Here is the transcript from that interview.. It's finally up at:
http://www.abc.net.au/insidebusiness/content/2007/s1968529.htm
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ALAN KOHLER, PRESENTER: While Australia's oil output is tipped to start declining next year, there was at least some good news this week with the announcement that the biggest new field, AED Oil's Puffin lease in the Timor Sea would start production before the end of September. It's been a remarkably rapid rise for AED which started with a $55 million dollar float just two years ago and a key asset of an oilfield no one else wanted. Since then its grown to be a billion dollar enterprise, its share price has increased more than tenfold, and as you'll hear, it's ready to substantially upgrade its reserves. I spoke to AED's founder and Chairman, David Dix. (To David Dix) Well David Dix, some of the world's biggest oil companies picked over Puffin: Arco, BHP and so on, you came along, an investment banker, and found what they couldn't find, how does that work?
DAVID DIX, CHAIRMAN, AED: I think actually what we did was exploited what they'd previously found. The project was first identified in the 1970s by Arco. BHP's owned it, Alberta Energy's owned it, they've all put a lot of wells into it, they've all spent a lot of money in trying to explore it, oil price went down, they lost interest. It was never going to be at that stage the 500 million barrel field that Arco was looking for and we were looking for a small commodity play, small project that we could get fund to get up and going, fitted us, we spent money, we were lucky and it grew.
ALAN KOHLER: Did you think it would be a big field or was it just luck?
DAVID DIX: No. We saw there was potential because Jabiru and Chalice... I mean, Jabiru I think had been identified as a 15 million barrel field, it's now done 105 million barrels and it's still going, Chalice I think was sort of 12 to 20 million barrels, it's now done 60 million barrels it's still going. Those projects gave us some confidence. The Timor Sea was a difficult area to actually interpret and understand and therefore there was potential and we talked about that at the time of the float but you never really expect to be that lucky.
ALAN KOHLER: And how much did you pay for it?
DAVID DIX: We paid 3.5 million vendor shares and a 1.25 per cent overriding royalty interest. We actually were meant to pay more...
ALAN KOHLER: That's almost nothing.
DAVID DIX: In retrospect it is, although it was a fair deal at the time and the parties we deal with are still good friends with us and they think at the time they got a reasonable deal. They were wanting to get into the North Sea, nobody really wanted to take on the field, it worked for us and we spent the money and took the risk and we've got the rewards.
ALAN KOHLER: What were the known reserves at the time?
DAVID DIX: It was uncertain when we first negotiated but we got Gaffney Cline in to come and do a reserve report which we funded personally, and it came out to around about 11 million barrels of P50 reserves at that point.
ALAN KOHLER: And what is it now?
DAVID DIX: Well in the next week or so, we're hoping that... we've probably got the potential to move up towards 100 million barrel fill. At the moment we've announced 40 million barrels of reserves in one portion of it, we've indicated that we've got a significant reserve base in the south west, we're becoming much more certain in relation to the size of that field and we'll be announcing something to that effect quite shortly.
ALAN KOHLER: Are any of the oil companies now coming along knocking on your door trying to take you over, to get it back?
DAVID DIX: No, none that have been involved in it before. We've had the occasional approach from parties that... obviously oil is very attractive particularly in our region where you've got black letter law, where you've got Tapis pricing, which is currently probably the highest pricing in the world and according to a lot of articles that are being written at the moment, it will stay at a premium to Brenton, a premium to WTI for quite some time, so it's a very attractive place to be, 'cause most new fields are being identified, are being... certainly happening in regions which are less politically stable than hopefully Australia is.
ALAN KOHLER: So do you think there will be, just leaving aside whether you sell out, do you think there will be consolidation in the oil industry in Australia?
DAVID DIX: I think there will be consolidation, and I mean, if you look in the cycles over the last 30 years, every time there is sort of a growth and a commodity price there has always been consolidation, there is a difficulty in getting capital equipment, there's a difficulty in getting good staff, those things can lead to a need to get bigger and to compete to acquire the capital equipment. We've been quite lucky, because of our size we've been able to buy a lot of second hand equipment, a lot of other things and we now have a lot of very good people coming to us to work for us, primarily because we've had a lot of growth and we're probably one of the greatest potential companies in the oil side of this stage a lot of people want to join, become part of it.
ALAN KOHLER: Are you now looking to use your script to buy other fields around the place, other companies?
DAVID DIX: I haven't actually had a lot of time to look at evaluating other companies because our field has grown so quickly, we really haven't had a lot of time for that type of activity.
ALAN KOHLER: You haven't needed to I guess either, have you? DAVID DIX: No, I think we are probably more likely be a target, and from my experience in acquisitions in this sort of market, it's very difficult to acquire things and get them at value, we know much more about what we have ourself than what other people have, we have a lot of growth where we are so we should be devoting our capital into growing the assets that we know best.
ALAN KOHLER: Do you think the success of Puffin indicates that the north west shelf could end up being a big oil field in general in addition to just gas?
DAVID DIX: That whole region does have a lot of potential, technology is improving all the time. And I suppose the thing is that in the last 20 years there has been a move away from that region, BHP left the region, went to gulf of Mexico, a lot of people are not investing a lot of money and time. I think that's changing, I think because there's a new lease of life that's happening there. There's a lot more activity and focus and with the oil price going up to sort of $70 plus it's a very profitable thing for people to do if they're successful.
ALAN KOHLER: Do you think that the oil price is going to keep rising, do you have a view about that and what about the proposition that the world's oil production has peaked?
DAVID DIX: There's so much oil coming from politically sensitive regions and if you look at what happened with the potential threat of an oil strike in Nigeria, the oil price spiked, there's a potential for weather conditions to occur in the Gulf of Mexico which would cause problems and the oil price will spike again, Venezuela has been becoming an issue, there's not a lot of new oil being found in regions which are politically stable or otherwise safe, so the margin between demand and supply is quite tight. As to whether, globally, Saudi Arabia or someone else can produce a lot more oil to balance it I think they're reasonably happy... there's a cartel where the oil price is at the moment and I don't think it sort of supports a lot of investment into biofuels and other things, there is that going to happen but an oil price of $70 is equivalent to at least how much it is going to cost to produce the alternate fuels, so I think it will stabilise at this level with the potential to go up if there's a change in the political environment in any of the regions where there is major oil being produced.
ALAN KOHLER: Thanks very much for joining us, David Dix.
DAVID DIX: Thank you.