Miller Energy Resources Releases Operational Update
Alaska and Tennessee Horizontal Mississippian Lime Drilling Update
Alaska Rework Update
We are pleased to report that Miller Rig 35 completed the workover of the RU-3 gas well on December 14, 2012. We then commenced swabbing operations to remove wellbore fluid in order to prepare for well testing. During the workover we discovered multiple unreported fish left in the hole by a previous operator. We were able to successfully remove the obstructions, but this caused the workover to take longer than expected. The well has now been completed and the wellhead installed. The project is on track to be completed under budget.
Swabbing operations have been recovering fluid at a slower rate than we had hoped, so we have decided to move forward with a nitrogen coil cleanout starting this weekend to accelerate the process. Well testing will commence as soon as sufficient liquids have been removed from the wellbore.
After this occurs, we plan to move Rig-35 to the RU-4 well for a gas workover. RU-4 previously tested at a rate of 1.4 MMcf/d from the Tyonek gas sands. The move to the RU-4 well should be completed in the first week of January 2013, after which the workover will immediately commence. The workover procedure is expected to take 10 to 12 days.
After completing work on RU-4, Rig-35 will immediately begin moving either to RU-2 to drill a sidetrack or to RU-7 to replace the failed electrical submersible pump (ESP) in that well. The Company is balancing a short rig move followed by a longer time on the RU-2 well against a longer rig move which will have a shorter time on the RU-7 well.
We plan on taking advantage of the down time during one of the rig moves to add additional perforations into our RU-D1 disposal well. The additional perforations should enhance the injectivity of that wellbore, which will support both drilling and operations by allowing us to dispose of wastes more rapidly and at a lower cost. The perforation of RU-D1 will be managed such that it will not delay our drilling schedule.
Tennessee Drilling Update
We reached total depth on the first horizontal well drilled in the Mississippian Lime in Tennessee on December 19, 2012. The well, CPP H-1, Permit #12404, was drilled into the Fort Payne Formation at a true vertical depth of approximately 1,600 feet on the Company's Cumberland Plateau Partners LLC lease in Scott County, Tennessee, and it exposed a pay section of approximately 2,300 feet in the horizontal section of the well. Strong indications of producible levels of oil and gas were encountered throughout the drilling of the horizontal section. A multiple packer system is to be installed in the 2,300 feet horizontal section to allow stimulation of the total oil and gas bearing zone.
This well is the first phase of drilling the undeveloped portion of existing vertical well Fort Payne oil fields in Tennessee in which Miller has controlling interest, and these initial results show that this strategy has significant potential. Miller has the next three horizontal well locations designated, and they are in the process of getting permitted. Miller expects to begin drilling its second location in January 2013. The Company has approximately 40,000 acres under lease or held by production in Tennessee.
"This has been a first for Miller, a first for Tennessee and a first for the entire Appalachian basin, we believe. These are exciting times for Tennessee," said Scott M. Boruff, CEO of Miller Energy Resources. "With the initial results we are seeing from this first well, we expect the advent of horizontal drilling to revolutionize the Tennessee oil field as horizontal drilling has revolutionized the mid-continent region of the United States.
"Similar horizontal wells in existing Mississippian Lime oilfields along the Oklahoma-Kansas border have come in at 200 barrels a day or more. We believe we will have the same success here in Tennessee, and possibly do even better," Boruff added. "Over a short period of time, we will perfect both our drilling and completion techniques, finding new ways to extract hydrocarbons from our old fields. There is a lot of potential in Tennessee."
About Miller Energy Resources
Miller Energy Resources, Inc. is a high growth oil and natural gas exploration, production and drilling company operating in multiple exploration and production basins in North America. Miller's focus is in Cook Inlet, Alaska and in the heart of Tennessee's prolific and hydrocarbon-rich Appalachian Basin including the Chattanooga Shale. Miller is headquartered in Huntsville, Tennessee with offices in Anchorage, Alaska and Huntsville, Tennessee. The company's common stock is listed on the NYSE under the symbol MILL.
Statements Regarding Forward-Looking Information
Certain statements in this press release and elsewhere by Miller Energy Resources¸ Inc. are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by Miller Energy Resources, Inc. and described in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, adverse general economic conditions, operating hazards, drilling risks, inherent uncertainties in interpreting engineering and geologic data, competition, reduced availability of drilling and other well services, fluctuations in oil and gas prices and prices for drilling and other well services, fluctuations in the US dollar and other currencies, the availability of sufficient capital to fund its anticipated growth, fluctuations in the prices of oil and gas, the competitive nature of its business environment, its dependence on a limited number of customers, its ability to comply with environmental regulations, changes in government regulations which could adversely impact its businesses well as other risks commonly associated with the exploration and development of oil and gas properties. Additional information on these and other factors, which could affect Miller's operations or financial results, are included in Miller Energy Resources, Inc.'s reports on file with United States Securities and Exchange Commission including its Annual Report on Form 10-K for the fiscal year ended April 30, 2012, as amended. Miller Energy Resources, Inc.'s actual results could differ materially from those anticipated in these forward- looking statements as a result of a variety of factors, including those discussed in its periodic reports that are filed with the Securities and Exchange Commission and available on its Web site (www.sec.gov). All forward-looking statements attributable to Miller Energy Resources or to persons acting on its behalf are expressly qualified in their entirety by these factors. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change unless otherwise required under securities law.
KEYWORDS: United States North America Alaska Tennessee
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