Republic of Kenya Block 11A

ERHC Kenya Acreage

In June 2012, the Company announced that it had signed a Production Sharing Contract (PSC) on Block 11A with the Government of Kenya. A PSC is an agreement that governs the relationship between ERHC (and any future joint-venture partners) and the Government of Kenya in respect of exploration and production in the Block awarded to the Company. The PSC details, among other things, the work commitments (including acquisition of data, drilling of wells, social projects, etc.), the time frame for completion of the work commitments, production sharing between the parties and the Government, and how the costs of exploration, development and production will be recovered

By virtue of the PSC, 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%.

Circle Oil Limited (www.circleoilandgas.com) (“Circle”) acted as finder in ERHC’s acquisition of the Block by facilitating ERHC’s entry into Kenya, including the introduction of Dr. Peter Thuo, ERHC’s Kenya-based geoscientist and technical adviser who provided liaison services in the pursuit of ERHC’s application. Circle’s involvement provided significant efficiencies, including substantial cost savings, in ERHC’s application process. By virtue of the terms of the business finder’s agreement reached between Circle and ERHC, Circle is entitled to receive a 5% payment on the value of the acquisition accruing to ERHC from the application. Circle has opted to receive this fee in the form of a carried 5% of ERHC’s total interest in Block 11A.

In October, 2013, ERHC entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., an international oil and gas company ("CEPSA"). The farm-out agreement 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. 

Kenya Operations Update

As of September 30, 2015, the exploration team is making steady progress toward drilling during the current phase of exploration. 2D seismic mapping has been completed. To date, two basins, Tarach and Anam, in the eastern and western parts of the block respectively, have been identified. 12 drillable prospects have been mapped in the Tarach Basin alone. Volumetric calculations and risk analyses have been completed leading to a total mean resource estimate of 662 MMBO. The well is scheduled to spud on or about March 1st, 2016 if all conditions precedent are met.

The Tarach-1 prospect is situated in the central part of the Tarach basin. The prospect is defined by four 2D seismic lines out of the 2014 survey. The structural trap is a 3-way dip closure against a north-south normal fault plane at 1,426 m MD (-954m TVDSS) and covering a surface area of 12 sq.km. The vertical closure is calculated at 220 meters at the P10 closing contour. The mean estimate of oil prospective un-risked resources for the prospect is 66 million barrels. Mean un-risked prospective resources of all prospects and leads in Block 11A totals 662 million barrels. Civil works toward the drilling of the well began in November 2015.

It is important to remind investors and other stakeholders that no wells have previously been drilled in our Blocks in Kenya and Chad. While the geological and geophysical work indicates prospectively, there are no guarantees before drilling that there will be a discovery of hydrocarbons. If there is a discovery, there is no guarantee that it will be commercial or in such quantities as to justify a development project.

Work Program Phase 1 (2 years – September 2012 to September 2014)

Minimum Work	Minimum Expenditure	Status
Acquire and interpret 1,000 square kilometers of gravity and magnetic data	$250,000	Completed: 14,943.8 line kilometers of FTG data acquired by January 2014 at an estimated total cost of $2,700,000.
Acquire and interpret 1,000 kilometers of 2D seismic data	$10,000,000	Completed: 1,086.6 line kilometers of 2D seismic data acquired by August 2014 at an estimated total cost of $28,300,000

Work Program Phase 3 (2 years – September 2016 to September 2018)

Minimum Work	Minimum Expenditure	Status
Drill one (1) well to a minimum depth of 3,000m	$30,000,000	Not yet arisen

More about ERHC Energy's operations:

Republic of Chad. ERHC has interests in Block BDS 2008 in the Republic of Chad. The government of Chad formally awarded the company the oil block for exploration and development in June 2011. A Production Sharing Contract was signed in July 2011. Chad is one of sub-Saharan Africa’s significant crude oil producers with proven oil reserves of 1.5 billion barrels. It share borders with Nigeria, Cameroun and Sudan, which all produce oil as well. For more on ERHC's operations in Chad, click here.

The Joint Development Zone (JDZ). ERHC has interests in six of the nine Blocks in the Joint Development Zone (JDZ), a 34,548 sq km area approximately 200 km off the coastline of Nigeria and São Tomé & Principe that is adjacent to several large petroleum discovery areas. For more on ERHC's operations in the JDZ, click here.