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Frequently Asked Questions
The following responses are intended to answer the questions currently being posed to the company. We will make every attempt to keep this FAQ section as up-to-date as possible, and appreciate your referencing this section of our website frequently for clarification of facts. Naturally, the content here will evolve as developments occur.
Q. Have the operators of JDZ Blocks 2, 3 and 4 committed to Exploration Phase II?
Not yet. In JDZ Block 2, the Joint Development Authority (JDA), which oversees the JDZ, has granted a one-year extenstion to Exploration Phase I to the contracting parties, led by our technical partner and operator Sinopec Corp. During the extension period, the contracting parties are expected to conduct further geological and geophysical studies on the Block. Further, they will assess exploration strategy and overall course of action regarding Exploration Phase II. Meanwhile, negotiations have commenced between the JDA and the contracting parties in JDZ Blocks 3 and 4, led by our technical partner and operator Addax Petroleum. The purpose of the negotiations between the contracting parties and JDA is to reach agreement on how to proceed with the exploration program.
Q. How long do you expect the negotiations to take?
Every negotiation is different and proceeds at its own pace. There is no way to predict with any degree of accuracy how long the process will take.
Q. What are the Company's plans for a 2011 Annual General Meeting (AGM)?
ERHC intends to hold its AGM of shareholders for 2011 later in the year. The Company will appropriately notify all shareholders of where and when the AGM will be held in accordance with the laws and regulations to which ERHC is subject.
Q. What are the Company's plans to list on the AIM?
ERHC Energy Inc. is continuing to pursue a listing on the AIM of the London Stock Exchange. The Company intends to also maintain its listing on the OTC. The AIM listing will have no impact on U.S. shareholders, other than providing the opportunity to buy and sell AIM-listed shares if they choose.
Q. What are the remaining obstacles to listing on the AIM?
The Company’s AIM listing is now contingent upon the completion of two major types of forensic analyses of the Company and reporting thereon by the Company’s advisers and independent experts. The first set of analyses is on the Company’s oil and gas assets. The second is on the Company’s corporate history, structure, governance and personnel. The reports of the analyses will form a fundamental part of the Company’s application to list on AIM. The analyses are underway.
The Company’s AIM listing is now contingent upon the completion of two major types of forensic analyses of the Company and reporting thereon by the Company’s advisers and independent experts. The first set of analyses is on the Company’s oil and gas assets. The second is on the Company’s corporate history, structure, governance and personnel. The reports of the analyses will form a fundamental part of the Company’s application to list on AIM. The analyses are underway.
Q. What is the timeline for listing on the AIM?
ERHC is not providing timeline guidance. The analyses have proven to be more complicated and are requiring a longer time than that of the usual listing applicant. When additional information regarding the AIM listing is available, the Company will notify shareholders through approved means.
Q. Why doesn't ERHC release an NSAI report?
The analyses we described earlier make up the Competent Persons Report (CPR) that is required for listing on the AIM. Netherland Sewall and Associates is among the Company's advisors compiling ERHC's CPR. As described above, the analyses are not complete so the CPR is not complete. When additional information regarding the AIM listing is available, the Company will notify shareholders through approved means.
Q. Is AIM a less-regulated market than the OTC BB?
The corporate governance regime on AIM is far more rigorous than the current corporate governance regime that the Company is statutorily obliged to implement. The corporate governance requirements for OTC BB companies are, by the nature of that trading platform, much less stringent than those required of companies on Exchanges such as NASDAQ, AMEX and the LSE. However, ERHC voluntarily adopted and implemented most of the corporate governance requirements of an Exchange-listed Company. As a result, ERHC is better placed than we would otherwise be to make the transition to a reputable international Exchange such as the AIM of the LSE.
Q. Why is ERHC planning to list on the AIM?
The primary reason is that we believe it will help ERHC achieve true value for its shares by attracting institutional investors and trading in the epicenter of the international finance community. We also expect that a listing on the AIM would attract the attention of reputable brokers – many of whom steer their clients away from OTC listed companies. There are three key reasons ERHC has determined that listing on the AIM will enhance shareholder value:
The corporate governance regime on AIM is far more rigorous than the current corporate governance regime that the Company is statutorily obliged to implement. The corporate governance requirements for OTC BB companies are, by the nature of that trading platform, much less stringent than those required of companies on Exchanges such as NASDAQ, AMEX and the LSE. However, ERHC voluntarily adopted and implemented most of the corporate governance requirements of an Exchange-listed Company. As a result, ERHC is better placed than we would otherwise be to make the transition to a reputable international Exchange such as the AIM of the LSE.
Q. Why is ERHC planning to list on the AIM?
The primary reason is that we believe it will help ERHC achieve true value for its shares by attracting institutional investors and trading in the epicenter of the international finance community. We also expect that a listing on the AIM would attract the attention of reputable brokers – many of whom steer their clients away from OTC listed companies. There are three key reasons ERHC has determined that listing on the AIM will enhance shareholder value:
- Institutional investors are able to invest in AIM-listed companies. All but a few institutional investors are prohibited from investing in OTCBB-listed companies.
- AIM is more familiar and comfortable with companies that are focused on the African oil and gas industry, which will help the company's shares more accurately reflect true value. ERHC is one of just two OTCBB companies listed on the OTCBB that are focused on Africa's oil and gas industry.
- It will help ERHC tap into additional capital markets to fund acquisitions that will help the company grow and accelerate the pace of producing revenues.
Why did ERHC decide to issue shares in 2010?
Companies -- from Fortune 500 to pink sheets to private companies -- raise money all the time by issuing equity to minimize costs. The SEC issued a Notice of Effectiveness of the Company's Shelf Registration in late-August, which authorizes the Company to raise up to $50 million for acquisitions. This is the first placement and ERHC anticipates there will be more.
Why not raise money through debt?
After careful analysis, ERHC determined that debt was not a suitable approach to raising funds at this time. Credit markets remain constrained, meaning debt would come at an exorbitant price for ERHC and could imperil the company's future.
How will the funds be used?
How will the funds be used?
ERHC is appraising several exciting opportunities that are expected to diversify the Company’s portfolio of oil and gas assets, give us bookable proven reserves and bring ERHC closer to revenue generation. Please refer to the company's video page for a discussion on this subject with Vice President - Corporate Development David Bovell. The funds raised will enable us to compete on some of the more time-sensitive opportunities that hold out a promise of enhancing shareholder value.
Why are acquisitions important for ERHC?
Acquisitions will diversify the Company's portfolio of assets, which can accelerate the pace of producing revenues and manage risk. By growing the Company through acquisitions, ERHC expects to establish a fair valuation for the benefit of all shareholders.
Won't more shares dilute the value of my holdings?
We are taking these steps to manage risk, accelerate the pace of revenue production and grow the Company, which we believe will enhance shareholder value. There will be more shares outstanding, but through strategic acquisitions we anticipate that the valuation of the Company will grow even more. While we can't predict future stock fluctuations, we would anticipate the growing the Company would reflect positively on the value of your holdings.
Q. What will the price of future offerings be?
The specifics of any future offering, along with the prices, terms and the use of proceeds of any securities offered by the Company, will be determined at the time of any offering and will be described in detail in a prospectus supplement filed with the SEC at the time of such offering.
Q. ERHC often says that it can't disclose drilling outcomes because of contractual and regulatory constraints. What are those constraints and where are they contained?
ERHC reported preliminary drilling results in April 2010 -- announcing that biogenic methane gas was discovered across all three JDZ Blocks. You can review Block-by-Block findings on the JDZ Operations page of this website. More detailed information is not yet available to enable definitive reporting on drilling outcomes and prospectivity of the Blocks in which the exploratory drilling campaign is being carried out. The requisite analyses that produce such information are currently going on to determine the nature and extent of hydrocarbons encountered.
The Joint Development Zone's Petroleum Legislation stipulates the Joint Development Authority's overriding authority regarding operational information submitted by the operator. Contractual obligations also bind the operators and consortium partners in each Block to comply with agreed operational procedures in the JDZ. ERHC is determined to release results in accordance with and as permitted by those regulations and obligations immediately when we have the results and the relevant authorizations.
The situation in the JDZ is the norm in oil and gas exploration. The requirement on management of information is woven into the fabric of the industry. It is the result of the fact that every exploration program has many players with an array of interests. Without strict controls on management of information, inaccurate information would be inevitable. Moreover, the general operating procedure and convention in the oil and gas industry is that definitive announcements on the nature and extent of any hydrocarbons encountered (and particularly on commerciality) are made after all analyses are complete. This procedure and convention has been adopted formally in the Joint Development Zone at the direction of the Joint Development Authority.
Why doesn't ERHC Energy disclose more information?
ERHC reported preliminary drilling results in April 2010 -- announcing that biogenic methane gas was discovered across all three JDZ Blocks. You can review Block-by-Block findings on the JDZ Operations page of this website. More detailed information is not yet available to enable definitive reporting on drilling outcomes and prospectivity of the Blocks in which the exploratory drilling campaign is being carried out. The requisite analyses that produce such information are currently going on to determine the nature and extent of hydrocarbons encountered.
The Joint Development Zone's Petroleum Legislation stipulates the Joint Development Authority's overriding authority regarding operational information submitted by the operator. Contractual obligations also bind the operators and consortium partners in each Block to comply with agreed operational procedures in the JDZ. ERHC is determined to release results in accordance with and as permitted by those regulations and obligations immediately when we have the results and the relevant authorizations.
The situation in the JDZ is the norm in oil and gas exploration. The requirement on management of information is woven into the fabric of the industry. It is the result of the fact that every exploration program has many players with an array of interests. Without strict controls on management of information, inaccurate information would be inevitable. Moreover, the general operating procedure and convention in the oil and gas industry is that definitive announcements on the nature and extent of any hydrocarbons encountered (and particularly on commerciality) are made after all analyses are complete. This procedure and convention has been adopted formally in the Joint Development Zone at the direction of the Joint Development Authority.
Why doesn't ERHC Energy disclose more information?
We have aggressively and proactively disclosed information on drilling progress that would not otherwise have been disclosed. We have done so out of our determination to keep our shareholders as informed as possible on drilling progress. A cursory search of independent news reports on the drilling campaign shows that they are mainly based on ERHC's press releases.
Q. One of the shareholder updates stated that the Company was planning to get the ERHC story out to the investment community. When can we expect that to happen?
Q. One of the shareholder updates stated that the Company was planning to get the ERHC story out to the investment community. When can we expect that to happen?
The Company continues to get its extraordinary story out to investment specialists and analysts. For instance, the Company recently participated in the Nigeria Oil and Gas Conference, the premier industry showcase event in the region, in February 2011.
Q. What is happening with the stock price?
It is impossible at any given time for the company to declare with certainty the trading activity that is affecting the company’s stock price. Investors are encouraged to seek guidance from investment professionals.
Q. When will investors learn of milestones in the company’s progress?
In keeping with full disclosure rules, the company will announce developments such that all interested parties will simultaneously have access to the information.
Q. Will the company comment on rumors?
No, the company does not comment on rumors and media reports but will provide timely, material information as well as provide periodic updates to the investment community.
It is impossible at any given time for the company to declare with certainty the trading activity that is affecting the company’s stock price. Investors are encouraged to seek guidance from investment professionals.
Q. When will investors learn of milestones in the company’s progress?
In keeping with full disclosure rules, the company will announce developments such that all interested parties will simultaneously have access to the information.
Q. Will the company comment on rumors?
No, the company does not comment on rumors and media reports but will provide timely, material information as well as provide periodic updates to the investment community.
Q. When did drilling occur?
Drilling of the Kina well in JDZ Block 4 and the Bomu-1 well in JDZ Block 2 began in August 2009. That was followed by the Lemba-1 well in JDZ Block 3, the Malanza-1 well in JDZ Block 4 and the Oki East well in JDZ Block 4. Addax Petroleum used the Deepwater Pathfinder drill ship in JDZ Blocks 3 and 4 while Sinopec Corp. used the Sedco-702 semi-submersible rig in JDZ Block 2. Exploratory drilling under Phase I commitments in JDZ Blocks 2, 3 and 4 was completed in advance of the required March 2010 deadline.
Q. What can you share regarding drilling progress?
First we would like thank our technical partners, Sinopec and Addax Petroleum for a job well done. Drilling wells in deep water, of over 5,000 feet is technically challenging, requires years of planning and a great deal of teamwork. So far the drilling has gone remarkably well. The wells are over 11,000 feet deep and take approximately 40 days to drill.
We have finished drilling five wells -- one each in JDZ Blocks 2 and 3, and three in JDZ Block 4. Each well targets several unique sands or potential hydrocarbon reservoirs. In our specific area there are approximately 10 sands that could have contained hydrocarbons. We expected some would contain producible hydrocarbons; and that some would fail. In our specific case, four of the five wells discovered gas.
The forward plan is to evaluate the well results, re-calibrate the seismic interpretation, and update the geologic model with the aim of calculating the volume of hydrocarbons in place. This process will take several months.
While the sub-surface team is doing their evaluation, the development group will study various development scenarios to determine commerciality. If studies indicate a commercial development, the joint venture will decide to drill further exploration wells or development if appropriate.
Q. How will you determine commerciality?
Commerciality is dependant upon many factors. Arguably the most important are volumes of hydrocarbons, price achieved for the hydrocarbons, cost of development and availability of infrastructure, fiscal regime, and timing to first sales.
Q. If oil and/or natural gas are discovered in commercial quantities, when would you expect the production of oil and/or gas?
Due to the depth of the Joint Development Zone (JDZ) Blocks after the first year of exploration drilling an appraisal well in each block would be drilled in the following year, with a possible second well. Two further wells would be drilled in the third year. Actual commercial production would not be expected until 2015 or later.
Q. If oil is discovered, how do you plan to transport it? Would you use Floating Production Storage and Offloading (FPSO) vessels or are you going to pipe the oil to an onshore terminal?
Due to the depth of the JDZ Blocks, an FPSO is likely to be the most economical approach to conduct production operations. For more on FPSOs, click here.
Q. Are you only exploring for oil or is there also the possibility of discovering natural gas as well? If so, do your rights entitle you to the gas?
Drilling in 2009 discovered gas in JDZ Blocks 2, 3 and 4. ERHC's rights do extend to gas as well as to oil.
Q. Is ERHC Energy truly a U.S. energy investment company or a face for another foreign company?
ERHC Energy is a Houston-based publicly-traded, energy investment company with the goal of exploring numerous opportunities in West Africa. ERHC Energy and its shareholders have the benefit of being invested in a regulated US company that has extensive relationships in the region, which is a unique position among peer companies seeking to do business in the region and attract foreign investment to their cause.
Our company is managed by employees and consultants to the company whose shared mission is to return value to all our shareholders. Though a significant portion of our stock has been held by a Nigerian controlled company, the majority of our ownership is in the hands of other investors.
Q. Is the company’s plan to position itself for a buy-out?
The Company's intention is to become a recognized and respected member of the international oil and gas community, specifically with interest in developing our business in West Africa. That said, the board will pursue those opportunties -- including but not limited to potential merger and acquisition opportunities -- that it determines are in the best interests of the shareholders.
Q. Should I respond if contacted by Equisearch?
ERHC Energy's stock transfer agent, Corporate Stock Transfer, uses Equisearch to reconnect with shareholders whose addresses or other information have become outdated. As is the case with any organization that contacts you seeking personal information, we recommend proceeding with caution and confirming that the person contacting you works for Equisearch before providing any information. As always, never give your social security number or credit card information.
Cautionary Statement
This page contains statements concerning 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, 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 Economic Zone 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. 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.