SEC Filing Summary: Tengasco, Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2002, for Tengasco, Inc. and its subsidiaries. The company operates oil and gas properties in Kansas and the Swan Creek field in Tennessee, alongside pipeline transportation services. The filing notes that the company is in the early stages of its operating history and has incurred continuous losses.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2002 | Nine Months Ended Sep 30, 2002 |
|---|---|---|
| Total Revenues | $1,507,308 | $4,059,165 |
| Net Loss | $(721,879) | $(2,447,944) |
| Net Loss Attributable to Common Shareholders | $(856,074) | $(2,820,539) |
| Loss Per Share (Basic & Diluted) | $(0.08) | $(0.26) |
| Cash and Cash Equivalents | $322,539 | $322,539 (Ending Balance) |
| Working Capital Deficit | $(5,383,496) | $(5,383,496) |
| Total Debt (Current + Long Term) | $9,809,977 | $9,809,977 |
| Accumulated Deficit | $(26,935,921) | $(26,935,921) |
Material Changes vs. Prior Period
- Revenue Decline: Oil and gas revenues dropped to $1.45 million for the quarter (from $2.31 million in 2001) and $3.86 million for the nine-month period (from $5.55 million in 2001). This was driven by lower gas production in the Swan Creek field and decreased commodity prices in Kansas.
- Increased Losses: Net loss attributable to common shareholders widened significantly to $856,074 for the quarter and $2.82 million for the nine months, compared to $491,055 and $1.36 million in the prior year periods, respectively.
- Expense Fluctuations: Production costs decreased due to lower maintenance needs in the maturing Swan Creek field. However, professional fees increased dramatically due to legal costs associated with litigation against Bank One. Depreciation, depletion, and amortization (DD&A) increased due to pipeline depreciation and loan fee amortization.
- Capital Structure: The company raised capital through private placements of common and preferred stock and issued convertible notes to fund operations.
Outlook, Risks, and Contingencies
- Going Concern Uncertainty: The filing explicitly states that the company's ability to continue as a going concern is uncertain due to continuous losses, an accumulated deficit of nearly $27 million, and a working capital deficit. This is exacerbated by a dispute with its primary lender.
- Bank One Litigation and Settlement: Bank One demanded a $6 million reduction in the company's credit facility in April 2002, leading to federal litigation. As of November 5, 2002 (post-period), the company reached a preliminary settlement to replace the revolving credit facility with a term loan of approximately $7.7 million maturing in April 2004. Finalization was expected by November 29, 2002.
- Production Constraints: Drilling programs in the Swan Creek field were halted due to funding instability caused by the Bank One dispute. Production declines in existing wells are expected to continue without new drilling.
- Commodity Risk: The company is exposed to volatile oil and gas prices. Hedging activities expired in June 2002 and were not renewed, resulting in a $160,000 loss during the first half of the year.
Investor Verification Checklist
- Settlement Finalization: Verify if the preliminary settlement with Bank One was finalized by November 29, 2002, and confirm the terms of the new $7.7 million term loan.
- Liquidity Runway: Assess the company's cash burn rate against the $322,539 cash balance to determine if additional financing is immediately required to meet the $200,000 monthly principal payments.
- Production Recovery: Monitor the output of the newly drilled Paul Reed No. 8 (oil) and No. 9 (gas) wells to see if they offset the natural decline in the Swan Creek field.
- Legal Exposure: Review the status of the arbitration award against King Pipeline & Utility Company and the pending lawsuit against Caddum, Inc., which could impact future cash flows.
- Preferred Stock Obligations: Confirm the cumulative dividend obligations on the convertible redeemable preferred stock, which totaled $372,595 for the nine-month period.