Why Miller Energy Resources Inc Stock Dropped Again Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil and gas explorer Miller Energy Resources Inc (NYSE: MILL  ) continued to fall Wednesday, dropping another 12% at its bottom.

So what: This follows a drop Tuesday after the company reported earnings. For the fiscal fourth quarter, the company reported a nearly three-fold jump in revenue to $22.1 million but adjusted net loss ballooned to $17.2 million, or $0.38 per share. Analysts had expected revenue of $22.1 million and a loss of just $0.14 per share. 

Now what: Production and revenue is growing, but the continued losses are a concern because Miller Energy isn't exactly sitting on a strong balance sheet. Cash stood at just $6.4 million at the end of last quarter and even after receiving $21.8 million in Alaska production credits the continued quarterly losses can't continue. I'd take a cautious approach to Miller and wait for income and cash flow to improve, but there's upside if production continues to grow like it has recently.

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  • Report this Comment On July 19, 2014, at 1:17 AM, lovesstocks2 wrote:

    This article really missed the boat. Miller management was as ill prepared for the phone conference as I have ever seen them and the stock reacted to that. Much of the losses will not recur next year. Administrative costs could be cut in half just from the lack of refinancing activities and legal activities, and there is over $15 million in charges for the refinance that is going away.

    You missed that the RU-9 well has really encouraging logs so far, and has the potential to be the largest producer that Miller has yet drilled, and they still have 2000 feet to go.

    Miller is also moving to a six rig drilling program next year, and is busy renting a rig to drill at Badami up on the North Slope (two wells). The pipeline is hooking up to Thomson point which is an EXXON project, and Miller will be paid to transport their production.

    There is a fairly leveraged balance sheet here, and so there is some risk, but the Badami acquisition, for 9 million comes with over $300 million of equipment and lots of upside potential fairly quickly.

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