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.   Which shareholders are entitled to vote at the Annual Meeting?

You are entitled to vote your shares and attend the Annual Meeting, only if you were an ERHC “shareholder of record” or joint shareholder of record at the close of business on March 26 , 2012 (the “Record Date”). As of the Record Date (March 26, 2012), there were 738,933,854 shares of common stock ($0.0001 par value) of the Company (“Common Stock”) outstanding and entitled to vote. Each share of Common Stock is entitled to one vote on each matter properly brought before the Annual Meeting. No other class of securities is entitled to vote at the Annual Meeting. ONLY “SHAREHOLDERS OF RECORD” WILL BE ALLOWED TO VOTE AT THE ANNUAL MEETING.

What do I need to present to attend the Annual Meeting?

You will need to present photo identification to enter the Annual Meeting. If you are a “shareholder of record,” your name will be verified against the list of shareholders of record on the Record Date prior to your admission to the Annual Meeting. If your shares are held beneficially in the name of a bank, broker or other holder of record (“beneficial owner”) and you plan to attend the Annual Meeting, you must also present proof of your ownership of ERHC Common Stock, as of March 26, 2012, such as a bank or brokerage account statement, to be admitted to the Annual Meeting. If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting. If you have any questions about attending the Annual Meeting, you may contact our Corporate Secretary at 713-626-4700.

Q.   What is the difference between holding shares as a shareholder on the Record Date (a “shareholder of record”) and being a “beneficial owner”?

If your shares of Common Stock are registered directly in your name with ERHC’s transfer agent, Corporate Stock Transfer, you are considered the “shareholder of record” of those shares. The Notice, Proxy Statement and proxy card have been sent directly to you by ERHC, or in some cases, by Broadridge Financial Solutions, Inc.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of such shares held in street name. While you are invited to attend the Annual Meeting, as a “beneficial owner” you may not directly vote the shares held by you at the meeting.

Q.   How can I vote my shares in person at the Annual Meeting?

You may vote in person, if you are the “shareholder of record,” at the Annual Meeting by completing a ballot; however, attending the Annual Meeting without completing a ballot will not count as a vote. You may also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. Even if you plan to attend the Annual Meeting, we recommend that you also vote by proxy, as described below, so that your vote will be counted if you later decide not to attend the Annual Meeting.

Q.   How can I vote my shares without attending the Annual Meeting?

If you, as “shareholder of record,” (or your broker, trustee or other nominee in the case of shares held through a broker, trustee or other nominee) submit a properly completed proxy, your shares will be voted as you (or they) direct. However, if you (or they, as the case may be) submit a proxy and do not specify how to vote, we will vote your shares: (1) “FOR” the election of the nominees for Director as identified on Proposal No.1; (2) “FOR” the ratification of the Audit Committee’s appointment of MaloneBailey, LLP as the Company’s independent public registered accountants for the fiscal year ending September 30, 2012 and (3) in our discretion as to other business that is properly brought before the Annual Meeting or any adjournment or postponement of the Annual Meeting.

If you are the “shareholder of record,” you may vote your shares for the Annual Meeting scheduled for Thursday, April 26, 2012 by one of the following means.

• By Mail. Complete, sign and date the proxy card you received and return it in the prepaid envelope. If the prepaid envelope is missing, please mail your completed proxy card to the Company’s stock transfer agent – Corporate Stock Transfer at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. All mailed proxies must be received by the Company’s stock transfer agent, on or before 5:00 p.m. (CST) on Wednesday, April 25, 2012. If you do not indicate your voting preferences, your shares will be voted as recommended by the Board of Directors.

• Online. By following the instructions on the proxy card. All online votes must be received by the Company’s transfer agent on or before 5:00 p.m. (CST) on Wednesday, April 25, 2012.

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.

Q.   Our current rate of spending seems high for a company that does no drilling on its own and has few employees.  How do you plan to stay afloat three years from now?  

ERHC operates extremely efficiently in a capital intensive business with minimal internal staff. An E&P business is inherently expensive to operate, particularly when you are a U.S. public company that has to comply with a vast array of regulatory requirements. What other U.S. public oil and gas company that has international operations and the scale of assets as does ERHC has as streamlined a business model as ERHC does? We do have expenses – $4 to $5 million annually. We are an international business and our operations require activities on a global scale. We discussed our plan for raising funds during our year-end conference call in December. Plan A is to monetize a portion of our oil and gas assets in Chad and the EEZ to raise funds, which you may remember is how we raised funds back in 2006. 

Q.   How will the company’s cashflow needs be met with dwindling cash on balance sheet and no apparent revenue source? 

The current cash on the balance sheet resulted from two sources. The first and primary source was the monetization of the JDZ assets and the second was the equity raise in 2010. Both modes of raising revenue are still available. Our main plan is to monetize a portion of our assets in Chad and the EEZ to raise more cash.

Q.   In Chad and the EEZ, does ERHC expect to receive sizable cash compensation along with full carry in operator contracts (somewhat akin to the JDZ)?

The agreements that were struck in the JDZ are the model. We intend to raise funds by monetizing a portion of these assets. Whether we will be able to have our exploration costs carried until first oil as is the case in the JDZ will have to be seen. That was an unusual arrangement, but it has provided significant protections for the Company.

Q.   How can we pay for Chad without putting the company in serious financial risk? 

The plan is to bring a partner onboard that will provide a cash infusion and help to defray exploration costs. But the costs of onshore exploration and development will be a fraction of the costs of our deepwater exploration to date.

Q.   Does ERHC have interested companies looking at our assets?

Q.   In Chad, what time frame to get seismic results?

We discussed this during our year-end conference call in December. Our Nominated Advisor recommended that several public relations’ and international image challenges of various ERHC affiliates be addressed in order to make our listing application more likely to be accepted at the first time of asking. We took that advice and have, partly in the interest of cost efficiency, discontinued pursuing the AIM listing until these matters can be addressed. This is not something directly connected to ERHC. It involves companies affiliated with ERHC and those companies are, strictly of their own volition and at their own cost, cooperating in the addressing of those challenges.

Q.   Are we still pursuing AIM or is this a dead issue?

 The AIM listing has been suspended while our affiliates actuate the public relations’ efforts needed to make our listing more likely to succeed at the first time of asking.

In May 2011 we explained that we were pursuing the acquisition of an ownership position in an E&P company that holds interests in valuable concessions within ERHC’s geographical areas of focus. The goal was to acquire a big enough stake to give us the ability to participate in decision-making and possibly foment partnerships that are value-enhancing to both our shareholders and their shareholders. As we stated in the year-end conference call we did not purchase the Exile shares to realize a capital gain – it was part of an acquisition strategy of a company we considered quite undervalued by the market considering its underlying assets. The wisdom of our strategy was of course demonstrated, in a pyrrhic way from  our standpoint, by a company with bigger resources preempting us on it. We have been encouraged by what Exile/Oando are setting out to achieve and believe that our investment could prove to be a good one, albeit not in the manner we intended. ERHC continues to hold a stake in Exile and, once the regulatory approvals are secured and the deal is completed, ERHC plans to participate as a proactive and supportive shareholder in the new company’s first meeting of shareholders.

Q.   As shareprice is the ultimate judge and jury on how well management is performing, what is your own assessment of your performance?  

This investment, like other early stage E&P companies, is not a short-term investment.  We are here for the long haul and make no other promises save that we will continue to do our very best to run an efficient and ultimately profitable or value enhancing oil and gas company.

An early stage exploration company with exploration assets is a unique thing. Its valuation is ultimately dependent on something it has no control over – the situation of oil and gas in the ground. Until the day the technology is developed that indicates before drilling whether there is oil for sure in the ground, companies like us are always vulnerable to the lottery of oil and gas not being present, despite all the best pre-drill permutations. ERHC has performed well – we have had our assets drilled in a frontier, deep-offshore territory by world-class partners on a complete carry over five wells and the expenditure of $300 million.

The company staked its bets, as most shareholders wanted, on finding oil in the JDZ. Ultimately, no oil has been found and the market seems to have reacted naturally. We have recently doubled the size of our portfolio with the addition of new highly prospective assets and we will work hard again to try to find oil in those and other assets we might be on the verge of adding. We have done this while attending to the one of the most comprehensive investigatory processes that government can foment over a small company like ours. All the while, through everything, we have kept reducing operating costs by adopting ever more inventive and innovative ways of carrying out unavoidable processes. 

Q.   What can you share regarding drilling in the Joint Development Zone?

Five wells were drilled -- 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. If studies indicate a commercial development, the joint venture will decide to drill further exploration wells or development if appropriate.

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.

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.   Has any JV partner in JDZ Blocks 2, 3 and 4 done any log analyzing besides SNP?  Has ERHC done any analyzing?  Is SNP our sole source of info for results of Phase I?

 Analysis of the results is a collegiate process rather than one by the operators unilaterally. The operator does take the lead since it is the part in charge of expenditure but all the contracting parties are part of the management committee, the technical committee, the financial committee and the operating committee that run the operation. These committees meet regularly and review results and progress thus far. Several rounds of meetings are taking place this month. The JDA of course oversees all this particularly at MACOM level and also analyzes results. Indeed, by the PSC, as is conventional, all data produced during the exploration period ultimately belongs to and must be turned over to the JDA.  

Q.   What “controlling elements” have been analyzed for 2 years if only biogenic gas was found and in what blocks were such elements found?

 The term “controlling elements” does not refer to oil, but to the hydrocarbon system that was encountered – the biogenic gas. The operators have spent $300 million but no oil has been found. The evaluation has had several aspects. The first is to analyze the findings and carry out modeling for exploitation of biogenic gas uses a correlation from other provinces in the world where biogenic gas has been commercially exploited. The second is to evaluate the other prospects based on the subsurface findings from the drilling already conducted. Drilled wells provided several bases for important correlations that will inform any future drilling. The third of course is more an internal commercial decision than a technical one – simply, do the findings justify a subjective decision on the part of the operators (who are funding the operation) to spend more or to apply their resources to other regions/fields within their portfolio?  

Q.   Are drilled prospects in Phase I considered a total waste or could they again be drilled at a later date?

 As described during the year-end conference call in December, it is highly unlikely that an operator would choose to re-enter any of the five wells drilled to date. They did not discover oil in those wells. However, the wells provide a plethora of useful data and information about the stratigraphy, sedimentology and structuralism of the JDZ that will facilitate any further drilling. 

Q.   Have the operators of JDZ Blocks 2, 3 and 4 committed to Exploration Phase II?

 Not yet. In JDZ Blocks 2, 3 and 4, 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 partners Sinopec Corp. (in block 2) and Addax Petroleum (in blocks 3 and 4). During the extension period, the contracting parties have been conducting further geological and geophysical studies on the Blocks. Further, they have been assessing exploration strategy and overall course of action regarding Exploration Phase II.

Q.   How is it possible that the Kina well in JDZ Block 4 went from a ‘company maker’ to a non-commercial gas find? How does the company explain such a large difference between initial expectations and reality? 

The 2-D and 3-D seismic of all five prospects that were drilled in 2009 and 2010 had everyone very enthusiastic. But everyone knowledgeable about oil and gas exploration understands that pre-drill is not an assurance of finding oil. The only certainty in oil and gas exploration comes with drilling and our drilling found only biogenic gas. 

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.  What is the status of blocks 5 & 6 in the JDZ?

As indicated in the various quarterly and annual filings from ERHC in recent years, the Company’s rights in JDZ Blocks 5 and 6 are in arbitration. We have worked in recent years to improve our relations with Sao Tome government in hopes of resolving issues related to those rights – and the advances we’ve been able to make in the EEZ illustrate those positive relations. The JDA recently announced the signing of a PSC with the other parties in JDZ Block 5 and it is our understanding that  15 percent interest accruing to ERHC in that Block remain intact pending resolution of the arbitration.

Q.   Why did the operator decide to drill three wells in JDZ Block 4, while the other wells didn’t give any positive indication of oil being present?  

 There was a contractual commitment under the PSC to drill three wells during the first Exploration Phase in Block 4. This was part of the basis on which the operatorship of the Block was won in the first place and the commitment was predicated on the existing seismic at the time the bids were made.

The wells in Block 4 targeted different prospects. That wells into the first two prospects did not find oil did not necessarily mean that the last one would not find oil. Further seismic work and interpretation informed the three best prospects which were chosen for drilling.  

Remember too that the expense of three wells (nearly $200 million) has been borne solely by the operators, at least for the time being and the entire risk of failure (and loss of expenditure) if no oil is found is theirs.   

Q.   Is ERHE presently negotiating for revenue producing properties and do you expect those negotiations to be completed in 2012?  

 We have always been negotiating for revenue-producing properties. However, entry into such properties does not come cheap as a hefty premium will be paid for production. In 2012, our concentration is on securing more awards from government, which we then intend to monetize to an extent that might enable us the leverage to realistically bid for immediate revenue-producing properties.  

Q.   Is it the company's plan to pay for annual operating expenses with the revenue from revenue producing properties once they are acquired?

As is the case with any oil and gas company, the idea is to have revenues from producing assets cover expenses. It is not likely to be a short-term solution, which is why our plan is to monetize a portion of our EEZ and Chad assets to raise funds. 

Q.   Why doesn’t the Company do something about the misinformation and possible libel posted that deters new investors, instills doubt on investors adding stock at this low price?

There is a lot of inaccurate information online about ERHC and it can be frustrating. We have expressed our concerns to the owners and management of various online forums. Unfortunately, companies and their executives do not have the same protections from libel that others have. Ultimately, it could be a distraction; ERHC’s resources are already stretched we’ve had to make a choice between concentrating on the challenges of creating shareholder value or being distracted by the slander and libel, often in the most extreme, by persons whose motives must be called into question so we have not spent a great deal of time on it. What we have done is implored the shareholder community to rely on information from ERHC to be accurate. Information about ERHC from other sources often is not accurate.

Q.   Where does ERHC stand with the IMO State MOU? 

Last October we announced the signing of a Letter of Intent with the Imo State Government to pursue marginal field development together. Since then the Imo State Government has been taking the lead in the negotiation of awards of the marginal fields from the Federal Government of Nigeria, which is more complicated than it sounds. To date there are no further agreements in place, but the work continues and we will keep shareholders apprised in the event agreement is reached. 

Q.   Is the Chief Steve Aheneku the same man that worked for ERHC in the past?

Yes, Chief Steve Aheneku was a legal advisor for ERHC for many years before he took up his government appointment.

A Letter of Intent is in place to pursue marginal field development with the IMO State Government. So far, the Imo State Government has been taking the lead in the negotiation of awards of the marginal fields from the Federal Government of Nigeria. When an agreement is reached, we will update shareholders. 

Q.   What type of funding can we now do that won’t drastically dilute current stockholder value?

Our first option would be to raise funds by monetizing a portion of our assets in Chad and the EEZ. 

Q.   Is funding already set up for the Chad requirement of $5MM or is it still being set up?

The funding is not set up. We are seeking farm-in partners that would pay for a portion of our assets and carry at least a portion of our costs.

Q.   Is ERHC's MOU with IMO State still valid? If so, what type of role does ERHC play in the matter, and how would funds be earned by ERHC?

Our Letter of Intent with IMO State is still active. Once the Imo State Government completes negotiation of awards of the marginal fields from the Federal Government of Nigeria, ERHC will contribute technical, operational and financial assistance to the partnership. 

Q.   What type of work are the new technical consultants doing?

We are privileged, for a small company, to have the quality of technical consultants that we have. Our consultants are helping evaluate future block acquisitions; Messrs. Shafie and Seymour were part of the team that negotiated Chad. Dr. Seymour has been part of the team negotiating the EEZ PSC – apart from his specialist technical knowledge and experience, his Portuguese fluency and his acquaintance with the cultures of Lusophone Africa comes in very handy. Dr. Seymour has also been heavily involved in our evaluating opportunities in other parts of Lusophone Africa including Angola. He has also evaluated assets including marginal fields in Nigeria, where he has lived and worked extensively, and been part of the team on the Imo project. Mr. Shafie is based in Houston and co-ordinates technical matters including evaluation of prospects from here.  He is currently heavily involved in designing the work program for Chad and has been technical lead on several of the ERHC delegations into the African countries in which we have applications for new concessions. Dr. Thuo is involved in the technical aspects of our business development in Eastern and Central Africa. 

It is important to realize that as we grow as a company and make the transition from passive interest holder to active operator, our retained technical team will necessarily grow. Apart from the inherent necessity for technical services, evaluations of bids for new concessions from Government place a premium on the quality of technical specialists available to the Company.    

Q.   Recent disclosures show that management and the board have been awarded options that have requirements for a considerable increase in share price in order to be effective. Why did you set the price so high? 

ERHC can make no promises or speculate about what ERHC's share price will do or what shareholders' expectations should be. That said, the Board made the decision partly on the basis that while improved levels of compensation were needed to attract marquee Board members, as would be required on an expanded Board in the event of a successful listing on an international exchange, it was necessary, given the company's available resources, to structure the compensation in such a way that shareholder's interests and the Board's were aligned. While we do not comment on share price, we do not necessarily think from experience with ERHC's market valuation in past years that oil necessarily has to be found for the market valuation to fluctuate. It is not unique to ERHC that excitement about future exploration can sometimes reflect positively on the market’s valuation of a company with oil and gas assets, and ERHC has such assets in the Republic of Chad, the EEZ and JDZ. The Board and management of ERHC remain committed to doing all they can to enhance shareholder value despite all the challenges faced by emerging E&P companies such as ERHC.  

Q.   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. 

Q.   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. 

Q.   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. 

Q.   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.   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.

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.

Cautionary Statement