Use access key #2 to skip to page content.

Otrex (98.77)

I Believe MILL to Be a Potential Fraud.

Recs

1

January 20, 2011 – Comments (4) | RELATED TICKERS: MILL

After some review of the financial records of MILL, an energy exploration and drilling company, I believe that something highly suspicious is going on there. 

I'm no expert in this, and frankly I didn't spend a lot of time on the company after deciding that it wasn't for me.  I was looking at them for a potential investment, but was scared off by the unusually rosy picture that their current financial statements present.

Very rarely do I stay away from an investment for looking so good, but this one looks "too good".  Therefore I cannot come to any other conclusion except that some fancy financial accounting is going on here, and I would urge other investors considering this investment to look carefully at the financial documents. 

I'm not going to suggest that you not invest your money, just that the old adage "If it looks too good to be true..." might apply here.  

4 Comments – Post Your Own

#1) On January 20, 2011 at 1:57 AM, Otrex (98.77) wrote:

I should add that I have no position long or short in this stock, nor do I intend to take one in the forseeable future.

Report this comment
#2) On January 20, 2011 at 6:17 AM, JakilaTheHun (99.93) wrote:

What in particular is difficult to believe? 

It looks like they are losing money and diluting shareholders a lot, which wouldn't fit my definition of "good."

Report this comment
#3) On January 20, 2011 at 1:51 PM, Otrex (98.77) wrote:

They seem to be acquiring assets and then revaluing them.  They then mark that as a gain.  

 Additionally, if I recall, they are suffering from particularly poor cash-flow. 

So, on one hand they are claiming HUGE profits, but on the other hand they're diluting constantly in order to make ends meet. 

This sounds like a very bad situation for the average shareholder.  The shareholder comes in saying "The PE ratio is 1!", but the truth of the matter is that no actual profits are being made, and the inflated stock price allows the company to print up additional shares.  

I would be very concerned about this if I were a regulator.  I think shareholders might find themselves holding worthless paper before too long.

Just my gut reaction to the numbers though.  I am not an investigator, nor do I have any specific proofs of any wrongdoing. 

Report this comment
#4) On April 09, 2011 at 9:50 AM, lovesstocks2 (23.33) wrote:

The bought the assets in bankruptcy, which is a specialty in its own right.  You had a $500million in investment company that was completely shut down.  The auditors made them write up the assets because of the sheer size of the tangible assets, which produced a huge gain and a huge deferred tax liability at the same time.  Again, typically a bankruptcy kind of thing, and only used in extreme cases.  When they were making their bid for this company it was the end of 2009 or so, and oil prices were not great, so no competition for these properties.  Had this company gone broke a year later.......

 

Still there is a lot of work to start up a shut down company so in the beginning you may well see increased sales and increased deficits, until things get going.  Alaska offers a big tax credit for situations like this which may actually give the company its operating income in the beginning.

This is a complex situation and will take a fair amount of money, also one has to wonder about the break even of these properties which is a lot lower without $500mm in debt.  As of right now, the properties are producing 1000boe per day, and supposedly have the potential for a lot more. 

But expect a lot of one time charges and gains for a year or so until the operations ramp up.  The guy restoring these wells headed the Alaska division of forest oil and may well know what he is doing.  They have also hired a high powered finance person to help get the money needed to develop these properties.

This is a risky company but far from a fraud, just an unusual accounting situation

 

 

 

Report this comment

Featured Broker Partners


Advertisement