SEC Filing Summary: Tengasco, Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2002, for Tengasco, Inc. and subsidiaries. The company is an oil and gas exploration and production entity focused on the Swan Creek Field in Tennessee and properties in Kansas. The filing highlights significant operational challenges regarding fluid inflow in wells and a critical liquidity dispute with its primary lender, Bank One.
Key Financial Metrics
| Metric | Q1 2002 | Q1 2001 |
|---|---|---|
| Total Revenues | $1,254,189 | $1,448,318 |
| Net Loss | $(867,868) | $(368,768) |
| Net Loss Attributable to Common Shareholders | $(980,326) | $(447,546) |
| Loss Per Share (Basic & Diluted) | $(0.09) | $(0.05) |
| Cash and Cash Equivalents (End of Period) | $158,685 | $767,192 |
| Working Capital Deficit | $(6,507,649) | N/A |
| Total Debt Outstanding | $10,522,827 | N/A |
| Accumulated Deficit | $(25,095,708) | N/A |
Note: Total debt includes $6,329,547 in current maturities and $4,193,280 in long-term debt.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by approximately 13% year-over-year. This was driven by a significant drop in commodity prices (Kansas oil prices fell from $26.76 to $19.40/bbl; gas from $7.01 to $2.19/Mcf) and reduced oil production in the Swan Creek Field due to well work-overs.
- Increased Losses: Net loss more than doubled to $867,868. A primary driver was a sharp increase in depletion, depreciation, and amortization (DD&A) expenses, which rose from $97,500 to $487,348. This increase resulted from lower reserve estimates due to price declines and the commencement of pipeline depreciation.
- Cash Flow: Operating cash flow turned negative, using $363,557 compared to providing $136,722 in the prior year. Investing activities used $670,991 for property additions. Financing activities provided $799,782, primarily through private placements of common stock ($632,000) and new borrowings.
Outlook, Risks, and Contingencies
- Going Concern Uncertainty: The filing explicitly states substantial doubt about the company's ability to continue as a going concern due to continuous losses, an accumulated deficit of over $25 million, and a working capital deficit of $6.5 million.
- Lender Dispute: On April 5, 2002, Bank One demanded immediate repayment of $6 million, reducing the borrowing base from $10 million to $3.1 million. Tengasco disputes this action as a violation of the credit agreement and has filed a federal lawsuit seeking $51 million in actual damages and $100 million in punitive damages.
- Operational Outlook: Production in the Swan Creek Field stabilized at approximately 3 Mmcf/day by March 2002. The company expects repair work to conclude by September 2002 and plans to drill approximately 17 new wells to increase production. A deep test well (12,000-15,000 feet) is planned for late 2002.
- Capital Raising: The company initiated a private placement of Series C 6% Cumulative Convertible Preferred Stock. As of the filing date, $1 million was sold, netting $917,000, to fund well reworks and working capital.
Investor Verification Checklist
- Legal Status of Bank One Dispute: Verify the current status of the federal lawsuit filed against Bank One and the likelihood of the $6 million demand being enforced.
- Financing Success: Confirm whether the company has secured alternative financing to replace the Bank One credit facility or successfully completed the Series C preferred stock offering.
- Production Recovery: Monitor the completion of well repairs in the Swan Creek Field and the actual production output from the newly drilled wells to validate management's recovery timeline.
- Commodity Price Exposure: Assess the impact of current oil and gas prices on the company's ability to service its remaining debt, given the high sensitivity of revenues to price fluctuations.