Miller Energy Resources (MILL) Posts Q2 GAAP Loss of $2.48/Share; Will Evaluate Several Offers

Miller Energy Resources (NYSE: MILL) reported Q4 EPS of $2.48, $2.75 better than the analyst estimate of ($0.27). Revenue for the quarter came in at $15.5 million versus the consensus estimate of $21.5 million.

While the Company is comfortable with the numbers presented below, the Company requires additional time to satisfactorily complete its financial statements and disclosures to be included in its Annual Report on Form 10-K ("Form 10-K"). Accordingly we will not be filing our Form 10-K on this date. We expect to file our Form 10-K within the next two weeks.

Notable Items

• For the quarter, net production averaged 3.7 MBoed, up approximately 5% from the 3.5 MBoed last quarter. For the year, net production averaged 3.5 MBoed, up approximately 58% from the 2.2 MBoed last year.

• For the quarter, Adjusted EBITDA was $23.1 million, down approximately 31% from the $33.3 million last quarter. The decrease in Adjusted EBITDA from the third quarter to the fourth quarter was primarily due to a reduction of $18.4 million of Alaska carried forward annual loss credits applied for during the third quarter, as well as one less shipment of oil during the fourth quarter, slightly offset by $11.6 million of derivative settlements during the fourth quarter. For the year, Adjusted EBITDA was $78.6 million, up approximately 108% from the $37.8 million last year.

• Given the increasingly constrained nature of its liquidity and debt structure, the Company is in the process of repositioning its capital structure to improve its liquidity, to more appropriately finance its business and to optimize the value and growth potential of its core asset base.

As part of this process, the Company is evaluating several offers, including negotiations with an Alaskan strategic partner that would provide a sale lease back financing for the Company's rigs, buy the Company's stake in Badami and other non-core oil and gas assets and provide a meaningful equity-linked investment in the Company.

Miller Energy has also signed a commencement agreement with a private financing source for an approximately $165 million loan that will largely pay down the Company's existing debt. The potential lender is in the process of confirmatory diligence and legal documentation. The Company will provide more detail as this process progresses.

• Miller Energy has settled all its hedges to meet its lenders' demand for progress on an orderly pay-down of its outstanding revolver balance. The Company has no ability to borrow beyond its current $3.8 million balance on that revolver.

• Despite the advanced stage of its ongoing capital repositioning process, the Company believes that, from an accounting perspective, substantial doubt exists about its ability to continue as a going concern.

• Given that substantial doubt exists about the Company's ability to continue as a going concern, the SEC 1P PV-10 of $91.3 million as of April 30, 2015 reflects only the value of the Company's PDP reserves using SEC pricing.

• Also, given that substantial doubt exists about the Company's ability to continue as a going concern, as well as our unsuccessful WF-3 well, among other factors, Miller Energy recorded an impairment of $82.8 million on its oil and gas properties during the fourth quarter. The Company also recorded an impairment of $14.3 million on its owned drilling rigs given U.S. rig market dynamics. As a result of these impairments, the accounting net book value of Miller Energy's assets no longer exceeds the book value of its debt.

• The Company received notices from the NYSE regarding potential delisting events arising from the decrease in its common share price and overall capitalization. In addition, the Company noted that its stock could face delisting in the event its average market capitalization declines below $15 million on a 30-trading day basis, a threshold that it has been approaching. In the event of a delisting trigger, Miller Energy expects to avail itself of its right to appeal and believes there are many factors which the NYSE should consider before taking that action, including the advanced status of the Company's capital repositioning and its efforts to maximize the value of and growth in its assets.

• In April, the Company received a notice from the SEC indicating that its staff had made a preliminary determination to recommend that the SEC file a civil claim against the Company. If this action were brought, the Company believes it would relate to public filings made in connection with its 2009 acquisition of certain Alaska assets. The notice invited the Company to file a response showing why no action should be taken, and the Company has complied. Miller Energy is waiting on feedback on that response or any additional questions the SEC may have.

• Additionally, in March, the court in the Company's lawsuit brought by VAI, Inc. awarded the plaintiff approximately $7.0 million, including interest. The case stems from a fee dispute under an advisory contract and a related memorandum of understanding in 2009. Miller Energy is moving forward with an appeal.

• The Company has identified and implemented cost initiatives for both G&A and opex that it expects will save more than $9.0 million annually going forward.

• Miller Energy has continued its capital discipline initiatives, incurring approximately $5 million in capex during the fourth quarter.

• As of April 30, 2015, the Company had state tax credits receivable, net of $41.5 million outstanding. Subsequent to April 30, 2015, the Company collected $9.3 million in cash and expects to receive at least $23.7 million in cash by the end of August. The remaining balance will be collected within the next twelve months.

• During the quarter, Miller Energy moved its headquarters to Houston, Texas from Knoxville, Tennessee.

For earnings history and earnings-related data on Miller Energy Resources (MILL) click here.

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