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AC, one more question I always wanted an answer to:
In the STP EEZ we claim right to two 100% signature free blocks (choice numbers 4 and 5) and to two 15% choices, signature payable, of our pick (effectively choice numbers 1 and 2). This is in conflict with a third party which has 100% rights to choices numbers 1 and 2. Has this been resolved? Also, how will the $ amounts be assigned to our 15% signature bonus payments since the blocks they apply to will be given away before bidding occurs?
NY Times article on oil, STP and ERHE.
Talk about publicity...
http://www.nytimes.com/2007/07/02/world/africa/02oil.html?_r=1&hp&oref=slogin
And then the tape was painted in the last little bit today with some really small buys. Same as yesterday. Does this mean anything to anyone?
Oil Production at Cantarell Declines 25% in 2006
http://www.greencarcongress.com/2007/01/oil_production_.html#more
30 January 2007
Cantarell_1
Production from the PEMEX Cantarell complex in 2006. Click to enlarge.
Oil production from Mexico’s giant Cantarell offshore complex, which now accounts for 50% of PEMEX’s total output, declined 25% during the course of 2006, according to statistics from the Energy Ministry available on the Sistema de Información Energética.
Total Cantarell output dropped from 1.978 million barrels per day in January to 1.493 million barrels per day in December. The Akal-Nohoch field—the main component of Cantarell—declined from 1.920 million barrels per day to 1.439.
Although the sharp decline was partially offset by production from other fields, Mexico’s total petroleum production dropped 12% from 3.371 million barrels per day in January to 2.978 million barrels per day in December.
The decline is more rapid than PEMEX has projected. In testimony before the Energy Committee of the Mexican Senate in November 2006, PEMEX CEO Luis Ramirez Corzo said that production at Cantarell would decline by an average of 14% per year between 2007 and 2015. (Earlier post.)
In August 2005, PEMEX forecast that Cantarell production in 2006 would average 1.905 million bpd—a forecast volume 6% lower as compared to 2005 production of 2.032 million bpd.
The data, however, show an average realized production of 1.788 million bpd in 2006, representing a 12% annual decline from 2005 to 2006—double the forecast.
Cantarell’s production peaked in 2004 at 2.125 million barrels per day, according to PEMEX. In 1997, PEMEX began nitrogen injection to maintain reservoir pressure. The injection regimen supported increasing crude oil production from 1.082 million barrels per day in 1996 to the peak in 2004. (Earlier post.)
The US imports about 1.6 million barrels per day of crude from Mexico—about 12% of the total—making Mexico the number two source of imported crude behind Canada. Saudi Arabia and Venezuela contend for the third spot, according to data from the Energy Information Administration.
ERHE also gets 15% of each of two blocks of their choice in the EEZ. This is not really clear because it implies that we get 15% of each of EEL's first two choices. (This was stated in a 2000 business day article). If I remember right we have to pay signature fees for our two 15%'ers.
...and Syntroleum also sold its exploration and production holdings to... EER:
http://www.syntroleum.com/pr_individualpressrelease.aspx?NewsID=942975
Syntroleum Announces Sale of Its Exploration and Production Holdings
TULSA, Okla.--(BUSINESS WIRE)--Dec. 18, 2006--Syntroleum Corporation (Nasdaq:SYNM) announced today that its subsidiary, Syntroleum International Corporation, has signed a letter agreement with Energy Equity Resources Limited ("EER") for the sale of Syntroleum's exploration and production holdings. Syntroleum could realize up to $25 million from this sale, subject to certain conditions.
The transaction will be effected through the sale of 100 percent of the stock of Syntroleum International Holdings, Ltd. and Syntroleum International Holdings Company. Through a subsidiary, Syntroleum International Holdings, Ltd. and Syntroleum International Holdings Company own Syntroleum's 25 percent cost bearing interest in Oil Mining Lease ("OML") 113, which includes the Aje field, and its 20 percent interest in the Ajapa field in OML 90. Both fields are located off the coast of Nigeria.
EER has paid Syntroleum a non-refundable $2 million deposit, and will also pay an additional $10 million to Syntroleum by April 1, 2007, or at the time EER completes its raising of additional capital pursuant to any form of private placement or public offering, whichever occurs first. Payments of an additional $13 million could be earned from future farm-outs of the Aje field and initial production from the Aje and Ajapa fields. Closing of this transaction will occur on or before January 31, 2007.
"The monetization of our upstream exploration and development interests through this transaction is beneficial to Syntroleum on several fronts," said Jack Holmes, president and CEO of Syntroleum. "The elimination of both our capital cost obligations and the commitment of our management resources to upstream activities, coupled with the proceeds realized from the sale will allow us to more closely focus on the commercialization and funding of our portfolio of technologies on a global basis."
Previously, EER and Syntroleum's subsidiary, Syntroleum Nigeria, entered into agreements whereby EER obtained a 7.5 percent interest in OML 113, and a 20 percent interest in the Ajapa field.
OT: While we're all waiting...
http://www.businessjive.com/nss/darkside.html
Ethanol has only 2/3rds the btu's of gasoline per gallon. So you go to the pump once every 4 days instead of 6. Gasoline is an incredible resource.
Deleted posts on ihub ERHE, mongo's then mine.
Posted by: Mongo1071
In reply to: None
Date:6/3/2006 8:12:23 PM
Post #of 57396
OT: Who's minding the store now? Who's shift is it?
http://www.sec.gov/Archives/edgar/data/799235/000114420406021834/v043939_10q.txt
Page 14
".....The Company's Chief Executive Officer and Chief
Financial Officer have concluded that as a result of the material weaknesses, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's disclosure controls and procedures were not effective..."
Happy Moderating
Mongrel
And pinecat's response:
The Company has now perfected its interests in the JDZ and is poised for full
operations. Accordingly, the Company has made changes to its staff to add the
skills necessary to achieve full operations.
Internal Controls Surrounding Corporate Governance:
As of September 30, 2005, the principal factors contributing to the material
weakness in corporate governance were as follows:
|X| Inadequate number of independent directors.
|X| Lack of independent audit committee.
|X| Lack of audit committee financial expert.
If these weaknesses were not addressed, they could result in material
misstatements of annual or interim financial statements that might not be
detected, corrected or disclosed in a timely manner, or at all.
Following the recognition of the above material weaknesses above, the Company in
the first and second quarter of 2006, appointed:
|X| Additional independent directors
|X| Additional independent directors as members of the audit committee
|X| A financial expert as a director and as a member of the audit committee
Wolfin, the problem isn't that straightforward; we don't run out of oil slowly. You've got to figure the Canadian/Venezuelan tar sands into the picture. We know sands cost somewhere around $40-50/barrel to produce since there is a big kick-start in sands development going on. There is a phenominal amount of oil tied up in sands, and this will temper the price of oil. What isn't figured into the equation is CO2 imbalance/global warming. The problem isn't that we don't have enough oil, the problem is we have to start paying for sequestering the CO2 for additional consumption.
Sorry if this has been gone over, but did we really pay Feltang about $13M to set up the Sinopec deal in which we only got $13.6M from them plus carry minus the interests in block 2 that we gave up?
What's wrong with my thinking here?
From the last quarterly:
Note 4 - DRSTP concession fee
As described in Note 3, during the quarter ended March 31, 2006, the Company
entered into production sharing agreements in Blocks 2, 3 and 4 under which they
sold various participating interests for total cash proceeds of $45,900,000. The
Company agreed to pay a $3,000,000 cash success fee to Feltang International
Inc. ("Feltang"), a British Virgin Island company that was responsible for
obtaining Sinopec's participation in Block 2. Under the agreement with Feltang,
in addition to the cash payments, the Company also will issue 5,250,000 shares
of common stock and warrants for 6,500,000 shares at $0.355 per share. The
common stock was valued at $4,803,750 based on the quoted market value of the
common stock on the date Sinopec signed the production sharing agreement. The
warrants were valued at $5,154,500 based on a valuation using the Black-Scholes
Option Pricing Model and the following assumptions; market price of $0.915,
strike price of $0.355, volatility of 115%, interest rate of 4.42%, dividend
yield of 0% and expected life of 4 years. Following is an analysis of the sale
of the participating interests in blocks 2,3, and 4.
Oil-cowboy: If the past has a trend to the future, neither the increase in $/barrel or Nigerian political climate will have much of an effect on ERHE, at least in the next 6 months. Probable reserves are months away. Our pulling oil out is years away. The only things that have affected our SP in the past 3 or so years are:
An LA times article pointing to our very supurb rights.
The start of the first round of the JDZ.
Us not getting rights in the 1st round.
The coup in STP.
The buy-off of debt by Offor and the loss of the going-concern clause.
Partnerships and then the loss and then the gain of partnerships.
The prelude to the second round, lots of rumors.
The aftermath to the second round (now what? for months).
Final validation.
Rumors of Chevron find in Blk 1.
I have trivialized this agonizing process, but the price of oil has apparently had no affect on our SP thus far.
Visitors:
From post 44443
"Chinese president's trip to the United States
When: Starting Tuesday is President Hu Jintao's first visit to Washington since becoming China's leader in 2002." Also, the Morse code message told us who was buying shares, all of about 2 million max that day? They weren't buying on the market. My guess is Manti is right, though 2 questions remain: what price and what dilution?
OK Brez, you won by a nose.
Oilphant, thanks for all the ideas. On Easter my daughter gets a treasure hunt where each clue leads to another -and finally- her Easter basket. Very apropos for us leading to your "by Easter" surprise. "Visitors" Chinese?
XOXOXO
Taxes. Coloradans that have owned Colorado companies such as ERHE for 5+ years do not have to pay state tax on their earnings from those companies. Nice benefit, a little less than 2 years for me to go....
UPDA? Why? eom
Missing posts. Why not post them on RB? Or create a link to missing posts where they can be viewed if desired? Most of us are big kids and can read #!?'s and racial epithets etc. and just get on with it, really. Most of us are pretty puzzled by Mongo being able to erase his old RB messages. iHub was meant for openness, clarity and brevity.
Meridian, a while back I asked you about the status of ERHE and EEL in the STPEEZ. Both companies apparently have rights to the two most prospective blocks in the STPEEZ; EEL has two 100% rights and ERHE has two 15% rights. Obviously these can't be granted simultaneously. Any hints as to how this is expected to be resolved?
Aussie/Rocky You might also try uploading the extension "linky" in firefox. It allows you to select all the messages on the page and load them all at once into tabs in the background. Then you read and close as you go, very good for everyone but those on the fastest T1 lines.
A comparison of our interests before and after these deals shows that the relative signature value of block 4 has gone up 2.7-fold, block 3 1.9-fold and block 2 3.6-fold since original bids. The minimum value of ERHC's holdings for just blocks 2-4 is $153M. This includes our cash and avoidance of signature bonus fees.
See the table below.
Block %orig_owned %retained %traded $tradedFor OrigSigVal NewSigVal NewValERHC*
4 25% 17.7% 7.3% $18M $90 $247M $61.6M
3 20% 10% 10% $7.5M $40 $75M $15M
2 30% 22% 8% $20.4M $71 $255M $76.5M
.... .... .... .... .... .... .... .... .... .... .... .... .... Total $153.1M
Let me get this straight, in block 2 we gave up 8% of our original 30% for 20.4 million dollars, doesn't that indicate that the effective signature for the block was (100/8)x20.4 = $255 million! And that's discounting the carry............
Jeez, when I'm home I'll do some more calculations
this is absolutely amazing.
Congrats, one and all longs!
Meridian, about the STPEEZ and our two 15% signature bonus payable rights: are these really applicable to the 1st and 2nd best blocks of the STPEEZ (followed by our two 100% rights in 4th and 5th best slots)? How does this work out with Equator Exploration Limited's 100% preferential rights in the best two blocks?
As you're used to hearing: THANKS FOR YOUR INFO!
It's funny that Afren's SP did not go up appreciably yesterday. On Monday it did go up 8%. You would think that if a major hit occured Afren's stock would show a greater rise than ERHC. EEL's has also not gone up appreciably. Something else is afoot.
Snow, BB, good posts. Offor and Co wrote some very nice contracts with both Noble and Pioneer; 1) neither of them walked before Offor was ready, 2) there was wriggle-room to pull better partners out, and 3), there have been little negative comments coming from our previous partners, (so nothing too unexpected or nasty came about). I bet Exxon is telling Pioneer "I told you so". As for the stock price, remember, you and I are small-fry. There are big boys at XOM, Noble, Devon and Pioneer that may still be slowly selling and big boys at Addax and Sinopec buying. Its probable that our SP has largely been reflecting this dynamic in the last 6 months rather than the glaciatic progress of the JDZ or the AG report. Humble guess, but the deep pockets at Addax are tied up in their IPO and the deep pockets at Sinopec are not as savvy as XOM et al.
Yes, it appears that the JDZ has been waiting for Sinopec to come together, the AG report may have fed into this waiting game. However, the whole process really seems to be wrapped up at this point --it's interesting that the Sinopec deal was announced after Obasanjo and Menezes met followed by the JMC "budget meeting". I wonder why the second round was rushed just enough for Sinopec to come up with a bid in block 6 but not a full-blown take-out of block 4? (Answer: Offor).
We now need to figure out what Sinopec has in the area in terms of available drill ships.
The STPEEZ is a muddy affair. ERHC's 2 100% blocks are signature free, call them choices 4 and 5 in the STPEEZ. But their other two 15% picks (which they can take in the best two blocks of the STPEEZ) are signature bonus payable. Moreover, these two 15% choices presumably overlap the two best blocks already promised to EER as signature bonus free. So how they establish the price ERHC will have to pay is not clear. Its possible that if EER gets them for free, our portion of the signature bonus would be free too? John Coleman was tight-lipped about this a year ago; probably this is going to take some horse-swapping and legal wrangling. Wonder what Barry Morgan's take on this is?
The business wire article is google cached at:
http://64.233.179.104/search?q=cache:_Flvx8GdmOUJ:www.prnewsdirect.com/rls/2003/04/30/PD_BW_23120551....
The quote (if it prints up properly) is:
"
ERHC's DRSTP EEZ Rights
ERHC retained its exploration rights in DRSTP's Exclusive Economic Zone ("EEZ").
ERHC has the right to acquire 100% working interest in two (2) blocks of its choice in the EEZ, subject to DRSTP reserving three (3) blocks of its choice. There are no signature bonuses to be paid on these two (2) blocks. ERHC additionally has the right to acquire 15% working interest in any two (2) blocks of its choice in the EEZ and would pay its proportionate share of signature bonus on these two blocks.
For simplicity, assuming that ERHC "ranked" the blocks in Choice order and DRSTP had reserved Choices 1, 2 and 3, the percentages and signature bonuses payable in each option pick are as follows:
Working Interest
Option Pick Percentage Signature Bonus Payable
----------- ---------------- -----------------------
ERHC/Block Choice 1 15% 15% of the total
Signature Bonus
ERHC/Block Choice 2 15% 15% of the total
Signature Bonus
ERHC/Block Choice 3 0% n/a
ERHC/Block Choice 4 100% $0
ERHC/Block Choice 5 100% $0
As in the JDZ, ERHC is not precluded from bidding for additional working interest in any block in the EEZ either alone or in partnership with other oil companies.
DRSTP has indicated that it would attempt to hold its EEZ licensing round as soon as possible after the conclusion of the JDZ licensing round.
"
My bet (only opinion!) Pioneer buys 10% of ERHE valued at $3. Also trades a carry to first oil in blocks 2 and 3 for ERHE warrants for another 20% or so. OK: shoot.
Upatnight. Technically the rights ERHE has in the JDZ state that ERHE and Exxon combined may exert premption in no more than 40% of any one block. Originally, it was expected that XOM would have taken their 25% rights in block 4 leaving ERHE to exercise only 15%. Unexpectedly, XOM didn't exercise in blocks 2 and 4 thus leaving ERHE to taking their most significant rights in these blocks.
On the previous post the tax rate should be 0.3, not 0.7, however, the tax rate is actually probably already worked into the $3/ barrel valuation. That would put us up to $0.65 for just block 4.
Thanks, rambus.
From page 10:
"At a discount rate of 10%, a barrel of undeveloped oil has a value of approximately US$2.00 for an oil price of US$25 per barrel, rising to over $3.00 per barrel for an oil price of US$40 per bbl."
For block 4 alone:
1 B boe x 0.7 (tax) x 0.7 (carry) x 0.25 (rights) x $3 (at$40/barrel) x 1/ 0.8 (B shares) = $0.46 per share
Ignoring 10x P/E and 10 years production time.
Am I low-balling something?
Thanks, rambus, for the model JDZ PSC. Two main points: the tax rate for our interests lies between 67 and 76% (Jeez that's a lot) and any natural gas we produce is ours untaxed.
From the doc:
V. FINAL REMARKS 36. Considering that the JDZ blocks are located in the deep waters of the Niger Delta, the Model PSC represents a good balance between the petroleum prospectivity, and fiscal terms, which should stimulate operators both to reduce costs and produce efficiently. Within the overall fiscal regime established by the Regulations, and the Model PSC, the JDA’s take, i.e., the percentage of revenues resulting from the operations to the JDA (to be apportioned between State Parties – Nigeria and Sao Tome and Principe) will be approximately 67% (undiscounted), or 76% (discounted at 10%).
Balance, I'm sure you noticed that the article is about the STP EEZ, which is a long way off, not about the JDZ.
My best guess why NBL withdrew is that there was only room for one buy-in suitor for ERHC and Pioneer took it. NBL did not want to carry ERHC under their contracted terms when ERHC gave an ixnay to NBL's buy-in offer. NBL couldn't withdraw (as per terms)until the JMC OK'd a replacement. Devon withdrew knowing that NBL was going to eventually withdraw. ERHC did the typical scenario; it courted two suitors and Pioneer brought the nicest chocolate to the date. Groups associated with NBL sold stock when the ERHC decision was made, price went down. IMHO.
Balance, even EEL does not (apparently) get to move forward in the STP EEZ until ERHC has made their two 15% signature bonus payable selections, presumably in the best two blocks that EEL has chosen. You are right, NOTHING in the STP EEZ moves forwards until our rights are perfected.
Balance, additionally, If XOM were in the same block as ERHC, they would in effect be adding to ERHC's SP by association, and it would cost 'em more to buy us off.
Homeport, thanks for all your translations, BTW.
This article, now only a cache on google originally from business wire, explains ERHE ownership in the EEZ as being able to take 15% from the very best two blocks of the EEZ. That implies 15% of each of EEL's two favorite blocks, signature bonus payable. Not sure how the sig. bonuses are determined (maybe as 15% of EEL's low sig. bonuses?). John Coleman never explained it, was very cryptic when asked, maybe a question for Ms. Buks?
Don't know how to get the article direct, but do a google search for
"ERHC president explains recent" and then select the cached article.
Here is the pertinent part from the cached article:
ERHC's DRSTP EEZ Rights
ERHC retained its exploration rights in DRSTP's Exclusive Economic Zone ("EEZ").
ERHC has the right to acquire 100% working interest in two (2) blocks of its choice in the EEZ, subject to DRSTP reserving three (3) blocks of its choice. There are no signature bonuses to be paid on these two (2) blocks. ERHC additionally has the right to acquire 15% working interest in any two (2) blocks of its choice in the EEZ and would pay its proportionate share of signature bonus on these two blocks.
For simplicity, assuming that ERHC "ranked" the blocks in Choice order and DRSTP had reserved Choices 1, 2 and 3, the percentages and signature bonuses payable in each option pick are as follows:
Working Interest
Option Pick Percentage Signature Bonus Payable
----------- ---------------- -----------------------
ERHC/Block Choice 1 15% 15% of the total
Signature Bonus
ERHC/Block Choice 2 15% 15% of the total
Signature Bonus
ERHC/Block Choice 3 0% n/a
ERHC/Block Choice 4 100% $0
ERHC/Block Choice 5 100% $0
As in the JDZ, ERHC is not precluded from bidding for additional working interest in any block in the EEZ either alone or in partnership with other oil companies.
DRSTP has indicated that it would attempt to hold its EEZ licensing round as soon as possible after the conclusion of the JDZ licensing round.
And Afren is up to 60 pence, that puts our valuation at about $2.92/share:
http://www.lse.co.uk/SharePrice.asp?SharePrice=AFR&share=Afren
ERHC Energy valuation based on Afren
Today, based on Afren's current SP of 35.5 Pence, ERHE should be valued at a minimum of $1.55.
I know I've harped on this before, but there is a small shell company, Afren, that bought up 4.41% of block 1 from EER. You can do some pretty straightforward math with some pretty conservative comparisons and estimate that ERHE has about 16 times the oil rights in the same area (and this factor does NOT include our STPEEZ rights).
Oilman57, start with an excel file I posted last March on EF (under files) called ERHE eval afren, and start your evaluation. You keep on telling us that we are currently valued correctly, but Afren allows us a fairly direct market comparison of our rights. I would not simply assume our SP is fairly valued by the market. I agree with others, this stock is being heavily manipulated. Thanks for everyone's postings, BTW.
I particularly like that you can train the dog to crap on Joe's bald head under manual mode.
Rancho: Nigeria and Sao Tome are actually trying to shed big oil for transparancy and indiginous industry. Bravo to them. Hope they can get away with it. Here ERHC sits as the perfect tool: 1/3 Indiginous, 1/3 U.S. and 1/3 Offor. What a perfect way to bring Nigeria and Sao Tome onto their own footing. As to why Exxon and other majors didn't bid in this round, I can come up with only 3 possible reasons:
1)big oil is not used to an open process where their greasy, money-dripping handshakes weren't allowed to compete with African behind-the-scenes-backsratching/brotherhood,
2) someone at Exxon screwed up, or
3)the seismic didn't look THAT great.
I have the feeling its 1).
SH70, the funny thing is, if you look at blocks 1-4, the US came out owning probably about 80% of the rights anyways, since Chevron, Exxon, ERHC, Devon, Pioneer, Noble and Anadarko are all US companies.