My Speculation - Explanation Part 2
(all values hypothetical for explanation purposes only)
Scenario 1: If ERHE entered into a large PSC with a deep pockets company the share price would rise significantly. For instance, a $20M deal might increase the intrinsic share value (under possible dilution of 3B O/S, for instance) by $0.0066 per share, so the S/P might hang around $0.0080-0.0085 range only based on the intrinsic value of the additional cash alone. The reality is that the market share price would probably reach $0.01-0.02 because everyone knows that ERHE would make it to drilling. If the drilling were successful, the share price might go up $0.05-0.10 easily and then higher as upstream operations transition to midstream cash. This is how developmental E&P companies turn speculation into real value (in an ideal world).
The timeline for Scenario 1 might take 1-2 years to reach the midstream cash stage.
Scenario 2: Newly founded, privately held company (Company A) determines that ERHE has potential to reach $0.75 per share. However, ERHE needs to complete Scenario 1 above 2-3 times consecutively on more than one of their licenses. That timeline is 5+ years. Therefore they see the future value of the company in terms of completing Scenario 1 several times over, but growing with each subsequent PSC deal. Company A is aware of another company (Company B) with plently of capital that is ready to make a deal with ERHE to prime the Scenario 1 pump one or more times. Company A has several options to profit from Scenario 2:
1) They can buy ERHE shares and wait 5+ years to get to their $0.75 valuation like everyone else.
2) They can initiate a deal to purchase ERHE shares outright (to take ERHE private), speed up the priming process with Company B, including offering Company B a nice portion of Company A's newly acquired ERHE shares (i.e., ownership percentage via potential JV). They see ERHE as a huge bargain and offer $0.05 per share and engage Company B directly on financing one or more ERHE PSC deals.
Stakeholder Outcomes:
--ERHE gets bought out for $0.05 per share. This would be seen as a positive development for shareholders currently sitting at < $0.002 (a 25-bagger?!).
--Company A decides to go public in order to finance the ERHE deal.
--Company B gets a chunk of the ERHE wave in addition to their PSC portion of the oil in the future.
Why the deal would actually work (still speculating here):
--ERHE needs capital to get to drilling. Who wouldn't want to be bought out now with the current SP < $0.01?
--Company A is controlled by ERHE insiders.
--Company B is controlled by at least one Company A insider.
--Company B assumes a large portion of the risk of the future value of the ERHE's license assets, but has confirmed knowledge of the oil reserves based on their own technical expertise. They get ERHE assets at a bargain price with the potential to grow those license acorns into giant $0.75 oaks.
End of thought experiment...
(Company A is NGAR; Company B is xxxxxxx?)
DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND IN THIS MESSAGE.
I'm not registered as a securities broker-dealer or investment adviser either with the U.S. SEC or with any state securities regulatory authority.
