Tengasco Enters Crude Oil Hedging Agreement
04 August 2009 - 1:21AM
PR Newswire (US)
KNOXVILLE, Tenn., Aug. 3 /PRNewswire-FirstCall/ -- Tengasco, Inc.
(NYSE Amex: TGC) announced that on July 28, 2009 the Company
entered into a two-year price hedging agreement effective August 1,
2009 in the form of a costless collar applicable to a portion of
the Company's crude oil production volumes. The hedge agreement has
a $60 per barrel floor and $81.50 per barrel cap on a notional
volume of 9,500 barrels per month from August 1, 2009 through
December 31, 2010 and 7,375 barrels per month from January 1
through July 31, 2011. The hedge is based on the West Texas
Intermediate price reported by NYMEX, and not the prices actually
received for the Company's oil production. The Company entered the
hedge agreement with Macquarie Bank Limited, as counterparty, and
Sovereign Bank of Dallas, Texas, the Company's senior lender.
Jeffrey R. Bailey, CEO, explained, "We entered the hedge agreement
to protect the Company from the risks of a return to the crude oil
prices of late 2008 and early 2009, when crude oil sold for around
$30 dollar per barrel. The costless collar provides price support
on the hedged volumes when market prices for crude oil fall below
$60 per barrel. Conversely, we give up the upside potential on the
hedged volumes if per-barrel prices exceed $81.50. Entering into
this collar arrangement, rather than merely purchasing a put at the
lower price, permits the Company to avoid paying cash for the
option, which we view as a significant benefit. Our average
production is currently about 15,000 barrels per month, so the
risks and benefits of the hedge arrangement apply to only about
two-thirds of this volume. If low prices return, this agreement may
help us to maintain production levels of crude oil by enabling us
to perform at least some ongoing polymer or other workover
treatments on our existing producing wells in Kansas. Our view is
that ensuring sufficient cash flow to fund operations is more
important in the current environment than maximizing any profit
possibilities from potential price improvements." 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 2009 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. DATASOURCE: Tengasco, Inc.
CONTACT: Jeffrey R. Bailey, CEO of Tengasco, Inc., +1-865-675-1554
Web Site: http://www.tengasco.com/
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