Note 6 – Oil and Gas Concessions

Following is an analysis of the cost of oil and gas concessions at September 30, 2015 and 2014:

	2015		2014

DRSTP concession	$	3,113,795	$	3,113,795
Chad concession		2,800,600		2,800,600
Pending concessions in other African countries		101,619		91,840

	$	6,016,014	$	6,006,235

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 certain onshore hydrocarbon exploration and production of Block 11A located in northwestern Kenya.

ERHC is also committed under the PSC to:

pay surface fees of $60,000 per year and annual training fees of $175,000 per year during the initial exploration term of two years that started in the first quarter of 2013,

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.

In October, 2013, the Company entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., an international oil and gas company ("CEPSA"). Under the terms of this agreement, the Company assigned and transferred 55% of its participating interest in Kenya Block 11A to CEPSA. Pursuant to the agreement, the Company received farm-in fee of $2,000,000, reimbursement of $2,175,966 of exploration costs incurred, and recovery of capitalized concession costs of $555,642 for the year ended September 30, 2014. In connection with this farm-out, the Company recognized a gain of $239,515 and $2,724,793, during the years ended September 30, 2015 and 2014, respectively.

In exchange for the transferred rights, CEPSA will carry the Company's proportionate share of obligations and financial costs under the terms and conditions outlined in the farm-out agreement. The agreement was approved in January 2014 by the Kenyan Government and from February 2014, CEPSA took over from ERHC as operator under the production sharing contract ("PSC") for Kenya Block 11A.

Republic of Chad Concession Fees and Other Financial Commitments

On June 30, 2011, ERHC entered into a production sharing contract ("PSC") with Chad for certain onshore hydrocarbon exploration and development. In September 2013, the Ministry of Energy and Petroleum of Chad approved ERHC’s application to voluntarily relinquish two of the three Blocks covered by the PSC.

The following is an analysis of the costs paid or incurred at September 30, 2015 and 2014:

	2015		2014

Signature bonus	$	2,000,000	$	2,000,000
Advisers’ and ancillary costs related to the PSC		320,600		320,600
Legal fees and costs for the drafting and negotiation of the PSC, as provided in PSC		480,000		480,000

	$	2,800,600	$	2,800,600

ERHC is also committed under the PSC to:

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

incur surface fees of $16,360 per calendar year during the first validity period starting on July 12, 2012, 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.

Sao Tome Concession

In April 2003, the Company and the DRSTP entered into an Option Agreement (the “2003 Option Agreement”) in which the Company relinquished certain financial interests in the JDZ in exchange for exploration rights in the JDZ. The Company additionally entered into an administration agreement with the Nigeria-Sao Tome and Principe JDA. The administration agreement is the formal agreement by the JDA that it will fully implement ERHC’s preferential rights to working interests in the JDZ acreage as set forth in the 2003 Option Agreement and describes certain procedures regarding the exercising of these rights. However, ERHC retained under a previous agreement the following rights to participate in exploration and production activities in the EEZ subject to certain restrictions: (a) the right to receive 100% working interest signature free bonus of two blocks of ERHC’s choice and (b) the option to acquire up to a 15% paid working interest in up to two additional blocks of ERHC’s choice in the EEZ. The Company would be responsible for its proportionate share of exploration and exploitation costs in the EEZ blocks.

The following represents ERHC’s current rights in the JDZ and EEZ blocks:

Block	ERHC Original Participating Interest	ERHC Joint Bid Participating Interest	Participating Interest(s) Transferred	Current ERHC Retained Participating Interest	Remaining Cost Allocated to Blocks
JDZ 2	30.00%	35.00%	43.00%	22.00%	$	-
JDZ 3	20.00%	5.00%	15.00%	10.00%		-
JDZ 4	25.00%	35.00%	40.50%	19.50%		-
JDZ 5	15.00%	-	-	15.00% (in arbitration)		567,900
JDZ 6	15.00%	-	-	15.00% (in arbitration)		567,900
JDZ 9	20.00%	-	-	20.00%		567,900
EEZ 4	100.00%	-	-	100.00%		567,900
EEZ 11	100.00%	-	-	100.00%		842,195

The Original Participating Interest is the interest granted pursuant to the Option Agreement, dated April 2, 2003, between DRSTP and ERHC (the “2003 Option Agreement”).

Under the terms each of the Participation Agreements Sinopec and Addax agreed to pay all of ERHC’s future costs for petroleum operations (“the carried costs”) in respect of ERHC's retained interests in JDZ blocks 2,3 and 4. Additionally, Sinopec and Addax are entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil from the retained interests on individual blocks until Sinopec and Addax Sub recover 100% of ERHC’s carried costs.

The remaining $3,113,795 of cost related to the DRSTP concession, as shown on the Company's balance sheet at September 30, 2015 and 2014, relate to blocks 5, 6 and 9 of the JDZ, and the Company's EEZ blocks. Production Sharing Contracts are yet to be signed on block 4. As of September 30, 2015, blocks 5 and 6 are in arbitration (see Note 9).