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Miller Energy Resources, Inc. Message Board

  • pa1702 pa1702 Jun 27, 2013 9:32 AM Flag

    Paying 12.5% on the newly issued series C preferred

    Run the numbers, they had to price the $25 par C series at $21.50 per share paying 10 3/4% on the $25 par amount. That folks is $2.6875 divided by $21.50 or 12.5%. And note they only raised $7.2 million on the offering. My guess is they will be looking for more money in early to mid August via another series C Preferred.

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    • what's the symbol for the "C"?????

    • They are generating over a 100% IRR on incremental spending for drilling. Borrowing at 13% (the net amount to MIll is less than 21.50 due to underwriting fees) is bad unless you are generating a much higher return - as they are.

    • Actually 12.95%

    • It is still cheaper than 18% from Apollo. Look, this is a small company with a very limited track record in Alaska. As wells begin to flow, flow rates are established and reserves estimated. Along the way a credit history is established. By this time next year they should be in a position to re-do the loan at much lower rates. Another question involves what they are doing with the cash. I would be worried if it were only to pay on-going expenses. However, they are using it to drill and re-work wells. Look at the cash flow from RU-2A - over 1000 bopd and the ~11M cost is returned in under six months. I would call that a great investment. They also have a lot on their plate with Olson, Sword, RU-5, etc.

      Sentiment: Strong Buy

    • But that is not a bad thing. You are just blowing smoke. They will be borrowing money from somewhere so they can get to 5-10,000bpd. You can pretend that something is wrong (like the infamous "water cut" guy kept doing), and maybe protect your short interest a little while. But every company out there, Walmart, McDonald's, Exxon, you name it, they all have debt.

      Samtn put it best, there is no risk to the company on issuing preferreds and it is cheaper than the current financing options. Once more product is coming out of the ground they will reduce their well-risk (more baskets to carry eggs in), and the interest rate will probably come down.

      At this point 12.5% is a good thing.

 
MILL
4.86-0.10(-2.02%)Sep 19 4:05 PMEDT

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