Filing identity and reporting period
Important: The supplied filing is Tengasco, Inc.’s Form 10-Q for the quarter ended September 30, 2019—not a filing for Riley Exploration Permian, Inc. Confirm the issuer before relying on this summary.
Tengasco is an oil and gas exploration and production company whose primary operations are in Kansas. The filing presents unaudited third-quarter and nine-month 2019 results, with comparisons to 2018.
Financial results and position
Amounts below are in millions of dollars unless otherwise noted.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $1.215 | $1.654 | $3.777 | $4.497 |
| Operating income (loss) | $(0.181) | $0.285 | $(0.306) | $0.500 |
| Net income (loss), continuing operations | $(0.182) | $0.298 | $(0.269) | $0.530 |
| Net income (loss), total | $(0.182) | $0.298 | $(0.269) | $1.650 |
| Operating cash flow, continuing operations | Not provided by quarter | Not provided by quarter | $0.371 | $1.018 |
- Q3 2019 diluted loss per share was $0.02; nine-month loss per share from continuing operations was $0.03. Nine-month 2018 total earnings included $1.120 million from discontinued operations, mainly a gain on the 2018 sale of the methane facilities.
- Oil and gas revenue was $3.757 million for nine months, with the balance from saltwater disposal fees. Production costs and taxes were $2.604 million, or about 69% of revenue. Operating loss was about 8% of revenue for the nine-month period.
- At September 30, cash was $3.482 million, current assets $4.510 million, and current liabilities $0.556 million (current ratio about 8.1x). Total assets were $9.182 million and total liabilities $2.670 million, including a $2.168 million asset retirement obligation.
- No borrowings were outstanding under the bank credit facility. Finance lease liabilities totaled $0.088 million; operating lease liabilities were $0.056 million. Cash increased $0.367 million during the first nine months of 2019.
- Continuing-operations investing cash flow was positive $0.036 million, including proceeds from the sale of materials inventory; financing cash flow was negative $0.040 million. Oil and gas property additions were $0.153 million.
Changes versus prior comparable periods
- Q3 revenue fell $0.439 million (about 27%) and the company moved from $0.298 million of continuing-operations income to a $0.182 million loss. Management attributed the decline mainly to lower oil prices and sales volumes, alongside $0.051 million higher production costs and taxes.
- For nine months, revenue declined $0.720 million (about 16%) and continuing-operations results deteriorated by $0.799 million, from $0.530 million income to a $0.269 million loss. Production costs and taxes rose $0.102 million.
- Management said nine-month net oil sales were 72.1 thousand barrels versus 73.0 thousand barrels in 2018. The average realized price decreased to $52.09 per barrel from $61.27; the volume decline was 0.86 thousand barrels.
- Operating cash flow from continuing operations decreased by $0.647 million year over year. The filing attributes the decline primarily to lower revenue and higher production costs, partly offset by improved working-capital cash flow.
Outlook, risks, contingencies, and unusual items
- No quantitative earnings, production, or capital-spending guidance is provided. Management cautions that interim results are not necessarily indicative of full-year results.
- In July 2019, Prosperity Bank increased the borrowing base to $4 million, subject to a covenant-based credit limit of about $3.8 million, and extended facility maturity to July 31, 2021. The facility is secured by oil and gas properties; the company reported covenant compliance. A borrowing-base review was scheduled for November 2019.
- Commodity prices and reserve-based borrowing availability are key risks. Kansas oil prices received ranged from $46.39 to $58.60 per barrel during the first nine months of 2019. The company reported no commodity or interest-rate derivative positions.
- The company was drilling a well at quarter-end and reported about $0.073 million of remaining commitments on that well. After quarter-end, it entered into an additional drilling commitment of about $0.293 million.
- Potential claims from Hoactzin Partners relating to historic operating and management matters remain under discussion. The company states it is not party to pending material legal proceedings; it also describes the historic BSEE civil penalty, which was paid in 2015.
- Historical employee and director compensation reductions totaled about $0.389 million through September 30, 2019. No liability was accrued; reimbursement is contingent on the specified WTI price trigger reaching $85 per barrel and eligibility conditions being met.
- The company adopted lease accounting in 2019, recording operating-lease right-of-use assets and liabilities. It reported no oil and gas property impairment in the nine-month period.
Important facts for investors to verify
- Confirm the filing belongs to the intended company: the document identifies Tengasco, Inc., not Riley Exploration Permian, Inc.
- Review oil-price and production trends, including the effect of the reported declines on operating cash flow and future reserve-based borrowing capacity.
- Check the outcome of the November 2019 borrowing-base review and continued compliance with credit-facility covenants.
- Assess the cost and results of the ongoing and committed drilling activity against available cash and the company’s production-decline profile.
- Review the status and potential financial exposure of the Hoactzin-related matters and contingent compensation obligations.