That post was well thought out, Jim. DG says that this board is more for the out-of-the-box thinkers than the ERHE board. If dot connecting is allowed here and so long as my dots will not be confiscated, I would like to add my 2 cents worth with a Chinese perspective as well to your excellent post.
As you alluded to SNP's need to take out ERHE due to their belief of the JDZ and EEZ potential, I agree and that is why I originally posted about a possible Addax/ERHE/EEL consortium whereby Sinopec would come in later with a buyin/out proposal. The EEZ block delineation is expected at the 4th qtr of this year and EEL and ERHE has two 100% signature bonus free blocks that must be rectified soon before the auction begins. How can the Chinese resolve this predicament other than to buy the companies? Yes,there is the onerous full carries on the JDZ blocks. Also, keep in mind that EEL (9% in block 2) and ERHE holds huge acreage in the JDZ as well. It is not in line with the Chinese in terms of long term planning as they do not like to leave any loose ends hanging. Another point is that I also believe that China wants to make a big political point in regards to Taiwan. As some of you already know, Sao Tome & Principe is only one of a handful of countries in the world that actually recognize Taiwan as they have given millions in aid to the country for decades just for that distinction. What better way for China to make a big political play then to make business deals with your supposed ally. Yes, Taiwan will lose face in this as I suspect that Sao Tome will not let friendship get in the way of possibly tens of millions of dollars in possible revenue!
I believe that the Chinese learned a lot from the failed Unocal takeover. Consequently, they do not want to deal with the U.S. congress and SEC regulations associated with a takeover. Although the Chinese would rather buy assets rather than taking over a company, the Addax takeover was more palatable to acquire albeit at a premium price. First, I believe that Jeff Schrull and his team give Sinopec an excellent opportunity to upgrade their technical knowledge by acquiring a top notch technical team with first hand knowledge of the JDZ along with an excellent managerial team headed by Gandur. Say what you want but for a guy who went public with his company several years ago only to be taken out at this premium price says a lot about Gandur's vision as a CEO. He is a multi-billionaire and the Chinese respects self-made rich people like Gandur and Offor. China is really communist in name as most of the people I know in China are full-fledged capitalists. Anyways, I believe that Addax will remain Addax as a Sinopec subsidiary. Why mess with a good thing as the Chinese covets Western managerial expertise especially if one is to become a global resource company.
With my family dealings with other Chinese entrepreneurs here, in Hong Kong and in China, many times we deal with a middle man such that when a deal falls apart, one group or the other does not lose face. It is a cultural thing that Westerners may not understand but it is apparent in Asian business dealings. Thus, I surmise that Sinopec may have tried using Addax as a liaison of sorts to bring ERHE into the fold with Addax first in the hope that Sinopec could take both of them out. First, they may have high regard for Gandur and may see Offor as difficult to deal with. Besides why mess with a U.S. registered company again after the failed Unocal takover. It was probably prudent to let a Swiss-registered company do the talking and see what comes out of it with face intact. You notice that when the negotiations were taking place with Addax that Sinopec denied any negotiations? Well that is due to what I was saying about 'losing face' in a business transaction in Asia. One does not acknowledge negotiations unless a deal has been signed and delivered. What if Sinopec acknowledged negotiations and the deal fell thru? Yep, egg on your face!
Anyways, back to the alleged Addax/ERHE deal...Maybe that was the reason Markgovols and Pops6x heard the leaks from their sources. Either Offor declined the offer at that time and decided on a wait and see approach to the drilling results or time was running out for Sinopec and decided to go ahead with the Addax takover first. Although the Addax takeover by Sinopec has been announced, I believe that an open-ended agreement with an Addax buyout of ERHE's JDZ assets as theorized by Balance_builder and Sneak-attack is still possible. I personally believe that an offer was submitted and Offor is the unknown factor in the equation.
Earlier I mentioned that time was running out on a possible Addax/ERHE deal and Sinopec went ahead with just buying out Addax. I will try to explain that in Western-style thinking. This may be off topic but here goes...
If there is a deal between Sinopec/Addax/ERHE, then I suspect that it would be consummated in August as that is the 8th month of the year. For the Chinese, the number 8 is an auspicious number and most business deals, weddings, etc. are consummated during that month. It is the reason why I felt strongly in early July that the then proposed Sinopec/Addax deal would go through in late July simply because Sinopec raised the bid to 8 Billion CD and that the time frame to consummate the deal in August (i.e. Aug. 24)was quickly disappearing. This may sound strange to westerners but it is how the Chinese think. The Chinese are superstitious and I've seen many a deal fall apart made by Westerners due to certain numbers seen as bad numbers by Asians when dealing in real estate transactions when the address was considered unlucky. I could go on and on in explaining the Chinese mind think but succinctly put, the number eight spoken in Chinese sounds like prosperity in Chinese. Is it any wonder why the Chinese picked the eighth month, the eighth day at 08:00 am in
the year 2008 to start the Olympics? This may all sound like hocus pocus to westerners but the point is that the Chinese believe that it brings prosperity and they did have the biggest haul of medals at the Summer Olympics last year!
To summarize, the Chinese are long-term planners. (i.e. think Great Wall building aspirations) I feel that they wanted to acquire the nice properties in Iraq and West Africa. Chinese oil companies think for the long term in a strategic manner so they are looking for long-lived reserves that aren't going to run dry in a few years. Addax's properties fit that profile. It is also the reason that the tar sands in Canada are very attractive to them due to the huge reserves. However, I will also add that the Chinese much prefers the sweet light grade of crude that comes out of places like West Africa and Russia since their refineries are more suited to that right now. But they will be upgrading their refineries for the tar sands as that is more of a long term project down the road. As I said earlier, acquiring huge reserves is very important to power their growing economy and they will be building a strategic emergency reserve just like the United States but about 10 times larger. China covets the JDZ and EEZ acreage and I believe that a deal was/will be offered but it is really Offor that will be deciding factor as to whether long suffering shareholder's need will be satiated this year or in a more methodical progression of gains. Drilling results willing of course!
GLTA & JMHO!
