KNOXVILLE, Tenn., March 31, 2011 /PRNewswire/ -- Tengasco, Inc. (NYSE Amex: TGC) announced today that it has filed with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2010.
The Company reported total proven reserves at December 31, 2010 of 2.5 million barrels, valued at $48.3 million on a discounted future net cash flow basis, up from 2.3 million barrels valued at $28.2 million at the end of 2009. With production of 240,000 barrels during 2010, this reserve increase demonstrates a production replacement gain of 186%.
The Company realized revenues of $13.2 million in 2010 compared to $9.7 million in 2009. Revenues increased $3.3 million from 2009 due to an increase in oil prices in Kansas as prices averaged $72.14 in 2010 compared to $54.48 in 2009 and increased $0.1 million due to volume increases in Kansas oil sales. In addition, revenues from the methane project increased $0.1 million in 2010 over 2009 levels.
The Company reported a net loss to holders of common stock of $(1.7) million or $(0.03) per share in 2010 compared to a net loss to holders of common stock of $(2.0) million or $(0.03) per share in 2009.
The net loss for 2010 included the impact of a non-cash unrealized gain on the Company's derivative contracts and a non-cash impairment of the Company's pipeline assets. The net loss for 2009 included the impact of a non-cash unrealized loss on the Company's derivative contracts. If these non-cash items are excluded from the Company's net income (loss), the Company would report an adjusted net income to holders of common stock of $0.9 million or $0.02 per share in 2010 compared to an adjusted net loss to holders of common stock of $(1.2) million or $(0.02) per share in 2009 (a non-GAAP measure). Below is a reconciliation of these non-GAAP financial measures used in this release, to comparable GAAP financial measures (in thousands):
Years ended December 31,
Net income (loss) (GAAP)
Unrealized (gain) loss on derivatives
Impairment of pipeline assets
Adjusted net income (loss) (non-GAAP)
During 2010, the Company recorded a $0.5 million gain on derivatives. The gain was composed of a $0.6 million unrealized gain partially offset by $0.1 million of settlement payments made to Macquarie, the counterparty under the Company's hedge agreement. In 2009, the Company had recorded a $(1.3) million unrealized loss on derivatives.
During 2010, the Company recorded a $5 million ($3 million net of tax effect) non-cash writedown of its 65-mile pipeline system asset in Tennessee. This writedown resulted from the Company's assessment that cash flows generated from the pipeline were insufficient to recover the pipeline's net book value. During the fourth quarter of 2010 the Company received expressions of interest to purchase from potential purchasers of the pipeline asset which were significantly below the asset's net book value. These offers indicated that the carrying amount of the pipeline may not be recoverable.
The Company recorded a deferred tax benefit of $1.1 million in 2010.
Jeffrey R. Bailey, Chief Executive Officer, said "The Company's revenues from operations increased in 2010 to $13.2 million, an increase of 36% above 2009 revenues of $9.7 million. Our production volumes of oil in Kansas also began to increase as a result of increased drilling activity which has allowed us to begin to catch up from the period of low drilling activity in 2009 and early 2010 due to low commodity prices. Despite these positive results in revenues and production, we have reported a loss of $0.03 per share for 2010 as a result of our non-cash writedown of our Tennessee pipeline system. This system was built to deliver gas volumes from Swan Creek, but with the natural decline of Swan Creek volumes and low gas prices, the pipeline capacity has been underutilized because the line is not interconnected to other fields. The pipeline was being carried on our books at its depreciated cost of $12 million, and we have written it down to $7 million. The difference of $5 million is counted against earnings per share even though it is a non-cash item. Along this same line, we reported a non-cash unrealized gain on the hedge agreement of $.6 million, and a deferred tax benefit of $1.1 million which partially offset the effect on earnings from the pipeline writedown."
Mr. Bailey continued: "As we move into 2011 we have begun drilling in Kansas again with our 12th well of the year finishing this week. We look forward to increasing revenues through the drill bit. We continue to drill using our own cash flow from operations, without any drilling partners that would dilute the Company's interest in the wells, and our senior lender has increased our borrowing base from $14 million to $20 million. We believe this is a vote of confidence in our chosen course to grow the company through predominantly focusing on increasing production in Kansas during these times of high commodity prices for oil."
The statements contained in this release that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding "expectations," "anticipations," "intentions," "beliefs," or "strategies" regarding the future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings analysis for 2010 and thereafter; oil and gas prices; reserve calculation and valuation; exploration activities; development expenditures; costs of regulatory compliance; environmental matters; technological developments; future products or product development; the Company's products and distribution development strategies; potential acquisitions or strategic alliances; and liquidity and anticipated cash needs and availability. The Company's actual results could differ materially from the forward-looking statements.
SOURCE Tengasco, Inc.