ERHC Company History

ERHC Energy, Inc. is focused on maximizing corporate value and shareholder returns by leveraging its assets in the Joint Development Zone (JDZ) between Sao Tome & Principe and Nigeria and in the exclusive waters of Sao Tome (EEZ) and by pursuing other upstream and downstream oil and gas opportunities wherever attractive projects can be acquired at low cost and transformed into valuable oil and gas assets. ERHC currently is partnering with other oil and gas companies that have technical and financial resources that can help ERHC fully exploit these assets.

1986-1997 – Early ERHC History

ERHC Energy was formed in 1986 as a Colorado corporation that operated in a number of business areas. In 1996, ERHC narrowed its focus and began operating solely as an energy investment company.

In May 1997, the ERHC entered into an exclusive joint venture with the Democratic Republic of Sao Tome & Principe (DRSTP) (the “1997 Agreement”).

1999 – JDZ Prospects/Leads Identified

A report issued by WesternGeco interpreted and mapped out seismic data, highlighted prospectivity and calculated volumetrics in the JDZ. The report identified 56 prospective structures within Blocks 1 to 9 in the JDZ – 17 prospects and 39 leads. The estimate of "recoverable reserves potential" is based on WesternGeco's report, which interpreted and mapped seismic data, highlighted prospectivity and calculated volumetrics. It did not include any attempt to comply with any SEC definition of reserves. ERHC Energy has access to the data under the terms of a data use license with WesternGeco.

2001 - Joint Development Zone Established

In the spring of 2001, the governments of Sao Tome & Principe and Nigeria reached an agreement over a long-standing maritime border dispute. Under the terms of the agreement, the two established the Joint Development Zone to govern commercial activities within the disputed boundaries.

About the JDZ:

• 200 km off the coastline of Nigeria and Sao Tome & Principe
• 34,548 sq km
• 1,500 meters deep in the northern part
• 3,500 meters deep at its southwestern sector.
• Adjacent to several large petroleum discovery areas

Oversight of the JDZ

The JDZ is administered by a Joint Development Authority (JDA) which oversees all future exploration and development activities in the JDZ. The remaining claimed territorial waters of Sao Tome & Principe are known as the Exclusive Economic Zone (EEZ).

Revenue Split

Revenues derived from the JDZ will be shared 60/40 between the governments of Nigeria and Sao Tome and Principe, respectively.

2001 – A New Agreement/New Exploration Rights

On May 21, 2001, the 1997 Agreement was replaced by a Memorandum of Agreement (the “2001 Agreement”), which was embodied in a Consent Award issued by an international arbitrator as a result of the satisfaction of several conditions, including the ratification of a treaty between the FRN and the DRSTP. The 2001 Agreement gave ERHC exploration and production rights in the EEZ and the JDZ.

2003 – Option Agreement

In April 2003, ERHC and DRSTP entered into an Option Agreement (the “2003 Option Agreement”) in which ERHC relinquished certain financial interests in the JDZ in exchange for exploration rights in the same area.

For more on the 2003 Option Agreement and ERHC’s exercising of option rights, review the pertinent SEC filing: Option Rights in JDZ.

2004 – Participation Agreements

In August 2004, ERHC Energy entered into a participation agreement with Pioneer Natural Resources to jointly apply for rights in the production sharing contract for Block 2 of the JDZ, and in December 2004 for similar rights for Block 3.

In September 2004, ERHC Energy entered into a participation agreement with Noble Energy International, Ltd., a subsidiary of Noble Energy, Inc., to jointly apply for rights in the production sharing contract for Block 4 of the JDZ.

In December 2004, ERHC Energy submitted bids as a consortium for Blocks 2, 3, and 4. The company had previously exercised its option rights in all five Blocks on offer in the 2004 JDZ Licensing Round.

2004-2005 – Management/Name Changes

Effective December 31, 2004, ERHC Energy terminated its management services agreement with Chrome Oil Services. On January 1, 2005, ERHC Energy assumed direct responsibility for costs and expenses of its officers and staff and the lease obligation of its office space.

In February 2005, Environmental Remediation Holding Corporation (ERHC) changed its name to ERHC Energy Inc., by decision of its shareholders.

2005 – Blocks Awarded

In May 2005, the Nigeria-São Tomé and Príncipe JDA awarded five Blocks on offer in the 2004 Licensing Round, with the following results:

• Block 2 — a consortium including ERHC was awarded 65% interest, inclusive of ERHC Energy's 30% signature bonus free interest. The consortium was designated operator for Block 2.
• Block 3 — a consortium including ERHC was awarded 25% interest, inclusive of ERHC Energy's 20% signature bonus free interest.
• Block 4 — a consortium including ERHC was awarded 60%interest, inclusive of ERHC Energy's 25% signature bonus free interest. The consortium was designated operator for Block 4.
• In making the awards for Blocks 5 and 6, the JDA confirmed ERHC Energy's 15 percent interest in each Block.
• ERHC Energy's interest in Block 6 is free of signature bonus

On November 17, 2005, ERHC Energy entered into a participation agreement with an Addax Petroleum subsidiary whereby the Company agreed to assign to Addax a 40.5% participating interest in Block 4 of the Joint Development Zone, leaving a 19.5% participating interest in Block 4 to the Company. In exchange, Addax paid $18 million. ERHC agreed to support Addax as operator, and Addax agreed to pay all of the Company’s future costs in respect of all petroleum operations in Block 4. Addax is entitled to ERHC’s share of cost oil until they recover the Company’s costs.

2006 – Production Contracts Developed

On February 16, 2006, ERHC Energy entered into a participation agreement with an Addax subsidiary whereby the Company agreed to assign a 15% participating interest in Block 3 of the JDZ to Addax, leaving a 10% participating interest in Block 3 to the Company. In exchange, Addax paid ERHC $7.5 million and agreed to pay all of the Company’s future costs in respect of petroleum operations in Block 3. Addax is entitled to ERHC’s share of cost oil until they recover the Company’s costs.

On March 2, 2006, the Company entered into a participation agreement with Sinopec International Petroleum Exploration and Production Corporation Nigeria (“Sinopec”), and an Addax subsidiary, whereby the Company agreed to assign a 28.67% participating interest in Block 2 of the JDZ to Sinopec, and a 14.33% participating interest in Block 2 of the JDZ to Addax, leaving a 22% participating interest in Block 2 to the Company. In exchange, Sinopec paid the Company $13.6 million and Addax paid the Company $6.8 million. Under this agreement, ERHC agreed to support Sinopec as operator, and Sinopec and Addax agreed to pay all of the Company’s future costs in respect of petroleum operations in Block 2. Sinopec and Addax are entitled to ERHC’s share of cost oil until they recover the Company’s costs.

On March 14, 2006, the Company entered into Production Sharing Contracts (“PSC”) for Blocks 3 and 4, pursuant to which ERHC was granted a 10% participating interest in Block 3 and a 17.7% participating interest in Block 4.

On March 15, 2006, the Company entered into a Production Sharing Contract for Block 2, granting ERHC a 22% participating interest in the Block.

In 2009, the independent engineering firm, Netherland, Sewell & Associates, Inc. (NSAI) released a Resources Assessment for ERHC that examined unrisked and risked prospective resources for JDZ Blocks 2, 3 and 4. The NSAI report estimated ERHC's unrisked prospective resources in those JDZ Blocks totaled more than 336 million barrels of oil and 372 billion cubic feet of natural gas (P50). The NSAI report estimated ERHC risked prospective resources in JDZ Blocks 2, 3 and 4 totaled 135.5 million barrels of oil and 144 billion cubic feet of natural gas (P50).

 

For more on the seismic survey, visit JDZ Technical Data.

 

In August 2009, Addax Petroleum took possession of the Deepwater Pathfinder deepwater drill ship and commenced exploratory drilling in JDZ Blocks 3 and 4. Also in August 2009, Sinopec took possession of the Sedco-702 semi-submersible rig for drilling in JDZ Block 2. A total of five exploratory wells were drilled across the three JDZ Blocks between August 2009 and January 2010, gathering information that will guide future decisions related to exploration and, perhaps, eventual production.

ERHC Energy remains focused on exploiting its assets in the JDZ. ERHC now has the following working interests in the JDZ:

Block 2: 22%

Block 3: 10%

 

Block 4: 19.5%

 

JDZ Block 5:  15.0%

JDZ Block 6:  15.0%

JDZ Block 9:  20.0%

Additionally, ERHC continues to evaluate other potentially lucrative opportunities in West Africa and elsewhere and has announced plans to establish or acquire a subsidiary that will be listed on the Alternative Investments Market (AIM) of the London Stock Exchange. That subsidiary will invest in assets that leverage the Company’s strengths in central West Africa.