2010 End of Year Message to Shareholders
Dear Shareholder,
I'm writing to provide you with an update of our key projects and outline the activity we have planned in the near term. I believe that 2010 has been a year of substantial achievement for AED Oil and I'm optimistic that we are well placed to deliver significant shareholder value going forward.
Key highlights of 2010 include:
? putting the Company in the position to commence well testing of the Lempuyang-1 and Lukut-1 well in Brunei in January 2011
? the completion in March of the acquisition of a 50% operating interest in Block L in Brunei (in one of Asia's most prospective hydrocarbon regions)
? the completion in March of the acquisition of a 60% non-operating interest in South Madura and a 100% operating interest in Rombebai, both in Indonesia
? completion of drilling at the Lempuyang-1 and Lukut-1 wells at Block L, Brunei, in October
? obtaining US$20m in convertible note financing through the Asia Resources Fund
? completion of further 3D seismic acquisition on ACP/22 (Puffin Exploration).
The significant work that was undertaken by your staff in order to bring about these outcomes should not be underestimated. I also wish to thank our staff for their work to put AED in the best possible position to finance and complete the further exploration and development of our assets in the near to medium term.
Brunei encouraging signs reinforce our optimism
Bruneiis one of Asia's most prospective hydrocarbon regions and is currently South East Asia's third largest oil and gas producer. We already believe that at least one commercial development at Brunei Block L may be feasible. As previously stated your company is excited about the prospect that testing in Brunei will confirm the potential for a commercial gas field development in the Southern region in Block L, where ease of access to infrastructure could see a commercial development with production in 2014. In addition, we will continue to assess the potential for AED to pursue a low cost oil development in the Jerudong region of Block L, the site of previous production in order to provide short term income flow. A Jerudong well has the potential to create revenue as soon as 2012.
Consistent with our previous market guidance on 2 December, testing of Lempuyang is expected to commence mid January 2011, to be followed by the testing of Lukut-1. We are confident of our ability to meet this timeframe and can advise that the following progress has already been made for both Lempuyang-1 and Lukut-1:
? Test program and design has been finalised
? Testing rig has been mobilised and will be on site prior to 23 December 2010
? Flare pit and associated infrastructure for testing are presently under construction
? Specialised testing components have been ordered and are awaiting manufacturing
? Remainder of test spread presently available for mobilisation
Rombebai world-class potential
The Rombebai prospect is a world-class multi Tcf prospective resource (targeting in excess of 7 Tcf). In addition to the massive gas potential within Rombebai, we believe there is also significant
prospectively for a major oil find.
New seismic data and interpretation work has significantly increased the prospectively of the Gesa structure. Our recent reviews indicate oil as well as thermal gas potential indicated by oil fluorescence in Gesa 1 and 2, and oil being analysed in hydrocarbon seeps. Our initial assessment had previously concluded that only biogenic gas was likely to be present.
Based on this latest analysis, including the review of well logs from previous drilling campaigns, amplitude and AVO anomalies assessed are indicative of the presence of hydrocarbons within these Gesa reservoirs. In our 2011 G&G program will undertake activities reprocessing data and performing detailed AVO studies to better quantify the hydrocarbon type and distribution, as well as sampling oil seeps in the region.
As previously advised, the current licence in respect of the Rombebai resource expires in November 2011 and we are currently seeking a three year extension to November 2014. We have been encouraged by the support shown from BPMIGAS and we believe that we will shortly receive their recommendation to the Government of Indonesia to grant the extension requested.
On receiving a successful extension to the licence the company plans to continue with its development plans to drill at Kare-1 in Q4 2011 and recommence farm-out discussions with interested parties. Significant work has been performed in readiness for next year's operations including:
? Socialisation and permitting is well advanced.
? Tendering for long lead items such as rig selection, tubulars, liner hanger and wellhead is underway.
? Initial field surveys and analysis of construction work required have been completed.
? A mobilisation plan for entering via Gesa River in being prepared, and the process for obtaining permits for rig and related services underway.
Australia
The seismic for AC/P22 has been shot and submitted for processing, no results have as yet been received. Depending on the results of the survey, we will work with Sinopec, our joint venture partner, in assessing the merits of a development programme for the existing reserves on AC/L6 and the new potential identified on AC/P22. There are a number of significant structures apparent on the assessment of the previous 3D seismic over AC/P22 and, following the drilling of Great Auk in 2009, there is confidence in an oil migration model to fill structures identified. Our current expectation is that we can further advise shareholders on the potential and timing of a Puffin development in Q2 2011.
In closing, I believe that 2011 is shaping up as a very exciting year for AED. We have a portfolio of highly prospective projects and there is significant activity planned in the near term. Our key focus remains the creation of shareholder value and I'm confident this will be delivered in the coming year. On behalf of AED I thank you for your ongoing support and look forward to sharing in the exciting times ahead with each of you.
David Dix
Executive Chairman
AED Oil Limited
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