TGC Tengasco Inc New

Tengasco Announces First Quarter 2004 Financial Results, Settlement of Litigation with Bank One, and Results of Recent Drilling in Swan Creek Field KNOXVILLE, Tenn., May 20 /PRNewswire-FirstCall/ -- Tengasco, Inc. announced today its financial results for the first quarter ended March 31, 2004, and that on May 13, 2004 the Company reached a settlement of its pending litigation with Bank One. The Company also announced the results to date of recent drilling by the Company in its Swan Creek field in Tennessee. First Quarter Financial Results The Company realized a net loss attributable to common shareholders of $1,125,778 ($0.06) per share of common stock), during the first three months of 2004 compared to a net loss in the first three months of 2003 to common shareholders of $793,545 ($0.07) per share of common stock). The Company recognized $1,332,350 in oil and gas revenues from its Kansas Properties and the Swan Creek field during the first three months of 2004 compared to $1,923,915 in the first three months of 2003. The decrease in revenues was due to a decrease in production of oil in both Kansas and Swan Creek and in production of gas in Swan Creek. Although production of gas in Kansas increased, revenues from gas sales declined by approximately $130,297 from the first quarter of 2003 due to an unusually high gas price received in March 2003 of $8.64 per Mcf, as compared to $4.11 per Mcf in 2004. During the first three months of 2004, the Company produced and sold 29,635 barrels of oil and 67,582 Mcf of natural gas from its Kansas Properties comprised of 149 producing oil wells and 59 producing gas wells. The first three months production of 29,635 barrels of oil compares to 32,807 barrels produced in the first three months of 2003. The first three months production of 67,582 Mcf of gas compares to 64,438 Mcf produced in the first three months of 2003. The revenues from the Kansas properties were $999,707 in the first three months of 2004 compared to $1,165,422 in 2003. In summary, the first three months production reflected expected continued production levels from the Kansas Properties, which have been in production for many years. The decrease in oil production reflects a normal decline curve for the Kansas properties. During the first three months of 2004, the Company produced gas from 23 wells in the Swan Creek field, which it sold in Kingsport, Tennessee to Eastman Chemical Company. Natural gas production from the Swan Creek field for the first three months of 2004 was an average of 617 Mcf per day during that period as compared to 1,241 Mcf per day in the first three months of 2003. The first three months production reflected expected natural declines in production from the existing Swan Creek gas wells which were first brought into production in mid-2001 upon completion of the Company's pipeline. Production costs and taxes in the first three months of 2004 of $871,581 increased from $769,909 in the first three months of 2003 due primarily to a reclassification of insurance cost related to field activities. Depreciation, depletion, and amortization expense for the first three months of 2004 was $608,164 compared to $630,942 in the first three months of 2003. During the first three months of 2004 the Company reduced its general and administrative costs by $222,977 from the same period in 2003. Interest expense for the first quarter of 2004 increased to $413,858 from $153,356 in the first quarter of 2003. The increase was due to the payment of interest on notes to Dolphin Offshore Partners, LP (the managing partner of Dolphin is Peter E. Salas, a member of the Company's Board of Directors) during the first quarter of 2004, as well as the recognition of dividends in the first quarter of 2004 on the Company's preferred stock in the amount of $134,194 as interest expense due to the Company's adoption of SFAS 150. Settlement of Lawsuit with Bank One As of May 1, 2004, the principal amount owed by the Company under its existing credit facility agreement with Bank One, N.A. in Houston was $4,101,601.61. This agreement was the subject of litigation filed in May, 2002 in federal court in the Eastern District of Tennessee by the Company against Bank One. On Thursday, May 13, 2004, the Company and Bank One executed a written settlement agreement resolving the lawsuit. The Company agreed to pay the sum of $3,657,000 to the Bank by May 18, 2004 in full satisfaction of its obligations to Bank One and the parties agreed to dismiss the lawsuit and release all claims against each other. Bank One also agreed to immediately release all its liens on all of the Company's properties securing the credit facility upon receipt of the agreed payment. The Company and the Bank each agreed to bear all of its own costs, expenses, and attorneys' fees incurred to date. On May 18, 2004, the Company paid the Bank the settlement amount of $3,657,000. The funds were obtained from proceeds of a bridge loan from Dolphin in the principal amount of $2,500,000 bearing interest at 12% per annum with interest only payable monthly beginning June 18, 2004, principal being due and payable on May 20, 2005, prepayable without penalty and secured by a first lien on the company's Tennessee and Kansas producing properties and the Tennessee pipeline. The remainder of the settlement payment of $1,157,000 was paid from funds available to the Company from proceeds received by the Company from its rights offering. Upon receipt of this payment, an agreed order signed by the Company and the Bank dismissing all claims was filed with the court on May 20, 2004 and entry by the court is anticipated immediately. No hearing or approval of the settlement by the court is required. Results of Drilling in the Swan Creek Field The Hazel Sutton #3 was drilled to the Knox reservoir on May 5, 2004. Well logs and pressure tests indicate that this portion of the Knox gas reservoir is already being drained by other wells in the area, and completing the Hazel Sutton #3 as a Knox gas well would not add significantly to the total volume of gas that will ultimately be produced from the Knox reservoir. Instead, the well will be completed as a Trenton gas well. The Hazel Sutton #3 will be the first well in the Swan Creek field to specifically test the Trenton as a gas reservoir. The Stephen Lawson #8 was drilled to the Knox reservoir on May 18, 2004. It is anticipated that the well will produce commercial quantities of gas from the Knox reservoir. 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 DATASOURCE: Tengasco, Inc. CONTACT: Dr. Richard T. Williams of Tengasco, Inc., +1-865-523-1124 Web site: http://www.tengasco.com/

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