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Miller Energy closes North Fork purchase Subsidiary Cook Inlet Energy will operate the Kenai Peninsula natural gas field; acquisition value put at nearly $65 million Wesley Loy For Petroleum News
Miller Energy Resources Inc. says it has closed its purchase of the North Fork natural gas field on Alaska’s Kenai Peninsula.
Tennessee-based, publicly traded Miller operates in Alaska through its Anchorage-based subsidiary, Cook Inlet Energy LLC.
Miller acquired North Fork from a partnership led by Denver-based Armstrong Oil and Gas Inc.
The North Fork field is on the southern Kenai Peninsula, east of the community of Anchor Point.
Miller had announced in late November it intended to buy North Fork in a nearly $65 million transaction. The company said at the time that the deal would involve just under $60 million in cash plus $5 million in Miller preferred stock.
Contract with Enstar In a Feb. 5 press release, Miller said the North Fork unit was producing about 7 million cubic feet of gas per day.
The gas is being sold under contract to Enstar Natural Gas Co. at a fixed price of $7 per thousand cubic feet, Miller said. Enstar is the main gas utility in Anchorage.
Miller in November said about 4.8 billion cubic feet remained on a 10 bcf commitment to Enstar.
Cook Inlet Energy will operate North Fork, and is seeking state approval for transfer of the unit leases.
The company launched as an Alaska oil and gas producer in late 2009, and began commercial gas sales in 2013.
North Fork is the first producing property for Cook Inlet Energy on the inlet’s east side. The company operates the West McArthur River oil field and the Osprey offshore platform on the west side.
New financing arrangement Miller said it used new financing to help pay for the North Fork acquisition.
Specifically, the company said it had “entered into a $175 million second lien credit facility with Apollo Investment Corporation and Highbridge Principal Strategies.”
Miller said $75.3 million was used to refinance its previous credit facility and $56.6 million was used on the North Fork acquisition, with the remainder available for “general corporate purposes and expenses.”
Miller described the interest rate on the new debt as “LIBOR plus 9.75%.”
“The new second lien credit facility provides the necessary capital to execute our near-term plan and close the acquisition of North Fork at a reduced cost versus the previous facility,” said Scott M. Boruff, Miller chief executive. “The terms, flexibility and size of this transaction illustrate the value of our close relationship with Apollo and our ability to attract world-class new investors, such as Highbridge.”
Apollo and Highbridge are both based in New York.
North Fork history The sellers of the North Fork field included operator Armstrong Cook Inlet LLC and partners GMT Exploration Co., Dale Resources Alaska LLC, Jonah Gas Co. and Nerd Gas Co.
The North Fork gas field was discovered long ago, with a well Standard Oil of California drilled in 1965.
The field wasn’t brought into production until March 2011. Armstrong had acquired the North Fork unit in 2007.
Armstrong’s development efforts included reworking the original discovery well, and drilling some new wells.
Miller in November said the purchase would include six gas wells, a leasehold of about 15,465 acres, and Anchor Point Energy LLC, the owner and operator of nine miles of twin 4-inch gas transmission pipelines.
Cook Inlet Energy sees big potential to more fully develop North Fork with up to 24 additional wells.
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