This is how I think ERHC investments should be done....
Invest in rounds. Start off with the money you already have and invest in ERHC for the JDZ. JDZ is a bust? Then amass funds from your daytime job as the share price plummets and the next opportunity, Kenya is brought to the fore. Then, use those funds to average down and buy up that opportunity for Kenya.
Is Kenya a bust? Then rinse and repeat for Chad. And for the EEZ.
Sooner or later, in my opinion, ERHC will hit oil in one of its properties.
It's an investment style that is incredibly trying, requiring patience, and dealing with all those people who point to the low share price and deride the investment.
These things take time. Wealth takes time. The horizon on investments like these are a decade or more long. That's the expectation that must be set at the outset of any such investment. And there needs to be the expectation that more investment will be necessary down the road should any wells come up dry.
Management's job is to use the funds it has to continue to diversify and find new opportunities for "do-overs". To the extent that management has done this while managing its cash to get to drilling is what determines the merit of that management.
Now did management screw up its cash management? Perhaps. But some factors like the oil glut may have come in between management and a farm in or funds at that time.
Now let's not confuse the oil glut. I do NOT believe that the oil glut is to blame for ERHC's perceived diminished potential. The potential is always there to find oil and CEPSA is clearly moving forward in Kenya despite the oil glut. Where the oil glut may have harmed ERHC is not in the oil discovery potential but in securing financing at that time.
So we did the CD's. The CD's really should not have been toxic or really that big of deal. We have, in fact, discovered that most of the selling has not been by CD holders but by panic investors as is evidenced by the O/S and the CD's outstanding as of March 31st. $808k of CD's were not even converted on that date.
So now the stock is depressed beyond any reasonable measure creating an incredible opportunity for some who recognize what this investment is and the risks it entails.
Krombacher
