management presentation from october 9, 2012 special meeting of shareholders
DESCRIPTION
This is the management presentation from the Special Meeting of Shareholders held in Houston, Texas on October 9, 2012. The final 10 slides provide additional technical detail.TRANSCRIPT
www.erhc.com
Cautionary Statement
Statements during this presentation may concern ERHC Energy Inc.’s future operating milestones, future drilling operations, the planned exploration and appraisal program, future prospects, future investment opportunities and financing plans, future shareholders’ meetings, response to U.S. governmental authority and related proceedings, as well as other matters that are not historical facts or information. Such statements are inherently subject to a variety of risks, assumptions and uncertainties that could cause actual results to differ materially from those anticipated, projected, expressed or implied. A discussion of the risk factors that could impact these areas and the Company’s overall business and financial performance can be found in the Company’s reports and other filings with the Securities and Exchange Commission. These factors include, among others, those relating to the Company’s ability to exploit its commercial interests in the JDZ and the exclusive territorial waters of São Tomé and Príncipe, general economic and business conditions, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations and various other matters, many of which are beyond the Company’s control. Given these concerns, investors and analysts should not place undue reliance on these statements. Each of the above statements speaks only as of the date of hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any of the above statements is based.
2
Special Meeting of Shareholders Management Presentation
• Strategy overview• Technical presentation on exploration work
programs in Kenya, Chad• Fund raising plan• Value proposition• Q & A
Our Purpose Today
• Ask our existing shareholders to contribute to ERHC’s growth and therefore realizable shareholder value
• Need to raise up to $45MM • Money will enable exploration in Kenya and Chad• Exploration will increase value of our assets and
enhance shareholder value
Brief History
• Through 2009– Primary focus on deepwater JDZ assets– Unexpected results from drilling in the JDZ
• 2010 – Awarded two Blocks in Sao Tome & Principe EEZ• 2011 – Awarded three Blocks in Republic of Chad• 2012 – Awarded Kenya Block 11A
Diversification Strategy
• Transition from single-asset model to multi-asset model– Onshore assets complement more complex and
demanding deepwater assets– More assets means more opportunities to win
• Continuing to leverage home field advantage in Africa
ERHC Stock Price
Series3
0.050.090.130.17
Past Six Months
Kenya Exploration
Kenya Block 11A
• Located in NW Kenya adjacent to border with South Sudan
• Structural setting in the vicinity of intersection between Cretaceous and Tertiary Rift systems
• Significant production already in place in the Cretaceous basins of South Sudan and recent discoveries in the Tertiary rifts in Uganda and Kenya
Block 11A
Block 11A licensing history:
First demarcated as the larger block 10 and licensed to AMOCO in 1985. Block covered the whole of northwestern Kenya
Amoco relinquished parts of the block after ground gravity and reconnaissance seismic (~250km)
Block re-gazetted and licensed to CAMEC (Central Africa Mineral Exploration company)
CAMEC’s term expired after acquiring aero gravity and magnetic data
Kenya Exploration Acreage
Oil and Gas Occurrences in the Region
12
Similar to Uganda FindsOperator Tullow estimates the discoveries may be similar in size to the Lake Albert Rift Basin in Uganda, which are estimated at 2,000 MMBOE
Regional GeologyThe area is dominated by the Cretaceous Central Africa Rift System (CARS) and the Tertiary East Africa Rift System (EARS) with the associated basin depositional trends
Northwest KenyaThe proximity and in-trend relationship between the Lotikipi plane and the Abu Gabra Rift basins of southern Sudan suggest high oil and gas prospectivity
Recent Exploration Success• Eliye Springs well is in the adjacent Block 10BA • Loperot and Ngamia-1 wells in Block 10BB are
also nearby
Regional GeologyGravity data enabled the delineation of a sedimentary basin within the Block 11A area below the Lotikipi plain with a basin-fill believed to be in excess of 5,000 meters
Block 11A
Rift basins clearly visible in blue/green colors
Kenya Global Bouguer Gravity
Rift basin extends into Block 11A
Block 11A
100Km
LotikipiGatome
Elemi
Block 11A Block 11B
Seismic line
• The data is coarse grid and therefore regional, but it identifies 3 sub-basins in the north Turkana area, namely: Lotikipi Gatome Elemi
• Estimated sediment thickness in excess of 5000m In the Lotikipi Basin
Gravity Survey Acquired by CAMEC
Block 11A
Block 11A
Potential sub-volcanic sediments
Lotikipi Basin Lokwanamorou High Gatome Basin
Block 11A
Potential Reservoirs• Data acquired by Amoco in in the 1980s • Data quality is poor due to existence of
surface and subsurface volcanics, a major challenge in acquisition and processing
• Indications of existence of sedimentary rocks below the volcanics can be interpreted from seismic
On outcrop, the potential reservoir sands are composed of good-quality basement-derived units, measuring approximately 500m in thickness with measured porosities of up to 25%
v v v vv v v
v v v v v
v v
Potential reservoir target
Subsurface inferred from surface
Volcanics
Basement
Reservoir Sands
The Lapur outcrop is the most prominent topographical feature in
northern Turkana
Potential Cretaceous Reservoir Sands
Work Program and Budget: Year 1
General & Admin $2,478,500
PSC work program $3,432,500
Performance bond $5,125,000
Other PSC expenditure $865,000
Contingencies $1,000,000
Total $12,151,000
Work Program and Budget: Year 2
General & Admin $1,532,750
PSC work program $10,040,000
Other PSC expenditure $3,242,500
Contingencies $1,000,000
Total $15,640,250
Chad Exploration
• June 2011 After months of negotiations, Government of Chad awards ERHC Energy Inc. 3 blocks:
– Chari-Ouest III– BDS 2008 – Manga
• July 2011 Production Sharing Contract (PSC) signed• August 2011 Presidential Approval of PSC granted• July 2012 Exclusive Exploration Authorization received
Gazette of Principal Approval received
Introduction
ERHC’s Exploration Blocks in Chad
Block Sq. Km. Acres Working Interest
Chari-Ouest III(northern half)
4,500 1,111,974 100%
BDS 2008 41,800 10,329,000 100%
Manga 17,000 4,200,790 100%
NigerCNPC largest playerCurrent Production: ~17,000 bbl/dUnconfirmed EUR: 1.0 BlnbblContinue to explore
Ndjamena RefineryOperator: CNPCCapacity: 20,000 bbl/d expandableto 60,000 bbl/dOnline Date: June 2011Supply: Block H Area II (CNPC)
Block H Area IIOperator: CNPC (Former EnCana)Expected Production: ~17,000 bbl/dReserves (remaining): 85 MMbblOOIP: 700 mmbbl (CNPC)Continue to explore
Chad/Cameroon PipelineOperator: ExxonCapacity: 225,000 bbl/dUtilization: 115,000 bbl/dDistance: 1,070 kmPort: Cameroon loadingExpandable by adding pump stations
Republic of Chad• Proven Reserves are 1.5 Billion Bbls
Source International Petroleum Encyclopedia
• Undeveloped Discoveries are 2.6 Billion Bbls, and 14.6 TCF of Gas
Source USGS, World Petroleum Resources Project
Sudan All FieldsKey Operators: CNPC & ConsortiumsCurrent Production: 465,000 bbl/dPeak Production: 538,000 bbl/d (2011)Reserves (remaining): 1.96 Bln bblsEUR: 3.0 Bln bblsKey basins: Muglad, MelutWells Drilled: 300Commercial & Technical Success: 60%
Greater Nile Oil ProjectOperator: GNPOC (Formerly Arakis)Current Production: 203,000 bbl/dPeak Production: 300,000 bbl/d (2004)Reserves (remaining): 662 MMbblEUR: 1.49 Bln bbl
Chari Ouest - Doba BasinOperator: Exxon (Esso)Current Production: 115,000 bbl/dPeak Production: 220,000 (2004)Reserves (remaining): 462 MMbblEUR: 795 mmbbl
ERHC BLOCKS
Chad Infrastructure
60,000 bbl capacity, presently processing 20,000 bbl per day Opened 6 February 201260% CNPCI 40% CNO
660 mile long pipeline 225,000 bbl per day capacity
Chad Production126,200 bbl per day in
2010(CIA World Fact Book)
9/18/2012
Major Tectonic Elements of Chad
Shear ZoneRift
ERHC BLOCKS
BENUE TROUGH
DOSEO BASIN
DOBA BASIN
TE
RM
T/L
AK
E C
HA
D B
AS
IN
SILTOU BASIN
FAYA LARGEAU BASIN
9/18/2012
Focus on BDS 2008
• North of Esso Tega and Maku discoveries in Doseo basin
• East and on trend with OPIC Benoy-1 discovery in Doba basin
Paleogeographic Reconstruction of Lower Cretaceous “C” Doseo Basin
Patterson et al (2007)9/18/2012
Focus Area 1
Tega: 8 mmbbls
Maku: 21 mmbbls
Rift margin
10 km
BDS2008
Tega
Maku
ERHC BDS 2008 “Lead A”
ESSO CHARI EAST - DOSEO
Esso Tega #1 – 8 MMBOE
SSE
ERHC Lead A
PTD 12800’ MD
NNW
1st Derivative RTE Magnetic Map
BDS 2008
ERHC BDS 2008
OPIC Benoy #1 – Lower Cretaceous (11.9 - 41.3 MMBOE)
OPIC Benoy #1
A
B
C
DE
SW NE
0 1.2 KM
• 3,053 m (10,013’) MD; Budgeted dry hole = 17.62 MM USD• 53 days to TD, 73 days total• 62 feet net pay, Avg porosity = 17.0; Avg perm = 23.25• Avg Sw = 49.0, Avg Vsh = 6.1• DST #1: 2309 – 2334; 1,231 BOD, 0.15 MMCFGD, 0 BWD, 20/64”
ch; API 37.4, GOR 122• DST #2: 2229 – 2232; 1,174 BOD, 0 MMCFGD, 0 BWD, 24/62” ch;
API 34, GOR 0
Focus Area 1 and Area 2
CHARI QUEST III
BDS 2008
BDS 2008
CHARI WEST - DOBA
CHARI EAST - DOSEA
12
3
4
5
67
Focus Area 1 2D Seismic
Focus Area 2Airborne Gravity
Gradiometry 2D Seismic
DOBA/DOSEO BASINS
OPIC Benoy-1
Short tie-in distances to proposed infra-structure for ERHC initial
exploration focus areas
Tega-1
Maku-1,2
ERHCBDS 2008
ERHCBDS 2008
OPIC Benoy-1
Focus Area 2
Focus Area 1
Griffith
Griffith
Griffith
Griffith
Initial Period Technical Work Program
• Database generation• Complete regional G&G studies• Acquire airborne grav/mag surveys over focus area 2, Q4 2013• Acquire 2D seismic over focus area 1 or focus area 2 , Q4 2014• Determine lead/prospect areas• If necessary, delineate with additional seismic, Q4 2015• Drill first exploration well Q4 2015 or Q4 2016
2013 Work Program and Budget
General & Admin $1,695,000
PSC work program $1,514,645
Other PSC expenditure $545,006
Contingencies $750,000
TOTAL $4,504,651
2014 Work Program and Budget
General & Admin $1,395,000
PSC work program $10,074,000
Other PSC expenditure $545,006
Contingencies $ 750,000
TOTAL $12,764,006
Fund Raising
Fund Raising Options
• Objective: Raise up to $45MM• Fund Raising Approach:
– Issue shares of common stock• Rights Offerings • Registered Direct Offerings
– Convertible Loans and other debt instruments– Other available financing options
Rights Offering
• Existing shareholders as of a date to be determined will have opportunity to contribute substantial portion of new capital
• The number of shares an existing a shareholder can purchase in the offering will depend on the number of shares they own
Oversubscription Privilege
• For: Shareholders exercising all of their basic subscription privilege
• What: The right to purchase remaining unsubscribed shares of common stock at the expiration of the Rights Offering
• Subject to: Availability and pro-rata allocation of shares
Dilution
• Shareholder taking up their pro-rata entitlement in full in the Rights Offering will experience no dilution
• Shareholders not taking up their pro-rata entitlement will experience an immediate dilution in their interests in the Company
Value Proposition
ExplorationHigh Return/Low Cost
Mar
ket
Cap
A
sset
Val
ue
Development ProductionExploration
The market cap and asset value curve depicted here is merely for discussion purposes. Actual results may vary.
ERHC Energy – JDZ Block 4
Apr 2004 Nov 2005$0$2$4$6$8
$10$12$14$16$18$20
$1
$18 Acreage Details:
• November 2003 ERHC was awarded Block 4 in the JDZ for $0.73 million.
• November 17, 2005, ERHC Energy entered into a participation agreement with an Addax Petroleum who agreed to assign to Addax a 40.5% participating interest in Block 4 of the JDZ for $18 million and pay all of the Company’s future costs in respect of all petroleum operations in Block 4
1,700% Incre
ase
$MM
Source: Company Public Filings and Press Releases
Growing Value Requires Investment
Kenya Work Program and Budget: Year 1 $12,151,000
Kenya Work Program and Budget: Year 2 $15,640,250
Chad 2013 Work Program and Budget $4,504,651
Chad 2014 Work Program and Budget $12,764,006TOTAL $45,059,907
Summary
• Ready to commence exploration work programs in Kenya and Chad
• Existing data points to prospectivity of our target areas• Existing shareholders will have an opportunity to
participate in fund raising and avoid dilution• Objective is to grow and diversity the Company, add
value to our assets
Questions and Answers
www.erhc.com
Intersection of two rift systems: Central African and East African Rift Systems
Proven petroleum province extends from the Niger Delta through Cameroon, Chad, Central Africa Republic and southern Sudan, terminating in the Anza Basin, Kenya
Central African Rift System (CARS)
Potential Reservoirs
Subsurface Cross Sections
PSC Highlights
• Blocks awarded and single PSC signed in June 2011• Presidential decree of approval issued in August 2011• Total signature bonus of US$40,000,000 (Chadian standard)
– ERHC has negotiated:• US$6,480,000 upfront in three installments • Balance payable from production
• Contract terms– Initial Period: 5 years with minimum work program of US$ 15,000,000– Renewal Period: 3 years with minimum work program of US$ 1,000,000 plus drilling of one (1) exploration well, if
such a well has not already been drilled in the Initial Period• Royalties: 14.25% oil and 5% gas• Cost recovery100%:
– through yearly “Cost-oil” up to a value of 70 % of yearly net oil production minus the royalty on this production• 60% oil profit to ERHC up to R – Factor of 2.25; 50% for R – Factor of 2.25 – 3.0; 40% for R – Factor of greater than 3.0
Stratigraphic Chart - Esso (2008)
HC
So
urc
e L
acu
stri
ne
Sh
ales
1D Basin Modeling
Esso Assessment (2008) • Lower Cretaceous lacustrine
shales of the C, D, and E are the source rocks for the common HC system (source, maturation, migration) that applies to all the plays.
• Peak maturation occurred from 70 to 100 mya and generation has been waning ever since.
Platte River 1D Basin Model Esso Tega #1 well used for geochem,
structure and heat flow input
BSMT
DSB
DFS
CSB
BFS
2D Seismic Coverage and Well Locations in ERHC Technical Inventory
Chari Ouest III
BDS 2008
Focus Area 2
Focus Area 1
Initial Period Technical Work ProgramINITIAL PERIOD RENEWAL PERIOD
year2 year3 year4 year5 year 6 year7Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017 2018
ContinueFA1Expl.well
FA13D propsects Drop
FA1 or additional 2D2D seismic Drop
FA1 ContinueExpl.well
Drop ContinueFA2 FA2Airborne Expl.wellGravity FA2
3D propsects Dropor additional 2D
Drop
ContinueFA2 FA22D seismic Expl.well Continue
FA1Drop Expl.wellFA13D prospects Drop
FA1 or additional 2D2D seismic Drop
FA1 ContinueExpl.well
Drop
dry season 2D/3D Seismic Drilling of WellAcquisition