Story by The Wall Street Journal
A group of companies that say they are owed millions from Miller Energy Resources Inc.’s Alaska subsidiary is trying to push the unit into bankruptcy after a securities regulator charged the company with accounting fraud.
Creditors of Miller’s Cook Inlet Energy LLC subsidiary, filed an involuntary chapter 11 petition Thursday against the oil and gas company driller in U.S. Bankruptcy Court in Anchorage. The creditors—Baker Hughes Oilfield Operations, Inc., M-I LLC, Schlumberger Tech. Corp.—claim the Alaska subsidiary owes them about $2.8 million, according to court papers.
Executives at Miller plan to fight the request and restructure the company’s debt without bankruptcy, Chief Executive Carl Giesler told The Wall Street Journal Monday. Miller is attempting to get Baker Hughes and Schlumberger to pull the petition and spent the weekend reaching out to them, he added.
“We have legacy issues that we have to deal with from the balance sheet to the SEC matter,” said Mr. Giesler, who took over the company last year. “We’re trying to deal with them responsibly, and that’s why we’ll continue to cooperate with the state and the SEC.”
A lawyer for the creditors declined to comment.
The so-called involuntary bankruptcy filing comes after the Securities and Exchange Commission accused the company of accounting fraud. The SEC said last week that Miller Energy, after acquiring oil and gas properties in Alaska in late 2009 for $2.5 million, allegedly overstated the value of its holdings by more than $400 million, boosting the company’s net income and total assets.
The SEC charged Miller Energy, its former chief financial officer and its current chief operating officer for allegedly inflating values of oil and gas properties, which boosted the company from the ranks of penny stocks into one that eventually listed on the New York Stock Exchange, where its stock reached a 2013 high of nearly $9 a share, the SEC said. The exchange suspended trading in Miller at the end of July and said it would move to delist the stock, which the company plans to fight, it said.
Miller Energy noted Friday that the SEC civil action is related to alleged valuation errors from approximately five years ago. While it believes the SEC action “is not warranted by the facts or the law, current management has taken the allegations seriously and is working with the Company’s Board of Directors to effect appropriate actions,” the company said.
The company’s Chief Operating Officer David Hall resigned Friday. Former CFO Paul Boyd had previously left Miller Energy, the company said.
Under U.S. bankruptcy law, Miller Energy can contest the bankruptcy or have the case converted to a voluntary financial restructuring under chapter 11 of the bankruptcy code. It has 21 days to respond to the creditors, although executives are pushing for a much quicker resolution, Mr. Giesler said.
Miller Energy, a former Tennessee company that shifted its oil and gas drilling to Alaska in recent years, is waiting on tax reimbursements from Alaska to help pay its debts. But the SEC filing has caused increased scrutiny and delayed the payment, Mr. Giesler added.
He criticized Baker Hughes for furthering the delays by starting the bankruptcy proceeding. Miller Energy owes much more money, some $176 million, to Apollo Global Management LLC and Highbridge Capital. Mr. Giesler said the two investment firms have been willing to work with the company through attempts to refinance and sell assets.
Apollo and Highbridge declined to comment.
“We have a plan,” to pay creditors back, he added. “Unfortunately, the decision by the SEC to file suit…created some unintended consequences that, I hope only temporarily, knocked us off course.”