ERHC Energy Inc (ERHE)

[TOB]

Yes, exactly!

But it is far better for ERHC to have the two years work with payable with cash on hand to get the best deal.

It can be enough just for ERHC to have the money on hand and have started the two year work program. This shows a JV farm-in that ERHC is able to go it alone and confident that the studies will show good targets.

If at that point the JV farm-in offers terms as good as would occur later, then sure ERHC accepts them at this point. It's like an auction, until someone bids $1,000 nobody will bid up to $2,000. And often people want an appraisal of value before bidding. For oil blocks this would be Gravity/Magnetic and Seismic studies, third party reserve estimates, and discoveries in adjacent and similar geology.

So it is possible a Farm-in could come at almost any point from now to two years. Or even after drilling once a discovery is made. The money raised can then go to other blocks, expenses, and new acquisitions.

But the worst deal comes if ERHC appears desperate to the JV because they simply can't do it alone with no money. That is negotiating from weakness. Do ERHE shareholders really want a bad JV deal just because they are desperate for a nickle or dime more in the share price now? Or unwilling to help with financing by buying some discounted shares that may prove very profitable?

But note that the great Farm-in terms for the JDZ didn't come until after Seismic studies had shown good targets. We see the same thing with HDY now, they look on the verge of a fantastic farm-in with Tullow, this is coming after initial Seismic and drilling work. Not right away at the asset acquisition stage like ERHE is now in Chad and Kenya.

So the best deal often comes later. Not that this rules out a great deal coming quickly as Kenya is quite hot for exploration, and Chad is also moving along.