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.
2. 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
3. Special Meeting of Shareholders
Management Presentation
• Strategy overview
• Technical presentation on exploration work
programs in Kenya, Chad
• Fund raising plan
• Value proposition
• Q&A
4. 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
5. 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
6. 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
9. 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
10. Kenya Exploration Acreage
Block 11A licensing history:
Block 11A 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
12. Recent Exploration Success
• Eliye Springs well is in the adjacent Block 10BA
• Loperot and Ngamia-1 wells in Block 10BB are
also nearby
Northwest Kenya
The proximity and in-trend Block 11A
relationship between the
Lotikipi plane and the Abu
Gabra Rift basins of southern Regional Geology
Sudan suggest high oil and The area is dominated by the Cretaceous
gas prospectivity Central Africa Rift System (CARS) and the
Tertiary East Africa Rift System (EARS) with
the associated basin depositional trends
Regional Geology
Similar to Uganda Finds Gravity data enabled the delineation of a
Operator Tullow estimates the sedimentary basin within the Block 11A
discoveries may be similar in area below the Lotikipi plain with a
size to the Lake Albert Rift Basin basin-fill believed to be in excess of
in Uganda, which are estimated 5,000 meters
at 2,000 MMBOE
12
13. Kenya Global Bouguer Gravity
Block 11A
Rift basin
extends into
Block 11A
Rift basins clearly visible in
blue/green colors
14. Gravity Survey Acquired by CAMEC
• The data is coarse grid
and therefore Block
regional, but it identifies 11A
Elemi
3 sub-basins in the north
Turkana area, namely:
Lotikipi
Gatome Lotikipi
Elemi Gatome
• Estimated sediment
thickness in excess of
5000m In the Lotikipi Block 11A Block 11B
Basin
100Km
15. 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 Block 11A
interpreted from seismic
Block 11A
Lotikipi Basin Lokwanamorou High Gatome Basin
Potential sub-volcanic
sediments
16. Subsurface inferred from surface
On
outcrop, the
potential
Potential reservoir target
reservoir sands
are composed
vvvv
of good-quality vvv
basement- vvv
derived vv
units, measurin
g
approximately
500m in
thickness with
measured vv
porosities of up
to 25%
17. Potential Cretaceous Reservoir Sands
Volcanics
Reservoir Sands
Basement
The Lapur outcrop is the most
prominent topographical feature in
northern Turkana
18. 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
19. 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
21. Introduction
• 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
22. ERHC’s Exploration
Blocks in Chad
Block Sq. Km. Acres Working
Interest
Chari-Ouest III 4,500 1,111,974 100%
(northern half)
BDS 2008 41,800 10,329,000 100%
Manga 17,000 4,200,790 100%
23. Republic of Chad
•Proven Reserves are 1.5 Billion Bbls
Source International Petroleum Encyclopedia
Niger •Undeveloped Discoveries are 2.6 Billion Bbls, and
CNPC largest player 14.6 TCF of Gas
Current Production: ~17,000 bbl/d Source USGS, World Petroleum Resources Project
Unconfirmed EUR: 1.0 Blnbbl
Continue to explore
Sudan All Fields
Key Operators: CNPC & Consortiums
Ndjamena Refinery
ERHC BLOCKS Current Production: 465,000 bbl/d
Peak Production: 538,000 bbl/d (2011)
Operator: CNPC
Reserves (remaining): 1.96 Bln bbls
Capacity: 20,000 bbl/d expandable
EUR: 3.0 Bln bbls
to 60,000 bbl/d
Key basins: Muglad, Melut
Online Date: June 2011
Wells Drilled: 300
Supply: Block H Area II (CNPC)
Commercial & Technical Success: 60%
Block H Area II Greater Nile Oil Project
Operator: CNPC (Former EnCana) Operator: GNPOC (Formerly Arakis)
Expected Production: ~17,000 bbl/d Current Production: 203,000 bbl/d
Reserves (remaining): 85 MMbbl Peak Production: 300,000 bbl/d (2004)
OOIP: 700 mmbbl (CNPC) Reserves (remaining): 662 MMbbl
Continue to explore EUR: 1.49 Bln bbl
Chari Ouest - Doba Basin Chad/Cameroon Pipeline
Operator: Exxon (Esso) Operator: Exxon
Current Production: 115,000 bbl/d Capacity: 225,000 bbl/d
Peak Production: 220,000 (2004) Utilization: 115,000 bbl/d
Reserves (remaining): 462 MMbbl Distance: 1,070 km
EUR: 795 mmbbl Port: Cameroon loading
Expandable by adding pump stations
24. Chad Infrastructure
660 mile long pipeline
60,000 bbl capacity, presently 225,000 bbl per day capacity
processing 20,000 bbl per day
Opened 6 February 2012
60% CNPCI 40% CNO
Chad Production
126,200 bbl per day in
2010
(CIA World Fact Book)
9/18/2012
25. Major Tectonic
Elements of Chad
ERHC BLOCKS
Shear Zone
Rift
SILTOU BASIN
FAYA LARGEAU BASIN
DOSEO BASIN
9/18/2012
DOBA BASIN
26. 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
28. Focus Area 1
Tega:
8 mmbbls
BDS2008
Maku:
21 mmbbls
Tega
10 km
Maku
29. ERHC BDS 2008 “Lead A”
ERHC Lead
A
PTD 12800’ MD Esso Tega #1 – 8
MMBOE
NNW SS
E
ERHC BDS ESSO CHARI EAST - 1st Derivative RTE Magnetic Map
2008 DOSEO
30. OPIC Benoy #1 – Lower
Cretaceous (11.9 - 41.3 MMBOE)
SW OPIC Benoy NE
#1
A
B
C
D
E
• 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”
0 1.2 KM ch; API 37.4, GOR 122
• DST #2: 2229 – 2232; 1,174 BOD, 0 MMCFGD, 0 BWD, 24/62” ch;
API 34, GOR 0
31. Focus Area 1 and Area 2
Focus Area 1
2D Seismic
Focus Area 2
Airborne Gravity 3
Gradiometry 2D Seismic
BDS 2008
4
CHARI QUEST
III
OPIC Benoy-1 2
1 BDS 2008
5
CHARI EAST -
CHARI WEST - DOSEA
7 6
DOBA
DOBA/DOSEO
BASINS
32. Short tie-in distances to proposed
infra-structure for ERHC initial
exploration focus areas
ERHC
BDS 2008
OPIC Benoy-1
ERHC
BDS 2008
Tega-1
Griffith
Maku-1,2
Focus Area 2
Griffith
Griffith
Griffith
33. 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
34. 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
35. 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
37. 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
38. 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
39. 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
40. 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
42. Exploration
Asset Value High Return/Low Cost
Market Cap
Exploration Development Production
The market cap and asset value curve depicted here is merely
for discussion purposes. Actual results may vary.
43. ERHC Energy – JDZ
Block 4
$20 $18 Acreage Details:
$18
$16 • November 2003 ERHC was awarded
$14 Block 4 in the JDZ for $0.73 million.
$12 • November 17, 2005, ERHC Energy
entered into a participation agreement
$MM
$10
with an Addax Petroleum who agreed
$8 to assign to Addax a 40.5%
$6 participating interest in Block 4 of the
$4 JDZ for $18 million and pay all of the
$2 $1 Company’s future costs in respect of
$0 all petroleum operations in Block 4
Apr 2004 Nov 2005
Source: Company Public Filings and Press Releases
44. 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 $12,764,006
TOTAL $45,059,907
45. 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
48. Intersection of two rift systems:
Central African and East African Rift Systems
49. Central African Rift System (CARS)
Proven petroleum
province extends
from the Niger
Delta through
Cameroon, Chad,
Central Africa
Republic and
southern
Sudan, terminatin
g in the Anza
Basin, Kenya
52. 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
54. 1D Basin Modeling
Esso Assessment (2008) Platte River 1D Basin Model
• Lower Cretaceous lacustrine Esso Tega #1 well used for
shales of the C, D, and E are geochem, structure and heat flow input
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.
55. 2D Seismic Coverage and Well Locations
in ERHC Technical Inventory
BDS 2008
Chari Ouest III
Focus Area 2
56. Initial Period Technical Work Program
INITIAL PERIOD RENEWAL PERIOD
year2 year3 year4 year5 year 6 year7
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017 2018
Continue
FA1
Expl.well
FA1
3D propsects Drop
FA1 or additional 2D
2D seismic Drop
FA1 Continue
Expl.well
Drop Continue
FA2 FA2
Airborne Expl.well
Gravity FA2
3D propsects Drop
or additional 2D
Drop
Continue
FA2 FA2
2D seismic Expl.well Continue
FA1
Drop Expl.well
FA1
3D prospects Drop
FA1 or additional 2D
2D seismic Drop
FA1 Continue
Expl.well
Drop
dry season 2D/3D Seismic Drilling of Well
Acquisition
Notas del editor
During this presentation, management will provide an overview of its business strategy, discuss the technical aspects of its work programs in Kenya and Chad, highlight its plans for raising funds and explain how those funds will be used to enhance the value of the Company’s assets and enhance shareholder value. We also will set aside ample time for questions.I now turn the floor over to President and CEO Peter Ntephe…
Our purpose today is to request you – our existing shareholders – to give us the means to increase the value of your shareholding by contributing to the growth of your Company. We intend to raise up to $45MM that will be used over the next two years to fund exploration work programs in Kenya and Chad. These programs are intended to boost shareholder value far in excess of amounts contributed and enable shareholders cash in on the enhanced valuation. We will provide details in a moment regarding our assets and why we are so excited about this opportunity to increase their worth and enhance shareholder value.
In the past 3 years, we’ve gone from having only 3 JDZ blocks under definitive contract to having 3 blocks under contract in Chad and 1 further block contracted in Kenya. The size of acreage under ERHC’s control has more than tripled in that time. There are still more contracts on the horizon with negotiations proceeding apace in the EEZ and applications in progress in several African countries.
We’re transitioning rapidly from owning only offshore assets operated for us by others to a focus on onshore assets, some of which this company expects to operate in its own right. It is a fundamental shift but one we expect if diligently pursued will better position the Company and its shareholders to reap significant and sustainable gains.
The ultimate goal of course is to see that the benefit accruing to shareholders, in terms of realizable value of their investment in ERHC, is maximized
I will now call on ERHC’s exploration manager, Mr. Gertjan Van Mechelen, to talk about the onshore assets in Kenya and Chad. Shareholders realize of course that the impending work programs and advance pecuniary obligations on these assets are the immediate reason why ERHC needs to raise money and to raise it fairly quickly. Gertjan?
Location is on the intersection of Central African Rift System and the East African Rift System
Recent success by Tullow south of our acreage in the Ngamia-1 well, oil with similar characteristics as found in Uganda.
Global Gravity derived from Satellite measurements.
The Global gravity does not show what locally acquired gravity shows as the presence of additional basins.
Seismic imaging of the subsurface structure is poor on this 1986 vintage data. Improved seismic acquisition and processing techniques we hope will provide a better subsurface structure.
Excellent reservoir rocks are present in outcrop. We hope to find these same reservoir rocks in the subsurface.
Three block, but all under one PSC., which means these three block do not have separate obligations.
Self explanatory slide
Infra-structure put in place for both domestic consumption as well as export.
Particularly the Chari Ouest III and BDS2008 are located along the Central African Shear Zone (CASZ)
Focus on areas close to proven oil.
Regional stratigraphy mapping indicate presence of alluvial fan deltas and lacustrine deltas in our areas of interest providing both reservoir and seal rocks.
During peak oil generation oil (70-100 mya) would have moved already towards the edges of the basin prior to later structuring.
Similar structural style as seen in the OPIC’s Benoy-1 discovery is expected to the east in our Focus Area 2
Griffith, who hold the acreage south of BDS2008 shows proposed infra-structure in which future discoveries could be tied in.
Thank you, Gertjan. I will now call on Mr. Sylvan Odobulu, ERHC’s Vice President and Controller, to present on our fund raising plans and objectives.
SYLVAN:Thank you, Peter. Our assumption is that we will not accept a farm-in partner through year two of our exploration work programs. This is a conservative assumption that we believe is in the best interests of shareholders. We will therefore need to raise up to $45 million over the next 18 months for our exploration programs in Kenya and Chad. The most feasible option open to us is equity finance. We plan to proceed by a rights offering to existing shareholders and registered direct offerings to new ones.
The shareholder approval to increase the authorized share capital gives us the number of shares needed to undertake meaningful rights offering to our existing shareholders. We shall be announcing the terms of a rights offering shortly, approval having now been given to the increase in authorized share capital. The rights offering will give our existing shareholders the right to purchase shares in proportion to their existing holding
Subject to final consultations with our advisers, we expect that oversubscription privileges will be provided as part of the rights offering to enable willing shareholders take up any shares offered under the rights offering that are unsubscribed at the end of the exercise.
A rights offering gives shareholders the opportunity to participate fully in the Company’s growth while avoiding dilution. Of course, no shareholder is under any compulsion to participate in the rights. I will now hand back to Peter to explain the ERHC value proposition.
PETER: The E&P value proposition is a unique one. The excisable value proposition of the ‘E’ in E&P – that is, exploration – is even more unique. It is a high-risk, high reward proposition that is not necessarily predicated on cash flow and might not even involve the discovery of hydrocarbons.
To increase the value of your Company, to increase the money you can make from this Company, we need to spend money to enhance the assets – up to $45mm assuming we don’t take a farm in partner before then. This is the value proposition of E&P. The more money you can spend on developing the asset, the more you can potentially reap from the investment
In summary, ERHC is positioned to get started with exploration work programs in Kenya and Chad. As we’ve described, we have every reason to be excited about the prospectivity of our target areas. What needs to happen next is raising funds. We understand that existing shareholders are concerned about dilution, which is why we plan a Rights Offering, which will allow existing shareholders to participate and avoid dilution. Our overriding objective is to grow and diversify the Company while adding value to our assets and to shareholders’ value.This completes our management presentation. Thank you for your interest and attention. Dan Keeney is in the audience with a microphone if anyone has questions.
Thanks, Peter. If anyone has questions, please raise your hands. We ask that you keep any comments to no more than a minute. If you have more than one question, we can come back to you, but we want to be sensitive to everyone’s time and give everyone an opportunity to ask a question.