ERHC Energy Inc (ERHE)

[developer]

Production Sharing Contracts permit the Contractor to recover costs through a Cost Oil allocation. This means that a certain percentage of the production is allocated to the recovery of all permitted costs. This percentage can vary from 40 - 100%. Another part of the production is allocated to Profit Oil. This percentage is paid to all parties regardless as to whether all costs have been recovered. Usually the Government has the largest percentage. Profit Oil allows the Government and "carried" parties to receive part of productio regardless of whether all costs have been recovered. As costs decline Profit Oil increases. ERHC will receive a share of Profit Oil from the first day of production.