scenarios

posted here from other thread.

Rougetrader,

You win the prize for the most intelligence post on AED and ppl should go back and have a readread of your post. A+

Totally agree with the first part. Asset sale does not mean more AED shares - in reality or theory! It means the revenue stream/prodn is split according to the percentages agreed upon. As I read it, AED is not selling a percentage of the company either, rather selling a percentage of the existing production fields. Contrary to what some have said, it doesn't necessarily include future development and as such AED can still go it alone on this.

As for the figures, I have said I am expecting $400M for 51% (slightly different to your estimates). Value of AED will then have to be decided by the maket. But with about $150M in bank; 49% of estimated $260M in revenues (15000bpd @ $85 minus prodn of $33pb); much more stability; a lot of new terriority and possible increase in prdn; we should see the start of a steep climb in SP back to where it was 4-5 months ago!!! On the above and with profit of say $80-100M pa in theory we should see a market cap of over a billion (that is a PE of 10-12 min). Which is 4X current share price. With the carnage elsewhere, this will take some time - but a doubling of SP in the short term is reasonable to expect.

Based on figures of say $250M for 60 or 70% of producing assets, I think the SP will stay rather neutral ($1.70-$2 range). But AED's "extinguish debt" and money left line leads me away from this.

If the deal is closer to $500M and up to 66%, WHOA Baby! Get set for blastoff. This will mean that they will have pretty much Market Cap in Cash; Debt Free and Ongoing Profitability (say $70M) . I hope and I pray, but realistically this may be a little too optimistic.

There is downside. When the money is coming? If it is a foreign company then FIRB may delay process. We may have more bad news from the fields (cyclones, reserves only 30M barrels; prodn back at 5000bpd or aliens attacking); Short term refinancing suprises; Hedging on oil sales at US$70 in still in place up to 1M or 1.5M barrels (from memory). Plus if AED has not made an announcement by Friday, I will be more concerned and will expect some sort of nasty suprise.

Upside. Buyer should be able to bring some expertise to the party. Price of oil doesn't look like stopping. Potential for good news on finds. Buyer seems to have already ok'ed the deal.

Someone, mentioned about the H1 Report or lack thereof at this stage. I don't see this as a huge drama and seems reasonable going into the negotiations last Wed. Will expect to see this with the announcement on return to trading and to assit with cruncing numbers.

As for selling. I am ready to hold on for a couple of weeks to how it travels.

Will wait and see.