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Exploration:Prospects and Challenges for a Small Independent

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Peter Ntephe, PhD

• President and CEO of ERHC Energy Inc.• Career spanning 25 years, in the public and private

sectors. • Involved in ERHC’s executive management since 2001. • Key roles in the negotiation, securing and maintenance

of ERHC’s oil and gas interests in sub-Saharan Africa• Member of the Association of International Petroleum

Negotiators (AIPN) and the Committee on Oil and Gas Law of the International Bar Association.

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Cautionary Statement

This presentation contains statements concerning 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 stockholders’ meetings 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 Kenya, Chad, the JDZ and the Exclusive Economic

Zone 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 this presentation. 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.

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Part 1. The Exploration

Model

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Exploration Company Business Model

• Step 1: Acquire– Acquire early stage exploration assets – low entry costs

• Step 2a: Build – Develop prospectivity of assets – G&G work, reserve

estimate, drilling• Step 2b: Build

– Gain increased valuation of assets and company with Step 2a

• Step 3: Sell– Sell assets or sell company at tremendous profit (just

before drilling or on discovery)

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Exploration Value Proposition

4 to 10 years 5 to 12 years 5 to 20+ years

Mark

et

Cap A

sset

Valu

e

Exploration Development Production

Usual Point of Sale

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Salient Points on Model

• No cash flow• Until discovery of oil and/or sale of asset or company

(“Payout”)

• Equity is sole source of capital• Working capital before Payout is from sale of equity in (a)

asset and/or (b) company

• Process-driven value• Value accretions of asset and company predictable

through asset prospectivity development

• High risk • But high reward when successfully executed

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Part 2. Case Study:ERHC Energy

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Introducing ERHC

• U.S. Public Company – Regulated by U.S. SEC; based in Houston– Shares tradeon the OTCQB marketplace

(OTCQB:ERHE)– Market Capitalization: $53.5m (August 16, 2013)– Issued Shares: 738m

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ERHC Exploration Assets

• Kenya • Block 11A

• Chad• Blocks BDS 2008, Chari Ouest 3 and Manga

• Nigeria-Sao Tome & Principe JDZ • Blocks 2, 3, 4, 5, 6 and 9 (working interests)

• Sao Tome & Principe EEZ • Blocks 4 and 11

• Small Equity Stake • In Toronto-listed Oando Energy Resources (TSX: OER)

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The Original ERHC Plan

Remember the Exploration Business Model and E&P Value Proposition in Part 1:• Step 1. Acquire frontier E&P rights for low entry

costs• Step 2a. Build asset value through greenfield G&G

work, attract partners and drill wells• Step 2b. Build company value by doing 2a, driving

ERHC rapidly up the value curve• Step 3. Sell ERHC or E&P rights for tremendous profit

prior to drilling or upon discovery (within 5 years)

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Oil Frontier: Sao Tome & Principe

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Original Plan Execution: Step 1. Acquire

• 1997: Exclusive Agreement with STP– 25 year term– Over 50% of net revenues from all STP oil production in return for

• Mapping STP maritime boundaries and delineating Exclusive Economic Zone• Developing STP oil industry, including establishing national oil company and licensing oil rights• One-time payment of $5million

• 1997-1999: ERHC does the following: – Pays $5 million– Maps maritime boundaries and delineates EEZ– Establishes national oil company (JV with government)– Contracts for seismic acquisition

• 1999-2003: ERHC and STP renegotiate Agreement until: – ERHC gives up all previous rights and entitlements in return for preferential minority rights in

• 6 offshore blocks in the Nigeria-STP Joint Development Zone (JDZ)• 4 offshore blocks in the STP EEZ

• 2004: ERHC exercises preferential minority rights in the JDZ• 2005-2006: ERHC teams up with International Operators to acquire additional rights (by

competitive bidding) in JDZ Blocks 2, 3 and 4

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Original Plan Execution: Step 2a. Build

• 2006 -2009: Pre-drilling Activities– Geological and Geophysical Work– Preparation for drilling and contracting of drillship

and rig• 2009-2010: Drilling

Well Block Total DepthKina-1 JDZ Block 4 3,750m

Bomu-1 JDZ Block 2 3,580mLemba–1 JDZ Block 3 3,758mMalanza-1 JDZ Block 4 4,196mOki East-1 JDZ Block 4 3,873m

Original Plan Execution: Step 2b. Build (Value)

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09

$/ Sh

are

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February 2009Sinopec-ERHCannounceplans to drillexploration well

June 2009Addax-ERHC announce4 exploration wellprogram

~$80 MM~$160 MM

August 2009Drilling begins onLemba – 1 in Block 3 of JDZ

March 2009Sinopec-ERHC prepare for Bomu– 1 wellon Block 2 of JDZ

~$310 MM

~$535 MM

~$340 MM

~$672 MM

~$540 MM

11x price increase over 8 month period Jan – Sept 2009

Month 1 Month 8

Milestones

Market Cap

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Original Plan Execution: Step 3. Sell?

• 2010: Results of drilling– No commercial discoveries announced– >$400 million exploration costs written off– Value curve inverts

• What to do? Sell at

diminished value?

Renew plan and start

again?

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Renewing the Plan

• 2010-2011– Acquire

• Sao Tome & Principe EEZ – Blocks 4 and 11• Chad – BDS 2008, Chari Ouest III and Manga Blocks (onshore)• Kenya – Block 11A (onshore)

• 2011-2013– Build (Exploration)

• G&G work (ongoing)• Formation of partnerships (ongoing)

– Build (Value)• At inception of value curve again

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Republic of Kenya

• ERHC’s Block 11A is at the intersection of two major rift systems

• The African rift play is one of the hottest trends in global oil exploration

• Recent African rift discoveries include:– Ngamia (Kenya) 200-250 million barrels of oil– Twiga (Kenya) flowed at a cumulative rate of

5,200 barrels/day– Lake Albert (Uganda) 1.3 billion barrels of oil

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Republic of Chad

• The Republic of Chad has proven oil reserves of 1.5 billion barrels

• Undeveloped discoveries estimated at 2.6 billion barrels

• ERHC’s assets in Southern Chad are adjacent to the Doba Basin and the Doseo Basin

• The area produces more than 120,000 barrels per day

• Served by the 660 mile Chad/Cameroon Pipeline and the N’Djemena Refinery opened in 2012

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São Tomé and Príncipe Exclusive Economic Zone

• Virtually surrounded by proven hydrocarbon systems• ERHC has a 100 percent working interest in Blocks 4

and 11• Free of signature bonuses• Additional rights to acquire up to a 15 percent paid

working interest in two additional blocks• Cretaceous Turbidite fan deposits from offshore

Gabon may have formed traps in Blocks 4 and 11• Similar fan plays led to the Jubilee Field discovery

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Part 3. The Continuing Investment Rationale

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Example of Successful Exploration Business Model

• Pre-drilling ofRovuma Field, Mozambique: $18m valuation

• 12 months later, after drilling and huge discovery in Rovuma: $2bn valuation

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ERHC Investment Opportunities

• ERHC is open to discuss– Farm-in and other partnerships on ERHC’s oil

and gas assets– Equity participation in asset-holding

subsidiaries– Other routes to participation in ERHC’s diverse

asset portfolio

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Summary

• Early Stage Exploration– High risk– Possibility (but no guarantee) of high reward

• Small Independent– Focus on early mover opportunity and low-entry cost – Revenues during execution limited to sale of:

• Company equity• Equity in asset

• Proven but Recondite Business Model– Precedents of successful execution and massive profits– Perseverance is key

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