THESTREETSWEEPER QUICK HIT – Terrible, cash-eating news from Alaska threatens to drive another stake into Miller Energy Resources (NYSE:MILL). The bleeding Knoxville, Tenn. company is already struggling beneath a recent executive chairman’s margin call that led to panic selling, plus enormous debt, big earnings/revenue misses and low oil prices.
The last thing the company needs is a hit to its tax credit receipts.
That’s because tax credits tied to Miller’s exploration in Alaska have meant millions to the oil and gas company each year. Miller anticipates receiving about $72 million in Alaska tax credit receipts in 2015.
Alaska issues tax credits to oil producers to encourage exploration in the state. The company applies for these credits each quarter and frequently notes that operations depend heavily on tax credit money.
Every spare dime is coveted, as new CEO Carl Giesler told analysts in December:
From both the financial and operational perspective the quarter was disappointing to put it mildly.
But now it’s obvious that Alaska Gov. Bill Walker is having second thoughts about the very tax credits that keep Miller pumping.
Recently sworn into office, Gov. Walker wrote an opinion piece and made public comments about some $100 million more going out in oil tax credits than the state will receive in production taxes. The state’s revenue commissioner specifically called out small explorers and developers in the North Slope and Miller stronghold Cook Inlet.
Gov. Walker’s opinion piece stated,
But giving away more in tax breaks than we collect is irresponsible, and it’s unsustainable.
He didn’t specifically propose legislation cutting the tax credits. But he alluded to that, writing:
I look forward to working with the Legislature and all Alaskans to stabilize our financial health and secure our future.
Working from a recent legislative report examining indirect expenses, AlaskaRep. Steve Thompson, co-chairman of the House Finance Committee, is taking a closer look at the issue.
So, the tax credit issue is boiling and presents the possibility of legislative action limiting those tax credits so critical to Miller’s financial core. The ramifications for investors? Daunting.