trading at a pe ratio of 1 ......................., page-9

ridiculously undervalued Timor Sea project has the good oil for AED investors


By Barry Fitzgerald
May 22, 2006

DAVID Dix and his tight-knit crew of employees and consultants at AED Oil enjoyed a modest celebration at a Southbank noshery on Friday night.


The get together included the singing of a song penned — with apologies to the Jackson 5 — by the towering Dix, the former Macquarie Bank and UBS investment banker who brought AED to market in May 2005 on the strength of its near-term oil production opportunity from the Puffin oilfield in the Timor Sea.


While there is still work to be done to get Puffin to the starting stalls, there have been some good reasons of late for the AED team to feel pretty pleased with themselves — a position reflected in the stock's run so far this year from the 80¢-a-share level to the $1.305 level it commanded on Friday.


Most significant has been successful testing of the Puffin 7 accumulation (14 million barrels reserves potential).


It has confirmed that when brought in to production, it would have an initial production capacity of more than 15,000 barrels a day, worth more than $1.35 million a day at current Australian dollar oil prices, or near on $500 million a year if you don't mind.


Earlier this year, the company also notched up an oil discovery with the drilling of the Puffin 9 accumulation that makes for a bigger production profile and struck a deal for the conversion, supply and operation of a floating production storage and offloading facility that is expected to be ready to go early next year.


While all that is behind schedule from what was originally planned, AED is no more immune from the intense competition for the full suite of oil-sector services required to get a project such as Puffin flying than are the Exxon Mobils of the oil exploration and development world.


What is known is that the banks are happy with AED's progress, with Westpac and Commonwealth Bank providing a $US53.25 million ($A70.4 million) project-financing facility — considered by AED to be sufficient to get to the stage of first Puffin production.


And AED has backed itself home by hedging 600,000 barrels of oil for various 2007 delivery dates at an average price of $US71.30 a barrel — a $US42.7 million position that is currently $US1.6 million in the money following the recent retreat in global oil prices.


If all goes according to plan, AED will be producing oil at a daily rate of 15,000 barrels from the first quarter next year at Puffin 7 ahead of a step-up to 35,000 barrels a day (including Puffin 8 and 9) from the end of next year.
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Fully Diluted Market Cap only $190 Million based on current share price of $1.36

compare that to the possible earnings above and thats even before the step up in production from puffin 8 and 9.

AED Trading at a forward P/E ratio of below 1

Ridiculously undervalued Yip!!!



End Ramp.



Cheers



AA