ERHC Energy Inc (ERHE)

[Krombacher]

Some thoughts about BOMU KINA LEMBA and MALANZA:

I've been staring and staring at the Meandering Channel System in the I-box and trying to second guess why the DP would return to Block 4 to drill not Kina, but rather Malanza.

Is walldog right? His post:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=43136645

or was Kina a bust, and they are desperately looking for any structure at all to find oil and they picked Malanza because it is on the meandering channel structure.

Do we have a pool or do we have pockets of oil as Midtier suggests?

What would I do faced with different scenarios given the results of the drilling, if I were Addax/Sinopec? What would you do?

Let's try to break this down.

First, is "one" hole enough to determine whether a given structure is a bust, and if not how many holes on average does it take? Obviously it takes only one hole if you have a gusher, because you got the result you wanted. But if you get a bust, then do you need to drill again to validate the bust, or is one hole enough?

Several hole scenario for busts: If you answer it takes several holes, as I believe, then they must have surely found a lot of oil in Kina on the first try, which eliminated the need to drill more there. If not, i.e. it was a bust then they would have had to drill more holes in Kina to understand its viability. Why spend $600k a day on a drill ship, if you can't be absolutely sure about a given structure like Kina?

One hole scenario for busts: On the other hand, if "one" hole is all it takes, then a bust would mean it makes sense to move on to another structure. In other words if one hole is enough, and they didn't find oil, then they could scratch off Kina as a potential, and move on to Malanza. If one hole is enough and they did find a lot of oil in Kina, then they would probably continue on to Malanza ANYWAY. Therein lies the key. In the one-hole scenario, Kina becomes a maybe. Whereas in the several hole scenario, Kina is a sure thing.

Conclusion: if "one" hole is enough, gusher or bust, in order to determine whether a given structure is viable, then you have a "maybe" for Kina, because the logical next move gusher or bust would be to move on to another structure in block 4.

If, you need multiple holes for a bust, but only one hole for a gusher, then they found a lot of oil in Kina, and the logical move is to move on to Malanza.

So best case scenario, a lot of oil in Kina, worst case scenario, a "maybe" in Kina. In any case you can't completely rule out Kina as a bust by second guessing based on their move to Malanza.

So how do we confirm based on just these "chess" moves? Well, Bomu will be the tell-tale sign. If Bomu was a bust, and Sinopec decides to drill Bomu-2, then the answer to the question is clear, Kina has lots of oil. Why? Because, the additional Bomu drilling means they need to drill more to determine whether Bomu is really a bust. But no additional drilling needed for Kina and Lemba, because both were gushers.

On the other hand if Sinopec decides not to drill Bomu-2, even when Bomu-1 was a bust, that means that Bomu in total is a bust, and Kina and Lemba must be "maybe's" based on second guessing alone.

Unfortunately there are not too many other structures other than Bomu and Principe in Block 2, so a re-drilling of Bomu may be a coincidence.

Nevertheless, my chess playing mind is concluding the same thing as Walldog. More than likely they have found a lot of oil in Kina and Lemba and now they are getting greedy by going to Malanza for a super jack pot.

I hope all of that makes sense to you,

Krombacher