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Miller looking at sale of non-core assets Company’s four drilling rigs, Badami and North Fork fields, North Fork pipeline may go; large refinancing also nearing conclusion KRISTEN NELSON Petroleum News
Miller Energy Resources, which operates in Cook Inlet and on the North Slope through Cook Inlet Energy and Savant Alaska, is in the midst of “repositioning its capital structure to improve its liquidity, to more appropriately finance its business and to optimize the value and growth potential of its core asset base,” the company said in a July 29 statement accompanying its fourth quarter and full fiscal year results.
Miller said it recorded a fourth quarter impairment of $82.8 million on its oil and properties and an impairment of $14.3 million on the drilling rigs it owns, and as a result, “the accounting net book value of Miller Energy’s assets no longer exceeds the book value of its debt.”
Carl Giesler, the company’s chief executive officer, said the company has been challenged by continued low oil prices and “exacerbated by past capital, financing and drilling decisions that, at least in retrospect, left us poorly positioned for such market conditions.”
He said management and the board have been working on a plan to appropriately finance the business and “are working to reposition our capital structure; to rationalize our non-core assets; to develop our core Cook Inlet assets in a safe, disciplined and return-focused manner; and to stream-line our cost and organizational structure.”
And no, he said, the company does not intend to file for bankruptcy.
However the company said it is evaluating several offers, “including negotiations with an Alaskan strategic partner that would provide a sale lease back financing” for the company’s four drilling rigs and sale of its stake in Badami and “other non-core oil and gas assets.” Giesler said those non-core assets include the North Fork pipeline, which, he said, might be more valuable to another owner or with a partner.
The company is also in the process of acquiring a $165 million loan which will largely pay down its existing debt.
Changes at the top There are also changes at the top of the company, founded by Deloy Miller in 1967. The company has been headquartered in Knoxville, Tennessee, and moved its headquarters to Houston earlier this year.
Giesler, hired as CEO in September 2014, said in the July 29 analysts’ call that Deloy Miller would be entering full retirement. When he retired as chief operating officer and chairman of the board last September, Miller was retained as a consultant. In a Form 8-K filed with the Securities and Exchange Commission July 29, the company said it terminated the separation agreement as well as a consulting agreement, and executed a promissory note under which the company will pay Miller a total of $760,079.28 in monthly installments through Sept. 15, 2016, a balance determined by converting remaining known payments in connection with prior agreements into a more predictable and definite payment schedule for the company.
Scott M. Boruff, hired as CEO by Miller Energy in 2008, became chairman of the board when Miller stepped down last September, and is lessening involvement in day-to-day operations and will focus on mergers and acquisitions, Giesler said, while remaining as a director and chairman.
David Hall remains chief operating officer, Giesler said, but the company has added Leland Tate as senior vice president, operations, and Tate will manage day-to-day operations.
The company has reduced staff and contractors from some 180 last September to a current count just over 100.
Small jobs planned The company said that until it completes its capital repositioning process it will focus primarily on small jobs and said it has identified and begun executing eight projects with an aggregate capital requirement of some $1.8 million that are expected to increase gross production by some 1.7 million cubic feet per day of natural gas and 220 barrels per day of oil. The company said it expects each project will exceed its internal return requirements and that each will have a payback period of less than one year.
If finances permit, the company will drill the RU-7B sidetrack at its Redoubt Shoal field and the NF 22-26 at its North Fork natural gas field.
More losses For the year and quarter just ended Miller Energy continues to lose money, with net production averaging 3,700 barrels per day equivalent, up 5 percent from 3,500 last quarter, and averaging 3,500 boepd for the fiscal year which ended April 30.
Adjusted earnings before interest, taxes, depreciation and amortization were $23.1 million for the quarter, down some 31 percent from $33.3 million last quarter.
For the year, loss before income taxes was $584.2 million, compared to the loss of $43.5 million the previous year. Miller said the loss this year relates to impairment charges on oil and gas properties and equipment, along with increased litigation and interest expense.
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