From a $US600m deal to administration: the sad tale of AED Oil

You would have thought that an oil producer with $US600 million in cash during the middle of a resources boom would be a good bet.

But three years after selling a 60% stake in its Puffin oil field to Chinese giant Sinopec, the listed oil and gas explorer AED Oil is in administration, bogged down by a seemingly unexpected legal loss.

Damian Templeton and Damien Hodgkinson of KPMG have been appointed to the Melbourne-based business.

In a statement, KPMG says it will be “working on a potential recapitalisation of the company and will be assessing the company’s financial position and ongoing funding requirements for its projects.”

The accounting giant adds it plans to obtain an understanding of AED’s current financial position, to engage with key stakeholders with a view to recapitalising the company and to seek expressions of interest from parties wishing to participate.

The KPMG statement draws attention to an interim award from an international arbitration panel earlier this month that found against AED and Sinopec in favour of Norway’s Sea Production, which cried foul when its contract for the project was terminated years ago.

In early August, AED said it had lost that case and been ordered to make a “substantial payment”, which has been put at $US72.4 million within 30 days for the joint venture – well above AED’s cash holdings of just over $3 million at the end of June.

As late as July, AED had sought to raise money and welcomed the decision of two new entities taking 6% stakes in the business, saying it believes the new holdings “support the confidence that the directors have in the asset portfolio and future prospects of AED.”

The Age reports that AED had placed $14.2 million on a security deposit with the Supreme Court of Victoria to cover potential tax liabilities, but had anticipated that money would be refunded.

A call was made to AED Oil this morning, but questions were directed to its administrator, which did not respond before publication. David Dix, the company’s chairman, was also contacted for comment.