Interview at NAPE Expo with ERHC Energy Inc. President and CEO Peter Ntephe
(All text below from interview)
This week ERHC Energy exhibited at the International Pavilion of NAPE Expo, the world's largest E&P (upstream) expo, which drew approximately 20,000 attendees and exhibitors to highlight producing properties and prospects from around the world, capital formation and services and technologies. We took the opportunity to talk with ERHC Energy President and CEO Peter Ntephe about the Company’s activities in Africa and priorities for the coming months.
Question: Why have you been quiet in recent months regarding Production Sharing Contract (PSC) negotiations related to ERHC’s offshore assets in the São Tomé and Príncipe Exclusive Economic Zone (EEZ)?
Peter Ntephe, President and CEO of ERHC Energy: We’ve actually put out quite some news on it. At the end of December, we filed our Annual Report on Form 10-K and announced that while we had hoped to conclude the PSC by the end of the year (2012), a few clauses remained that we were still talking over with the Sao Tome and Principe National Petroleum Agency (STP-ANP). We are working hard with the agency to round up on this and look forward to finishing the PSC in due course.
It sounds as though you expect to be able to wrap that up rather quickly?
That is our intention. We are confident that we can soon have a final document that works for both sides.
Once PSCs are in place, then you’ll market the assets to E&P companies to farm-in?
We have already been talking with potential operators for some time. We’ve had several potential partners visit the data room that the STP-ANP maintains to look at the data on our blocks. You know that oil and gas exploration in deep water is very expensive and is highly technical. We want to get a partner that can operate in deep water and has the deep pockets needed to fund that exploration. We did that in the JDZ. Even as we continue the discussions with potential partners for the EEZ, we are forging ahead with the PSC. We will not delay the PSC negotiations. ERHC has no signature bonus to pay on its blocks so if we did sign the PSC before getting a big partner, we could start the preliminary geophysical and geological work ourselves.
What is the status of activities related to your oil and gas block in Kenya?
The Kenya Ministry has formally given the go-ahead for our 2013 work program for Block 11A in northwest Kenya so we can now move forward. Our first major step will be to do what is called an FTG (Full Tensor Gravity) gradiometry. This is a kind of survey, done from an airplane, which helps pinpoint better where oil and gas deposits might occur. One of the more successful explorers in Africa in the last five years has used FTG a lot and we hope to emulate their success when we use it in our block.
Last week, I sat through a presentation made by one of the companies that want to conduct FTG for us. It was quite interesting and I must say, got us quite enthusiastic about the prospects. FTG appears to be so much more accurate and revealing than conventional surveys.
Block 11A is rather large. How do you decide where to focus your work?
That is one of the reasons why we want to fly an FTG first. It will help us pinpoint areas where we can focus our geological and geophysical investigations and thereafter, drilling.
Where does ERHC stand in terms of discussions with potential partners in Kenya?
We are discussing opportunities with several likely partners. The industry has been excited about Kenya since Tullow discovered oil there last year. I would say we have two, big international companies that have shown the most interest. Many juniors have also expressed interest. None of their proposals are yet up to the minimum we expect but we continue to discuss.
In the meantime, we are planning to go it alone until such time as we get proposals that we think are in the best interests of our shareholders. As you know, we are currently running a rights issue which we hope will give us sufficient money to start exploration ourselves even if we don’t have a partner at the time we start.
It is always good to share risk (and cost) by getting in partners. We will continue with those discussions but will not delay our work program because of them.
Is your participation in NAPE Expo focused on attracting farm-in partners?
NAPE has been about getting our story out there, whether it is to farm-in partners or to the industry and the markets generally. We plan to do more of such outings this year. Exploration Manager Gertjan van Mechelen has been our man at the show and he does a great job of explaining what we know about the prospects for our exploration blocks in Kenya and Chad.
Where is your focus in Chad?
We have two focus areas, both in one of our blocks, BDS-2008. These focus areas lie north of some major discoveries on a rift margin along what geologists call the Central African Shear Zone. Rifts are geological occurrences that have hosted a lot of past oil and gas discoveries.
Is there anything you can tell us about the rights offering?
The rights’ offering is going on right now. It gives our shareholders the right to buy one new share of the company for every three shares they held on December 27, 2012. Each share in the rights is being sold at $0.075. We want to use the money we raise through the rights offering to start our Kenya and Chad exploration programs, with or without partners. We decided that our shareholders should have an opportunity to contribute the money that the company initially needs and avoid dilution of their holdings.
What are ERHC’s alternatives beyond the rights offering?
The rights offering is a starting point. Our existing shareholders deserve to be given the choice to provide the capital the Company needs before before we approach new investors. We thank all those shareholders that have already exercised their rights and in some cases have exercised the privilege to oversubscribe. We also call on those who still intend to do so to exercise on or before the closing date of February 28.
Did the extension of the rights offering suggest there have been problems with it?
Many of our shareholders see it as a good way to directly participate in funding the Company. We decided to extend the offering after learning that a number of our stockholders did not receive the materials from their brokers. Also, some overseas shareholders told us that because of international postage delays, they got their materials well into January which did not give them enough time to finalize before the earlier closing date of January 31.
The essence of the rights is for us to raise as much money as possible from our existing shareholders within the limits of the rights offering and of course, to give them a chance to avoid dilution. So we felt it was only fair to extend the deadline to give everyone who wanted to do so an opportunity to take part.
.
