ERHC Energy Inc (ERHE)

[Krombacher]

Probability of Phase II vs. share price.

I believe that the probability of abject failure, i.e. no Phase II, is highly unlikely. Does the market think the same?

If you are like Midtier, and you are let's say 90% sure, then the formula is like this:

New Share Price * probability of Phase II = Current Share Price

Hence, if the probability of the Market's opinion of Phase II is 90% and the current share price is .33 cents, then the new share price will be .355 cents. So if the Market is 90% sure of Phase II, then the price will already be nearly "baked in".

Of course the lower the Market's opinion of the probability, the better will be the new share price if Phase II is announced.

For example, if the market thinks that there's a 50/50 chance of a Phase II, then solving once again for "New Share Price" you get .33/.5 = 66 cents a share.

I'm betting like midtier that Phase II is a very high probability. You don't have much to lose if you are SNP to go ahead and hedge your bets and drill one more hole per block.

Does the market also put a high probability on this? I'm thinking no. That is evidenced by SNP coming out and saying Bio-gas, down playing the JDZ, and asking for a 6 mo extension. The "rational" folks like Badog just look at it at face value and say slim chance of a Phase II. So the market probability must be lower than 90%. Hence a share price that is sure to trade as high as 66 cents, let's say if Phase II is announced.

However, based on my prior posts, I wouldn't say that a Phase II announcement will take us to a multi-dollar share price. It's the other info that seems to be coming out right around the Phase II announcement, which is what'll make that difference.

Krombacher - imo