TWST: Please begin with a brief introduction to Miller Energy Resources, including a few key highlights from its history and an overview of its two primary projects.

Mr. Boruff: Miller Energy (MILL) is headquartered in Knoxville, Tenn., and is about a 45-year-old company. We've been public about 14 years. I became CEO in August of 2008, and we were a pink sheet company - we went through some savvy acquisitions and some management add-ons, and we were able to go from the pink sheets to the New York Stock Exchange in less than three years. It's been a fun ride.

We've done about four acquisitions. We sold some assets right when I came on board in Tennessee, and kind of recapitalized the company with those assets. We sold 30,000 acres for $20 million. And then, six months later, we bought two companies in Tennessee, and we bought back about 35,000 acres for less than $1 million.

Then you roll forward a year later, and in every company there is always a turning point that makes you who you are. From our investment banking background and experience in the past, we looked at several deals every month, but we acquired the bankrupt assets of Pacific Energy Resources in 2009, where we basically sat in the bankruptcy court for about four months trying to figure out how to make this deal work. Because there is always something wrong with a deal and your job as a CEO is to figure out what's wrong, because these assets went bankrupt twice before so you want to avoid making the same mistakes, we were able to identify some undesirable assets and get the bankruptcy court to consent to a sale of the business without those undesirable assets. And that has made all the difference for us.

We've grown production from eight barrels a day when I took over to - we've been as high as 1,500 barrels a day in production. This year, we're hoping to grow again from - we're giving guidance on January through January ending out the year at 5,000 barrels a day, so we plan to grow another 400%, 500% again. So it's an exciting story.

TWST: For the most recent quarter reported, ending October 31, revenues at Miller Energy Resources were up 63%, which you attributed to the success of the new wells the company reworked in Alaska. Please tell us more about what's going on there. How much of the increase was prices and how much was increased sales and how much more value do you expect those wells to deliver?

Mr. Boruff: The life blood of every oil and gas company are the reserves, and reserves are just basically oil and gas in the ground, and it takes capital to get them out and to produce them. When I came on board, we had about 15,000 lease acres in 2008. We've grown our lease acreage to around 700,000 lease acres. We've grown revenues from 2008 at around $800,000, and our year end is April 30, so we should finish somewhere around $35 million to $40 million in revenues, planning to grow to next year to over $100 million in revenues. So we went from $800,000 early on in 2008 to around $40 million this year, and planning to grow to $100 million in the next 12 months. We've grown our well count from 53 wells in Tennessee and Alaska to over 393 wells.

But the main thing is our assets have grown because of the acquisition that we made in Alaska. The Oil and Gas Magazine is something that we always track, but in 2008 MILL was ranked 178 in The Oil and Gas Journal magazine in what they call a year-over-year growth ranking all of the companies. And in October this year, The Oil and Gas Magazine ranked us number one in year-over-year growth over all the companies, which is exciting for us. Here's a little bit of background. Deloy Miller, our Chairman, since he was 19 years old, and he is 64 now, he's been drilling oil and gas wells. He started out as a Water-Well Driller and is one of the most prolific drillers in the Appalachian Basin. So at one time, he had about 20 rigs running, 300 people employed.

Most E&P companies are not vertically integrated. What I mean by that is they go and contract out the drilling. In our case, we own our own rigs, we do our own drilling, so we're integrated from top to bottom, from acquisition of the land to drilling, to selling. What's so beneficial about that is when we moved up to Alaska in 2009, beginning of 2010, in the Cook Inlet, the rigs were scarce and it's very expensive to get rigs. So we made the decision way back then and said, "OK, this is what we do, this is what we understand and know, so let's go ahead and bring our own rigs up to Alaska." So we made that decision last year to bring up an onshore rig that we had in Tennessee. We trucked it up to Alaska, and we had to get ready for the winter onset up there, which meant that we had to make some modifications to the rig. And then we went down to Houston, about six months ago, and we bought a rig for our offshore platform, and that's the one that's being assembled as we speak. We spent about $30 million combined on both those rigs.

But what that does for us, this year, we'll be drilling onshore, with the onshore rig scheduled to actually start next week. And the rig for the offshore platform should be completed in the next 45 days. So in 45 days, we ought to be drilling onshore and offshore. Because we own our own rigs, we aren't waiting on somebody else's rigs or not getting them, which is what happens a lot of times in this industry. We have a capex plan that's very aggressive and soon we'll have the rigs and operators to make that happen, so we're looking for an exciting year.

TWST: In August, you put out a news release that Miller Energy Resources set a company record for barrels of oil shipped that month. I know that a lot of your sales are concentrated with Tesoro Corporation. So what factors led to the increase and what indicators do you have that you'll see continued strong demand?

Mr. Boruff: What happened there is on our Osprey platform that we bought as part of the acquisition, all of the wells on the platform were shut in because of the bankruptcy, so there were a few wells that we could bring online with a snubbing unit, which is what we did. We went down to Louisiana and hired Cudd. We brought a snubbing unit up, and what that snubbing unit did is it reworked a couple of those wells, which are the RU-1 and RU-7. That increase and getting those wells online is what drove production.

Now our drilling rig is being constructed, as we speak, and has the 2,000-horsepower rig, a million pound derrick, and it can drill to the depth of 20,000 feet. And once it's up, we can start on the big reworks of the previously producing wells and then start doing new developmental drilling. So all we will be doing for the first six, eight months of this year is just going back and reworking wells that were previously producing at this offshore platform at one time, which when Forest was producing was at around 5,000 barrels a day. Those wells had casing issues and mechanical issues, and we're going to go back again and put new casing in and sidetrack the wells, and again get production back online before we start drilling what they call the new grassroots wells. And we have about thirteen of those, for a total of nearly twenty wells - that's three years of drilling. So that's also exciting. We're not drilling exploratory wells. We're just drilling what they call proved reserves, and that's where tremendous growth should come from.
For our investors, the good part about us is we only have about 40 million shares total outstanding. Management owns about 33%, 34% of that. So another thing we're always proud of as management, myself, the Chairman, President, CFO, we've never sold a single share of stock. So even though our stock went from less than a dollar up to $8 last year, we've never sold a single share, and that's why we have shareholders that have stayed with us, because they can see that we as owners believe in the future of this company.

TWST: As you look to the future and continued growth and expansion, do you expect to stay primarily in the two areas where Miller Energy Resources currently operate or are there other geographic areas that maybe you've got your eye on? And if so, which are they and what characteristics make them attractive to MILL?

Mr. Boruff: Honestly, as a company, we've chosen to be the best in class in our two basins. So right now, we are the largest owner/operator of oil and gas wells in Tennessee. We own and operate almost about 393 wells in Tennessee, but we're not the largest producer. So our goal in Tennessee is to be the largest producer. We have fields that have what they call the Big Lime formation, which is the same as the Mississippi Lime out in southern Kansas and Oklahoma, where they're going back in and doing the horizontal drilling. In Tennessee, these are shallow wells that are about 1,600 feet deep. And so that's our goal for Tennessee this year, to go back in and drill several horizontal wells and grow Tennessee's oil production fourfold again.

And in Alaska, we have so much infrastructure, land and reserves up there, and we won't look into another basin until we get to probably 15,000 to 20,000 barrels a day, because we're laser focused, and unless something accretive falls into our laps, I wouldn't see us going out to another basin in the next two years. But once we get those two basins up and maximize the production in there, we will look out to other basins.

We are looking to make acquisitions up in our area, and so we'll look at JV opportunities and with JV partners. What's exciting about the Cook Inlet that the public really doesn't know, but it's public record, is when we came up there at the end of 2009-2010 at the state of Alaska lease sale, there were four bidders on five leases, and then the next year, there were nine bidders on 35 leases, and at the last lease sale, there were 11 bidders on 109 leases. We saw everybody trying to get their acre positions. The good news is since we've acquired Cook Inlet Energy, we've had about 20 more companies come up to the Cook Inlet to do business, so it's an exciting time to be there.

Now, the large independents have moved into the Cook Inlet, which generally happens after the majors like the Chevrons, the Exxons, BPs and ConocoPhillips have developed an area and start exiting. That's when the independent producers like us come in and take over. So we've had Apache move in about a year and a half ago, and before they arrived, we used to be the largest leaseholder with about 700,000 acres of leases and exploratory licenses up there. But now they're the largest leaseholder. They're kind of all around and those guys are smart and know what they're doing. Their model is they come in, lease acres, shoot 3D seismic, drill it, produce it. You saw where Chevron sold out to HilCorp - you actually drive across Chevron's land to get to our property, it kind of abuts and joins us with it. We were a friendly neighbor to Chevron. We stored their excess oil in our tanks. So now, we're working with HilCorp, and those guys are super smart, and they're all about cutting cost and increasing production. So we're sandwiched between Apache and HilCorp, and I kind of think we're like a convenience store, because we have these midstream assets that our neighbors can pay us to use. We have our Kustatan production facility, which was built in 2002, and is practically brand new. When you drill an oil well, you have to process it all before you sell it. Our production facility can process up to 50,000 barrels a day of oil, and that's huge.

Right now, we're still getting our production online, so there's room for us to process oil for our neighbors. We also have a permit for disposal down the hole that's hard to get. We acquired a huge amount of seismic data that we're able to license to our neighbors. We can sell our excess power, and rent out our camp if it's not fully occupied by us. So we are talking to all of our neighbors, especially the ones that don't have a production facility up there. We expect that in the future, we will be processing all fluids for our neighbors, because we've got a process facility that was built in 2002, and this is the latest, state-of-the-art, brand new facility. If you had to build that today, it would cost you $400 million to $500 million and five years to do it. And we get no credit for our midstream assets. That's part of my job, is to go out and let the public know, "Hey, here is what we've got, and this is how we're making these assets produce for us while we're still ramping up our own oil and gas production." So that's exciting for us, too.

TWST: Would you comment on the overall strength of the company's balance sheet and its continued ability to fund operations, as well as growth and expansion?

Mr. Boruff: Yes, that's a great question. I'm proud of our balance sheet, because we have about $0.5 billion in assets and less than $30 million worth of debt, so our debt-to-asset ratio is nil. We have a $100 million credit facility with a $35 million borrowing base from Guggenheim Corporate Funding, LLC, and Citi.

But something which you may or may not know, for every capex dollar that you spend in Alaska every quarter - say, if we spend $10 million this quarter on developing properties - we submit an application to the state of Alaska, we get 40 cents on every dollar back. It's like having a built-in joint venture partner, but we get to retain the entire working interest in the well. So that's another thing that's driven these companies to come up. You can shoot seismic, you can drill and they've got great tax incentives to operate there. So for every dollar we spend - for example, now on our books, we've got $7.5 million of receivables to come back from the state. We've already received over $1 million back from last year. So the program does work and the state of Alaska is very healthy and very strong.

And unlike the Lower 48, when we drill a gas well in Alaska, we get a premium for gas. In the Lower 48 you get $3 an Mcf of gas. We are paying $7, $7.50 an Mcf for gas in Alaska. So as we grow our gas prospects this year, you should see us doing five to seven-year contracts from $6 to $10 an Mcf, probably an average $7 an Mcf for gas, which is huge. And you can make a lot of money with that.

TWST: What do you believe will be the biggest hurdle this year for Miller Energy Resources, and what are the strategies you and your team plan to use to deal with that challenge?

Mr. Boruff: The biggest challenge is we're constantly trying to reduce our cost of funds. Right now, we have a $100 million credit facility, but it's 25% interest for year one. Our issue as a company was what they call well concentration risk, so our goal this year is to alleviate that. Well concentration is when you have too much of your production coming from just one or two wells. Because all of the wells were shut in when we acquired Cook Inlet Energy, when we brought the first two wells online, we had two wells doing 80% of our production. So our challenge this year and what we have laid out is to develop a plan, which we've got laid out, that's where we've got about 20 wells online and not a single well accounting for more than 15% of our revenue. After we do that this year, then we should be eligible for senior secured debt, which means that our cost of funds will be much lower. And so that's our challenge is to bring these wells online.

One of the biggest challenges we had this past year was building a rig - we went to Houston and got Ron Voorhees, who is a gentleman who's been in business for about 50 years. He's about 80 years old and he's built probably 80% of the platforms up in the Cook Inlet. So we engaged him, and he's built us this rig for our offshore platform. And that's been the challenge, because for a little company like us to go spend $20-plus million for one rig and then transport the rig to Alaska, ship it up there and then get it to the platform, and install it on the platform, and finally go into production - that's a big milestone for us to make that happen.

So with our onshore rig that we shipped up to Alaska from Tennessee, that reality should come true next week and for our offshore platform it should come true in the next 45 days. So it's been a big challenge, but it's been one that our crew has done before and we've just about completed. So we do control our own destiny, because we do have the rigs and we locked in the credit facility to execute our capex plan. So that's also exciting.

TWST: Would you tell us about your professional background, as well as some of the key strengths of your core management team. And I know you're searching for a new CFO. Have you secured one?

Mr. Boruff: We're interviewing for the new CFO. What we have done is David Voyticky, our President, has been made acting CFO. His background is he's a JPMorgan banker, a Goldman Sachs banker, has an MBA and law degree from the University of Michigan, a very seasoned gentleman that's done some big deals. He actually facilitated the sale of the Twin Towers in New York and one of his clients was Disney Euro.

My management team is unbelievable. Myself, what I do is try to surround myself with the smartest people in the world and so we've brought on - actually, we kind of revamped our accounting department. So we brought Charlie Lobetti home from Alaska, who was our controller up there, brought him back home to the Knoxville office, and he's been a big asset.

What I do best is basically just structured finance, structured deals. I was taught early on by my dad: you make your money when you buy, not when you sell. And as of this May, the team has done four trades. We sold and bought four things, and we would put those - even though they're not the largest deals - we would put those up against any deal out there in the country for price per barrel of oil or price per Mcf of gas. When we made the acquisition in Alaska, cost per barrel of oil equivalent on average was like $19.58 a barrel, we paid $0.36 a barrel. And we sold land in Tennessee for $20 million and acquired more acreage back six months later for $1 million. It's just structured finance and dealmaking.

And it's the same thing - what's so fun about the Cook Inlet now is we have 700,000 plus acres, we intend to grow that position to over 1 million acres this year. So if you have 1 million acres, and now we've got about right at $1.45 billion of reserves of what they call 1P, 2P and 3P, and that's just what we call our runway. Now, our goal is to grow, take those 3P reserves and 2P reserves, take joint venture partners, because that's the more risky stuff, take those reserves, and work them until they are 1P, and that drives your stock price, that drives your revenue, that drives everything. And we're doing it all without being $500 million in debt, like some of the previous operators. Again, we have less than $30 million of debt.

Going back to the acquisition of our Alaskan subsidiary, what most of the world doesn't know is when we went into the bankruptcy court, we bifurcated the bad eggs, the ones that didn't make money, that didn't make cash flow, and then bought the accretive assets. When they couldn't get a buyer in bankruptcy, because the package that was being offered was packaged with another five, what they call nonoperated platforms with shared bonds. So those abandoned assets had $0.5 billion in assets along with the substantial liabilities attached to it. And we managed to convince the bankruptcy court to bifurcate those two groups of assets because we did not want the nonoperated platforms. So we continued to tell this story the last year and a half, we got hit by a lot of questions of, "How do you buy from less than $5 million rounded up to $350 million?" Well, it's an accounting matter, but the gist of it is that we record the fair value of the assets and liabilities that we acquired - not the purchase price. No different than when you inherited your grandfather's farm and it's a $10 million farm and just because you got it for nothing because you're his granddaughter, doesn't mean it's worth nothing.

We got hit last year by a short seller that put out a nasty article that took a lot of facts out of context and really painted the company in a false light. So our stock price is recovering from that, but we are continuing to go forward with our development plans, and we're continuing to add to and improve our management team. We're developing our reserves and our midstream assets and working toward increasing daily production. So that's our goal this year, to go back out to the institutions with our story and our record of development. Our goal is to grow that institutional shareholder base, which we have now.

The good thing about what happened at the time with the short sellers is that it made us realize some of our weaknesses. When we go from a regional accounting firm to KPMG, it's a big job, all in one year, and we had some growing pains that went along with that. So being best in class, we want to do it, but it takes some time and a lot of work and a lot of effort. But we've put our accounting under the microscope and it's correct now, and we've got the infrastructure in place for another super year of growth.

TWST: It sounds as if 2012 is going to be an eventful year for Miller Energy Resources.

Mr. Boruff: Indeed, it really is, that's what's so exciting, is that we've got the runway. To grow a business, you've got to have something to grow. In our case, the prior companies have built over $1 billion of assets that we acquired cheaply and we're just taking our capex dollars, putting them into the ground and growing reserves and growing production. You see a lot of financings done with warrants and options and all that stuff, but we're financing our development without diluting our shareholders.

We've been through four rigorous due diligence checks in the last year and half, between getting listed on Nasdaq, then NYSE, changing our auditors to KPMG, and closing our credit facility with Guggenheim and Citi. We came through all of those inspections.

We're poised for major growth and development this year once our two rigs are ready to drill in Alaska, and we're also aiming to maximize our midstream assets. We're looking forward to seeing our hard work over the last two years really pay off this year.

TWST: Thank you. (MES)

Scott M. Boruff

President & CEO

Miller Energy Resources

3651 Baker Highway

P.o. Box 130

Huntsville, TN 37756

(865) 223-6575

(865) 691-8209 - FAX

www.millerenergyresources.com