Below is an excellent post from strategyone from RB today. Like him I am very excited about the two 100% blocks in the Sao Tome EEZ. That is the true "ace in the hole" for ERHE IMHO.
A Thought for Discussion:
Not that I take what Barry Morgan types at face value but let's assume for a moment that he is pretty close to facts on this one. ERHE/Pioneer is in line to win blocks 2 & 3. XOM is trying it's best to work with Anadarko to win Block 4. ERHE/Noble currently have very tempting offer on the table of fast tracking 3 wells in one year. A very good analytical post was presented by mabeen1 (post 16126) showing the present value advantage of ERHE/Noble's 3 wells in one year versus Anadarko's 1 well in three years. XOM may be able to sweeten the Anadarko deal in a couple ways. First, it may be willing to use its abilities to increase the number of wells drilled or decrease the number of years before the second well is drilled. The second benefit XOM seems to state is it's supposed superior technology to know "where" to drill (which I believe has merit due to the size and power of XOM). This may bring the present value numbers more in line with each other. Then the JDZ have the political pressures of XOM being the biggest oil giant in the world which looks very good to have them involved in as many blocks as possible (within reason of course).
Here is a interest thought that came across my mind: Let's say JDZ awards block 4 to XOM/Anadarko. The JDZ finally award all 5 blocks on current bid. ERHE/Pioneer go forward with blocks 2 & 3...........STP now is free to open up their EEZ.......Since ERHE is sitting on 2 100% free blocks of the EEZ (granted after several other preferred rights are taken), ERHE/Noble could be set rather quickly to sink those same 3 wells in one year in one or both of those EEZ blocks. As soon as the JDZ is done awarding these 5 blocks, I think we will start hearing STP putting together their EEZ process. They have already hinted at it being in 2005. I also think that since ERHE has 2 100% blocks free of signature bonus, that these won't take much time to figure out and will probably be resolved BEFORE STP puts out their EEZ for bid. This I think is extremely likely.
Granted STP will benefit the most from not loosing too much by having ERHE/Noble drill their proposed 3 wells in the EEZ instead of the JDZ. Nigeria may still push for a ERHE/Noble win in Block 4......
Any other thoughts on this are welcome.
