OC: Like I said, a 20% equity swap would be better for Chrome going forward as they reduce their risk in ERHE, while at the same time increase their upside!
Elcrest is a private joint venture between Starcrest (The Chrome Group) and AIM listed Eland Oil. Starcrest had an agreement with the Nigerian Government to take over operational control from Total and Shell for $100 million for about a 50% stake in OML-40. Eland paid $50 million to Starcest for a 40% stake in the Elcrest Joint Venture with Starcrest. Eland also retains the rights to purchase another 15% of Elcrest from Starcrest in the future.
Chrome has about a 41% stake in all of ERHE'S unproven asset base. I am sure you will agree that Spending $16 million to increase that stake by 2/10 of 1% was not wise, but allowing Elcrest to purchase a 20% stake in ERHE for Cash and a Equity Swap achieves two things. 1) It reduces Chromes risk going forward as OML-40 will bring in much needed capital to ERHE. 2) ERHE does not have to accept any farm-in deals that are not good for ERHE in the long run.
Should ERHE sell 20% of stock to Elcrest, Chrome % of ERHE's overall asset base drops to about 31%. Chrome gets about a 12% cut and Eland get about a 8% cut of the 20% through the joint venture.
Chrome still retains it's % of the asset base in ERHE and get a much needed cash infusion. ERHE boat starts to float as a rising Tide of capital lifts the share price. Do not forget that Eland can still purchase an additional 15% of Elcrest.
A deal done in this manner would not be seen as risky for Eland shareholders as buying into ERHE staightout might seem.
ERHE is working hard to get all of the JDZ block trouble (5,6 & 9) Cleaned up. (window dressing if you will).
Before any buy-out of ERHE can take place the share price must rise to a respectable level based on proven Hydrocarbon Assets.
Could Total be waiting in the Wings should the assets base be Proven?
Only Time will Tell.
Have a Great Day!
Sneak
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