2nd UPDATE: AED Oil Acquires Indonesian Oil, Gas Acreage

AED Oil Ltd. (AED.AU) said Friday that a A$9 million purchase of stakes in two Indonesian oil and gas properties from Canada-based Nations Petroleum marks an end to its active search for acquisitions.

"This is the last step for a while in our expansion," Chairman David Dix told Dow Jones Newswires.

AED will pay Nations Petroleum US$1.5 million and issue it 12 million AED shares, worth about A$7.2 million on Thursday, for 100% and 60% stakes in permits in West Papua and Madura Island, respectively.

The deal marks a continuation of AED's attempt to reinvigorate its business after a horror 2008 culminated in the sale of 60% of its underperforming Puffin project in the Timor Sea to China's Sinopec for A$600 million.

Since then its had to pull out of a proposed A$155 million investment in Nexus Energy Ltd.'s Longtom gas project after Nexus failed to meet a first production deadline for the development.

After that deal fell through, AED in November bought 50% of a permit in Brunei, also from Nations Petroleum, for around A$17 million in cash and shares.

According to AED, a concentration by Nations Petroleum on developing its U.S. assets has put pressure on its balance sheet, making it a more willing seller of its South East Asian assets.

The latest deal, which is subject to AED shareholder approval, will increase Nations Petroleum's stake in AED to around 17%.

Dix said AED's 50% joint venture in Brunei intends to drill two wells this year, one in March and another between April and July.

At South Madura, one small well is planned to be drilled this year in an attempt to source gas for a nearby power station.

Dix said drilling on the Rombebai asset in West Papua probably won't commence for another 18 months. "Rombebai will be more expensive but we've got a longer timeframe to put that in place," he said.

"If it's the size that we anticipate, then it's probably going to justify an LNG (liquefied natural gas) type operation."

AED had A$86.1 million cash at Dec. 31 and Dix said it intends to fund the drilling campaigns through existing cash reserves.

The Melbourne-based company said four wells drilled in the Rombebai contract area in the 1950's by Royal Dutch Shell PLC encountered gas, but the company was looking for oil at the time, so it didn't attempt to develop the resource any further.

Further testing by Nations Petroleum has indicated that the permit's Gesa reservoir could possibly contain about 5 trillion cubic feet of gas, "although there is a large range of uncertainties as the reservoir sands have not yet been penetrated by drilling," AED said.

The South Madura contract area is surrounded by a number of oil and gas discoveries, AED said.

AED shares slid 4.5 cents, or 7.5%, to 55.5 cents on Friday amid a wider sell-off among energy stocks hit by a steep drop in the oil price.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com

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