ERHC Energy Inc (ERHE)

[TOB]

ERHC exploring the Tullow Sweet spot in Chad.

I also discussed this with Geoscientist Martin Wensrich who is focusing on Chad in particular, as petemantx also recounted from the ERHC shareholders meeting and you have gleaned from the presentation.

(Scroll down for all text and charts)

Previous Oil & Gas exploration theory was to drill more distal formations from the rift itself. For example the discoveries that border ERHC 's BDS 2008 reflect this, as does prior drilling in Uganda and Kenya which came up disappointing.

Then Tullow came along and drilled closer to the rift, testing a newer theory that the oil tends to flow in that direction, towards the rift, not away from it more central in the basin. The result was the opening of two new petroleum basins with the major discoveries in Uganda and Kenya where others had drilled without much success.

As your chart shows, ERHC has chosen their Chad Focus Area 1 and Focus Area 2 using the same theory, just riftward of existing discoveries. The advantage being that those existing discoveries have already proven working petroleum systems.



The chart also shows OPIC Benoy-1, which also was closer to the rift than prior drilling. This was OPIC's largest ever overseas discovery which they estimate will net $1.6 billion for about $42.78 million spent.

We can see also that Chad Focus Area 2 is directly in-trend with OPIC's Benoy-1 discovery, just as Chad Focus Area 1 is directly adjacent to existing discoveries that Griffiths plans produce with an extension of the Chad-Cameroon pipeline.



For these reasons I've previously mentioned that Chad has a higher probability of oil discoveries than Kenya, as it is hardly virgin territory. The two Southern ERHE blocks are adjacent to, and surrounded by, known petroleum basins and proven working petroleum systems. And by that I mean walking distance. So same basins and the same geology, but the sweet spot of that geology that was previously over-looked before Tullow proved it will Billions of barrels in Uganda and rumoured the same in Kenya with Ngamia-1 and Twiga South-1.

As this chart shows, ERHC is targeting the same geological formation and basin which has an existing oil discovery. This makes the probability of an oil discovery more in line with an appraisal well than an exploration well. Appraisal wells have much higher probability of success, of course, as they are delineating known working petroleum systems and oil discoveries, not exploring virgin geology.



Kenya alternatively likely has the potential for much larger discoveries, as it is in trend with both the 6 Billion proven in Sudan and Tullow's two Kenyan discoveries, but possibly lower probability than Chad - in theory - until there is closer drilling proving working petroleum systems.

I do recall some discussion that ERHC should give up Chad and only explore Kenya. Obviously this was very misguided and based only upon Kenya seeming more 'exciting', not the geology and certainly not a sound understanding of oil and gas exploration.

Both Chad and Kenya are highly prospective and part of why ERHE in 2012 has the best odds of success in the shortest time in its history. An entirely new situation than 2010. The idea and wisdom of ERHC 's diversification plan is to explore several regional geologies rather than put all their eggs in one basket again.

Yes it takes some additional fund raising to do this exploration, and no ERHC shouldn't just take any deal they can get for a JV out of desperation to see the share price have a little pop first. ERHC is playing for a big win here, not a few nickles or dimes, and bidding on additional exploration blocks as well.