ANCHORAGE, AK--(Marketwire - Jan 30, 2013) - Miller Energy Resources, Inc. (Miller) (NYSE: MILL) announced today that its Alaskan subsidiary, Cook Inlet Energy, LLC (CIE), has successfully brought a new gas well, RU-4A, into production. CIE completed the RU-4 gas workover on the Osprey Platform with the newly constructed Miller Rig-35. After a successful well test on January 26, 2013, the well was immediately put into production to supply fuel gas to its operations and to offset the use of costly gas purchased from third parties. RU-4A showed an initial post-workover shut-in pressure of 2,375. The subsequent four-point flow test culminated in a peak flow rate of 1.7 million cubic feet of gas per day (MMscf/d) at a 25/64ths inch choke setting. Miller plans to release one week and 30-day production rates during its anticipated monthly operations update.
The RU-4A work-over consisted of re-completing the well to access a behind pipe gas accumulation in the Lower Tyonek gas sands at a measured depth of approximately 9,200 feet that previously tested at 1.4 MMscf/d rate by prior operator. Based on log analysis and well test results, the average net pay is 11 feet with an aerial extent of 130 acres. Initial estimates of recoverable reserves by the company's geologists are in excess of 1.0 billion cubic feet of gas (Bcf).
"We could clearly see that a secure supply of fuel gas was critical to keep operating costs down and to provide for security of supply," explained David Hall, CIE's CEO. "Therefore we've concentrated on developing fuel gas supplies before executing our oil development program."
The new production from RU-4A allowed CIE to suspend purchases of third party gas supplies on January 28, 2013. In the last three months CIE's natural gas expenses have been approximately $450,000 per month. Declining gas supplies in the region have caused prices to increase significantly and have made it difficult to obtain contracts for the purchase of natural gas. The Cook Inlet lacks a spot market for natural gas, and all gas must be purchased under a contract. CIE's fuel gas acquisition costs reached $15 per thousand cubic feet (Mcf) this winter and were projected to increase over the winter months.
"The redevelopment of RU-4A is another milestone for Miller as gas shortages continue to be problematic in the area. Miller has now successfully reworked three of the previously producing wells from the Redoubt Shoals field," said Scott M. Boruff, Miller's CEO. "With the restoration of production from the Redoubt Shoals Field and the additional production from our horizontal wells in Tennessee, we expect to see major increases in our production over the next few months, and we are excited as we continue to build significant long term value for our shareholders."
About Miller Energy Resources
Miller Energy Resources, Inc. is a high growth 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 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, 2012. 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.