Filing summary
Period and entity: The supplied filing is Tengasco, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2019, filed May 14, 2019. This does not match the request metadata identifying Riley Exploration Permian, Inc.; confirm the issuer before relying on this summary. Tengasco’s primary business was oil and gas exploration and production in Kansas. Its methane-facility assets were sold in January 2018.
Financial results
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $1.171 million | $1.367 million |
| Operating income (loss) | $(138,000) | $118,000 |
| Continuing-operations net income (loss) | $(96,000) | $133,000 |
| Net income, including discontinued operations | $(96,000) | $1.243 million |
| Cash flow from continuing operations | $(18,000) | $71,000 |
Production costs and taxes were $779,000, or about 66.5% of revenue, versus $730,000, or about 53.4%, a year earlier. The resulting revenue less production costs was $392,000 (about 33.5% of revenue), compared with $637,000 (about 46.6%). Continuing-operations net margin was about -8.2%, versus 9.7%. These are simple calculations from reported figures, not company-presented non-GAAP measures.
Oil and gas revenue was $1.164 million; salt-water disposal fees were $7,000. The company sold 23.4 thousand net barrels, compared with 23.7 thousand. Average oil price fell to $49.88 per barrel from $57.36; management attributed most of the revenue decline to price, with a smaller contribution from lower volume.
Balance sheet, liquidity and cash flow
- Cash was $3.224 million at March 31, 2019, versus $3.115 million at December 31, 2018. Current assets were $4.481 million and current liabilities $659,000; the implied current ratio was about 6.8x.
- Total assets were $9.525 million and total liabilities $2.850 million. Asset-retirement obligations were $2.214 million.
- No credit-facility borrowings were outstanding. The Prosperity Bank facility had a $3 million borrowing base, subject to an approximately $2.74 million covenant-based credit limit; its stated rate was 6.00%. The company reported covenant compliance. Vehicle finance-lease liabilities were $112,000; operating-lease liabilities were $84,000.
- Continuing operating activities used $18,000. Investing provided $139,000, primarily from selling materials inventory; financing used $12,000. Cash increased by $109,000.
Changes, outlook and risks
- Continuing-operations results declined from a $133,000 profit to a $96,000 loss. Management cited the $196,000 revenue decrease and $49,000 increase in production costs and taxes, partly offset by a $29,000 increase in gains on asset sales.
- Q1 2018 included $1.110 million of discontinued-operations income, mainly a gain from selling the methane-facility assets. There was no discontinued-operations income in Q1 2019, so the reported year-over-year net-income comparison is materially affected by that one-time prior-year sale.
- The company adopted lease accounting Topic 842 on January 1, 2019, recording approximately $98,000 of operating right-of-use assets and lease obligations at adoption. No oil-and-gas-property impairment was recorded in either quarter.
- No specific financial guidance or production outlook is provided. Management cautioned that results depend on volatile oil prices, production and reserve estimates, drilling outcomes and costs, and the lender’s borrowing-base determination. The next borrowing-base review was scheduled for May 2019.
- The company reported no pending material legal proceeding. It disclosed historical Hoactzin-related matters, including possible operational claims under a management agreement; the filing does not quantify a potential liability. A previously affirmed $386,000 BSEE penalty was paid in 2015.
- Compensation reductions accumulated to approximately $432,000 through March 31, 2019. About $103,000 may be paid in shares if WTI’s 30-day trailing average reaches $85 per barrel and eligible recipients remain employed or on the board; no liability was accrued.
Investor verification points
- Verify the issuer: the filing is for Tengasco, Inc., not Riley Exploration Permian, Inc.
- Review the May 2019 borrowing-base review outcome and any subsequent changes to facility availability or covenants.
- Assess whether oil-price and production trends support operating cash flow, given the Q1 continuing-operations cash use and operating loss.
- Review the status and potential exposure, if any, of the disclosed Hoactzin matters and conditional compensation obligations.
- Separate recurring operating performance from the prior-year methane-asset sale gain when comparing earnings.