Embattled Miller Energy and its Alaska subsidiaries have filed for bankruptcy protection and reorganization under Chapter 11, a move due in part to sliding oil prices and investments in Cook Inlet that didn't pan out as hoped, the company said.
Other factors that contributed to the Thursday filing in U.S. Bankruptcy Court in Alaska include a financial restructuring plan that fell apart, an effort by a pair of oil field service companies to push Miller into bankruptcy, and allegations from the Securities and Exchange Commission that Miller inflated the value of Cook Inlet property it acquired in 2009.
The Knoxville-based firm produces oil and gas in Cook Inlet, through its subsidiary Cook Inlet Energy, and oil at the small Badami field on the North Slope, following Miller's acquisition of Savant Alaska for $9 million last year.
Miller owes more than $200 million to numerous companies, including several in Alaska that support its operations.
The company hopes to restructure under Chapter 11 bankruptcy with a plan that would give two large creditors an equity stake in the company's assets. That plan involves Apollo Investment Corp. and affiliates of Highbridge Capital Strategies, both based in New York City. The deal has been agreed to in principle and would ultimately have to be accepted by the bankruptcy court to go forward, said Carl Giesler, chief executive for Miller Energy.
He said Miller is eager to get back on its feet and pay its vendors in a timely manner.
"The overarching goal is to restructure the company and get back to doing what we should be doing, which is safely and more efficiently producing oil and gas," he said.
Because of the drop in prices from around $100 a barrel last summer to less than $50, the company has reduced its workforce from about 170 employees and contractors, most of them in Alaska, to about 100, with roughly 80 of those in Alaska, said Giesler.
Like other oil and gas companies in the state, Miller Energy has received millions of dollars in state tax credits. The company had hoped to escape bankruptcy in part by relying on those credits, as well as by selling its stake in the Badami Unit and by receiving a $165 million loan that would allow the company to refinance its debt.
But the private company that would have provided that loan recently "terminated negotiations with the company," citing the SEC investigation and the effort by Baker Hughes and Schlumberger, who are owed more than $2 million, to force Miller into bankruptcy, a statement from Miller said.
Among the creditors with the 30 largest unsecured claims against Miller are Palmer-based Cruz Construction, owed $1.5 million, Kenai-based Inlet Drilling Alaska, owed $1 million, and ASRC Energy Services in Anchorage, owed $400,000.
This summer, Giesler had urged prompt payment of state tax credits owed for 2014 to help the company cover its debts in Alaska, leading to a $6.4 million state payment. The state owes another $17.3 million in tax credits for 2014, but Giesler said the company has not received additional tax credit payments.
"We haven't received anything further but we are cooperating and acting with the state in a joint effort to make sure our assets are ideally operated and we maintain gainful employment," he said.
Alaska leaders are considering reducing the tax credit program in part because Cook Inlet gas fields have seen a turnaround after natural-gas production had fallen to critically low levels.
As for the SEC complaint, Miller Energy reached a preliminary settlement with the SEC's enforcement division to pay $5 million over three years, a deal that has not been approved by the agency's commission.
Miller's woes also include a $446,000 fine by the Alaska Oil and Gas Conservation Commission and a share price that has collapsed from almost $9 in late 2013 to 4 cents on Friday.
Giesler said Miller's stake in Badami could be sold, if that's the path the bankruptcy court approves. But that may not be necessary, if the restructuring deal is accepted.
"The bankruptcy court will determine how the value of our assets is allocated," he said.
Alaska Dispatch Publishing