John, as an investor in any stock, such as I have done in Boston Scientific, ATI Technologies, Bank of Montreal, Mackenzie Financial, etc. etc., I also invest in small caps. I am a strong believer of junior oil and gas companies with great exploration potentials.
What I will give you below in addition to what is already known about ERHC, is my honest opinion. If I am optimistic, I am sorry, I can't help it because this company has great management with proven track record.
What I do I think about ERHC with regards to Sao Tome & Principe:
First, let's take it from the New York Times:
"NEW YORK TIMES ARTICLE ON 'THE BONANZA' IN THE GULF:
" Western Oil Companies Will Invest Between 40 Billion and $60 Billion in the Gulf of Guinea Alone."
The article focuses on Equatorial Guinea: "Equatorial Guinea Joins the Region's Bonanza" but also provides information on the area as a whole, illustrating just how quickly this area is developing as a major oil and gas exploration play.
As an example of how some of these small African nations are reaping the benefits of offshore development, the article begins: "Last year alone, offshore petroleum production, which was begun here only recently by the Mobil Oil Corporation, earned this poverty stricken country an estimated $100 million..." This was a result of a single deep-water field, Safiro, producing 80,000 BOPD and projected to grow steadily: "Safiro doesn't even represent one-tenth of the potential production of Equatorial Guinea. Mobil and other companies are already scrambling for the rights to explore for more deposits on deep-water blocks nearby." Although off-shore exploration and drilling is expensive, it is the huge size of the deposits which is
attracting the majors. ERHC expects to attract similar investment in
regions offshore Sao Tome. Sam Bass Jr. and Jim Callender (COO of ERHC) are no strangers to any of the world's major oil companies and investors can assume preliminary discussions have already taken place."
Wow, look what follows as JV partners, Schlumberger ( the largest in the world as an oil service company, and Mobil. Yet, ERHC is blame for lack of performance.
The following are other interesting quotes selected from the Times article, written by African correspondent Howard W. French:
"Over the next twenty years, industry experts say Western oil companies will invest between 40 billion and $60 billion in the Gulf of Guinea alone."
"The geological evolution of this region has produced a fortuitous
combination of all the right ingredients required for big oil fields, said Art Green, production manager for Mobil in Equatorial Guinea. Jean-Francois Gavalda, an expert with Elf Aquataine, France's largest oil company, was even blunter: "The potential here is enormous. There are new discoveries every two or three months, and that is why all the oil companies want to be here."
"Last year in the space of six months, Elf announced the discovery of two major offshore fields in Angola ... each of which could ultimately prove to contain a billion barrels or more of oil, according to industry experts."
There follows a description of some of the political turmoil that is rampant in many of these West African countries that tends to strengthen ERHC's notion that the Democratic Republic of Sao Tome and Principe (DRSTP) is an ideal location for a Logistics Support Centre in the area. ("In addition to their vast oil reserves, all the Gulf of Guinea producers share the traits of authoritarian government.") If the Gulf of Guinea is indeed turning into one of the world's hottest oil and gas exploration zones, the development of such a centre would likely be welcomed by all participants.
Just to review previous information, ERHC's joint venture with DRSTP,
"STPETRO", was amended by both parties to stipulate that STPETRO, in
addition to being in charge of the development of all DRSTP's oil and gas reserves, will be in charge of the development of a seaport, off-shore logistics centre and the expansion of the DRSTP airport. DRSTP is ideally located and has the necessary political stability for the development of a commercial logistics support centre to service all of the Gulf of Guinea region - a 'Safe Harbour'. There is huge economic value in a logistics support centre. Development of a deep-water sea port with dry-dock facilities, an expanded airport for landing and refueling and the establishment of a base or 'logistics centre' from which major companies in the area would work could all be enormously profitable, even dwarfing revenues and earnings from successful oil production."
As an example how another company benefit from JV with Mobil, I will also repeat for your benefit, some data provided by Laurel on Bidding on Bay Street. If you or anyone else wants to verify this information, please call up the JV partners. Information I provide, I like to justify.
Neighboring Equitorial Guinea ( this name will come up again elsewhere, I will not say why), with a 4.5 million acres off-shore concession started with Mobil with a Technical Assistance Program (Mobil chose 12 million acres with their JV with ERHC and STP, 20% of the total area). A junior, United Meridian (UMC) which merged with Ocean Energy in March 1998 was then positioned just as ERHC in this collaborative venture.
Over a 36 months period, production was 80,000 BOPD, and shares of UMC closed at US $30.25 before the merger.
The oil field, Zafiro field, was discovered in March 1995. In 1996, with a fast track development production was over 30,000 BOPD( which is exactly what ERHC chose with Mobil instead of concession lease sale that will lead to production in 5 years or more. Yes, with lease sale our share price would have been higher in early 1999, but, production will be in 5 or more years). The following year, production was increased to 80,000 BOPD.
August 5th, Mobil stated that "In addition to exploration drilling, Mobil and its partner Ocean Energy are increasing the production capacity of their Zafiro operations from the current design level of 80,000 BOPD .... to approximately 120,000 BOPD in the year 2000." Spending through 2000 is expected to be at $900 million.
I will strongly encourage Noreen Wilson as soon as she arrived back from Sao Tome & Principe (and Equitorial Guinea) to let investors be more informed about the immediate plans of ERHC locally and abroad. |
