Financial Results Summary
Half Year ended 31 December 2010
Overview
AED Oil Limited (ASX: AED) today released its results for the half year ending 31 December 2010. This report should be read in conjunction with the Condensed Half Yearly Financial Report as at 31 December 2010.
Review of Operations
AED strengthened its strategy of diversifying into South East Asia with continuing developments on its strategic investments in Brunei and Indonesia and completion of the seismic acquisition on the Puffin field.
AED completed the drilling of the Lempuyang-1 well and has recently commenced its testing. The testing of the Lukut-1 well is scheduled to commence immediately following completion of the testing of Lempuyang-1. Encouragingly, mobile hydrocarbons have been identified at both of these wells and AED remains optimistic as to their commercial potential. The Company is now well-positioned to capitalise on these investments through testing and further development in Brunei and continuing to assess and appraise its investments in Indonesia and Australia.
As part of the Company’s capital management plan, AED announced on 30 December 2010 that it had entered into a new US$20 million financing arrangement for the issue of four US$5 million convertible notes. At the date of this report there continues to be certain conditions precedent to be satisfied before this facility can be utilised. The funds to be raised from the potential issue of the convertible notes may be used to finance Brunei costs including further exploration, well testing and phase 2 development activities in Brunei Block L.
Subsequent to 31 December, the Company also announced amendments to the terms of its US$21.2 million 9% convertible notes listed on the Singapore Exchange (SGX-ST). AED redeemed and paid on 23 February 2011 an amount of US$8,605,000, introduced new put dates and a reset of the conversion price to $0.38.
These capital management initiatives are intended to strengthen AED’s funding position to assist it to develop and maximise the potential of the portfolio of assets and provide a strong basis for increasing shareholder value. It is hoped that 2011 will see value being realised from our exciting portfolio of assets for all our shareholders.
Financial Overview
Financial results for the period were:
2010 2009
A$ ‘M A$ ‘M
Revenue - 0.3
Net loss after tax (10.9) (13.8)
Net cash flow used in operations (7.7) (10.3)
AED continues to follow its current strategies in respect of the activities associated with the planning, exploration and appraisal of its assets in Brunei, Indonesia and Australia.
The operating loss of for the period of $10.906 million is comprised mainly of $4.819 million in relation to the non-recurring Puffin Field Joint Venture maintenance and decommissioning costs and finance costs of $4.377 million. Exploration and evaluation costs in relation to Brunei and Indonesia have been capitalised.
Major cash outflows for the period comprised of $15.229 million in respect of planning, exploration and appraisal of the Puffin Field in Australia, Block L in Brunei and Rombebai and South Madura in Indonesia; $11.117 million for the Puffin Field Joint Venture maintenance and decommissioning and corporate costs; and a GST refund of $4.640 million for previous payments in relation to the FPSO Charter Contract.
At 31 December 2010, AED had cash and cash equivalents and other financial assets balance of A$39.5 million.
Convertible Notes / Financing Facilities
Subsequent to 31 December 2010, AED has:
- Amended the terms of its US$21,217,500 9% Convertible Unsecured Notes; and
- Entered into a new US$20 million convertible note financing agreement with La Jolla Cove Investors (subject to certain conditions precedent to be satisfied).
At an Extraordinary General Meeting on 25 February 2011 the Company refreshed its capacity to raise 15% of its share capital without further shareholder approval.
AED will continue to look at the most appropriate capital structure to finance its exploration and operational activities.
Subsequent Events
For full details of subsequent events refer to the Condensed Half Yearly Financial Report as at 31 December 2010. In summary, the significant events that have occurred after the end of the financial period are as follows:
- Amendments to terms of 9% Unsecured Convertible Notes;
- AED entered into a new US$20 million convertible note financing agreement with La Jolla Cove Investors (subject to certain conditions precedent to be satisfied);
- $14.185 million in restricted cash as part of the GST refund dispute process with Puffin FPSO is recorded in the cash balance at 31 December 2010. This is held in an interest bearing cash deposit that was lodged with the Supreme Court of Victoria. The GST matters have now been finalised resulting in AED receiving a further refund during the period of A$4.6 million. AED applied to the Court to have this deposit returned, and on 10 March 2011 AED received judgement in its favour when the Court held that these monies should be released to AED, pursuant to orders expected to be made on or around 24 March 2011.
Future Outlook
Following the successful acquisitions in Brunei and Indonesia, AED has strengthened the balance sheet via the restructuring of its existing convertible notes and obtaining a new financing facility. The Company now has an exciting and diversified portfolio of exploration assets which offers excellent long-term growth potential. The focus for AED over the next 6 months will be to deliver the next phase of growth via:
- completion of the testing program in Brunei –it is now anticipated that testing of Lempuyang-1 will recommence towards the end of this month followed by the testing of Lukut-1;
- proceeding with Phase 2 exploration program in Brunei which will comprise further seismic acquisition and preparation for two further exploration/appraisal wells;
- ongoing geological and geophysical assessments of the drilling opportunities in Rombebai and South Madura;
- receipt of results from the 3D seismic which was recently shot for the Puffin Field on AC/P22; and
- reviewing further its capital management strategy to achieve its objectives.
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