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Ignoring the value of a discovery *is* delusional. It won't be months before results are known. The drilling results are known NOW.
Try this... look at what Africa Oil did... Ngamia-1 thru 7ish were drilled and then they sold half their stake for $400M in carry and $400M in cash. *Half* of their stake was worth $800M. They started with 50% and kept 25% plus $800M. Use ERHC's percentages and do the math. You will quickly see that a 50 cent valuation is comical.
Anyway...
Tullow announced the Ngamia-1 discovery 61 days after spudding. Tomorrow is day 61 for us. Could it still be weeks away? Yep. Will it "probably be months"? Very doubtful.
What do you base "probably" on anyway, your penchant to be as negative as possible?
A billion dollar market cap will occur at 100M barrels (ERHC's share). The MEAN estimate is 662M barrels. There is a min and max to that MEAN, and a discovery at Tarach-1 skews the likelihood toward the MAX which means the 662 MEAN estimate could easily be exceeded.
Say the block pans out to 1B barrels, if ERHC only held 10% of the block by then this will be a $20+ stock.
It really is simple math.
I'm not planning to sell so I haven't reall watched others performance. The company and its buyer will know fair value better than I because they see all the data. We don't.
I'll let them set the price. Ntephe and Odobulu have over a million reasons to get the best price. For the first time in history the management of ERHE have a chit-ton of skin in the game.
It would suck to sell at $2 only to see the company bought for $12.
This discussion is irrelevant anyway... the plan, as stated by the company, is to sell the asset or the company upon discovery.
I believe that is how this will play out. Don't get me wrong, I *do* see dilution coming. I can see Offor or another strategic investor making a massive investment to drill half dozen or more wells so they can determine a fair value.
Let me put it this way, it makes sense to dilute as long as every percent of dilution increases the value by more than a percent. Diluting us 30% to increase the market cap by 100% doesn't bother me at all. It shouldn't bother anyone at all because they are gaining all the way.
That is how I see this playing out.
To be fair, if this well is a duster I think it's game over.
That would suck... but if they hit, it's gonna be really, really fun!
No. It took 3 years before Maersk gave them $800M for half of their stake. The ride the remaining 25% for free.
Their share price went from $1.75 to $10 going in to drilling Ngamia, but I don't know if they had anything else going on at the time. I haven't and don't follow them closely.
Not with a discovery. Why do you act like it takes $100B dollars to produce $10B worth of oil?
It's the other way around.
3 years from Ngamia-1 to Maersk farm-in, currently at 600M proven and a projected upside of 1.3B. Drilling "high impact" targets later this year.
It's all in Africa Oil's presentations.
A block to block comparison is not completely false. That's why seismic interpretation of Tarach were said to be analogous to Lokichar...
"Responsible for seismic interpretations in operated exploration licenses block 11A Kenya." The play of this area is oil bearing Silicoclastic reservoir in the synrift of Tarach Basin (Analogous Lokichar Basin Tullow oil discovery
What is happening in the Lokichar basin could happen, and may even be likely to happen, in the Tarach basin.
I'll use your numbers... "If we use a 20% COS Tarach would be 13.2 million if we compare on an equal basis"
Ngamia went from 45M estimated to and upside of 2B barrels. That's an increase of 44X
Using your number, 11A's 13.2M risked and blessed by YOU could reach 580M barrels... that's 44X original estimates, and this basin has oft been compared to Lokichar. Our results could be worse, but they could be better, much better.
That makes this a $30-$50 stock if all goes well.
CEPSA jumped on this for a reason.
We have exactly 1 thing, and only 1 thing, in common.
I have never traded ERHE either.
Paid promoters? LOL! Ain't nobody makin nuttin here!
we'll have to wait and see I guess. Man you waste a lot of time on this chit stock!
LOL!
Here it is, with links. Are you calling Africa Oil a liar?
"• World Class onshore oil discovery in the South Lokichar
Basin in Kenya
• Discovered oil resources of over 600 MM barrels with an
upside of 1.3 BN barrels"
Slide 4:
http://www.africaoilcorp.com/i/pdf/AOI-Corporate-Presentation-April-2016.v3.pdf
Slide nine from king's link:
http://www.africaoilcorp.com/i/pdf/CorporatePresentation_Jan_2012.pdf
shows that the Ngamia-1 prospect was estimated at 45M barrels. So they went from a basin opener estimated at 45M barrels to 600M barrels confirmed and a potential upside of 1.3B barrels.
CEPSA/ERHC's Tarach-1 is estimated at 66M barrels for comparison.
No amount of repeating this will make it true, but please continue...
"Until all this happens, ERHC will be worth pennies not dollars."
The obvious "who" is CEPSA... the "how much" is anyone's guess... CEPSA dumped another block and grabbed this one for a reason. If this well is a success, what they are willing to pay will be defined by their confidence in the block as a whole.
IMO, they won't pony up an offer until they know more, and they won't know more until they drill more, and ERHC can't pay for more drilling so.... CEPSA has to reach a carry deal with ERHC to proceed.
If that means we get diluted from a potential of $20-$30 per share and have to accept $10-$15... darn nice problem to have, IMO.
Of course it does. They have no income. The day I bought this stock I understood that dilution was inevitable. I did *not* see the last 2 years coming, and I still think it was avoidable... but to fund field development they have to dilute... period.
However, going forward... with a discovery... any of the dilution you fear will be tolerable.
Once there is proven ERHC could easily negotiate a carry from CEPSA for a small percentage of their share. Also, with proven they could borrow against the value of the asset. Another option would be a private placement of shares at a vastly higher share price making the dilution minimal. They could also farm-in another entity for full carry.
The word "proven" opens all kinds of doors to get it drilled.
It's a process, we all know that. A discovery give's ERHC the opportunity to get full carry on the rest of development similar to what Africa Oil did with Maersk after Ngamia-1 showed proven:
"The value of the deal is split between an upfront farm-in payment of $365 million, including exploration costs. Future contingent payments of up to $480 million will be made by Maersk Oil for the Lokichar Project"
Full disclosure... this deal came almost 3 years after Ngamia-1 and after several follow-on discoveries.
Africa Oil had 50% of the block and gave up half for the ~$800M farm-in fee/carry. They retain 25% of the block.
If ERHC's block is similar, ERHC could see $560M and retain 17.5% of their block... all things being equal in drilling results.
With an assumed 45M shares out, that $560M is $12.44 per share, and the retained 17.% would be double/triple that once it was "developed".
If CEPSA/ERHC's block mirrors the results at Ngamia, $30 per share is a fair value. Ignore the "words". The math is sound.
Yeah, king nailed it. I had been reading about the Ngamia field in Kenya and can across this...
"• World Class onshore oil discovery in the South Lokichar
Basin in Kenya
• Discovered oil resources of over 600 MM barrels with an
upside of 1.3 BN barrels"
Slide 4:
http://www.africaoilcorp.com/i/pdf/AOI-Corporate-Presentation-April-2016.v3.pdf
So I wanted to know where the estimates started before the first well, Ngamia-1. Slide nine from king's link:
http://www.africaoilcorp.com/i/pdf/CorporatePresentation_Jan_2012.pdf
shows that the Ngamia-1 prospect was estimated at 45M barrels. So they went from a basin opener estimated at 45M barrels to 600M barrels confirmed and a potential upside of 1.3B barrels.
CEPSA/ERHC's Tarach-1 is estimated at 66M barrels for comparison. I found the entire exercise enlightening and interesting.
Thanks king, that is exactly what I was looking for.
They started with a P50 of 45M barrels at Ngamia-1 and are up to 800M proven at the Ngamia field with touted high impact wells yet to be drilled.
Where does that put CEPSA/ERHC's 66M estimated Tarach-1?
Also at billion barrel potential down the line?
"Somehow the amount of dilution that will be needed to keep ERHC in the game is always left out of the equation"
I am in the camp that this company will be sold as soon as a reasonable valuation for the Tarach field can be assessed.
If Tarach-1 is a success any dilution thereafter will be minimal.
Your 200M share suggestion is possible, and even likely, *if* Tarach does not meet expectations. I believe it will be a success and dilution will be minimal..
DD challenge...
I have exhausted my available time to find an answer to this question:
What were the estimates for Ngamia-1 before it was drilled?
We'll see about that. I obviously don't agree with your vast underinflating of valuations and over inflating of dilution.
Time will tell.
Reaching total depth takes 6-30 days depending on well depth (see page 2 http://energyindepth.org/wp-content/uploads/ohio/2013/05/oil-gas-regulatory-gap-analysis1.pdf)
So by May 14 or so, they were at total depth. If there wasn't any oil, plug and abandon. We would have known before the end of May if this well disappointed.
So it must have not disappointed.
$16M market cap... with a discovery? You clearly must be joking.
AKPO sold for $7 per barrel, undeveloped.
Addax sold for ~$13 per barrel, in various stages of development.
Thankfully anyone looking at this stock can understand basic math.
Now let's talk about the IRS lien... on no, the "IRS lieeeen"...
1% of ERHC's share of oil in this well alone will take care of that.
Oh, the HORROR!
Let's just hope that this prospect works out like Ngamia has... from and initial 20 meters of pay to what is now being called a world class discovery... closing in on 800M barrels and with more "high impact" wells planned for that field this year.
Wouldn't that be fun!
It took them 61 days from spud to discovery announcement at Ngamia-1 in Kenya.
Don't believe what you're told on this board. From the SEC Filing...
"The number of shares of common stock, par value $0.0001 per share, outstanding as of April 30, 2016, was 42,204,558."
https://www.sec.gov/Archives/edgar/data/799235/000114036116065594/form10q.htm
You will get a ridiculous number.
Figure it out yourself... just pick a per barrel valuation ($9 is popular, although I think a bit low) and multiply that by the number of barrels and then 0.35 since ERHC has 35% of the block.
The market cap will be north of that number.
7,000-9,000 feet.
Page 2 is where it's at... 6-30 days... to "total depth"
We're there... they haven't plugged and abandoned, we'd know by now. They are in the 6-21 days of logging, production casing, and stimulating.
Hold on to your butts... countdown has commenced, IMO.
Maybe, maybe not. If they sell the asset for how ever 100's of millions it is worth and we are stuck looking at a cash rich company with madmen in control of the bank accounts the stock might not react well at all.
Then again, if the put $500M in the bank and the market cap refuses to recognize it I suppose a hostile takeover could get us our due.
After tens years of spiraling downward I just want this over with a solid buyout, but I do mean solid. I look at it this way... if this well is a success... estimated and 66M barrels... and it derisks the rest of the block. My math goes like this:
- Total block estimate: 662M barrels
- Assume 50% success rate, 331M barrels
- Assume 50% recoverable, 165M barrels
- ERHC's share (35%), so 57M barrels * $9 per barrel, or $521M market cap
- Assume 45M shares out, so roughly $11.50 per share
Anything in that range and I'll gladly walk away.
If you go to google finance and type Tullow you can pick the listing you want. I just looked at TUWOY and swet the same time frame. That graph looked identical to the one I posted although the currency appears to be different (Pence in TLW and Dollars in TUWOY?)
Anyway, the percentage move is the same.
Africa Oil gained $2.25 per share during that 2 months...
They had 322M shares out...
http://www.africaoilcorp.com/i/pdf/AOI-2012-Q1-Report.pdf
So Ngamia-1 added $724.500,000 to their market cap. Assuming ERHE shares out of 45M, that's $16 per share.
Not bad!
Don't defend management failure. We deserve to know. It is OUR flesh these carnivores have eaten for the last 2 years.
They OWE us for those painful meals.
There was no communication from spud to discovery announcement. And Tullow share price didn't indicate anyting either:
I've said it before, this is gut wrenching "place your bets" time.
If they hit oil, you have to be in to win. Waiting for confirmation could be the difference of paying $0.06 or paying $6.00.
And if they don't hit oil you could lose everything. That is the gut wrenching part.
Tullow spudded Ngamia-1 on January 25, 2012...
http://finance.yahoo.com/news/Africa-Oil-Spuds-Ngamia-1-iw-2094686344.html
Tullow announce the Ngamia-1 discovery on March 26, 2012.
http://www.tullowoil.com/media/press-releases/ngamia-1-oil-discovery-in-kenya-rift-basin
That's was 61 days from spud to announcement. CEPSA spudded on April 14th. June 14 is the 61st day from ground breaking. I understand things don't always go the same, but we're getting real damn close to show time!
"Why did CEPSA take a gamble here with even worse odds, and go immediately for drilling?"
And why did Ntephe and Odubulu and Offor take a gamble with another $550K of their own money on the minnow?
I believe there was/is a whisper number on the odds of success that is far, far higher than the industry standard 20% publicly stated.
Answer in tick-tock... days.
C'mon, you should know better by now...
Peter Ntephe disseminates material information to investors through the brother of the niece of a rig hands grandpa...
You don't think Ntephe would tell us anything, do you?
The letters M-B-A after his name may make him feel smart, but the letters C-E-O after his name show he is incompetent.
Peter Ntephe is not CEO material. His lawyer education keeps getting in the way of showing leadership.