KNOXVILLE, Tenn., May 17 /PRNewswire-FirstCall/ -- Tengasco, Inc. (NYSE Amex: TGC) announced today its financial results for the quarter ended March 31, 2010. The Company realized a net income attributable to common shareholders of $0.3 million or $0.00 per share of common stock during the first quarter of 2010, compared to a net loss in the first quarter of 2009 to common shareholders of $(0.4) million or $(0.01) per share of common stock. The Company recognized $2.9 million in revenues during the first quarter of 2010 compared to $1.9 million in the first quarter of 2009. The increase in revenues was due to an increase in oil prices in 2010, partially offset by a decrease in oil sales volumes in Kansas.
During the first three months of 2010, the Company sold 48 MBbl gross from its Kansas Properties, comprised of 186 producing oil wells. Of the 48 MBbl gross, 35 MBbl were net to the Company after required payments to all of the drilling program participants and royalty interests. The Company's net sales volumes and revenues from Kansas for the first three months of 2010 were 35 MBbl of oil and $2.5 million, respectively, compared to a net of 48 MBbl and $1.7 million for the first three months of 2009. The increase in revenues was due to an increase in oil prices from an average of $35.74 in the first quarter of 2009 to an average of $71.24 in the first quarter of 2010, partially offset by a 13 MBbl reduction in net volumes in the 2010 period. The Company's sales from Tennessee properties included $0.1 million from Swan Creek and $0.1 million from Manufactured Methane sales.
In the first quarter of 2010, MMC's facility at the Carter Valley Landfill in Church Hill, Tennessee, averaged about twenty producing days per month with an average sales volume of 329 Mcfd each producing day. Beginning in February 2010 and through May 11, the MMC plant operated on 78 continuous days, unprecedented since operations commenced in April 2009. In April 2010, the plant was not only operational on every day of the month, it operated for 95% of the total hours of the month. Although the Company expects that downtimes will occur in the future for maintenance of the plant and as a result of variances in the raw gas stream or other circumstances, the recent production record suggests that the facility has overcome most of the operational difficulties encountered since startup.
Commenting on the Company's Kansas operations, Jeffrey R. Bailey, Chief Executive Officer, said "It has been good to go back to work with enough cash flow for drilling and polymers. We drilled two wells in the 1st quarter, the Veverka B #3 and Veverka C #2, that have produced an average of about 15 BOPD combined. Both wells had high water flow, but are also in an area that has responded very well to our polymer treatments, which reduces produced water and increases oil production, so both wells are future polymer candidates."
"The Company also completed three polymer jobs in Kansas through April 2010. Two of these were performed on wells located on the Liebenau lease purchased in July of 2008. The remaining one was a well located on the Croffoot C lease. During April 2010, the combined Liebenau lease production (including both polymered wells) increased from an average of about 15 BOPD to about 46 BOPD and produced significant additional savings from produced water reduction, as we do not have to pay to pump the water to the surface and then dispose of it in a disposal well. The third polymered well, the Croffoot C, increased its production from 5 BOPD to about 20 BOPD as a result of the polymer treatment."
"After the end of the first quarter, we also drilled the Albers B # 1 well in Kansas. We finished drilling on May 6, 2010 and the well tested as an oil well. Production casing is now being installed as the final step to completion of the well. We are very excited because this well expands the Albers discoveries of 2008 into a new area of Trego County, Kansas. While no production has yet occurred on this new well, the geological information and testing to date are promising. The other two wells on the Albers lease have been productive. The Albers #1 discovery well has produced 18,000 barrels of oil since July of 2008, and added another 91,000 barrels of reserves. The second well, the Albers A #1, was completed in November 2008 and has produced 14,000 barrels of oil and has remaining reserves of 70,000 barrels."
Also in the first quarter of 2010, the Company experienced an unrealized, non-cash gain on the fair value of derivative instrument of $162,000. The unrealized gain was generated by the costless collar hedging agreement the Company entered into in the third quarter of 2009, hedging approximately two-thirds of the volumes of crude oil produced by the Company. No gain was realized because no cash payments were received from the counterparty to the hedge, as the commodity price stayed within the collar during the quarter.
The Company's costless collar arrangement is effective from August 1, 2009 until August 1, 2011. The Company entered into this costless collar following a period of high volatility in oil prices during the preceding year. The costless collar was intended to mitigate both the immediate cash flow consequences from potential future downturns in the crude oil markets as well as the impact that reduced cash flow would have on well maintenance and new drilling efforts, and thus production volumes. The costless collar has a $60.00 per barrel floor and an $81.50 per barrel cap based on WTI NYMEX prices, although the Company receives a price based on Kansas Common plus bonus, which results in a price approximately $7 per barrel lower than current WTI NYMEX prices. The unrealized gains and losses that the Company reports in its financial statements are a function of the fair valuation accounting required to be applied to the hedging agreement based on estimates of future oil prices at the time of our quarterly financial statements. That fair valuation is separate from any gains or losses resulting from actual payments between the parties if the price is outside of the collar. Consequently, there is the possibility that in any given future period, the Company may have unrecognized gain or loss regardless of whether payments are made under the collar. The Company will only be required to make cash payments in connection with the costless collar to the extent the average WTI NYMEX oil prices during any month are actually above the $81.50 per barrel cap. Thus, the Company expects that if it were required to make cash payments to its counterparty under the costless collar, the Company would be generating sufficient cash flow to meet these payments without impact to operations because it would be selling its oil production at higher prices. Moreover, in the event oil prices exceed the costless collar cap, the Company will still benefit from such higher prices in respect of the approximately one third of its oil production that is not hedged. The costless collar expires on August 1, 2011. For additional information on the costless collar, shareholders are directed to the Company's 10-Q and 10-K filed with the SEC.
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.
Tengasco, Inc.
CONTACT: Jeffrey R. Bailey, CEO, +1-865-675-1554
Web Site: http://www.tengasco.com/
