Miller Energy Resources (“Miller”) (NYSE: MILL) announced today that it has successfully completed a work-over on the RU-1 crude oil well with newly commissioned Rig 35 on the Osprey platform in Alaska’s Cook Inlet. The work-over consisted of removing two failed electric submersible pumps (“ESP”) and several restrictive flow devices, followed by installing a new ESP. The RU-1 well has demonstrated an initial production of 482 barrels of oil per day (“BOD”), which exceeds the previous average flow rate under its previous operator from September 2007 through July 2009 of 125 BOD. This was the first project for Miller’s new Rig 35, which received state approval to operate in August.
Rig 35, a National 1320, 2000 hp rig, is designed for offshore and onshore drilling to a maximum drilling depth of 24,000 feet. Cook Inlet Energy, a wholly owned subsidiary of Miller led by David Hall, will deploy Rig 35 to redevelop RU-3, a previously producing gas well to address Alaska’s continuing gas shortage. Following these two wells, Miller will then target the RU-2, RU-4, and RU-5 wells for work-over. Through the use of advanced drill techniques and wellbore optimization, Miller expects production rates to meet or exceed historical flow rates as demonstrated on the RU-1 and RU-7 work-overs.
“The successful redevelopment of RU-1 is another significant milestone for Miller. Our fixed costs to operate the Osprey platform are covered by existing production, so each additional barrel of oil produced comes at an estimated marginal incremental cost of less than $5 per barrel. This means that each well brought online on the platform has a significant direct, positive impact on Miller’s bottom line,” said Scott M. Boruff, Miller’s CEO. “With Rig 35 working to restore production from the Redoubt Shoals Field, we expect to see major increases in our production over the next few months which will build significant long term value for our shareholders.”
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