Joel R. Glucksman
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Miller Energy Resources Inc. files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
Date: November 5, 2015
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On Oct. 2, Miller Energy Resources Inc., one of the major oil and gas producers in the U.S., announced that it filed for Chapter 11 bankruptcy protection. According to the Wall Street Journal, Miller Energy plans to hand over control of operations to Apollo Investment Corp. and Highbridge Capital Management LLC.
Miller Energy falls victim to the oil price drop
The company cited several issues contributing to its decision to seek Chapter 11 bankruptcy protection, but chief among them was the rapid decline of prices in the energy markets. Like many independent companies in the oil and gas commodities sectors, Miller Energy was deeply affected by the plummeting price of oil. In bankruptcy papers, company officials stated that the price of Brent crude oil has dropped from over $100 per barrel in the summer of 2014 to $45 per barrel this summer. With these falling prices came a substantial drop in revenues, leading the company into record losses. As a result, the company’s revenues were down by 30 percent in the third quarter of 2015 to $15.5 million, with a $111 million net loss for the year to date.
In its court documents cited by a Reuters report, Miller Energy listed approximately $393 million in assets with only $6.2 million in cash on hand, and $336 million in liabilities with over $183 million in debt. Then as the company faced an involuntary Chapter 11 bankruptcy petition from creditors of its Inlet Energy LLC subsidiary, Miller Energy decided to file for Chapter 11 bankruptcy protection. According to a separate Wall Street Journal report, these creditors, Baker Hughes Oilfield Operations, Inc., M-I LLC and Schlumberger Tech. Corp. claimed that Miller Energy owed them $2.8 million.
Miller Energy had initially negotiated a deal with a lender for $165 million in operating capital, but the involuntary bankruptcy filing and a fraud charge levied against the company by the Securities and Exchange Commission led to the termination of the agreement, which forced the company into insolvency.
Miller deals with SEC accounting fraud accusations
The SEC charged Miller Energy with accounting fraud in August after it was reported that several companies were owed millions of dollars from a subsidiary of Miller Energy. In the lawsuit, the SEC claimed that the company overstated the value of its asset holdings by over $400 million after it acquired $2.5 million in oil and gas assets in 2009, according to a report by Fuel Fix. This not only inflated the valuation of Miller Energy’s net income and total assets, but it vaulted the company from a $0.61 per share penny stock to an asset traded on Nasdaq for $6.60 per share. It reached the New York Stock Exchange in 2013 when it traded at its peak of $8.83 per share.
As a result of the fraud charge, Miller Energy has agreed to pay $5 million each year till 2018 as part of a deal reached with the SEC.
Miller’s reorganization plan
As part of the restructuring deal, which is subject to court approval, Miller Energy will receive $20 million in financing from a debtor in possession agreement from its junior lenders Apollo Investment Corp., an arm of Apollo Global Management, and Highbridge Capital Management LLC, the investment management branch of JPMorgan Chase & Co. In the agreement, Apollo Investment Corp. and Highbridge Capital Management LLC will exchange over $190 million in Miller Energy’s second-lien debt for new debt and 100 percent equity in the company, according to Seeking Alpha. The deal would also provide the company’s unsecured creditors with warrants to buy equity stakes in the company as well as the chance to recover a minimum amount of cash. In turn, the agreement would also give preferred and common shareholders warrants to purchase equity.
The proposed agreement is also subject to approval from the SEC because its settlement would be applicable to the company.
The future of Miller Energy
The $20 million debtor in possession financing will be used to maintain operations through the bankruptcy period because the company intends to emerge from the restructuring process as a viable business, according to a report by the Houston Business Journal. However, before the company can emerge from the bankruptcy period, there are several issues facing Miller Energy.
It has an outstanding $82.5 million impairment fee on an unproductive well as well as over $14 million in charges on drilling rigs. Perhaps even more pressing for the company though is that Miller Energy could be de-listed from the New York Stock Exchange following its civil action with the SEC. This is due to the fact that the company has been priced below the $1 threshold since April.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
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Miller Energy Resources Inc. files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
On Oct. 2, Miller Energy Resources Inc., one of the major oil and gas producers in the U.S., announced that it filed for Chapter 11 bankruptcy protection. According to the Wall Street Journal, Miller Energy plans to hand over control of operations to Apollo Investment Corp. and Highbridge Capital Management LLC.
Miller Energy falls victim to the oil price drop
The company cited several issues contributing to its decision to seek Chapter 11 bankruptcy protection, but chief among them was the rapid decline of prices in the energy markets. Like many independent companies in the oil and gas commodities sectors, Miller Energy was deeply affected by the plummeting price of oil. In bankruptcy papers, company officials stated that the price of Brent crude oil has dropped from over $100 per barrel in the summer of 2014 to $45 per barrel this summer. With these falling prices came a substantial drop in revenues, leading the company into record losses. As a result, the company’s revenues were down by 30 percent in the third quarter of 2015 to $15.5 million, with a $111 million net loss for the year to date.
In its court documents cited by a Reuters report, Miller Energy listed approximately $393 million in assets with only $6.2 million in cash on hand, and $336 million in liabilities with over $183 million in debt. Then as the company faced an involuntary Chapter 11 bankruptcy petition from creditors of its Inlet Energy LLC subsidiary, Miller Energy decided to file for Chapter 11 bankruptcy protection. According to a separate Wall Street Journal report, these creditors, Baker Hughes Oilfield Operations, Inc., M-I LLC and Schlumberger Tech. Corp. claimed that Miller Energy owed them $2.8 million.
Miller Energy had initially negotiated a deal with a lender for $165 million in operating capital, but the involuntary bankruptcy filing and a fraud charge levied against the company by the Securities and Exchange Commission led to the termination of the agreement, which forced the company into insolvency.
Miller deals with SEC accounting fraud accusations
The SEC charged Miller Energy with accounting fraud in August after it was reported that several companies were owed millions of dollars from a subsidiary of Miller Energy. In the lawsuit, the SEC claimed that the company overstated the value of its asset holdings by over $400 million after it acquired $2.5 million in oil and gas assets in 2009, according to a report by Fuel Fix. This not only inflated the valuation of Miller Energy’s net income and total assets, but it vaulted the company from a $0.61 per share penny stock to an asset traded on Nasdaq for $6.60 per share. It reached the New York Stock Exchange in 2013 when it traded at its peak of $8.83 per share.
As a result of the fraud charge, Miller Energy has agreed to pay $5 million each year till 2018 as part of a deal reached with the SEC.
Miller’s reorganization plan
As part of the restructuring deal, which is subject to court approval, Miller Energy will receive $20 million in financing from a debtor in possession agreement from its junior lenders Apollo Investment Corp., an arm of Apollo Global Management, and Highbridge Capital Management LLC, the investment management branch of JPMorgan Chase & Co. In the agreement, Apollo Investment Corp. and Highbridge Capital Management LLC will exchange over $190 million in Miller Energy’s second-lien debt for new debt and 100 percent equity in the company, according to Seeking Alpha. The deal would also provide the company’s unsecured creditors with warrants to buy equity stakes in the company as well as the chance to recover a minimum amount of cash. In turn, the agreement would also give preferred and common shareholders warrants to purchase equity.
The proposed agreement is also subject to approval from the SEC because its settlement would be applicable to the company.
The future of Miller Energy
The $20 million debtor in possession financing will be used to maintain operations through the bankruptcy period because the company intends to emerge from the restructuring process as a viable business, according to a report by the Houston Business Journal. However, before the company can emerge from the bankruptcy period, there are several issues facing Miller Energy.
It has an outstanding $82.5 million impairment fee on an unproductive well as well as over $14 million in charges on drilling rigs. Perhaps even more pressing for the company though is that Miller Energy could be de-listed from the New York Stock Exchange following its civil action with the SEC. This is due to the fact that the company has been priced below the $1 threshold since April.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.