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Miller Energy files for bankruptcy
In August major creditors filed involuntary bankruptcy against Cook Inlet Energy. On Oct. 1 Cook Inlet Energy’s parent company, Miller Energy Resources and subsidiaries, including its Alaska producing companies, Cook Inlet Energy and Savant, filed to reorganize under Chapter 11 bankruptcy.
Miller said in a statement that it has agreed on comprehensive restructuring with Apollo Investment Corp. and certain affiliates of Highbridge Capital Strategies, to whom it owes some $190 million under a 2014 financing agreement. The bankruptcy plan requires that Apollo and the Highbridge affiliates support and provide funding for the proposed reorganization.
Miller also said it and its subsidiaries would continue to manage their properties and operate their business through the Chapter 11 process while the company seeks approval of the pre-negotiated bankruptcy plan in bankruptcy court.
How they got there Miller said it began a capital repositioning process in March and had secured a signed term sheet for more than $165 million from a private financing source to refinance the company’s outstanding debt. Miller said it had also “secured signed letters of intent on several non-core asset sales.”
The loan, the non-core asset sales and tax credits from the state of Alaska “may have provided Miller Energy sufficient funding to restructure its financial position outside of bankruptcy,” the company said.
But, following proceedings against Miller by the Securities and Exchange Commission’s Division of Enforcement and the involuntary bankruptcy petition filed against Cook Inlet Energy by affiliates of Baker Hughes and Schlumberger, the private financing source terminated negotiations, Miller said.
In addition to that termination, the company also cited the substantial decline in oil prices from September 2014 and “an ambitious drilling plan implemented during the relatively high oil price environment of calendar 2014 that resulted in meaningfully lower-than-expected additional production,” as factors leading up to its bankruptcy filing.
Tax credits Miller said in its filing that as of August 2015 it “was owed approximately $27 million” from the state of Alaska in tax credits.
The state wired Cook Inlet Energy $6.4 million in partial payment of tax credits on Aug. 31. In a letter Alaska Attorney General Craig Richards explained that the remaining amount approved for tax credits was $17,292,055. That amount, however, “is subject to offset for other CIE obligations owed” to the state, including a fine of $446,000 from the Alaska Oil and Gas Conservation Commission from an order dated May 1, and $2,050,000 due July 1 under a 2011 performance bond agreement.
Richards noted that the company had described the tax certificate payment as a receivable owed to CIE, “but those shorthand terms are not technically accurate.”
Objections Miller filed a number of motions with the bankruptcy court.
There were objections to some of those motions.
The United States Trustee, for example, objected to a Miller’s motion that the court confirm the company’s right to continue all of its employee programs and make payments under those programs.
Congress, the trustee noted, is hostile to certain types of employee programs such as key employee retention programs. The trustee asked for clarification of what falls under employee programs and requested that the debtors confirm that an order approving payment of employee programs “does not constitute Court authorization of the payment of any bonuses which may be due or owing to the senior management” identified in the motion.
Creditors who filed the August involuntary bankruptcy petition against Cook Inlet Energy - Baker Hughes Oilfield Operations Inc., Baker Petrolite LLC, Schlumberger Technology Corp. and M-I LLC doing business as MI-Swaco - objected to the income of Cook Inlet Energy, which “appears to be the only debtor making money” according to Miller’s filings, be distributed among the debtors.
In their August filing for relief the companies listed what they were owed for goods, materials and services as: Baker Hughes, $1,399,251.87; MI-Swaco, $478,219.01; and Schlumberger $742,084.27.
The objecting creditors said none of the debtors are drilling anything at this time and Miller Energy Resources owns no drilling rigs. “CIE owns three drilling rigs, one of which is committed to the Osprey platform in the Cook Inlet and two which sit idle in Southcentral Alaska and should be sold.”
The objection said CIE appears to have daily working interest 3,700 barrels of oil equivalent from its three Cook Inlet and Kenai Peninsula fields. “Savant has approximately 690 working interest barrels of oil equivalent per day, but this is from the Badami field, an expensive to operate North Slope field and almost certainly does not cover its own costs.” The creditors objected to Miller Energy’s statement that CIE’s income will not fund operations of the “non-productive affiliates,” including Miller Energy Resources, and called the assertion “absurd on its face.”
“Petitioning Creditors believe the ten bankruptcies affiliated with CIE’s involuntary bankruptcy were filed to poach the income and tax credits of CIE for the benefit of MER and its affiliates,” the petition argues.
“No more intercompany transfers should be permitted until DIP (debtor in possession)-like protections in favor of CIE are in place,” the petitioning creditors told the court.
- KRISTEN NELSON
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