ERHC Energy Inc (ERHE)

[Meridian]

withuall,

Cost Oil is allocated on a dollar for dollar basis with an annual available allocation cap of 80%. Once all costs are recovered there is no Cost Oil allocation.

What is left for the contractors is profit oil allocation.
initially they get 80% of profit oil, but once allocated cost oil and profit oil exceed the costs by a factor (R-factor) of 1.2 the contractor profit share drops to 20% once a R-factor hits 2.5.

So when r-factor is 1.85 contractor profit oil shares is 50%.

the more cost the merrier seems logic on a barrels basis, but on a return on investment basis is not logic. It will simply take longer before you recoup your investment and make a return. Do not think that our partners, who carry us, want to do that.