To ERHC Shareholders:
I am pleased to update the investment community and other interested parties on ERHC Energy Inc.
Shareholders will recall that a few days ago, we formally announced the details of a proposed rights offering. If fully subscribed, the rights offering will raise approximately $18.5 million, which will be applied primarily to ERHC’s exploration programs in Chad and Kenya next year.
December 17, 2012 was the record date for the Rights Offering.
Each shareholder will be entitled to purchase one share of common stock at a subscription price of 7.5 cents per share for every three shares of ERHC stock the shareholder owned as of the close of business on the record date.
The Rights Offering allows each shareholder to identify with the Company’s objectives and participate fully in its growth. Of course, no shareholder is obliged to participate in the Offering. A shareholder may also choose to take up some but not all the rights available to him or her under the offering. We look forward, however, to our shareholders fully subscribing to the rights so that the Company’s funding requirements may be met without proportionately diluting any existing shareholders.
In addition to the record date of December 17, 2012, other important dates are:
-December 27, 2012, is the proposed distribution date. ERHC expects to begin distributing subscription rights to shareholders under the Rights Offering on or about this date.
-January 31, 2013, is the proposed termination date. Holders of rights will need to exercise their subscription rights prior to 5:00 p.m. Central Time on the termination date. It is possible that ERHC could extend the termination date.
Further details of the Rights Offering will be contained in a forthcoming prospectus supplement that will be distributed to all shareholders entitled to participate in the Rights Offering. We encourage holders of subscription rights to read the prospectus supplement carefully.
Earlier this year, we detailed how the funds raised through a Rights Offering will be used to advance exploration activities in Kenya and Chad.
We have recently received formal approval for our 2013 work program in Kenya.
That work program is focused on conducting a Full Tensor Gravity (FTG) survey to define the major structural elements of our Block 11A. FTG acquisition measures minute changes of the earth’s gravity caused by differences in density in the local geology. When combined with known geologic information and other kinds of data, FTG data is used to assess geological structures and potential resource deposits, which helps us to identify potential leads and prospects. This will enable us focus the acquisition of seismic data, which will follow thereafter.
The main surface feature of ERHC’s Block 11A is the Lotikipi plain. The proximity and in-trend relationship between the Lotikipi plain and the Abu Gabra Rift basins of southern Sudan, which are established petroleum provinces, suggest high oil and gas prospectivity. More directly, exciting news of discoveries and other positive developments continue to come from surrounding Blocks. In November, another oil discovery of significance was announced at the Twiga South-1 exploration well in Block 13T. This followed the earlier oil discovery in the Ngamia-1 well in Block 10BB. Both Blocks are in the same Northern part of Kenya in which our Block 11A is located.
In 2013, our proposed work program in Chad will concentrate on our focus areas in BDS-2008 with the goal of identifying leads and prospects for future drilling. ERHC’s exploration team has delineated two focus areas situated directly north of numerous major discoveries on a rift margin along the Central African Shear Zone. Regional stratigraphic mapping indicates the presence of alluvial fan deltas and lacustrine deltas in ERHC’s areas of interest, which provide both reservoir and seal rocks.
It is important to understand that while we are forging ahead as the operator of both our Kenya and Chad assets, we continue to entertain potential partnerships with oil and gas exploration companies.Given the nature of exploration assets, partnerships spread risk and reduce the financial outlay of each partner. Our Kenya Block in particular has attracted considerable interest, and we are currently in advanced discussions with several potential partners. However, exploration programs are time-bound and until a farm in is actually concluded, we believe it is in the best interests of the Company and its shareholders to proceed as if we will not have a partner. We have spent the last two years strategically building up a highly competent and vastly experienced technical team. We are, therefore, quite well-positioned to operate the assets by and for ourselves.
We anticipated that Production Sharing Contract negotiations related to our exploration Blocks in SAo Tom and Prncipe Exclusive Economic Zone (EEZ) would be completed by the end of 2012. This has not been possible as ERHC and the ANP-STP continue to negotiate diligently a few key terms that remain with a view to making resulting provisions mutually satisfactory and equally beneficial to both sides. We have also continued to explore meaningful farm-in discussions on the EEZ.
Finally, in the Nigeria – Sao Tome & Principe Joint Development Zone (JDZ), we still await a final decision as between the remaining parties to the PSC and the Joint Development Authority on how exploration in Blocks 2, 3 and 4 will proceed. As we have stated in the past, that decision could be made public at anytime. The three potential courses of action are entry into Phase 2 of the exploration program, further extension of Phase 1 or a withdrawal by some or all of the remaining parties from the PSC and relinquishment of the acreage. ERHC intends to remain in the three Blocks and to retain its other interests in the JDZ. We will keep shareholders updated in a timely manner as developments occur.
Thank you for your continued interest in ERHC and your trust. We wish you all happy holidays.
Chief Executive Officer