Replies to post #299300 on ERHC Energy Inc (ERHE)

[Strategyone]

ssc,

I definitely think we have a difference of opinion but I also stress that you don't seem to understand my opinion or a possible ERHE position that is more likely. Let me try to be very clear.

IN NO WAY did the $250,000 loan from Chrome prove that ERHE stopped issuing toxic debt in December. You have the time frame wrong. It was announced on 2/23/2015 of the $250,000 loan from Chrome. I and anyone else will not know what was issued between January 1st and 2/23/15 until the next 10-Q report.

On the other hand, there is a HIGH (IMHO) possibility that ERHE WILL stop issuing toxic debt to outsiders now that the share price has entered a toxic downward cycle to below an asset valuation point. It only makes business sense.

Yes, naysayers can continue the pandemonium fear mongering that ERHE is going to issue 100 Billion shares to raise $4 million dollars that it once said it wanted for funding the programs this year but I feel that opinion is ludicrous and not based on changing circumstances that ERHE has now experienced first hand.

I say, plans change as circumstances change. That IS reality. I say there is a much higher probability of Chrome/Offor continuing to fund ERHE at 'minimal' levels until drilling than further outside toxic debt issuance. UNLESS the share price recovers to above a valuation point that makes sense to do otherwise. If the share price immediately recovered to .05 - .10 (which I doubt unless Chrome kicked in about $5 million with favorable terms) then I would flip my position to saying ERHE may go back to the toxic debt lenders. Again, this is possible but HIGHLY unlikely given the share price performance when these lenders call in their options.

I strongly believe ERHE will NOT need the $4 million for this year due to the high cost of capital. They will need to change their time table at a minimum OR find partners to fund the expenses (hence, enter Deloitte to help find a partner).

and to answer your question

If ERHC has a funding runway to drilling without having to use additional toxic debt why hasn't it been announced?

I don't see this as a fixed, guaranteed "funding runway" so they can't announce what they do not have. Like I said, if the share price recovers to above a reasonable valuation point, ERHE may go back to the toxic well. They obviously don't want to take this option off the table therefore they can't announce it is off the table.

[nordicroots]

I hate to answer a question with another question. But I will here - "Simple question: If ERHC has a funding runway to drilling without having to use additional toxic debt why hasn't it been announced?" More to the point, not just why hasn't it been announced, why pursue this particular strategy that involved the use of extremely dilutive convertible debentures rather than a different form of recapitalization? Why not a "follow-on" offering ( http://us.practicallaw.com/5-382-3479) or a "private placement" http://smallbusiness.chron.com/explain-differences-between-private-placement-public-offering-61989.html). I have a hard time imagining that either of those more traditional approaches for raising cash through additional shares would be anywhere near as dilutive as the quick cash (and resulting toxic death spiral) through the convertible debentures has proven to be to the existing shareholders.

"After the initial public offering (IPO) of a given company, an additional offering of stock for sale, which increases the number of shares outstanding in that public company.

But why do companies offer this additional stock?...
Simple really. They need more money. to reduce existing debt, or to fund expansion or acquisitions or, in some extreme cases, it's a last-ditch effort to save the company from failing.

If big money managers and analysts like the explanation given, for example for a business expansion or to fund further research and development in a high-growth area, then the stock price could actually go up on the news of a secondary offering." The reason it could go up is because the perception of the market reflects the fact that the company would then have the necessary funding to execute the business plan and there are good prospects going forward with the necessary capital through such an action. Of course the opposite can be true as well if the prospects are really bleak. (http://www.stockhomework101.com/275.htm)

And as a side note, I would observe that ERHC is not the only company going through some of this angst related to capitalization and tough times in the oil patch. See this link about Afren's problems (note mention of dismissal of CEO and COO in article): http://www.proactiveinvestors.co.uk/companies/news/78234/afren-agrees-rescue-deal-with-lenders-but-shareholders-face-major-dilution-78234.html?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=7163-331334-Proactivity+-+13%2F03%2F2015

Or alternately check out this article. It profiles a company that recently failed to successfully partner with other firms through farm outs to assure adequate funding in NZ: http://www.proactiveinvestors.co.uk/companies/news/78225/kea-petroleum-surrenders-mercury-after-farm-out-process-fails-78225.html?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=7163-331334-Proactivity+-+13%2F03%2F2015