emails, page-24

HERE IS A COPY OF THE EMAIL.....


The JV partner is ‘Mr. Big’ [a big foreign shark as stated by SMH, not Apache or Talisman]. They are so big that AED is finished and minnowed as an operating company. The Operatorship has now been transferred to Mr. Big because of the slice of asset that they are buying. AED will have no say in the running of the Puffin and Talbot fields. AED is our Mr. Sleeper. All of Puffin fields will be operated by this big company. Bye bye Mr. Sleeper. AED will have to pay their share of the exploration and development costs with no more say. AED’s priorities will be completely ignored by this Company. The big company is in no hurry to develop anything. They will meet the tenement exploratory requirements and nothing more, until they are 100% sure. Very very different to AED.



Mr. Big is apparently buying 65% of AED’s assets [all assets including Talbot, Puffin North, South, satellites etc], for something like USD 500M.



Mr. Big, is in no hurry to develop anything further. All big oil companies will take something like 2 years to do developments. The new projects will have to go through internal competition with other big projects. Knowing what is really in Puffin in Talbot, forget about competing for funds within this big company. Therefore, do not expect to see any future developments within the Puffin or Talbot fields till very earliest late 2009. All that will happen is exploratory work only and there will be no future developments for a very long time to come.



One would ask why Mr. Big is then spending all this money. The answer is simple. They want to get a foothold in Australia and this gives them the cheapest possible option to do so. USD 500M is peanuts for this company and AED has been sucked into this no potential for growth and further development to realize the assets.



I also understood, that the North east drilling campaign scheduled for April- May 2008 has now been canceled. Mr. Big has already ascertained his role and have commenced dictating terms.



The SMH of 4 March 2008 stated

“ AED's partner could be a shark


There's good news and bad news for suffering AED Oil shareholders.

The good news is AED is in late-stage talks with a joint venture partner that would give it the cash needed to pay off its debts and help fix problems with its self-funded Puffin oilfield offshore Western Australia.

The bad news is the partner wants to take a majority stake in the project.

Although its problems so far have largely been operational, AED had hoped it could maintain control of the field, with a partner simply providing assistance.

It is now looking like its initial assessment was overly optimistic.

AED said the proposal was from a "significant company" and would place it in a position to extinguish its $176 million bank debt and repay creditors, such as Norwegian oil services provider AGR Group, which had been getting antsy over the ability to recover $41.5 million owing.

AED said the joint venture deal also would give it enough cash to exploit previously identified development and exploration opportunities at its Puffin and Talbot fields.

What AED didn't mention was that selling more than half the project would come at a steep price in terms of earnings and cashflows.”

The meaning here is cashflow and revenue of AED will now be dictated by Mr. Big. This is bad news. Furthermore, with the current poor performance of Puffin North at around an average of 4000 bbl/d, there is no growth potential for AED.



Good news is that all debts, including the Convertible notes debts can now be extinguished for about USD 350Million. AED will be left with some USD 100-150M in cash where they will have to spend their share whenever Mr. Big decides that he will drill and develop.



Other issue is though this deal is to be announced soon [may be end of this week], the actual deal will not be consummated for another 6-8 weeks. The reason is that approvals will have to obtained from Australian Government for transfer of operatorship and a foreign company purchase of Australian assets. There are Northern Territory jurisdiction issues.. I have been advised that these are all hurdles and preconditions for this transaction.



In summary:



Good things are:



(1) AED will have cash and debt free. Probably valued around $2.50-2.75



Bad things are:



(1) Deal cannot be consummated for another 6-8 weeks.

(2) Many pre-conditions will have to be met to consummate the deal.

(3) Mr. Big will dictate terms and become the operator. AED will have no say in the development options or the timing of things.

(4) No developments will be done in a hurry. No new developments till about late 2009. Mr. Big will be risk averse and will take whatever time it takes to get through their internal processes.

(5) AED will have only 35% revenue as well as 35% of the expenses for development.

(6) AED will never be a blue sky stock with potential for growth quickly, but will be Mr. Sleeper.

(7) Why do you think it is taking this long to announce the deal? It is because there are so many hurdles and conditions that AED will need to satisfy before the transaction is finally consummated.



How long would you think it will take before Mr. Big buys out the rest of the assets and leave nothing for the shareholders?

These types of deals or any deal that bails out companies in crisis [See today what happened to ABC Learing] is detrimental because whoever that puts in large sums will always get the best. AED shareholders will loose 65% of the asset and get very little benefit out of the deal.