Tengasco and Riley Exploration Announce Merger Deal
NYSE American-listed Tengasco Inc. has entered into a merger agreement to acquire 100% of privately-held Riley Exploration-Permian LLC, in an all-stock corporate transaction valued at approximately US$197 million. The transaction constitutes a reverse takeover, after which the current stakeholders of Riley will own 95% of the merged entity, and Tengasco‘s current stockholders will hold the remaining 5%.
Under the terms of the agreement, shareholders of Riley will receive ~98 shares of Tengasco common stock for each common unit of Riley held, resulting in the issuance of approximately 203 million Tengasco shares. Based on its closing price of US$0.97 per share on October 19th, this amounts to a total offer value of approximately US$197 million.
Upon completion, Tengasco will change its name to Riley Exploration Permian Inc., and its corporate office will be relocated to Riley’s current office in Oklahoma City. In addition, Riley will become a wholly-owned subsidiary of the merged entity. The current management of Riley will become the management of the newly-formed company, with Bobby Riley (current CEO & Chairman of Riley) serving as CEO, and Kevin Riley (current President & Interim CFO) as President.
Private equity-backed Riley Exploration is focused on the acquisition, exploration, and development of conventional oil and natural gas properties in the northwest shelf of the Permian basin. The company holds interests in approximately 44,880 net acres located primarily on large contiguous blocks in Texas and New Mexico. Total 1P and 2P Reserves attributable to Riley (as of September 30th, 2019) are approximately 54.8 and 115.4 million barrels of oil equivalent (MMboe), respectively. The company produced an average of 7,073 barrels of oil equivalent per day (boe/d) during the nine months ended June 30th, 2020, of which 81% was oil.
“We started a process at the beginning of the year to explore strategic alternatives that we hoped could maximize the value of Tengasco for our stockholders. We sought a candidate that would provide a solid asset base, proven management, a healthy balance sheet and growth that could be accelerated based upon market conditions,” said Michael Rugen, Tengasco’s CFO & Interim CEO.
“Riley not only meets these objectives but exceeds them in that they have a history of paying a cash dividend to common unitholders that is expected to continue, resulting in our stockholders participating in that dividend going forward,” he added.
ROTH Capital Partners is acting as exclusive financial advisor to Tengasco, while Truist Securities is advising Riley on the deal.
The transaction is subject to customary closing conditions including regulatory, shareholder, and board approvals, and is expected to close in Q1-2021.