By Yemie Adeoye
RHC is a sub-Saharan,
energy investment company with a strong Nigerian background.The American oil company with a single largest Nigerian interest of 43 per cent has also decided to expand its shareholding with its recent move to get listed on the London Stock Exchange and subsequently on the Johannesburg stock Exchange. This is aimed atÂ giving more peopleÂ around the world the opportunity of having a stake in the fast expanding oil investment company.
The company was representedÂ Â at the just concludedÂ Nigerian Oil and Gas (NOG) 2010 conference in Abuja.
The companyâ€™s Vice President Corporate Development Mr David Bowell, Chief OperatingÂ Officer Peter Ntephe and Financial Controller Sylvan Odobolu all spoke with energy correspondents on immediate plans of the company in its effort to expandÂ operations and create more presence in Nigeria.
ERHCâ€™s planned investment in Nigeria
We will be looking at the oil services; anything that can enhance the delivery of our products is an investment that could make sense to us. And we are looking at a number of such opportunities in Nigeria. From oil service companies, to refineries, weâ€™ll probably leave that to the experts because it is a technical business that is highly capital intensive and the returns on investments while not steady are not as spectacular as they are. So we see ourselves as primarily an upstream company withÂ some presence in oil services.
Our strategy is to get into production and again thatâ€™s where the battle is very interesting, you canâ€™t buy into some of these projects that are very close to production. If we can get into any of those, it will make a lot of sense to us because we make a lot of revenue from extra productions and recycled into our business to try to expand it. We relyÂ solely on share capital, held by our share holders.
Securing credit lines to finance operations
What we areÂ looking atÂ is listing on the London Stock Exchange. The idea isÂ that we will do that to generate funding to be able to expand our business in Nigeria and the advise weâ€™ve taken is that we will raise share capital available to companies through the capital market just asÂ Oando is raising money in London, Afren has raised over hundred million dollars over the last year in London, and we believe weâ€™ve got an attractive set of assets and an attractive set of strategy, so we should also follow suit.
This means of financing is available to companies such as ours and we will end up raising money through theÂ London Exchange.Â Afren has raised over hundred million dollars in the last year in the London Exhange and we believe that we have got an attractive strategy that we should use as well and that is what we shall do.
Interests despite uncertainties in the Nigerian oil and gas industry
We believe that this is a crucial time and we also believe that if you go to sleep, you will miss the boat and coming at this time when the risks are perceived to be higher than other time is actually a good time to get a good deal.
If you wait for the smaller players to come in, youâ€™re going to miss some of the better deals and also you end up paying more, and we believe we understand the market perspectives than most of the international companies. As far as the PIB is concerned, the Nigerian government is not going to be part in destroying the goose that lays the golden eggs because every body weâ€™ve spoken to tells me that the Niger Delta needs investment, and they can’t make it unattractive for companies like ERHC to come in or we take our money and go somewhere else. So I donâ€™t think thatâ€™s going to happen.
Strategy of operations in the Niger Delta
Our strategy is to partnerÂ Â with Local players. We are actually by ownership structure an indigenous company and we believe that to succeed in Nigeria we needed an indigenous company as a partner.Â So it boils down to choosing your indigenous partner very carefully in participating in a joint venture where our strength is needed withÂ those of the joint venture.
It is coming in a very well sought outÂ manner in working with the right people, if you work with the wrong people its not going to work.
The Sao-Tomeans have announced that their licensing round is going to commence in March this year, and they are going to start a six month licensing rounds for nineteen blocks in what they call the Sao-Tomean (Exclusive Economic Zone) EEZ. But because of what weâ€™ve done in the area in the past, ERHC have the right to choose two blocks of the hundred per cent of ownership each and also has a right to choose 215 per cent interest in two other blocks.
We have to pay a signature bonus on that. We have recently negotiated with the Sao-Tomeans, chosen two blocks, blocks 4 and 11, and we will choose two in the 15 per cent interest in due course which is being negotiated with the Sao-Tomeans.
The EEZ is deep water and it is difficult to get into these fields until weâ€™ve negotiated and the Sao-Tomeans can tell usÂ what the developments would be,Â Â Â Â but we would know that in the next six to nine months.The currently owned blocks of the JDZ
We are a large working interest holders in the JDZ and the thing to understand about our holdings in the JDZ is that we have whatâ€™s called the carried interest, in other words, the operators of the blocks have to pay our development costs, and they can recover that money out of all that was taken out of that block in due course so we donâ€™t have any monetary obligations in the JDZ.
The operators who got interested in blocks 2, 3 and 4.Â Sinopec is the operator in block 2 and Addax in blocks 3 and 4. Phase one of exploration drilling in that area has happened and is completed, weâ€™re waiting for the results which would be announced within the next month or in six weeks and then we move on to phase 2. We have been following negotiations with the Joint development Authority (JDA)
Ownership structure of ERHC
The company has about two and half million (2,500,000) shareholders, and from a number point of view the vast majority of them are Americans, but from a per centage point of view the company is about 51/52 per cent owned by Nigerian interest, and our biggest single shareholder holding about 43 per cent is the Chrome group, and the remaining 8 to 9 per cent is held by a number of individuals and companies.
Outcome of a recent investigation
The thing to understand is that it was an investigation. They came in and did their investigation, the investigation thenÂ went quiet, and in January of this year the authorities returned all the paper works they had taken from us as part of their investigation, and the investigation, if it had proceeded would have led them charging us in the US courts for some criminal misdemeanor and they have not done that, and the fact that they returned all of our documents simply indicates that they are not going to do that.Â The investigation started in 2005 and it is now 2010 and the expectation is that if theyÂ had found anything wrong they would haveÂ charged us.Â As far as we are concerned weâ€™ve got a clean record.
If we operate in Nigeria we have to be subject to the countryâ€™s laws and rules so we would create a reporting structure and a monitoring structure to ensure that we comply with local content requirement and I do not think there is any long term benefit in trying to find a way around these policies as it is more benefitial to play by the rules and that is what we would do.
Scope of operation
We see ourselves strictly as energy investors, we do intend to reinvent the wheel, we speak to people who are good at actually operating them and we would want to tune up with those people, indigenous and non indigenous depending on circumstances of a particular investment opportunity.
Attraction to Nigeria
We have always been attracted to the Nigerian environment, the issue has always been that of corporate development where all of our assets are in the JDZ and the phase one development process that was completed requires that we focus our attention and resources on that, now if that is completed we can start moving forward and looking at other opportunities, alsoÂ we started off in the JDZ and from the operations point of view our mnagement5 was focused on the JDZ our resources so that we could focus on other areas and as i said earlier we are looking to expand from sub-Sahara down to Capetown, and you donâ€™t just decide to do that on one day and start on day two, it takes time to develop the expertise, the networks, and so on. So that is principally weâ€™re we come from and why we are where we are today.