Management Presentation from October 9, 2012 Special Meeting of Shareholders

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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.

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  • 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.
  • Management Presentation from October 9, 2012 Special Meeting of Shareholders

    1. 1. www.erhc.com
    2. 2. Cautionary StatementStatements during this presentation may concern ERHC Energy Inc.’s future operating milestones, future drilling operations, theplanned exploration and appraisal program, future prospects, future investment opportunities and financing plans, futureshareholders’ meetings, response to U.S. governmental authority and related proceedings, as well as other matters that are nothistorical facts or information. Such statements are inherently subject to a variety of risks, assumptions and uncertainties thatcould cause actual results to differ materially from those anticipated, projected, expressed or implied. A discussion of the riskfactors that could impact these areas and the Company’s overall business and financial performance can be found in theCompany’s reports and other filings with the Securities and Exchange Commission. These factors include, among others, thoserelating to the Company’s ability to exploit its commercial interests in the JDZ and the exclusive territorial waters of São Tomé andPríncipe, general economic and business conditions, changes in foreign and domestic oil and gas exploration and productionactivity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance withgovernmental 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 thedate of hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to anyforward-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. 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. 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. 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. 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
    7. 7. ERHC Stock Price0.170.150.130.110.090.070.05 Past Six Months
    8. 8. Kenya Exploration
    9. 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. 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
    11. 11. Oil and Gas Occurrences in the Region
    12. 12. Recent Exploration Success • Eliye Springs well is in the adjacent Block 10BA • Loperot and Ngamia-1 wells in Block 10BB are also nearbyNorthwest KenyaThe proximity and in-trend Block 11Arelationship between theLotikipi plane and the AbuGabra Rift basins of southern Regional GeologySudan suggest high oil and The area is dominated by the Cretaceousgas prospectivity Central Africa Rift System (CARS) and the Tertiary East Africa Rift System (EARS) with the associated basin depositional trends Regional GeologySimilar to Uganda Finds Gravity data enabled the delineation of aOperator Tullow estimates the sedimentary basin within the Block 11Adiscoveries may be similar in area below the Lotikipi plain with asize to the Lake Albert Rift Basin basin-fill believed to be in excess ofin Uganda, which are estimated 5,000 metersat 2,000 MMBOE 12
    13. 13. Kenya Global Bouguer Gravity Block 11A Rift basin extends into Block 11ARift basins clearly visible in blue/green colors
    14. 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. 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. 16. Subsurface inferred from surfaceOnoutcrop, thepotential Potential reservoir targetreservoir sandsare composed vvvvof good-quality vvvbasement- vvvderived vvunits, measuringapproximately500m inthickness withmeasured vvporosities of upto 25%
    17. 17. Potential Cretaceous Reservoir Sands Volcanics Reservoir Sands Basement The Lapur outcrop is the most prominent topographical feature in northern Turkana
    18. 18. Work Program and Budget: Year 1General & Admin $2,478,500PSC work program $3,432,500Performance bond $5,125,000Other PSC expenditure $865,000Contingencies $1,000,000Total $12,151,000
    19. 19. Work Program and Budget: Year 2General & Admin $1,532,750PSC work program $10,040,000Other PSC expenditure $3,242,500Contingencies $1,000,000Total $15,640,250
    20. 20. Chad Exploration
    21. 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. 22. ERHC’s Exploration Blocks in Chad Block Sq. Km. Acres Working InterestChari-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. 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 ProjectOperator: CNPC (Former EnCana) Operator: GNPOC (Formerly Arakis)Expected Production: ~17,000 bbl/d Current Production: 203,000 bbl/dReserves (remaining): 85 MMbbl Peak Production: 300,000 bbl/d (2004)OOIP: 700 mmbbl (CNPC) Reserves (remaining): 662 MMbblContinue 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. 24. Chad Infrastructure 660 mile long pipeline60,000 bbl capacity, presently 225,000 bbl per day capacityprocessing 20,000 bbl per dayOpened 6 February 201260% CNPCI 40% CNO Chad Production 126,200 bbl per day in 2010 (CIA World Fact Book)9/18/2012
    25. 25. Major Tectonic Elements of Chad ERHC BLOCKS Shear Zone Rift SILTOU BASIN FAYA LARGEAU BASIN DOSEO BASIN9/18/2012 DOBA BASIN
    26. 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
    27. 27. Paleogeographic Reconstruction of Lower Cretaceous “C” Doseo Basin9/18/2012 Patterson et al (2007)
    28. 28. Focus Area 1 Tega: 8 mmbbls BDS2008 Maku:21 mmbbls Tega 10 km Maku
    29. 29. ERHC BDS 2008 “Lead A”ERHC Lead APTD 12800’ MD Esso Tega #1 – 8 MMBOENNW SS EERHC BDS ESSO CHARI EAST - 1st Derivative RTE Magnetic Map 2008 DOSEO
    30. 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. 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 IIIOPIC Benoy-1 2 1 BDS 2008 5 CHARI EAST -CHARI WEST - DOSEA 7 6DOBA DOBA/DOSEO BASINS
    32. 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-1Griffith Maku-1,2 Focus Area 2 Griffith Griffith Griffith
    33. 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. 34. 2013 Work Program and BudgetGeneral & Admin $1,695,000PSC work program $1,514,645Other PSC expenditure $545,006Contingencies $750,000TOTAL $4,504,651
    35. 35. 2014 Work Program and BudgetGeneral & Admin $1,395,000PSC work program $10,074,000Other PSC expenditure $545,006Contingencies $ 750,000TOTAL $12,764,006
    36. 36. Fund Raising
    37. 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. 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. 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. 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
    41. 41. Value Proposition
    42. 42. Exploration Asset Value High Return/Low Cost Market Cap Exploration Development ProductionThe market cap and asset value curve depicted here is merelyfor discussion purposes. Actual results may vary.
    43. 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 2005Source: Company Public Filings and Press Releases
    44. 44. Growing Value Requires InvestmentKenya Work Program and Budget: Year 1 $12,151,000Kenya Work Program and Budget: Year 2 $15,640,250Chad 2013 Work Program and Budget $4,504,651Chad 2014 Work Program and Budget $12,764,006TOTAL $45,059,907
    45. 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
    46. 46. Questions and Answers
    47. 47. www.erhc.com
    48. 48. Intersection of two rift systems:Central African and East African Rift Systems
    49. 49. Central African Rift System (CARS)Proven petroleumprovince extendsfrom the NigerDelta throughCameroon, Chad, Central AfricaRepublic andsouthernSudan, terminating in the AnzaBasin, Kenya
    50. 50. Potential Reservoirs
    51. 51. Subsurface Cross Sections
    52. 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
    53. 53. Stratigraphic Chart - Esso (2008) HC Source Lacustrine Shales
    54. 54. 1D Basin ModelingEsso 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. 55. 2D Seismic Coverage and Well Locations in ERHC Technical Inventory BDS 2008Chari Ouest III Focus Area 2
    56. 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 ContinueFA2 FA2Airborne Expl.wellGravity 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

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