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).
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).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.
2010 – EEZ Block Awards
In February 2010, the National Petroleum Agency of São Tomé & Príncipe (ANP-STP) on behalf of the Government of São Tomé and Principe confirmed the award to ERHC of 100 percent working interests in Blocks 4 and 11 of the São Tomé & Príncipe Exclusive Economic Zone (EEZ).
2011 – Chad Oil Block Awards
In June 2011, the government of Chad formally awarded the company Block BDS 2008 for exploration and development. A Production Sharing Contract was signed in July 2011. ERHC has 100 percent of the interest in BDS 2008.
2012 - Kenya Oil Block Award
In July 2012, ERHC announced that it had signed a Production Sharing Contract with the government of Kenya on Block 11A in northwest Kenya. The Block encompasses 11,950.06 square kilometers or 2.95 million acres and is in the vicinity of Block 10BB in which significant oil discoveries have recently been announced.
2013-2015 - Exploration Progress
In 2013, ERHC commenced an airborn Full-Tensor Gravity survey in Kenya Block 11A, completed an Environmenal Impact Assessment in Chad Block BDS 2008 and completed PSC negotiations with the ANP-STP for its interests in Blocks 4 and 11 of the Exclusive Economic Zone.
In February 2014, ERHC completed a farm-out agreement with CEPSA (Compañía Española de Petróleos, S.A.U.), an international integrated oil and gas company. CEPSA acquired a 55 percent stake in Block 11A and assumed operatorship of the Block in exchange for certain considerations. ERHC retained a 35 percent interest in Block 11A.
In April 2015 ERHC announced that a major 2D seismic acquisition program, paired with the structural mapping of prospective basins from a Full Tensor Gravity Gradiometry (FTG) survey completed earlier in 2014, helped to identify the Tarach-1 prospect as the drilling location for the first exploration well. The Tarach-1 prospect is situated in the central part of the basin. It is a three-way structural closure trapping against a North - South trending normal fault. The mean estimate of oil prospective resources for the prospect is 65 million barrels. The exploratory well is expected to spud in March 2016.
In October 2015, ERHC and the ANP-STP announced an agreement in principle to terms of a PSC for Block 4 of the São Tomé and Principe EEZ. ERHC also agreed to transfer all ERHC's rights to EEZ Block 11 to Kosmos Energy.
Cautionary Note to U.S. Investors - The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms on this Web site, such as "recoverable reserves potential," that the SEC's guidelines generally prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 10-K. You may review our filing with the SEC at the following Web site: www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000799235.