A $6.4 million tax-credit payment from the state is helping an embattled Alaska oil and gas producer stay alive.
Knoxville-based Miller Energy has also reached a proposed settlement with federal regulators, agreeing to pay $5 million to the Securities and Exchange Commission following allegations of accounting fraud.
The outlay from the state is a partial payment of tax credits approved to Cook Inlet Energy, a subsidiary of Miller Energy. The state supports using the money for "safety and compliance purposes," according to a letter from Attorney General Craig Richards filed in federal bankruptcy court in Alaska.
Companies seeking payment from Miller Energy for past services, such as U.S. oilfield service companies Schlumberger and Baker Hughes, claim they are owed more than $2 million and are trying to push Miller Energy into bankruptcy.
The letter from Richards said it would wire the company $6.4 million, a payment that comes as part of $23.7 million approved for the company for a tax-credit certificate for 2014.
The remaining $17.3 million in tax credits approved as part of that certificate could be offset by a $446,000 fine owed to the Alaska Oil and Gas Conservation Commission, as well as another $2 million owed to the state as part of a performance bond agreement, the letter said.
The state's payment comes as Alaska leaders consider revamping the tax credit program in part because Cook Inlet gas fields, where Cook Inlet Energy operates, have seen a turnaround after natural-gas production had fallen to critically low levels. Miller Energy's chief executive, Carl Gielser, has said timely payment of the tax credits owed to the company will help it cover debts.
He said state officials are being "very constructive" as the company tries to regain its footing. It is hoping to pay off debt, refinance loans, and sell its two-thirds stake in the Badami oil field on the North Slope to generate cash for achieving solvency.
"Things are going as planned," Giesler said. "We're working with the SEC and we are looking forward to having the matter behind us."
The Securities and Exchange Commission alleges the company overstated the value of oil-and-gas properties acquired in Cook Inlet in 2009 by more than $400 million, increasing the company's net income and total assets. Three individuals no longer doing work for the company were also charged.
Miller announced recently it had reached a settlement "in principle" with the SEC's enforcement division. The agreement has not yet been accepted by the commission.
In addition to paying $5 million over three years, the company has agreed to review, and if appropriate, "restate its financial" information related to the 2009 valuation. It will also notify investors that "affected financial disclosures should no longer be relied upon."
Miller Energy "would neither admit nor deny the allegations but would agree to cease and desist from committing or causing any violations or future violations of those provisions."
The agreement would apply only to the company, not individuals named separately in the action.