Filing identity and period
Important mismatch: The request identifies Riley Exploration Permian, Inc., but the supplied filing is Tengasco, Inc.’s Form 10-Q for the quarter ended March 31, 2015. The summary below reflects the supplied filing, not Riley Exploration Permian.
Tengasco explores for and produces oil and natural gas, primarily in Kansas, and operates a landfill-methane facility in Tennessee. Financial statements are unaudited and amounts below are in millions of dollars unless stated otherwise.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $1.634 | $3.505; down 53% |
| Operating income (loss) | $(0.854) | $0.710 |
| Net income (loss) | $(0.515) | $0.424 |
| Net margin | (31.5%) | 12.1% |
| Operating cash flow | $0.340 | $1.885 |
| Investing cash flow | $(0.377) | $(0.739) |
| Financing cash flow | $0.085 | $(1.156) |
Revenue weakness primarily reflected Kansas oil prices averaging $42.30 per barrel versus $92.21 a year earlier. Net Kansas oil sales were 35.6 MBbl versus 37.0 MBbl; methane-facility revenue increased to $116,000 from $82,000. Production costs and taxes were $1.202 million, depreciation, depletion and amortization was $732,000, and general and administrative expense was $554,000.
At March 31, cash was $83,000, current assets were $1.734 million, and current liabilities were $1.870 million, implying negative working capital of $136,000 and a current ratio of approximately 0.93. Total debt was $980,000; the company also reported $386,000 of restricted cash pledged for an appeal bond. Total liabilities were $4.818 million and stockholders’ equity was $31.657 million.
Material changes and management commentary
- The $1.871 million revenue decline drove the shift from profit to loss. Lower production costs and taxes, lower G&A, and lower income tax expense partly offset the decline.
- Operating cash flow fell by $1.545 million year over year. Capital spending on oil and gas properties was $409,000.
- On March 16, the bank reduced the borrowing base from $14.3 million to $7.8 million and extended facility maturity to January 27, 2017. Outstanding bank borrowings were $843,000; the next borrowing-base review was scheduled for July 2015. The company said it complied with covenants.
- The company implemented employee and director compensation reductions tied to oil-price thresholds; reductions totaled approximately $23,000 at quarter-end and were not accrued as liabilities.
Outlook, risks, and contingencies
The filing provides no specific earnings or production guidance. Management cautioned that sustained low oil prices or reduced cash flow could constrain operations and capital spending. The lender could further reduce the borrowing base, potentially requiring repayment; the company said it could not assure it could continue normal operations indefinitely during extended low-price periods. Oil prices are volatile, and the company had no commodity or interest-rate derivative positions at quarter-end.
A $386,000 BSEE civil penalty relating to a Hoactzin-operated property was affirmed by the administrative appeals board. The company sought federal judicial review, had recorded the liability, and expected to seek reimbursement from Hoactzin if the penalty is upheld, without assurance of recovery. The $386,000 appeal bond remained collateralized. The filing also describes related-party balances, including $159,000 of past-due Hoactzin-related receivables fully reserved and $602,000 of suspended payments recorded as related-party payables.
Most important facts to verify
- Confirm whether Tengasco, rather than Riley Exploration Permian, is the intended filing and issuer.
- Check the July 2015 borrowing-base review and any resulting repayment requirements or covenant effects.
- Verify the status and eventual outcome of federal judicial review of the $386,000 civil penalty and the restricted appeal-bond cash.
- Assess whether oil prices, production volumes, and operating cash flow improved after the reported quarter.
- Review the underlying filing for reserve, impairment, and related-party disclosures; the company’s full-cost accounting makes reserve estimates and oil prices important to asset valuation.