AED - AED Oil

As I have stated previously on this thread, the volatility is to be expected with this stock, hence the reason why I only put gambling money on it (200 @ $7). I can only laugh at my situation, but feel sorry for those people that have considerable amounts of money in this stock; the fundamentals are there, management has just failed miserably to deliver and hence the reason for my previous posts warning about the likely downside and high risk, given the company had no field diversification or proven record as an operator. Looks like $5.20 is the next target and by the looks of it will be hitting it sooner rather than latter. Investor confidence will be very low for a while and think it will continue to place strong selling pressure on this stock in the shorter term.

If 15,000-20,000BOPD can be maintained then this is getting oversold considering medium term oil prices of AUD80. But who knows production/development seem to be getting worse by the day. Looks like they are having problems with Puffin SE also, reservoir complexities, which may result in delayed production from this field (previously due on stream in 1H 2008). Anyways ill be holding on to my little parcel for a while to see what happens and may pick up a few more if it hits the $4.50 mark.

OMG

I thought I did well getting in when it first bounced off the mid $8's, so bought in at about $9.

Boy was I wrong!
Well its good to see if I'm right that people rejected the issue of options to the executives and the adoption of the renumeration report.

wow. I too only bought a small parcel in AED and I guess thats a good thing.
I didn't see anything that would warrant such a huge decline in the share price myself. I guess there are alot of investors who expect alot more.

I have learnt from this stock the importance of setting Stop Loss orders and sticking to them. I had confidence in management that production could be stabilised at 15,000-20,000 bopd upon first round of bad news. So I gave this one a little more freedom to move. Mistake
Having 7,000 shares I was sitting on a tidy profit only to see it vanish

Bush Trader said:

It was a good bounce off $5.90 mark, after what can only be described as a rush to the exits. I’m now holding.

Any elaborations on the AGM, did management look nervous? I read the announcements, however I would like to know if there was confidence in the rhetoric.

Cheers


BT

Click to expand...

I'd say there is a very good case for these guys to answer to ASIC. They have not been continually disclosing information, have not been giving updates on the SW exploration, and today we get the reason: It isn't going to produce. About 3 weeks late however.

I got in a big argument with these guys when they refused to give reasons to the market about delays in production. They told me the "wind" was the cause for several months of delays. Hmmm.... yes. So I sold the majority at that point.

But now it looks as though there isn't going to be significant production upside until at least 2009. Which is a massive hit from the forecast 1H 2008. Can't see this going anywhere but down in the medium term.

Go Nuke said:

OMG
Well its good to see if I'm right that people rejected the issue of options to the executives and the adoption of the renumeration report.

Click to expand...

Today's AGM announcement said that the remuneration report was passed on a show of hands. The numbers shown in the announcement are those of the proxy votes cast before the meeting. According to the chairman's address, the executive options were withdrawn before the meeting because production at Puffin NE has not met with the company's expectations.

If 20,000 bopd is achieved when commissioning of Puffin 7 & 8 is completed then this would be a good result. The question is how reliable is this latest estimate?

is anyone still in this one?, or am i the only one left. LOL
massive drop today. I'm figuring its too late to cut losses on this one now the is dropped so low.

bought in at 7.20, now at 5.80. figured it would recover eventually its not like the reserves have disappeared. all the brokers seemed to be backing aed for the even when it was in the 9.00 range.

EZZA said:

is anyone still in this one?, or am i the only one left. LOL
massive drop today. I'm figuring its too late to cut losses on this one now the is dropped so low.

bought in at 7.20, now at 5.80. figured it would recover eventually its not like the reserves have disappeared. all the brokers seemed to be backing aed for the even when it was in the 9.00 range.

Click to expand...

Hi EZZA,
I am still holding it. I bought in at 7.73 and I bet there would be good annoucement at AGM, which turned out to be the opposite.
When I look at bloody drop today, I feel so painful....

the oil price reaches new high today, while we suffer such much.
The volatile environment makes the future more vague.... I wonder if we should sell off and take the loss or wait until it recovers....


Regards,
Kevin

Well as EZZa pointed out, some major instos were rating it as a "buy" not too long ago and they still have oil....so.

Its too big a loss for me to take.So I guess it will just go to the back drawer.

I'd be happy to get out if it reaches the old highs.

The CEO turned up and spoke at the meeting with what looked like a golf cap on his head, which did not impress me one little bit. He stated that as CEO his role would be more back seat working closely with CFO (Hmmm).
Other points noted included:
-Need to address water levels and that oil prodn will stay down in the short-term
- 20k bpd is new optimum prodn level once the teething problems have been fixed (ie post commissioning)
- Drilling has resulted in some sand failure as a local effect only
- Stated that one well providing the most water
- Oil reserve will stay unchanged
- Updates will be regularly posted
- Will take from 3-6 Mos to get it right with the short-term timetable being Complete commissioing (2 weeks) then Individual testing (4-6 weeks) then analysis (2-4 weeks) then play with/tweeking equipment (unspecified time)
- Further 6 wells planned & this should help to plan & increase prodn levels
- Talbot field as per original forecast is expected to yield 5k bpd, but by deploying horizontal wells it is hoped that this will result in higher daily prodn values
- Whilst AED Oil has a letter of intent to be supplied another offload vessel for SW Sector, this has been placed temporarily on hold to avoid/defer the cost pending continued drilling.

I trust I have this info about right but would invite others to correct anything that may be in accurate.

I was disappointed in the presentation but will persist with my new holding purchased at the recently reduced share price, although I am now $10k in the red.

Great post Greenfs - thanks for the low down on the AGM. I would have gone myself, but I'm locked into work in Sydney town...

I like your comment about his golf hat - the CEO was probably coming back from his morning golf round, sitting pretty on all the $$ he's making !

My opinions on the whole AED story thus far ->

* AED has made a whole heap of promises, and hasn't delivered to the promises.

* As I posted earlier, I believe their comms could have improved dramatically, and they should have erred on the side of caution as first time oil producers. A degree of caution and not being too optimistic on the figures would have helped their cause.

With the publicity and spot light, the market has expected I think, way too much and have hammered this stock down !

Should production rates get to the 20k figure then as someone mentioned earlier, AED has been sold down way too much.

For those AED pros out there, any comments over the following points?

1. AED reserve estimates and recoverability factors - whats everyone's consensus over this - how much have they overstated on this one (if at all)?! Its a total of 100 million barrels at the moment I believe, but could they have been bullish on this too (considering their over estimate of the production rates) ?!

2. I expect there will be further selling down of this one, as the schedule has another offtake for 29th Nov I think, and I don't think that the 320,000 odd barrels of oil will be met.

Anyone?!?

greenfs said:

- 20k bpd is new optimum prodn level once the teething problems have been fixed (ie post commissioning)

Click to expand...

From 10k - 20k is quite a jump for just "teething" problems. Has anyone come across such drastic jumps in production during commissioning?

sfx said:

1. AED reserve estimates and recoverability factors - whats everyone's consensus over this - how much have they overstated on this one (if at all)?! Its a total of 100 million barrels at the moment I believe, but could they have been bullish on this too (considering their over estimate of the production rates) ?!

Anyone?!?

Click to expand...

There is a 30% write down already in the reserves I would say, as they have all but given up on SW. And there must now be big questions about the other reserves, because of the water cut, as recoverability was said to be quite high. In the order of 70% I think. With a thirding of the production, there is a massive increase in p/b costs, and with more water than expected I'd say this will get out of hand.

So even being conservative on the write down, you could perhaps factor in a 50% write down in reserves.

EDIT: And by write down, I mean recoverability, not the actual amount of oil there itself.

Doesn't look good.

Looks like I now own my very own share in a "Knife". If sell volumes contine to rise over the next couple of days then you can bet that the institutional investors are bailing out. Reminds me of a little company I had few shares in once...........................Hardman (HDR), the only way good thing to come out of that was when they were taken over!'




Cheers



BT

Hi, Bush Trader.

There's large volume jumping off this stock but I think it's a knee-jerk reaction. The big boys often follow each other which could account for the huge volume of sales.

The share now offers much better value around the $5.5 mark and that's also the resistance mark the market has had for AED, so I think you'll see some of the damage undone. With oil prices going up and up and up I don't think investors will be able to ignore this share for much longer.

The AED SP is very sad to see; I got two weeks ago!

Today AED $5.25 -$0.55 -9.48% 591,914 shares $3,221,271 @ 22-Nov 10:14:07

Re-thought my position on AED and bailed out this morning for a loss of $300. Management seem to have no idea what is going on and when they release announcements either overstate or over promise. They just seem to inform the market when it suits them. I don’t like a company I can’t trust. As many have stated in previous posts 100m recoverable barrels, could be way off the mark. Puffin SE looks highly uncertain now and who knows production problems could continue to get worse at Puffin NE and hence lead to lost reserves also. My original assessment when jumping on AED was that Puffin SE would be coming online in the 1H of 2008, now we don’t even know whether this will produce oil at all now. The upside is now significant limited while the downside seems to be endless and if production/devt problems get any worse this will be back to near its floating price. Even if Puffin NE gets going, I don’t see where the upside is going to come in the future, if they are already having reservoir problems in the block. As I said it was a complete gamble with this company and was always the case from day one. Good luck to those who stick it out, you have balls, ill give you that, hope it comes good for you!

“AED OIL has turned from a market darling into a cautionary tale in just a month after its much-hyped Puffin oilfield failed to deliver on initial forecasts.
Investors yesterday wiped almost $200 million - or 18 per cent - off AED's market value when it revealed further problems with its two main projects.
AED, which floated at 85c in 2005, saw its shares soar to a record $11.40 on October 17 when it started production at the Puffin field off the Northern Territory. The chairman, David Dix, took advantage of the milestone, selling a tiny portion of his 16 per cent stake in the company for $636,000.
But since then, AED has had nothing but problems. The company's shares closed $1.30 lower at $5.80 yesterday after the market lost confidence in its bullish forecasts.

AED had predicted peak production of 30,000 barrels a day at its Puffin North-East field, but yesterday said it was only likely to achieve 20,000 barrels a day without drilling more wells at a cost of $US40 million ($45 million) each. The field has been producing water earlier than expected, stretching the project's handling systems.

AED also disappointed the market by revealing its key growth project - the Puffin South-West field - was more geologically complex than previously thought. The company suspended development of the $US200 million project - thought to be about the same size as the Puffin North-East field - pending further studies.

Given AED owns 100 per cent of Puffin - unusual in an industry known for joint ventures - some investors have expressed concerns there is a relative lack of information about the project since it is all coming from one party.
In May AED said it was likely to have more than 100 million barrels of recoverable oil from its Puffin fields.

The company's managing director, Ken Tregonning, maintained his optimism, despite yesterday's share-price plunge. "We actually didn't see it as much of a downgrade, but the market did," he said. "It's entirely possible we'll be doing 30,000 barrels a day from Puffin NE in May [after drilling another well]."
But a BBY analyst, Scott Ashton, who does not formally cover the stock, said AED was a "very risky story" compared to peers such as AWE, ARC Energy and Roc Oil.

"Some companies are stretching the limits of the strict Society of Petroleum Engineers definitions of reserves and resources," he said.”

Jamie Freed, November 22, 2007 (SMH)

ASX ANN

22/11/2007 Response to AGM Questions
http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00785983

In response to a number of questions raised at the Company's AGM yesterday, and subsequent technical presentation, the Company makes the following points of clarification:

North East Production

• The occurrence of water as part of the production stream is a normal occurrence for a reservoir structure like Puffin NE and is in the range of production scenarios anticipated.
  
• Certain short term commissioning issues (including gas lift, metering and water handling) have been constraining recent production rates.
  
• These three commissioning issues are production equipment related, not reservoir related. All of these issues are expected to be rectified within 3 months and the Company anticipates a target production rate building to approximately 20,000 barrels per day during this period.
  
• The Company intends to maximise oil production to the extent of the FPSO processing capacity and to that end an additional production well is being planned for the first half of 2008. As a result, it is expected that production levels following this drilling program will further increase. This plan is in line with the Company’s previously stated drilling strategy.

Financial Performance

• It is noted that the Total Operating Costs for the North East (which are predominantly fixed costs) are in the order of USD$9m per month.
  
• Accordingly, even at the current production rates, the Company is already achieving significant operating cash flow and profitability from the North East Region.

Reserves

• The Company reviews its Reserves and Resources on a regular basis, taking into account all relevant factors including recent drilling results, results from reservoir studies, production information and oil price movements. Based on information to date the Company’s Reserves and Resources position (as per independent expert reports) is consistent with previous announcements
  
• The Company continues to work on a development plan, including additional wells to fully exploit the NE Reserves, the potential development plans for the SW and feasibility studies into the development for recoverable oil in Talbot and other exploration leads and prospects. Recovery of oil will always be subject to suitable field development.

South West Region

• As discussed, the Company continues its appraisal of the South West Region through its drilling program of Puffin 10. Development options are being evaluated and include the completion of Puffin-10, the re-entry of Puffin-9 and the drilling of additional wells.

Does anyone know what exactly are the three pieces of equipment that are causing all these "teething problems".

It is amazing how economical some people can be with the truth. To think that prior to yesterdays announcement of "opps no oil in SW" otherwise known as "technically challenging geology" the last announcement was saying "minor oil bearing sand has been intersected but the main UK1a is expected to be intersected near Puffin2 in the near future.

10 days later they announce somewhat whimsically that the intersection was the UK1a and that they had also drilled the lower sands and were now onto drilling a 2nd track to try to find deeper UK1a.

I just wonder at what point did they know ?
I cannot imagine it was monday night that they decided to drill deeper and then tuesday the ST2.

I must admit to feeling like an exceedingly dumb bunning when comes AED

finally couldn't stand it no more and got out at $5.40

lost $2K on this one

it's been an extremely disappointing adventure considering it was at almost $12 at one point

It's always better to get out before it climbs to the peak than it starts declining. I sold all out when it was 9.49 and it climbed to 11.00 later. But now it is only 5.50. I was lucky not to wait for long. Got some nice profit from this share that's good enough for me. I am not so greedy