Filing summary
Important identity discrepancy: The request identifies Riley Exploration Permian, Inc., but the supplied Form 10-Q is for Tengasco, Inc. (NYSE American: TGC). The summary below reflects the supplied filing, not Riley Exploration Permian.
Business context and reporting period
Tengasco explores for and produces oil and natural gas, primarily in Kansas. This unaudited report covers the quarter and six months ended June 30, 2020, with comparisons to the same 2019 periods. Figures below are in thousands of dollars unless otherwise stated.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $563 | $1,390 | $1,526 | $2,562 |
| Operating income (loss) | $(553) | $13 | $(1,080) | $(125) |
| Net income (loss) | $(554) | $9 | $(1,081) | $(87) |
| Net loss per share | $(0.05) | $0.00 | $(0.10) | $(0.01) |
| Operating cash flow | Not separately presented | $(414) | $230 |
Quarterly revenue fell 59% year over year; six-month revenue fell 40%. The six-month operating loss was about 71% of revenue. Cash and cash equivalents were $2,710 at June 30, 2020, down from $3,055 at December 31, 2019. Current assets were $3,602 and current liabilities $500. Total liabilities were $2,579, including $166 of PPP debt, $166 of long-term debt including current maturities, and $162 of lease liabilities. The company had no balance drawn on its Prosperity Bank revolving facility.
Six-month investing cash outflow was $74 and financing cash inflow was $143; cash declined by $345 overall. Capital additions to oil and gas properties were $102. No impairment of oil and gas properties was recorded.
Changes versus prior comparable periods
- Q2 net results shifted from $9 income to a $554 loss; six-month losses widened from $87 to $1,081.
- Management attributed the revenue decline mainly to lower oil prices: average realized price was $24.72 per barrel in Q2 2020 versus $54.98 in Q2 2019, and $33.03 for the first six months versus $52.53 in 2019.
- Six-month net oil sales volume declined 2.6 thousand barrels, to 45.9 thousand barrels. Natural production declines on several leases were partly offset by the Zimmerman well, completed early in 2020.
- Production costs and taxes fell to $689 in Q2 and $1,652 for the first six months, mainly due to lower well repair costs; lower revenue nevertheless drove the losses.
Outlook, risks, and unusual items
- Management said cash and expected revenues should fund operating and general and administrative costs through August 2021. This is an expectation, not a guarantee; the company reported recent net losses and negative operating cash flow.
- The bank borrowing base was reduced in April from $4.0 million to $3.1 million, and the covenant-based limit from $1.97 million to $1.442 million. Management said negative trailing-four-quarter EBITDA would make the credit limit zero upon a formal review and borrowing would require an EBITDA covenant waiver or amendment. The next review was scheduled for August 2020.
- The company received a $166 PPP loan in May at 1% interest, due May 2022, and anticipated eligibility for full forgiveness based on use of proceeds. Forgiveness was not reported as finalized.
- Oil-price volatility is a key exposure; Kansas monthly prices received ranged from $15.26 to $53.04 per barrel in the first half of 2020. No commodity or interest-rate derivatives were outstanding.
- The company received BSEE orders concerning decommissioning facilities on three Gulf of Mexico leases associated with Hoactzin Partners, controlled by the company’s board chairman. No monetary amount was specified. Tengasco cited an indemnity and defenses and said management assessed loss likelihood as remote; bankruptcy mediation had produced an agreement in principle among other responsible parties, but finalization and completion remained pending.
- Compensation reductions accumulated to approximately $365 through June 2020; about $52 could be payable in shares if WTI reaches $85 per barrel under the stated terms. No liability was accrued.
Most important facts to verify
- Confirm the intended issuer: the supplied filing is Tengasco, Inc., not Riley Exploration Permian, Inc.
- Check the subsequent outcome of the August 2020 borrowing-base review, covenant waivers or amendments, and the company’s access to liquidity.
- Verify whether the PPP loan was forgiven and whether any balance remained payable.
- Track oil prices, production volumes, and cash generation against management’s liquidity expectation through August 2021.
- Check the final disposition of the BSEE decommissioning orders and related indemnification arrangements.