MILL

[dan_s]

Tennessee-based Miller Energy Resources Inc. (NYSE: MILL) is opening a downtown Houston office and plans to expand, CEO Scott Boruff said in an interview.

Boruff said Miller Energy will start small in Houston with its CFO, John Brawley, and a team of nearly 10 people operating out of 3,500 square feet in the Kinder Morgan Building by the end of August or early September.

"Houston is a dealmaking community," Boruff said. "I'm in Houston three times a month already. It's the energy capital."

I will be sending out a profile on MILL later today.

[dan_s]

Miller Energy Resources (MILL): Our initial profile on the company has been posted under the Watch List tab.

For those seeking high yield: Miller has two publicly traded pfd stocks.

[kenm]

Dan, What is your opinion on the preferred stocks? I did not see it in the profile, although I could have missed it.

[dan_s]

It is called "preferred" for a reason. As long as Miller's production comes close to what I have in my forecast model they should have no problem paying the dividends on the preferred. Take a look at the profile we sent out. Preferred stock is discussed on page 9.

Both the Series C and Series D now trade over par ($25), so actual yield will be slightly less than the stated rates of 10.75% for Series C and 10.5% for Series D.

They are both callable at par, but I see little risk that the company calls them anytime soon.

I also like pfd stock of CPE, GST and ENRJ.

[dan_s]

See our High Yield Income Portfolio in the newsletter.

[celtic]

Sorry if a dumb question. What is the difference between the C and the D pref. shares? Price is close dividend is close. Thanks in advance.

[kenm]

The C is convertible to common at 10. The D is not convertible. The conversion price seems unattainable now, but sure didn't when the common hit close to 9 around 6 or 8 months ago. If I remember correctly, the D is about half the size of the C. I have owned both of these in size for a while, the C for over a year. They are equal in terms of preference.
Perhaps Dan can add more.

[dan_s]

I think you covered it. I recommend Series C. The conversion feature is a nice "Call Option" on the common. If all the stars align for Miller, it could push over $10/share. They are drilling a lot of high potential wells and it just takes one "gusher" for a company of this size.