Letter to Shareholders
Dear Fellow Shareholders
I trust that you received the recent offer to participate in the AED Oil Limited (AED) Share Purchase Plan (SPP). The SPP will allow eligible shareholders to purchase up to $15,000 of AED ordinary shares.
I am writing to encourage you to consider this opportunity in light of the following circumstances.
AED Oil has become a company with medium to long term assets. The issue facing all such companies is sustaining an inflow of capital to fund the exploitation of these assets. AED’s past approach to this issue has been to utilise the funds that were made available in the sale of its 60% interest in the Puffin field. The capital raised through this sale has adequately provided for the ongoing assessment of Puffin to date. This included the drilling of three wells and the undertaking of 3D Seismic on AC/P22. We were also able to acquire and assess the sites in Brunei and Indonesia held by Nations Petroleum.
AED has not gone back to its shareholders since listing in May 2005 (when we raised $55 million from the market) to obtain funding. This is our first approach to shareholders in over 5 years.
Your Board are encouraged by the portfolio of assets that AED holds and have confidence that they will realise a significant return to shareholders in the medium to long term. We understand that shareholders have been disappointed by the inability to complete testing on the Lempuyang-1 well in Brunei Block L. However, despite the absence of comprehensive testing results, the results of that well that we have obtained are encouraging and give the Board, the Joint Venture partners and the regulatory body, PetroleumBrunei, confidence in relation to its commercial potential. AED is currently assessing the testing of Lukut-1 which, like Lempuyang-1, flowed gas during drilling but does not have the same technical challenges.
Your Board also believes the potential field size in Brunei would encourage development of a gas project which would utilise the significant infrastructure in Brunei. This infrastructure includes an LNG terminal and a methanol plant close to the location of Block L.
AED is also proposing to undertake a 3D Seismic survey over the Jerudong field, where there is a proven oil reserve and prior production. Our expectation is that this survey will highlight additional oil targets that could be in production within two years.
Our Indonesian properties both have the potential to yield World-class discoveries. At Rombebai, we await the granting of the licence extension to enable our Joint Venture farm out process to continue. At South Madura, we are very encouraged by recent work undertaken in the PSA area and expressions of interest shown by third parties in new play concepts which are being developed.
The additional funds that we are seeking from our shareholders will be used to maintain this portfolio of assets, whilst the company undertakes a process to maximise the value of each individual asset. We will consider alternative means of financing and value realisation for all assets, including farm out and sale. Broader corporate strategies will continue to be considered such as the introduction of a strategic partner and M&A opportunities.
Attached to the ASX announcement is a copy of our Brunei Block L flyer, which we have prepared to demonstrate our plans and objectives in relation to Block L and give shareholders a better perspective of where we see opportunities at this important location.
I am of the view that the prospective value of these assets significantly exceeds the value currently attributed to AED by the market. This assessment encourages me to personally participate to the greatest extent possible in the SPP offer to eligible shareholders.
Accordingly, I encourage you to do likewise.
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