Just wait until the U.S. Securities and Exchange Commission finds out about this news. After fielding so many questions from the SEC about the reported value of its assets, Miller might as well go ahead assume that regulators will probably notice some new disclosures that make the $230 million company – strapped for cash, with less than $4 million in the bank – look virtually worthless right now.
Don’t take our word for that jarring conclusion. Feel free to double-check our math. We relied on a simple formula – using numbers provided by Miller itself – to determine that the company is likely worth no more than a measly 45 cents a share.
Here. We can walk you through the arithmetic to save a little time, if you like.
When Miller issued its latest press release (cluttering it mostly with a bunch of hype that we’ll scrutinize in more detail later), the company announced plans to boost its reserves by purchasing similar assets at prices well below the value assigned to the reserves that it already owns. Specifically, Miller said that it expects to buy “substantially all the Alaskan operating assets” of a neighboring firm with proven reserves totaling 1.9 million barrels of oil equivalent (MBOE) for somewhere between $40 million and $50 million. So let’s assume that its actual offer falls in the middle of that range, with Miller paying the equivalent of $23.68 per MBOE for those neighboring assets, and then value the company’s existing reserves at that very same level.
We figure that oil is oil, especially when it’s located in the same region, after all.
Since Miller estimated its proven reserves at 11.7 MBOE in its most recent financial statements, multiply that figure by $23.68 to arrive at a preliminary valuation of $277 million for the company. Don’t get too excited by that generous figure, though. You still need to subtract Miller’s hefty $314 million debt load from that impressive total and – with the results actually landing in negative territory – you will obviously want to add the company’s meager $3.7 million in cash and (far more helpfully) its $53.6 million in tax credits to that balance if you want to prevent the firm from looking entirely worthless.
Go ahead. Check out the pathetic number on your calculator screen. If you plugged in the correct figures, you probably feel rather startled by what you see.
Based upon the low price that Miller intends to pay for some additional reserves in Alaska, the company should be worth a paltry $20 million right now. When you divide that total by the number of shares that Miller currently has outstanding (46.35 million), you should arrive at a stock price for the company that – as we tried to warn you earlier – falls just below 45 cents a share.
We're almost tempted to stop right there and assume that (with the surprising help of Miller itself for a welcome change) we have already made our point about the true value of this cash-strapped company. Now that we've investigated the rest of the news that Miller packed into its recent press release, however, we can't bring ourselves to let the company off the hook so easily. After scrutinizing companies like Miller for years -- and finding all sorts of warning signs that hint at looming disasters that too often materialize -- we know how to recognize a bunch of pointless (and potentially dangerous) hype as soon as we see it.
Take Miller’s crazy notion that it can somehow transform itself into a Master Limited Partnership (MLP), for example. Talk about a ridiculous idea.
As a bleeding oil company that generated a mere $71 million in revenue last year, Miller bears no resemblance to a normal MLP at all. Once you do a little homework and see just how much revenue that a typical MLP tends to generate – not to mention the piles of cash that those multibillion-dollar companies generally clear– we’re pretty sure that you will agree with our conclusion. Miller has tricked the public with an outlandish proposal that seems like a desperate promotion at worst and a hopeless pipe dream at the absolute best.
Hey, regardless of what our critics might want to believe, we actually tried our hardest to be fair here. We felt willing to give Miller plenty of credit for one piece of welcome news, in fact, until the firm immediately proceeded to blow its chances.
Right after Miller announced that it had finally decided to replace its namesake and his son-in-law as its longtime chairman and its CEO, respectively, the company revealed that it had actually held onto both of those controversial leaders and simply rewarded them with cushier positions instead. By hiring the first as a consultant/advisor and appointing the second as the actual executive chairman of its board, Miller basically just assigned those tarnished insiders different titles and kept them on an expensive payroll that – given its bleeding operations and its meager $3.7 million cash balance right now -- the company must know that it cannot reasonably afford.
Miller didn’t stop there, however, The company actually found a way to make matters even worse by showering an incoming board member with a generous pile of stock options before that newly appointed director even tries to prove that he's any better than those blasted for their lousy oversight.
So forgive us if we refuse to believe that Miller has really changed its ways. Three years after the company originally caught our attention – prompting us to write a damaging report that rapidly cut its stock price in half – Miller continues to provide us with plenty of reasons to keep on doubting its word.
We don't think that Miller ever learned its lesson after that devastating crash, since the company seems to keep on looking for new ways to spin the ugly truth. If you happened to catch the year-end conference call that Miller hosted a few months ago, you should know exactly what we mean.
Miller loudly celebrated a boost to its proven reserves and then casually admitted that its engineers had just issued a new report that actually slashed the estimated value of those underlying assets. We’re not talking about a modest adjustment here, either. Despite the reported increase in reserves that Miller chose to trumpet first, that new study happened to reveal, the value of those assets literally plummeted by a full third over the course of four short months alone.
Don’t expect the bullish cheerleaders who keep on recommending Miller’s stock to actually pay attention to pesky details like that, however. Talk about a forgiving crowd! Even after Miller forced Wall Street analysts to give up on their hopes for a future profit of 23 cents a share – pushing them to steadily cut their estimates to a projected loss of almost $1 a share over the course of the past year – the company can still count on their loyal support. In spite of the dramatic reductions to their overblown forecasts, most of the analysts who follow the company have dutifully (if inexplicably) maintained their bullish stands on the risky stock to this very day.
Go figure. Surely, you have learned the game by now. Just follow your instincts and you can probably figure out where you should actually place your trust.
You can either believe Miller itself – now that the company has finally come clean and essentially pegged the true value of its $5 stock at just 44 cents a share – or you can listen to the hopeless analysts who have so far proven themselves totally clueless instead.
Rest assured: we know what to do. We’ve already placed another confident bet against the company, since we fully expect the stock to plummet from current levels, so we’re just waiting for the opportunity to celebrate our decision and happily cash in (along with our followers) on the way down.
* Important Disclosure: The owners of TheStreetSweeper established a short position in Miller (MILL) and stand to profit on any future declines in its stock price. As a matter of policy, however, TheStreetSweeper prohibits members of its editorial team -- including the author of this report -- from taking financial positions in any of the companies that they cover. To contact Melissa Davis, the senior editor of TheStreetSweeper and the writer of this story, please send an email to [email protected]