aed sinopec joint venture...60pct sinopec, page-60

P1000,

I disagree with some of your figures. However, there is a lot of detail missing, not only regarding the JV but also regarding AED's exact financial position. The latest financil statements relates to 30 June, nearly 9 months ago. However, I will revised your figures with what I think your calculation should include. They may or may not be more accurate.

Asset............ 400
Cash............. 600

less

Debt............. 279 (Refer below, replaces your 350)
Creditors......... 60 (leave at your 60, only know of 41)
Costs (Mac Bank).. 30
Well Remediation... 0 ( replaces your 45)
Hedge Book........ 18 (replaces your 50)

Value 613 (or $4 per Share)


1. Estimated Net Debt Level

AED Debt Levels (with Convertable Notes included)

Debt as per 30 June 2007 (as per annual Report):

...............................................$

Current Liabilities...................64.6M
Non-Current Liabilities...........124.2M
Total....................................188.8M

(consists principally of CBA/WBA & Convertable Notes)

Add:
Loan draw downs Sept Qtr..... 95.0M
Loan draw downs Dec Qtr.......22.3M

Estimated Debt Levels 31 Dec 07 .... 306.0M

(Consists of estimated $176.2M CBA/WBC plus Convertable Notes)

Cash on Hand 31 Dec 07 $26.9M

Est Net Debt $279.1M

Outstanding know unpaid Debts Est. $41.0M

Est. Total Debt as at 31 Dec 2007 $320.1M

My calculations above for net debt position for AED. I think previous estimates of AED's debt levels have left off the convertable Notes (estimated at $129.8M). KB on NWE thread has indicated that these notes may be a sticky point in current negotiations. (I note that AED's recent cash flow quarterly reports and latest Appendix B failed to detail these notes). They were detailed in the Annual Report.

2. Well Remediation

You have included well remuneration as an outlay for AED. While we don't know the details of the joint venture, it is likely that AED will only pay for its share of this work i.e. 40%. Even if this amount to $45M, this should be regarded as an investment that enhances the value of the project (say from $400M to $445M) just as says Sinopec share of the costs would increase its value from $600M to $668M). However, you could be correct as we don't know the detail of the joint venture arrangements.


3. Hedge Book

My understanding is that, after the 7 March 2008 only 4 x 120,000 barrels have been hedges at about US$72 per barrel. Estimated Hedge boook loss as at 31 March 480,000 x US$33 x %1.10 = A$17.5M

Fig 7 AED has hedged 1.2mmbbl via swaps for an average price of ~US$71/bbl
Barrels Fixed US$/bbl price Settlement Date
240,000 69.150 5 October 2007
120,000 71.810 5 October 2007
120,000 72.300 8 January 2008
120,000 72.910 7 February 2008
120,000 72.780 7 March 2008
120,000 72.530 7 April 2008
120,000 72.330 7 May 2008
120,000 72.080 6 June 2008
120,000 71.880 8 July 2008

Bargain Purchase

It should also be noted that this calculation values AED at the fire sale price it negotiated the sale of the 60% interest at. By comparision, AWE currently has a 42.5% interest in the Tui oil field in NZ. The total field has about 42MMbbl of oil and is current produing about 50,000 barrels a day. MBL has valued AWE 42.5% share of this field at $826M. Consequently, should expect AED's 40% share of Puffin to attract a higher valuation than $400M if/when production were to increase to in excess of 50,000 bbls per day.

PS. I am not saying the shares will trade at the above price, just working out what the theoritical value could be.

Regards

SP