It is about time ERHE comes back to life.
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TOB
I can confirm that the PP had no restrictions what-so-ever on the .22 shares (I do not know the specific details regarding the warrants). I see with my own eyes the transactions going by daily (although one day delayed) for one of the managers who participated. I was unaware of the original participation at the time it went down. Due to my connection to this data, I now have some minor restrictions put on my own trading activity of ERHE (internal company policy which falls under SEC audits). From everything I have seen, I am estimating my restrictions will be lifted next week sometime until the fund manager exercises their warrants.
I do agree with your comments regarding the participants were expecting a bullish run with these private placements and they would have or still can make the most money when the share price increases well above the .28 strike price.
Krom... spot on!
And to go with my info, the proportionate number of shares that a specific hedge fund acquired is about to reach the point in your example (short position equal to warrants held).
Here is another interesting effect of this strategy: once the fund manager hits this “safe” equilibrium, they have a few choices which all result in either neutral buy/sell pressure or increased buying pressure beyond the retail crowd.
1) If the then current price is lower than the warrant strike price and lower than the price they sold short on the way down (and borrowed against their own holdings), they can “cover short” to lock in the pre-calculated gains between the cover price and the specific tax lot sold short on the way down. This results in a gain plus it leaves wide open, an unlimited gain with the remaining warrants. In this case, long term shareholders also benefit from the increase buying pressure to cover the short position.
2) If the then current price is lower than the warrant strike price but raises too quickly above the short sales price (which is nearly impossible because of the structured pattern in the short sales happening daily, over time at multiple prices), the manager can do nothing new. They have guaranteed the gain for all tax lots sold between the .22 obtained position and the .28 warrant strike price. The warrants can be used to cover the “fake” short position if nothing is done. Again, the long term shareholder gains as there is an increase in buying pressure while there is a difference in share price between .22 and .28. and there is no new sales pressure once above that amount because they were just “covering short” what they could lock-in in profits. They have nothing new to sell.
3) If the fund manager is real bullish on the outlook, they also have the choice of covering short and purchasing beyond the equilibrium. This is pretty straight forward of increasing the buying pressure beyond the retail investor sentiment to buy. Again, helps the long term investor with artificial buying pressure on the way back up (spring board effect). As the price increases beyond the warrant strike price, both their warrants and they increased position are “in the money”.
Almost makes me want to run a hedge fund……
Let's just say there was a very structured dissemination of the pp shares without emotion involved. There are complicated strategies involved and between the pp shares, the shorting involved and the warrants still being held, the hedge fund will make money over time without showing a loss position being held on the books. They would have made more money had the share price been in a rising pattern though.
These are the types of vehicles used to provide liquidity for companies like ERHE wanting to raise capital.
Unlike TOB, I don't believe ERHE will tap more of their shelf registration until the share price is a lot higher than it is now. I also think a bulk of the shelf registration will be used in conjunction with the AIM listing (agreeing with TOB that it is needed for share liquidity with the new market) but the timing has to be around a positive event or a much stronger outlook (Phase II or EEZ major developments).
Ironic as it may sound, I view this as a test to raise capital and the current long term shareholder will benefit because of it. This test run showed how much it can fail in the wrong conditions (without a near term positive newsworthy event). I feel ERHE thought they had the timing down to sell the pp shares into Sinopec announcing Phase II commitment in the fall of 2010 but it somewhat backfired with another 6 month extension. It will be MUCH harder for ERHE to raise capital like this in the future without a very positive event (I am conservatively guessing this year) to bring a substantial return to the hedge fund managers with their warrants.
Side note:
I am estimating about 2 or 3 more trading days of "selling pressure" left by at least one of the hedge funds involved in the private placement. This should have a positive effect on the share price in the coming week (in addition to the penny stock newsletters or Tullow rumors or January effect, etc.).
This is based on solid "facts" which I am not able to share more about.
Good luck all
Is there blood in the streets yet?
The emotional frenzy is worked up here pretty good. The traders are going to have a hayday with this security.
If only I had a bunch more cash on the sidelines. I do have a little but I am guessing we have 1 to 5 more weeks of worked up fear/panic to go along with tax loss selling (less than two weeks), and hedge fund shorting to drift further.
Followed by EEZ partnership news, Phase II plan announcements, NSAI new numbers, about a 500% to 800% rebound, and finally another round of buyout speculation. All IMHO.
Good luck all.
ps. don't let the fear get the best of you. If you are too worked up, take a break from following the day to day price. Come back in late January for the show to begin again.
Markgovols,
You are correct. No one should be making buying and selling decisions based on posters on a stock message board.
That being said, I do applaud your efforts to make actual contact with people in the oil industry familiar with the GOG region. Ironically as it sounds, I think the efforts you have made previously helped or pushed ERHE to disclose information before they planned on it.
If you get in contact with one of your old sources, please find out what you can about either the intentions of TOTAL (drilling rig scoops etc.) or likelihood of Sinopec going to phase II vs. waiting for TOTAL to do something first.
I have my own guesses but it would be fun to chat about the rumors on the street again.
I personally, would like to see the hedge fund managers have to cover their shorts.....
Good luck to you.
What is interesting is that I believe all these shares in the filings today (obtained on 9/30/10 fyi) are through some benefit plans or options/warrants granted in the past.
I think the only way the employees and directors can legally purchase shares during "black out periods" is by exercising these rights through these plans.
If they let these benefits ride through a merger, they may lose them so this might be why they were just exercised. Curious indeed.
If I understand these forms correctly, Oviawe purchased (or aquired) 85,000 shares of common stock AND a 10 year option (or deferred comp) for 105,000 more shares. For which he paid $51,300. This comes out to an average of .27 or pretty much between the private placement @.22 and the warrents @.28.
Anyway you cut it, this is much better news than the silence we have had for 10 years from insiders.....
Real money was put up by Oviawe.
Krom,
I just did a quick check and can confirm the shorting transactions were taking place almost every day dating back to early Oct. They have not taken place since 12/3 which seems out of the pattern. It may be that the price dropped to a certain point that the manager no longer likes to short it anymore or it could have been that the trading volume seem to show signs of capitulation. On the flip side, I do not see them "covering" these yet either.
This is priceless comedy TOB. Thanks for your level headed responses.
Very nice news.
The only reason for a company to ask the investors to disclose them is if there is a positive PR play. I think that only would have been true if ERHE was doing a private placement to other companies within the Oil industry. How good would it have looked if Total or Sinopec would have participated in it? In this case, it was simply a financial transaction and there is no net PR gain to either buyer or seller. Keep in mind that this private placement was very small as a percentage of the total shares outstanding.
One Conspiracy theory I can factually put to rest.
For those of you who may still think the recent private placement was a single payoff to “friends” or people owed by ERHE or even people in Nigeria, I have verified in this case, that this is a false belief.
It turns out to be a small world sometimes. I have run across a US based Hedge Fund manager who participated in a “piece” of this placement directly. Yes, this private placement was not all sold to one entity or person. It was broken up. The transaction was exactly as stated by ERHE - a private placement to raise capital and it was all above the board and legit (no conspiracies or private payoff).
What was stated in yesterday’s PR is also correct in that the participants in the private placement have the choice to remain private as long as they don’t exceed 5% ownership in the company. I do not find anything unusual about this due to the relative small size of the pieces.
One other tidbit of information I will pass along is that some posters in IHUB were correct in that shorting of ERHE stock is taking place to lock in a profit (I have seen the transactions myself). This is a common strategy used in the industry by hedge fund managers (hence the title “hedge”). This strategy will put a temporary downward pressure on the stock price while it’s going on but it is done very systematically to keep volatility under control and lock in a minimum return.
That is all I have for now.
I agree with the .28 warrents for 5 years as being a huge gift also.
I doubt we will find out any time soon who this purchaser was. Notice that the 10 million shares plus the warrents (if purchased) did not equal 5%, therefore no reporting requirements.
I agree whole heartedly with your comment that the selling of shares at .22 is a slap in the face of current shareholders. I believe that this will turn out to be quite the "gift" to the purchaser of those shares.
At least it was only $2 million and not the full $50 million they are approved to raise. I ended up selling a few of my shares, as I posted the other day, but I still maintain a substantial position here. I will be judging ERHE's timing of selling future shares in this same way.
On that note, I do think ERHE is planning on raising capital in spurts over time. I hope they learn from this lesson (shareholder disgust and a further dampening of the share price) and wait for some substantial positive news before the next sale.
EHP, you are reading the file incorrectly. There is no lie there.
the "no transactions currently in place" they are referring to are talking about the purchasing of "working interests....".
They are not referring to transactions relating to the selling of shares to raise capital.
Sorry to say, I completed my first sell of ERHE stock since the STP coop attempt many, many years ago (pre PSC signing).
Now the good news for those who held firmly to their stock here, the price went up fairly quickly after I made that last sale. Maybe it will turn out to be a sign of good things to come…lol.
My reasons for selling mostly boils down to not being comfortable with what I read in the PR today. Yes, there are a thousand ways to spin this in the positive light and another thousand ways to spin the dooms day scenario around this. I don't feel it is either extreme. I do, however, feel that this is a change in what the company has been doing. They have not diluted shares since they paid off SEO’s loan many years ago. They had plenty of cash (with $20 million in the bank) to wait out the disclosure of drilling results UNLESS they change strategies. Regardless of the "why's" and the "to whom" for today's company stock sale, the fact is that they sold stock for cash and at what I consider to be a very low price. To me, this means they do NOT expect to be in a different position any time soon to raise capital at a higher price per share. I think the timing of this has to do with the 6 month extension of Phase I and therefore, we all have another wait of stagnant or drifting share price to endure (although, I hope for the opposite).
I still maintain a substantial position here that I don’t plan on selling soon. On the other hand, I am not planning on purchasing back in with the proceeds of today’s transaction. I simply changed my holdings to a more comfortable level to wait this out further.
I firmly believe the value of ERHE stock will one day be determined more specifically by the prospective assets that they have rights to. At this point, I feel it will be more than a “fortnight” away and I have no idea how many fortnights it may be.
Good luck to all
Here is a thought......
Maybe ERHE is contemplating selling it's rights in Block 2 to Total for them to start developing block 1 & 2 together. But, ERHE is in need of two things... one is cash (sounds like they would be more comfortable with $50 million in the bank). The second thing they desperately need is some OIL company to begin phase II of blocks 3 & 4 and possibly phase I of the EEZ. They also need to have some OIL partner communicate openly with the public to improve shareholder sentiment.
All this could be being negotiated. Maybe ERHE gives up a portion of each of their blocks (2, 3, 4, 5, 6 & 9) to be a part of the "regional" development team? Hey, they can be a smaller player of the whole, get some cash, and set the stage for EEZ all in one swoop.....
wishful thinking?????
If only SEO would publically say he wanted out. Then he would be doing something for the minority shareholder (and all shareholders for that matter).
2IRA's,
That was my thought also. I think the addition of TOTAL to block 1 has created a new round of analysis. Although this is a pain in the ### for us ERHE shareholders, it is likely a better situation for all players in the JDZ. TOTAL will not do work in blocks other than 1 unless there is some arrangement made (sharing of block percentages or of the profits). This is my personal opinion on why we have yet another 6 month delay.
Good luck all
Thanks spp119. Question resolved. AIM only requires 3 years 'audited' financials.
Just to be super duper clear here:::::::
this "price" you are referring to is the FUTURE costs to developement. There is NO up front buyin cost IF a player defaulted. Original signiture payments were paid at the PSC aggreement time or they already would have defaulted before drilling (and expenses) started.
I would bet that one of the reasons this has taken so long is the smaller players attempting to recoup their signiture costs and/or drilling expenses to date like XOM did in block 1. If Sinopec waited long enough, the companies defaulted instead. That alone puts ERHE in an eviable spot for a minnow oil company.
Krombacher,
It means the first option available to all remaining parties is their pro-rata share under the terms of the exiting party. In other words, if a small player left (other than ERHE with a carry), for let's say 10% interest and ERHE chose to keep their pro-rata share of let's say 2.2% in addition, ERHE would be then on the hook for 2.2% of the NEXT phase of expenses. They could also renegotiate this portion back to Addax/Sinopec for further carry but I am guessing Sinopec would say no. If ERHE couldn't pay their way on the new 2.2%, it would default back to Sinopec without having to carry that portion further so why would they.
Common sense here.
This update has a little of the "same ol, same ol" but they specifically hit on topics many here have been harping on. Sometimes all we need is a status of what are they continuing to work on, if anything.
Here are a few things I pulled out as good to hear:
1) "Natural gas was discovered in at least three wells". I don't need to analyze to death whether it was bio or thermo... I just want to see the straight terms "Natural Gas". On a slightly questionable note: why "at least" three wells. Could they not count higher????? They only drilled 5. Nothing to lose sleep over though.
2) "currently negotiating the terms for entry into Exploration Phase II". Simply put... you don't negotiate terms INTO phase II if there is nothing to go into phase II for! Yes, we don't have the specific details yet but we didn't hit 5 dry holes either.
It is a beginning.
It's about time. It doesn't tell us everything we want to know but at least it is a progress report. Thank you PN for the update.
Krom - my point exactly. Great post.
There are many here who make bold statements on what is and what is NOT going on or who at the company knows what. These statements are only your opinion and they have no basis in fact.
Second. Although I am happy to see many here stand up for and try to take action on when they perceive wrong doing, the irony is that if you really follow your logic through on this "midtier" BOD election you end up with a twist:
If Midtier successfully got elected onto the BOD, he would then become an 'insider' and could not disclose to ANYONE what he was all of a sudden privy to knowing including providing hints to answers that everyone here keeps screaming for. Not only that, but his shares in ERHE would also have restrictions put on them due to his 'insider' status and he might not enjoy the freedom he now has with his shares (whether he trades or not or his plans to sell some upon a specific price point or news worthy action would be put in jeopardy).
The company would likely enforce a gag order on him and insist any questions directed in his way be funneled to DK for proper and legal response.
We would be right back to where we are today minus one good knowledgeable oil poster on the board. Even if I don't always agree with his positions, I respect and enjoy reading his opinions.
In my opinion, I feel our ‘shareholder’ rights are being effectively managed with Howard Jeter and Leslie Blair on the board. These are not speculative stock traders with no name but professional and respected people with a lot more in reputation to lose if ERHE ever went in an unlawful direction.
Good luck all.
Balance,
I thought that the official Operator of the block had first choice of picking up the percentage available. If they didn't want the whole amount, it then goes to each remaining participant proportional to their holding as you stated. I am pretty sure this is what happened to ERHE a while back when we actually went to arbitration with Addax for our 'proportionate' amount of block 4 (if I recall correctly). The arbitration when in addax's favor.
Of those 5 example PR's about this show, 2 were PR'd last Thurs., 1 Friday and 2 today. Maybe ERHE is waiting for Sinopec first and then do a combined PR tomorrow.
There is still time.
ps. thanks for finding those examples
My guess is that this meeting has been scheduled for a while and ERHE is presenting on 9/15 for a planned reason (after a planned PR). The meeting goes from 9/12 - 9/15. I would guess that given the 9/14 deadline for Sinopec to announce results and phase II plans, plus ERHE's new estimate numbers, that they planned on presenting some pretty good news about ERHE. This also may be the planned beginning of a PR campaign. The only hitch with this thought is if Sinopec doesn't release info by tomorrow. I would also think that if this were the case, ERHE would have known about it by now and cancelled their presentation.
A lot of pointers are saying news soon but we just can't be certain until we see it in print. I also believe that is why we did not get any run up this time around. To much doubt and the share price reflects that. For the first time, I think any positive news will actually be a suprise.... lol.
Actually, ERHE single handedly helped put the JDZ treaty together (with a little of XOM help too). SEO was not a part of that step. He bought EHRC out later and saved it politically from being taken advantage of (IMHO).
None the less, it is a unique story which continues to unfold. It is so quiet that it makes me think something is cooking.
Although, I am sure some can come up with some valid arguments to wait for the block 5,6,7,8, & 9 auction, I strongly believe the JDA would hold any further delay against them and this holds more weight than the arguments for remaining silent.
STP & Nigeria want oil production sooner rather than later and higher signing bonuses that would come from proven oil discoveries "next door". Sinopec will have to continue to show their ability to work with the nations for which they are "temporarily" purchasing exploration rights from. If they get the reputation for not playing fair, they will likely get fewer invitations to the party. Even though the Chinese have a large bargaining chip with their cash, the whole world has demand for oil resources. We have seen many news pieces in the past year or more of Brazil and other nations willing to talk with STP. The US and Chinese are not the only countries with money and Rigs.
Most successful business negotiations are a matter of give and take and positioning for a “win – win” for both parties involved. I expect the same in the GOG over time.
Good luck.
Interesting find today – well, it is refreshing to see that this new tidbit of info was found on the operator’s website instead of hearsay or secret sources, lol. Regardless of the specific translation, I find that it is very encouraging to see Sinopec talk about the "first.... breakthrough". The tone of this paragraph alone is encouraging and shows they will indeed tout their own horn when they are ready to reveal more news.
I have never accepted some of the views others have said here regarding the Chinese unwillingness to 'ever' disclose the info. They may take extra time or they may save some of the info for strategic reasons, but they also have now shown two specific examples of positive news releases (the other being the Sinopec PR a couple of weeks ago about another oil find with great detail). Even the Chinese have business reasons to publically show success.
I also feel that Sinopec is very close to releasing very detailed information along with the phase II plans. There may have been some strategic reasons to either wait for Total to come on board or for the EEZ September closing, but I do think they are ready to give a lot more information than some might expect.
We should find out in the next week or two.
Good luck all
Equally to you, a whisper about this stock going to 14 cents is about as ridiculous. Yes, it could happen with about the same odds as the $14 in the next year or two.
Maybe that was the news oily was talkin about.... lol
Nice find.
I appreciate BB's point of view and I find much of it as a possibility, however I consider it NO big deal about the contracts going month to month. The original 1 year contract is typically needed to provide a new person a sense of security to jump from one organization to another. Once the original term is up, there really is NO need to extend that contract as now the employee is working based on performance as it should be.
JMHO
Great post and I second your thoughts. EO has nothing of value to gain by diluting his own (and his friends) shares to marginally increase his numbers and risk major lawsuits; freeze up of his assets (us stock) etc. Not feasible and completely foolish.
Finally, a note back to Krom, if EO wants more shares he could simply do what he successfully did in the past: 1) pay himself very well with stock options or stock compensation or 2) lend the company $50,000,000 in cash with a loan and pay that loan off later with shares. Very little legal risk with this approach. Oh, and you don't have to go through the legal expense of "shelf registration" to do this.
Bottom line is that the shelf registration is exactly what the company said it is. To raise up to $50M in cash if and when needed. Most likely used when they list on the AIM which also wouldn't make sense to do until they have VERY good news to move forward with (in order to attract new investors).
Actually, I reviewed claytraders video today and ERHE closed at the Second (and top) level of resistance from his chart. Everything else you said I agree with.
I sense that many of the ERHE traders exited their trading positions back when Sinopec was granted the 6-month extension. This was considered dead money through the summer and now some are re-entering for the September 14 run up.
Second, I noticed a number of ERHE’rs jumped ship (at least with a portion of their ERHE shares) back with Markgovol’s missed call on the JDZ contact rumors. Many jumped to the MMRF stock for perceived great fortune. Unfortunately for them (and for shareholders here), that stock took a fall from .30’s down to .14 currently even with the great communication that management team seems to have. I was hoping they would have a great fortune or run with that security so they could re-enter here in the fall with more basis. I still suspect some of those shareholders will try to move some money back here for the Sept. run also.
I thought we would have another week or two before the run up but my timing has never been very good. That’s why I am not a trader, lol.
Good luck all
ERHC has Proven, great statement that is a precedent to keep handy for reposting. When the typical naysayers stop by to drop comments like SEO is out to get the common shareholder, this precedent should be reposted. Even with a dual listing on the AIM, the (ERHE included) smaller shareholders are protected. I have never felt like there was any reality in the naysayers comments but I think those statements had been effective in instilling doubt and fear and have had very negative effects on the share price.
ERHC has proven,
please take a moment and step back to read your suggested statement. Now think of it as if the previous one hadn't been done.
Here are two reasons why I am glad your suggestion was not released:
First, the statement of "if its current funds run out" would create panick and concern over the thought that it might or that management thinks it might. It is also extremely unprofessional to make such a comment.
Second, the statement of "there are no current plans to sell shares at this level" could not be stated as it potential puts ERHE into a future lawsuit. ERHE does not know the future and can not know exactly how the share price will be valued in the foreseeable future. If they made such a statement and more delays or bad news occurred, the future price may be lower than the current price of this proposed release. This may put ERHE either into a bind of NOT being able to raise capital in this fashion when needed or create a potential lawsuit if they did raise capital in this fashion. Again, this wording would not be taken as positive as you might think by some of the investing public and would be unprofessional in my opinion.
Speaking from my point of view, I did not take the shelf filing as negatively as many here have interpreted it. I am guessing that there are many here who read the filing for what it was. It was simply setting the stage for possibly raising capital in this fashion using common boiler plate language that many, many other companies use. The known “bashers” out there used the boiler plate language to instill doubt and fear which they would also have done with your proposed wording.
Back to waiting.