If and when it emerges from bankruptcy proceedings, Miller Energy Resources Inc. will be a very different company - at least on paper.
For one thing, Miller will no longer be a publicly traded company.
Under a proposed plan of reorganization, Miller will “go private,” with the company’s lenders holding a controlling position in the new Miller common stock.
These and many more details are contained in a disclosure statement filed Oct. 30 in U.S. Bankruptcy Court in Alaska.
The court has ordered a hearing for Dec.15 to consider approval of the disclosure statement.
Ultimately, Miller’s creditors will vote on whether to approve or reject the reorganization plan.
If the plan isn’t confirmed and consummated, the alternatives include formulating an alternative reorganization plan or liquidating the company, the disclosure statement says.
Spectacular rise and fall
Miller Energy, originally rooted in Tennessee and now headquartered in Houston, filed for Chapter 11 bankruptcy reorganization on Oct. 1, citing “a confluence of factors” including a lack of financing, the decline in oil prices, 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.”
Miller made its entry into the Alaska arena in late 2009, and today Alaska is virtually its sole focus. The company operates four main producing properties: the offshore Redoubt unit and Osprey platform in Cook Inlet, the West McArthur River oil field on the inlet’s west bank, the North Fork natural gas field on the Kenai Peninsula and the small Badami oil field on the North Slope.
Miller operates in Alaska through its major subsidiary, Cook Inlet Energy LLC.
Following its entry into the state, Miller worked aggressively to build production and to acquire properties.
Its management avidly sought financing. And on Wall Street, the company’s stock graduated from the OTC Bulletin Board to the Nasdaq exchange and finally to the New York Stock Exchange.
For a time, investors seemed to really like Miller, driving its penny stock to a 2013 high of nearly $9 per share.
But some investors, and more recently the U.S. Securities and Exchange Commission, accused the company of overvaluing the Alaska oil and gas assets it acquired in 2009. The allegation has plagued the company, along with high management turnover, low oil prices, and weak results in the field.
Miller’s shares, no longer listed on the New York Stock Exchange, recently have traded for under a nickel on the OTC.
The hunt for financing
The disclosure statement details some of Miller’s struggles to find financing and to take other measures to save the company.
With the help of investment bankers at Seaport Global Securities, the company says it met with more than 75 prospective lenders and asset purchasers. In July, Miller thought it had a $165 million loan to partially refinance the company’s debt, but the deal fell apart.
Efforts to raise capital or sell Miller’s assets continue, the disclosure statement says.
Miller says it has laid off a substantial number of employees, and lacks the capital to continue drilling to develop its proven oil and gas reserves.
On a brighter note for the company, Miller says it recently has received about $18 million in state tax credits.
Under the proposed reorganization plan, Miller’s production is projected at roughly 4,000 barrels of oil equivalent per day gross through 2020, the disclosure statement says.
Pressing maintenance
On Oct. 21, Miller filed a motion seeking authorization to proceed with certain maintenance contracts.
Prior to filing for bankruptcy, the company undertook a “stabilization project” in Cook Inlet for pipelines related to the Osprey platform, the motion says.
A contract between Cook Inlet Energy and American Marine International is “a key component of the project because it provides diving and installation services related to, among other things, installing pipeline and cable sandbag supports for the project,” the motion says.
The motion adds: “The project is necessary to address safety issues and prevent potential environmental hazards in the Cook Inlet. The timing of the project is significant because it must be complete before the Cook Inlet mostly freezes over for the winter.”
The motion indicates the contract with American Marine is worth more than $800,000.
A committee of unsecured creditors has filed an objection to Miller’s motion.
