Tengasco turned to Citigroup to complete its first credit facility, which funds a buyout by the Knoxville, Tenn.-based energy company of drilling obligations and expansion. The facility consists of a $50 million revolving credit priced at LIBOR plus 2 1/2% available in loans and letters of credit.
Mark Ruth, cfo, said Tengasco has been working to obtain a facility for the past two years. After wrapping the loan, the company drew $2.6 million, of which it used $1.4 million to buy out the remainder of its 12-well Kansas drilling commitments to Hoactzin Partners, L.P. Hoactzin will now receive a 6.25% overriding royalty in six new wells as well as six wells Tengasco had already drilled. Had Tengasco not repurchased the obligation, Hoactzin would have received a 94% working interest in the wells.
Tengasco expects to use another $1.2 million to obtain new drilling sites, mostly in Kansas, Ruth said.