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If I could move the market with what he says then I would have been much more vocal (and rich). I know what he's told me over the last 10 years (most of it not shared with the board) and how accurate he has been. I have no interest in gaining points or credence from members of the board, that does not feed my family. My sole objective is the same as everyone's - to make money.
You can ask, but I won't tell you. Sorry. The one main guy is very accurate and close to things and I wont compromise him.
BB, according to guys I checked with this morning "what you know" does indeed seem to be true and "what you think is happening" also looks to be quite accurate. Well done.
Finally someone else gets it.
Sinopec/the Chinese are miles and miles ahead of anyone else who might be a potential competitor for assets in the region. India won't pay and Brazil doesn't need the region to feed the machine. Money cures all bad relations.
Net worth and money are different. He may have his fingers into assets that are worth alot of money, but lest we forget that he holds assets for others and always has. With the current political situation in Nigeria, many are positioning themselves for a new regime or to be relevant in the existing one. That takes money - cash money. IOU's dont work.
Sinopec had heard of Nigeria and its oil riches before Offor got involved. One man is not responsible for bringing them in. As I have said before, Sinopec actually finds him very hard to work with and want him out of the way. He can be very disruptive and medling.
Sinopec buying Offor's stake more than validates what is in the ground, regardless of the lack of information disclosed.
Believe what you want to believe. I know what I know.
They might have alot to say, but Sinopec is sitting there with their ears covered.
Because he needs the money and others that he promised money to on the back of the value of ERHC shares will be pressuring him to pay off. He'll be selling soon. When he does, we win big.
This is where BB's dot connecting comes in rather handy, cuz that's all we got.
So stop whining about the results or management. You're not getting results until Sinopec is damn good and ready and there's nothing management can do. Period.
Sinopec is playing this thing like a Stradivarius. Keep back all the results, cause doubts and mistrust among shareholders, cause stock to drop to uncomfortable levels where Offor is pressured to sell out to them. No need to trade a stock to manipulate a price...
SEO may have paid someone for daily reports, but no one had access to data from the drill except Sinopec. The contractors had to sign NDA's and were not allowed to see anything.
What leverage does the EEZ auction give STP that Sinopec cares about?
Sinopec has walked in with a bag full of cash, no qualms about paying whoever and whetever they need to get what they want. That's leverage. Sinopec has no interest in marginal fields. Offor doesn't matter in the face of that onslought, especially when his connections are only as good as what he can pay them.
The Chinese have the jewels in their hands, are flicking them and making people dance.
Let me tell you what IS going on.
1) Sinopec/Addax holds all the cards. They give ERHC whatever info they want to and tell ERHC what they can say. Normally a junior would be flooding the world with news flow, but ERHC is being held back. Sinopec has no reason to provide any information to anyone (Nigeria, DRSTP, JDA, ERHC, etc) that will compromise their leverage.
2) Without news the stock does nothing but drift lower. People get pissed off at management and it gets worse. Management does whatever it can, subject to point 1 above, to create a reason to buy the stock or stop the bleeding - the announce an AIM listing.
3) Sinopec wants Offor out and want his piece of ERHC (they dont need him), but they are not willing to pay his price.
So what does Sinopec do? You guys can figure it out.
You wouldnt want a few hundred new investors who would know and follow Offor but who have been unable to buy the stock until now becuase they couldnt open accounts with a US brokerage firm? ERHC is actually followed there and has quite a high profile, even though most people cant buy it. It is the ONLY oil company effectively run by Nigerians that is listed anywhere and as a pure play on Nigerian oil they could potentially buy.
You dont list a company like this in any US market if you have a choice. You list on AIM or Toronto. Aim is better for visibility into Africa and access to local Nigerian investors. Regardless whether discussions are on with Sinopec or not re a buyout, they have to move forward. This is moving forward.
They probably wont issue new shares for AIM listing. Strand will buy shares in the US market for initial orders in the UK and establish a base amount of shares for trading and clearance in the UK.
You cant naked short on AIM. Believe me...
Aim is a nice step up from OTCBB. AIM listing requires a resource to company file and keep updated a "Competent Persons Report"; a report from a recognized person or company, like NSAI, that maintains current information of the company's resources. That's more than we get now. Most importantly, however, the AIM listing will allow local Nigerians the chance to play ERHC. No US broker would allow a Nigerian to open an account to trade stocks, but Strand will. Strand, strandhanson.co.uk, has a JV with Renaissance Capital announced Tuesday. Renaissance bot 9.9% of Strand. Renaissance, www.rencap.com, is the only broker with a real Nigerian operation staffed with real bankers and analysts and commitment to improving the access to capital of Nigerian plays and open up world exchanges to Nigerian investors. We can look forward to research coverage as well. Strand is a very good boutique Nomad. I like this alot.
I agree and it is done.
Millions of them.
My "take" is useless as its just opinion and I will not be drawn on what I do know about results and future events. I can say, having been involved in marginal fields in Nigeria, that they are a dime a dozen, rarely as good as hoped and are more like Black Empowerment Enterprises trying to hook foolish offshore investors.
There will be no bidding frenzy on EEZ blocks because, and mark my words, DRSTP won't be ready to any EEZ round for ages. They showed while trying to decide on setting up the JDZ, signing off on deals and approving winners of blocks that they couldn't organize a piss-up in a brewery.
Mark is generally clear where his information comes from. It does not come from "insiders" of the company, but rather his own contacts with individuals he believes know more than he does. By definition, the information he has is not insider information as he had not obtained it, either directly or indirectly, from an insider of the company. His altruistic distribution of the information comes with the warnings that he heard it from whatever source. I am assuming you would rather hear his info than not. If I were him, I'd keep it to myself. Unless he acquired information from an insider and/or had a fiduciary responsibility to the company he can trade how he likes.
Toronto Globe and Mail. Good analysis of the potential valuation and price paid for oil in situ. It sure would be nice if a credible journalist mentioned ERHC just once.
http://www.theglobeandmail.com/report-on-business/commentary/chinas-petroleum-bargain/article1200302/
Eric Reguly
Last updated on Monday, Jun. 29, 2009 07:13AM EDT
Look at the price paid by Sinopec for Addax Petroleum and you would conclude the Chinese are stark, raving mad. Or are they?
Addax was no bargain by any conventional investment measure (which partly explains the takeover competition's distinct lack of U.S. and European bidders). Sinopec, formally China Petroleum and Chemical Corp., last week agreed to pay $8.3-billion - $52.80 a share - for the Toronto-listed company. That was a 47-per-cent premium to the share price the day before Addax announced it was in play. The fat premium made Addax CEO and controlling shareholder Jean Claude Gandur the happiest man in the industry. His haul was about $3-billion.
Certain bragging rights come with such a high-profile purchase. The headline price makes Addax the largest oil-and-gas investment made by a Chinese company.
Shame about the value. Add in Addax's debt and Sinopec is paying somewhere between $16 (U.S.) and $20 a barrel for Addax's proven and probable reserves of 537 million barrels, measured at the end of 2008. Compared with the current oil price of about $70, that doesn't seem outrageous. But consider that the average price paid for African and Middle Eastern oil deals - Addax's output comes from West Africa and Kurdistan - was less than $5 a barrel in 2008.
And that was a year when the average price was close to $100.
Sinopec would argue that Addax has a good record of shifting potential reserves into the so-called P2 category - proven and probable. If that were to happen, the price per barrel in the ground would drop dramatically.
But oil investors would be fools to pay for "good guess" reserves, all the more so because a fair chunk of Addax's holdings are in Iraqi Kurdistan; Baghdad has yet to bless Kurdistan with the right to independent resources management.
Measured another way, Sinopec (read the Chinese government) got a bargain.
Barring a global depression, the Chinese know oil prices have nowhere to go but up. They know this because their own voracious demand will make them go up.
Any commodities trader will tell you that China is starved for commodities, even as its growth rates slow.
If China's per capita resources production were even half that of the industrialized world, the country would consume 100 per cent of the world's new production.
With this reality in mind, they are underwriting their long-term security by buying the asset rather than the commodity produced by the asset.
Oil is especially important to China's growth because the country is industrializing quickly.
According to BP, China consumes 250 million tonnes of oil (or oil equivalents, such as natural gas) to produce $1-trillion (U.S.) of GDP at purchasing power parity, or PPP.
The equivalent figure in the United States is 164 million tonnes. In other words, the Chinese are 54 per cent more dependent on oil to fuel their economy than the Americans.
Since the start of the year, commodities overall have climbed about 15 per cent, in good part because of Chinese stockpiling, some economists say.
Oil prices have doubled from their lows, though they are still half of their 2008 peak of $147. Again, Chinese demand seems the driver.
And just watch what happens when the U.S. economy revives.
The world's two biggest economies pulling in tandem could easily restore triple-digit prices.
Demand, both current and expected, isn't the only reason behind rising oil prices and oil company values.
China has a massive portfolio of U.S. Treasuries. Acquiring commodities denominated in U.S. dollars might be an indirect hedge against the ailing dollar.
Toss in fear of inflation as governments everywhere print money to try to reignite their economies and you have a compelling argument for rising commodity prices. Commodities are a natural hedge against inflation.
The oil industry will see more deals like Addax; that is, Chinese buyers buying at seemingly inflated prices. Sinopec itself called Addax "a transformational transaction," one that would accelerate its international growth.
Through Addax, Sinopec will gain access to Kurdistan, a potentially prolific oil producer. Note the number of Chinese companies bidding in Iraq's first oil licence round. The list includes Sinopec, China National Petroleum Corp., China National Offshore Oil Corp. and Sinochem Group.
They are going up against the Big Oil establishment, including Chevron, Exxon Mobil, Shell and Anadarko.
If the value paid for Addax is any indication, the Western biggies will have a real fight on their hands.
The main shareholder of the Chinese bidders is the Chinese government, which probably has a pretty good idea what Chinese oil demand will look like 10 years down the road.
What might seem like a bubble price to the Americans and Europeans and their value-conscious shareholders probably seems a bargain to the Chinese.
You're right. I just think the company should have an advisor with global connections (RBC wouldn't hurt) who can bring those others in and make someone pay up. I also think they (and we) need to remember that there is a price at which it is better to sell at now than wait for drilling and the obvious risk that comes with it.
No crying here. I'm already quids in.
I could not agree more. But in order to get a deal on the table before drilling, the company has to be pro-active and force Sinopec by engaging someone to shop us. Sinopec wont budge unless forced to.
We are all assuming oil is there in commercial quantities. There is a 50% chance of that. If it turns out there is nothing, those of us who would not entertain a bid until drilling will look pretty foolish and have pennies in their hands. If it turns out there is oil, those of us willing to sell at the right price now will look foolish, but at least we'll have made a profit.
Also bear in mind that Sinopec won't buy us immediately after drilling if oil is found. They'll wait us out knowing that since it takes a couple years to start production and pick us up closer to that time at a cheaper price. They need to be forced in this situation as well.
No one should be surprised at the delay on drilling block 4 to the closing date of the sale. There is now way in hell that Addax would risk the deal with Sinopec by drilling.
Chet, did you hear Gandur say that Sinopec may add another well in block 4 once they start drilling? A friend who was at the meeting as well heard him say that.
Which is why, if faced with a competetive situation, will pay up now. But if they are not forced they will most certainly wait for drilling to confirm and buy then if oil.
I understand completely. I agree with you, but when the entire company is based upon basically one outcome, it is incumbent upon the company to explore every way to get value. The situation now is ripe to leverage Sinopec's commitment to the JDZ and force them to make an offer acceptable based on the probabilities of finding commercial oil or not. Otherwise, they'll wait until they know for sure. Even now, after the exhaustive due diligence they would have done in buying Addax, they know more than we do.
I could not agree more. Don't forget that gas there is useless and is equivalnt to a dry hole. Gandur said that himself. Addax's probabilities are that there is about a 50% to 60% chance of hitting oil. I dont know what the probability is of hitting commercial quantities.
Please read my previous posts. I am not saying sell at any price. I want Sinopec flushed out, our profile raised and if an offer comes, then great.
This stock is a 0-1 outcome. I am deathly afraid of the 0 so would like to see if there is anythin in between. Are you prepared to see the stock at $0 if what we think is there in fact is not?
Maximizing value means constantly reviewing the assets and the probabilities of success versus failure versus price as a result of each. With all due respect, I doubt Dan has done that. It does not mean gambling and hoping.
I said put iself in play. That means a credible investment bank advises you on valuation, presents you to potential buyers, etc. this exposure is invaluable. No sale price is stipulated publicly and no commitment to sell is made. If a price is high enough then the sale can be made. It will also flush out Sinopec, which is a huge reason for doing it.
Gandur made a cold, calculated assessment of the price versus the risks and made a brave decision to sell a company he started. He may be proved right or wrong by the drill bit. He'll accept whatever comes. But he cannot be faulted for taking a profit.
ERHC management has said for ages that it intends to be an ongoing oil company. The reality is that they are not and cannot unless they add huge staff for that effort. You can't be a fringe player and buy minority interests and expect to make meaningful money. You have to take risks. Addax did it in 15 years (3 of them public) - adding properties they ran, going into areas like Kurdistan, employing over 800 people, etc. In the last 3 years, ERHC has done little to expand its portfolio. That line is long gone.
ERHC has no access to the capital markets to borrow funds, no cash flow to lever off of and no willingness to issue more equity to raise the capital required to play at a scale large enough to make a difference. We are a one tick pony...and that's fine. But not every pony wins every race. Sometimes its best to be claimed away.
Every responsible company has to constantly review its options. Given the situation, a strategic move to engage a bank to conduct such a beauty contast is a proactive move that would be excellent to see. If any company wants to buy us we'll have to engage advisors anyway, why not get that going now?
This is nothing against management or the stock or the prospects. It is merely to present an option beyond hoping that drilling produces the results we all have waited for. Hope is not a strategy.
ERHC should put itself in play!
Engage a proper investment bank to search for a buyer for the company, operate a proper data room, etc (a modest retainer and a payment on success). RBC would do it unless they felt they had conflicts.
Advertise far and wide they are willing to entertain offers for the company. No price, no commitment to actually sell at any price but no guesswork that they are willing to sell at the right and fair price.
That'll flush Sinopec out of the woods and potentially get others in to maximize our price. Sinopec probably think they have all the time in the world to deal with ERHC. Make them deal with ERHC! Now!
Management has always said they want to maximize value for shareholders. They have no oil expertise, but they can take a page out of Gandur's book and induce a bit of a bidding competition.
Just a thought, but since I do that for a living it makes sense to me.
$10/ERHC share = $7.3 billion. Sinopec paid that for Addax. Do you really think they are going to pay that much for ERHC? I want some of what you're smoking.
If I was Mark I'd keep my knowledge to myself. He tries to provide relevant information within a stated timeframe, then he gets crucified if he doesn't deliver exactly what people hype themselves up to expect or within the time frame he had hoped to provide it by people who never have information and are piggy-backing off of everyone else. My Dad always said; "Tell them what or tell them when, but never tell them both.". In this case, tell them nothing, Mark, and see how they like it.