ERHC President Explains Recent Agreements as Nigeria-Sao Tome Joint Development Zone Enters Licensing Round
HOUSTON, April 30, 2003 - Mr. Chude Mba, president and CEO of Environmental Remediation Holding Corporation, DBA Chrome Energy Corporation, (OTCBB:ERHE) explains the significance of recent agreements after attending the launching of the licensing round for the Joint Development Zone ("JDZ") in Abuja, Nigeria, on Tuesday, April 22, 2003.
ERHC-DRSTP Option Agreement
Recently, ERHC concluded discussions with the Democratic Republic of Sao Tome & Principe ("DRSTP") to deal with specific concerns held by the government of DRSTP regarding the original Memorandum of Agreement of 21 May 2001. These discussions centered on the financial interests that ERHC was entitled to under the MOA and the long-term objectives of both parties. In order that the licensing round could move ahead for the benefit of all and to satisfy the parties' strategic objectives, ERHC agreed to relinquish the longer-term financial rights in return for larger working interest positions in more blocks in the JDZ. The relinquishment was formalized in an Option Agreement, which was filed as an exhibit to a Form 8-K filed April 15, 2003. This relinquishment gives both parties the benefits that are in line with their respective roles: DRSTP receives revenues as a sovereign nation and ERHC receives working interests as an exploration company.
On April 22, 2003, the Nigeria-Sao Tome Joint Development Authority ("JDA") announced that it would hold a licensing round on the JDZ. There would be nine (9) blocks available for licensing by bidders.
As detailed in the Option Agreement, ERHC obtained options to acquire fractional working interests in six (6) of the nine (9) blocks in the JDZ. These options must be exercised in sequence and are subject to certain restrictions of choice. Additionally, ERHC is not required to pay signature bonuses for acquiring working interests in four (4) of the six blocks in which it has an option. ERHC must pay its proportionate share of any signature bonuses in two (2) blocks. Specifically, the percentages and signature bonuses payable in each option pick are as follows:
Option Pick Working Interest Percentage Signature Bonus Payable
----------- --------------------------- -----------------------
ERHC Choice 1 15% $0
ERHC Choice 2 15% 15% of the total
Signature Bonus
ERHC Choice 3 20% $0
ERHC Choice 4 30% $0
ERHC Choice 5 25% $0
ERHC Choice 6 20% 20% of the total
Signature Bonus
In total, ERHC has options to acquire a total of 125 percentage points of working interest: 35 percentage points in two blocks with full signature bonuses payable and 90 percentage points in four blocks with no signature bonuses.
ERHC feels that the ability to participate in four blocks without the requirement to pay signature bonuses improves any valuation of project economics and adds value to ERHC in the context of the high signature bonuses that have recently been paid in similar situations.
ERHC-JDA Administrative Agreement
ERHC has also entered into an Administration Agreement with the Joint Development Authority in order for ERHC's rights in respect of the JDZ to be implemented and administered (also filed as an exhibit to ERHC's Form 8-K filed April 15, 2003).
In the agreement, "...the JDA agrees to do all things necessary to enable ERHC to properly exercise and enjoy the rights granted to it pursuant to the Option Agreement."
The timing of the receipt of information and time for ERHC to provide its option selections was critical in this agreement to ensure that ERHC had the ability to make proper decisions. Therefore, following the JDA's acceptance of bids in every block in the JDZ, the JDA will provide ERHC all material information relating to every successful bid in every block in the JDZ, including signature bonus and other financial commitments, PSC terms, identities of successful bidder and work commitments. ERHC will then have at least 45 days to provide the JDA with each of its block selections.
Additionally, the obligations of the JDA in the agreement will continue until all working interests to which ERHC has rights pursuant to the Option Agreement have been granted by the JDA to ERHC (or persons at ERHC's direction) and such rights become fully, irrevocably and unconditionally vested to ERHC.
Anticipated Selection Process
The ERHC/JDA Administration Agreement also spells out the process by which ERHC may exercise its rights in the JDZ.
For clarity, an affiliated entity of ExxonMobil Corp (NYSE:XOM) also has option rights in the JDZ that were granted pursuant to an agreement between DRSTP and the ExxonMobil affiliate dated Feb. 22, 2003 and referenced in the Administration Agreement. ExxonMobil has the right to exercise options to acquire 40% in one (1) block and 25% in two (2) additional blocks in the JDZ, which also must be exercised in sequence. ExxonMobil has the first overall option choice in the JDZ. As a result, ERHC cannot exercise a right to acquire interest in the block where ExxonMobil has exercised its right to acquire 40% and cannot exercise its right to acquire interest in excess of 15% in either of the two blocks where ExxonMobil has exercised its right to acquire 25%. ExxonMobil must pay its full portion of Signature Bonuses for these options.
Therefore, in aggregate, ERHC and ExxonMobil can exercise options for a maximum 40% in any block and ERHC's Choice 1 is, in fact, the second overall choice in the JDZ, and so on.
In summary, the JDA will receive bids for blocks from various parties (per the JDA announcement, not later than Oct. 18, 2003). It will then evaluate the bids and then determine "Successful Bids". The JDA will notify ExxonMobil and ERHC of the Successful Bids (including the bidders and other terms), upon which ExxonMobil will make its option selections of up to three (3) blocks.
Following ExxonMobil's selection(s), the JDA will notify ERHC of such selection(s) and ERHC will have a period of 15 days from the date of ExxonMobil selections in which to make its selections. The JDA will then make final award(s) and proceed with the concluding of contracts. Payment of any signature bonuses would be made after the conclusion of contracts.
The Option Agreement does not preclude ERHC from bidding for additional working interest in any block in the JDZ either alone or in partnership with other oil companies.
ERHC's DRSTP EEZ EEZ Exclusive Economic Zone Rights
ERHC retained its exploration rights in DRSTP's Exclusive Economic Zone ("EEZ").
ERHC has the right to acquire 100% working interest in two (2) blocks of its choice in the EEZ, subject to DRSTP reserving three (3) blocks of its choice. There are no signature bonuses to be paid on these two (2) blocks. ERHC additionally has the right to acquire 15% working interest in any two (2) blocks of its choice in the EEZ and would pay its proportionate share of signature bonus on these two blocks.
For simplicity, assuming that ERHC "ranked" the blocks in Choice order and DRSTP had reserved Choices 1, 2 and 3, the percentages and signature bonuses payable in each option pick are as follows:
Option Pick Working Interest Percentage Signature Bonus Payable
----------- --------------------------- -----------------------
Signature Bonus
ERHC Choice 3 0% n/a
ERHC Choice 4 100% $0
ERHC Choice 5 100% $0
As in the JDZ, ERHC is not precluded from bidding for additional working interest in any block in the EEZ either alone or in partnership with other oil companies.
DRSTP has indicated that it would attempt to hold its EEZ licensing round as soon as possible after the conclusion of the JDZ licensing round.
Summary
The two agreements relating to ERHC's rights in the JDZ, as well as confirmation of ERHC's position in the definitive JDZ licensing round documents, and its position in the EEZ provide ERHC a basis to move aggressively to maximize the value of these rights.
As previously stated, ERHC will continue its dealings with major oil companies interested in entering into partnership discussions with ERHC on developing its interests in the sub-region. ERHC believes that its unique position can establish or increase an exploration and production company's position in the Gulf of Guinea.
This press release contains certain "forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this release, these forward-looking statements are subject to risks and uncertainties, including government regulation, competition, capital resources, general economic conditions and other risks detailed in ERHC's SEC reports. These forward-looking statements can be identified by the use of terminology such as "intends," "may," "will," "should," "could," "expects" and "plans." Forward-looking statements in this release include the ability of ERHC to exploit its oil and gas exploration concession in Sao Tome and its ability to locate, acquire and develop high-potential oil and gas prospects. TEST
ERHC-DRSTP Option Agreement
Recently, ERHC concluded discussions with the Democratic Republic of Sao Tome & Principe ("DRSTP") to deal with specific concerns held by the government of DRSTP regarding the original Memorandum of Agreement of 21 May 2001. These discussions centered on the financial interests that ERHC was entitled to under the MOA and the long-term objectives of both parties. In order that the licensing round could move ahead for the benefit of all and to satisfy the parties' strategic objectives, ERHC agreed to relinquish the longer-term financial rights in return for larger working interest positions in more blocks in the JDZ. The relinquishment was formalized in an Option Agreement, which was filed as an exhibit to a Form 8-K filed April 15, 2003. This relinquishment gives both parties the benefits that are in line with their respective roles: DRSTP receives revenues as a sovereign nation and ERHC receives working interests as an exploration company.
On April 22, 2003, the Nigeria-Sao Tome Joint Development Authority ("JDA") announced that it would hold a licensing round on the JDZ. There would be nine (9) blocks available for licensing by bidders.
As detailed in the Option Agreement, ERHC obtained options to acquire fractional working interests in six (6) of the nine (9) blocks in the JDZ. These options must be exercised in sequence and are subject to certain restrictions of choice. Additionally, ERHC is not required to pay signature bonuses for acquiring working interests in four (4) of the six blocks in which it has an option. ERHC must pay its proportionate share of any signature bonuses in two (2) blocks. Specifically, the percentages and signature bonuses payable in each option pick are as follows:
Option Pick Working Interest Percentage Signature Bonus Payable
----------- --------------------------- -----------------------
ERHC Choice 1 15% $0
ERHC Choice 2 15% 15% of the total
Signature Bonus
ERHC Choice 3 20% $0
ERHC Choice 4 30% $0
ERHC Choice 5 25% $0
ERHC Choice 6 20% 20% of the total
Signature Bonus
In total, ERHC has options to acquire a total of 125 percentage points of working interest: 35 percentage points in two blocks with full signature bonuses payable and 90 percentage points in four blocks with no signature bonuses.
ERHC feels that the ability to participate in four blocks without the requirement to pay signature bonuses improves any valuation of project economics and adds value to ERHC in the context of the high signature bonuses that have recently been paid in similar situations.
ERHC-JDA Administrative Agreement
ERHC has also entered into an Administration Agreement with the Joint Development Authority in order for ERHC's rights in respect of the JDZ to be implemented and administered (also filed as an exhibit to ERHC's Form 8-K filed April 15, 2003).
In the agreement, "...the JDA agrees to do all things necessary to enable ERHC to properly exercise and enjoy the rights granted to it pursuant to the Option Agreement."
The timing of the receipt of information and time for ERHC to provide its option selections was critical in this agreement to ensure that ERHC had the ability to make proper decisions. Therefore, following the JDA's acceptance of bids in every block in the JDZ, the JDA will provide ERHC all material information relating to every successful bid in every block in the JDZ, including signature bonus and other financial commitments, PSC terms, identities of successful bidder and work commitments. ERHC will then have at least 45 days to provide the JDA with each of its block selections.
Additionally, the obligations of the JDA in the agreement will continue until all working interests to which ERHC has rights pursuant to the Option Agreement have been granted by the JDA to ERHC (or persons at ERHC's direction) and such rights become fully, irrevocably and unconditionally vested to ERHC.
Anticipated Selection Process
The ERHC/JDA Administration Agreement also spells out the process by which ERHC may exercise its rights in the JDZ.
For clarity, an affiliated entity of ExxonMobil Corp (NYSE:XOM) also has option rights in the JDZ that were granted pursuant to an agreement between DRSTP and the ExxonMobil affiliate dated Feb. 22, 2003 and referenced in the Administration Agreement. ExxonMobil has the right to exercise options to acquire 40% in one (1) block and 25% in two (2) additional blocks in the JDZ, which also must be exercised in sequence. ExxonMobil has the first overall option choice in the JDZ. As a result, ERHC cannot exercise a right to acquire interest in the block where ExxonMobil has exercised its right to acquire 40% and cannot exercise its right to acquire interest in excess of 15% in either of the two blocks where ExxonMobil has exercised its right to acquire 25%. ExxonMobil must pay its full portion of Signature Bonuses for these options.
Therefore, in aggregate, ERHC and ExxonMobil can exercise options for a maximum 40% in any block and ERHC's Choice 1 is, in fact, the second overall choice in the JDZ, and so on.
In summary, the JDA will receive bids for blocks from various parties (per the JDA announcement, not later than Oct. 18, 2003). It will then evaluate the bids and then determine "Successful Bids". The JDA will notify ExxonMobil and ERHC of the Successful Bids (including the bidders and other terms), upon which ExxonMobil will make its option selections of up to three (3) blocks.
Following ExxonMobil's selection(s), the JDA will notify ERHC of such selection(s) and ERHC will have a period of 15 days from the date of ExxonMobil selections in which to make its selections. The JDA will then make final award(s) and proceed with the concluding of contracts. Payment of any signature bonuses would be made after the conclusion of contracts.
The Option Agreement does not preclude ERHC from bidding for additional working interest in any block in the JDZ either alone or in partnership with other oil companies.
ERHC's DRSTP EEZ EEZ Exclusive Economic Zone Rights
ERHC retained its exploration rights in DRSTP's Exclusive Economic Zone ("EEZ").
ERHC has the right to acquire 100% working interest in two (2) blocks of its choice in the EEZ, subject to DRSTP reserving three (3) blocks of its choice. There are no signature bonuses to be paid on these two (2) blocks. ERHC additionally has the right to acquire 15% working interest in any two (2) blocks of its choice in the EEZ and would pay its proportionate share of signature bonus on these two blocks.
For simplicity, assuming that ERHC "ranked" the blocks in Choice order and DRSTP had reserved Choices 1, 2 and 3, the percentages and signature bonuses payable in each option pick are as follows:
Option Pick Working Interest Percentage Signature Bonus Payable
----------- --------------------------- -----------------------
ERHC Choice 1 15% 15% of the total
Signature Bonus
ERHC Choice 2 15% 15% of the totalSignature Bonus
ERHC Choice 3 0% n/a
ERHC Choice 4 100% $0
ERHC Choice 5 100% $0
As in the JDZ, ERHC is not precluded from bidding for additional working interest in any block in the EEZ either alone or in partnership with other oil companies.
DRSTP has indicated that it would attempt to hold its EEZ licensing round as soon as possible after the conclusion of the JDZ licensing round.
Summary
The two agreements relating to ERHC's rights in the JDZ, as well as confirmation of ERHC's position in the definitive JDZ licensing round documents, and its position in the EEZ provide ERHC a basis to move aggressively to maximize the value of these rights.
As previously stated, ERHC will continue its dealings with major oil companies interested in entering into partnership discussions with ERHC on developing its interests in the sub-region. ERHC believes that its unique position can establish or increase an exploration and production company's position in the Gulf of Guinea.
This press release contains certain "forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this release, these forward-looking statements are subject to risks and uncertainties, including government regulation, competition, capital resources, general economic conditions and other risks detailed in ERHC's SEC reports. These forward-looking statements can be identified by the use of terminology such as "intends," "may," "will," "should," "could," "expects" and "plans." Forward-looking statements in this release include the ability of ERHC to exploit its oil and gas exploration concession in Sao Tome and its ability to locate, acquire and develop high-potential oil and gas prospects. TEST