With the official business of the Annual Shareholder’s Meeting concluded, it is now time for the ERHC Management Presentation.

Statements during this meeting may concern ERHC Energy Inc.’s future operating milestones, future drilling operations, the planned exploration and appraisal program, future prospects, future investment opportunities and financing plans, future shareholders’ meetings 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 JDZ and the exclusive territorial waters of São Tomé and Príncipe, 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 these statements. Each of the above statements speaks only as of the date of this press release. 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 of the above statements is based.

ERHC’s Chief Operating Officer, the Acting Chief Executive Officer of the Company, will provide the 2010 Management Presentation.

Thank you, and again I want to thank all of you who have chosen to spend your valuable time this afternoon participating in this meeting of ERHC shareholders. We appreciate that you are taking your responsibilities as owners of this Company seriously and we look forward to updating you on the status of a number of important initiatives underway and will open the floor to questions following this presentation.

The Management Presentation will discuss
  • ERHC’s financial highlights;
  • Our assets in the Nigeria-Sao Tome & Principe Joint Development Zone;
  • Our assets in the Sao Tome & Principe Exclusive Economic Zone;
  • Our acquisition and growth strategy and will update you on what’s happening;
  • The plan of action for listing on the AIM of the London Stock Exchange.
First, let’s talk briefly about ERHC’s financial highlights for 2009.

This chart shows the positive trend in ERHC’s general and administrative expenses in recent years as we continue to operate in an efficient and streamlined fashion. General and administrative expenses last year totaled $4.2 million, which was the lowest since fiscal year 2004.  

As we have discussed in past conference calls, a financial institution in which ERHC Energy invested in certificates of deposit was placed into receivership in February 2009. During the fiscal year, we established a provision for loss of approximately $4.2 million to account for a potential loss if those funds are not recoverable.

With cash and cash equivalents at the end of 2009 totaling approximately $22.4 million and with virtually no debt on our books, ERHC continues to be on solid ground financially.  We are confident that we have adequate resources to continue to operate for the foreseeable future. That said, understanding that we have diminishing cash resources and a fairly long time horizon before our existing oil and gas assets can produce revenues, is essential for grasping the importance of the other business strategies we will discuss later in the presentation.

Now let’s talk about those existing oil and gas assets in more detail, starting with the Nigeria-Sao Tome & Principe Joint Development Zone.

Briefly, the Nigeria-Sao Tome & Principe JDZ is in the deepwater Gulf of Guinea approximately 200 kilometers off the coast of West Africa. It is between Nigeria and the island nation of Sao Tome & Principe. To date, the JDZ has been delineated into nine Blocks for oil and gas exploration and ERHC has interests in six of the nine. Specifically, we have
  • A 22% interest in JDZ Block 2
  • A 10% interest in JDZ Block 3
  • A 19.5% interest in JDZ Block 4
  • A 15% interest in JDZ Block 5
  • A 15% interest in JDZ Block 6
  • And a 20% interest in JDZ Block 9
The Blocks are in various stages of exploration. JDZ Blocks 2, 3 and 4 were the focus of an aggressive exploration campaign that concluded in January. To date, no Production Sharing Contracts have been signed in either JDZ Block 5 or 6, and no operatorship has been awarded yet in JDZ Block 9.

This time last year, many people were wondering if drilling would ever happen. The waiting seemed to be unending. And then BOOM, a series of events occurred that made a coordinated and comprehensive drilling campaign possible.
  • Addax Petroleum contracted for the Deepwater Pathfinder deepwater drill ship.
  • Sinopec arranged for a semi submersible drilling rig for Block 2.
  • Addax Petroleum acquired the operatorship of JDZ Block 3, setting the stage for a coordinated campaign across all three Blocks.
  • Finally, Sinopec acquired Addax Petroleum, which ensured all the knowledge and expertise across all three Blocks would be shared and seamless and that the campaign would well financed.
By the time the last well was completed in January 2010, five wells had been drilled.

Of course, everyone is excited to learn what was found during the drilling and we will share with you what we can today. However, please understand that the analysis of the information gathered during drilling is not complete. Both operators were granted an extension until mid-September to indicate their plans for Exploration Phase II, contingent upon approval by the Joint Ministerial Council.

Here you see the to-do list during this extension period. The operators are continuing to analyze the data and that may continue for some time. We get lots of questions asking about why it is taking so long. The reason is simple – the next step of exploration will require considerable resources and all parties involved want to be absolutely sure they make the right decisions – regardless of how long it takes.

Here are the drilling locations.
  • The Kina-1 well in JDZ Block 4
  • Followed closely by the Bomu-1 well in JDZ Block 2
  • Then over to the Lemba-1 well in JDZ Block 3
  • And back to Block 4 for the Malanza-1 well and Oki East-1 well.
Let’s discuss what we know about each of the Blocks in which drilling has occurred.

This is a closer view of JDZ Block 2 where you see the Bomu-1 well. Sinopec Corp. is the operator of this Block and is carrying ERHC’s interests.

Sinopec has authorized ERHC to release the following information about drilling in Block 2. The well was drilled on time and budget. Before drilling began, the team identified 13 individual sands. The Bomu-1 well was drilled to a total depth of 3,580 meters. After drilling, eight sands were found to contain natural gas. Currently, there is not enough hydrocarbon resource for a stand-alone development, but no final determination has been made by the operator regarding commerciality.

Moving on to JDZ Block 3 where the Lemba-1 well was drilled in October and November 2009. Worth noting also is that Addax Petroleum acquired the operatorship in this Block from Anadarko. Addax is carrying ERHC’s interests in this Block.

Addax Petroleum has authorized ERHC to release the following information about drilling in Block 3. The Lemba-1 well was drilled on time and below budget. The well was drilled to a total depth of 3,758 meters. Before drilling, eight individual sands were identified as prospective – two were found to contain biogenic methane gas. While no determination has yet been made regarding commerciality, an additional prospect is being evaluated for potential Phase II drilling.

And now let’s examine JDZ Block 4 where three wells– Kina, Malanza and Oki East – were drilled between August 2009 and January 2010. Addax Petroleum is the operator in this Block and is carrying ERHC’s interests.

Addax Petroleum has authorized ERHC to release the following information about drilling in Block 4. All wells were drilled on time, budget and to planned depth. In both the Kina well and the Oki East well, gas was discovered in multiple sands. It is important to understand that this information is preliminary and work is ongoing to integrate a potential area-wide development.

In recent months we have also seen considerable progress toward realizing the value of our interests in the Sao Tome & Principe Exclusive Economic Zone.

In 2009, the National Petroleum Agency of São Tomé & Príncipe delineated the EEZ into 19 Blocks and earlier this year ERHC exercised its preferential rights arising from prior agreements between ERHC and São Tomé & Príncipe. In February, the National Petroleum Agency of São Tomé & Príncipe confirmed the award to ERHC of 100 percent working interests in Blocks 4 and 11 – signature bonus free.  The ANP-STP has indicated that it expects to invite ERHC to negotiate Production Sharing Contracts on the two Blocks in due course.

Here is a better look at the EEZ, which is situated southeast of the JDZ. ERHC has been active in this area since 1997 and was among the first companies to identify the possibility of significant oil and gas reserves offshore of São Tomé & Príncipe. You’ll notice that both Blocks we selected sit directly to the east of the islands of Sao Tome and Principe. Let’s take a closer look.

EEZ Block 4 is directly to the east of the island of Principe. What you don’t see is that Principe is the very top of a very steep volcanic structure and the water depths get very deep very fast. Water depths in the Block 4 may reach up to 10,000 feet. The lines you see indicate seismic imaging that has been conducted in this area.

EEZ Block 11 is directly to the east of the island of Sao Tome. This, too, is a volcanic structure that juts up from the floor of the Gulf of Guinea. There has been less seismic imaging conducted in this area. As we have experienced with the JDZ, oil and gas exploration is a long process. The next step will be to open discussions with potential technical partners that will farm into the Block and assume the operatorship. We look to work with such operator in negotiating  Production Sharing Contracts on the two Blocks.

In addition to the two Blocks already awarded, ERHC has rights to acquire up to a 15 percent paid working interest in two additional blocks of its choice in the EEZ. The ANP-STP has informed the Company that selection of these other blocks will take place at a later date following the licensing round that is currently underway.

So we ARE making CONSIDERABLE progress toward realizing the value of our oil and gas assets in the Gulf of Guinea. That said, it is clear that we are still a long way -- perhaps as many as five to 10 years or more – from the point at which any of these oil and gas assets could produce revenues. Therefore, it is essential that we identify and acquire assets with a shorter time horizon of producing revenues.

After examining dozens of potential acquisition prospects, we have identified and are holding discussions a number of potential exploration and production opportunities in West Africa. Ultimately, what we seek is a portfolio of assets and companies in which we believe ERHC can derive significant strategic value. The success of potential acquisitions depends on the availability of adequate financing. In a moment we will discuss our plan for raising funds to complete these acquisitions.

Before moving on, I want to emphasize that ERHC’s principal assets remain the JDZ and the EEZ interests and it is our intention to protect them and advance the Company’s overall standing.  

Finally, we have important information to relate regarding management’s efforts to seek a listing on the AIM of the London Stock Exchange.

We originally announced our intention of seeking a listing on the AIM about two years ago but we had to put those plans on hold due to the global economic crisis that virtually froze financial markets around the world. In recent months, the business environment has improved enough to forge ahead. We have engaged Strand Hanson, an independent London based specialized corporate finance advisory and investment firm, as our principal adviser and sponsor on the AIM listing process.

For those who are not familiar with the AIM, it offers a number of important advantages. Perhaps most important is that it has earned a reputation for fostering emerging oil and gas companies – their are approximately 100 small and mid cap O&G companies listed on AIM with operations around the world. Also, the analysts who cover the oil and gas sector truly understand the unique opportunities and risks of doing business in Africa. This is a significant factor, as we believe that our market valuation has at times been adversely affected by low appreciation of the type of assets we have in the market in which our shares currently trade.


Just to illustrate that point, we offer this comparison. As far as we know, there is just one other company listed on the OTC focused on Africa’s oil and gas industry. Out of all the OTC-listed companies – ERHC has just one peer company. On the AIM, there are 11 companies that are focused on Africa’s oil and gas industry.

Here are a few examples of the excitement generated on the AIM from recent oil and gas fund raisings. It illustrates the vitality of this additional pool of capital and the fact that this is a market that is enthusiastic about emerging oil and gas companies. To grow ERHC into a successful West Africa-focused energy investment company, we will need to tap the market just like these companies in order to fund future significant acquisitions, some of which are already in the pipeline.

Why pursue a listing on the AIM? The primary reason is that we believe it will help ERHC achieve true value for its shares by attracting institutional investors and trading in the epicenter of the international finance community. We also expect that a listing on the AIM would attract the attention of reputable brokers – many of whom steer their clients away from OTC listed companies. Why not list on a different U.S. exchange? We note again AIM’s comparative advantages over NASDAQ and AMEX in terms of appreciation of, and appetite for, companies like us and assets like ours.  

As we announced earlier this year, the process of pursuing a listing on the AIM is underway. With the guidance of our sponsor and advisors, ERHC’s Board of Directors has approved a strategy and plan of action, which includes the implementation of a restructuring of the organization. We will describe what that entails in a moment.

ERHC is not embarking on this process alone, of course. We have engaged an experienced and highly capable team of advisors to guide us. Some of these names may be familiar to you – we previously announced that Strand Hanson is our Sponsor and we have had a previous relationship with Duane Morris. We have assembled a good team and are in capable hands.

We have agreed with our advisory team a strategy that has three primary elements.
  • Step one, is to establish a new wholly-owned subsidiary – ERHC Energy plc. More on that in a moment.
  • Step two is to seek shareholder approval of a proposed voluntary exchange of existing shares for shares in the wholly-owned subsidiary that will be listed on the AIM. This exchange would be offered to shareholders but without any obligation on their part to accept. Those who prefer to keep their shares in ERHC Energy Inc will be able to do so.
  • Step three is to list ERHC Energy plc on AIM.

Let’s examine that plan of action in more detail. This is the corporate structure announced in April 2008 with which you are all familiar.
Here you see our new corporate structure. Firstly, we have established ERHC Energy (BVI) Limited, which is an intermediate holding company that will hold all our Sao Tome & Principe EEZ assets once PSCs have been negotiated and our ownership thereof has been formalized. Secondly, a new intermediate holding company – ERHC Energy PLC – registered the U.K., will be established.  It is this new holding company that  we intend to list on AIM. This company will initially be a wholly owned subsidiary of ERHC Energy Inc, which will -- as you can see from the group structure -- own all of the Group’s oil and gas assets.

When ERHC Energy plc has been established, we shall ask shareholders to approve a plan to offer an exchange of current shares for shares in the ERHC Energy plc that will be listed on the AIM. If the plan approved by a majority of shareholders voting at a Special Shareholder’s Meeting, we will offer shareholders the opportunity to exchange their current ERHC Energy Inc. shares on a one-for-one basis for shares in ERHC Energy plc.

We want to stress that if approved by the shareholders, the Exchange Offer would be completely voluntary. Those who prefer to retain their current ERHC Energy Inc. shares can do so. The exchange offer is being structured in such a way as to avoid unfavorable tax consequences, although it is always a good idea to discuss matters such as this with an accountant.

We also want to make it clear that the total number of shares in ERHC’s listed companies will be the same before and after the exchange of shares. Today, ERHC Energy Inc. has approximately 723 million issued shares. In the example we’ve drawn up, if 600 million of our current shares are exchanged, there will be 600 million shares of the new AIM-listed company held by those shareholders participating in the Exchange. This would leave 123 million shares in ERHC Energy plc owned by ERHE.OB. Post the Exchange ERHC.OB will have 123 million issued shares.  The Exchange will not result in any shareholder value dilution, whether you choose to participate in the Exchange Offer or not.

The exchange offer will be contingent on two things: approval by a majority of shares voted at a special shareholder’s meeting and admission of ERHC Energy plc to the AIM. If a majority of shareholders voting in the meeting approve offering shareholders the opportunity to exchange their current shares for shares in the AIM-listed company, we will open the exchange offer period and proceed with the process to gain admission to the AIM immediately following the end of the offer period.

As a result of these initiatives, ERHC Energy plc will emerge as ERHC’s central holding company. There will be two groups of shareholders:
  • The direct shareholders – those who voluntarily participate in the Exchange Offer.
  • And shareholders of ERHC Energy Inc. – those who do not choose to participate in the
Exchange Offer or take no action at all and retain their current shares. These shareholders will own ERHC Energy, Inc., and through that ownership, will share ownership of the AIM-listed ERHC Energy plc.

To summarize, the AIM listing process is underway and we have a number of important administrative steps to complete in the near term, including securing shareholder approval to offer an exchange of existing shares for shares in the holding company to be listed on the AIM. Whether or not they choose to exchange their shares, we expect that shareholders will benefit as the Company gains visibility in a market that is more accepting of emerging oil and gas companies and more likely to accurately reflect our true value. It also will help us to accelerate our acquisition efforts and diversify of energy investment portfolio.

In conclusion, ERHC has come a long way. We await the completion of data analysis of the information gathered during drilling in the JDZ. We prepare for the negotiations of PSCs in the EEZ. We continue negotiations for potential acquisitions. Overall, we are making progress toward realizing the value of our assets.

While we are proud of what we have accomplished, we have a long list of actions yet to be taken – including setting the course for diversifying our assets and speeding up the pace of producing revenues. We believe what we have described here is a win-win that maximizes the Company’s future opportunities.

Thank you for taking the time to participate today.  

And now we would be happy to answer any questions you might have.