Filing summary
Entity discrepancy: The request identifies Riley Exploration Permian, Inc., but the supplied Form 10-Q is for Tengasco, Inc. (ticker TGC). The filing describes an oil and natural gas producer whose primary operating area is Kansas. This summary reflects the supplied filing, not Riley Exploration Permian.
Business context and reporting period
Unaudited results cover the three months ended March 31, 2020, compared with the three months ended March 31, 2019. Balance-sheet comparisons are with December 31, 2019. Amounts below are in thousands of dollars except per-share data and production volumes.
Financial performance and position
- Revenue: $963, down $208 (about 18%) from $1,171. Oil revenue was $959; saltwater disposal fees were $4.
- Production and earnings: Production costs and taxes were $964, exceeding revenue. Total expenses were $1,490; operating loss was $527, compared with $138 in Q1 2019. Net loss was $527, or $0.05 per share, versus a $96 loss, or $0.01 per share.
- Cash flow: Operating cash flow was $174, versus cash used of $18 a year earlier. Investing used $81, compared with $139 provided in Q1 2019; financing used $8. Cash increased $85 to $3,140.
- Liquidity: Current assets were $3,986 and current liabilities $571. Cash was $3,140. The company reported no borrowings on its revolving credit facility at quarter-end.
- Debt and obligations: The credit facility’s March 31 borrowing base was $4,000, with a covenant-based credit limit of $1,970; its interest rate was 3.75%. Finance-lease liabilities totaled $82, and asset retirement obligations were $1,982. Total liabilities were $2,504.
- Other balance-sheet items: Total assets were $8,329, down from $8,922 at year-end; stockholders’ equity was $5,825, down from $6,348. Net oil and gas properties were $4,192. No oil and gas property impairment was recorded in either comparison quarter.
- Production and pricing: Net oil sales were 23.4 thousand barrels in both periods. The average realized oil price fell to $41.06 per barrel from $49.88. Production-cost increases were attributed primarily to the oil-inventory adjustment.
Changes, outlook, risks and unusual items
- The greater net loss reflected lower revenue, $185 higher production costs and taxes, and a $43 lower gain on asset sales. Q1 2020’s $2 asset-sale gain compared with $45 in Q1 2019.
- Management said cash on hand and expected revenue should fund operating and general and administrative costs through May 2021. However, management noted that borrowing under the revolving facility would require an EBITDA-covenant waiver or amendment given projected negative EBITDA amid lower oil prices.
- In April, the lender reduced the borrowing base to $3,100 and the covenant-based credit limit to $1,442. A further borrowing-base review was scheduled for July 2020.
- The company received a $166 PPP loan in May 2020 at 1% interest, with a May 2022 maturity. Management anticipated eligibility for full forgiveness, subject to use of proceeds for eligible expenses.
- Oil-price exposure is a central risk. The company reported Kansas monthly oil prices ranging from $27.31 to $53.04 per barrel in Q1 and anticipated lower average prices in Q2. It had no commodity or interest-rate derivative positions.
- The CARES Act enabled reclassification of $65 of AMT credit carryforwards from noncurrent to current, with recovery expected upon filing the 2019 tax return. The company reported a $0 net deferred tax asset at March 31.
- Potential compensation reimbursements tied to a future $85-per-barrel WTI threshold totaled approximately $373 since 2015, including about $45 potentially payable in shares; no liability was accrued.
- The board extended the company’s shareholder rights agreement to March 16, 2021. The filing reported no pending material legal proceedings.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Tengasco, Inc., not Riley Exploration Permian, Inc.
- Check the April borrowing-base reduction, July redetermination outcome, and any changes to credit covenants or waivers.
- Assess the effect of subsequent oil prices and production costs on liquidity and the company’s stated ability to fund operations through May 2021.
- Verify PPP-loan forgiveness and recovery of the $65 AMT credit when the relevant filings and approvals are available.
- Review the filing’s inconsistent MD&A wording about the year-over-year revenue comparison against the financial statements, which report Q1 2020 revenue of $963 versus $1,171 in Q1 2019.