After months of struggle and dashed hopes, E&P Miller Energy Resources Inc. (MILL) said Oct. 1 that it filed for Chapter 11 bankruptcy to reorganize and secure financing.

Miller Energy, based in Houston, entered bankruptcy protection with a pre-negotiated plan it lined up with second lien holders.

The company, which primarily operates in Alaska, has agreed upon a term sheet with Apollo Investment Corp. and affiliates of Highbridge Capital Strategies for a comprehensive financial restructuring. The term sheet includes a proposed reorganization and a debtor-in-possession (DIP) loan facility of up to $20 million.

In its bankruptcy filing, Miller and its subsidiaries listed assets of $392.6 million and liabilities of $336.9 million.

Miller is the latest oil and gas company to file for bankruptcy protection amid a downturn in commodity prices.

On Sept. 16, Samson Resources Corp. also filed, the largest E&P to do so to date.

Oil prices continue to hammer companies and financing for some E&Ps is becoming more difficult to obtain. The company said a failed attempt to gain financing, the decline in oil prices and an ambitious drilling plan implemented before the downturn led to a need to restructure.

Miller's financial adviser, Seaport Global Securities is continuing efforts to solicit alternative refinancing, asset sales and restructuring proposals.

In July, Carl F. Giesler, Miller's CEO, told Hart Energy that the company was concentrating on a $165 million loan that would largely refinance the company’s outstanding debt as well as secured letters of intent to sell noncore assets.

"As with a number of E&P companies, continued soft oil prices have challenged our business," Giesler said. “That impact has been exacerbated by past capital, financing and drilling decisions that, at least in retrospect, left us poorly positioned for such market conditions.”

Tenuous Loan

The company appeared to have a loan in line to prop up its battered finances.

Miller had secured a term sheet from a private financing source for more than $165 million that would have largely refinanced Miller’s outstanding debt.

The company also had secured signed letters of intent on several non-core asset sales. Combined with Alaska tax credits, Miller might have had enough funding to restructure outside of bankruptcy, the company said.

However, the private financing source terminated negotiations following the initiation of administrative proceedings against Miller by the SEC’s Division of Enforcement and an involuntary bankruptcy petition filed against a Miller subsidiary.

Miller’s financial situation began to erode in July. The company faced SEC accusations of inflating asset valuations, along with lawsuits.

The SEC’s case centered on the acquisition of oil and gas assets in Alaska that Miller bought for $2.25 million from Pacific Energy in 2009. The SEC contended the assets’ value was later overstated at $480 million, according to the SEC’s enforcement division.

In August, Miller reached an agreement to settlement the matter for about $5 million over a three-year period.

Also in August, Miller subsidiary Cook Inlet Energy LLC (CIE) was the subject of an involuntary bankruptcy petition filed in federal court. The petition was filed by Baker Hughes Oilfield Operations Inc. and Schlumberger Technology Corp., with total claims of $2.79 million.

Miller said executives suspect the action was initiated by Baker Hughes in response to the SEC civil action against the company.

As it proceeds with its financial restructuring, the company expects to have adequate cash on hand, based on:

  • Current commodity prices
  • Cash on hand and cash from operating activities
  • Expected state cash tax credit receipts, including an expected $23.7 million in August
  • The DIP facility of up to $20 million.

The company plans to continue paying ongoing operating costs and expenses.

Miller has a substantial acreage, reserve and resource position in Alaska, significant midstream and rig infrastructure to support production, and 100% working interest in and operatorship of most of its assets.

The company began its previously disclosed capital repositioning process in March 2015 to stabilize its financial position, improve its balance sheet and maximize the value of its assets for all stakeholders.

Seaport Global Securities is the company's financial adviser. Andrews Kurth LLP is its legal counsel.

Contact the author, Darren Barbee, at dbarbee@hartenergy.com