logo
  Join        Login             Stock Quote

Miller Energy Resources (MILL) Initiated At 'Hold' By Brean Capital

 December 06, 2012 02:36 PM


(By Balaseshan) Brean Capital analyst Jeff Connolly initiated coverage of Miller Energy Resources Inc. (NYSE: MILL) with a "hold" rating and a $4.00 fair value.

Miller Energy Resources is an exploration and production company operating in the Cook Inlet and Appalachia regions of the United States, Connolly noted.

The analyst forecast Miller will grow production, EBITDA, and discretionary cash flow in fiscal 2013, but remains cautious due to execution risk, management's inconsistent track record, and the stock's valuation relative to our group. Therefore, he is on the sidelines.

Connolly's model assumes the company successfully restores production to the RU-3 and RU-2 wells and produces commercial quantities of natural gas from the exploratory Otter 1 and Olsen Creek wells in fiscal 2013.

Given the company's concentrated revenue stream, if the workovers does not come online in a timely fashion or the exploratory wells does not live up to the analyst's expectations he would cut his numbers.

Connolly's $4.00 fair value estimate is 85% of $4.20 per-share net asset value estimate. Shares of MILL are trading at 11.1 times EV/EBITDA versus the median EV/EBITDA multiple of 5.4 times for his group. He contends the premium multiple is not warranted because of the company's high cost structure and inconsistent track record on timely execution.

The analyst estimates Miller Energy will have the highest lease operating expense per BOE ($30.86) in group this year, reflecting high fixed costs to operate the Osprey platform. While he projects LOE per BOE declines to $18.00 next year as production ramps up at Osprey, it is still projected to be one of the highest cost operators in our group.

Furthermore, management has struggled to meet its targets in the past. The company expected to have Rig 35 installed and operational in January 2012, but inclement weather delayed operations until August 2012. Hence, Connolly's cautious stance on MILL.

MILL is trading down 2.70% at $4.33 on Thursday.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageWill The Real U.S. Market Please Reveal Itself?

Is it the small stock Russell 2000, in a pattern of rally attempts failing at lower highs since its March read on...

article imageTime To Chase Bill Gross?

Jason Zweig at the Wall Street Journal had a very good piece on whether to follow Bill Gross as he goes read on...

article imageA Bullish Sign For Uranium Could Send This Stock Soaring

On March 11, 2011, a massive 9.0-magnitude earthquake erupted about 45 miles east of the Japanese coast. read on...

article imageBanks' LCR-based Demand For Treasuries Moderates

One of the factors contributing to treasury market's strong performance this year has been the Liquidity read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Recent Articles by Balaseshan
More Articles on: Oils/Energy



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.