Tengasco, Inc. Announces Closing of $50 Million Revolving Credit Facility with Citibank, Repurchase of Drilling Program Interes
July 05 2006 - 3:25PM
Business Wire
Tengasco, Inc. (AMEX:TGC) announced today the closing of a
$50,000,000 revolving senior credit facility between the Company
and Citibank Texas, N.A. in its own capacity and also as agent for
other banks. Under the facility, loans and letters of credit will
be available to the Company on a revolving basis in an amount
outstanding not to exceed the lesser of $50,000,000 or the
borrowing base in effect from time to time. The Company's initial
borrowing base was set at $2,600,000. The initial loan under the
facility with Citibank closed on June 29, 2006 in the principal
amount of $2.6 million, bearing interest at a floating rate equal
to LIBOR plus 2.5%, resulting in a current rate of interest of
approximately 8.2%. Interest only is payable during the term of the
loan and the principal balance of the loan is due thirty-six months
from closing. The facility is secured by a lien on substantially
all of the Company's producing and non-producing oil and gas
properties and pipeline assets. $1.393 million of the $2.6 million
loan proceeds was used by the Company on June 29, 2006 to exercise
its option to repurchase from Hoactzin Partners, L.P., the
Company's obligation to drill the final six wells in the Company's
12-well Kansas drilling program for Hoactzin. The controlling
person of Hoactzin is Dolphin Advisors, LLC, an entity controlled
by Peter E. Salas, the Company's Chairman of the Board. If the
Company did not exercise its repurchase option, Hoactzin would have
received a 94% working interest in the final six wells of the
program. As a result of the repurchase, Hoactzin will now receive
only a 6.25% overriding royalty in six Company wells to be drilled,
plus an additional 6.25% overriding royalty in the six program
wells that have previously been drilled. As a further result of the
repurchase, the 12-well program has been converted to a 6-well
program, all of which have been drilled by the Company. Production
from those six will continue to be paid to Hoactzin in accordance
with the payment terms of the drilling program. Since the Company's
earlier 8-well program drilling obligations were also satisfied
earlier in 2006, the Company as of June 30, 2006 has no obligation
to drill any additional wells for any parties other than the
Company itself. The balance of the $2.6 million loan will be used
for lease acquisition and three dimensional seismic surveys and
analysis for oil exploration on large tracts in Kansas. The Company
also announced operational results for oil production in Kansas. In
June, 2006, the Company produced 16,576 gross barrels of oil in
Kansas, the highest monthly production total since the Company
acquired the properties in early 1998. The Company's Kansas oil
production in the second quarter of 2006 was 44,458 total barrels,
with approximately 30,945 barrels of oil being produced allocable
to the Company's working interest during the quarter. The second
quarter total oil production was also the highest quarterly
production total since the Company acquired the Kansas properties
in early 1998. CEO Jeffrey R. Bailey said, "Establishing a working
relationship with an energy lender with Citibank's national
presence in oil and gas lending is the last piece in our cleanup of
the Company's finances and in laying a foundation for our continued
growth. Our business model has been to focus on growth, and we
believe that model has now received validation with the closing of
this loan facility with a major industry lender. Much work remains
as we seek out intelligent acquisitions and growth opportunities.
Besides building the Company's oil and gas reserves through the
drill bit and expanding our lease acreage position in Kansas, we
are also exploring ways to utilize the inherent value of our
pipeline assets in Tennessee that we believe have significant
development and strategic potential." "I am extremely pleased that
this loan from Citibank has provided an opportunity to repurchase
our drilling obligations to others and to now put us in a position
where we are drilling wells solely for the Company's interest. This
drilling will begin immediately this week. This will certainly help
the Company to quickly build a larger reserve base. Although the
company owns a majority working interest in approximately 140 wells
in Kansas, the last 14 wells that the Company drilled were all part
of the drilling programs which were used to satisfy many of the
Company's obligations to its former preferred stockholders and
resulted in the Company only having a minority interest in those
wells. Although those 14 program wells already drilled will
continue until payout to distribute revenues to the participants,
we are extremely pleased to have completed all of our obligations
to our participants to drill new or additional program wells. We
can now return to drilling wells in which the Company will own 100%
of the working interest for the benefit of all the Company's common
stockholders." "Our continuing production of record volumes of oil
in Kansas, increasing our reserves, and now establishing a banking
relationship with a premiere energy bank that should continue to
grow long after the initial three year term, speak volumes about
the positive direction in which the Company is now headed. We are
excited about the opportunities and the strengthened position the
Company now enjoys as we enter a new chapter in Tengasco history.
This new chapter should be one of increasing growth while
decreasing both exploration and financial risks." The Company
announced that it expects to file with the Securities and Exchange
Commission, its Report on Form 10-Q for the Quarter Ended June 30,
2006 in early August, 2006. Forward-looking statements made in this
release are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are
cautioned that all forward-looking statements involve risk and
uncertainties which may cause actual results to differ from
anticipated results, including risks associated with the timing and
development of the Company's reserves and projects as well as risks
of downturns in economic conditions generally, and other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
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