Filing identity and reporting period
Important mismatch: The supplied filing is Tengasco, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2014—not a filing identified in its text as Riley Exploration Permian, Inc. Investors should verify the issuer before relying on this summary.
Tengasco explored for and produced oil and natural gas, primarily in Kansas, and operated a methane-treatment and electricity-generation facility in Tennessee. Its Swan Creek and Tennessee pipeline assets were sold in August 2013; pipeline results appear as discontinued operations in the 2013 comparison.
Key financial results
Amounts below are in thousands of dollars, except per-share data and where noted.
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | $3,505 | $4,314 |
| Operating income | $710 | $1,636 |
| Operating margin | 20.3% | 37.9% |
| Continuing-operations income | $424 | $978 |
| Net income | $424 | $937, including $41 loss from discontinued operations |
| Basic and diluted EPS | $0.01 | $0.02 from continuing operations |
| Cash from continuing operations | $1,885 | $2,359 |
| Cash used in investing activities | $739 | $209 |
| Cash used in financing activities | $1,156 | $2,104 |
Revenue declined 19%; operating income declined 57%, and continuing-operations income declined 57%. Net margin was 12.1%, versus 21.7% on 2013 net income. The filing reports no separate gross-profit or gross-margin measure.
At March 31, 2014, cash was $44,000 and restricted cash was $507,000. Current assets were $3.306 million and current liabilities $2.440 million, yielding working capital of $866,000 and a current ratio of about 1.35. At December 31, 2013, working capital was $1.570 million and the current ratio about 1.96.
Total debt was $2.301 million, including $2.107 million drawn on the revolving facility; long-term debt net of current maturities was $2.223 million. Total liabilities were $6.445 million and stockholders’ equity $33.358 million. The company reported compliance with its credit-facility covenants.
Material changes and management commentary
- Kansas net oil sales fell to 37 MBbl from 46 MBbl, primarily due to natural declines at existing leases; recent wells partly offset the decline. Average Kansas oil price rose to $92.21 per barrel from $87.53.
- Kansas net revenue was $3.4 million versus $4.0 million. Lower volumes reduced revenue by about $772,000; higher prices added about $173,000. The absence of $142,000 of Swan Creek revenue and a $70,000 decline in methane-facility revenue also contributed to the total revenue decrease.
- General and administrative expense increased $180,000 to $693,000, including Denver-office costs, bonus accruals, and higher tax-consulting costs. DD&A declined $91,000 to $703,000, while interest expense declined $100,000 to $31,000, mainly reflecting lower average credit-facility borrowings.
- Operating cash flow fell by $474,000. Management said working capital provided $462,000 in Q1 2014, with the year-over-year improvement largely related to increased accounts payable and accrued liabilities amid higher drilling and seismic activity.
- Investing outflows included $479,000 for oil and gas properties and $266,000 for methane-project equipment. Capital expenditures included in accounts payable and accrued liabilities were $363,000.
Outlook, risks, and contingencies
- No specific production, revenue, earnings, or capital-spending guidance is provided. Management cautioned that first-quarter results are not necessarily indicative of full-year results.
- The F&M Bank facility had a $14.3 million borrowing base, a 3.75% rate, and a January 2016 maturity. The next borrowing-base review was scheduled for July 2014. Management warned that lower commodity prices, production, or reserve estimates could reduce the borrowing base and potentially require debt repayment or curtailment of spending.
- Oil and gas prices are volatile; Kansas oil prices ranged from $88.26 to $94.58 per barrel during the quarter. The company reported no commodity or interest-rate derivatives. It estimated that a 10% increase in the facility interest rate would add about $8,000 in annual interest expense at the quarter-end balance.
- A BOEM civil penalty appeal involved a potential payment of $0 to $386,000; the company had fully collateralized the appeal bond and said no new developments occurred during the quarter. Management believed it would ultimately prevail but acknowledged a payment was reasonably possible.
- Related-party balances included a $159,000 allowance against Hoactzin-related receivables and $490,000 of suspended payments recorded as related-party accounts payable. The filing says remaining IndemCo bonds covered by the company’s indemnity were released and cancelled by May 15, 2014, reducing exposure under those bonds to zero; separate Argonaut bonds and transition arrangements were described.
- The company had $507,000 of restricted cash, including collateral for the BOEM appeal and a Tennessee regulatory certificate of deposit. It was working to obtain release of the certificate of deposit.
Most important facts to verify
- Confirm the issuer: the filing names Tengasco, Inc., whereas the request metadata names Riley Exploration Permian, Inc.
- Review the July 2014 borrowing-base redetermination and any resulting changes to availability or repayment requirements.
- Check subsequent production, realized oil prices, and methane-facility downtime against the Q1 declines described by management.
- Follow the BOEM appeal, restricted-cash release, and transition of Hoactzin-related operator and bonding responsibilities.
- Assess whether cash generation and working-capital movements—particularly the increase in payables—were sustainable.