Today, Tengasco, the independent oil and gas developer which has made quite a name for itself in the Central Kansas Uplift by employing advanced analytical, developmental, and production technologies, reported 2011 drilling results (period ending Dec. 31), updating reserves and offering a portrait of its logistical operations.
CEO of TGC, Jeff Bailey, was keen to point out the all-time annual company record set for gross production of some 246k barrels in 2011, which eclipsed previous records set in 2008 (238k barrels). Explaining that this feat was not attributable to any periodic records being set (daily, monthly, etc. as those records were all set in 2008), Bailey detailed how TGC was able to bring the reserve replacement percentage up to 137% via generic drilling, as reserve additions outpaced production declines. Reserves have been increased without additional acquisitions and drilling expenses were paid for largely from additional cash flow attributable to rising oil prices.
TGC looks forward to a 10-K filing for FY11 (ending Dec 31) and intends to issue a press release on earnings at the same time, offering a March 30 deadline for the release.
A technology portfolio that ranges from microseismic interpretation-driven 3D seismic imaging to state-of-the-art polymer techniques for increasing production/reserves, while lowering the cost/water requirements and improving overall long-term performance, has made TGC a force to be reckoned with. Of 26 wells drilled in 2011, 16 have come through as producers and 10 were dry holes. Polymer activities have been extremely helpful, delimiting backflow water volume and creating a physical barrier whose fluid dynamics enable increased access for the oil to enter the tubing.
TGC has obtained ($1.7M) requisite casing, tubing, and pump jacks already this year for use on the first 20 of 36 wells to be drilled in 2012, positioning for an aggressive program to be approached via cash flow and minimal use of the borrowing base (no third party drilling partners to be used). A dedicated rig has been contracted for the year with an option to add additional rigs should activity demand it, and the 2012 drilling program, while emphasizing Kansas operations, will also be going after targets on property in Tennessee (where TGC is also headquartered). TGC has already knocked out the first three wells (drilled/completed) in the program in Kansas and begun the fourth, with solid anticipation of the ability to secure a second rig to accelerate the process.
Wholly-owned TGC subsidiary Manufactured Methane Corp. (MMC) began selling electricity generated at its Carter Valley methane extraction site (reported Jan 25, sold under contract through the Tennessee Valley Authority Generation Partners program and including local distributor Holston Electric Cooperative, Inc.). MMC is thus able to gain an additional revenue stream while offsetting facility energy costs as methane production continues alongside electric generation. The added benefit of reduced oxygen input, combined with upgrades in the collection system, have yielded exceptional in-service time since Jan 25 for the facility as well.
Bailey pointed to the ability to simultaneously add reserve growth and gear up for an aggressive 2012 drilling schedule/budget as indicators of the health of TGC, offering the analysis that these 2011 results show a real comeback for the company, after doing no drilling in 2009 and being limited by cash availability in 2010. Bailey cited the benefit to investors of the 36-well drilling program for 2012 being all company-owned wells and shareholders should be very pleased with the upcoming 10-K and financials.
Ongoing tensions over Iran have already pushed some analysts to view this game of brinkmanship as potentially pushing prices at the pump in Europe 25% higher as soon as April, thanks to Iran freezing deliveries (and subsequently setting conditions on future oil sales) to British/French companies amid essentially stalled negotiations and tightening sanction talk. This is an unmistakable gesture from the market for domestic energy producers.
For more information, or to stay up to date with the latest developments at Tengasco, Inc., please visit the company’s website at: www.Tengasco.com
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