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African countries battle curse of the black gold
Alain Bommenel | Paris, France
26 May 2006 06:00
Experts call it the "oil curse". In Africa's oil-exporting countries, only a tiny fraction of revenues is used to fight poverty, and in many cases black gold has actually become a hurdle to development.
Oil in Africa -- from the Gulf of Guinea to north-western Sudan -- lies at the heart of questions of good governance and development, as oil prices and revenues soar but fail to bring better living standards for millions of poor.
Across the continent, "oil money evaporates into the savannah", Jean-Marie Chevalier, a professor at Paris-Dauphine University and director of Cambridge Energy Research Associates, told a conference in Paris this week.
Not only does oil wealth fail to translate into economic development, but in many cases it distorts the country's economy and holds back the development of other export industries, he said.
Almost everywhere in Africa, oil has fostered corruption and bureaucracy -- without benefiting the poor, according to speakers at the conference, organised by the French Agency for Development.
Africa accounts for 11,4% of global oil production, holding 9,4% of the world's reserves.
The continent's output has surged by 40% since 1990 to 10-million barrels per day (bpd), fuelled by demand from importers such as the United States and China looking to diversify their supply outside the Middle East.
Established exporters such as Nigeria, Gabon, the Republic of Congo and Cameroon have been joined by newcomers Chad, Equatorial Guinea, Sudan, São Tome and, most recently, Mauritania.
Yet despite the flow of oil revenues, African producers fare no better than importers in terms of development, according to Chevalier.
Nigeria -- Africa's most populous nation and its largest exporter with 2,5-million bpd -- is a prime example of the "oil curse", according to Philippe Sebille-Lopez, of the French Institute of Geopolitics. "The evolution is catastrophic and the country is regressing in terms of human development," he said.
Between 2004 and 2005, Nigeria lost seven places on the United Nations scale of human development, sliding from 151st to 158th out of 177 countries monitored.
More than 70% of Nigeria's 130-million inhabitants survive on less than $1 a day, and social unrest has gripped the oil-rich south as local communities rise up to claim a share of revenues.
Another case in point is Chad, which has been exporting crude oil since 2003, reaching a current rate of 200 000 barrels per day.
"Chadians don't understand why oil prices are rising but not their living standards," said Geraud Magrin, a leading researcher in the field.
Under a World Bank scheme, imposed in part because of endemic corruption, Chad agreed in 1999 for its oil to be extracted by a US-Malaysian consortium and for the revenues to be funnelled into development programmes.
"The idea was to use oil for sustainable development," said Magrin. Ten percent of oil revenues were to be set aside for future generations, and 85% used for poverty reduction and development projects.
But the benefits have failed so far to reach the poor, with almost 80% of the population still without access to drinking water and one in four children dying before the age of 10.
Since oil revenues started to flow in 2004, Chad has slid down 15 places on the Transparency International corruption index, and is now rated the world's most corrupt country.
Meanwhile, the regime of President Idriss Déby Itno, facing cash shortages and threatened by armed rebellions, has already questioned the system, provoking a stand-off with the World Bank.
Experts from Mauritania, which recently joined the club of oil-exporting nations, "came to ask us what can be done to avoid the oil curse", said Chevalier.
According to Oxford University economist Paul Collier, the only way to ensure African oil wealth transforms into growth is for "rich countries to apply pressure to ensure that checks and balance are put in place".
Currently, this job is largely being carried out by NGOs and international donors -- as in the case of Chad.
But in the long term, argued economic consultant Christine Rosellini, African producers will only be able to fight corruption, improve governance and create sustainable development by reducing their dependency on oil. -- Sapa-AFP
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UPSTREAM Chevron hits pay in Sao Tome play
By Upstream staff
US major Chevron says its first well in waters shared by Nigeria and Sao Tome has struck oil and gas.
Chevron took two months to complete the Obo-1 well, which lies under 1,720 metres of water in the formerly disputed border zone, and found at least 45 metres of hydrocarbons in several reservoirs, it said.
It is oil and gas. It's good, but it's a new region. We have data and we have to look at it," a Chevron spokesman said.
"It is premature to determine whether or not the Chevron and its co-venturers have made a commercial discovery," the company said.
Chevron holds 51% of the contract in Block 1 in the Nigeria-Sao Tome Joint Development Zone, while ExxonMobil has 40% and a local partner Dangote Energy Equity Resources holds the rest.
The results of this well have been eagerly awaited because it is the first to be drilled in the deep water area which is thought to contain billions of barrels of oil. Any commercial discovery in the area will be momentous for Sao Tome and Principe, a tiny impoverished island nation in the Gulf of Guinea which lives mostly from fishing.
The award of drilling licences in the joint zone has been plagued by delays and accusations of corruption, while expectations of an oil windfall have fuelled political instability in Sao Tome.
Under the treaty governing the joint area, Nigeria gets 60% of the revenues from oil production while Sao Tome gets 40%. But the countries only start to benefit after the companies have recouped their investment, which is likely to be in billions of dollars if oil is found in commercial quantities.
--------------------------------------------------------------------------------
26 May 2006 19:43 GMT | last updated: 26 May 2006 19:56 GMT
ERHC MENTIONED REUTERS UPDATE 2-Chevron strikes oil in Nigeria/Sao Tome well [GBWMVHV]
(Updates with further background)
By Tom Ashby
LAGOS, May 26 (Reuters) - The first well to be drilled in
an offshore area shared by Nigeria and Sao Tome has found oil
and gas, but it is premature to say if the discovery is
commercially viable, U.S. energy giant Chevron <CVX.N> said on
Friday.
Any commercial find in the area would be momentous for Sao
Tome and Principe -- an impoverished island nation in the Gulf
of Guinea which lives mostly from fishing -- and a big relief
for an industry which has bet hundreds of millions of dollars
on the concessions.
"It is oil and gas. It's good, but it's a new region. We
have data and we have to look at it," a Chevron spokesman
said.
The California-based company took two months to complete
the Obo-1 well, which lies under 1,720 metres of water in the
formerly disputed border zone, and found at least 150 feet (45
m) of hydrocarbons in several reservoirs, it said in a
statement.
"It is premature to determine whether or not Chevron and
its co-venturers have made a commercial discovery," the
statement said.
The well also provided samples of rock and liquids which
must be examined to determine how the company will proceed with
the appraisal of the reservoir. Oil companies normally drill
several wells in a new reservoir before declaring it fully
commercial.
Chevron holds 51 percent of the contract in block 1 of the
Nigeria/Sao Tome Joint Development Zone where this well was
drilled, while ExxonMobil <XOM.N> has 40 percent and a local
partner Dangote Energy Equity Resources has the rest.
The announcement will be welcome news for other companies
that paid millions of dollars for rights to drill in nearby
areas, including ERHC <ERHE.OB>, Addax <AXC.TO>, Sinopec
<SNP.N><0386.HK> and Anadarko <APC.N>.
The award of drilling licences in the joint zone has been
plagued by delays and accusations of corruption, while
expectations of an oil windfall have felled political
instability in Sao Tome.
Under the treaty governing the joint area, Nigeria gets 60
percent of the revenues from oil production while Sao Tome gets
40 percent. But the countries only start to benefit after the
companies have recouped their investment, which is likely to be
in billions of dollars if oil is found in commercial
quantities.
(c) Reuters 2006. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.
26May06 18:44 GMT
Symbols:
ca;AXC cn;28 de;AAZ de;AAZF de;AAZX de;CHU de;CHUF de;CHUS de;CHUX de;CHV
de;CHVF de;CHVS de;CHVX de;ERH gb;SNP hk;386 nl;CHV us;APC us;CVX us;ERHE
us;SNP us;XOM
Source RTRS Reuters News
Categories:
AFE CA CRU ENR IDS/TEXT INTEREST/ABN INTEREST/CANT INTEREST/D INTEREST/DNP
INTEREST/E INTEREST/M INTEREST/O INTEREST/OIL INTEREST/PEN INTEREST/RBN
INTEREST/RNP INTEREST/U NG NGS OPEC PKG/OCACO PKG/TDWPS PKG/USCO PROD ST
US MST/F MST/I MST/I/GAS MST/I/IDD MST/I/OIL MST/I/OIS MST/I/PIP MST/I/SHP
MST/L/EN MST/N MST/N/LNG MST/N/PET MST/N/REF MST/R/AFR MST/R/CA MST/R/G7
MST/R/NG MST/R/NME MST/R/OPEC MST/R/ST MST/R/US TGT/RON
REUTERS UPDATE 1-Hydrocarbon found in Nigeria/Sao Tome well-Chevron [GBWLSCR]
(Updates with quote and background)
LAGOS, May 26 (Reuters) - The first well to be drilled in
the offshore area shared by Nigeria and Sao Tome has found
hydrocarbons, but it is premature to say if the discovery is
commercial, U.S. energy giant Chevron <CVX.N> said on Friday.
The Obo-1 well found a cumulative total of at least 150 feet
(45 m) of net hydrocarbons in multiple reservoirs which must now
be evaluated to determine the next stage of the appraisal
process, the company said in a statement.
"It is premature to determine whether or not the Chevron and
its co-venturers have made a commercial discovery," the
statement said.
Chevron holds 51 percent of the contract in block 1 in the
Nigeria/Sao Tome Joint Development Zone, while ExxonMobil
<XOM.N> has 40 percent and a local partner Dangote Energy Equity
Resources has the rest.
The results of this well have been eagerly awaited because
it is the first to be drilled in the deep water area which is
thought to contain billions of barrels of oil.
Any commercial discovery in the area will be momentous for
Sao Tome and Principe, a tiny impoverished island nation in the
Gulf of Guinea which lives mostly from fishing.
Chevron did not say whether the hydrocarbons it found were
oil or gas.
(c) Reuters 2006. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
story teller?
Bush orders documents seized in Capitol Hill search sealed
Hastert, Pelosi demand return of document from the FBI
Hastert, Pelosi demand return of document from the FBI
Thursday, May 25, 2006; Posted: 3:41 p.m. EDT (19:41 GMT)
WASHINGTON (AP) -- President Bush stepped into the Justice Department's constitutional confrontation with Congress on Thursday and ordered that documents seized in an FBI raid on a congressman's office be sealed for 45 days.
The president directed that no one involved in the investigation have access to the documents taken last weekend from the office of Rep. William Jefferson, D-Louisiana, and that they remain in the custody of the solicitor general.
Bush's move was described as an attempt to cool off a heated confrontation between his administration and leaders of the House and Senate.
"This period will provide both parties more time to resolve the issues in a way that ensures that materials relevant to the ongoing criminal investigation are made available to prosecutors in a manner that respects the interests of a coequal branch of government," Bush said.
In a statement, Bush said he recognized that Republican and Democratic leaders in the House had "deeply held views" that the search on Jefferson's Capitol Hill office violated the Constitution's separation of powers principles. But he stopped short of saying he agreed with them.
"Our government has not faced such a dilemma in more than two centuries," the president said. "Yet after days of discussions, it is clear these differences will require more time to be worked out."
The FBI executed a search warrant to raid Jefferson's office Saturday night as part of a bribery investigation against the congressman. Earlier, authorities said they had videotaped Jefferson last summer taking $100,000 in bribe money and that agents had found $90,000 of that cash stuffed in a freezer in his Washington apartment.
Two people have pleaded guilty to bribing Jefferson to promote a high tech business venture. Jefferson has not been charged and has denied wrongdoing.
Bush urged the Justice Department and the House to continue discussions and to resolve the matter quickly.
"Let me be clear: Investigating and prosecuting crime is a crucial executive responsibility that I take seriously," he said. "Those who violate the law -- including a member of Congress -- should and will be held to account. This investigation will go forward and justice will be served."
The raid, which historians said was the first such search of a congressman's Capitol quarters in the more than two centuries since the first Congress convened, set off loud complaints from both Republicans and Democrats that the executive branch was overstepping its authority.
House Speaker Dennis Hastert, R-Illinois, and House Minority Leader Nancy Pelosi, D-California, issued a rare joint statement demanding that the FBI return the documents and saying that Jefferson then should cooperate more fully with the investigation.
Other lawmakers warned that the constitutional confrontation could spark a voter backlash, if Congress was seen as protecting its own at all costs.
Copyright 2006 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.
Spec29 what are the ODDs that a LA Congressman's office Gets raided by the FBI / Justice Dept for Nigerian dealings and bribery charges
ODDs that a Congressman's HOME gets raided by the FBI / Justice Dept
ODDs that the Nigerian VPs HOME gets raided by the FBI / Justice Dept the unnamed political heavy weight of which Jefferson had dealings
ODDs that ERHC's office Gets raided by the FBI / Justice Dept
all within a 2 week period
rumor is the Congressman had ties to ERHC's N. Wilson and
rumor is the Nigerian VP has not only close ties to SEO but perhaps is an ERHC Shareholder
is the congressman an ERHC Shareholder too ????
this whole thing stinks .... another dark cloud over us till we get cleared again - one more hurdle
I think Mr. Siverstein has a point when he says the common folk [media] are more interested in the well being of STPers and of poverty vs. the interests of Big Oil and us ERHC Shareholders
Looks like we have to live with the shame of bringing an impoverished nation to the forefront of the E&P world who had NOTHING and NOW stand to make billions over time, thanks to ER
I'm sure someone else may have come around eventually and shown them the way but ERHC was the one who did
and what thanks do we get - SLAP
FREEZING the ERHC docs LOL ...
President Bush orders all material seized by the FBI from a Louisiana congressman's Capitol Hill office sealed for 45 days.
AngryAsian you dont consider 750k of buying to be "HEAVY" I hope - especially after the best 10Q and removal of the "E"
way below ave. for ERHE
Heavy buying is more like 2-4 Million Above Ave. Buying
I am trying to give you the benefit of the doubt here
prove us wrong -
Tell us what you REALLY know
AngryAsian what happened to your HEAVY Buying ?
prove me wrong
AngryAsian PLEASED ABOUT WHAT - ??? [spill]
I appreciate your posts but cant decide if you are a HYPSTER or NOT
IF not please elaborate on your connections – cause they have been full of it thus far
Here are some of your last few posts – what went wrong? Are these the same clowns who said heavy buying is coming?
Let 'em sell. BUY BUY BUY!!! [stock went down]
DQ- I betcha we see .91 again!! [stock went down]
i believe we are heading to .80 any minute [stock went down]
Today is the day? I have a weird feeling that we make a nice climb. [stock went down]
No worries Mate. WE are more than fine [stock went down]
A few big buys and up we go [stock went down]
I did mean 10% up, could be wrong. we will see .80 now...on it's way up. filled! It's not good to live on the edge! lunch time and we are at .80, would mean a nice close imo. [stock went down]
your dream is a VERY POSSIBLE reality. just give it time
related - Sinopec takes Angola prize
By Upstream staff
Angola has awarded China's state-owned Sinopec the biggest stake in its lucrative offshore Block 18, the Asian giant's latest foray into the resource-rich south-west African country.
Angola's state-run oil company Sonangol said Sinopec won a 40% stake in a relinquished part of Block 18 after proposing a huge $1.1 billion government signature bonus, out of a total investment amounting to over $1.4 billion.
"This process demonstrates maximum transparency," Carlos Saturno, head of concessions at Sonangol, said at a presentation where the award was announced.
Sinopec's victory will be added to the 20% stake it landed earlier this month in deep-water Block 15 after it bid $982 million.
Angola's oil output currently stands at 1.4 million bpd, but this is expected to rise to 2 million bpd by the end of next year.
Sinopec fell short of analysts' expectations on Block 17 after it was beaten by France's Total , whose $670 million signature bonus and $1.04 billion total investment gave it a 40% operating stake, leaving Sinopec with 25.5%.
--------------------------------------------------------------------------------
22 May 2006 13:39 GMT | last updated: 22 May 2006 13:39 GMT
ERHC FORM 10-Q
UNITED STATES ECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission File Number 0-17325
ERHC ENERGY INC.
(Exact name of registrant as specified in its charter)
Colorado 88-0218499
(State of Incorporation) (I.R.S. Employer Identification No.)
5444 Westheimer Road
Suite 1570
Houston, Texas 77056
(Address of principal executive offices, including zip code.)
(713) 626-4700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
<TABLE>
<S> <C> <C>
Large Accelerated Filer |_| Accelerated Filer |X| Non-Accelerated Filer |_|
</TABLE>
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
The number of common shares outstanding as of May 2, 2006 was 710,912,226.
<PAGE>
TABLE OF CONTENTS
ERHC ENERGY INC.
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2006
and September 30, 2005 3
Consolidated Statements of Operations for the Three and Six Months Ended
March 31, 2006 and 2005 4
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 2006 and 2005 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Item 4. Controls and Procedures 13
Part II. Other Information
Item 1. Legal Proceedings 16
Item 1A. Risk Factors
Item 2. Unregistered Sale of Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ERHC ENERGY INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2006 and September 30, 2005
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, September 30,
2006 2005
------------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 45,384,771 $ 988,490
Prepaid expenses and other 134,625 32,093
----------------- ----------------
Total current assets 45,519,396 1,020,583
DRSTP concession fee 2,839,500 5,679,000
Furniture and equipment, net 16,076 20,627
Deferred tax asset 960,000 -
------------------- ------------------
Total assets $ 49,334,972 $ 6,720,210
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 8,255,965 $ 195,823
Accounts payable and accrued liabilities, related party 2,175,125 2,064,675
Income taxes payable 3,300,000 -
Asset retirement obligation 485,000 485,000
Current portion of convertible debt 33,513 33,513
------------------- ------------------
Total current liabilities 14,249,603 2,779,011
------------------- ------------------
Commitments and contingencies:
Shareholders' equity:
Preferred stock, par value $0.0001; authorized
10,000,000; none issued and outstanding - -
Common stock, par value $0.0001; authorized 950,000,000
shares; issued and outstanding 710,912,226 71,091 71,091
Additional paid-in capital 89,589,309 83,584,956
Accumulated deficit (54,575,031 ) (79,407,711 )
Deferred compensation - (307,137 )
------------------- ------------------
Total shareholders' equity 35,085,369 3,941,199
------------------- ------------------
Total liabilities and shareholders' equity $ 49,334,972 $ 6,720,210
=================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
ERHC ENERGY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended March 31, 2006 and 2005
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------------------- ---------------------------------------
2006 2005 2006 2005
------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
General and administrative
Expenses $ 1,727,524 $ 980,821 $ 2,960,316 $ 1,654,056
------------------- ------------------- ------------------ -------------------
Other income and (expenses):
Interest income 27,399 7,703 31,668 7,703
Gain from settlement - 252,310 - 252,310
Interest expense (461 ) (100,551 ) (922 ) (798,809 )
Gain on sale of partial interest in
DRSTP concession 30,102,250 - 30,102,250 -
Loss on extinguishment of debt - - - (5,749,575 )
------------------- ------------------- ------------------ -------------------
Total other income
and expenses, net 30,129,188 159,462 30,132,996 (6,288,371 )
------------------- ------------------- ------------------ -------------------
Income (loss) before benefit
(provision) for income taxes 28,401,664 (821,359 ) 27,172,680 (7,942,427 )
------------------- ------------------- ------------------ -------------------
Benefit (provision) for income taxes
Current (3,300,000 ) - (3,300,000 ) -
Deferred 960,000 - 960,000 -
------------------- ------------------- ------------------ -------------------
Total benefit (provision)
for income taxes (2,340,000 ) - (2,340,000 ) -
------------------- ------------------- ------------------ -------------------
Net income (loss) $ 26,061,664 $ (821,359 ) $ 24,832,680 $ (7,942,427 )
=================== =================== ================== ===================
Net income (loss) per common share -
basic $ 0.04 $ (0.00 ) $ 0.03 $ (0.01 )
=================== =================== ================== ===================
diluted $ 0.04 $ (0.00 ) $ 0.03 $ (0.01 )
=================== =================== ================== ===================
Weighted average number of shares
of common shares outstanding -
basic 710,912,226 661,143,285 710,912,226 631,263,070
=================== =================== ================== ===================
diluted 716,288,841 661,143,285 713,462,341 631,263,070
=================== =================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
ERHC ENERGY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2006 and 2005
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2006 2005
------------------ -------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 24,832,680 $ (7,942,427 )
Adjustments to reconcile net income (loss) to net cash used by
operating activities
Depreciation expense 4,551 2,163
Deferred income taxes (960,000 ) -
Compensatory stock options 1,156,990 -
Gain from settlement - (252,310 )
Gain on sale of partial interest in
DRSTP concession (30,102,250 ) -
Amortization of beneficial conversion feature
associated with convertible debt - 413,503
Amortization of deferred compensation - 561,710
Loss on extinguishment of debt - 5,749,575
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (102,532 ) (46,720 )
Accounts payable and other accrued liabilities 256,392 156,171
Current tax liability 3,300,000 -
Accrued officers' salaries - (13,000 )
Accounts payable, and accrued liabilities
related party 110,450 81,236
Accrued interest - related party - 385,309
------------------ -------------------
Net cash used by operating activities (1,503,719 ) (904,790 )
------------------ -------------------
Cash Flows From Investing Activities
Release of restricted cash - 10
Proceeds from sale of partial interest in
DRSTP concession 45,900,000 -
Purchase of furniture and equipment - (25,955 )
------------------ -------------------
Net cash provided (used) by investing activities 45,900,000 (25,945 )
------------------ -------------------
Cash Flows From Financing Activities:
Proceeds from line of credit, related party - 2,500,000
Proceeds from convertible debt, related party - 402,100
Repayment of convertible debt, related party - (70,400 )
------------------ -------------------
Net cash provided by financing activities - 2,831,700
---------------- -----------------
Net increase in cash and cash equivalents 44,396,281 1,900,965
Cash and cash equivalents, beginning of period 988,490 20,272
------------------ -------------------
Cash and cash equivalents, end of period $ 45,384,771 $ 1,921,237
================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Business Organization
The consolidated financial statements included herein, which have not been
audited pursuant to the rules and regulations of the Securities and Exchange
Commission, reflect all adjustments which, in the opinion of management, are
necessary to present a fair statement of the results for the interim periods on
a basis consistent with the annual audited financial statements. All such
adjustments are of a normal recurring nature. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
an entire year. Certain information, accounting policies and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
Company's audited financial statements included in the Company's Annual Report
on Form 10-K for the year ended September 30, 2005.
General Business and Nature of Operations and Significant Accounting Policies
ERHC Energy Inc. ("ERHC" or the "Company") is an independent oil and gas
company. The Company was formed in 1986, as a Colorado corporation, and was
engaged in a variety of businesses until 1996, when it began its current
operations as an independent oil and gas company. The Company's goal is to
maximize its value through exploration and exploitation of oil and gas reserves
in the Gulf of Guinea offshore of central West Africa. The Company's current
focus is to exploit its only assets, which are rights to working interest in
exploration acreage in the Joint Development Zone ("JDZ") between the Democratic
Republic of Sao Tome & Principe ("DRSTP") and the Federal Republic of Nigeria
("FRN") and in the exclusive territorial waters of Sao Tome (the "Exclusive
Economic Zone" or "EEZ"). The Company has formed relationships with upstream oil
and gas companies to assist the Company in exploiting its assets in the JDZ. The
Company is currently exploring opportunities in other areas of the energy
industry with emphasis in supply and trading.
Consolidated Financial Statements
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary after elimination of all significant inter-company
accounts and transactions.
Use of Estimates
The consolidated financial statements have been prepared in conformity with U.S.
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period for the quarters then ended.
Actual results could differ significantly from those estimates.
Stock-Based Compensation
As more fully discussed below in Note 6, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 123R, Share-Based Payment effective
October 1, 2005. The Company adopted the modified prospective transition method
provided under SFAS No. 123R and consequently has not retroactively adjusted
results for prior periods.
Reclassifications
During the year ended September 30, 2005, the Company corrected a 1,222,153
understatement in the number of shares of common stock outstanding that has
consistently existed for many years. The shares were issued at a time when the
stock had no significant value, accordingly, the correction of outstanding
shares resulted in a $122 increase in common stock and a corresponding decrease
in additional paid-in capital. All periods presented have been corrected to
include these additional shares.
6
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Going Concern
At September 30, 2005 the Company's registered independent public accountants
included an explanatory paragraph in their audit report on the Company's
financial statements. The primary reasons for the going concern paragraph
related to recurring losses incurred by the Company and the fact that the
Company's current liabilities exceed its current assets.
As described in Note 4 to the financial statements, during the quarter ended
March 31, 2006, the Company received cash proceeds of $45,900,000 from the sale
of participation interests in Blocks 2, 3 and 4 of the JDZ. Management believes
that these proceeds will sustain the Company's operations for the foreseeable
future and that they mitigate any going concern issues raised at September 30,
2005.
Note 3 - Sao Tome Concession
In November 2005, ERHC Energy Inc. ("Company") entered into a participation
agreement with Addax Petroleum (Nigeria Offshore 2) Limited ("Addax"), as
subsequently amended, whereby the Company assigned to Addax a 33.3%
participating interest in Block 4, leaving a 17.7% participating interest in
Block 4 to the Company. In exchange, Addax paid the Company $1,350,000 on
February 22, 2006, and an additional $16,650,000 ten days after the execution of
a production-sharing contract for Block 4. Under the participation agreement
ERHC will support Addax as operator, and Addax will pay all of the Company's
future costs in respect of all petroleum operations in Block 4. Addax is
entitled to the Company's share of cost oil until Addax recovers the Company's
costs.
In February 2006, the Company entered into a participation agreement with Addax
Petroleum Resources Nigeria Limited ("Addax Sub") whereby the Company assigned
to Addax Sub a 15% participating interest in Block 3 of the JDZ, leaving a 10%
participating interest in Block 3 to the Company. In exchange, Addax Sub paid
the Company $500,000 on March 3, 2006 and an additional $7,000,000 ten days
after the execution of a production-sharing contract for Block 3. Under this
agreement, Addax Sub agreed to pay all of the Company's future costs in respect
of petroleum operations in Block 3. Addax Sub is entitled to the Company's share
of cost oil until Addax Sub recovers the Company's costs.
In March 2006, the Company entered into a participation agreement with Sinopec
International Petroleum Exploration and Production Corporation Nigeria
("Sinopec"), and Addax Energy Nigeria Limited ("Addax Ltd."), whereby the
Company assigned a 28.67% participating interest in Block 2 of the JDZ to
Sinopec, and a 14.33% participating interest in Block 2 of the JDZ to Addax
Ltd., leaving a 22% participating interest in Block 2 to the Company. In
exchange, Sinopec paid the Company $13,600,000 ten days after execution of a
production sharing contract for Block 2, and Addax Ltd. paid the Company
$6,800,000 ten days after execution of a production sharing contract for Block
2. Under this agreement, ERHC will support Sinopec as operator, and Sinopec and
Addax Ltd. will pay all of the Company's future costs in respect of petroleum
operations in Block 2. Sinopec and Addax Ltd. are entitled to the Company's
share of cost oil until they recover the Company's costs and Sinopec is to
receive 6% interest on its future costs of (on costs up to $35,000,000) but only
to the extent that those interest costs are covered by production.
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.
7
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Cost Cash Feltang Gain
Basis Proceeds Fees Loss
------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Block 2 $ 946,500 $ 20,400,000 $ 12,958,250 $ 6,495,250
Block 3 946,500 7,500,000 - 6,553,500
Block 4 946,500 18,000,000 - 17,053,500
------------------- ------------------- ------------------ -------------------
Total $ 2,839,500 $ 45,900,000 $ 12,958,250 $ 30,102,250
=================== =================== ================== ===================
</TABLE>
Upon sale of the participation interests, the Company removed the entire cost of
the related Blocks due to the uncertainty surrounding their unproved interests.
Note 5 - Shareholders' Equity
Under three consulting agreements with the Company, 1,750,000 options were
granted to consultants on December 31, 2005. These options have an exercise
price of $0.20 per share with no expiration date. The Company recognized
consulting expense of $709,150 during the six months ended March 31, 2006
related to the fair value of these options. During the quarter ended March 31,
2006, two of the consultants elected to exercise 1,250,000 options, on a
cashless basis, for 950,140 shares and the Company recognized expense of
$508,500.
Note 6 - Stock-Based Compensation
During the year ended September 30, 2004, the Company issued options to purchase
3,000,000 shares of common stock to an employee as part of his initial
compensation package. These options have an adjusted exercise price of $0.20 per
share, with 1,000,000 options vesting on September 1, 2004, August 1, 2005 and
August 1, 2006. Due to the mutual resignation of this employee in January 2006,
the 1,000,000 options due to vest August 1, 2006 have been cancelled.
Effective October 1, 2005, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123R, Share-Based Payment, as interpreted by SEC Staff
Accounting Bulletin No. 107. Prior to October 1, 2005, the Company had accounted
for stock options according to the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, and therefore no related compensation expense was recorded for
awards granted with no intrinsic value. The Company adopted the modified
prospective transition method provided for under SFAS No. 123R, and,
consequently, has not retroactively adjusted results from prior periods. Stock
awards outstanding under the Company's current plans have generally been granted
at prices which are equal to the market value of the Company's stock on the date
of grant, generally vest over one year and bear no expiration date. Effective
October 1, 2005, the Company began recognizing compensation expense ratably over
the vesting period, net of estimated forfeitures. Due to the mutual resignation
of an employee in January 2006 and the cancellation of the non-vested 1,000,000
options, the previously recognized expense in the first fiscal quarter of 2006
of $101,618 has been reversed. The Company currently has no non-vested employee
options. No options were granted or exercised during the six months ended March
31, 2006.
8
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Stock-Based Compensation, continued
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
Description 2005 2005
------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Net loss - as reported $ (821,359 ) $ (7,942,427 )
Plus: stock-based compensation expense determined
using the intrinsic value of the option at the
measurement date 497,960 561,710
Less: stock-based employee compensation determined
under fair value method for all awards granted to
employees (137,884 ) (245,363 )
----------------- -----------------
Net loss - pro forma $ (461,283 ) $ (7,626,080 )
================= =================
Basic and diluted net loss per share - as reported $ (0.00 ) $ (0.01 )
================= =================
Basic and diluted net loss per share - pro forma $ (0.00 ) $ (0.01 )
================= =================
</TABLE>
<TABLE>
<CAPTION>
Three Months Three Months
Ended March 31, Ended March 31,
Assumptions 2006 2006
------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Expected life (years) 5.00 years 5.00 years
Interest rate 3.47% 3.47%
Dividend yield 0.00% 0.00%
Volatility (Based on historical experience) 88.40% 88.40%
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in subjective input
assumptions can materially affect the fair value estimate, the actual value
realized at the time the options are exercised may differ from the estimated
values computed above.
Note 7 - Commitments and Contingencies
Contingencies
From time to time, certain potential obligations are presented to the Company
that may have originated during periods not under existing management's control.
These alleged obligations are generally for goods and services for which the
Company has no record. The Company actively investigates these claims as they
arise. All known material obligations of the Company have been recorded and
reflected in the financial statements, but there is no certainty that all
material claims have been presented to the Company nor have the benefits of
available statutes of limitations been considered, should they apply.
9
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Commitments and Contingencies , continued
Employment and Consulting Agreements
On January 23, 2006, Company entered into a finders fee agreement with under
which it agreed to pay a $3,000,000 cash finders fee to Feltang, 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. See Note 4.
From August 1, 2004 until January 20, 2006, Mr. Ali Memon was the Company's
President and Chief Executive Officer. Mr. Memon had a three-year employment
agreement that originally included a base salary of $150,000 per year. On
January 25, 2005, the Board of Directors approved an increase in Mr. Memon's
salary from $150,000 to $200,000 per year for the remaining term of the
contract, beginning January 1, 2005, and expiring July 31, 2007.
On January 20, 2006, by mutual agreement with the Board of Directors, Ali Memon
resigned as Director and Chief Executive Officer of the Company. The Company has
accrued the remaining salary to be paid to Mr. Memon, less expenses related to
travel advances in the amount of $292,416.
On January 21, 2006, the Board of Directors appointed Walter Brandhuber as
Director and Chief Executive Officer. Mr. Brandhuber's employment agreement is
for a period of 36 months and provides for a base salary of $200,000 per year,
payable monthly. Further, the employment agreement provides incentive
compensation based on Board approval and on attainment of performance targets as
mutually agreed between the Board and Mr. Brandhuber.
In January 2006, the Company entered into consulting agreements with two
individuals for each individual to receive payments of $15,000 per month for a
term of one year, cancelable upon 30 days written notice by either party.
Effective January 1, 2005, the Company entered into consulting agreements with
two individuals, which require payment of cash and issuance of options for a
total of 1,250,000 shares of common stock upon completion of a full year of
service which was met on December 31, 2005. These options have an exercise price
of $0.20 per share and will vest immediately upon issuance and have no
expiration date. Either party may terminate these consulting agreements with 30
days notice. The options issued under these consulting agreements include
provisions for cashless exercise. One of the consultants elected to exercise his
750,000 options, on a cashless basis, in the quarter ended March 31, 2006 (see
Note 5).
Effective January 1, 2005, the Company entered into a consulting agreement with
an individual which requires payment of cash and the issuance of options for a
total of 500,000 shares of common stock upon a full year of service which was
met on December 31, 2005 (This agreement was signed September 1, 2005, but was
effective at January 1, 2005). These options have an exercise price of $0.20 per
share and will vest immediately upon issuance and will have no expiration date.
Either party may terminate this consulting agreement with 30 days notice. The
options issued under this consulting agreement include provisions for cashless
exercise. In the quarter ended March 31, 2006, the consultant elected to
exercise his options on a cashless basis (see Note 5). This agreement was
terminated in April 2006.
In August 2005, the Company entered into an agreement with a consulting group to
identify and introduce to the Company oil and gas acquisition opportunities in
Nigeria. The Company is required to pay a base fee of $1,000 per month. In
addition the Company shall pay a success fee of $75,000 per successful
acquisition, as defined. The agreement has a term of one year but expires
immediately upon the 30 day written notice of termination by either party,
without penalty to either party. This agreement was terminated in the quarter
ended March 31, 2006 without payment of the success fee.
In August 2005, the Company entered into an agreement with a consulting group to
identify and introduce to the Company oil and gas acquisition interests in
oil/mining leases granted by the government of the Federal Republic of Nigeria.
The Company is required to pay a base fee of $1,000 per month. In addition the
Company shall pay a success fee of $80,000 per successful acquisition, as
defined. The agreement also provides for the payment of legal fees per
successful transaction, as defined. The agreement has a term of one year but
expires immediately upon the 30 day written notice of termination by either
party, without penalty to either party. This agreement was terminated in the
quarter ended March 31, 2006 without payment of the success fee.
10
<PAGE>
ERHC ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Commitments and Contingencies , continued
Operating Lease
The Company leases office space at 5444 Westheimer Road, Houston, Texas. The
lease for office space expires February 2008. The monthly base rent payment is
$3,567 based on approximately 1,900 square feet of office space. Upon expiration
of its current lease, the Company expects to lease the same space or comparable
space in the normal course of business.
Legal Proceedings
See subsequent events for a description of proceedings by the U.S. District
Court of the Southern District of Texas, Houston Division.
Note 8 - Supplemental Disclosure of Cash Flow Information
Following is an analysis of non-cash operating and financing activities and
non-cash investing and financing activities for the six months ended March 31,
2006 and 2005.
<TABLE>
<CAPTION>
2006 2005
------------------- ------------------
<S> <C> <C>
Non-cash operating and financing activities:
Stock issued in exchange for:
Accounts payable and accrued liabilities $ - $ 241,689
Prepaid expenses - 118,100
Accrued salaries - 36,400
Accrued interest - 84,852
Accrued interest, related party - 2,620,295
Non-cash investing and financing activities:
Stock to be issued for success fee 4,803,750 -
Warrants to be issued for success fee 5,154,500 -
Stock issued for conversion of non-related
party debt to equity - 1,592,521
Beneficial conversion feature associated with
convertible debt - 331,699
Exchange of convertible and non convertible
debt, related party - 10,134,084
Stock issued to convert related party debt to
equity - 12,634,084
Beneficial conversion feature repurchased - 347,517
Repricing of options - 587,368
</TABLE>
Note 9 - Subsequent Event
On May 4, 2006, a search warrant issued by the U.S. District Court of the
Southern District of Texas, Houston Division, was executed on the Company for
various records including, among other matters, documents related to
correspondence with foreign governmental officials or entities in Sao Tome and
Nigeria.
In April 2006, the Company entered into a consulting agreement with an
individual for payment of $15,000 per month for a term of one year, cancelable
upon 30 days written notice by either party.
11
<PAGE>
Forward Looking Statements
This report contains forward-looking statements. These statements relate to
future events or ERHC Energy Inc.'s ("Company" or "ERHC") future financial
performance and involve known and unknown risks, uncertainties and other factors
that may cause ERHC or its industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by the
forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, there can be no guarantee of future
results, levels of activity, performance, or achievements. Moreover, neither the
Company nor any other person assumes responsibility for the accuracy and
completeness of these forward-looking statements. The Company is under no duty
to update any of the forward-looking statements after the date of this report to
conform prior statements to actual results.
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operations
You must read the following discussion of the results of the operations and
financial condition of the Company in conjunction with its financial statements,
including the notes included in its Form 10-K filing. The Company's historical
results are not necessarily an indication of trends in operating results for any
future period.
Overview
The Company's current focus is to exploit its only assets, which are rights to
working interests in exploration acreage in the JDZ and the EEZ. The Company has
entered into agreements with upstream oil and gas companies to jointly negotiate
production sharing contracts in these JDZ Blocks. The technical and operational
expertise in conducting exploration operations will be provided by the Company's
co-ventures.
Sale of Participation Interests
On November 17, 2005, the Company agreed to sell its 33.3% participating
interest in Block 4 of the Joint Development Zone between Sao Tome & Principe
and Nigeria ("JDZ") to Addax Petroleum (Nigeria Offshore 2) Limited for $18
million, leaving a 17.7% participating interest in Block 4 to the Company. This
transaction was completed in February 2006.
On February 16, 2006, the Company sold its 15% participating interest in Block 3
of the JDZ to Addax Petroleum Resources Nigeria Limited for $7,500,000, leaving
a 10% participating interest in Block 3 to the Company.
On March 2, 2006, the Company sold a 28.67% participating interest in Block 2 of
the JDZ to Sinopec International Petroleum Exploration and Production
Corporation Nigeria, and a 14.33% participating interest in Block 2 of the JDZ
to Addax Energy Nigeria Limited for $13.6 and $6.8 million, respectively,
leaving a 22% participating interest in Block 4 to the Company.
All of the sales proceeds were received by the Company during the quarter ending
March 31, 2006, and such sale proceeds were accounted for as a $30,102,250 net
gain from the sale of participation interest in the concession.
Results of Operations
Three Months Ended March 31, 2006 Compared with Three Months Ended March 31,
2005
During the three months ended March 31, 2006, the Company had net income of
$26,061,664, compared with a net loss of $821,359 for the three months ended
March 31, 2005. The primary reason for the $26,883,023 improvement in net income
for the three months ended March 31, 2006 is a $30,102,250 net gain from the
sale of participation interests in the three JDZ Blocks under production sharing
contracts with various joint venture partners. Interest expense decreased by
$100,090 due to the conversion of substantially all debt to equity in the
quarter ended March 31, 2005. General and administrative expenses increased by
$746,703 for the three months ended March 31, 2006 as compared to the three
months ended March 31, 2005 primarily due to $616,195 in consulting charges in
the period for the fair value calculation of options issued to consultants.
During the quarter ended March 31, 2006, the Company generated $45,900,000 of
cash to support operations from the sale of participation interests in three
Blocks in the JDZ.
Six Months Ended March 31, 2006 Compared with Six Months Ended March 31, 2005
During the six months ended March 31, 2006, the Company had net income of
$24,832,680, compared with a net loss of $7,942,427 for the six months ended
March 31, 2005. The two primary reasons for the $32,775,107 improvement in net
income for the six months ended March 31, 2006 are: 1) a $30,102,250 net gain
from the sale of participation interests in the three JDZ Blocks under
production sharing contracts with various joint venture partners; and 2) a
$5,749,575 non-cash loss on extinguishment of debt during the six months ended
March 31, 2005 as the result of the issuance of shares in conjunction with the
Chrome debt restructuring. Interest expense decreased by $797,887 to the
conversion of substantially all debt to equity in the quarter ended March 31,
2005. General and administrative expenses increased by $1,306,260 for the six
months ended March 31, 2006 as compared to the six months ended March 31, 2005
primarily due to $616,195 in consulting charges in the period for the fair value
calculation of options issued to consultants and due to increased legal and
professional services related to the Company's negotiation of production sharing
contracts.
12
<PAGE>
Liquidity and Capital Resources
As of March 31, 2006, the Company had $45,384,771 in cash and cash equivalents
and positive working capital of $31,269,793. Management believes that this cash
position should support working capital needs for the next 12 months.
Contractual Obligations
A tabular disclosure of contractual obligations at March 31, 2006, is as
follows:
<TABLE>
<CAPTION>
---------------------------------------- -----------------------------------------------------------------------------
Payments due by period
---------------------------------------- -----------------------------------------------------------------------------
Total Less than 1 1 - 3 Years 3 - 5 Years More than 5
year Years
---------------------------------------- ---------------- ---------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Operating Leases $ 82,041 $ 42,804 $ 39,237 - -
---------------------------------------- ---------------- ---------------- ------------- -------------- --------------
Employment and consulting contracts 1,399,083 1,032,416 366,667 - -
for officers and directors
---------------------------------------- ---------------- ---------------- ------------- -------------- --------------
Total $1,481,124 $ 1,075,220 $ 405,904 - -
---------------------------------------- ---------------- ---------------- ------------- -------------- --------------
</TABLE>
Off-Balance Sheet Arrangements
At March 31, 2006, the Company has no off-balance sheet arrangements that have
or are likely to have a material current or future effect on its financial
condition or results of operations.
Debt Financing Arrangements
At March 31, 2006, the Company had short-term debt of $33,513 bearing interest
at 5.5% per year. The Company had other current liabilities of $14,216,090
(Including related party liabilities as follows: $112,313 owed to Chrome
Management, $218,311 due to Sir Emeka Offor, the Company's Chairman, $1,844,500
of stock-based compensation due to directors, and a liability of $292,416 due to
the Company's former CEO). Included in current liabilities is also a $3,000,000
finders fee accrual due in cash to Feltang and a $4,803,750 liability to Feltang
that will be satisfied upon issuance of 5,250,000 shares of common stock.
Additionally, at March 31, 2006, the Company had accrued an income tax
obligation of $3,300,000 as a result of the net gain of the sale of
participation interests.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's first strategy is to exploit its only assets, which are rights to
working interests in the JDZ and EEZ under agreements with the JDA and DRSTP. To
achieve this strategy, the Company has formed relationships with other oil and
gas companies with technical and financial capabilities to assist the Company in
leveraging its interests in the JDZ. The Company also intends to form
relationships with other oil and gas companies with technical and financial
capabilities to assist the Company in leveraging its interests in the EEZ. The
Company has succeeded in perfecting its interests in the 2001 Agreement with
DRSTP or the 2003 Option Agreement and the Company is positioned to obtain
sufficient financial and other resources to develop its interests.
13
<PAGE>
At March 31, 2006, all of the Company's operations were located outside the
United States. The Company's only assets are agreements with DRSTP and the JDA,
which provide ERHC with rights to participate in exploration and production
activities in the Gulf of Guinea off the coast of central West Africa. The
governments that control these areas of geographic interest have historically
experienced volatility, which is out of management's control, and the Company's
ability to exploit its interests in the agreements it this area may be impacted
by this circumstance. Furthermore, the future success of the Company's
international operations may be adversely affected by risks associated with
international activities, including economic and labor conditions, political
instability, risk of war, expropriation, renegotiation or modification of
existing contracts, tax laws (including host-country import-export, excise and
income taxes and United States taxes on foreign subsidiaries) etc., may
adversely affect the Company's future results of operations and financial
condition.
Market risks relating to the Company's operations result primarily from changes
in interest rates as well as credit risk concentrations. The Company's interest
expense is generally not sensitive to changes in the general level of interest
rates in the United States, particularly because a substantial majority of its
indebtedness is at fixed rates.
The Company holds no derivative financial or commodity instruments, nor does it
engage in any foreign currency denominated transactions.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. The Company's management, with
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures as of the end of the quarter covered by this Quarterly Report on
Form 10-Q. As described below under Management's Report on Internal Control Over
Financial Reporting, the Company has identified material weaknesses in the
Company's internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)). 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.
Management's Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles in the United States of America. The Company's internal
control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. Management assessed the
effectiveness of the Company's internal control over financial reporting as of
September 30, 2005. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on our assessment and those criteria as of September 30, 2005, management
concluded that the Company did not maintain effective internal control over
financial reporting as of as a result of material weaknesses in (a) internal
controls surrounding corporate governance, and (b) internal controls surrounding
the accounting for common stock issuances.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.
The operations and activities of this company have essentially been focused and
limited to (1) continuing efforts to secure its working rights in the JDZ and
EEZ; (2) funding the associated contractual obligations related to securing its
rights )primarily legal and technical support); (3) funding a limited office
staff consisting of the CEO, the CFO and an administrative manager and
associated rental obligations. With the exception of (1) above, these were no
operational activities that required the institution of complex internal
controls; however, but an appropriate level of internal controls were necessary
to conform to rules and regulations to which the Company is subject.
14
<PAGE>
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
Internal Controls Surrounding the Accounting for Transactions Involving Common
Stock:
The principal factor contributing to the material weakness in the accounting for
issuances of shares of common stock is based on:
|X| The existence of differences in the number of shares of common stock
outstanding as reflected in the Company's accounting records and prior
financial reports and the number reported by the Company's stock transfer
agent that resulted in a change in previously issued financial statements
at September 30, 2005.
|X| An error in accounting for conversion of debt to equity that occurred in
fiscal 2005 and resulted in a $347,517 audit adjustment at September 30,
2005.
The Company's independent registered public accounting firm has audited
management's assessment of the effectiveness of the Company's internal control
over financial reporting as of September 30, 2005, as stated in their report
which appears on page F-2 of the Company's September 30, 2005 Form 10-K under
the heading, Report of Independent Registered Public Accounting Firm.
Remediation Plans for Material Weaknesses in Internal Control over Financial
Reporting
Corporate Governance
The Company has retained an executive recruiting firm to aid them in a search of
an independent financial expert to chair the audit committee. That effort was
successfully completed in the quarter ended March 31, 2006, with an independent
financial expert added to the Board and being appointed chair of the audit
committee. The Company is also is the process of amending their Audit Committee
Charter to include the responsibilities of the financial expert and to ensure
independent directors fill all positions on the committee.
Accounting for Stock Issuances
The Company is implementing enhancements to its internal control over financial
reporting to provide reasonable assurance those errors and control deficiencies
in its accounting for stock issuances will not recur. These steps include the
engagement of independent financial reporting consultants for review of critical
accounting areas and disclosures and material non-standard transactions. Until
these changes are completed, weaknesses will continue to exist. Management
presently anticipates that the changes necessary to remediate these weaknesses
will be in place by the conclusion of the 2006 fiscal year.
15
<PAGE>
Changes in Internal Control over Financial Reporting
Except as otherwise discussed herein, there have been no changes in our internal
control over financial reporting during the most recently completed fiscal
quarter that have materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 4, 2006, a search warrant issued by the U.S. District Court of the
Southern District of Texas, Houston Division, was executed on the Company for
various records including, among other matters, documents related to
correspondence with foreign governmental officials or entities in Sao Tome and
Nigeria.
Between February and April, 2006, Lakeshore Capital Limited ("Lakeshore") issued
written demands to ERHC requesting the issuance of 4,500,000 shares of ERHC
common stock and a four year warrant to purchase 1,500,000 shares of ERHC common
stock at an exercise price per share of $0.20, which Lakeshore contends is owed
for contractual services previously rendered. ERHC has disputed the claim,
believes any such claim lacks merit, and intends to vigorously defend any
further legal recourse that Lakeshore may pursue. No litigation or arbitration
proceeding has been initiated as of the date of this report.
The Company is not aware of any other material legal proceedings pending to
which it is a party or its property is subject. From time to time, the Company
may be subject to proceedings, lawsuits and other claims in the ordinary course
of business, the resolution of which, in the opinion of management should not
have a materially adverse effect on the Company's financial position. The
Company is opposing vigorously each of the claims discussed below and intends to
continue to do so unless an agreeable resolution may otherwise be secured with
regard to each such claim.
Item 1A. Risk Factors
You should carefully consider the risks described below before making any
investment decision related to the Company's securities. The risks and
uncertainties described below are not the only ones facing the Company.
Additional risks and uncertainties not presently known or that the Company
currently deems immaterial also may impair its business operations. If any of
the following risks actually occur, the Company's business could be harmed.
THE COMPANY HAS NO SOURCES OF REVENUE AND A HISTORY OF LOSSES.
The Company's business is at an early stage of development. The Company has not
generated any revenue since its entry into the oil and gas business and has
incurred significant operating losses. The Company has incurred net losses of
$11,270,478, $3,593,388, and $3,153,882 in fiscal years 2005, 2004 and 2003,
respectively. While the Company had net income of $26,061,664 for the second
quarter, equating to net income of $.04 per share during that period, this was a
one time gain from sale, and the Company expects to incur operating losses in
future periods.
THE COMPANY HAS A LIMITED OPERATING HISTORY IN THE OIL AND GAS BUSINESS.
The Company's operations to date have consisted solely of acquiring rights to
working interests in the JDZ and EEZ. The Company's future financial results
depend primarily on (1)) the ability of its partners to fund significant
financial commitments in the production sharing contracts; (2) its ability to
discover commercial quantities of oil and gas; and (3) the market price for oil
and gas. Management cannot predict that the Company's future operations will be
profitable. In addition, the Company's operating results may vary significantly
during any financial period. These variations may be caused by significant
periods of time between discovery and development of oil or gas reserves, if
any, in commercial quantities.
THE COMPANY MAY NOT DISCOVER COMMERCIALLY PRODUCTIVE RESERVES IN THE JDZ OR EEZ.
The Company's future success depends on its ability to economically locate oil
and gas reserves in commercial quantities in the JDZ and EEZ. This is a region
in which no drilling operations have been conducted to date. There can be no
assurance that the Company's planned projects in the JDZ or EEZ will result in
significant, if any, reserves or that the Company will have future success in
drilling productive wells.
THE COMPANY'S NON-OPERATOR STATUS LIMITS ITS CONTROL OVER ITS OIL AND GAS
PROJECTS IN THE JDZ OR EEZ.
The Company will focus primarily on creating exploration opportunities and
forming relationships with oil and gas companies to develop those opportunities
in the JDZ or EEZ. As a result, the Company will have only a limited ability to
exercise control over a significant portion of a project's operations or the
associated costs of those operations in the JDZ or EEZ. The success of a future
project is dependent upon a number of factors that are outside the Company's
areas of control. These factors include:
17
<PAGE>
o the availability of future capital resources to the Company and the
other participants to be used for drilling wells;
o the approval of other participants for the drilling of wells on the
projects; and
o the economic conditions at the time of drilling, including the
prevailing and anticipated prices for oil and gas.
The Company's reliance on other project participants and its limited ability to
directly control future project costs could have a material adverse effect on
its future expected rates of return.
THE COMPANY'S SUCCESS DEPENDS ON ITS ABILITY TO EXPLOIT ITS LIMITED ASSETS.
The Company's only assets are rights to working interest in exploration acreage
in the JDZ and EEZ under agreements with the JDA and DRSTP. The Company's
operations have been limited to sustaining and managing its rights under these
agreements. The Company's success depends on its ability to exploit these
assets, of which there is no assurance that it will be successful.
THE COMPANY'S COMPETITION INCLUDES OIL AND GAS CONGLOMERATES THAT HAVE
SIGNIFICANT ADVANTAGES OVER IT.
The oil and gas industry is highly competitive. Many companies and individuals
are engaged in exploring for crude oil and natural gas and acquiring crude oil
and natural gas properties, resulting in a high degree of competition for
desirable exploratory and producing properties. The companies with which the
Company competes are much larger and have greater financial resources than the
Company.
VARIOUS FACTORS BEYOND THE COMPANY'S CONTROL WILL AFFECT PRICES OF OIL AND GAS.
The availability of a ready market for the Company's future crude oil and
natural gas production depends on numerous factors beyond its control, including
the level of consumer demand, the extent of worldwide crude oil and natural gas
production, the costs and availability of alternative fuels, the costs and
proximity of transportation facilities, regulation by authorities and the costs
of complying with applicable environmental regulations.
THE COMPANY'S OPERATIONS ARE LOCATED OUTSIDE OF THE UNITED STATES WHICH SUBJECTS
IT TO RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES.
At March 31, 2006, all of the Company's operations were located outside the
United States. The Company's only assets are agreements with DRSTP and the JDA,
which provide ERHC with rights to participate in exploration and production
activities in the Gulf of Guinea off the coast of central West Africa. This
geographic area of interest is controlled by foreign governments that have
historically experienced volatility, which is out of management's control. The
Company's ability to exploit its interests in the agreements in this area may be
impacted by this circumstance.
The future success of the Company's international operations may also be
adversely affected by risks associated with international activities, including
economic and labor conditions, political instability, risk of war,
expropriation, renegotiation or modification of existing contracts, tax laws
(including host-country import-export, excise and income taxes and United States
taxes on foreign subsidiaries) and changes in the value of the U.S. dollar
versus the local currencies in which future oil and gas producing activities may
be denominated. As well, changes in exchange rates may adversely affect the
Company's future results of operations and financial condition.
THE COMPANY'S RESULTS OF OPERATIONS ARE SUSCEPTIBLE TO GENERAL ECONOMIC
CONDITIONS.
The Company's revenues and results of operations will be subject to fluctuations
based upon the general economic conditions both in the United States and
internationally. If there were to be a general economic downturn or a recession
in the oil and gas industry, the Company's future revenues and the value of its
oil and natural gas exploration concession could be materially adversely
affected. If there were to be a general economic downturn or a recession in the
oil and gas industry, the Company's ability to exploit its assets in the JDZ and
EEZ could be materially adversely affected
STATUS OF PENDING LEGAL MATTER
It is impossible to predict what effect the matter pending in the U.S. District
Court of the Southern District of Texas, Houston Division, will have on the
Company and the price of its common stock. This pending action will likely cause
uncertainty in the marketplace, and could have an adverse effect on the
Company's business partners, its business operations, and the market for its
common stock.
18
<PAGE>
ONE SHAREHOLDER CONTROLS APPROXIMATELY 43% OF THE COMPANY'S OUTSTANDING COMMON
STOCK.
Chrome Oil Services Ltd. beneficially owns approximately 43% of the outstanding
common stock. As a result, Chrome has the ability to substantially influence,
and may effectively control the outcome of corporate actions that require
stockholder approval, including the election of directors. This concentration of
ownership may have the effect of delaying or preventing a future change in
control of the Company.
THE COMPANY'S STOCK PRICE IS HIGHLY VOLATILE.
The Company's common stock is currently traded on the Over-the-Counter Bulletin
Board. The market price of the Company's common stock has experienced
fluctuations that are unrelated to its operating performance. The market price
of the common stock has been highly volatile over the last several years. The
Company can provide no assurance that its current price will be maintained.
THE COMPANY DOES NOT CURRENTLY PAY DIVIDENDS ON ITS COMMON STOCK AND DO NOT
ANTICIPATE DOING SO IN THE FUTURE.
The Company has paid no cash dividends on its common stock, and there is no
assurance that the Company will achieve sufficient earnings to pay cash
dividends on its common stock in the future. The Company intends to retain any
earnings to fund its operations. Therefore, the Company does not anticipate
paying any cash dividends on the common stock in the foreseeable future.
THE COMPANY'S STOCK IS CONSIDERED A "PENNY STOCK."
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks". Penny stocks generally are equity
securities with a share price of less than $5.00. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document prepared by
the SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. These disclosure requirements may have the
effect of reducing the level of trading activity in any secondary market for a
stock that becomes subject to the penny stock rules. The Company's common stock
may be subject to the penny stock rules, and accordingly, investors in the
common stock may find it difficult to sell their shares in the future, if at
all.
Item 2. Unregistered Sale of Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
10.9* Employment Agreement with Walter Brandhuber
31.1* Certification Pursuant to 18 U.S.C Section 7241, as adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification Pursuant to 18 U.S.C Section 7241, as adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
*Filed herein
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons, in the capacities and on the dates indicated below, have
signed this report.
ERHC Energy, Inc.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Walter Brandhuber President & Chief Executive Officer May 19, 2006
---------------------
Walter Brandhuber
/s/ Franklin Ihekwoaba Chief Financial Officer May 19, 2006
----------------------
Franklin Ihekwoaba
</TABLE>
20
</TEXT>
</DOCUMENT>
Pup your "TUNE" seems to have changed from March when you seemed excited about the OBO results and the ERHC affect
We are talking about a Huge amt of oil all around us
- are you suggesting the market discount this?
Has Something changed for you [besides the Fed's or a late Q]
apparantly ERHC may be releasing some news of upcoming Drilling news/ schedules for 2007 with their partners according to Franklin from recent meetings held
Apparantly Operating committies are being formed and more meetings are going to be held ERHC and shareholders will be privied to such news / events perhaps this summer
Blog says Filing will be tomorrow
us;ERHE SYMBOL CHANGE to us;ERHEE
eff 18-May-06 LBSC [GBKLSWK]
Bridge Sequence Number : USLBSC1705060019
Issuer Name : ERHC Energy Inc
Description :
Currency :
SEDOL Number :
CUSIP Number :
ISIN Number :
Bridge Symbol : us;ERHE
Effective Date : 18 May 2006
New Bridge Symbol : us;ERHEE
17May06 23:27 GMT
Symbols:
us;ERHE us;ERHEE
Source BROP Operational News
Categories:
BRCCUS/SYM MST/I/OIS
MM ABLE at around 3pm came in to sell IMO about 500-750k shares
he was not patient and kept hitting bids large blocks of 50k 30k etc. went off and the Bidding MMs quickly dropped their bids so the seller would sell lower
TD And NITE went Best ASK to force the seller lower and he kept coming
he ceased at 3:45 ish and the pps rose from .62 to .65 and after a short break returned to keep pounding the bids down to .58
Q: who would sell this aggressively infront of potentially good news
Q: is it good news? You would think so Big $$$ money came in Contracts signed it was a pretty good Quarter for ERHC
Q: perhaps more to the investigation than meets the eye?
out of guesses why the sudden blasting
if ABLE returns tomorrow could be more of the same
Regardless a RUDE Seller to spoil the bigger gains for all had the seller been patient he would have been filled higher
was a total Jerkoff
OilPhant 685 NetPay you should change your name to ELEPHANT STAMPEDE
EXXON Announces Deepwater Discovery Offshore Nigeria
ExxonMobil Announces Uge Deepwater Discovery Offshore Nigeria [GBHNMNY]
IRVING, Texas--(Business Wire)--May 16, 2006--
Exxon Mobil Corporation (NYSE:XOM) announced today that
its subsidiary, Esso Exploration and Production Nigeria Deepwater
West, Ltd. (Esso), has drilled an oil discovery in Oil Prospecting
License (OPL) 214, approximately 70 miles (113 kilometers) offshore
Nigeria.
The Uge-1 discovery well was drilled in 4,144 feet (1,263 meters)
of water to a total depth of 16,831 feet (5,130 meters) and
encountered more than 300 net feet (100 meters) of oil. The Uge
structure is located approximately 90 miles (145 km) south-southeast
of the Erha deepwater development. Studies and data analyses are under
way to fully evaluate the discovery and development options for Uge.
Esso is the operator of OPL 214 with a 20 percent working
interest. Other working-interest owners are Chevron Nigeria Deepwater
B Limited at 20 percent, Phillips Deepwater Exploration (Nigeria)
Limited (a subsidiary of ConocoPhillips) at 20 percent, Oxy Nigeria
Exploration & Production Limited (a subsidiary of Occidental Petroleum
Corporation) at 20 percent, Nigerian Petroleum Development Company at
15 percent, Sasol Exploration and Production Nigeria Limited at 5
percent and Nigerian National Petroleum Corporation (NNPC) is the
concessionaire. Uge-1 represents the first discovery on the license.
ExxonMobil is a leader in the discovery and development of
deepwater hydrocarbon resources in West Africa, where it has interests
in 17 blocks totaling more than 10 million gross acres. The company
has a leading position in nearly all the major exploration and
production areas in the world and the industry's strongest portfolio
of proprietary geoscience and engineering technology.
CAUTIONARY STATEMENT: Estimates, expectations, and business plans
in this release are forward-looking statements. Actual future results,
including resource recoveries, production rates, and project plans and
schedules, could differ materially due to changes in market conditions
affecting the oil and gas industry or long-term oil and gas price
levels; political or regulatory developments; reservoir performance;
timely completion of development projects; technical or operating
factors; and other factors discussed under the heading "Factors
Affecting Future Results" on our website (www.exxonmobil.com).
ExxonMobil
Bob Davis, 713-656-4376
Copyright Business Wire 2006
16May06 15:00 GMT
Symbols:
us;XOM
Source BW Business Wire
Categories:
MST/I/OIL MST/I/OIS MST/L/EN MST/R/AFR MST/R/NG MST/R/NME MST/R/US
MST/R/US/TX TGT/BWB
Equatorial Guinea round is put back
By Upstream staff
Equatorial Guinea has delayed its 2006 licensing round by three months, citing the need to pass oil and gas legislation this September.
Under the new schedule, prequalification for the round has been put back to 31 August from June and the deadline for bid submissions has been delayed to 31 January 2007 from 31 October.
A data room opened on 8 May in London and it is obligatory for all companies wishing to participate in the round to visit it.
Roadshows that were planned for this month in London and Houston are now tentatively being scheduled for late September or October.
A statement on the Ministry of Mines&Energy website said that the delay is to ensure that "all enabling legislation is in place and consistent" for the round.
"This will include the hydrocarbon law (and its model contract and regulations), the tax law and laws concerning local content," it added.
However, industry sources have linked the delays to the licensing round to the ongoing dispute over the award of offshore Campo basin Block R to independent Ophir Energy.
The award to Ophir made by the ministry has just been ratified but Norwegian minnow Equity Energy Resources (EER), which was lined up for the block by state oil company GEPetrol, insists it should have the acreage.
Malabo's proposed new oil and gas legislation has been driven by the need to draw a clear distinction between the roles of the Ministry of Mines, Industry&Energy and GEPetrol, with special emphasis on the demarcation of responsibilities during the negotiating phase of upstream contracts.
There is mounting concern that confidence could suffer if the dispute with EER over the acreage cannot be resolved.
In an effort to shore up confidence in the licensing system the bill is being rushed through by the ministry.
In addition to Ophir's block, located to the south of ExxonMobil-operated Block C, Malabo has also ratified the China National Offshore Oil Corporation's award of Block S, located in acreage to the west of Hess' Okume field complex and surrounding the Ceiba field.
--------------------------------------------------------------------------------
11 May 2006 23:01 GMT | last updated: 11 May 2006 23:01 GMT
Ministry looks at EER compensation
By Upstream staff
Equatorial Guinea is focusing on how to compensate Oslo-based Energy Equity Resources (EER) for the eleventh hour loss of offshore Block R, writes Barry Morgan.
If the Ministry of Energy, Industry&Mines fails to devise appropriate compensation before the roadshows this summer, EER has notified its intent to either launch an action against Africa-focused independent Ophir Energy for interference with its contract or else force arbitration with the government through the International Chamber of Commerce.
Ophir partnered EER in the Nigeria-Sao Tome Joint Development Zone and knew of EER's ambitions in Equatorial Guinea. It is understood EER now has a war chest ready to tie up the disputed acreage in the courts.
Meanwhile, Ophir hopes to realise a pre-initial public offering value of about $200 million before going to New York or London's Alternative Investment Market. It needs to raise $75 million pledged in a signature bonus for Block R.
Ophir landed the licence with ministry officials by offering to drill three wells and committing more than $250 million to the play, potentially raising the stakes for future applicants. For its part, EER has not let go and is seeking a quid pro quo in return for a waiver, and possibly alternative blocks.
Malabo's Ministry of Mines, Industry&Energy claims EER's competing production sharing contract was never submitted but state oil company GEPetrol said it was. EER had offered a bonus of only $5 million based on expenditure of $2.5 million on seismic work with a couple of wells, giving GEPetrol a 25% carry and 10% working interest.
Following an earlier memorandum of understanding and notification of interest, EER signed a PSC on 11 May 2005. GEPetrol retained an overall 35% of the PSC, while EER formally negotiated a 65% stake.
EER's PSC was originally signed by GEPetrol national director Candido Nsue Okomo, who is President Teodor Obiang's brother-in-law. Ophir's deal appears to have been orchestrated by President Obiang's son, Mines&Energy vice minister Gabriel da Lima.
The ministry now feels constrained to honour EER's contract somehow and is considering alternative compensation to prevent the acreage from getting mired in legal action and to restore confidence in the system.
--------------------------------------------------------------------------------
11 May 2006 23:01 GMT | last updated: 11 May 2006 23:01 GMT
AngryAsian you said "PLAIN AND SIMPLE. There is an huge upside however and It WILL HAPPEN SOON"
this is BASED on WHAT ??? or WHAT EVENT ???
so Closer to BL 4 vs. BL 2 ?
US' ERHC says FBI searches files on Nigeria-Sao Tome
http://www.platts.com/search.jsp?query=erhc
Oilgram News
08-May-2006
US' ERHC says FBI searches files on Nigeria-Sao Tome New York Controversial Houston-based Sao Tome/Nigeria upstream minnow ERHC Energy disclosed May 5 that FBI agents executed a...
can someone post
Court to Disclose Items Found in Atiku’s US Home Tomorrow
05.10.2006
http://www.thisdayonline.com/nview.php?id=47763
A United States Magistrate Judge, William Connelly, will tomorrow release the items found in the United States home of Vice-President Atiku Abubakar and US Congressman, Williams Jefferson.
The Federal Bureau of Investigation (FBI) on August 3, 2004 searched the Potomac home in Maryland, USA of the Vice President and recovered some items.
On the same day, the FBI served search warrants on Jefferson’s homes in New Orleans and Washington.
According to Fox News.Com yesterday, Jefferson fought the release of the search warrant documents which contains excerpts of wire tapped conversation.
Jefferson through his attorney, Robert P. Trout opposed the release, saying it would taint him for life and added, the harm done will not be remedied.
Jefferson, 59 has denied any wrong doing.
But the judge, while ruling on a motion filed by Washington Post to unseal the affidavit containing the items found in Jefferson and Abubakar’s home said the affidavit would be unsealed on Thursday unless someone appeals his ruling.
The report said Jefferson was alleged to have visited the Vice-President’s house in July 2004 to persuade the Vice President to salvage a $45m deal in Nigeria involving the Kentucky telecommunications firm, iGate Corporation.
In 2003, when Jefferson was on official business in Nigeria, he promoted iGate to a Nigerian Company called Netlink Digital Television (NDTV), which was seeking to deploy internet technology throughout Africa.
Reacting to the story last night, a media aide of Atiku said the VP welcomes the unsealment of the Jefferson affidavit. "When it is opened, it will show that the VP has done no wrong. He has never had any business relationship with the congressman"
The aide added that once the matter was dealt with tomorrow, "the VP will be free of the FBI saga."
on 8k and BL 4 Drilling .. from an Industry Source
"Frankly we are not concerned about the development at ERHC. While we have no more information about what happened then was diclosed in the 8K we have no reason to believe that the execution of the warrant is any way material to our business or to our position in the JDZ.
Operating committees for each of the blocks are being formed. Typically we would expect to have agreement on work schedules and drilling plans by July/August 2006
Subject to rig availability drilling would start in the first half of 2007.
There is a lot of rumor and chatter about Block 1 but nothing has been confirmed.
new JDA PRESS RELEASE OUT http://www.nigeriasaotomejda.com/
PAYMENT OF SIGNATURE BONUS IN RESPECT OF JDZ BLOCKS 2, 3, AND 4 BY CONTRACTOR PARTIES.
OILPHANT posted this link & erased it...
http://www2.rosettastone.com/en/offer/google?language=chi&a=b
Award-winning Software by Rosetta Stone
Learn a [CHINESE] language naturally with Dynamic Immersion
Strassenheim ... 2005 First oil from the Okwori field
Implementation of early production scheme for Nda field
Addax Petroleum’s production reaches 75,000 bopd level
Participation agreement signed in November with ERHC Energy Inc. to acquire 33.3 per cent participating interest in JDZ Block 4
http://www.addaxpetroleum.com/site/milestones.php
ADDAX posts ERHC DEAL a MileStone
http://www.addaxpetroleum.com/site/milestones.php
Addax lifts its JDZ standing
By Upstream staff
Addax Petroleum has boosted its stake in the Joint Development Zone managed by Nigeria and Sao Tome&Principe in the Gulf of Guinea, writes Barry Morgan.
The Swiss explorer increased its interest in Block 4, where it recently secured operatorship through a partnership with Houston minnow ERHC Energy.
Last week, Addax acquired the 5% participating interest of Nigerian independent Overt Ventures, thereby raising its own stake to 38.3%.
Last year, Noble Energy walked away from the blocks, partly on the grounds that it could not secure sufficient equity to justify operatorship and because of unresolved question marks against local independent participants.
Addax will pay $10 million to Overt, with which it already had a technical partnership deal, and another $5 million to the Abuja-based Joint Development Authority to cover the administration fee and an additional signature bonus of $4.5 million.
--------------------------------------------------------------------------------
21 April 2006 12:35 GMT | last updated: 21 April 2006 12:35 GMT
Umbra no apoligies required
you have pre empted your statement with "IMO" in my opinion
thats fair enough
any idea now when we all may be wealthy LOL
Good Luck with the Launch of the JDZ Board
Ruby
Swamp Perfect Thanks too bad the author was too damm lazy to see ERHC changed its name over a year ago
was a re hash of several other stories of late
but none-the-less any press even bad press is good press
was no Ken Silverstein however
SWAMP please copy/paste the story not the LINK
The story you requested is available only to registered members.
Can Someone post the FULL LA Times story
it is requesting a password
Umbra ... I'm Short ?????? I'm TALL & BIG ...
Been here since 1999 with the BIG picture in mind
all of us here are infront of 99.9% of the investing public
who have no IDEA of what Sao Tome is or ERHC is
but they will ...
Dig was just pointing the press on the Straddle from BL 1 to BL 2
this is what we need 1000's stories of this development
Who cares What CVX has in BL 1 we care about how it affects us in BL 2
PLATTS News on JDZ
<<Strong indications have emerged in recent weeks that Chevron has encountered a substantial oil-bearing structure in the well, which may also straddle nearby block 2 in the JDZ.>>
Addax Petroleum has increased its participating and operating interest in Block 4 of the Nigeria/Sao Tome and Principe Joint Development Zone from 33.3% to 38.3% by buying the 5% stake held by Overt Ventures, Swiss-based Addax said
Thursday.
The assignment of Overt's interest to Addax has been approved by the Nigeria/Sao Tome and Principe Joint Development Authority.
Addax will pay $10 million to Overt for the interest and a further $5
million to the JDA, including a $4.5 million signature bonus.
"We believe that the JDZ offers world-class exploration potential. This acquisition follows our strategy of investing in the JDZ as a core exploration
area for Addax Petroleum," said Addax President and CEO Jean Claude Gandur.
Block 4 covers 857 square kilometers with water depths ranging from around 1,800 to 2,200 meters. Seismic data acquired over the block is
presently being analyzed to determine potential drilling locations.
The JDZ is around 200 kilometres offshore Nigeria, adjacent to areas
where several large petroleum discoveries have been made.
--
The partners in block 1 in the Nigeria-Sao Tome Joint Development Zone in the Gulf of Guinea have yet to present a report on the results of drilling of
the Obo-1 wildcat completed on March 15, the government of Sao Tome and Principe said Tuesday.
"We are still waiting to hear from Chevron. We are eager but we have not heard anything officially from the company," Sao Tome's National Petroleum Agency Executive Director Luis Prazeras said in a telephone interview.
A Chevron spokesman said there had been no update since it issued a statement March 17 that a review of the results of the Obo-1 well was underway to determine the next steps in the exploration program.
Strong indications have emerged in recent weeks that Chevron has encountered a substantial oil-bearing structure in the well, which may also straddle nearby block 2 in the JDZ.
Block 1 operator Chevron and its partners--ExxonMobil, Dangote-EER and
Afren--started drilling the well in mid-January. The block will test the potential of Nigeria and Sao Tome's shared offshore region and has generated considerable interest from global upstream players. The consortium won exploration rights to the block with a $123 million bid in an October 2003
bidding round.
Of the six blocks awarded in 2004 and 2005, Prazeras said production sharing contracts had yet to be signed for blocks 5 and 6 but that the process should be concluded by July. "Our expectations are that these blocks will be
signed in June or July. That is what we expecting. Right now, the Joint Development Authority is working on negotiations, so we hope by July everything will be signed," he said.
FINAL THREE BLOCKS NOT FOR SALE
Prazeras said Sao Tome and Principe and Nigeria had withdrawn from auction blocks 7,8 and 9, the last three of the nine JDZ oil blocks. These
blocks could be looked at again after the start of operations in the six JDZ
blocks already awarded, he said.
"For now, we have no plans to put them on the market, it will take some
time. The JDA is concentrating on the ongoing blocks so blocks 7, 8 and 9 will
definitely not be put on the market in the short term. It will take some time
to come," he said.
Prazeras said Sao Tome could launch tenders for oil exploration in its
Exclusive Economic Zone by the middle of next year.
"We are finalizing in house the papers as far as the legal framework is
concerned. So we believe that by middle of the 2007, something will happen in
the EEZ zone," he said.
The former Portuguese colony of some 140,000 people has up to now relied
almost exclusively on the export of cocoa for foreign currency revenue and is
one of the world's poorest countries.
Some studies suggest the islands sit on between 6 billion and 11 billion
barrels of crude oil.
Under the terms of a treaty signed in 2002, Nigeria, which is already
Africa's largest oil producer, will take 60% of all oil and gas revenues from
the shared zone. Sao Tome will take 40%.
--Jacinta Moran, jacinta_moran@platts.com