage of the proposed extension Chad-Cameroon right along the border with ERHC’s two most attractive southern blocks. The expected reservoir size of any one target in Chad is more moderate, using the already proven 900 million barrels in the adjacent petroleum basins as a model, with targets expected to be in the 10 to 40 million barrel range.
But as this is onshore, and an entire development can be done for less than the cost of one deepwater exploration well and no massively expensive FPSO is needed, the profit per barrel is much higher and the threshold for commercial oil is vastly lower. Just a small discovery can take the ERHE share price much higher.
Kenya likely has the greater potential for a massive discovery, being on trend with billion barrel discoveries in similar geology. But, as it is not directly adjacent to and an extension of a known petroleum basin, yet, it is perhaps lower probability than Chad at this early stage of exploration.
However , Kenya has more existing seismic and gravity studies, as I’ve written about in some detail and was confirmed by the scientists of the technical team who were present at the meeting.
ERHC's Kenya block is on trend with the intersection of two highly prolific geological systems where billions of barrels have already been discovered and Tullow, Marathon, Total and others are active, or eager to explore further. In most cases one prolific geological trend or the other, ERHC's block has the intersection of both!
Large potential basins in two parts of the massive Kenya block have already been identified from prior studies. Neither is anywhere near the tiny slither that may or may not be disputed with Sudan. No issue there at all.
The Board of Directors and ERHC executives were relaxed, confident, and exuded optimism. There was ZERO issue with admittance, with just the secretary pleasantly verifying the admittance requirements as fully expected. As a shareholder I was made to feel very welcome.
The CEO Peter Ntephe gave an excellent and well balanced presentation, just as at the previous ASM. He made an excellent case for why ERHE has tremendous potential and opportunity at the current share price, but also carefully and responsibly emphasised that exploration is a high risk business, with potentially extremely high reward.
However, he clearly and compellingly illustrated a point I have made in recent days and often in the past; that ERHE has a very high potential return at the exploration stage starting from the current low share price, with comparisons to other small exploration companies and ERHC’s historical share price.
The CEO Peter Ntephe emphasised that rapid share price appreciation is most likely in the Exploration stage starting from a low share price, as we are at now. With a potential large increase as studies identify good drilling prospects, and pre-drilling excitement takes hold.
As I’ve often noted, this has resulted in several opportunities for ERHE investors to make 800% or more on their investment several times over the past years. By buying in at the lows and taking some profits at the highs. Peter urged shareholders to consider taking advantage of such potentially huge profits should they occur again, as reward for the risk of buying in at the lows and investing in and supporting ERHC’s potential at this start-up stage for these new assets.
The next large potential profit curve comes right after discovery, and then levels off into the Development phase and Production phase. More conservative investors may wait for those phases, with proven reserves and a much higher ERHE share price buy in, but those who understand the high risk and potentially extremely high rewards of the exploration phase would be sensible in taking some profits at these peaks.
Again, using the JDZ as an example. Those buying ERHE at around the current share price of 12 cents had opportunities to take profits at 80 cents or higher. That was only one asset, now ERHC has Kenya, Chad, EEZ, JDZ and more possibly on the way. But none of them are ever guaranteed in the exploration business, the science is simply not at that point of pre-drill certainty. The ERHC CEO emphasised this, and your humble TOB has often made very similar points.
The ERHC CEO did not mention specific price targets, but spoke in general terms similar to what I’m illustrating.
Peter Ntephe did emphasise that the huge prize was possible without even a drop of oil being discovered, either through a buy-out based upon the portfolio of assets, or again, possible huge share price run-ups just based upon pre drilling excitement.
If your plan is to hold all your shares until buy-out or full exploration of all assets, I understand that as well. To each his own investing decisions and one must consider carefully the added risks of initiating new positions at these low share prices, or reducing the cost basis of an existing ERHE position. Nobody can predict with any accuracy the future share price.
But the idea of making excellent profits along the way should the opportunity present with ERHE, yet again, as it has several times in the past, is sound and worth consideration. Why not remove some risk and take some profits off of the table? Why not buy in at the lows which have historically been extremely profitable with ERHE?
Excellent advice from ERHC’s competent CEO who wants those investing in his company to share its success and make money and feel happy should the opportunity occur yet again, and also be comfortable with, and understand the risks.
The Rights Offering in particular is to offer the opportunity for loyal shareholders to take on risk at low share prices generally available only to institutional investors or those who buy in at the lows, before the excitement becomes huge and the share price runs up.
We have a perfect set up here once again with ERHE, just as there was prior to the JDZ drilling when it was also possible to buy ERHE below 20 cents. A perfect storm so to speak. Only now it is more like hurricane season as there is are several systems setting up, Kenya, Chad, EEZ, and (?).
The CEO Peter Ntephe also emphasised that he appreciates very much ERHC’s shareholders, and those willing to invest in the company’s future. He again stated that all suggestions, comments and criticisms from shareholders are passed on to him considered.
There was some good stuff too. But I’ll get into it further in future posts.
