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
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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