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Saturday, December 3, 2022

Todays Stock Focus is ERHC Energy Inc. (OTCMKTS:ERHE)

ERHC Energy Inc. (OTCMKTS:ERHE) continues to wallow away in sub penny land after recently drifting into oblivion. The stock has a history of big moves at much higher prices running from $0.30 to $1 in 2006.

ERHE moved steadily lower in recent months 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.

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.

On October 20 ERHE announced it has reached an agreement with Kosmos Energy KOS, +1.34% a leading independent oil and gas exploration and production company focused on frontier and emerging areas to transfer all ERHC’s rights to Block 11 of the Sao Tome and Principe Exclusive Economic Zone (EEZ) to Kosmos. The agreement has been approved by the National Petroleum Agency of Sao Tome & Principe (“ANP-STP”) as required in the requisite Production Sharing Contract (“PSC”) for EEZ Block 11.

CEO Peter Ntephe said “Given the difficult global environment for doing deals, particularly for deep-offshore assets in frontier areas, we are very pleased to have concluded the agreement with Kosmos. The agreement enables us to immediately monetize one of our offshore holdings while preserving a financial upside in the event that exploration in Block 11 is successful.”

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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

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