Miller Energy Resources Inc. is notching rapid growth, based largely on what it touts as a string of drilling successes in Alaska.
The company, however, is spilling considerable red ink along the way.
Miller, based in Knoxville, Tennessee, on July 14 reported financial results for its fiscal year ended April 30.
“Fiscal 2014 was a banner year for Miller Energy, establishing tremendous momentum for the company,” said Scott Boruff, Miller’s chief executive. “We more than doubled our production and our revenue.”
Miller operates in Alaska via its Anchorage-based subsidiary, Cook Inlet Energy LLC.
Since entering the Alaska scene in late 2009, Miller has pursued an aggressive program of drilling, buying and borrowing.
Much of its drilling has focused on restoring production from damaged wells on the Osprey offshore platform, which was idle when Miller acquired it out of the bankruptcy of previous operator Pacific Energy Resources Ltd.
Part of Miller’s Alaska strategy has been to assemble its own fleet of drilling rigs.
In a recent filing with the U.S. Securities and Exchange Commission, the company said it had entered into a $7 million deal with Teras Oilfield Support Ltd. to purchase the Glacier No. 1 rig.
The Glacier rig, described as a Mesa 1000 carrier-mounted land drilling rig, will be used to further develop the North Fork natural gas field on the Kenai Peninsula. Miller acquired the North Fork field in February.
Key numbersMiller is a small company, yet is listed on the New York Stock Exchange.
Most of the company’s oil and gas production comes from Alaska’s Cook Inlet basin. Miller executives recently announced the company will sell off its Tennessee operations to focus on Alaska.
Miller is aiming to expand soon onto Alaska’s North Slope, where the company has a pending deal to acquire a controlling interest in the small Badami oil field, which BP originally developed.
In financial statements filed with the SEC, Miller reported oil sales of $64.5 million for fiscal year 2014, up from $29.4 million in 2013. The company reported natural gas sales of about $5 million for 2014. Total revenues for 2014 tallied about $70.6 million.
Miller reported total operating expenses of $81.3 million during 2014, resulting in an operating loss of $10.7 million.
At April 30, the company had total debt of $184.2 million.
Average net daily production for fiscal 2014 was 2,238 barrels of oil equivalent per day, Miller said. The average for the fourth quarter was 3,070 barrels, the company reported.
Drilling operationsIn an investor conference call on July 15, Miller executives spoke in glowing terms about the company’s year and its upcoming plans.
David Hall, Miller’s point man in Alaska, said the company is completing a new well on the Osprey platform to prove up reserves in the southern reaches of the Redoubt structure. Following this well, the company plans to drill another Redoubt well to a northern fault block.
These wells “could be very impactful to the company’s reserves,” Hall said.
Elsewhere, the company drilled the Sword well adjacent to the company’s onshore West McArthur River oil field.
Sword has been “an enormous success for us,” Hall said, holding steady at a rate of 600 to 650 barrels of oil per day gross.
In the North Fork gas field, Hall said the company evaluated for oil while reworking a well and came away with “encouraging preliminary results.” Expect a further announcement, he said.
The company also has plans to drill a second well at the Olson Creek prospect, on the west side of Cook Inlet, Hall said.
Trial date setMiller Energy is continuing its defense in a securities fraud case brought against it in U.S. District Court in Knoxville.
The plaintiffs in the case are investors who allege Miller executives overstated the value of the Cook Inlet oil and gas assets the company acquired in 2009, and violated accounting principles. This had the effect of artificially inflating Miller’s stock price, which subsequently crashed when the alleged fraud was exposed, the plaintiffs contend.
The presiding judge in February denied Miller’s motion to dismiss the case.
The case is now set for a jury trial beginning Feb. 9, 2015.