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TPC Completes Swan Creek Financing
Tengasco, Inc. and its subsidiary, Tengasco Pipeline Corp. (TPC), have entered into a definitive agreement to finance the completion of TPC's 58-mile intrastate Swan Creek natural gas pipeline system in Tennessee.
Under the terms of the financing, a number of individual investors have joined to provide TPC a $5.6 million credit facility secured only by the Swan Creek pipeline facility. TPC will use the facility to pay for the construction and start-up costs associated with the 28-mile Phase II of the system carrying gas from the Swan Creek Field to markets in eastern Tennessee. The cost had been estimated at $6 million. The first eight miles of Phase II have already been completed. The project, deliver more than 10 MMcf/d to the Eastman Chemical Co. in Kingsport, TN, is expected to be completed by yearend.
The lending agreement is for a five-year term at 10.75% interest and payment of interest only for six months. There is no prepayment penalty. The Lender receives a throughput fee of 10 cents/MMBtu during the period the loan is outstanding.
The lending group was formed to provide the special-purpose financing, and capital commitments were made by certain of Tengasco's board of directors. The board had rejected several other financing options which were considered substantially less favorable.
TPC also has been awarded the franchise to sell at retail and to transport gas to all customers, including industrial and commercial customers in the City of Kingsport. Tengasco currently has production capacity in excess of 20 MMcf/d from the Swan Creek field. In the current tight natural gas market, the company expects to be selling its full capacity of natural gas by mid-2001. At existing prices, the sales would add an estimated $29 million of cash flow per year, or $3.30 per share.
Tengasco also said it is in the process of securing a $20 million senior secured note facility that will allow it to prove up other Swan Creek look-alike structures and test deeper horizons on the Swan Creek field. The company has estimated the Swan Creek Field ultimately will produce more than a Tcf of gas.
Commenting on the closing of the pipeline financing, Tengasco CEO Mike Ratliff said, "The proceeds of this facility are more than adequate to cover Tengasco's near-term capital requirements for the completion of the Swan Creek system. Our Swan Creek natural gas assets represent approximately 70% of Tengasco's underlying asset value. The completion of our pipeline system will now bring to market this substantial asset with a concurrent significant increase in revenues and cash flows for our shareholders."
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