Miller Energy Resources Inc. is making moves just about everywhere you look — in the boardroom, in the field and in court.
On Sept. 15, the Tennessee-based oil and gas producer announced changes to its senior leadership, including the retirement of founder and board chairman Deloy Miller.
The company also announced plans to buy the Alaska assets of Buccaneer Energy, which is going through bankruptcy proceedings.
Miller continues to advance various drilling projects around Alaska’s Cook Inlet basin, and is close to resolving a long-running investor lawsuit.
Aside from these developments, the company recently filed financial statements showing it roughly doubled its production rate and revenue in a year’s time. But the red ink is rising.
Miller Energy is a small company, yet it’s listed on the Big Board — the New York Stock Exchange. Miller reported 84 employees as of April 30.
The little independent is showing outsized ambition as it looks to divest its legacy Tennessee assets to focus on bigger plays in Alaska.
Miller came onto the Alaska scene in late 2009, buying a collection of Cook Inlet properties at a bankruptcy sale. These included the offshore Redoubt unit, and the onshore West McArthur River oil field.
These properties were shut-in when Miller acquired them. Its subsidiary, Cook Inlet Energy LLC, has since worked to restore and grow production.
Miller has steadily sought to add to its holdings. The company early this year acquired the North Fork natural gas field on the southern Kenai Peninsula. And it’s working to complete a takeover of the Badami oil field on the North Slope.
Now Miller is looking to buy Buccaneer’s Alaska assets in a deal worth up to $50 million, the company said in its Sept. 15 press release.
Executive shuffle
Deloy Miller will retire as board chairman and will resign as a director, but will remain involved with the firm as a consultant and adviser, the company said.
He is the father-in-law of Scott Boruff, who until very recently was Miller Energy’s chief executive officer. Boruff is now executive chairman of the company, and Carl F. Giesler Jr. has come aboard as the new CEO, Miller said.
“While Carl will assume primary leadership responsibility, I’ll remain active in Miller’s strategic activity and help grow the value of my family’s substantial investment in the company,” Boruff said.
Giesler, a Harvard Law School graduate, previously was responsible for oil and gas investments as a managing director for Harbinger Group Inc., Miller said.
His experience with master limited partnerships could help Miller maximize the value of, and potentially “monetize,” its substantial midstream assets, the company said.
Mixed financials
In filings with the U.S. Securities and Exchange Commission, Miller reported average net production of 3,313 barrels of oil equivalent per day for the quarter ended July 31. That compares to 1,360 boepd for the same three-month period in 2013.
Total revenue for the quarter was up sharply to $25.4 million, but so was the company’s operating loss at $9.6 million.
Nearly all of Miller’s oil and gas production comes from Cook Inlet.
Company headquarters are in Knoxville, Tennessee, with its Cook Inlet Energy subsidiary based in Anchorage. Miller recently established an administrative office in Houston.
Debt has figured prominently in the company’s aggressive growth strategy.
In June, Miller secured a $250 million “revolving credit facility” with a banking syndicate led by KeyBank.
For the Buccaneer assets, Miller said it would “fund the potential purchase with its existing facilities or other borrowings.”
‘Encouraging’ well
Miller has focused much of its efforts on well workovers and drilling on its Osprey offshore platform, which stands in the Redoubt unit.
The company said tests on its latest well, RU-9, have confirmed oil.
“While flow rates have varied preliminary results are encouraging,” Miller said in its Sept. 15 press release.
Elsewhere, drilling was under way on the Olson Creek gas prospect on the inlet’s west side, Miller said in a Sept. 9 operations update.
Miller also is preparing to drill the Sabre No. 1 well near the West McArthur River field. The company is “evaluating joint venture offers for participation in the project.”
In August, the Alaska Division of Oil and Gas named Miller’s local subsidiary the successful bidder for an exploration license encompassing 168,581 acres of state land in the Iniskin Peninsula area of southwest Cook Inlet. In its bid, Cook Inlet Energy committed to spending $1.5 million on exploration over four years.
Miller expects to close its acquisition of the Badami field in December, and the company said it is evaluating a drilling program at Badami for the upcoming winter.
“All told, we believe we are on target to meaningfully expand our footprint in Alaska and establish Miller Energy as one of the state’s preeminent” exploration and production companies, Boruff said.
Making peace
Since 2011, Miller has wrestled with an investor class action in federal court in Tennessee. The plaintiffs alleged company executives misled investors by overstating the value of the Cook Inlet assets acquired in 2009.
Miller executives have stood by their valuation.
A judge in February denied the company’s motion to dismiss the case.
Now Miller and the lead plaintiff, the Oklahoma Firefighters Pension and Retirement System, say they have reached a $2.95 million settlement.
The proposed settlement is subject to court approval and class notice. The court has scheduled an Oct. 8 hearing for preliminary approval.
In a separate matter, Miller said it has resolved a dispute with Voorhees Equipment and Consulting Inc., which built the drilling rig atop the Osprey platform.
Miller claimed Voorhees was in breach of its obligations under a construction and sale agreement. Voorhees contended it was owed money.
The settlement took effect in May, Miller said in a Sept. 9 filing with the SEC. As part of the pact, Miller agreed to return certain equipment to Voorhees, such as a blowout preventer stack originally included on the rig but later removed for “a better functioning replacement.” l
