Tengasco, Inc. (NYSEAMERICAN: TGC) is making a run for the top in the market this morning, and for good reason. The company announced that it has entered into a definitive merger agreement, sending the stock on gains in multiples. Here’s what’s going on:
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
TGC Stock Is Flying on Merger Agreement
In the press release, Tengasco said that it has entered into a definitive merger agreement with Permian, LLC, also known as Riley. The merger will take place in an all-stock transaction.
In the release, TGC said that it will issue about 203 million shares of common stock to Permian members at the closing of the transaction. Following the close of the transaction, Permian will own 95% of Tengasco, leaving the remaining 5% for Tengasco shareholders.
As part of the deal, Riley will become a wholly owned subsidiary of Tengasco.
In the release, TGC said that Riley is a private equity backed company focused on developing conventional oil and natural gas properties in the Northwest Shelf of the Permian Basis. The company was formed with the goal of building a premier Permian Basin pure-play acquisition, exploration, and development company.
Importantly, Riley’s assets have a shallower decline profile than most unconventional reservoirs. This provides Riley with optionality in terms of capital deployment, development schedule, and management of organic growth. As a result, the company has a strong balance sheet with low debt.
Moreover, the company has shown significant financial strength. In fact, over the past six quarters, Riley has paid cash dividends to shareholders in the amount of $25 million.
This Is Huge News
The news released by Tengasco proved to be overwhelmingly positive. Through the merger, the company’s shareholders will now own a piece of a largely successful traditional oil and gas play in the Permian Basin. Sure, the oil and gas space has been struggling as of late, but the struggles won’t last forever, and many suggest that a rebound is around the corner.
Nonetheless, even through the tough times, Riley has been able to maintain financial stability and pay dividends to investors. All in all, the move gives TGC shareholders ownership of a valuable asset, and there’s good reason for the gains in the value of the stock today.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!