Remodeling Nigeria’s Energy Industry for 2020:Remodeling Nigeria’s Energy Industry for 2020:The E&P Capital ChallengeThe E&P Capital Challenge

Peter Ntephe (COO, ERHC Energy)Peter Ntephe (COO, ERHC Energy)

Cautionary StatementCautionary 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.

The E&P VacuumThe E&P Vacuum

• Nigerian Petroleum Policy Emphasis: Local Capacity Development

• Stunted Progress: operational capacity in exploration and production

• Common problem for developing economies

The ConstraintsThe Constraints

• Two constraints – Technical capabilities– Financial capacity

• Finance is arguably the paramount constraint• E&P is highly capital intensive

Capital Intensive PursuitCapital Intensive Pursuit

• E&P activities are:

‘...characterised by a high level of risk, a long time span before a return on investment is received, a lack of correlation between ... expenditures and the value of any resulting reserves’

– Wright and Gallun (2008:2)

The IllustrationThe Illustration

• Nigerian Marginal Field Program– 23 marginal fields awarded in 2003– Less than a quarter taken into production

• Major complaint has been finance– Limited domestic sources– Limited access to international capital

Accessing Accessing International CapitalInternational Capital

• Credibility challenge for E&P players• International recognition required

– Recognizable corporate structures– Corporate governance and accounting– Reporting and disclosure

Case StudyCase Study

www.erhc.com

Possible precedent for Nigerian E&P players

A model not the [only] model

Introducing ERHCIntroducing ERHC

• Incorporated in Colorado and based in Texas, USA• Publicly traded on the U.S. Over the Counter

Bulletin Board (OTCBB) – ERHE.OB• Market cap: $250 million - $500million• Valuable E&P assets in the Gulf of Guinea

ERHC in the Gulf of ERHC in the Gulf of GuineaGuinea

• Rights in six of the nine blocks of the Joint Development Zone

• 100% of two blocks and other rights in the Sao Tome & Principe Exclusive Economic Zone

• Moving into Nigerian fields

Uniqueness of ERHCUniqueness of ERHC

• Significant investment by Nigerian business interests

• Sensitive to American and Nigerian policies

• Subject to international corporate governance standards

• Structure and governance recognized by international capital

ERHC Access to ERHC Access to Capital I: EquityCapital I: Equity

• Impressive market capitalization on OTCBB

• Exploring listing on AIM of the London Stock Exchange for even better capitalization

ERHC Access to ERHC Access to Capital II: CarryCapital II: Carry

• ‘Carry’ arrangements with technical partners in 3 JDZ Blocks

• Costs of exploration borneby partners

• Cost recovery from production

ConclusionConclusion

• Capital for aspiring Nigerian E&P players remains major issue

• Aspiring Nigerian E&P players need structures recognized by international capital

• ERHC a possible model

Remodeling Nigeria’s Energy Industry for 2020:Remodeling Nigeria’s Energy Industry for 2020:The E&P Capital ChallengeThe E&P Capital Challenge

Peter Ntephe (COO, ERHC Energy)Peter Ntephe (COO, ERHC Energy)