ERHC Divests
Stakes In EEZ Block to Kosmos
Sopuruchi Onwuka
American multinational independent oil explorer with focus
on Africa, ERHC Energy< has declared sale of its stake in one of its oil
blocks in Sao Tome and Principe (STP) to peer explorer, Kosmos, in a strategy
seen as spreading its risks at a time of price downturn.
Managing Director of the company which has strong Nigerian ownership
content, Mr. Peter Ntephe, had stated in an interview that the terms of the
production sharing agreements it holds in proximate joint development zone
between Nigeria and STP has also come under the prevailing market realities to
be reviewed.
He also said that the company was refocusing its exploration
opportunities to onshore terrains where, according to him, it has the capabilities
and competencies to drive operations without seeking technical and funding
partnership.
Divestment from one of its offshore blocks in STP might be
part of the strategies to slash its deepwater exposure and liquefy part of the
assets in order to buoy up operations funds for newly acquired onshore blocks
in East Africa.
ERHC Energy declared that it reached an agreement with
Kosmos Energy to transfer all ERHC’s rights to Block 11 of the São Tomé and
Principe (STP) Exclusive Economic Zone (EEZ) to Kosmos.
It added that the agreement has been approved by the
National Petroleum Agency of Sao Tome & Principe (ANP-STP) as required in
the requisite PSC for EEZ Block 11.
ERHC will however retain its 100% stake in EEZ Block 4. It
also retains its option to take a 15% interest in two over EEZ blocks of its
choice. The company also revealed that it and the ANP-STP have agreed in
principle to the terms of a PSC for Block 4.
President and CEO, Mr. Peter Ntephe, stated, “Given the
difficult global environment for doing deals, particularly for deep-offshore
assets in frontier areas, we are very pleased to have concluded the agreement
with Kosmos.
“The agreement
enables us to immediately monetize one of our offshore holdings while
preserving a financial upside in the event that exploration in Block 11 is
successful.”
In Kenya, ERHC holds a 35% interest in Block 11A, where the
first exploration well is expected to be spudded toward the end of the first
quarter of 2016.
The Kenyan block is part of the strategic shifts by the
company from exclusively risky, cost intensive and technology driven offshore terrains
where it has dominated acreages in the JDZ of Nigeria-STP and EEZ of STP.
Mr. Ntephe had stated that Kenya offered initial attraction to
ERHC after fall in oil prices impacted operating terms and dampened the company’s
operations outlook in deepwater Gulf of Guinea.
“We decided that it would be too risky to continue the
company to remain exclusively in the offshore. Instead of that we are going to
switch the business model entirely to onshore. So, theoretically it is easier
for a small company to run the show, to become operator onshore so that it
controls its own destiny which was what we wanted.
“That shouldn’t rule out the fact that we might need
partners at one stage. We thought that if the crunch came, theoretically we
could run the whole show: do the drilling, raise the money and do it. It is not
like that deep offshore.
“Therefore, we have moved from being a company with offshore
focus to one with onshore focus. The next thing now was to actually start
operating the blocks, and Kenya was attractive to everybody. When we sounded
the industry, Kenya was very attractive. So we started working very quickly on
Kenya. We carried out our full tension gravity study in 2013, and immediately
we finished that CEPSA farmed in.
“That is as far as the business model is concerned. It was
very successful. We have operated it well and demonstrated for the first time
in history that ERHC could operate by itself. So, it was very well done for us
in Kenya.”
In Chad where it has onshore assets, ERHC stated that it is
accepting tender proposals for a 2D seismic acquisition program for Block BDS
2008.
Mr. Ntephe explained that the company had acquired petroleum
rights in Chad in line with its new strategy of relocating to onshore operations,
especially seeking fresh opportunities in regions that have proven petroleum
plays.
According to him, “Chad has been a producing country since
at least 2003. It has an export pipeline. It has a refinery. It has a well
defined basin and a well defined oil industry.
Well defined exploration hasn’t been done. It has majors operating
there. It has CNPC. It has ExxonMobil, and up to a point, even Chevron. So we
focused on Chad and it became the first country we went to and we got our
blocks in 2011.”
ERHC also has interests across several oil blocks in the
Nigeria as well. The company has interests in Oando Energy Resources through
its reverse acquisition of Exile Resources which had interest in the Akepo
field in Nigeria.
Mr. Ntephe had explained, “So, what we wanted to with Exile
Resources was to a large extent what Oando did. It would give us access to the
Akepo Field which has proven reserves and could quickly gone on to production.
However when we started making our moves, as a public company we had to
disclose everything we did, and whether it was down to us or down to their own
exclusive strategy, Oando now moved very quickly and completed a take-over of
the company.
“Our stake in that company remains. And, of course, with
Oando’s reverse take-over our proportionate control was reduced just like all
the existing shareholders’ shares were diluted. In the new entity we have
roughly 420, 000 shares in Oando Energy Resources. We had several million
shares in Exile but when they did the reverse take over everything was
compressed because they did a reverse stock split as well. So, our interest was
diminished to a level where it is no longer considered significant.”
