Frequently Asked Questions
The following responses are intended to answer the questions currently being posed to the company. We further recommend reviewing the Company’s SEC filings, which are posted at http://erhc.com/secfilings/, news releases, which are posted at http://erhc.com/news and presentations, which are posted at http://erhc.com/presentations/.
We will make every attempt to keep this FAQ up-to-date, and appreciate you referencing this section of our website frequently for clarification of facts. Naturally, the content here will evolve as developments occur.
Q. Why hasn't ERHC filed its annual Form 10-K for fiscal year 2016?
As indicated in the Form 12b-25 filed by ERHC on December 29, 2016, ERHC is delayed in filing Form 10-K as a result of time constraints stemming from the recent appointment of M&K CPAS, PLLC as the Company's registered independent public accounting firm. ERHC and M&K are working diligently to complete the filing.
Q. How can I find out information about ERHC's capitalization, such as the number of shares outstanding?
ERHC complies with regulations requiring mandatory disclosure of certain financial information including information on its capitalization in its quarterly and annual filings, which are posted at http://erhc.com/secfilings/. ERHC has direct responsibility for the accuracy and timeliness of those disclosures with particular reference to audited accounts and related figures and price-sensitive information. Independent contractors, consultants or agents retained by ERHC to maintain, compile or archive such disclosures, or the information contained therein, usually do so under contracts containing strict covenants as to unauthorized or random disclosures, in accordance with general industry practice.
Requests for information and other enquiries should therefore be directed to the company and not to contractors, consultants or agents, including stock transfer agents, in the first instance. Contact ERHC at http://erhc.com/contact/.
Q. What steps have been taken to minimize expenses?
The company continues to minimize expenses sharply on all fronts, focusing its resources on the maintenance of its exploration licenses.
Q. Is ERHC considering divesting its position in Oando Energy Resources to raise funds?
The company is considering all fund-raising options available to it.
Q. Is the company considering a reverse split to raise the price of the stock?
Yes. Please see the Schedule 14A that has been filed.
Q. What is happening with the stock price?
It is impossible at any given time for the company to declare with certainty the trading activity that is affecting the company’s stock price. Investors are encouraged to seek guidance from investment professionals.
Q. With the current valuation, how could a stake in the company be sold for much value?
All parties in the oil and gas industry understand that the underlying valuation of the company is distinct from the market valuation. This is not something unique to ERHC. Many small oil and gas exploration companies have found it challenging to raise funds in the current environment, which impacts market value but does not impact the value of the underlying assets.
Q. With the company valuation so low what is the Company’s updated plan to raise the funds necessary to fund the overhead and requirements for Kenya and Chad?
The company's funding plans continue to focus on a farmout of its assets and attracting a new significant equity investor. This does not foreclose any other funding options available to the company.
Q. What type of funding is planned?
The Board and management, in conjunction with our financial and legal advisers, have carefully considered ERHC’s available options and formulated a funding strategy that started with a right issuance to existing shareholders, which was completed in the spring of 2013. Other fundraising strategies may include:
a. Direct placements to new shareholders or strategic investors.
b. Farm-outs of part of our interests in the assets to interested E&P companies or strategic investors.
c. Debt instruments, such as convertible notes, where available and appropriate.
Q. How will the company’s cashflow needs be met?
Oil and gas exploration is an expensive business. Historically, ERHC's cash on the balance sheet has resulted from three sources: monetization of the Company's oil assets through farm-out agreements, private placements of shares and issuance of convertible notes. Our main plan is to monetize a portion of our assets in Chad and the EEZ, but we also intend to seek financing from equity issuances to existing and new shareholders as well as from appropriate debt instruments and other arrangements.
Q. Why doesn't ERHC Energy disclose more information?
We have aggressively and proactively disclosed information on drilling progress that would not otherwise have been disclosed. We have done so out of our determination to keep our shareholders as informed as possible on drilling progress. A cursory search of independent news reports on the drilling campaign shows that they are mainly based on ERHC's press releases.
Q. When will investors learn of milestones in the company’s progress?
In keeping with full disclosure rules, the company will announce developments such that all interested parties will simultaneously have access to the information.
Q. Is the company’s plan to position itself for a buy-out?
The Company's intention is to become a recognized and respected member of the international oil and gas community, specifically with interest in developing our business in Sub Saharan Africa. That said, the board will pursue those opportunities -- including but not limited to potential merger and acquisition opportunities -- that it determines are in the best interests of the shareholders.
São Tomé and Príncipe Exclusive Economic Zone
Q. What is the status of negotiations related to Block 11 of the São Tomé and Príncipe Exclusive Economic Zone (EEZ)?
ERHC and Kosmos Energy announced in October 2015 to transfer all of ERHC's rights to Block 11 of the São Tomé and Principe EEZ to Kosmos. The agreement has been approved by the National Petroleum Agency of Sao Tome & Principe.
Kenya Block 11A
Q. What is next in Kenya?
Post-well analysis continues. As announced in November 2016, ERHC’s preliminary analysis of the Tarach-1 drilling results reveals encouraging information for further exploration. The Tarach-1 well encountered two different hydrocarbon charged intervals, the first extending over 100 meters. The significant oil shows and highly-elevated gas readings encountered by the well indicate the presence of a working petroleum system with the strong possibility of significant hydrocarbon generation.
Q. What was the objective of the Tarach-1 drilling?
The objective of the well was to establish a working petroleum system and test a three-way structural closure trapping against a North-South trending normal fault. The Tarach-1 well was always designed as an exploratory well. It has been plugged following conclusion of drilling.
Nigeria - São Tomé and Príncipe Joint Development Zone
Q. What is the status of Joint Development Zone (JDZ) Blocks 2, 3 and 4?
In late 2009 and early 2010, ERHC’s consortium partners in JDZ Blocks 2, 3 and 4 drilled five wells at a cost of more than $300 million. Each well targeted several unique sands or potential hydrocarbon reservoirs. In our specific area there are approximately 10 sands that could have contained hydrocarbons. We expected some would contain producible hydrocarbons; and that some would fail. In our specific case, four of the five wells discovered gas. The drilling did not find oil or gas in commercial quantities. Since that campaign, the Joint Development Authority (JDA), ERHC and other contracting parties have been reviewing possible next steps. One of the possibilities that the parties are collectively examining is to bring in exploration companies to spread risk and to reinterpret existing data with a fresh perspective and possibly a fresh exploration strategy. The current analysis of the JDZ assets (see slide 22 of the presentation, ERHC Presentation at Enercom's London Oil & Gas Conference, which illustrates current theories regarding the Migration Pathway in the JDZ.
Q. Has SNP officially left the JDZ? If so, did their interest in Blocks 2, 3 and 4 revert back to ERHC?
The Participation Agreements signed with Addax and Sinopec, subject to the satisfaction of legal and regulatory conditions, provide for reversion of interests acquired from ERHC in the event of relinquishment by Addax and Sinopec. The Joint Development Authority is currently working with the contracting parties towards a resolution of several matters, including but not limited to relinquished and retained interests as well as further exploration possibilities on the Blocks, following the unsuccessful drilling campaign in 2009/10.
Q. How will you determine commerciality?
Commerciality is dependant upon many factors. Arguably the most important are volumes of hydrocarbons, price achieved for the hydrocarbons, cost of development and availability of infrastructure, fiscal regime, and timing to first sales.
Q. Has any JV partner in JDZ Blocks 2, 3 and 4 done any log analyzing besides SNP? Has ERHC done any analyzing? Is SNP our sole source of info for results of Phase I?
Analysis of the results is a collegiate process rather than one by the operators unilaterally. The operator does take the lead since it is the part in charge of expenditure but all the contracting parties are part of the management committee, the technical committee, the financial committee and the operating committee that run the operation. These committees meet regularly and review results and progress thus far. Several rounds of meetings are taking place this month. The JDA of course oversees all this particularly at MACOM level and also analyzes results. Indeed, by the PSC, as is conventional, all data produced during the exploration period ultimately belongs to and must be turned over to the JDA.
Q. Are drilled prospects in Phase I considered a total waste or could they again be drilled at a later date?
It is highly unlikely that an operator would choose to re-enter any of the five wells drilled to date. They did not discover oil in those wells. However, the wells provide a plethora of useful data and information about the stratigraphy, sedimentology and structuralism of the JDZ that will facilitate any further drilling.
Q. How does the company explain such a large difference between initial expectations and reality?
The 2-D and 3-D seismic of all five prospects that were drilled in 2009 and 2010 had everyone very enthusiastic. But everyone knowledgeable about oil and gas exploration understands that pre-drill is not an assurance of finding oil. The only certainty in oil and gas exploration comes with drilling and our drilling found only biogenic gas.
Q. What is the status of blocks 5 & 6 in the JDZ?
As indicated in the various quarterly and annual filings from ERHC in recent years, the Company’s rights in JDZ Blocks 5 and 6 are in arbitration. We have worked in recent years to improve our relations with Sao Tome government in hopes of resolving issues related to those rights – and the advances we’ve been able to make in the EEZ illustrate those positive relations. The JDA recently announced the signing of a PSC with the other parties in JDZ Block 5 and it is our understanding that 15 percent interest accruing to ERHC in that Block remain intact pending resolution of the arbitration.
Chad Block BDS 2008
Q. In Chad, does ERHC expect to receive sizable cash compensation along with full carry in operator contracts (somewhat akin to the JDZ)?
The agreements that were struck in the JDZ are the model. We intend to raise funds by monetizing a portion of these assets. Whether we will be able to have our exploration costs carried until first oil as is the case in the JDZ will have to be seen. That was an unusual arrangement, but it has provided significant protections for the Company.
Q. Does ERHC have interested companies looking at our assets?