Miller Energy to focus on North Fork gas

Kristen Nelson

Petroleum News

Miller Energy is going to focus on its North Fork gas field, may drill and frack a sidetrack at Redoubt this summer and will be deferring other prospects as it looks to drill where production can be put online immediately.

Carl Giesler, named chief executive officer in mid-September, told a March 12 third-quarter analysts’ call that the two new wells the company drilled at North Fork both came in below budget and ahead of schedule.

He said the company won’t be in a rush at North Fork, but will digest data from the first two wells and compare that to data from the previous field operator, Armstrong. There are several workovers at the field that look economically promising, he said, and two additional wells, but the company won’t be in a hurry to drill them. Giesler said in hindsight it might have been better to wait the drill NFU 42-35, rather than drilling it right on the heels of NFU 24-26.

But, he said, both wells were drilled under budget and on time, something the company hasn’t done recently.

Giesler said the company has been paying for decisions and goals of prior management, but is close to done with that and expects future results to reflect the current strategic plan.

He said management will be working to repair the company’s operating performance, balance sheet and credibility and is aware that its 2014 calendar year performance was poor.

The company wants to be straightforward he said, and as part of that goal the board has approved a change to make its fiscal year coincide with the calendar year.

The RU-9 well Miller drilled from its Osprey platform last year was a disappointment, the company said in November, with output only reaching about 100 barrels of oil per day prior to an electrical failure.

The company is now considering a sidetrack from the RU-7 well.

Giesler said the company believes Redoubt holds significant resources, but said wells there are riskier and costlier than North Fork wells.

The plan with the RU-7 sidetrack is to do “mild hydraulic fracturing” which is expected to double or triple recovery rates, and he said deferring that work until summer at the earliest gives more time for planning and for oil price recovery.

Giesler said RU-7 is the only well likely at Redoubt this calendar year and results from that well will indicate the company’s next steps.

Giesler said Rig 37 is on the Osprey platform, ready to drill the RU-7, while Rig 37 is at North Fork and could potentially be used to drill two more wells and workovers there. Since the company owns the rigs, he said, they are available when needed and the company is not paying standby fees.

Miller Energy’s production averaged 3,401 barrels of oil equivalent per day for the fiscal quarter ending Jan. 31, up from 3,273 boepd for the fiscal quarter ending Oct. 31, and also up from 2,450 boepd for the fiscal quarter ending Jan. 31, 2014.

The company’s total revenues were $20.3 million for the third quarter of fiscal 2015, ending Jan. 31, up 22 percent from $16.6 million in the third quarter of fiscal 2014. Miller said the year-over-year increase was primarily due to increased production volumes and the North Fork field acquisition, which increased natural gas sales, offset by declines in crude oil prices.