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to be a 200 bagger, I put it at 12 Billion barrels proven for ERHE's share.
Therefore, to meet that number it would mean that between the JDZ and the EEZ there would have to be recoverable reservoir potential of at least 50 to 60 Billion barrels. How much is out there who knows? But can these two areas have that much oil...absolutely.
Again that is why I think if Investors want to magnify their own potential with this stock they should look at it in the Long-term.
Tryoty,
Is there any information out on EEZ that describes the number of leads and prospects in that area. I know it is early and ERHC has not yet made their picks. But if the EEZ has anywhere near the potential as the JDZ then I would think 'double-wow' comes to mind.
When you put all this together it becomes more apparent that as an investment and to magnify it's potential, investors should be looking at ERHC as a long-term hold. In my mind I define long-term hold as 5 to 8 more years. I know a lot of us that have been here 2 to 3 (or more) years do not want to consider this possibility, but this stock over a 5 to 8 year period has the potential to be a 1000 bagger. And yes I did write 1000 bagger.
Your thoughts?
Bayfisher
Tapco,
When Hess went into the Ceiba in 1999 within 14 months they were producing(this literally saved Hess financially). This area is a lot less problematic to produce and has more facilities (infrastructure) already in place.
Remember their is a certain economic value associated with known reserves. We may start reaping some share price benefit of the EEZ (of course only if their are economic amouts of oil their) within 3 to 5 years.
The truth is once drilling starts sometime in 2008 and we see oil our price may rise to 4 to 6 dollars a share. But in 10 to 12 years the value of ERHC or the entity that acquires it could be...... pun intended elephantic!
Jobinthecloth,
What I think I know about Ceiba is that:
One, it is about 35 miles from the far Eastern edge of EEZ
Two, It is worldclass reservoir, in that it has unbelievable permeability and porosity
three, The size of the field keeps growing as they do additional exploratory drilling
four, current estimates are that it is above 1 billion barrels recoverable.
five, it is a perfect reservoir for allowing secondary and terteriary recovery methods
six, the hope is that these sand continuue all the way out to the Princepe.
I have heard it mentioned on this board and of course no one knows but in the end the EEZ could dwarf the JDZ in the amount of oil it contains.
JMO
Bayfisher
...that was funny
Essentially Godsonic did not have an EO as a holder of almost 50% of their stock. SO yes I do think it will go for a much higher price
I think by this time next year (at the very latest) we will know.
Do you think the initial investors in Microsoft and Apple went through the same emotional duress that this stock has put us through?
In Response:
1) AT $90/Bbl the incremental rise per bbl will be significantly greater than it woul dhave been at $45
2) I have done very basic calculations on this board before but every 1Billion recoverable equates to $2.50 per share based on recoverable risked reserves. Even more if yoyu put this stovck on a cask flow valuation model.
3) No one knows that question but in the Sep 24th conference there was no mention made of significant penalties being possible.
4) Relates to #3
5) We will have to wait and see won't we.
I wish I had a better answer but "it depends".
In our case I think an Elephant would be better for the JDZ as it would get a bit more attention and help elevate our stock price.
You are not reducing long-term production costs in fact with $100/oil you are raising long term production cost. But you are hitting your cost-oil bench mark quicker.
Sorry Kobiashi,
That is not entirely true. The Beaufort sea is a very shallow sea just North of Prudhoe Bay. It would not be too expensive to lay a pipeline from the production field to the Alaska Pipeline and Alyeska would probably incentivate them for doing so as this would keep that piepline viable for at least another 3 to 5 years.
Our 300 Million barrel field is large but the ecnomics associated deep water and starting at square-one put the hurdle rate probably above 1 billion barrels (cumulative)
Walldog,
Saudi Arabia and the world have relied on Tha Gawar reservoir for the past 30 years. It was and still is the largest single reservoir ever found. While it is a moving target estimates are that it will end up over 65 Billion recoverable barrels. So no they cannot produce oil in the past historic quantities out of these massive end of life Giants.
Estimates at one time were that the lifting cost for this reservoir was under $2.oo per barrel, now those have gone up as they have applied new recobery methods (water flood, miscible sweep, etc). So no there 'probably' are not any more Gawars out there. And in the future we will have to work harder and get our energy from the thousands of smaller reserves still out there.
Walldog,
That's a bit harsh don't you think.
We posted(discussed) last week that you cannot calculate peak oil unless you calculate it based on a specific price per barrel.
Now I am not a geologist that specializes in reservoir engineering but in my (very humble) opinion if the price of oil stays at the $85 to $90 per barrel mark then all current projections go out the window.
The largest single hurdle in bringing oil to market is the initial infrastructure cost. These include massive gathering centers, giant pipeline and off-loading centers. There are two ways to overcome this hurdle, the 1st is to find giant reservoirs where the economics can be overcome simply by the size of the field. The second and that is what I am intoning here is when the price of oils elevates so dramatically that now fields that were deemed un-economic can now be produced.
There are literally hundreds of these fields around the world.
Some specific areas would include the North Sea, all across the North American Arctic, The huge Rocky Shale oil regions, and finally as i mentioned last week the Canadian Tar Sands.
Please understand I am certainly not sayting everything is rosy and we will have Oil coming out of our Wazzou for years to come. I am simply saying that for T-Boone to make a prediction is silly at (current posted price NYMEX) of $92.15/Bbl our reserve potential will haqve to be recalibrated.
Now in conclusion, how does any of this affect us as investors in ERHC? It looks like from the Addax presentation that the JDZ will not be one massive Elephant field but instead is a series of smaller reservoirs. This will require more capital to develop the production facilities. Additionally there may be smaller more marginal offset zones that may now be included because the economics are now viable.
So when you hear someone say we have reached Peak Oil ask them what their price basis is.
Granted Pepsiman,
But since we all continue to watch Investors Hub I felt we could profitably spend our time sepculating on one of the many unknowns out there.
In this case I would think we could come up with some worthwhile interpretations as to the majors lack of interest in ERHC.
And I think your timetable is a bit long. This stock should start to piclk up significantly about the end of the 1st qtr 2008, or when we get a difinitive timetable for our initial spud-in date.
Topshelf, those numbers are not entirely correct. If someone went after 50 Million shares on the open market we would quickly shoot up to above $1/sp. Still the economics are not bad
Walldog,
That post makes some sense but it also leads to this question. If you already have contolling ownership of the block (ie. ADDAX) why wouldn't you snap up that 100,000,000 shares of ERHC that are available and in block 4 alone add another 7% to your position for pennies on the dollar?
Again, if the seismic and the well results are so strong the majors could purchase these rights on the cheap compared to what they will pay once reserves are proven?
Are you sayng that the majors have approached SEO and he has held back due to price?
If so why haven't they been snapping us up on the open market?
Posters,
I am going to ask everyone to look at a question that may lead to some solid discussion today. I think a lot of us are struggling with this and maybe it is time to place it on the table and see collectively what we can come up with.
The question: IF the JDZ (especially zones 2 & 4) has so much dang oil in it. Why are other majors (supposedly in the know)not rushing this company or its stock to buy the potential to these reserves?
Most of us think that the JDZ has a vast potential (I know I and my 125k shares do), why then aren't the people that have had a chance to see the results of OBO-1, all the 3-D overlay mapping are not rushing to control us?
What do most of you think the reasons could be:
1) ERHC's continuing issue with the SEC?
2) ERHC's is still primarily controlled by a Nigerian business man?
3) How strong are ERHC's rights?
4) ???"
let's get everyone's thoughts out there and see if we can shed some light on this, and yes Oilphant if you won't be so cryptic even you are welcome to share your insight on this issue.
Come on Walldog, Balance Builder, Mark Govals, Tryoty and many, many others let's look at this topic this morning. How come CVX isn't snapping us up?
Brez, Can you decipher for me the P50?
Bayfisher
Thanks Walldog,
as an adjoiner to the previous post. the current prices are why our little minnow could be in for the ride of its life over the next few years.
as a hypothetical drilling based on geologic surveys is still not an exact science even with 3-d Overlay mapping. Case in point the Aje that was drilled by Synrtoleum in OML 113. Thye missed the mark even though the surveys looked very promising.
BUT: the JDZ and the EEZ are so large and are in such a prolific area that oil will be found there. What I am getting at is that there is a chance that this first foray into exploring the area (the first 6 wells) may or may not be as successful as we would want. As terrible as this sound there is a chance that this swim could go on longer than any of us want. That is why I am glad that Addax is taking thier time and that they are associated with the very best exploration company's.
One more thing: The Sadlerochit in Prudhoe Bay Alaska has to date produced more than 12 billion barrels and the pay zone on that reservoir was only 110 feet thick. OBO-1 was 150 feet thick with a very high gravity oil, I have to conclude that they felt they were on the high side of the reservoir.
Tryoty,
Walldog’s gloom and doom scenario does not completely hold water. While I am not mitigating the seriousness of the earth’s energy situation, here is why I think Walldog is off the mark:
Worldwide reserves are always stated as to the economics associated with producing them. At $40/Bbbl the estimated worldwide reserves are different than what they are at $80/Bbl.
Case in point: during my father’s last few career years with a major in Prudhoe Bay, Alaska, he worked on developing a field just east of the Sadlerochit field. Unlike the Sadlerochit which is generally at a depth of about 10,000 feet and has a reservoir temperature of 225 degrees Fahrenheit, this field is just below the permafrost (approx 3,000 feet) and has a temperature of around 34 degrees Fahrenheit. The recoverable reserves of this field at that time were estimated to be more than 20 Billion barrels. But at 10, 20, 30 or $40 a barrel it was not economic to go after them. To produce this field you would have to drill thousands of shallow wells develop a huge gathering system and overlay all of that with an enormous steam injection plant. We are talking huge capital outlay. At $80 to $100 a barrel maybe this oil becomes economic and can then be counted in the world reserves.
There are literally hundreds of fields like this one all over the world. Another case in point are the Canadian Tar sands. They are estimated to hold over 200 billion barrels of oil. But it costs a lot of money to get this oil out of the ground and to then strip the hydrocarbons from the trash.
My point here is that, in one way Walldog is correct all the easy oil is gone, but in another way any experienced geologist or Pet Eng will tell you there is still quite a bit of oil out there but it is getting harder and more costly to get to it.
So what does this mean, Oil will never be in the 20 or 30 dollar levels again. But we can go on producing $100/oil for quite some time. No Mad Max scenario’s that I can see.
Crappie,
I do not see 101027 as you see it..........?
I think this management board is not looking at our share price as something they need to positively reflect to the investment community.
IMHO they are working on a deal with another major, Could be Addax, could be Synopec, could be Chevron. If this is correct the market share price is little concern to them. In fact the the fact that no one seems to be working hard to get our SP price up in the short term is telling in of itself.
Why would it not matter to them? We are a public company wouldn't our sp performance be reflected in their pay or their yearly bonuses?
It seems they are working on a bigger end all deal. Before any of that can happen I suspect the SEC investigation must be closed down............?
dat_51,
Thanks for the reply and let me share my thoughts with you on mabenn 1's model.
The two valuation models are different. Mabenn created a cash flow model, while I created a (very simple) balance sheet reserve valuation model. Neither one has any more relative value as a valuation model than the other they are just different ways to skin the same cat. BUT cash flow valuation models are typically used to value something for purchase that does not have an intrinsic market value. A good example of this would be a Doctor's pratice. In our case if oil and amount of Oil are 'PROVEN' than a valuation model based on proven reserves would be IMO the better tool.
But I looked at Mabenn's model and besides the obvious fact that he has oil priced at only $40/Bbl another thing caught my eye. He has ERHC receiving only 1.8% of any oil produced. So therefore out of the 6 Billion recoverable reserves (again using Mabenn's model) Mabenn's model has ERHC receiving only 1.6% of the recoverable reserves. Mabenn does qualify this number by saying that the 1.6% is net of all costs and all taxes, but I have trouble with using that type of quantitative analysis as he is not sure in the future what type of tax structure ERHC will be engaged in as well as factoring in cost. And even if you accept just a simple taxing structure I have problems duplication Mabenn's 1.6%.
From my analyis this number is too low.
But who knows, I have a bit of back ground in all of this but would certainly not say it is my area of expertise. I just wanted to lighten the board up a bit by putting some very hypothetical numbers up on the board.
But if the numbers mentioned during the ADDAX investors meeting are anywhere near correct and can be proven through phase 1 of the drilling program (the first 6 wells) then we
could see a mid 20's share price by 2009.
IMHO
Sidewinder,
As silly as that post is.......there is a grain of reality in it.
Reality is that none of us really know what is down there and we have to make speculative guesses from what we hear the oil companies saying in analysts meetings and from what their actions are.
Let have some fun.
It's a slow day and I know there will be many naysayers, but let's run some hypothetical numbers.
At this time we all assume that the JDZ will be produced through a joint venture type production field due to the economics of producing many smaller fields in deep water rather than one large field. Right or worng let's start with that assumption.
If we look at the posted ownership that ERHC has in the JDZ (I know that block 4 is still in question, but for now let's go with the 26.7%) in all 6 blocks (2,3,4,5,6 & 9) then the average ownership position for ERHC is 18.12%. I know that it would be better to weigh blocks 2 and 4 a bit heavier since they are assumed to be better prospects, but for ease in analysis let's leave them all weighted equally.
After these assumptions (of course we all know what assuming does, but remember slow day and just for fun), let's make a few more based on factors of 3 Billion. I am using 3 Billion as a starting point for no appparent reason other than that seems like a reasonable reference point.
If we assume that after drilling in 2008 it is proven that all of the JDZ has 3 Billion in recoverable oil (not including oil equivalents..gas and condensate) and ERHC has approximately 18.11% of that then our next exercise is to put a value on that approximately 543MM barrels of proven oil owned by ERHC. Historically proven reserves (in reservoir) would be valued in the $4 to 5 dollar range depending on where they were and the economics of recovering them. Due to the fact that the JDZ is in very deep water I would have to go on the historical low side of closer to $4/Bbl. But ERHC has no cost oil so that should raise their value by atleast $1.50 to $2.00 per Bbl. (Again these are arbitrary but I am basing these numbers on the current value of a 20 year production cost cycle and I am estimating that cost at between 6 and 7 billion dollars). Additionally, when the industry pegged proven reserves at 4 to 5 dollars per barrel market prices were ranging between 40 and 50 dollars a barrel. At today's price range of 70 to 80 dollars per barrel if we extrapolate then our new price for proven reserves should be about $ 6.50 per barrel then add the 'ERHC no-cost kicker' our reserve barrel price should be $8.00/Bbl.
Now the fun, based on our previous pie in the sky number of 543,000,000 barrels for ERHC's ownership then immediately upon proven, ERHC adds $4,344,000,000 to our balance sheet.
The net effect is $6.00 to our share price.
So lets look at this using multiples of 3 Billion:
3 Billion in Proven Recoverable Reserves = $ 6.00/sp
6 Billion in Proven Recoverable Reserves = $12.00/sp
9 Billion in Proven Recoverable Reserves = $18.00/sp
12 Billion in Proven Recoverable Reserves = $24.00/sp
15 Billion in Proven Recoverable Reserves = $30.00/sp
18 Billion in Proven Recoverable Reserves = $36.00/sp
Now obviously I would NOT post this as my Masters Thesis as this was just for fun and I have used many more hypotheticals than would be suggested for a serious study. But, what this shows is that if the consortium of oil company's come out late next year and announced a specific level of proven and economic reserves our share price should move immediately in relation (somewhat) to the numbers presented above.
As we move into production in years 2011 to 2012 (and based on today's oil price) then you could just about triple those share prices based on the same proven recoverable reserves. We can all see that if there truly s a significant amount of Oil in the JDZ, albeit in many smaller pools, then our share price should move exponentially over the 1 to 5 years.
One final thought it makes you wonder about what an appropriate buy price would be if a major decides to swallow up our little minnow.
Hey this was all in fun, so don't blast me (too much), but if you have any econmics or better numbers to add to this please do so.
IMO
BayFisher
Tryoty,
We may all be overlooking the obvious, at one point in time there was rampant speculation that OB-1 was the high side of the reservoir and contained mainly gas cap. Could be that XOM determined that ERHC were not going to lose their holdings (in spite of all XOM could do) so they bailed (on Block 1).
I think this aligns with your scenario of an Addax take over of ERHC and ultimately an XOM takeover of Addax. One view could be that XOM is going to make the GOG thier primary production holding for years to come.
Of course this is just rampant speculation on my part.
Bayfisher
Generally under most standard PSA's Countries receive their royalty after production of cost oil.
Sidewinder,
The Delta could represent some problems in dealing with the counter insurgency in Nigeria. Even though the JDZ lies in deep water that deep water protected the operations from any political turmoil that could be going on at the time. While I am cretainly not against looking for on-shore fields it does represent a new level of problems that to date ERHC has not had to deal with. Your thoughts?
If you look at the Frankfurt exchange erh.f is up 18.57%.
While there is not a lot of volume on this exchange they have paralled our direction (bullish/bearish) over the last few weeks. I have to think given the recent news and all the developments over the last 2 weeks, todays early morning drop can only be explained by MM's trying to regain control of the price position and volatilty.
Anyone have any more salient thoughts on todays early morning price decline?
I suspect most of us were anticipating a repeat performance of Friday's price movement.
IMHO
Bayfisher
125k.
Invested since early 2005.
Share Price has fallen 5.5 cents on volume of under 350k.
This again really menas nothing to any of us. Without real volume we can only say that the day-traders are trading out of their position (which they took on the possibility that real news would come out of this CC).
Inevitable as before it will be a wait til next year approach.
The onbly thing that could cahnge this is if a major or Addax or Synopec came after ERHC for their rights. Looks like all of us will have to keep telling friends and relatives, "just wait".
Fishdog,
I certainly do not disagree with you but can you tell me why you think Offor is in the process of looking for a buyin of his shares now. What would be the advantage? As soon as he sells the market will know the news and at what price. and should then equalize?
It seems a better ploy (if he wanted to get out of ERHC) would be to leak to the market what he knows then look for a buyin or buyout his optionality increases exponentially in this scenario
Good Point!
Let's put this CC into perspective!
Positives:
1) Our partners are planning extensive drilling schedules with already secured drill ships in 2008.
2) Our rights in the JDZ are secured and cannot be taken away.
3) We are looking to have a shareholders meeting end of 2007 or early 2008 where we will get a chance to vote on Directors(I look forward to meeting many of you there, might I suggest a lunch or dinner at Americas)
4) We heard the ERHC speaker say that the JDZ is the most promising site known
Negatives:
1) No real response to why Offor left.
2) Looks like Feltang could possibly be another example of Offor making his friends rich.
It was not Joe Shea
meaning what?
He said his name was Mike Madigan
That is the best info so far given out. And if understood should help our SP go back to where it should be given our rights in the JDZ and EEZ.