MILL, Miller Energy Oil and Gas Investor Article One on One
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Miller Energy Resources is an oil and gas company focused on development and step-out drilling in Alaska near existing infrastructure. The company will continue implementing its strategy in the coming year by drilling proven and probable undeveloped reserves and step-out targets identified by previous well tests and seismic data. Miller Energy receives attractive state drilling rebates in Alaska and benefits from both strong oil and gas markets in the region. The company's projects in Alaska are expected to yield the best returns due to the infrastructure in place and drilling rebates received from the state. Miller Energy plans to spend $180 million in capital expenditures in the current year.
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MILL, Miller Energy Oil and Gas Investor Article One on One
- 1. Energy Companies To Watch A SPECIAL REPORT FROM THE PUBLISHER OFSPRING 2014 ONEONONE
- 2. Describe the strategy that drives the company, and how you will implement it this year. We are focused on development and step-out drilling in Alaska close to our existing infrastructure. We have a team that has operated in the Cook Inlet for more than 20 years. We will continue to imple- ment our strategy in the coming year by drilling PUD and step-out targets identified by previous well tests and 3-D seismic. How have high oil prices and low gas prices af- fected your business? One of the many benefits of operating in Alaska, in addition to attractive state drilling rebates, is that both the oil and natural gas markets have been strong. Prior to this year we have focused on oil drilling where we receive ANS-based pricing (which is similar to Brent pricing). This year we closed a gas-focused acquisition with a fixed con- tract at $7 per thousand cubic feet (Mcf). The development of our existing oil assets and the pur- chase of natural gas-focused assets are indicative of the strong commodity markets in Alaska and demonstrate management’s commitment to invest- ing in projects with exceptional rates of return, whether gas or oil. Going forward, we anticipate that our production will be approximately 80% oil and 20% gas. Will you expand into any new basins or plays? Why or why not? Our core area of expertise is in Alaska where our capital budget is focused, and also in Tennessee, where we are drilling horizontal wells. We are primarily focused on expanding in Alaska; however, we are always looking at acquisitions in other areas where we might find opportunities with strong rates of return and that require a rela- tively low upfront purchase price. Which projects will yield the best return for the company this year? Given that we currently receive 35% to 60% of every dollar we spend drilling in Alaska back from the state, and because we already have sub- stantial infrastructure in place, MILLER ENERGY RESOURCES INC. NYSE: MILL | MILLERENERGYRESOURCES.COM SCOTT M. BORUFF has served as a director and CEO since August 2008. Prior to joining Miller, Boruff was a licensed investment banker. He was a director from 2006 to 2007 of Cresta Capital Strategies LLC, a New York investment-banking firm that closed transactions totaling $150 million to $200 million. He specialized in structuring of direct financings, recapitalizations, M&A, and strategic planning with an emphasis in oil and gas. He was a commercial real estate broker for more than 20 years. Boruff holds a BS in business administration from East Tennessee State University. Oil and Gas Investor | OneOnOne: Energy Companies to Watch | Spring 2014 Miller Energy’s Osprey Platform is part of its Cook Inlet midstream infrastructure.
- 3. our Alaska projects will undoubtedly yield the best rates of return. What is your projected budget for the current year and how does it compare to prior years? What are the primary drivers? We expect to spend somewhere in the range of $180 million this year, of which we expect to receive a meaningful por- tion back from the state. Our capital budget has been accelerating every year as we continue to add great drilling proj- ects in which to deploy capital. In the process, we have been able to secure expanded financing at lower interest rates, with world-class capital partners such as Apollo and Highbridge. Are you constrained by midstream capacity? Not for the foreseeable future … our midstream assets include our Osprey Platform, and our process- ing facilities at Kustatan and West McArthur River. These were built by a prior owner at a cost of more than $300 million and they are state-of-the-art facil- ities. Our midstream infrastructure has the capacity to support many times our current production level and is a great competitive advantage for Miller. Do you foresee any acquisitions this year? Yes—in fact, we have several letters of intent out for assets in Alaska and have also acquired additional acreage in Tennessee. We expect to continue to acquire additional assets throughout this year and into the foreseeable future. How much are you hedged? We have hedged more than 2,000 barrels of oil per day in the near term at prices from $108 to $94, details of which can be found in our SEC filings and presentations. We have hedged with straight swaps against Brent crude to date.We like to hedge a high portion of our net production to insure our cash flow against commodity price movements. Our gas is effectively 100% hedged as it is sold under a fixed contract at $7/Mcf. What is the greatest challenge you face this year? Our greatest challenge perennially has been managing costs as we execute our drilling plan. That said, state tax credits mitigate any increases in capex and we have learned to be increasingly efficient as we drill. For example, in our next West McArthur River project, we intend to use an existing wellbore (WMRU-2A) to mini- mize costs to access a new development drilling location. The message here is that, with each well we drill, we gain additional information and experience that we put to immediate work in subsequent efforts. What is the one thing you want investors to know? With its exceptional assets and the unusually favorable regions in which we operate, Miller is an established company with a long operating history. We’re very proud of our success to date, but we think the best is yet to come. Any final comments or thoughts? We appreciate the chance to share some details about our company, and if anyone would like addi- tional information, they are welcome to visit our website at millerenergyresources.com. IR Contact: Derek Gradwell. 512-270-6990. [email protected] The Kustatan Production Facility in Alaska is a state-of-the-art midstream asset that Miller Energy purchased. © Hart Energy | 1616 S. Voss, Ste. 1000, Houston, TX 77057 USA | +1.713.260.6400 | Fax +1.713.840.8585