KNOXVILLE, TN--(Marketwired - Apr 29, 2014) - Miller Energy Resources, Inc. ("Miller" or "the Company") (NYSE: MILL) today announced updates on its operations in Alaska and Tennessee.
- Successfully tests the Tyonek G zone in its Sword No. 1 well at approximately 290 BOPD, gross
- Current Company-wide daily production is approximately 4,700 BOEPD, gross
- Drilling passes 9,500 feet on both its WMRU-2A and RU-9 wells.
"We are closing fiscal 2014 having achieved significant milestones, including substantially increasing production and reserves, reducing our cost of capital, and successfully putting our first grassroots well online," stated Scott M. Boruff, CEO of Miller. "We enter this next year with the expectation of appreciably increasing production through our current drilling schedule, including RU-9, WMRU-8 and WMRU-2B, coupled with enhancements at North Fork and multiple productive zones on our Sword #1 well. Furthermore, through the acquisition of an additional rig, we plan to accelerate our drilling program. I have great confidence that fiscal 2015 will be another year marked by production and reserves growth as well as exceptional acquisition opportunities for Miller Energy."
At its Sword No. 1 well, Miller's wholly owned Alaskan subsidiary, Cook Inlet Energy ("CIE"), has successfully tested the Tyonek G zone, one of three zones in that well. This zone tested at approximately 290 bopd with a 6% water cut. The well was completed with preparations and plans to test and flow all three zones, the Hemlock, Tyonek G-O and the Tyonek G. To date, the well has produced solely from the Hemlock with a recent flow rate of approximately 600 BOPD. The two additional zones are expected to add significantly to the Hemlock production. Following the successful production test of the Tyonek G, the Company isolated the zone and initiated the testing of the third zone, the Tyonek G-O. The G-O zone will stay online post testing and the Tyonek G zone will be put online after an amended comingling order is approved by AOGCC.
Sabre and Rig Purchase Option
On March 31, 2014, Miller entered into a Purchase Option Agreement with Baker Process, Inc., which grants Miller the option to acquire a 2,400 HP onshore drilling rig and related equipment on or before May 5, 2014. Miller fully intends to exercise its option and plans to use the rig to drill its first well on the Sabre prospect, which will offset the Company's Sword well on the adjacent fault block. The Company has received interest from several potential Joint Venture partners for involvement in the Sabre well and is considering those opportunities. Once purchased, the Company will retrofit the rig to meet the requirements to drill the Sabre Field. These improvements are planned to take place over the course of approximately four months in the Company's Nikiski yard located in Alaska. The estimated total acquisition and building cost for the new rig is expected to be $10 million. The Company expects that the rig will pay for itself within 16 months of activity, making the purchase more attractive than a lease of the same unit.
West McArthur River Unit
The Company has recently drilled, tested and completed its WMRU-8 oil well. The well was recently brought online with low flow rates requiring additional stimulation procedures. The Company has designed an acid stimulation that should improve flow and allow for proper testing which will be implemented in the coming weeks. The Company has also sidetracked its WMRU-2B well from the unused WMRU-2A wellbore at approximately 7,000 feet and has recently drilled to a depth of 9,500 feet on its way to planned final measured depth of approximately 15,000 feet. The total current daily production from WMRU wells is approximately 1278 BOEPD.
The Company recently performed a successful re-perforation procedure in the Hemlock Formation on its RU-7 well. Prior to this procedure, RU-7 had not been producing meaningful amounts of oil, though it is currently producing at a rate of approximately 65 BOPD as a result of the re-perforations. Plans are to progressively increase the pumping speed on a go-forward basis to increase productivity. Drilling is currently underway on RU-9, a new grassroots well in the southern step-out of the Redoubt Shoal field. Drilling has reached approximately 10,500 feet with a planned final measured depth of approximately 18,500 feet. The total current daily production from the Redoubt Shoal wells is approximately 1527 BOEPD.
North Fork Unit
Following its recent acquisition in Alaska, the North Fork Unit is currently producing approximately 9.9 MMcf/d with peaks as much as 10 MMcf/d, up from 7.0 MMcf/d at the time of acquisition. The Company is moving forward with an optimization program on two of its producing wells to continue increasing production rates. A coil tubing unit is currently being secured to perform workovers and the Company is currently evaluating the PDNP and PUD wells for further development.
In its Tennessee operations, Miller is in the final stages of permitting its Willoughby et al H-1 well, its fourth horizontal well in Tennessee. A reservoir study is underway to create a field-wide unit in the Low Gap Field in order to begin a gas pressure maintenance program for greater oil recovery in the field from the horizontal wells drilled. Miller plans to begin using the re-pressurization program on its Brimstone Et al #1well and test data prior to drilling the Willoughby well. The State has approved Miller's permit for a gas processing unit in the Burrville area of Tennessee to allow for the recovery of natural gas liquids from high BTU gas from Miller and other operators in the area. The lower BTU gas will then be allowed in pipelines, and the liquids can be sold. This is a pilot project that, once proven, may be used throughout Tennessee. The current total daily production from Miller's Tennessee wells is approximately 228 BOEPD.
All production numbers cited in this press release represent gross production values.
About Miller Energy Resources
Miller Energy Resources, Inc. is an oil and natural gas exploration, production and drilling company operating in multiple exploration and production basins in North America. Miller's focus is in Cook Inlet, Alaska and in the heart of Tennessee's prolific and hydrocarbon-rich Appalachian Basin including the Mississippian Lime and the Chattanooga Shale. Miller is headquartered in Knoxville, Tennessee with offices in Anchorage, Alaska and Huntsville, Tennessee. The company's common stock is listed on the NYSE under the symbol MILL.
Statements Regarding Forward-Looking Information
Certain statements in this press release and elsewhere by Miller Energy Resources¸ Inc. are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by Miller Energy Resources, Inc. and described in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the potential for Miller Energy to experience additional operating losses; high debt costs under its existing senior credit facility; potential limitations imposed by debt covenants under its senior credit facility on its growth and ability to meet business objectives; the need to enhance management, systems, accounting, controls and reporting performance; uncertainties related to the filing of its Form 10-K for 2011; litigation risks; its ability to perform under the terms of its oil and gas leases, and exploration licenses with the Alaska DNR, including meeting the funding or work commitments of those agreements; its ability to successfully acquire, integrate and exploit new productive assets in the future; its ability to recover proved undeveloped reserves and convert probable and possible reserves to proved reserves; risks associated with the hedging of commodity prices; its dependence on third party transportation facilities; concentration risk in the market for the oil we produce in Alaska; the impact of natural disasters on its Cook Inlet Basin operations; adverse effects of the national and global economic downturns on our profitability; the imprecise nature of its reserve estimates; drilling risks; fluctuating oil and gas prices and the impact on results from operations; the need to discover or acquire new reserves in the future to avoid declines in production; differences between the present value of cash flows from proved reserves and the market value of those reserves; the existence within the industry of risks that may be uninsurable; constraints on production and costs of compliance that may arise from current and future environmental, FERC and other statutes, rules and regulations at the state and federal level; the impact that future legislation could have on access to tax incentives currently enjoyed by Miller; that no dividends may be paid on its common stock for some time; cashless exercise provisions of outstanding warrants; market overhang related to restricted securities and outstanding options, and warrants; the impact of non-cash gains and losses from derivative accounting on future financial results; and risks to non-affiliate shareholders arising from the substantial ownership positions of affiliates. Additional information on these and other factors, which could affect Miller's operations or financial results, are included in Miller Energy Resources, Inc.'s reports on file with United States Securities and Exchange Commission including its Annual Report on Form 10-K, as amended, for the fiscal year ended April 30, 2013. Miller Energy Resources, Inc.'s actual results could differ materially from those anticipated in these forward- looking statements as a result of a variety of factors, including those discussed in its periodic reports that are filed with the Securities and Exchange Commission and available on its Web site (www.sec.gov). All forward-looking statements attributable to Miller Energy Resources or to persons acting on its behalf are expressly qualified in their entirety by these factors. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change unless otherwise required under securities law.