Miller Petroleum Inc., which explores for natural gas and oil in Alaska and Tennessee, has significantly upped its net reserves and acreage after acquiring the Alaska assets of bankrupt Pacific Energy Resources.
The acquisition, announced last week, increases Miller’s total reserves 32 times over to 16.33 million boe from 0.504 million boe. The producer’s net present value of reserves would jump to $331.13 million at the acquisition’s closing from $4.99 million. In addition, Miller would have 656,506 net acres at closing, compared with 54,506 net acres pre-acquisition.
The acquisition by Miller marks the third and largest since Scott M. Boruff assumed the CEO position in August 2008.
“The good news just keeps coming at Miller,” said Boruff. “This new acquisition should continue the strong improvement in Miller’s value for our shareholders…Initial production is estimated to be 280 boe/d. Our three-month target is over 800 boe/d, with a goal of pushing production over 1,100 barrels daily by the fourth quarter of 2010, which would generate more than $30 million annually in gross revenue for Miller.”
According to the Huntsville, TN-based producer, total reserves to be acquired include more than 13.2 million bbl of oil and 15.5 Bcf of natural gas, including total proved reserves of 5.6 million bbl of oil and 3.7 Bcf.
In addition, the transaction includes onshore and offshore production and processing facilities, an offshore energy platform and more than 600,000 net acres of land with 3-D geologic seismic data, as well as miscellaneous roads, pads and facilities, all of which originally cost almost $300 million to build and install in the last five years.
Miller plans to operate the facilities through subsidiary Cook Inlet Energy LLC, which has been approved by the state of Alaska as the long-term operator for the Alaskan oil and gas wells. The Pacific Energy team, which has operated the assets since early 2000, also would continue under Miller’s ownership.
“Our immediate focus will now be to operate these assets with an experienced team already on the ground in Alaska,” said Boruff. “Management believes that the company has, through its investment partners, the necessary capital to build out its assets without incurring significant risk.
“Beyond Alaska, Miller continues to see great value in our Tennessee operations in the emerging Chattanooga Shale and we expect to continue to develop this reserve and production basin. Miller now has its feet firmly planted in two very productive oil and gas basins in the U.S. and we expect to grow within these regions as we exploit the resources we now have acquired.”
Miller already is the largest owner/operator of oil and gas wells in Tennessee with more than 602 wells and 54,500-plus net acres of lease holdings in the state. Company Chairman Deloy Miller has a track record spanning more than 40 years in the Tennessee Basin. The company went public 12 years ago.
The Alaska assets and reserves provide Miller with target reserves and production in the Cook Inlet region of Alaska, which includes the West McArthur River Unit, the Redoubt Unit, the Kustatan Field, the Kustatan Production Facility, the West Foreland Field, the Three Mile Creek Field, the Sabre Field and the Valkyrie Field.
According to Miller, Pacific Energy originally acquired the Alaska assets in 2007 from Forest Oil for $464 million. However, earlier this year Pacific Energy declared bankruptcy and abandoned its assets in Alaska in September. Miller entered into an agreement with Pacific Energy in October to acquire most of the Alaska assets, and the deal was approved by the U.S. bankruptcy court overseeing the case in November.
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