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ERHC Energy Inc. (OTCBB: ERHE) is a publicly traded American company with oil and gas assets in Sub-Saharan Africa. The company reported fiscal Q1’12 results for the quarter ended December 31, 2012 on February 9, 2012.

ERHC had cash and cash equivalents and treasury bills totaling $11,920,851, and no debt on the company’s balance sheet. During fiscal Q1’12, the company reduced its G&A expenses by 15% to $1,040,999 compared to fiscal Q1’11.

OAG360 Comments:

If you compared ERHC Energy during fiscal Q1’11 to the ERHC Energy that just reported fiscal Q1’12 results, you would notice a significant shift in operational focus. From fiscal Q1’11 to fiscal Q1’12, the company made the move onshore to The Republic of Chad, nearly doubling its corporate acreage position in Sub-Saharan Africa, and has been actively pursuing partners on its São Tomé and Príncipe Exclusive Economic Zone (EEZ) projects. Prior to this expansion, ERHC only held interests in two offshore West Africa projects, the EEZ, and the São Tomé and Príncipe Joint Development Zone (JDZ).

Republic of Chad – Onshore Assets:

ERHC has a production sharing contract (PSC) with the Republic of Chad on three oil blocks, including: Chari-Ouest III (50% interest in 1,111,974 acres), Manga (100% interest in 1,600,501 acres), and BDS 2008 (100% interest in 4,042,644 acres). ERHC his diligently working to submit a detailed budget and work program to the Chadian Government for its first year of exploration while simultaneously evaluating farm-in partners on the project.

ERHC reports the three blocks in Chad are of strategic importance because they diversify ERHC’s portfolio beyond the Gulf of Guinea, significantly increase the size of exploration acreage under the Company’s control and are onshore, in a country with proven production and reserves. According to ERHC, two of the Blocks, 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 BOPD. The Manga block is north of Lake Chad, along the border with Niger.
OAG360 notes that in 2000, Chevron (NYSE: CVX) entered in two major projects in Chad. The first being development of the Doba oil fields in the south, and the second being involved in the construction and operation of a pipeline to transport oil from those fields to an export terminal facility in Cameroon. Chevron reported these two developments represent one of the largest industrial projects in Africa. Chevron holds a 25 % non-operated working interest in an international consortium that is producing oil in the Doba fields in southern Chad.


Source: ERHC Energy

Joint Development Zone (JDZ) – Offshore Assets:

Led by its technical partners, first Addax Petroleum and later Sinopec Corp., ERHC and its partners have been analyzing the prospectivity of its JDZ Blocks to determine if the project is commercial. The Exploration Phase 1 ends in mid-March 2012, at which point operators will determine how to proceed in consultation with the Joint Development Authority (JDA). A few options for the company include submitting to the JDZ a future exploration plan of one or more of the JDZ Blocks with timelines and budgets, extend exploration phase 1, or the operators could decide not to pursue the operation whereby ERHC would then begin to look for other operating partners. ERHC remains enthusiastic about its JDZ blocks and believes more than 12 additional prospects have been identified through its drilling campaign and seismic data. The Joint Development Authority, a bi-national agency comprised of Nigerian and São Tomé officials, administers the JDZ under the auspices of the United Nations given that the JDZ is comprised of areas that fall within the Exclusive Economic Zones of Nigeria and São Tomé and Príncipe.

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Recent West African Exploration Successes:

On February 13, 2012, Hyperdynamics (NYSE: HDY) announced it has completed the drilling of the Sabu-1 exploration well on its concession offshore Guinea-Conakry. The Sabu-1 well was drilled to a depth of 11,844 feet in a water depth of 2,329 feet. Results of real-time hydrocarbon chromatograph measurements and Schlumberger (NYSE: SLB) petrophysical wireline analysis warranted collection of downhole fluid samples. These samples, together with sidewall cores taken, are being sent to Core Lab (NYSE: CLB) for analysis. The Sabu-1 is the first exploration well drilled by Hyperdynamics in its Guinea concession, and the first deep water test in the offshore Guinea basin.

On February 9, 2012, Cobalt International Energy(NYSE:CIE) provided additional data confirming the significance of its Cameia Pre-salt oil discovery in Block 21 offshore Angola. The Cameia-1 Well was drilled in 5,518 feet (1,682 meters) of water to a total depth of 16,030 feet (4,886 meters), at which point an extensive wire line evaluation program was conducted. The results of this wire line evaluation program confirmed the presence of a 1,180 foot (360 meter) gross continuous oil column with over a 75% net to gross pay estimate. No gas/oil nor oil/water contact was evident on the wire line logs. An extended Drill Stem Test (DST) has now been performed on Cameia-1 to provide additional information. The DST flowed at an un-stimulated sustained rate of 5,010 barrels per day of 44-degree API gravity oil and 14.3 million cubic feet per day of associated gas (approximately 7,400 BOEPD) with limited drawdown. The flow rate, which was restricted by surface equipment, facility and safety precautions, confirmed the presence of a very thick, continuous, high quality reservoir saturated with light oil.

On January 18, 2012, Kosmos Energy (NYSE: KOS) announced today that the Ntomme-2A appraisal well, located in the Deepwater Tano Block offshore Ghana, has successfully encountered significant quantities of light oil. The well, located over 4 kilometers (2.7 miles) south of the Tweneboa-3 sidetrack which discovered the Ntomme field, was designed to test the potential for an oil leg beneath the previously-identified gas-condensate at Ntomme. Results of drilling, wireline logs and fluid samples indicate that the well encountered 45 meters (148 feet) of high-quality stacked reservoir sandstones, including 39 meters (128 feet) of 35 degrees API gravity net oil pay. Pressure data from the well and the original discovery well suggests the potential for an oil column at Ntomme of approximately 125 meters (410 feet) below the gas-condensate accumulation.


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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.