ERHC Energy Inc (ERHE)

[daylatedolarshort]

Plumo-The following is an excerpt from a 10-K SEC Filing, filed by ERHC ENERGY INC on 12/14/2010.

http://sec.edgar-online.com/erhc-energy-inc/10-k-annual-report/2010/12/14/section3.aspx

ERHC entered into a series of negotiations and agreements that positioned the Company to enter into a Participation Agreement dated November 17, 2005 (the “Participation Agreement”) with Addax Petroleum (Nigeria Offshore 2) Limited (“Addax”). Under the Participation Agreement, as amended, Addax ultimately paid ERHC $18 million in February and March 2006 in exchange for the sale of a 40.5% participating interest (the “Assigned Interest”) in Block 4 while ERHC retained a 19.5% interest (“Retained Interest”). Under the Participation Agreement, as amended, Addax currently serves as operator and pays all of ERHC’s current and future costs in respect of all petroleum operations in Block 4 subject to reimbursement upon production. Addax is to receive 100% of ERHC’s allocation of costs plus up to 50% of ERHC’s allocation of profit until Addax recovers all costs advanced on behalf of ERHC.


In February 2006, ERHC assigned a 15% participating interest in Block 3 of the JDZ to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) for $7.5 million which was paid in the second quarter of fiscal 2006. ERHC retained a 10% interest in Block 3. Under the participation agreement between ERHC and Addax Sub, Addax Sub is currently “carrying” all of ERHC’s current and future costs in respect of petroleum operations in Block 3. Addax Sub is to receive 100% of ERHC’s allocation of costs oil plus up to 50% of ERHC’s allocation of profit until Addax Sub recovers all costs advanced on behalf of ERHC.
In March 2006, ERHC assigned a 28.67% participating interest in Block 2 of the JDZ to Sinopec International Petroleum Exploration and Production Corporation Nigeria (“Sinopec”), and a 14.33% participating interest to Addax Energy Nigeria Limited (“Addax Ltd.”). ERHC retained a 22% participating interest in Block 2. In connection with these sales, Sinopec paid ERHC $13.6 million and Addax Ltd. paid ERHC $6.8 million in the second quarter of fiscal 2006. Under the participation agreement among ERHC, Sinopec and Addax Ltd., Sinopec currently serves as operator, and Sinopec and Addax Ltd. pay all of ERHC’s current and future costs in respect of petroleum operations in Block 2. Sinopec and Addax Ltd. are to receive to 100% of ERHC’s allocation of cost plus up to 50% of ERHC’s allocation of profit until they recover all costs advanced on behalf of ERHC. Additionally, Sinopec is to receive 6% interest on its current and future costs, up to $35 million, but only to the extent that those interest costs are recoupable out of production.