ERHC Energy Inc. (OTCMKTS:ERHE) continues to move lower in recent weeks. ERHE has a long history of big moves at much higher prices running from $0.30 to $1 in 2006 and $0.10 to $0.90 in 2009.
Since those days ERHE moved steadily lower as oil prices collapsed hitting their lowest level in 5 years and debt holders cashed in their chips resulting in massive blocks of newly printed ERHE shares hitting the market.
ERHC Energy Inc. (OTCMKTS:ERHE) is an independent oil and gas Company out of Houston that is focused on developing oil and gas fields in Africa. ERHC currently holds a 100 percent interest in Block BDS-2008 in Southern Chad and a carried 35 percent interest in Block 11A in Northwestern Kenya. The Company also has offshore interests in the São Tomé and Príncipe Exclusive Economic Zone (EEZ) and the Nigeria – São Tomé and Príncipe Joint Development Zone (JDZ).
The Company was incorporated in 1986 as Environmental Remediation Holding Corp. under the laws of Colorado. In February 2005 the Company changed their name to ERHC Energy Inc.
Back in June 2012 ERHE signed a Production Sharing Contract (PSC) on Block 11A with the Government of Kenya. By virtue of the PSC (an agreement that governs the relationship between ERHC, any future JV partners and the Government of Kenya) the Company initially acquired a 90% interest in Block 11A, which encompasses 11,950.06 square kilometers or 2.95 million square acres. The Government of Kenya has a 10% carried participating interest up to the declaration of commerciality and may thereafter acquire an additional 10% interest in the PSC in which case the total Government participation would rise to 20%.
In October, 2013, ERHC entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., which was approved by the Government of the Republic of Kenya during the quarter ended March 31, 2014. Under terms of the agreement, ERHC transferred majority of its interest in Kenya Block 11A as well as operatorship to CEPSA. The farm-out agreement includes a carry and other considerations.
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During the quarter ended March 31, 2014, the Company received the arrêté (decree) of the President of Chad giving presidential seal of approval to the Company’s request to obtain oil exploration Block BDS 2008 and its voluntary relinquishment of the Manga and Chari-Ouest III Blocks.
In December ERHE announced an important update to shareholders some of which I have included here: ‘’We have made remarkable progress in Kenya with our exploration program in Block 11A. With our operating partner, CEPSA Kenya Limited (a wholly owned affiliate of Compañía Española de Petróleos, S.A.U. (CEPSA)), we are poised to proceed directly to drilling within the next 12 to 16 months, following the successful conclusion of our seismic survey on the Block this summer. Drilling will be contingent upon several conditions precedent, but the partners are pursuing the plans with the requisite zeal.
In Chad, the successful completion of aero-magnetic/gravity studies has deepened geological understanding of our Chad Block BDS 2008 and enhanced our assessment of the prospectivity of already identified leads. A seismic study based on the results of the aero-magnetic/gravity studies is the next step and will complete our work program obligations for the first phase of the exploration program. We expect that the survey will enable an upward adjustment of the technical team’s prior estimate of up to 200 million barrels.’’
ERHC Energy strategy in Kenya and Chad is to perform exploration work and further establish the prospectivity of assets acquired through Production Sharing Contracts (PSCs) with the governments of both countries. ERHC has contracted a farm-out partner for its interests in Kenya, and is currently seeking for partners for its interests in Chad. ERHC expects that such farm-in arrangements, if entered into, might lower the risk and cost of the exploration programs to ERHC.
The Company’s strategy in the JDZ and EEZ is to farm out its working interests to well established oil and gas operators for valuable consideration including upfront cash payments and being carried for ERHC’s share of the exploration costs. This has already been done successfully on Blocks 2, 3 and 4 of the JDZ where ERHC has benefited from partnerships with Addax Petroleum and Sinopec Corporation, which have operated some of the license areas on behalf of ERHC.
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ERHE continues to fall in recent days down lower into sub penny land. Back at the end of December the stock popped off its $0.007 low’s to highs near $0.04 but it has been dropping steadily since then. One of the Company’s biggest asset remains its loyal shareholder base that still cares what they are doing even though the stock has done nothing but disappoint in recent months. We will be updating on ERHE when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with ERHE.
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Disclosure: we hold no position in ERHE either long or short and we have not been compensated for this article