AED Oil (AED) Ridiculously Undervalued??

**ASXIOU** · 26-05-2006, 09:41 PM

Floated about a year ago with the intention of developing the Puffin oil field off North Western Australia. Drilling of 2 wells (Puffin 7 and 9) has been completed and has been successful. Estimated recoverable reserves from these wells are around 10-14million barrels from P7 and 3-5million barrels from P9 both with considerable upside and due to be analysed in-depth over coming weeks.

Now here is the juicy part

... Recently completed flow testing from P7 has shown a sustainable flow-rate in excess of 15000bopd and the potential to flow 35000bopd when other Puffin wells are brought online later on [:0]. Oil is scheduled to start flowing from Q1 next year so at an oil price of say $70 a barrel an expected minimum of over $1m of cash inflow per day can be expected. Project financing has already been secured with CBA which only required a small amount of hedging so there is considerable upside from a booming oil price. With these reserves which will probably be increased after urther drilling and testing and the staggering flow rates AED could be earning well over $100m NPAT for the next couple of years giving it a massive amount of cash to pursue other substantial interests. Current market cap <$100m. Yep looks damn cheap on forward PE of less than 1.... [8)] didn't believe it first but can't see why it wouldn't happen?? Of course there are a few minor hurdles that need to be overcome before production starts and there will probably be some inevitable delays but definitely one to keep an eye on.....

A recent article from The Age
http://www.theage.com.au/news/busine...150124548.html

Disc: Hold AED, please do your own research before deciding whether to buy, sell or hold stocks

**Moonshine** · 27-05-2006, 12:59 AM

Thanks for the heads up ASXIOU.

I can't fault your figures.

This could be MASSIVE.

Current mkt cap of only $90 million.

I am still rubbing my eyes.

Cheers,

Moonshine

**tommy** · 27-05-2006, 01:07 AM

Hi all,

This sounds too good to be true[:0] Must look deeper into this one, thanks for starting the thread ASXIOU! I was looking for somewhere to park my cash and this one will be a possible candidate[:I]

**mark100** · 27-05-2006, 03:09 AM

I picked up a few of these earlier in the week. Pattersons recently put out a report on them with EPS estimates of:

2007 $1.40 @ US$57/barrel
2008 $1.98 @ US$54/barrel

Obviously the field has a very short life based on current reserves but as ASXIOU has said the reserves have been getting upgraded and there seems to be potential for further upgrades.

Yes I think it is ridiculousy undervalued!

Mark

**OneUp** · 27-05-2006, 01:39 PM

Looks interesting.

In their valuation, do Pattersons take account of the substantial unlisted shares and options?

Listed shares = 64.7m x $1.46 = $94.46m

Unlisted shares = 40.5m x $1.46 = $59.13

20c options = 40.5m x ($1.46 market price - strike price of 20c) = $51.03m

Current market cap = $204.6m

**ASXIOU** · 27-05-2006, 02:19 PM

quote:Originally posted by OneUp

Looks interesting.

In their valuation, do Pattersons take account of the substantial unlisted shares and options?

Listed shares = 64.7m x $1.46 = $94.46m

Unlisted shares = 40.5m x $1.46 = $59.13

20c options = 40.5m x ($1.46 market price - strike price of 20c) = $51.03m

Current market cap = $204.6m

Yeah sorry I didn't give a fully diluted mkt cap but still in any case the figures are still extraordinary. [8)] Happy to see a broker backing up the numbers but the oil price used looks conservative so these estimates could also be susbstantially upgraded. The question that needs to be asked is what will they do with all the money? Pay it out in huge dividends and wind up the company or pursue other substantial longer-term interests? Might just be setting itself up with hope of a takeover from a big boy? Management hold a large percentage of shares so would have a big say if this was to occur.

Disc: Hold AED, please do your own research before deciding whether to buy, sell or hold

**laurie** · 27-05-2006, 02:42 PM

Took a while for people to wake up to this! been on since IPO and picked up more @ .55c! arhhh hindsight

cheers laurie

still has not made CommSec Margin Lending approved stock [:0]

**mark100** · 29-05-2006, 01:27 AM

I haven't read the Pattersons report but it appears they have taken into account the fully diluted amount of shares.

The Actual cash flow should be higher than the profit as there will be a high ammortisation charge.

My very very rough calcs are:

Revenue - 14m barrels @ US$65/barrel produced over say 2yrs: US$910m
less Expense - 14m barrels @ US$20/barrel: US$280 (might be on the high side)
Gross Profit over 2yrs: US$630m

less Tax (30%) and Royalties (2.5% of Revenue): US$212m
Cash Received over 2yrs: US$418m

Less Debt to be Paid back: US$53m
Free Cash: US$365m, A$485m (0.75 conversion)
Add Cash from Options: A$8m
Total Cash Available: $493m

Fully Diluted Shares: 149.5m
Cash Backing per Share: $3.30

This cash backing needs to be discounted back to 2006 dollars plus an appropriate discount to reflect execution risk etc.

Upside comes from potential reserve increases etc.

Mark