It is about time ERHE comes back to life.
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PatentGuy,
Thank you for your well thought out reply.
I do agree with you that this is a bit more complicated than it should be and therefore not an easy answer to my exercise I put forth. I put it out there to focus on the issues at hand.
I think there will be a slight variation on the three cases you presented but very close. I am thinking that it will unfold kind of like this:
Case 4:
I think they split the 250,000,000 shares to 2,500,000 and the market cap stays the same for the opening price (.04 moves to 4.00). This will keep it legal that the market cap stays the same for the R/S. But, I think they simultaneously issue new shares to the Anti R/S holders to bring the outstanding shares from 2,500,000 to 12,400,000. Then the market makers get to work the share price to what the market will bear. In other words, for the R/S official price, it goes at $4.00 per share but it is extremely likely that no one will be willing to purchase shares at that $4.00 mark at the open and they will start dropping the price until they can "find a market". IF, the market cap were to stay about consistent then the common shareholder would have a stock that was worth $4.00 down to approximately .80 (or .008 pre split price).
That said, I don't think this is how it will play out. I think you are correct that it would be somewhat insane for the company to spring this on the market without anything else and therefore kill the confidence in the market for their shares. I think they will time this R/S with some other transaction or news release, therefore trying to offset the dilution. Hopefully they will be able prevent the share price from going from $4.00 to .80 in a heart beat.
I still think current management should do or say something to clear this situation up because it still looks like a huge unknown at this point and that looms greatly over the potential of the share price.
Nostradamus? or would you like to expand on your pronunciation...
Quoting an opinion as fact does not make the underlying opinion, fact. Just sayin. You are making this argument and your other arguments look worse.
If in fact, everyone held this opinion that all NSCT patents are worthless, then a $0 is already priced in and it is a moot point.
Stick to the Anti-R/S split questions and concerns. Those are very valid and potentially effect shareholders a lot more.
Krom,
I agree 100% with your comments about news soon. I hope ERHE holds until they can release a full report on their Kenya property. This will likely be a large triggering event to rebuild the shareholder value in this stock.
Good luck to all
Stock Barber,
I am going to go out on a limb and give you my opinion on this subject. First, I don't think you are helping your argument a bit by your claim of these patents being "worthless". That is purely YOUR opinion and I can guarantee you that others may not share that opinion. Myself being one of those "others". In fact, I have to fall firmly on the side of ThePatentGuy on this one. You can keep your opinion and I will even go out and say some of the patents may have expired, but don't go mixing this minor point with your opinion that they are worthless. Anything is "worth" what ever someone else is willing to pay for it. Including this stock for that matter.
That being said, in the long run, I think the whole patent issue will not play a big roll in the success or failure of this business so it is really a waste of energy to continue raising this issue.
I do, however, appreciate any good questions that are brought up for discussion.
Carry on.
Unfortunately, this situation is as clear as MUD!!!!!!!!!!!
I really wish NSCT management would clear this up with either a completion of the R/S or a public statement of how many shares they have sold/issued with this clause attached. I feel it is extremely unprofessional of the current management to have a completely unknown number of shares with this protection while common shareholders purchasing their stock on the open market do NOT have this protection. Therefore, NO ONE (not thepatentguy, not grouchy, not Stock Barber, not stinkypinky , not damnedyankeefan) can estimate a fair market value for shares they either hold; want to purchase; or plan to sell, based on the facts that we now know. This is SIMPLY a matter of transparency.
Full disclosure: I am a current shareholder. I have held this stock for well over a decade. I have a strong hope for this stock to do well. I hold no grudge against current management/former management or any shareholder or message board poster for that matter. I am very pleased there is a new and growing business going on behind the scenes with the NSCT stock but will not support the business venture by buying more stock until they clear this one looming issue.
Challenge to both sides of this argument: Please use an actual example to explain how you see a R/S unfolding assuming the following example for NSCT:
Prior to split:
250,000,000 shares Outstanding
10,000,000 of shares outstanding have been issued/distributed with the anti-reverse split clause (pure speculation for use with this example).
$10,000,000 market cap (this means a share price of .04 going into the reverse split)
Assume a Reverse split of 1 share for every 100 held (for easier math).
With the above assumptions, based on your understanding of what will happen with the Anti-R/S shares, please answer the following questions:
1) How many shares are outstanding after the completion of the reverse split?
2) How many shares do the anti-R/S current shares have of the OS in #1 above?
3) What is the market cap and therefore the price per share of common stock right after the split takes place (opening price)?
Side question to deal with: What do you do to account for the 4,000,000 preferred shares with rights to convert into 600,000,000 common shares and how does that effect the future price per share for current common shareholders?
One final comment that has me somewhat confused is from the current wording of the 10-Q. When they state
In for a small starter position. Had to move my limit order up twice after partial fills. Not many shares on that dip.
I will follow more closely now (lol) and maybe add more if another dip comes along.
Here for a fun ride
Good luck all
Count me in as a frequent visitor to the board but it sure is a lot less stressful during this quiet period without the pointless anti-management banter that went on for years here.
Much brighter days are ahead. Looking forward to the discussions of the next drilling phase in Kenya/Chad or new partners in other areas.
Good luck all.
FYI - about public releases:
It is totally legal for him to release new and material news on this podcast. The company would just need to follow up with a properly distributed public release before the market opens on Monday.
However, rarely have I seen a company do this nor do I expect it this time.
Just letting everyone know that if they do hear something material from the podcast this weekend, don't go getting all up in arms..... until after the market opens on Monday IF no official PR hits the press.
Good luck all
Been following for a while. Enticing entry point today so I have put a toe in the water.
Good luck all,
Strat1
It looks like we are starting to see the details of the most recent debt financing by ERHE. The good news is that it is only about $900,000. I don't know the specifics on the pricing of the stock it is convertible to but I am very pleased to see it is only about $1 million. This is exactly what I was hoping they would do. It looks like they are only financing in small quantities what they need in the short run until we get back the numbers on the Kenya prospects. This should be the catalyst to a much higher share price which will minimize the dilution for the next phase of development in any of their prospects.
Back to quiet mode until Kenya results come back.
Very good post. Kudo's
Red and others,
In my opinion, NSCT is between a rock and a hard spot right now. True, in the filings they have publically announced that they have a very large RS (1:200). That alone is almost a non-issue except most RS's have a negative stigma attached to them for good reason. The MUCH bigger issue here is the unknown protected shares if and when the RS happens. I have never seen this type of arrangement and think it is perceived as shady but I understand why it would be done ONLY when the original shell company transaction takes place. IMHO, they should have completed the protected share RS as part of the ownership change.
The reality of the current situation is that NSCT's new company looks to be very real with debatable potential (I kinda like it for that matter) and they are starting to put out real press releases with debatable good news. The problem is that any new money invested from outside current ownership is HIGHLY at risk to be watered down to an undetermined amount (due to the protected shares).
There is a very easy solution for current management to do that could propel this stock forward. They need to do one of the following 2 things:
1) Announce and complete the RS and disclose the exact amount of shares protected. Then standard math can be applied to put a real company valuation out.
OR
2) Announce and file the dissolution of the protected shares. The company can get to the exact same goal by issuing new stock and giving it to the new ownership/management team at any amount they want (stock option plan, bonus plan, etc.).
Until one of the previous two options occur, no one can debate the value of anything this company is doing or producing. It is that simple.
Full disclosure: I still own shares from the good ol' days and wish nothing but the best for all current shareholders.
Good luck to all,
Strategyone
Or, the vibrant and fluid discussions will return when the status quo changes and there is something to discuss. I feel we are in a quiet period until there is news released outside of Kenya or the data comes back from Kenya with relative numbers to discuss (which I put several months out at least).
Given the full volume of today's trades is equivalent to about $2,500, there isn't much to debate (IMHO) or many people around to debate about it.
Priceless reply. That is hilarious.
My take on today's news....
Nice!
Basically, it looks to me like ERHE has found a source of capital to get some needed short term funds to continue with the data gathering in Chad. This is WITHOUT diluting and trying to do a private placement at this time. This is tremendously good news considering where we are sitting on the Kenya front (months away from estimated targets).
I read this news to basically say, "We (ERHE) have borrowed money to begin the next phase of studies in Chad. When we finalize a farm-out arrangement we will negotiate these expenses into that deal and recover these costs at that time". IMHO, that is what is going on with the Chad front and it makes a lot more sense to me that trying to raise cash from stock sales when we are likely close to a much better valuation point shortly.
This investment is starting to look up again.
Good luck to all
Are MJ stocks the next boom???
ha, I live in Washington state. One of only two where it is now legal. Of course, you can't legally buy it in WA yet but it is legal to have it .... so how do they get it???
What tryoty? Up 34 cents to $108.10. It could happen down the road..... LOL
I'll be much happier at $1.08 which I think is very doable with a single successful drilling hit.
midtieroil,
You misunderstand the "relinquishment". They do not give back 25% of there percentage of ownership of the block. They have to relinquish 25% of the AREA (acreage) of the block which THEY get to select. This is very common and throughout all blocks in Kenya. Therefore, ERHE and partner get to do their 2D to combine with their already completed study to then make a decision on the 25% area to give back to Kenya to possibly reoffer up.
I would only be worried about this relinquishment aspect if CEPSA wasn't signed and/or the 2D wasn't scheduled. Even if the 2D slipped (which I don't think it will), I trust Dr. Thou to know enough of the block to give up the area that is not as prospective as the area they keep.
Ask Tullow or Africa Oil if they are worried about their relinquishments? Non-issue IMHO
Hilarious..... thanks for the laugh
This thing can't make up it's mind. Up pretty good on no news just like it was down a similar amount the other day again on no news.....
I do think the new basin will be the catalyst. If it looks good, I am guessing the share price will immediate spike to about the analysts estimates around $13 - $16. Then we will start hearing new estimates based on the NEW basin to open which is not priced in yet. I think new analyst estimates will be well above $20 at that time (assuming the new basin hits a decent pay number).
Kudos tryoty!
My point exactly. I have been trying to convey exactly what you state here. Thanks for your perspective.
LOL... Nice!
although tongue in cheek.... it is also a possibility that would not surprise me if it has been discussed between the two parties.
Not speculating at this point though.
have a good day all
This is where I have to disagree with you midtier.
The press release disclosed "the carry". Because it is too early in the game to disclose whether or not the partnership of CEPSA and ERHE will drill at least one well, makes it IMPOSSIBLE to disclose that fact. Which, in turn, makes your claim of materiality impossible to determine.
Here is a quick analogy: Microsoft recently released Office 2013. Do you think that is a material event? I do. Now, will Microsoft release Office 2015? Office 2016? Office 2017? Will those events be material? I think they will be. If you owned MSFT stock, would you be demanding Microsoft tell you NOW whether or not they will be releasing these future products (ie.. the number of wells to be drilled)?
I think your interpretation the other day was closer to the facts as they lie now which is - the carry is through the first phase of the PSC agreement with Kenya which puts the option on the operator to either spend money to drill at least one well OR spend money to do 3D studies instead only AFTER they analyze the 2D studies which have not been completed yet. Either way, the partnership is going to spend money and ERHE is carried. Either way, ERHE is in a great position as it does NOT have to lay out further dollars now before it is known what is beneath the surface.
It is unfortunate that so much negativity is being focused on just a few persistent posters implied confusion. I know I am not confused. I read the PR in the English it was written in and I read "carry".
Now, we also know that ERHE has proven from the JDZ experience that it will, indeed, release the full wording of the agreement in a future quarterly filing. So, I am not sweating over the details that may or may not determine a future number of wells being covered.
Let us all agree that in reality, one of two things are going to occur in Block 11A with the partnership of CEPSA and ERHE. 1) If the analysis of future studies show very positive studies - the partnership will drill. 2) If the analysis of future studies do not show enough justification to risk more money to drill, the CEPSA and ERHE partnership will dissolve and NO wells will be drilled by CEPSA in the near future.
IMHO, the market is "telling" us ERHE is a 6 cent stock until #1 or #2 is determined above. It is really that simple. The market may tell us something different if more news is released on other assets ERHE owns but at this time, nothing looks to change in the very short term therefore, no movement.
Well, I wouldn't want to speak for other shareholders. If it wasn't clear to you, I will respect your opinion of this being materially important in your eyes and not clearly reported in a timely manner. Please report this directly to the company so they can possibly do it differently next time.
For me, I am good with how the information was disseminated. Thanks for asking.
I have never seen a block disappear.
However, I am sure glad ERHE turned back in part of the Chad properties to minimize the cash payment ERHE would have had to pay them. It sure sounds like the smart thing for management to do since they were able to study the information they had on the block and buy time while trying to get a partner. Since, they haven't found a partner yet, they cherry picked the best of the block and returned the other portion back to the government of Chad to 1) stay on the good graces of Chad and 2) minimize the cash outflow of ERHE during this stage of the company.
I don't know about you but I would think most ERHE investors would be thanking management for strategically managing the various resources knowing that as soon as one of the multiple assets they have hits oil, the game changes for the remaining pieces they have in other locations.
Just remember to smile and also look for the good things going on in addition to the "constructive criticism" you've mastered.
Allow me to chime in....
Yes, Africa Oil has multiple blocks in Kenya and several blocks in other countries. Similar, ERHE has multiple blocks in multiple locations and multiple countries. Thanks Ntephe and team!
Africa oil hit the "commercial" threshold after 3 or 4 drilled holes. I think the 4th hole was a second hole in the same target as their first hole. I recall that hole putting them over the top as it double the estimated reserves of the original target.
By the way, AOI went up 800% after just the first well results and before determining "commercial" quantities were determined. All this happened in less than a year also..
Search hard for the bright side of life. I know you can see it if you really try.
This can all happen to ERHE (regardless of who is ERHE management team) as it really comes down to discovering oil by the operator....
smile and have a good day.
Woot! Woot! Up 10% Baby! What's that market telling you today?
That's right, the Market must be telling you these guys are great! The overall market is flat, no news on ERHE yet it is up over 10%. The market knows all..... You couldn't ask for better management. CEPSA deal in place. A Carry to boot!!!!!!!!!
A little tongue in cheek to start the day....
Smile and look at the bright side for a change. Have a good day all.
Again, It is absolutely impossible for ERHE to state "the carry is for 17 wells drilled" since there are currently NO prospective targets.
Some people are making this way more complicated than it is. Put yourself in CEPSA's shoes for a moment. You have been offered the opportunity to become the operator of Block 11A in Kenya. The price you pay is $2,000,000 plus the cost of the FTG study that was already started by ERHE and a carry of ERHE's portion. For this you get 55% of the block. You agree to this and both company's state this in their Press Release. (done)
Next step is to do 2D study of the block. Scheduled for 1st quarter 2014. (will begin in the next 30 days)
Future:
Worse case scenario - the 2D comes back looking like poop!!!! literally. There is nothing there to even give the slightest bit of interest to move forward in this territory. CEPSA has paid $2,000,000 + the FTG cost to ERHE and 100% cost of the 2D. They relinquish their rights effectively ending their agreement with ERHE. They part ways and no wells were drilled. End of story. Question: would the current release cover this scenario? Yes.
Middle case scenario - the 2D comes back looking interesting but not enough to go straight into the drilling phase. CEPSA contracts for 3D analysis of the blocks. This brings up 2 possible scenarios. 1) Good prospects are identified and they go into the drilling phase or 2) Either not enough or large enough prospects are identified to risk going into the drilling phase. If option 2, same results as worse case scenario above. No wells were drilled. Same question: would the current release cover this scenario? Yes.
Best case scenario - the 2D comes back smelling like roses. So good, CEPSA decides to begin drilling in at least one target. They may or may not also shoot 3D while going into the drilling phase. Based on the results of this first well drilled and/or 3D analysis done during the first well drilled, they may decide to drill more wells. The number depends on the number of targets identified and how good they look. In this scenario, one or more wells were drilled. Same question: would the current release cover this scenario? Yes.
This is not speculation. This is fact. You can choose to accept it or not.
As for what is really bugging everyone, including myself.... the current share price. Some people are latching on to the theory that not all details are released about the number of wells that are carried. I say hog wash. The price is lingering because ERHE/CEPSA is months and months and months away from drilling and at this point NOBODY knows on whether or not they will drill. The "Market" has plenty of time to get in prior to drilling on this oil play and everyone here knows it. There are no more details that could be released including the full legal document, that will change the timing or change the UNKNOWN number of wells to be drilled.
To be fair:
1) The choice of wording on ERHE's PR's in general and historically have been poor. I give no excuses for management nor Dan Keeney. Then again, they have not had any drilling success to toot their horn about.
2) Management is doing their selves NO favors by not having an annual shareholders meeting. No excuse to management for this. This alone creates doubt in the "market" and undoubtedly effects the share price.
3) The fund raising held from current shareholders last year was extremely poorly done. The poor communication, the multiple delays, and the delay in communicating the level of participating after the fact was the worse I have ever seen. To top it off, SEO did not participate at all. This fiasco is hugely weighing on the share price.
All said, if CEPSA finds enough interesting prospects and decides to move into the drilling phase, the share price will ignore all of these past mistakes. Once CEPSA announces a date for the first well to be drilled, the Market will finally have something real to grab onto. If history repeats itself as with examples like Africa Oil, the share price will be a 1 to 20 bagger before the drill hits the ground and I will happily forget ERHE did not have a shareholders meeting in 2013.
Actually, I don't feel mislead by initial cash payment at all. I have explained exactly how and why I read it the way I do. Even Midtieroil agrees that basically, the deal is for $2,000,000 dollars. The variable part is simply the ongoing costs of the work currently under way. This is VERY good news as it fully discloses that CEPSA is the one on the hook for cost overruns on this stage of the studies. I fail to see how this confuses you so much. I don't hear anyone else really complaining. Just you. I do see others "speculating" that it may mean more money is coming later but I hardly blame ERHE management for the misinterpretations by people that are free to speculate about anything they want.
As to the carry, I am also very clear on what that is. Does the release say 50% carry? Does the release say 10% carry? Does the release say 92.3456% carry? No, it says carry. I interpret that as ERHE full cost being carried until there is a change. PERIOD. Where there is room for interpretation or speculation is how much CEPSA may be locked into. It is very clear to me that because the 2D is not complete yet and therefore, no one knows to what extent there may or may not be targets worth persueing, the carry that ERHE is receiving may end at the end of the 2D analysis. I would expect CEPSA has the right to NOT drill if there are no targets found and therefore, it would end the farm out agreement at that point in time. This is EXACTLY why we haven't seen that there are "X#" of wells being carried. This is not rocket scientist stuff. I fully expect the 2D studies to come back with prospective targets and if they look good enough, they may go straight to drilling. If CEPSA determines they need 3D studies first, then guess what???? I expect the 3D studies to be carried also. Does the fully disclosed and compliant press release say something different than that?
No, it is only the negative slant or angle you choose to read into it which creates the ambiguity. Please don't assume everyone else is as confused as you claim to be just as I don't assume everyone else is as clear as I feel I am.
By the way, please feel free to post an example of another oil prospecting company similar to ERHE that does release the full wording of a legal farmin/farmout agreement. I have never seen any multi-page legal agreement put in any press release or 10Q. If you find one, I would be more than happy to send the link on to ERHE as an example of what ERHE shareholders would benefit from.
midtieroil,
I think we agree on the magnitude of the CEPSA deal. I feel everything is fully disclosed. I agree with you that if there was any more to the deal of material nature that ERHE would be required to disclose it and I do feel ERHE follows the letter of the law on disclosures. Therefore, nothing hidden, nothing not disclosed, and no need for any excuses or fabrications. End of story.
I also agree with you on the CEPSA website. I also looked for numbers or previous drill site disclosures and I did not see the types of numbers I would expect to see from a public company. However, I did see timely disclosures (unlike Sinopec).
I am very confident that the public will see much more information on the Kenya block exploration with ERHE and CEPSA as partners. I see no reason for either of these companies to hold back anything or hide anything when it comes to disclosing what they end up finding. I think CEPSA will be timely with their drilling plan and announcing success or failures. I think ERHE will be the party that will want to disclose actual number details and or third party estimates. But most of these details CEPSA will have as they need it to make their decisions over where to drill, how many to drill, and priority to other projects. ERHE is still a public company that will need to raise more funds in the future and will benefit greatly with a higher share price and therefore will want to disclose as much as possible (on successes).
Even though we all experienced a bad example with the JDZ drilling program, the fact of the matter is that there were 5 deep water, expensive dry wells drilled. There really wasn't anything more to disclose and any excuses bantered around on the board were not from the company but primarily rumors from posters about more discoveries found than disclosed. Unless dry wells are dug in Kenya, I fully expect to hear results within 60 to 75 days of the drill bit hitting the dirt.
Nothing but good news ahead of us and nothing is priced in at this point.
Smile and try to enjoy the ride this time.....
midtieroil,
You ask a very valid question
A Fresh Thought........
Just think, in three to six months down the road, we don't have to worry about what ERHE says (or at least blame them for any poor communication about their Kenya block). CEPSA is the majority owner and the operator of Kenya Block 11A. The 2D will be complete and the real meaningful decisions will be coming together - where to drill and what the prospects are projected to be (Risked and Unrisked). We will get meaningful information on projected drill dates and likely more detail of future planning for the region. No more "rig of opportunity" 2 years out, etc.
Patients will be rewarded.
Good luck all.
snayeman,
You do have a point that neither I nor any other shareholders (except the insider people) know how the complete deal is structured at this point in time. My main point to express is that 1) all the primary and most important details have been fully disclosed; 2) any undisclosed details may have very valid business or timing reasons why they aren't disclosed yet; and 3) If there are other details still to come out, it is HIGHLY likely that is will be more money or more carry or good news in general.
This is why I don't understand why 95% of the discussion on this board is over what we 'might' not know yet and this gets painted as bad news. Some people will only discuss the negatives regardless of the proven positive accomplishments that have just been released.
Finally, I will also admit, I 'wish' I knew all the unknown details too, I just accept that more time is needed before these details come out and I refuse to accept that it is automatically bad news or bad on the company's part.
We will all have to wait and see.
Emdyal,
Not to beat a dead horse here, but I still fail to understand the "big secret" you keep referring too?
If one doesn't incorporate message board posting opinion into the meaning of company released information, there is full material disclosure being made.
Don't get me wrong, everyone on this message board is free to speculate both good and bad scenarios on what the future may hold, but there should be no direct connection between our need to speculate and then blame being directed at the corporation for the lack of information disclosure.
As I read it:
ERHE now has a Partner for the Kenya block. Check. Fully disclosed.
The partner is CESPA. Check. Fully disclosed.
The partner is carrying ERHE. Check. Fully disclosed.
The partner has paid ERHE $2,000,000 plus some variable amount that highly looks to be tied directly to the cost of ongoing work previously started on the Kenya block. Check. Fully disclosed.
The Kenya Government has now approved the Farm in partnership with CEPSA. Check. Fully disclosed.
2D studies are contracted for and scheduled to start in the first quarter of 2014. Check. Fully disclosed.
I see no problems and I see no secrets.
oil-cowboy, thank you for your response.
Yes, as a shareholder of ERHE, I would love to know precisely that CEPSA is carrying ERHE for 10 wells over the next 2 years. Who wouldn't want to hear this information (except for the shorts). This is the question some shareholder/speculators/message board naysayers are demanding to know but it is likely the wrong question to ask at this stage. There likely is no documented number of wells written into the agreement and therefore it is not hidden or secret or non-disclosed information. Keep in mind, I would also like to know next week's winning numbers to the mega lottery ....... but is that data available yet?
Now, let's think back at the JDZ experience. 3D was already completed with third party analysis and data showing a number of targets with like 14 or 18 billion barrels of oil estimates. With that data in hand BEFORE a partner was signed, the partnership agreements could have been signed INCLUDING a specific number of wells. The number of wells were defined in the PSC agreement and therefore were included in the partnership agreement between ERHE and SINOPEC.
In Kenya, there are NO targets yet; there are NO size estimates yet. The PSC between Kenya and ERHE doesn't even have a # of wells requirement built in yet. Therefore, how do you expect ERHE to disclose the number of wells a partner is going to carry ERHE for?????
Let's be realistic in our expectations and recognize that the Kenya property is at a different stage than the JDZ was. Some people here seem to be demanding that ERHE "disclose" the number of wells they are being carried for in Kenya. When in reality, that may not be a part of the agreement at all.
Let's walk through the two extremes to understand the "why" behind this misperception of missing data.
First the bad news example:
The FTG has been completed and provides some good relevant information for pushing forward (we already know this but we didn't 3 months ago). Now the 2G is being shot and CEPSA is now on board to carrying ERHE (as disclosed properly). Now let's assume the 2G comes back showing extremely low volume targets (aka NOT WORTH drilling for). CEPSA and ERHE shake hands and part ways... ERHE turns back over the block to the Kenya government and they spend no more money in Kenya. This is a worse case scenario but it costs ERHE relatively zero in cash flow for this prospect during this "carry" phase. Now, tell me, how would ERHE or CEPSA be able to "disclose" the number of wells this agreement is for, when there is NO number in the agreement (for very good business reasons)?
Now the good news example:
The FTG has been completed and provides some good relevant information for pushing forward (we already know this but we didn't 3 months ago). Now the 2G is being shot and CEPSA is now on board to carrying ERHE (as disclosed properly). Now let's assume the 2G comes back showing a high number of great looking targets that look to be very commercial in size (aka, ERHE's own "string of pearls"). For CEPSA, the prospects look so good, they move to the top of their companies prospective drilling list and gets highest priority. CEPSA then decides to drill 10 holes over the next 12 months . Great news right? Keep in mind, ERHE's carry may include all of these wells also. CEPSA and/or ERHE can not disclose information about what they do not know about yet. It is really that simple.
At this stage of the Kenya property, ERHE is exactly where it should be.... They have a partner to carry them and they are now getting the information needed to see just what will define that carry down the road.
Also, please keep in mind, a carry is nothing more than 2 principle benefits which are both HUGE mainly to a company like ERHE which has no "working" properties. The first benefit is to reduce the RISK (and associated cost of drilling to zero) on hitting a dry hole. The second benefit is a simple time value of money on the cost of drilling for commercial hits. Remember, when a drilling prospect is determined to be commercial and they finally get to the production stage, the FULL cost of drilling is recovered from the oil revenue. Therefore, this "carry" that CEPSA is fronting for ERHE is recovered to CEPSA. In my opinion, this is a huge benefit to ERHE due to the cash flow constraints it has yet, the cost of this benefit is actually relatively low to a well diversified company like CEPSA which can factor in percentage of commercial hits to attempted drill sites and still maintain a very profitable business outlook.
I guess my post got deleted on Friday so here is a toned down version:
In Reply to several arguments held by the naysayers on the site, where repeated claims are made about managements lack of disclosure or hidden truths about the Kenya agreement, here is a different way of looking at it:
Guess what, ERHE got approximately $2,000,000 in cash. END OF STORY. The likely reason the statement says "initial $2 million" is that CEPSA probably agreed to pay them some fixed $ amount plus the cost of FTG and 2D shoot and analysis of this info. Considering that the FTG survey was either going on or in the analysis stage when CEPSA and ERHE were coming to terms, this is why it wasn't an exact figure. They disclosed the deal with FULL Truth and disclosure just as us shareholders deserve. Believe me when I say, if ERHE was going to get $20,000,000 or more, we would have heard about it (IMHO). There is NO reason to hide a big extra payment down the road. I am estimating that 6 months to 1 year from now, we will see some disclosure in one of ERHE's filings that give the final figure for that agreement. Since the FTG study was signed between ERHE and Bell GeoSpace, Bell is billing directly to ERHE. Once all work is completed and turned over to ERHE, the final billing can be given to ERHE and paid by ERHE. Then ERHE can provide the invoice to CEPSA to add to it's initial $2,000,000. This is all the market should be considering at this point. Yes, it is totally possible that ERHE and CEPSA could have agreed to more upfront money down the road based on the outcome of the FTG and/or 2D analysis but it certainly is not relevant at this time (speculation at best) and should not be considered in the current share price AND should not be disclosed (if it even exists). I give it less than 1% chance of some other bonus down the road that hasn't been disclosed. It makes no logical sense to me and I am not loosing any sleep over rampant speculation or griping to the company.
There are no "tricks" or "hollow excuses" going on. They have fully disclosed all the good news and the market has processed it accordingly. The tricks and excuses don't exist IMHO but are deceptively being thrown around to maintain a negative slant and a company that ironically has proved it is moving forward.
ERHE has taken a huge positive step forward on the Kenya front. They have a partner that is carrying them to the next phase. Smile and enjoy as more developments are disclosed when appropriate.
Not a bad idea and most likely what will be done but they have to complete the 2D first.
Good things to come......
I thought I was pretty clear. Let's try this example.......
I don't care if ERHE hired the 'dalai lama' to be their CEO, any oil prospecting company that goes 0 - 5 drilling in very expensive deep water territory will have a noticeable hit to their share price. End of story.
midtieroil,
I get the impression that no matter what the subject is, you seem to look (very hard I might add) for a reason to blame ERHE management. Then, in your mind, it becomes a fact and the only possible explanation.
Other people may not jump to that extreme.
1) The share price being hit so extreme, down to 5 cents from a high several years ago in the .90+ range. Your frequently posted reason - ERHE management/incompetent Chinese drilling company.
Another possible explanation or major contributing cause - After years of pre-drilling estimates and third party studies stating the JDZ may have 18 Billion barrels of oil . . . . . zero feet of oil was discovered in 5 consecutive wells in ERHE's owned blocks.
2) Pioneer and Noble pulling out of the JDZ blocks after partnering with ERHE and winning the awards. Your frequently posted reason - ERHE management.
Another possible explanation - Pioneer and Noble did not like working with the JDZ. Maybe they decided the risk was too large or the project costs were too large. Maybe they realized the availability of deep water drilling rigs were too scarce or the costs were going up too fast to justify the risks. Maybe they were concerned over Nigeria's threat to change the terms of contracts after signing them as they were doing with their onshore contracts. Maybe they didn't like the experience they had with how the JDZ handled the bidding process and it got worse when they began negotiating the PSC's. Maybe they didn't like the instability of the STP government. Back then, they had recently experienced a coop of the STP leader. Maybe Pioneer and Noble won the awards and then hoped to find a "major" to partner with themselves. Keep in mind that back then, block 1 was split between Mobil and Chevron (two huge majors) and Noble and Pioneer were considered mid tier oil companies in deep water at best.
In my mind, we will never know and we can't turn back the clock and do it all over. It seems to me that both Pioneer and Noble had already came to terms to work with ERHE (and their management) before going into bid with them. They pulled out AFTER winning those bids with ERHE. What changed at that time to make them want to leave..... hmmm. The PSC negotiating is the timeframe when they pulled out. It would be more logical to point a finger at the changing component rather that the same ERHE management they already came to terms with before bidding for the awards.