Filing summary
Entity and period: The supplied filing is Tengasco, Inc.’s Form 10-K for the fiscal year ended December 31, 2012—not a filing for Riley Exploration Permian, Inc. or a quarterly report. The summary below reflects the filing actually provided. Financial amounts are in U.S. dollars.
Business context
Tengasco explored for and produced oil and natural gas, with its principal oil operations in Kansas and gas production at Swan Creek, Tennessee. Its subsidiary also operated a landfill-methane extraction and electricity-generation project in Tennessee. Kansas contributed 94.4% of 2012 revenue and 95.4% of oil and gas production.
Financial and operating results
| Metric | 2012 | 2011 |
|---|---|---|
| Revenue | $20.6 million | $17.1 million |
| Operating income | $7.4 million | $6.3 million |
| Continuing-operations income | $4.2 million | $5.0 million |
| Net income (loss) | $(0.07) million | $4.7 million |
| Operating cash flow, continuing operations | $9.3 million | $8.7 million |
| Investing cash flow, continuing operations | $(7.6) million | $(10.4) million |
| Working capital | $1.6 million | $0.8 million |
| Total debt | $10.3 million | $11.8 million |
Revenue rose about 20% year over year, largely due to higher oil sales volumes; the average Kansas oil price declined modestly to $86.92 per barrel from $88.13. Continuing-operations income fell, while the overall net loss reflected a $4.3 million after-tax loss from discontinued operations, principally a $5.2 million pipeline impairment before tax. Operating margin was approximately 35.8%; continuing-operations net margin was approximately 20.6%.
Gross Kansas oil production increased to 278.8 MBbl from 240.8 MBbl. The company drilled 20 Kansas wells: 15 producers and five dry holes, a 75% success rate. It reported 2.216 million BOE of proved reserves at year-end, down from 2.591 million BOE; the standardized measure of discounted future net cash flows declined to $45.4 million from $51.9 million.
Cash and cash equivalents were $31,000 at year-end. The F&M Bank credit facility balance was $10.1 million against a $21.5 million borrowing base at December 31, 2012; the borrowing base was reduced to $20.5 million in March 2013. Total assets were $44.2 million and stockholders’ equity was $30.1 million.
Material changes, outlook, and risks
- The pipeline impairment was a significant non-cash item. The company classified pipeline assets as held for sale and reported the related results as discontinued operations. In March 2013 it agreed to sell the Swan Creek and pipeline assets for $1.5 million, subject to due diligence and approvals.
- Methane gas and electricity sales generated $0.219 million and $0.447 million, respectively, net of royalty in 2012. The methane plant remained affected by oxygen-related shutdowns and ran online about 59% of the time for gas sales and 46% for electricity sales.
- The company provided no specific financial guidance. Management said it remained focused on developing Kansas properties and could adjust drilling and capital spending as needed. Future results depend significantly on commodity prices, production, drilling outcomes, reserve estimates, and access to financing.
- Oil price protection under the Cargill floor contract expired December 31, 2012; no derivative positions remained open at year-end. The methane gas sales contract with Atmos was scheduled to expire July 31, 2014.
- The company disclosed a possible BOEM civil penalty of up to $386,000, which it appealed; $386,000 was posted as collateral. It also had approximately $9.6 million of bonding obligations associated with Hoactzin-operated offshore properties, with $6.6 million collateral provided by Hoactzin. A $257,000 allowance was recorded against Hoactzin-related receivables.
- Financial risks include variable-rate debt, potential borrowing-base reductions and repayment requirements, customer concentration, environmental and regulatory exposure, and the possibility of further asset impairments. Three purchasers accounted for 84.0%, 14.3%, and 2.2% of revenue in 2012.
Key facts for investors to verify
- Confirm the issuer: this is Tengasco, Inc. (ticker TGC), not Riley Exploration Permian, Inc.
- Verify the closing and proceeds from the proposed $1.5 million Swan Creek and pipeline asset sale, including final approvals and any resulting gain or loss.
- Review the borrowing-base terms, covenant compliance, and subsequent borrowing-base reduction and facility extension.
- Track the BOEM penalty appeal, bonding exposure, and collection of the Hoactzin-related receivable.
- Assess reserve revisions, oil and gas price assumptions, drilling results, and the sustainability of operating cash flow and methane-project performance.