COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jun. 30, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 5 – COMMITMENTS AND CONTINGENCIES

COMMITMENTS UNDER PRODUCTION SHARE CONTRACTS

Republic of Kenya Concession Fees and Other Financial Commitments

On June 28, 2012, ERHC entered into a production sharing contract ("PSC") with the Government of the Republic of Kenya for hydrocarbon exploration and production of Block 11A located in northwestern Kenya.

ERHC is committed under terms of the PSC to spend at least $10,250,000 over the first two years on a minimum work program and an additional $30,000,000 in each of the following two periods of two years each. Under the terms of the PSC, ERHC is required to provide a bank guarantee of 50% of the expenditures under the minimum work program. In May 2013, ERHC acquired a bank guarantee facility in the amount of up to $5,000,000 in favor of the Ministry of Energy of Kenya as required by the PSC.

As of June 30, 2013, ERHC has incurred and paid:

a. $310,000 as the entire signature bonus

b. $229,569 as training and surface fees, as provided for in the PSC

c. $36,573 in advisers’ and ancillary costs related to the PSC

Republic of Chad Concession Fees and Other Financial Commitments

On June 30, 2011, ERHC entered into a production sharing contract ("PSC") with Chad for onshore hydrocarbon exploration and development in three blocks. Under terms of the PSC as sealed by the Approval Law issued subsequently, a total signature bonus of $6,000,000 is payable by ERHC. The PSC requires that the signature bonus be paid as follows: $1,000,000 upon transmittal of an Approval Law by Chad to ERHC, $4,000,000 is due within 90 days of the later of (a) a publication of the Approval Law in Chad’s official gazette and (b) a notification of ERHC of the Award Order, and $1,000,000 is due 120 days after the date of transmittal of the Approval Law to ERHC.

As of June 30, 2013, ERHC has paid or incurred:

a. $2,000,000 out of the signature bonus commitment with the balance of $4,000,000 in accrual

b. $480,000 as legal fees and costs for the drafting and negotiation of the PSC, as provided for in the PSC

c. $450,339 in advisers’ and ancillary costs related to the PSC

d. $39,400 as costs of Environmental Impact Study, as provided for in the PSC

ERHC is also committed under the PSC to:

a. Spend at least $15,000,000 over the first five years on a minimum work program and at least an additional $1,000,000 over a further period of up to three years.

b. Pay surface fees of $27,000 per calendar year during the first validity period, and lasting for up to eight years. Surface fees for subsequent periods will depend on the exploration progress as well as on the acreage retained by ERHC.

As of June 30, 2013, particular milestones are outstanding including certain financial obligations as provided in the PSC, as indicated above. During the three months ended June 30, 2013, following the approval of ERHC’s work program in Chad for 2013 and 2014 by the government of Chad, ERHC awarded a contract to perform an Environmental Impact Study (“EIS”), required under the PSC, to a local company. ERHC expects the EIS to be completed during the fourth quarter of 2013. As of June 30, 2013, ERHC has applied to the Government of Chad without prejudice to the PSC, to tailor its acreage holding to current determination of prospectivity. If the application is granted, it might reduced certain financial obligation in the PSC.

LEGAL PROCEEDINGS

JDZ BLOCKS 5 AND 6

Arbitration and Lawsuit

The Company’s rights in JDZ Blocks 5 and 6 are currently the subject of legal proceedings at the London Court of International Arbitration and the Federal High Court in Abuja, Nigeria. The Company instituted both proceedings in November 2008 against the JDA and the Governments of Nigeria and Săo Tomé and Príncipe. The Company seeks legal clarification that its rights in the Blocks remain intact.

The issue in contention is entirely contractual. The Company was awarded a 15 percent working interest in each of the Blocks in a 2004/5 bid/licensing round conducted by the JDA following the Company’s exercise of preferential rights in the Blocks as guaranteed by contract and treaty. The JDA and the Government of STP contend that certain correspondence issued by a previous CEO/President of the Company in 2006 amount to a relinquishment of the Company’s rights in Blocks 5 and 6 under the Company’s contracts with STP which provide for the rights. The Company contends that no such relinquishment has occurred and has sought recourse to arbitration accordingly. It also filed the suit to prevent any tampering with its said rights in JDZ Blocks 5 and 6 pending the outcome of arbitration.

Suspension of Proceedings on the Arbitration and Lawsuit

As of June 30, 2013, the proceedings on the suit and the arbitration are currently suspended while the Company pursues amicable settlement with the Governments of Nigeria and Săo Tomé & Príncipe.

Routine Claims

From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business. ERHC intends to defend these matters vigorously. The Company cannot predict with certainty, however, the outcome or effect of any of the arbitration or litigation specifically described above or any other pending litigation or claims.