Erin Energy (ERINQ) Risk Analysis

The Company by virtue of our majority stockholder, CEHL, which has indigenous status in Nigeria, is eligible for preferential treatment under the Nigerian Content Development Act with respect to the acquisition of oil and gas assets and in oil and gas licensing rounds in Nigeria. If CEHL were to lose its status as an indigenous Nigerian oil and gas company due to its affiliation with our U.S.-based company or otherwise, or if CEHL's majority interest in us were to be diluted or reduced due to additional issuances of equity by the Company, or if CEHL were to sell or transfer its interest in the Company or otherwise, we may lose our status as an indigenous Nigerian oil and gas operator. As a result, we would lose one of our key advantages in the Nigerian oil and gas market, and our results of operations could materially suffer.

Following the Allied Transaction, CEHL beneficially owned approximately 56.7% of our outstanding shares of our common stock and continues to own a majority interest. CEHL controls the power to elect our directors, to appoint members of management and to approve all actions requiring the approval of the holders of our common stock, including adopting amendments to our Certificate of Incorporation and approving mergers, acquisitions or sales of all or substantially all of our assets, subject to certain restrictive covenants. The interests of CEHL as our controlling stockholder could conflict with your interests as a holder of Company common stock. For example, CEHL as our controlling stockholder may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investment even though such transactions might involve risks to you, as minority holders of the Company.

Many of the Company's assets are and are expected to continue to be located outside the United States and held through one or more subsidiaries incorporated under the laws of foreign jurisdictions. Substantially all of the Company's operations are and are expected to continue to be conducted in Africa. In addition, some of the Company's directors and officers, including directors and officers of its subsidiaries, may be residents of countries other than the United States. All or a substantial portion of the assets of these persons may be located outside the United States. As a result, it may be difficult for shareholders to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the foreign courts would recognize or enforce judgments of United States courts obtained against the Company or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof or be competent to hear original actions brought in these countries against the Company or such persons predicated upon the securities laws of the United States or any state thereof.

The market prices of securities of energy companies are extremely volatile and sometimes reach unsustainable levels that bear no relationship to the past or present operating performance of such companies. Factors that may contribute to the volatility of the trading price of the Company's common stock include, among others: - financial predictions and recommendations by stock analysts concerning energy companies and companies competing in the Company's market in general, and concerning the Company in particular;- the Company's quarterly results of operations or variances between the Company's actual quarterly results of operations and predictions by stock analysts;- public announcements of regulatory changes or new ventures relating to the Company's business or its competitors, or acquisitions, joint ventures or strategic alliances by the Company or its competitors;- investor perception of the Company's business prospects or those of the oil and gas industry in general;- the timing of commencement of production of new wells;- the operating and stock price performance of other companies that investors or stock analysts may deem comparable to the Company;- large purchases or sales of the Company's common stock; and - general economic and financial conditions. In addition to the foregoing factors, the trading prices for equity securities in the stock market in general, and of energy-related companies in particular, have been subject to wide fluctuations that may be unrelated to the operating performance of the particular company affected by such fluctuations. Consequently, broad market fluctuations may have an adverse effect on the trading price of our common stock regardless of the Company's results of operations.

The market price for shares of the Company's common stock has been, and is expected to continue to be, volatile. Numerous factors beyond the Company's control may have a significant effect on the market price for shares of the Company's common stock, including the fact that the Company is a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volumes. There may be periods of several days or more when trading activity in the Company's shares is minimal as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. Due to these conditions, investors may not be able to sell their shares at or near ask prices or at all if investors desire to liquidate their shares.

There is a limited trading market for our common stock on the JSE. An active trading market may not successfully develop on the JSE, or if it does, it may not be sustained. In addition, we cannot assure what effect our listing on the JSE will have on our trading market on the NYSE MKT. In 2014, we issued an aggregate of 62.8 million shares of our common stock to the Public Investment Corporation (SOC) Limited ("PIC") of South Africa in a private placement. If PIC chooses to sell those shares on the JSE, sales of a large number of shares could have a negative effect on the market price of our shares on the JSE, which could have a negative effect on the market price of our shares on the NYSE MKT.

The potential for substantial amounts of our common stock to be sold in the public market may adversely affect prevailing market prices for our common stock and could impair the Company's ability to raise capital through the sale of its equity securities. Additionally, we may issue and register a greater number of shares of common stock in order to meet our obligations to pay up to $50.0 million in oil and gas milestone payments under the Transfer Agreement or upon conversion of the 2014 Convertible Subordinated Note or the 2015 Convertible Note. All of such shares would be eligible for registration under a registration rights agreement.

The conversion of some or all of the 2014 Convertible Subordinated Note or the 2015 Convertible Note, in the event of a default thereunder, may dilute the ownership interests of existing stockholders. The 2014 Convertible Subordinated Note is convertible into 13.4 million shares of our common stock, which represents approximately 6.28% of our currently outstanding shares. The 2014 Convertible Subordinated Note is subject to anti-dilution adjustment provisions, including provisions that make it convertible into the same percentage of our outstanding shares if we issue shares of common stock or any convertible security at a price per share less than the conversion price. The 2015 Convertible Note is convertible into shares of the Company's common stock upon the occurrence and continuation of an event of default thereunder, at the sole option of the holder. The number of shares issuable upon conversion is equal to the sum of the principal amount and the accrued and unpaid interest divided by the conversion price, defined as the volume weighted average of the closing sales prices on the NYSE MKT for a share of common stock for the five complete trading days immediately preceding the conversion date. Any sales in the public market of the shares of our common stock issuable upon such conversions could adversely affect prevailing market prices of our common stock. In addition, the anticipated conversion of the 2014 Convertible Subordinated Note or the 2015 Convertible Note into shares of our common stock could depress the price of our common stock.

The Company's Amended and Restated Certificate of Incorporation authorizes the issuance of up to 50.0 million shares of preferred stock, which shares constitute what is commonly referred to as "blank check" preferred stock. This preferred stock may be issued by the Board of Directors from time to time on any number of occasions, without stockholder approval, as one or more separate series of shares comprised of any number of the authorized but unissued shares of preferred stock, designated by resolution of the Board of Directors, stating the name and number of shares of each series and setting forth separately for such series the relative rights, privileges and preferences thereof, including, if any, the: (i) rate of dividends payable thereon; (ii) price, terms and conditions of redemption; (iii) voluntary and involuntary liquidation preferences; (iv) provisions of a sinking fund for redemption or repurchase; (v) terms of conversion to common stock, including conversion price; and (vi) voting rights. The designation of such shares could be dilutive of the interest of the holders of our common stock. The ability to issue such preferred stock could also give the Company's Board of Directors the ability to hinder or discourage any attempt to gain control of the Company by a merger, tender offer at a control premium price, proxy contest or otherwise.