Business Context and Reporting Period
This Form 8-K was filed by Tengasco, Inc. on December 17, 2007. The filing reports the execution of an assignment of a revolving senior credit facility from Citibank Texas, N.A. to Sovereign Bank of Dallas, Texas.
Key Financial Metrics
- Revolving Credit Facility Limit: Up to $20,000,000 or the borrowing base, whichever is less.
- New Borrowing Base: $7.0 million (increased from the previous $3.3 million).
- Initial Borrowing Amount: Approximately $4.2 million.
- Interest Rate: Floating rate equal to Prime + 0.25% (approximately 7.5% at the time of borrowing).
- Maturity Date: December 31, 2010.
- Collateral: Substantially all producing and non-producing oil and gas properties, pipeline, and methane project assets.
Material Changes
The primary material change is the increase in the borrowing base from $3.3 million to $7.0 million following the assignment to Sovereign Bank. The company utilized the new facility to pay off the existing $3.3 million debt to Citibank. The remaining $900,000 of the new borrowing was allocated to transaction fees and capital expenditures.
Outlook, Management Commentary, and Unusual Items
Capital Expenditures: The company is constructing a methane extraction facility in Carter Valley, Tennessee, through its subsidiary, Manufactured Methane Corporation (MMC). The total anticipated cost is approximately $4.1 million. To date, $2.6 million (63%) has been paid, with $1.8 million funded by operating revenues. The company anticipates funding the remaining balance from future cash flow.
Use of Proceeds: Of the $900,000 net proceeds from the new borrowing (after paying off Citibank), approximately $75,000 covered bank and attorney fees, and approximately $825,000 was used to purchase equipment for the methane project.
Disclaimer: The filing explicitly states that the information is not deemed "filed" for purposes of Section 18 of the Exchange Act and is not incorporated by reference into other filings except as expressly set forth.
Investor Verification Checklist
- Verify the current status of the $4.1 million methane project in Carter Valley, Tennessee.
- Confirm the current borrowing base calculation and available capacity under the Sovereign Bank facility.
- Review the company's cash flow projections to ensure the ability to service the $4.2 million debt and fund the remaining methane project costs.
- Check for any subsequent amendments to the credit agreement or changes in the interest rate environment affecting the floating rate.