Miller Energy Resources (NYSE:MILL)

CAPS Rating: 1 out of 5


Player Avatar Allstar13913 (99.83) Submitted: 7/29/2011 12:21:57 PM : Underperform Start Price: $4.57 MILL Score: +53.06

Street Sweeper negative Report. Seems to be fraudulently valuing assets on the books.

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Member Avatar lovesstocks2 (< 20) Submitted: 7/30/2011 3:01:18 AM
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Believing Streetsweeper is your first mistake. KPMG, a big four firm has signed off on the financials. Those valuations are allowed. The 10K is out today so you can see for yourself

Member Avatar Allstar13913 (99.83) Submitted: 7/30/2011 6:57:43 PM
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I'm not just following Street Sweeper. About a week ago, the Motley Fool did an article on them too.

If something is too good to be true, it probably is. The related party transactions here are a joke, and the board is stuffed with penny stock con men. Ask yourself this, "Why are assets that no one on the street would touch suddenly worth 100 times a much. Is everyone stupid?"

Member Avatar lovesstocks2 (< 20) Submitted: 7/31/2011 12:25:45 AM
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Actually a bunch of competitors including Nabors tried to keep Miller from closing the deal with the court. The bigger companies have more overhead in place and often cannot do something like this at the cost of a small company without much overhead. The little company, on the other hand has to struggle for financing. The problem with Streetsweeper and the motley fool article is that it is clear that no one has read the 10K and related documents nor understood complexity of purchasing something in bankruptcy and then turning on 300 million worth of assets when you are only a fraction of that size before the purchase. The assets Miller wrote up are easily documented, what they were worth when oil was in the 60's and the oil industry was in the tank, is anybody's guess. Many companies think short term and may well have been unable to see that the economy and oil prices would recover, hind sight is twenty-twenty. By the time oil prices recovered and this became economical or even attractive, Miller was way ahead of everyone, so when they actually got the properties months later, oil prices were on their way up, and things were far better than when they were bidding. It was a slow process. There is no fraud here, KPMG signed off on the accounting and they are a big four firm. There is however tremendous risk in a small company turning into a large company quickly and that is where the risk is here. All the systems have to grow quickly, and right now the accounting system is lagging according to the 10K. But the company has hired some extremely experienced operating people up in Alaska and production is rising, it should double again in about 9 months or so.

Also note that a division of Citi is involved in the financing for the next two years and even though its pretty restrictive financing, Citi is usually hard to fool. Plus these guys are using the successful efforts method of accounting which is inconsistent with fraud. The full cost method is far more open to manipulation.

Member Avatar lovesstocks2 (< 20) Submitted: 7/31/2011 12:31:20 AM
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Motley fool did not do much research on them either. The street sweeper disclosed that they had a short position and liquidated it during the mad rush. As long as KPMG signs off on the financials, they are a big four firm and they have to verify those assets every year that they do the audit. Assets are always subject to an annual review and can be written down as soon as they are deemed ovevlaued

Member Avatar Allstar13913 (99.83) Submitted: 7/31/2011 9:48:46 PM
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Your Big 4 firm argument is a non-starter. It used to be the Big 5 firms, until Arthur Anderson was caught cooking the books. Auditors can only check numbers, they don't value the assets or make boardroom decisions. And what about the penny stock millions who sit on the board.

Your analysis is a pipe dream.

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