ERHE GAVE UP NOTHING, NADA, ZILCH!
I think we are getting ahead of our selves and quite frankly, looking at it from the wrong point of view.
Let's take a step back and recognized what ERHE is and has.
ERHE started out with 25% preferential rights (bonus free)that they decided on for Block 4. ERHE has nothing else on Block 4. What they did is negotiate with another oil company to work with them on Block 4 (in this case Noble). It doesn't matter whether the "consortium" has 51%, 60%, 75% or 99%. ERHE has ONLY 25% bonus free to negotiate with. The end results is that ERHE is getting 17.7% in the end in exchange for "up to" $18 Million in cash and a FREE ride to production with the new deal with Addax. I am guessing that the original deal with Noble would have been for less, maybe a lot less.
Any amount above ERHE's free 17.7% is simply the other participant(s) within the "consortium". The other player in this case is Addax. They are getting 33.3% of the benefit but paying $18 Million to ERHE and 51% of the cost to production. At the point of production, I am sure, ERHE will start picking up 17.7% of ongoing costs of production paid for by the revenue stream of that production. The MAGIC of the 51% is simply the operatorship control. With Noble or Addax going in on the "ERHE Consortium", they are only paying 33.3% of future costs essentially have 51% controlling interest in the block.
Remember, for all the big oil companies out there that actually drill and produce this oil, there are many areas or blocks to bid and explore. The JDZ is unproven territory in the ultradeep. How many blocks did Nigeria alone put up for auction in their EEZ last year? (like 100 or something). Look at the other African countries that have their own EEZ's. The big oil companies want to diversify their stakes around the world. We (as ERHE small time shareholders) may think the JDZ portion of the GOG is the be all and end all of oil exploration on this planet but I'll bet the oil companies think differently.
My opinion is that ERHE is getting a GREAT deal at 17.7% of the block with a free ride to production and the $18MM cash. This all they would have gotten regardless of the percent for the Consortium. I think ERHE would have ended up with less than half of their free 25% if Noble would have stayed in the picture. JMHO
Be happy,
Strategyone
