UPDATE 1-AED in talks to sell majority interest in assets

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SYDNEY, March 3 (Reuters) - Australia's AED Oil Ltd (AED.AX: Quote, Profile, Research, Stock Buzz), a junior oil and gas producer, said on Monday it has begun negotiations with an unidentified firm to sell a majority interest in its fully owned oil fields in northwestern Australia.

AED, whose shares were hit earlier this year on news of overdue debt, said that it would be able to clear its bank debt and repay creditors on completion of the negotiations.

It will also have sufficient cash resources to exploit its previously identified development and exploration opportunities at the Puffin and Talbot oilfields, AED said.

"This proposal is from a significant company which has received all internal approvals and is for a majority interest in the company's (AED's) assets," AED said in a statement.

AED said in January it had received several approaches from international and Australian oil firms wanting to invest in the Puffin and Talbot fields. It has appointed Macquarie Group (MQG.AX: Quote, Profile, Research, Stock Buzz) to conduct a review of its business.

AED became an investor favourite in June after it said it was likely to have up to 100 million barrels of recoverable oil at Puffin and Talbot, up sharply from an earlier estimate of 40 million barrels.

But its stock has plunged from a record A$11.40 in October as technical problems slashed output from Puffin North East to just 6,000-10,000 barrels per day (bpd), well short of its initial forecast of 30,000 bpd.

It has taken a further hit after Norwegian oil services firm AGR Group AGR.OL said last month AED was overdue in paying an AGR subsidiary about A$41.5 million ($38.7 million). AED had said it was still cashflow positive and that it was in discussions with AGR over payments.