As CIE works to avoid bankruptcy, state wires partial tax credit payment

Photo/Miller Energy Resources The Osprey platform is one of several assets owned by Miller Energy Resources in the Cook Inlet, Alaska. The company, one current and one former executive have been charged by the Security and Exchanges Commission for overvaluing company assets. A partner with a with a now-defunct accounting firm taksed with auditing Miller Energy's financial statements has also been charged.

The State of Alaska has promised to wire Cook Inlet Energy LLC — a subsidiary of Miller Energy Resources — a $6.4 million partial tax credit payment as the company works its way through an involuntary bankruptcy case.

 

Although neither the state nor Miller Energy Chief Executive Officer Carl Giesler were willing to discuss the exact amount owed to the company, Miller Energy reported in a July 29 fiscal report that the state owed $32.2 million. The company expected to get the majority of those funds by late August.

Cori Mills, attorney with the state’s Department of Law said the state would not disclose when it would wire the money to Cook Inlet Energy or when it would pay the company the rest of its tax credit earnings.

Alaska has incentive programs for companies that develop the state’s oil and gas resources. It is unclear if the tax credit payment to Cook Inlet Energy is related to exploration or production.

Miller Energy announced in July that it was working to reposition its assets.

“We were very clear that our capital structure, as is, currently isn’t sustainable,” Giesler said in a previous Clarion interview.

However, as it was restructuring, three companies filed claims in federal bankruptcy court seeking more than $2.6 million in unpaid bills owed by Cook Inlet Energy on Aug. 6.

Baker Hughes Oilfield Operations Inc., MI-SWACO — a subsidiary of Schlumberger Technology Corporation — and Schlumberger filed the petition citing payment owed for goods, materials and services.

Neither company specified the type of work done for Cook Inlet Energy nor why personnel had decided to push Cook Inlet Energy toward bankruptcy.

Melanie Kania, media contact for Baker Hughes, said the company would not comment on the specific type of work that Baker Hughes has performed for Cook Inlet Energy in Cook Inlet, for which it has yet to be paid. Kania wrote in an email that the lawsuit was an “ongoing legal matter” and the company would not comment beyond its public filings.

A spokesperson for Schlumberger also cited the ongoing legal case as a reason for refusing to speak about the matter.

After the case opened, several other creditors piled on, including AIX Energy LLC, Apollo Investment Corporation, D&D Equipment Sevices, GE Oil&Gas Pressure Control, LP and Vetco Gray Inc. None of the companies that filed to be part of the case specified how much Cook Inlet Energy owes.

While Cook Inlet Energy initially had 20 days to respond to the petition it has since been granted an extension of the deadline until Oct. 6.

Giesler said the company intended to file for a dismissal of the involuntary petition. But, he said, that won’t be as easy as paying off the creditors that filed the petition. Rather, a settlement must be agreed upon by the Anchorage-based bankruptcy judge Gary Spraker.

“You can’t just pay them off, the judge won’t let you,” he said.

However the case is resolved, Giesler said the petition had stirred up nervous energy at a time when the company has been working toward restructuring, staying profitable and continuing to operate in Alaska.

“The filing of that petition has not been helpful to secure a non-bankruptcy solution and, at least in my opinion, will likely do more harm to the unsecured creditors in the State of Alaska than it will help them,” he said.

The bankruptcy petition is the latest in a series of financial blows for Miller Energy Resources, which was de-listed from the New York Stock Exchange July 30 after its stock price fell, and stayed, below listing standards for market capitalization.

Additionally, in March, VAI Inc., won nearly $7 million from Miller Energy over a contract dispute VAI, Inc., is a Pennsylvania-based financial advising and consulting company that accused Miller Energy of breaching a contract between the two companies that would have netted the company 1.75 million shares of Miller stock. Miller intends to appeal the ruling, according to its fourth quarter results report.

Giesler said the company does not plan to use the funds it acquired from the state to pay just the creditors involved in the bankruptcy petition.

“That would be unfair because they’d be paid in full and all the other unsecured (creditors) wouldn’t and they’d kind of be rewarded for filing an involuntary petition and creating a lot of nervous energy,” he said.

According to the state’s filing in the case, Cook Inlet Energy intends to file a plan for the distribution of the tax payments when it responds to the bankruptcy petition.

Giesler said Cook Inlet Energy is actively working toward a non-bankruptcy solution, but it is not guaranteed that the company can avoid Chapter 11.

“I don’t want to give anyone false hope that there will be a resolution, I don’t know that,” Giesler said.

If it fails, it will be the second Cook Inlet explorer to reach bankruptcy in 2015; Buccaneer Energy filed for bankruptcy protection on May 31.

Giesler said Miller Energy had been making progress in other areas that could net the company more cash.

Miller Energy has assets and oil and gas operations in Cook Inlet in the North Fork and West MacArthur fields. It also owns assets in the North Slope through a 67.5 percent stake in the Badami field which it bought in December. It has been working to sell its stake in Badami to an Alaskan partner in order to focus on its “core assets” Giesler said.

That sale is “moving along nicely” he said. “I’m very happy on that progress, I’m very confident. It’s far along but not yet done.”

 

Reach Rashah McChesney at rashah.mcchesney@peninsulaclarion.com or follow her on Twitter @litmuslens

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