Facts About ERHC

Rights in the Republic of Chad

ERHC has interests in three oil blocks – Block BDS 2008, Manga and Chari-Ouest Block 3 – in the Republic of Chad. The government of Chad formally awarded the company the three oil blocks for exploration and development in June 2011, following several months of negotiation.

Production Sharing Contracts were signed in July 2011. ERHC has 100 percent of the interest in BDS 2008 and Manga. The Company has a 50 percent interest in Chari-Ouest Block 3. BDS 2008 and Chari-Ouest Block 3 lie next to the Doba Basin oilfield, which in 2010 had an average daily production of 122,500 barrels of crude oil per day. The Manga block is north of Lake Chad, along the border with Niger. 

The West African nation of Chad is one of sub-Saharan Africa’s significant crude oil producers. It share borders with Nigeria, Cameroun and Sudan, which all produce oil as well. According to the World Fact Book, a consortium led by two U.S. companies has been investing $3.7 billion to develop oil reserves - estimated at 1 billion barrels - in southern Chad. 

Rights in the São Tomé & Principe Exclusive Economic Zone

In February 2010, the National Petroleum Agency of São Tomé & Príncipe (ANP-STP) on behalf of the Government of São Tomé and Principe has confirmed the award to ERHC of 100 percent working interests in Blocks 4 and 11 of the São Tomé & Príncipe Exclusive Economic Zone (EEZ). The confirmation follows ERHC’s exercise of rights arising from prior agreements between ERHC and São Tomé & Príncipe. 

The ANP-STP indicated that it expects to commence negotiations of Production Sharing Contracts (PSCs) on the two Blocks during the fourth quarter of 2011.

The São Tomé & Príncipe EEZ encompasses an area of approximately 160,000 square kilometers south and east of the Nigeria/São Tomé & Príncipe Joint Development Zone and surrounding the volcanic islands of Príncipe and São Tomé. Block 4 is situated directly east of the island of Principe. Block 11 is directly east of the island of Sao Tome. 

Rights in the Joint Development Zone

The JDZ was established during the spring of 2001 to govern the disputed boundary area between Sao Tome and Principe and Nigeria for commercial exploitation. The JDZ is administered by a Joint Development Authority (JDA) which oversees all future exploration and development activities in the JDZ.

In June 2005, ERHC accepted awards by the JDA for Blocks 2, 3, 4, 5 and 6. The awards were subject to the execution of a mutually acceptable production sharing contract and joint operating agreement for each Block.

The foundation for those awards was established in April 2003, when ERHC and the Democratic Republic of Sao Tome & Principe entered into an Option Agreement in which ERHC relinquished certain financial interests in the JDZ in exchange for exploration rights in the same area.  The rest of the claimed territorial waters of Sao Tome and Principe is known as the Exclusive Economic Zone (EEZ).

Plans for Exploratory Drilling

ERHC Energy works closely with its technical partners Addax Petroleum and Sinopec Corp. on matters related to exploratory drilling. In 2009, Addax Petroleum and Sinopec commenced a comprehensive exploratory drilling campaign ecompassing five wells stretching across three Blocks of the Joint Development Zone. Analysis of the geologic data gathered during the campaign is continuing and will guide future decisions regarding further exploration in the area.

Business Operations   

Peter Ntephe, the chief operating officer of the company, currently serves as ERHC’s acting president and CEO.
ERHC Energy management includes three corporate officers and support staff. 
The company’s corporate offices are located in Houston, Texas.
Chrome Energy, LLC and its subsidiary, Chrome Oil Services, own a total of 42 percent of ERHC shares.
ERHC Energy terminated its management services agreement with Chrome Oil Services, Ltd. effective December 31, 2004.
As of January 1, 2005, ERHC assumed direct responsibility for costs and expenses of its officers and staff, and the lease obligation of its office space.
ERHC Energy’s current focus is to exploit its assets in the JDZ between the São Tomé & Principe and Nigeria, and in the São Tomé EEZ, and to pursue other upstream oil and gasopportunities in West Africa.

Nigeria-São Tomé and Principe Joint Development Authority (JDA)  

• The Nigeria-São Tomé and Príncipe Joint Development Authority (JDA), manages the development of oil and gas resources in the waters between the countries.
• In April 2003, ERHC entered into an administration agreement with the JDA that fully implemented the company’s preferential rights to interests in its JDZ acreage.
• ERHC Energy had previously exercised its option rights in all five Blocks on offer in the 2004 JDZ Licensing Round, and in December 2004 submitted bids for Blocks 2, 3, and 4 as a consortium member.
• In May 2005, the Nigeria-São Tomé and Príncipe JDA awarded five blocks on offer in the 2004 JDZ Licensing Round. This and subsequent decisions by the JDA led to the following results:
  • In Block 2, the ERHC/Sinopec/Addax consortium was awarded 65 percent interest, which is inclusive of ERHC's 30 percent signature bonus free interest. The consortium was designated operator for Block 2.
  • In Block 3, the ERHC/Addax consortium was awarded 25 percent interest, which is inclusive of ERHC's 20 percent signature bonus free interest.
  • In Block 4, the ERHC/Addax consortium was awarded 60 percent interest (Addax has since acquired an additional five percent interest), which is inclusive of ERHC's 25 percent 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's 15 percent interest in each of these Blocks.
• ERHC's interest in Block 6 is free of signature bonus.  

Participation Agreements/Partnerships

ERHC Energy has entered into relationships with other oil and gas companies that have the technical and financial resources to work in deep water. These strategic relationships are designed to assist ERHC in realizing the full value of its assets in the JDZ.

JDZ Block 2 - ERHC has a participation agreement with Sinopec International Petroleum Exploration and Production Corporation Nigeria, and Addax Energy Nigeria Limited

JDZ Block 3 - ERHC has a participation agreement with Addax Petroleum Resources Nigeria Limited.

• Addax received a 15 percent participating interest in Block 3 of the JDZ, leaving ERHC a 10 percent participating interest in Block 3. 
• Under the agreement, Addax will pay all of ERHC's future costs in respect of all petroleum operations in Block 3.
• ERHC has agreed to pay Addax up to 100 percent of the allocation of cost oil plus up to 50 percent of the allocation of profit oil until all carried costs are recovered, subject to certain conditions.
• Addax Petroleum drilled the Lemba-1 well in October/November 2009.

JDZ Block 4 - ERHC has a participation agreement with Addax Petroleum (Nigeria Offshore 2) Limited.

• Addax received a 40.5 percent participating interest in Block 4 (Addax has since acquired an additional five percent interest), leaving a 19.5 percent participating interest in Block 4 to ERHC.
Under the participation agreement, ERHC will support Addax as operator, and Addax will pay all of ERHC's future costs in respect of all petroleum operations in Block 4.
ERHC has agreed to pay Addax up to 100 percent of the allocation of cost oil plus up to 50 percent of the allocation of profit oil until all carried costs are recovered, subject to certain conditions. 
Exploratory drilling of the Kina well commenced in August 2009, followed by the Malanza-1 well in November and Oki East well in December.

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 here.