re: Official Erin Energy (ERN) thread

Financials are filed, and the call is posted as a webcast on their website. Below are some takeaways, but really need to be considered along with the full filings and listening to the call.

Rumors about Oyo 8 being shut in, and lack of sales due to Nigeria not allowing exports were true. Not enough gas production to pump oil. Bringing in a fix shortly. Oyo 7 kept producing. It was dialed down during the permit situation. Both wells were either stopped, or greatly reduced until the permit was sorted out. The storage vessel stored a bunch of oil, now sold. At least 1MM. As of call, they only had 200K stored.

Both Kase and Lionel McBee took criticism about lack of communications about these events. Some questions were almost hostile.

Capex for 2016 reduced but targeted at increasing production and revenue at existing wells, and the two new wells promised. Production costs are being reduced. Balance sheet being improved. Current break even is net $35.

Contract for light well intervention services with Island Constructor for Oyo 8 being brought back online. Within 30-60 days

Oyo 9 being drilled in 2016, and Prospect G in Miocene. This was announced really last call. Their position is rather than show less of a oss, plunge revenue into exploration while costs are low to the extent possible.

Kase going to concentrate on his charities (funny stuff right there).

2015 revenue was $68.4MM. Lifted and sold 1.4MM net at average price $47.24.

Largest line item was an asset impairment charge. Net loss of $451.5MM resulting in -$2.13 basic and diluted ps. $281.8MM impairment charge, and had increased depletion, depreciation and amor of $99.1MM.

Adjust loss of $70.6MM or -.33 ps.

Average net daily production in 2015 (over days of production) was 6400. Q4 net daily was 2560. Temporary shut in of Oyo 8.

Production costs for 15 were $90MM. $16MM explo costs.

Production guidance for 16 is between 1.5mm - 1.9MM. Net. Capex for 16, drill developmental and one exploration well.

Liquidity. (Aloof as always.) Options to raise capital. Restructure debts, reduced accounts payable.

2016 G&A down 17%, Cap down 20% and operating down 20%.

Mark Robins from Wells Fargo Advisors -

Mark is somewhat hostile about lack of communications. He is pinning down Kase about exactly how many barrels are being pumped out of both Oyo 7 & 8. What happened to Oyo 8 that it got shut in? Kase answered.

Kase said they filed and announced the export permit situation. (Kase should be on Dancing With the Stars).

In Q2 and Q3 they reached full storage of 1MM. Forced to shut in. (Not clear if one well, or both wells).

For mechanical reasons well, or wells (not clear again) didn't come back up. Encountered problems with safety valves.

Light intervention vessel was needed. Limited availability. Most productive well, 8K, was shut in.

They were at 14K, but in addition to the mechanical issues and shut in, had a natural decline.

Wells Fargo pushed Kase further. Why didn't you have another ship available after first ship was filled to 1MM?

Kase stresses government didn't allow oil to be sold (which really doesn't answer the question). After government audit was completed, all 1MM barrels were sold.

ERN then had the "mechanical" problem(s).

Well Fargo suggests ERN's pr people do better job. (Laffy)

Steve Green Ordinance Capital.

What's the cost to produce the oil including storage?

Kase says break even is $35, and as production is increased it will fall. He drops #9, so this is the first new well. Cost will be reduced to $29-$30.

Reach agreement with operator of FBSO. Major operating expenditure (fixed). This will result in cost of production being lower than what "I've" (Kase) mentioned.

Does $29-$30 include cost of paying interest?

Kase: "That is correct"

That's the all in cost?

Kase: "That is correct"

What percentage of your costs are fixed?

Kase: 70-80%

Miocene - High level of confidence. Why? Prospect G especially.

Worked by various 3rd parties, all with high confidence. In an environment that other large producers are present and producing. Technical work. PLan to engage in a contract to drill 2nd half of 2016.

Frank Zins for Seeful

Shut down 7 & 8. What date?

Kase - September. And that is when ERN noticed an issue with Oyo 8. Cut down production due to permit issue, and then shut down Oyo 8.

Late September tried to open up 8, and couldn't open it.

What are you currently producing today?

2000 from Oyo 7.

Combination of 7 & 8 was producing 13K, and present production of 7 is reduced due to depletion?

Kase - Several factors. "conditions issue" and can't produce enough gas to inject back in well to bring up more oil. When Oyo 8 is brought back up, there will be enough gas to increase production.

Production will be brought up to 9000.

Pushed further on 14K to 9K.

Kase - 14K was oil equivalents. 9 is oil. Kase says, "more or less" Oil equivalents would be 11K.

Pushed further - Is that 11K net?

Net is about 88% of gross.

Asks about 9 and Miocene. Same rig?

9 will be tied in to same reservoir. It will come in about about 6-7K oil, don't know about equivalent. Most likely 9 is the first new well.

Current level of storage

150K

He reinforces the bad communications.

Mark Highman Sigaro Capital Advisors.

Plan to drill 9 and G?

Drilling of G is about 25 (or 45, I couldn't hear) days. Kase previously mention they have moving pieces, but want to time this so 9 is drilled, tied in and producing with no down time, and G is immediately started after that. They will delay, if necessary, to optimize this schedule.

50 days for drill and complete of 9. Production for 9 would come in early 2017.

Liquidity?

Oyo 8 back online. Financing and capital. Continued support from two large shareholders, so they believe no issues raising necessary capital.

Form - Loans from Allied?

Various options.

Gambia with capital constraints makes wildcat impossible?

Committed by end of 2018. Gambia extended. Kase goes back and talks about potential partners for Gambia, becuase of successes announced in Sennagal (sic), which are extremely close to ERN's fields.

Peter Cardello First Standard Financial - My one problem is management's poor job in communicating with market. Low trading volume, high spread. No interest. 4-5 months with no updates. Has harmed company.

Kase - We're not going to have releases every 6 weeks like in the past. We're cutting costs. We'll do better. We will announce news that is worthy.

Not me.

Down on good news. I bought more.

Putting off debt payments is my best guess. I bought a bunch on the dip.

LINK

I bought some additional today as well. Strange pricing action., The announcement of the intervention vessel was good news, and the price dropped.

I understand the concern today about debt restructure. But really, given most of the real debt is payable to either Allied or Kase, and not immediately due, it sounded like this could also be considered good news. They seems t get along fine with Zenith. Or if not good news, maybe a better way to phrase it is not terrible news.

To be clear the rest of what I said that wasn't quoted:

"Or if not good news, maybe a better way to phrase it is not terrible news."

In this case it's not terrible news. It was expected. The debt was being serviced fine through the prepayment agreement with Glencore (not a small player). They ran into issues (export permitting, and an underwater deterioration as I understand it), and one of their banks, a smaller lender in terms of their debt, has decided to work with them.

In light the overall depressed selling price, it isn't unexpected, nor is it horrible. And due to their debt structure, isn't much of an issue right now. Although it could easily become an issue. That is true.

Again, I've indicated several times on here that this is a speculative play. And it is. Most of us already took our principal and some profit out a long time ago.

It is not a pump and dump on my part as you seemed to suggest several posts further back. It is a risky play on what could ultimately turn into a royalty company, which has become even more risky due to the current oil situation.

Could very well be. I doubt PIC lets that happen. But it could very well be. Time will tell.

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Q1 looked more encouraging. About $415K daily in revenue, although it isn't clear what the day to day BOEPD and BOPD was as the intervention wasn't successful until part way into the quarter.

A bit discouraging is that they didn't hold their bank hostage earlier than they did, as posted above, which turned out to be a good thing. Exactly as I had suspected, posted above, it would be.

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CSB

IG, thoughts on how the Trump victory will affect this stock? I know the CEO is an Obama/Clinton guy.