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Miller aims for 4,000 barrels of oil per day Tennessee-based, publicly traded company operates in Alaska as Cook Inlet Energy; local firm undertakes multiple drilling projects Wesley Loy For Petroleum News
Tennessee-based Miller Energy Resources Inc. says it’s on track to reach 4,000 barrels of oil equivalent per day by the end of the calendar year.
The company, however, is producing some substantial red ink along the way, financial reports show.
Most of Miller’s oil and gas production is in Alaska through its subsidiary, Anchorage-based Cook Inlet Energy LLC.
Cook Inlet Energy operates the offshore Redoubt unit, and the onshore West McArthur River field.
On Sept. 9, Miller reported revenue of $13 million for the first quarter of fiscal 2014, which ended July 31. That compares to $8.3 million in the first quarter of the prior year.
The company said “costs and direct expenses” increased for the quarter to $19.2 million, up from $13.3 million.
The operating loss was $6.2 million, versus $5 million in the prior first quarter.
The company reported capital expenditures of $16 million during the quarter, primarily to “accelerate oil development opportunities in Alaska.”
“Currently, our total production from both Alaska and Tennessee is approximately 3,300 boepd,” Scott Boruff, Miller’s chief executive, said in a press release. “We are well on our way to reaching our goal of 4,000 boepd before the end of the calendar year, which now appears conservative.”
Focus on Osprey sidetracks As the numbers reflect, Miller Energy is a small company. Its shares are listed on the New York Stock Exchange.
Miller’s subsidiary, Cook Inlet Energy, launched as an Alaska oil and gas operator in late 2009 after acquiring a collection of west inlet properties out of the bankruptcy of the previous operator, California-based Pacific Energy Resources Ltd.
Since then, Cook Inlet Energy has focused much of its efforts on restoring production from the formerly shut-in Osprey platform, which sits in the Redoubt unit.
Osprey is the newest and southernmost of the platforms in Cook Inlet. Prior operators met mostly with disappointing production results from the platform.
Cook Inlet Energy managers say problems such as collapsed casings impaired the performance of Osprey wells.
The company commissioned construction of a custom rig for Osprey, and is using it now to drill sidetracks to existing wells.
One of these sidetracks, known as RU-2A, is “our highest producing oil well to date,” averaging 1,307 barrels of oil per day during the first quarter, Boruff said.
“This well alone contributed $4.1 million to our revenues for the quarter,” he said.
“We are also very excited about our most recently completed sidetrack, RU-1A, which came online in mid-August,” Boruff continued. “The oil well showed a 14-day average initial production rate of 754 bopd, but we have been running the well at a reduced speed while we analyze formation response. Once the analysis is complete, we will adjust the pump speed accordingly to maintain optimal formation stability.”
Work on another sidetrack, RU-5B, is nearly complete, Miller reported.
Two more Osprey wells, RU-3 and RU-4, are producing natural gas to fuel field operations. The company is selling excess gas from these wells under a sales contract with an undisclosed buyer. Miller reported $270,000 in gas sales for the quarter.
Exploratory drilling, rig dispute Onshore, the company reports “making considerable progress” on a couple of exploratory drilling projects.
The Sword No. 1 oil well is being drilled from a site adjacent to the West McArthur River pad. The well was spudded on June 19 using Patterson-UTI Drilling Co.’s rig 191.
Sword is a directional, extended-reach well targeting a bottom hole location beneath the inlet. The company has said it’s aiming for a total depth of 19,000 feet.
Cook Inlet Energy also is drilling an exploratory well on its Olson Creek natural gas prospect west of the ConocoPhillips-operated Beluga River gas field. The company previously said it had hoped to wrap up drilling on the Olson Creek No. 1 well by the end of August.
Miller in July disclosed it was disputing $531,000 in invoices from the Osprey rig builder, Voorhees Equipment and Consulting Inc.
The parties were to arbitrate the matter beginning in mid-September. But the arbitration has been postponed until early January, Miller said in a Sept. 9 filing with the U.S. Securities and Exchange Commission.
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