Equator Exploration - W. African Oil / Gas Giant in the Making (moderated)

Happy and Prosperous New Years to all, although it does seem to be entering with the wrong foot. At least as far as the EEL sp goes.
But it will change, in both direction and pace.

I have consistently maintained that what happens to ERHC will be the catalyst affecting other oilers in the GoG, EEL in particular. Although I am naturally somewhat disappointed that events did not fall in line with anticipated time-frames, I must remind all…myself first of all, that time frames in Africa, certainly so in Nigeria are somewhat loose in meaning. A fortnight is not necessarily 15 days. It can mean a month, even more.
But I remain convinced that the constituents of change are basically all in place. And will impact our holdings accordingly.

Therefore, to atone for my perhaps overly optimistic postings prior to the Xmas break, I am going to post a trilogy describing what I see as occurring. It basically refers to developments surrounding ERHC (of which I am a shareholder alongside my EELs). But it clarifies the field and its background, the same venue upon which EEL presents its own saga.
And it rationalizes why I intend to hold on to every share I own in both companies. Patiently.

spp119

PS- The first posting (The Flogging of ERHC) was written on the 13th December,as a private correspondence to a fellow shareholder and friend. Part 2 – “Asian Fans and Drill Ships” & Part 3 – “Arab money and the Big Bang” were prepared over the holidays and completed today.

Part 1 - The flogging of ERHC (13/12/06)

The basic question relates to if and why Sir Emeka Offor (SEO) is selling ERHC (or parts thereof).
I do not believe he wants to do so, but his hand is forced.
Not because he needs electoral contribution money. That kind of liquidity can be found elsewhere in Nigeria. Nor to shelter associates, through some form of distancing, from prying American eyes; the far-away SEC/DOJ investigation is hardly reason enough to part with control of company assets after the years spent putting them together.
No. The reason lies in the Starcrest/OPL 291 conundrum and its aftermath, namely the investigation being pursued by Nuhu Ribadu, of Nigeria’s Economic and Financial Crimes Commission (EFCC).

This is an immediate and grave threat.
Immediate because it occurs during an increasingly atavistic pre-election period, where the EFCC is anxious to be impress its independence from competing politicos and disprove allegations of favouritism towards Obasanjo and his cronies (as SEO is now openly depicted). And bear in mind that quasi-autonomous state organs cannot be harnessed easily by waning political controls in pre-election times.
Grave, in that if charges are brought against SEO and he is incarcerated (and Ribadu has proven himself relentless in arresting suspects- including governors, police commissioners, businessmen, etc - for which he has gained widespread international acclaim), there is no one to bail him out. First, because of the pre-election political vacuum. Second, because his over-blown ambition (greed) and inept OPL 291 tactics, disgraced public figures with stature like Chukwueke and Daukoru, who were forced subsequently to explain the unexplainable, despite witnesses to the contrary. And hubris – for that is what SEO’s behaviour amounts to - will not be tolerated.

Faced with such circumstances, SEO must buttress his ERHC position, immediately. And he can only do so by selling a portion to a foreign buyer. Principally by relinquishing operational control, for that is the main issue any buyer would first demand.

That is my interpretation of why he is forced to sell. Now who can he sell it to and how much room is there for maneuver?

Addax is out; too close to the OPL291 affair and too heavily involved in Nigeria already. American and European super-majors (with the remote exceptions of CVX and Shell) are not interested in any pre-drill JDZ block in which they do not own or control operatorship. Post drill of course is a different matter. So he is basically left with Sinopec (theoretically possibly the Koreans also), given that ONCG had budgetary constraints imposed on it from HQ in New Delhi. And then…coincidently or not, there is Millennium Private Equity (MPE) fund with all their ERHC related trappings.

So SEO begins to haggle the ERHC flog with MPE and SNP. One is nimble, one is quick…the other is like a tortoise (and this time around there is no Feltang). But it suits SEO because he can at least exercise some leverage.
But as speed is of the essence ….those EFCC indictments can come down real quick-like….he and ERHC end up with MPE. For better or for worse.

The rest (including price…I reckon about $2 per share) is just detail.