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Replay of Quarterly
Conference Call  Recording ID 27Q94Z
Recording Key bhb3H:g Or call 877-890-0968 (domestic) 706-902-1710 (international) Pass Code 77294003 |
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, response to the Senate Subcommittee investigation, developments in the SEC 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 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.
For additional information on ERHC, please visit our Web site at www.erhc.com.
I am now pleased to turn the call over to Mr. Peter Ntephe, Chief Operating Officer of ERHC Energy….
(Peter Ntephe)
Good morning! I appreciate you taking time out of your busy day for this update on ERHC’s financial position and our operations as we complete 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.
- And Mike Madigan, who represents ERHC on matters related to the government investigations.
In a moment, I will report on our financial results and then update you on the various initiatives underway. Before we start, let me make it categorically clear that this Company’s business performance in 2008 has not been satisfactory and is neither acceptable to this management nor to many of our shareholders who have made their views known in no small measure. Our challenge as a management is to continually fashion strategies that will counteract or neutralize emerging challenges, whatever they may be. The current challenge is to ensure that this Company responds appropriately to the adverse effects of massive downturns in global markets that have occurred recently. As I am sure everyone is well aware, we have been in the midst of massive changes both in the oil and gas industry and in the world’s financial markets. We are working to ensure our strategies going forward address ERHC’s top priorities: to protect the company’s assets and to position us to be able to realize the value of our assets. This is what we MUST do to protect the Company.
To be sure this management has worked very hard under difficult circumstances in the past 6 months but mere hard work and intense activity cannot be enough; the results of the Company will testify to whether our efforts are successful or not.
Financial Results
Now I’d like to share with you an overview of ERHC’s fourth quarter financial results:
Through the end of September 2008, which represents the end of our fourth quarter and of our fiscal year, ERHC had cash assets totaling $31.7 million, compared to $34.7 million at the end of the fourth quarter in fiscal 2007.
The strict cost controls we implemented throughout the company continue to be effective in reducing our general and administrative expenses. During fiscal 2008, the Company had general and administrative expenses totaling $4,249,572 compared with $4,954,848 in fiscal 2007 – a decrease of 14 percent. The primary reason for the decrease is a reduction in legal and professional fees due to lower legal expenses in connection with all the governmental agencies investigations of the Company. Legal expenses remain one of the Company’s largest items of expenditure and we will continue to work during the next fiscal year to keep them as low as we can.
During 2008, the Company had a net loss of approximately $3 million compared to a net loss of about $1.7 million for fiscal 2007. The increase in net loss is due to the fact that the Company is now in a loss carry forward position and thereby has no remaining tax benefits from utilization of tax losses in 2008.
Let’s turn now to a discussion of some of our ongoing initiatives.
Aban Abraham
Our latest report from Singapore is that the Aban Abraham – the deepwater drill ship that our technical partners, Addax and Sinopec, have contracted for drilling in the Joint Development Zone – is expected to set sail this week. This has been a long time coming and we are very excited about it.
The Aban Abraham has been undergoing refurbishment and has been retrofitted for the capability to drill at the depths needed to explore the Blocks in which ERHC has interests, which are about a mile deep or more.
The Aban Abraham will next sail for a few days to 60 meters water depth in order to conduct additional tests. After getting approval, it will sail approximately 30 days to Cape Town, South Africa, and is expected to enter the Gulf of Guinea in February to begin operations for another company off the coast of Ghana. Addax expects to take possession sometime in the second half of 2009.
The Aban Abraham is scheduled to explore the Kina Prospect in JDZ Block 4, in which Addax is the operator, and later in 2010 explore the Bomu Prospect in JDZ Block 2, in which Sinopec is the operator.
Rig of Opportunity
Now an update regarding an interim solution as we await the Aban Abraham. In November, negotiations that had been at an advanced stage with a rig owner were suspended at least for the time being. We have the utmost trust in, and respect for, our technical partners and they made the decision for good business reasons.
With the Aban Abraham finally sailing, and given the nature of the rig market, our technical partners appear to think it prudent to step back and reassess whether a rig of opportunity is still an imperative.
We were hopeful that we would be exploring in JDZ Block 4 by now but we have also always warned of the contingencies surrounding any drilling program. As frustrating as the delays have been at times, we are heartened by the fact that credible progress is still being made towards the ultimate goal of drilling the JDZ prospects.
Reserves Report
Netherland, Sewell & Associates, is currently working on a report evaluating ERHC’s oil and gas reserves. Netherland Sewell is the firm that developed the industry standards for that type of assessment. They have been examining 3-D seismic images of the JDZ Blocks in order to provide an updated and more detailed and precise assessment of the company’s potential reserves.
We have commissioned this report to provide the investment community with the most up-to-date, detailed and accurate information about the company’s potential reserves. When completed, it will be made available on the company’s Web site and in various SEC disclosures.
Growth Strategy
Following ERHC’s Annual General Meeting in April, we outlined a strategy to grow the company and diversify our portfolio of holdings through the acquisition of revenue-producing assets. Several interesting prospects have been seriously considered and our plans on specific targets were advancing when the markets precipitously took a turn for the worse.
In conjunction with our Board, we have been forced to re-examine the Company’s growth strategy with a view to adjusting it to accommodate the effects of the considerable changes in the oil and gas industry and the world’s financial markets in the past few months. These changes have so far not impacted favorably on business valuations of companies like ERHC but the challenge, to reiterate, is to respond as best we can as a Company. There are two main courses of action that are available:
The first is an aggressive push to grow the company through acquisitions of revenue producing assets. On this view, diversifying ERHC’s asset portfolio will help to manage risk and to reduce volatility and uncertainty.
Conversely, given current trends in financial and energy markets, the strategy of preserving ERHC’s current portfolio of assets and capital is an option that has been raised in some of the Company’s advisory circles. The rationale for this alternative view is that the current state of financial markets makes it unlikely that ERHC will be able to get favorable terms for the type of leveraging that will enable specific acquisitions or for stock listings to finance corporate expansion generally.
ERHC is lucky to have a very active shareholder base and we have received significant communication from our shareholders on strategy going forward. Some favor the first option of aggressive diversification while others favor the second option that basically requires hunkering down until financial markets improve. I can reveal that some strong views on either side have been expressed to us in the process. I can also reveal at this moment that management is working hard at arriving, shortly, on what it considers the better decision in the interest of enhancing shareholder value. We will take into account all the facts available to management while also giving proper consideration to shareholder sentiment on the matter.
Happily, we remain in a position of financial strength. The importance of having adequate cash assets can not be over-stated. There are numerous examples of companies that do not have cash reserves and have been put into difficulty by the current financial climate. This is the key difference between ERHC and many companies of our size that have been adversely affected by recent trends in capital markets. There must therefore be no cavalier activity that might unwisely deplete our reserves and/or imperil our ability to realize the value our JDZ assets, our ‘crown jewels.’
I must state that this is not a time for talking – that time is long gone. This is a time for careful but decisive action in the interest of enhancing shareholder value. Our view of realization of value remains a long-term view that is based upon our highly prospective assets in the Gulf of Guinea. That view has not changed. We have factored in the possibility of shorter term value enhancements where those can be done without compromising the Gulf of Guinea assets in any way.
Nigeria Oil & Gas 2008
To show the Company’s commitment to the region, ERHC is once again sponsoring the Nigeria Oil & Gas 2009 Conference in Abuja, Nigeria. It will take place February 23rd through the 26th. We will exhibit at the conference, which is the best and most prestigious Oil and Gas Event for Nigerian and International companies and investors alike. It is a great way for ERHC representatives to connect with local and regional leaders and with other companies that are active in Nigerai’s the oil and gas industry.
And finally, just a quick word about our Annual General Meeting. Plans are underway to hold our meeting in Houston in April. Once all the details are confirmed, we will announce the date and location of the meeting.
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.
Conclusion
In conclusion, let me send this message on behalf of management to all shareholders and other stakeholders who have believed in this company for a long time. We know that you want action and want it quick. We shall deliver that action. To those shareholders who have expressed their concerns and frustrations, we hear you loud and clear. To those who ask whether ERHC will remains on course to realize its promise, we invite you to reflect on this Company’s remarkable resilience, its careful management strategy over the years and its unwavering commitment to ultimately achieving its goals. We have come a very long way and are nearer than we have ever been to realizing our promise. Thank you for taking time out to participate in our call today.
And now we would be happy to answer any questions you might have.
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