bloomberg article

May 28 (Bloomberg) -- AED Oil Ltd., 40 percent owner of the Puffin field off northern Australia, bought half of the Longtom gas project in Victoria state from Nexus Energy Ltd. for A$155 million ($120 million) to add new sources of production.

AED will pay Nexus an initial A$35 million and the balance when it completes debt financing, the Melbourne-based oil producer said today in a statement to the Australian stock exchange. The company is in talks with Australian and overseas banks to arrange financing, AED said.

Nexus, which slumped 77 percent in Sydney in 12 months before its stock was halted in March, is selling assets to help finance the Crux condensates project in Western Australia. AED said in November it would study opportunities to invest in projects to take advantage of a decline in the cost of fields prompted by the global recession.

“The addition of the Longtom project to AED’s existing oil projects in the Timor Sea will diversify the company’s asset base as well as providing further cash flow over the long term,” AED Executive Chairman David Dix said in a statement.

AED dropped 2 cents, or 2.2 percent, to close at 90 cents in Sydney after climbing as much as 8.7 percent following the announcement. AED has dropped 69 percent in the past 12 months.

The first gas and condensate production from Longtom is expected in July, AED said. Condensates are a type of light oil. Gas produced from Longtom is contracted for sale to Santos Ltd., Australia’s third-largest oil and gas producer.

Sensible Price

Nexus sold the Longtom stake to AED at “a sensible market price,” the Melbourne-based company said in a separate statement today. Longtom’s final capital cost is estimated at A$300 million, Nexus Managing Director Ian Tchacos said during a conference call.

The sale “provides Nexus with the necessary funding to endure an extended market downturn and eliminates any pressure to sell an interest in a world-class asset like Crux at below market value,” Tchacos said in a statement. Nexus does not need to conduct a capital raising, he said. Nexus will have A$65 million after repaying part of the existing Longtom project debt, the company said.

Nexus continues to explore the sale of an interest in Crux to a new partner, the company said. Osaka Gas Co., Japan’s biggest natural gas distributor, has a 15 percent stake in the venture. Nexus shares will resume trading tomorrow.