Miller Energy Resources, Inc.(fka MILLQ)

[Timothy Smith]

I base most of my buy / holds on reserves and potential of recovery. The value of these assets is represented by the so-called "PV-10" of its proven, probable and possible resources.

The PV-10 is the present value of the net cash flows (discounted at 10% per annum) expected to be generated by the company's resources. Miller's Alaska reserve estimates were compiled by Ralph E. Davis Associates, a highly reputed reservoir engineering firm that has been in business since 1924.

Proven Reserves (P1):

10.4 million BOE

PV-10: $396 million

Probable Resources (P2):

7.9 million BOE

PV-10: $259 million

Possible Resources (P3):

30.8 million BOE

PV-10: 596.9 million

(based on data from earlier this year)

To be ultra-conservative, focus only on Miller's proven reserves. This would disregard not only the massive probable and possible resources, but also Miller's valuable infrastructure, such as its processing facilities and modern equipment. Using Miller's diluted share count of 40 million shares, this equates to an intrinsic value of $9.76 per share. Over time, a valuation of over $20 per share would not be surprising, as some of the probable and possible assets get classified as proved reserves and some of its mid-stream assets get monetized.

I like this one a lot for a long term hold here. JMHO