ERHC Energy Inc (ERHE)

[sideeki]

Mabenn1 made a stab at oil per block in message No. 65552 on the old EHRC (not ERHE) board:

Here’s what the bashers are trying to steal from you!


Some time ago I made an attempt at determining a near term potential value of ERHC’s rights. I think it is worth repeating to put in perspective what these bashers are attempting to steal from us. I started with what we know from the Western Geo seismic studies, which estimate RECOVERABLE reserves of 14.4B bbls in the JDZ. (Don’t forget that ERHC has rights in the EEZ which should be worth even more than the JDZ).

http://tinyurl DOT com/2jaf5

“Interpretation carried out by WesternGeco has enabled the identification of fifty-six prospective structures within Blocks 1 to 9, of which seventeen were defined as prospects and thirty-nine as leads. Of particular interest to ERHC, however, is the recoverable reserve potential of Blocks 1, 2 and 4. WesternGeco identified six High Confidence prospects in these three blocks alone with estimated cumulative recoverable reserves potential of 4.5 billion barrels of oil. WesternGeco used reservoir parameters similar to those known from nearby fields in Nigeria and Equatorial Guinea. Combined recoverable reserves potential of the seventeen prospects was estimated by WesternGeco to be 14.4 billion barrels of oil. WesternGeco partitioned these reserves on a block-by-block basis for ERHC’s exclusive use in the bidding and option selection process relating to the JDZ licensing round.”

As I read this paragraph again, something jumped out at me that we have not discussed before on the board that I can recall. The 14.4B bbl of recoverable reserves is just that which is contained in the 17 prospects. It does not account for the additional potential reserves contained in the other 39 leads!

Please read the above paragraph carefully so as not to misinterpret the data. It’s important that they reference 6 “high confidence” prospects in blocks 1, 2 and 4 totaling 4.5B bbl. Because as you will see below, my estimate for blocks 1, 2 and 4 comes up with over 9B bbls in these blocks. This leaves several possibilities. First, my assumptions in calculating reserves per block could be all wet, or there is a distinction between “prospects” and “high confidence prospects”, or the other 39 leads represent additional significant reserves. The important point here is that the 4.5B bbl does not represent the total reserves in blocks 1,2 and 4 because there may be additional prospects and there are certainly additional leads in these blocks.

Now assuming all bidders had access to the same seismic data, it is reasonable to suppose that the distribution of the high bids is a reasonable representation of the distribution of the expected reserves in the various blocks. So I took the sum of the total bids and divided the bid for each block by the total. This gives the percentage of the total bid for each block. Then I multiplied this percentage times the total reserves of 14.4B bbl to estimate the recoverable reserves in each block.


……..High…….% of……..Est. total…..ERHC…ERHC……….Cummulative
Blk…bid……..total bid…..Reserves….%………reserves……..ERHC reserves

1…..$123M…..23.8%…..3.4B bbl……..0%………0M bbl……….
2…..$113…….21.9%…..3.2B bbl…….30%……946M bbl………0.95B bbl
4…..$100M….19.4%……2.8B bbl……25%……698M bbl………1.64B bbl
6…..$55M……10.7%……1.5B bbl……15%…...230M bbl………1.87B bbl
9…..$45M……..8.7%……1.3B bbl……20%…...251M bbl………2.13B bbl
3…..$35M……..6.8%……976M bbl…..20%…...195M bbl………2.32B bbl
5…..$35M……..6.8%……976M bbl…..15%…...147M bbl………2.47B bbl
7…..$10M……..1.9%……276M bbl…….0%
8…..$0…………...0%………0 bbl

Total………………………14.4B bbl………………

The first thing that jumps out of the table above is that the vast majority of ERHC’s value lies in blocks 2, 4 and 6 which should represent about 75% of ERHC’s likely reserves. So all the talk about the re-bid of the remaining blocks is of little consequence in my mind, so long as 2, 4 and 6 are announced. The other important point is that ERHC has rights to over 2.4B bbls of oil in the JDZ alone! And don’t forget about the EEZ!

The next question is what is a bbl of “expected” oil worth. I have asked everyone I could find who had any knowledge of the oil business and did some research on my own. I got values ranging from $0.70 to $2 per bbl. Based on this I determined the potential expected share price immediately following announcements, because at that time the reserves are only “expected” not “proven”. I understand that a bbl of “proven” reserve is worth probably something more on the order of $4 per bbl. I did not make any additional consideration for the tax rates and production costs because these things are embedded in the value per expected bbl. All oil leases have production costs and presumably somewhat similar tax rates or lease hold cost costs.

………….Cumulative…………..PPS at various values per expected bbl
Blk………ERHC Reserves……….$0.70/bbl……….$1.00/bbl…..$2.00/bbl

2……….0.95B bbl………………..$1.11…………….$1.58………..$3.16
4……….1.64B bbl………………..$1.92…………….$2.74………..$5.49
6……….1.87B bbl………………..$2.19…………….$3.13………..$6.26
9……….2.13B bbl………………..$2.48…………….$3.55………..$7.10
3……….2.32B bbl………………..$2.71…………….$3.87………..$7.75
5……….2.47B bbl………………..$2.88…………….$4.12………..$8.24

So I believe it is reasonable to expect a PPS in the $3 range immediately following awards of only blocks 2 and 4. Balance Builder and others have done other valuations based on a longer term view which arrive at share prices that are multiples of these I have calculated. I think their estimates are reasonable as well. We are simply talking about different points in time. Red has suggested a PPS of $3.67 upon awards. This is also consistent with my estimates.

And don’t forget that the above estimates do not take into account ERHC’s additional rights in the EEZ at all, and certainly do not reflect the huge jump in value that will take place once the reserves are actually proven and oil is flowing.

Is it any wonder the bashers want to drag us down and steal our shares for a mere 46 cents??!!




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