Replies to post #312465 on ERHC Energy Inc (ERHE)

[ssc]

My reply is the same as it was the last time you posted your argument for no more toxic debt and, lol, a market cap of $100 million prior to drilling.

Seems like the main issue is whether or not ERHC can raise the cash they need from a "strategic investor" without much dilution or be forced to continue the toxic debt funding.

First, let's use a run up to drilling valuation estimate more in tune with today's oil economy. Does anyone really believe ERHC will be valued at $100 million with no cash, partial carry for 1 well and oil under $40? HDY is struggling to hold onto a market cap between $20 and $30 million with $15 million in cash and the potential of their property dwarfing ERHC's Kenya holdings. So let's say ERHC market cap could reach $25 million before drilling.

Then consider they need to raise $5 to $10 million in cash to survive, hold onto Chad and in general look like a company that any "strategic investor" might even consider buying into instead of one on the brink of bankruptcy.

So let's be optimistic and say $5 million would be enough cash for now. If they start issuing more toxic notes with the stock at .10, by the time they reach $5 million they would be fortunate to have an outstanding share count of 250 million shares which would mean a stock price of .012 to equal the same $3 million market cap they have now. A run up to drilling taking the market cap up to $25 million would mean a stock price of 10 cents and no gain for current shareholders.

To anyone who asks "why would they repeat the toxic debt debacle?", the simple answer might continue to be that they have no other choice. Remember, they didn't stop issuing more notes when they saw the stock being destroyed. They continued until they maxed out the share count. And as of the last report there are still a considerable amount of those notes yet to be converted.

At least keep the numbers in the ball park. Expecting anyone to value the current ERHC at $100 million in today's oil economy is almost as crazy as the rumors that the Kosmos deal was for $45 million, even $100 million cash.

[midtieroil]

Unfortunately, by the company's own admission, issuing shares is definitely an option and it very well may be the only option. The only other way is farming out acreage at bargain basement prices. In any merger do you really think existing shareholders would make out well? Anyone believing issuing more share is not an option is not being realistic. Even a private placement instead of CDs would require a lot of shares.

ERHC wouldn't have asked for the RS if they didn't intend to use the shares that frees up.