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Safe Harbor Statement
Statements in this conference call that may contain "forward-looking statements" within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended may include, but are not limited to, statements concerning the Company's future operating milestones, future drilling operations, the planned exploration and appraisal program, future prospects, future investment opportunities and financing plans, future shareholders' meetings, response to the Senate Subcommittee investigation, developments in the Securities and Exchange Commission investigation of the Company and related proceedings, as well as other matters that are not historical facts or information. Such statements are inherently subject to a variety of risks, assumptions and uncertainties that could cause actual results to differ materially from those anticipated, projected, expressed or implied. A discussion of the risk factors that could impact these areas and the Company's overall business and financial performance can be found in the Company's reports and other filings with the Securities and Exchange Commission. These factors include, among others, those relating to the Company's ability to exploit its commercial interests in the Joint Development Zone and the exclusive territorial waters of Sao Tome and Principe, general economic and business conditions, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations and various other matters, many of which are beyond the Company's control. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this call. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.
ERHC holds valuable assets in what was once an undeveloped oil region of the world. Earlier this year, we marked the 10th anniversary of ERHC’s exclusive joint venture with the Democratic Republic of Sao Tome and Principe.
Nobody said it would be easy or quick. We have faced our share of challenges. We are proud of where this company has come from… we are proud of what we have built… and we are very excited about where we are going.
Now, for a review of ERHC’s third quarter financial results, the following numbers summarize our financial performance:
- As of June 30, 2007, the close of ERHC’s third quarter, cash assets totaled $35.8 million, compared to $41.3 million at the end of the third quarter in fiscal 2006.
- Third quarter interest income was more than $457 thousand, compared to $538 thousand for the same period last year.
- General and administrative expenses in the third quarter decreased to approximately $1.1 million, compared to approximately $1.5 million during the same period a year ago
- Overall, ERHC’s net loss in the third quarter was approximately $587 thousand, compared with a net loss of approximately $621 thousand in the third quarter of fiscal 2006.
Management Discussion
On August 12, the ERHC Board of directors met and voted to accept the resignation of Sir Emeka Offor from his positions as non-executive director and chairman of the board of directors. We are very grateful for his excellent and substantial contributions to ERHC since joining the board in 2001. Sir Emeka Offor served during a period of important accomplishments, and ERHC appreciates his years of visionary leadership and we pledge to continue to build upon that legacy. The ERHC board has begun the process of identifying a successor.
The Board also recognized that current management has taken significant steps to clarify the future of ERHC:
- We have re-affirmed the rights to our assets in the JDZ. This deserves elaboration. ERHC’s rights in the JDZ, as well as those granted to other companies, were recognized by the Joint Development Authority and ratified by the governments of Nigeria and Sao Tome & Principe. And on July 15 of this year the new president of Nigeria, Umaru Yar'Adua, affirmed this treaty yet again. ERHC’s rights in the JDZ have repeatedly been upheld.
- Our relationships with governments and regulators in the region remain positive and productive, and we have successfully transitioned responsibility for those relationships to ERHC staff rather than engaging external consultants.
- We have resolved outstanding paperwork issues, stabilized operations and reduced General and Administrative costs. We are, therefore, in better shape financially and operationally than in the past.
- We have a solid strategy for the orderly growth of this company.
- We are moving forward to improve transparency and our dialog with shareholders. This conference call, and our plans for an annual meeting, reflect that effort.
- And, we are committed to improve and increase our public and community relations activities in order to protect and advance ERHC’s public image.
Operations
Presently, we continue to see activity toward eventual exploration in the Joint Development Zone, or J-D-Z, located in the Gulf of Guinea. It is important to note that ERHC is a carried interest partner in JDZ Blocks 2, 3 and 4, as well as minority interest-holder in Blocks 5, 6, and 9. As such, we are required to defer to our consortium partners and the operators of each block to disclose information about progress in each of these Blocks.
That said, according to ERHC’s consortium partners, the Swiss firm Addax Petroleum and China's Sinopec Corporation are still on-track with previously disclosed plans to bring the deepwater drill ship Aban Abraham to the JDZ next year. Addax and Sinopec have announced that they have five firm well slots in Blocks 2 and 4 of the JDZ and anticipate drilling -- likely beginning in the third quarter of 2008.
Anadarko Petroleum of Houston, the designated operator of Block 3, has yet to publicly announce its exploration plans.
ERHC has working interests of 22 percent in Block 2; 10 percent in Block 3; and 26.7 percent in Block 4. You may note that our interest in JDZ Block 4 has changed since previous quarters. This is due to our move to reclaim a nine percent interest from Godsonic Oil Company Limited. I’ll refer you to our Form 10Q for further explanation, but it is worth noting that it is likely that there will be further changes in our interest in Block 4 as we work out how to divide that nine percent interest between ERHC and Addax. ERHC also has 15 percent interests in JDZ Blocks 5 and 6 and a 20 percent interest in JDZ Block 9.
In Sao Tome & Principe’s Exclusive Economic Zone, or EEZ, ERHC’s rights to participate in exploration and production activities include the right to receive up to two blocks of ERHC’s choice and the option to acquire up to a 15 percent paid working interest in another two blocks of ERHC’s choice. The Company would be responsible for its proportionate share of exploration and exploitation costs in these EEZ blocks.
Therefore, we have numerous reasons to be optimistic about exploration in the region.
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 website at www.erhc.com.
Investigations
Of course, those of you who have followed ERHC for any length of time know of the recent investigations concerning ERHC interests in the Gulf of Guinea.
Most recently, the Permanent Subcommittee on Investigations of the U.S. Senate Committee on Homeland Security and Governmental Affairs served ERHC with a subpoena. ERHC’s attorneys, Akin Gump, are assisting ERHC in responding to the subpoena, which seeks documents and information regarding ERHC’s activities, particularly those related to the acquisition of ERHC’s interests in the Gulf of Guinea.
I hope you understand that we are not at liberty to discuss matters related to the ongoing investigations. This is at the advice of our counsel. While we have taken appropriate steps to protect the interests of the Company and its shareholders, ERHC Energy remains focused on building positive momentum going forward.
We value your ongoing trust and support. The management and board look forward to getting together with you in due course at the annual shareholders’ meeting in late 2007 or early 2008. Of course, the formal notice and documentation will be provided to shareholders well in advance of the meeting.