Statements during this conference call may concern ERHC Energy Inc.’s future operating milestones. Such statements are subject to a variety of risks, assumptions and uncertainties. Please refer to our cautionary statements posted on the ERHC Energy Web site at www.erhc.com.
Good morning! I am Peter Ntephe, Chief Operating Officer of ERHC Energy. I appreciate you taking time out of your busy day to learn about ERHC’s progress during the third quarter of fiscal year 2008.
With me on the call are:
James Ledbetter, ERHC’s vice president in charge of technical matters.
David Bovell, ERHC’s vice president in charge of corporate development.
Deon Warner of Warner & Associates, ERHC’s corporate counsel.
Mike Madigan and Michael Fitzpatrick represent ERHC on matters related to the government investigations.
We hold these investor conference call updates to keep you up to date on our recent progress and where we are headed in the near and longer term.
I am pleased to report that ERHC Energy remains on solid financial footing. Our cash assets continue to be substantial. And, with conservative cost controls in place, our expenses are down considerably from one year ago.
Through the end of June 2008, ERHC had cash assets totaling $32.4 million, compared to $35.7 million at the end of the third quarter in fiscal 2007. This chart shows that since the second quarter of 2006 when we had an infusion of cash from the sale of participation interests in 2006, our cash reserves have diminished by approximately 13 million dollars.
A major factor in maintaining these substantial cash reserves is the fact that the strict cost controls we implemented throughout the company continue to be effective in reducing our general and administrative expenses. During the quarter, this expense category was down nearly 25 percent compared with the third quarter last year. You would have to go all the way back to fiscal 2005 to find the last time we had such low expenses in a quarter.
Worth noting is the fact that ERHC’s legal expenses were considerably lower in the third quarter than they were a year ago due to reduction in required assistance in connection with investigations of the company. At the same time, however, we pushed forward with a communications strategy to spread the word about ERHC at various conferences, which partially offset those savings.
Moving on to the milestones we reached this year….
It seems like a long time ago, but back in April ERHC’s board, management and shareholders gathered in Houston and online for our annual shareholders meeting. We received many positive comments about the meeting.
We have also been introducing ERHC Energy to the investment community through presentations in San Francisco and London. These have been very worthwhile as we have an opportunity to tell our story to new audiences and attract interest from those who were not previously familiar with ERHC.
The company also sent a delegation to Sao Tome and Principe to participate in a recent business forum focused on the Joint Development Zone. It served as an opportunity to show ERHC’s passion and commitment for the development of the region and for the people of Sao Tome & Principe.
We also are happy that the London Court of International Arbitration has clarified the basis for division of the outstanding 9% interest between Addax Petroleum and ERHC regarding JDZ Block 4. The ruling confirmed that ERHC’s share of Block 4 increased to 19.5 percent. Addax WILL CARRY the exploration and production costs associated with the additional 1.8 percent that we received. Addax will not however pay ERHC any additional consideration for the 7.2% that Addax received out of the 9%.
And we – along with our technical partners Sinopec and Addax Petroleum – have secured approval from the Joint Development Authority for the first drilling location in JDZ Block 2…
If you look to the right of this image, you can see where the Bomu prospect in JDZ Block 2 is in relation to the other prospects and the Obo Discovery in Block 1…
And here is a closer view of Block 2 showing the Bomu prospect. Our technical partner, Sinopec, is the operator in JDZ block 2.
Looking ahead, we have a number of significant events that are sure to keep us busy, including completion of work on the Aban Abraham, assisting our technical partners in the effort to secure a rig to mitigate drilling delays, pushing forward with the growth strategy announced earlier in the year and responding to issues raised by some government representatives in Sao Tome and Principe about some of our rights in the JDZ.
Our latest information is that the Aban Abraham is expected to set sail in September. It has a commitment to another company before coming to ERHC’s technical partners, but the fact that work on the deepwater drillship is nearly complete is very good news.
We have a number of photos on our Web site if you would like to get a closer view of progress on the ship.
Since work on the Aban Abraham has been running behind schedule, Addax Petroleum has been working to secure a rig of opportunity. Addax wants to do all it can to meet its schedule for exploring the Kina Prospect in JDZ Block 4. We expect to continue assisting Addax in their efforts as needed.
Of course we will also be continuing to pursue the growth strategy we laid out at our annual shareholder’s meeting. There are many things that we look forward to sharing them with you when the time is right, but we can’t disclose yet because doing so would disadvantage the company in negotiations. We are exploring acquisition targets and financing options.
Finally, we are working to maintain good relations with the government and people of São Tomé & Príncipe in hopes of quickly resolving any questions about the status of ERHC’s interests in JDZ Blocks 5 and 6. As described earlier, ERHC sent representatives to the 2008 Investment Forum in São Tomé & Príncipe and we hope that our very visible involvement serves as an initial step toward addressing any questions.
In summary, we continue to make significant strides both financially and operationally that contribute to achieving our goal of maximizing shareholder value. Although many of the strategies that we are implementing do not bear fruit in a day or a week or a month, we are making progress step-by-step toward realizing the value of this company’s assets while responsibly managing risk.
Thank you very much for your time and interest in ERHC Energy. For more detailed information concerning the Joint Development Zone, the Nigeria-São Tomé and Principe Joint Development Authority, and the company’s Participation Agreements and Partnerships, I invite you to visit our Web site at www.erhc.com.
And now we would be happy to answer any questions you might have.