Tengasco, Inc. and its subsidiary, Tengasco Pipeline Corp.(TPC), have entered into a definitive agreement to finance thecompletion of TPC’s 58-mile intrastate Swan Creek natural gaspipeline system in Tennessee.

Under the terms of the financing, a number of individualinvestors have joined to provide TPC a $5.6 million credit facilitysecured only by the Swan Creek pipeline facility. TPC will use thefacility to pay for the construction and start-up costs associatedwith the 28-mile Phase II of the system carrying gas from the SwanCreek Field to markets in eastern Tennessee. The cost had beenestimated at $6 million. The first eight miles of Phase II havealready been completed. The project to deliver more than 10 MMcf/dto the Eastman Chemical Co. in Kingsport, TN, is expected to becompleted by yearend.

The lending agreement is for a five-year term at 10.75% interestand payment of interest only for six months. There is no prepaymentpenalty. The Lender receives a throughput fee of 10 cents/MMBtuduring the period the loan is outstanding.

The lending group was formed to provide the special-purposefinancing, and capital commitments were made by certain ofTengasco’s board of directors. The board had rejected several otherfinancing options which were considered substantially lessfavorable.

TPC also has been awarded the franchise to sell at retail and totransport gas to all customers, including industrial and commercialcustomers in the City of Kingsport. Tengasco currently hasproduction capacity in excess of 20 MMcf/d from the Swan Creekfield. In the current tight natural gas market, the company expectsto be selling its full capacity of natural gas by mid-2001. Atexisting prices, the sales would add an estimated $29 million ofcash flow per year, or $3.30 per share.

Tengasco also said it is in the process of securing a $20million senior secured note facility that will allow it to prove upother Swan Creek look-alike structures and test deeper horizons onthe Swan Creek field. The company has estimated the Swan CreekField ultimately will produce more than a Tcf of gas.

Commenting on the closing of the pipeline financing, TengascoCEO Mike Ratliff said, “The proceeds of this facility are more thanadequate to cover Tengasco’s near-term capital requirements for thecompletion of the Swan Creek system. Our Swan Creek natural gasassets represent approximately 70% of Tengasco’s underlying assetvalue. The completion of our pipeline system will now bring tomarket this substantial asset with a concurrent significantincrease in revenues and cash flows for our shareholders.”

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