TENGASCO INC (Form: 10-K, Received: 03/28/2018 16:49:59)

Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Derivative Financial Instruments

The Company uses derivative instruments to manage our exposure to commodity price risk on sales of oil production. The Company does not enter into derivative instruments for speculative trading purposes. The Company presents the fair value of derivative contracts on a net basis where the right to offset is provided for in our counterparty agreements. As of December 31, 2017 and 2016, the Company did not have any open derivatives.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation with no effect on net income.

2. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014–09 Revenue from Contracts with Customers (“ASU 2014-09”). This ASU, as amended, superseded virtually all of the revenue recognition guidance in generally accepted accounting principles in the United States. The core principle of the five–step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. The provisions of ASU 2014–09 are applicable to annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. We have implemented ASU 2014-09 as of January 1, 2018 using the modified retrospective approach. To date, the Company has identified the contracts with each of its customers and the separate performance obligations associated with each of these contracts. Based on the evaluation performed to date, we have identified similar performance obligations as compared with deliverables and separate units of account previously identified, and we do not expect any change related to the allocation of the transaction price and the timing of our revenue to have a material impact on our consolidated financial statements or results of operations.

In February 2016, the FASB issued Update 2016-02 Leases (Topic 842). This guidance was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements . This guidance is e ffective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this Update is permitted for all entities. To date, the Company has identified each of its leases and is in the process of determining the impact of this new guidance on each of the identified leases. The Company does not expect this to impact its operating results or cash flows, however, the Company does expect to carry a portion of future lease costs as an asset and a liability on its balance sheet.

In March 2016, the FASB issued Update 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . This guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows . This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. T he company implement this in 2017 with no impact on the Company’s operating results or cash flows .

In August 2016, the FASB issued Update 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . This amendment provides guidance on certain cash flow classification issues, thereby reducing the current and potential future diversity in practice . This guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company does not expect this to impact operating results or cash flows .

3. Related Party Transactions

On September 17, 2007, Hoactzin Partners, L.P. (“Hoactzin”) subscribed to a drilling program offered by the Company consisting of wells to be drilled on the Company’s Kansas Properties (the “Program”). Peter E. Salas, the Chairman of the Board of Directors of the Company, is the controlling person of Hoactzin and of Dolphin Offshore Partners, L.P., the Company’s largest shareholder. Hoactzin was also conveyed a net profits interest in the MMC facility at the Carter Valley municipal solid waste landfill owned and operated by Republic Services, Inc. in Church Hill, Tennessee where the Company installed a propriety combination of advanced gas treatment technology to extract the methane component of the purchased gas stream (the “Methane Project”). The net profits interest owned by Hoactzin during 2017 was 7.5% of the net profits as defined by agreement and takes into account specific costs and expenses as well as gross gas revenues for the project. As a result of the startup costs, monthly operating expenses, and gas production levels experienced, no net profits as defined were realized during the period from the project startup in April, 2009 through December 31, 2017 for payment to Hoactzin under the net profits interest. Since the start of 2014, there have been no methane gas sales or revenues, and consequently no net profits attributable to Hoactzin’s net profits interest.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

On December 18, 2007, the Company entered into a Management Agreement with Hoactzin to manage on behalf of Hoactzin all of its working interest in certain oil and gas properties owned by Hoactzin and located in the onshore Texas Gulf Coast, and offshore Texas and offshore Louisiana. As part of the consideration for the Company’s agreement to enter into the Management Agreement, Hoactzin granted to the Company an option to participate in up to a 15% working interest on a dollar for dollar cost basis in any new drilling or workover activities undertaken on Hoactzin’s managed properties during the term of the Management Agreement. The Management Agreement expired on December 18, 2012.

The Company entered into a transition agreement with Hoactzin whereby the Company no longer performs operations, but administratively assists Hoactzin in becoming operator of record of these wells and transferring all bonds from the Company to Hoactzin. This assistance is primarily related to signing the necessary documents to effectuate this transition. Hoactzin and its controlling member are indemnifying the Company for any costs or liabilities incurred by the Company resulting from such assistance, or the fact that the Company is the operator of record on certain of these wells. As of the date of this Report, the Company continues to administratively assist Hoactzin with this transition process.

As operator during the term of the Management Agreement that expired in 2012, the Company routinely contracted in its name for goods and services with vendors in connection with its operation of the Hoactzin properties. In practice, Hoactzin directly paid these invoices for goods and services that were contracted in the Company’s name. As a result of the operations performed in late 2009 and early 2010, Hoactzin had significant past due balances to several vendors, a portion of which were included on the Company’s balance sheet. Payables related to these past due and ongoing operations remained outstanding at December 31, 2017 and December 31, 2016 in the amount of $159,000. The Company has recorded the Hoactzin-related payables and the corresponding receivable from Hoactzin as of December 31, 2017 and December 31, 2016 in its Consolidated Balance Sheets under “Accounts payable – other” and “Accounts receivable – related party”. The outstanding balance of $159,000 should not increase in the future. However, Hoactzin has not made payments to reduce the $159,000 of past due balances from 2009 and 2010 since the second quarter of 2012. Based on these circumstances, the Company has elected to record an allowance in the amount of $159,000 for the balances outstanding at December 31, 2017 and December 31, 2016. This allowance was recorded in the Company’s Consolidated Balance Sheets under “Accounts receivable – related party”. The resulting balances recorded in the Company’s Consolidated Balance Sheets under “Accounts receivable – related party, less allowance for doubtful accounts of $159” are $0 at December 31, 2017 and December 31, 2016.

4. Oil and Gas Properties

The following table sets forth information concerning the Company’s oil and gas properties: (in thousands):

	December 31,
	2017			2016
Oil and gas properties	$	5,704		$	5,315
Unevaluated properties		—			106
Accumulated depreciation, depletion and amortization		(984	)		(196	)
Oil and gas properties, net	$	4,720		$	5,225

During the years ended December 31, 2017, 2016, and 2015, the Company recorded depletion expense of $796,000, $1.0 million, and $2.5 million, respectively. In addition, as a result of the ceiling test impairments during 2015 and the first three quarters of 2016, the accumulated depreciation, depletion, and amortization was been netted against the cost to reflect the post impairment value of the oil and gas properties. As no ceiling test impairment was recorded during the quarter ended December 31, 2016, nor during any of the quarters ended in 2017, these amounts were not netted against cost, but remained in accumulated depreciation, depletion, and amortization at December 31, 2017 and December 31, 2016.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Manufactured Methane Facilities

The following table sets forth information concerning the Manufactured Methane facilities: (in thousands):

	December 31,
	2017				2016
Manufactured Methane facilities, net of impairment		$	1,681			$	1,681
Accumulated depreciation			(184	)			(122	)
Manufactured Methane facilities, net		$	1,497			$	1,559

During each of the years ended December 31, 2017, 2016, and 2015, the Company recorded depreciation expense of $62,000, $62,000, and $60,000, respectively.

6. Other Property and Equipment

Other property and equipment consisted of the following as of December 31, 2017: (in thousands)

Type	Depreciable Life	Gross Cost		Accumulated Depreciation		Net Book Value
Machinery and equipment	5-7 yrs	$	20	$	20	$	—
Vehicles	2-5 yrs		318		183		135
Other	5 yrs		63		63		—
Total		$	401	$	266	$	135

Other property and equipment consisted of the following as of December 31, 2016: (in thousands)

Type	Depreciable Life	Gross Cost		Accumulated Depreciation		Net Book Value
Machinery and equipment	5-7 yrs	$	20	$	20	$	—
Vehicles	2-5 yrs		339		199		140
Other	5 yrs		63		63		—
Total		$	422	$	282	$	140

The Company uses the straight-line method of depreciation for other property and equipment. During each of the years ended December 31, 2017, 2016, and 2015, the Company recorded depreciation expense of $66,000, $69,000, and $77,000, respectively.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

7. Long-Term Debt

Long-term debt consisted of the following: (in thousands)

	December 31,
	2017			2016
Note payable to a bank, with interest only payment until maturity.		$	—		$	2,400

Installment notes bearing interest at the rate of 4.16% to 4.6% per annum collateralized by vehicles with monthly payments including interest, insurance and maintenance of approximately $10			90			102

Future debt payments to unrelated entities as of December 31, 2017 consisted of the following: (in thousands)

	2018		2019		Total
Bank Credit Facility	$	—	$	—	$	—
Company Vehicles	$	41	$	49	$	90
Total	$	41	$	49	$	90

At December 31, 2017, the Company had a revolving credit facility with Prosperity Bank. This is the Company’s primary source to fund working capital and future capital spending. Under the credit facility, loans and letters of credit are available to the Company on a revolving basis in an amount outstanding not to exceed the lesser of $50 million or the Company’s borrowing base in effect from time to time. As of December 31, 2017, the Company’s borrowing base was $1.25 million . The borrowing base was increased to approximately $2.0 million with the March 21, 2018 amendment to the credit agreement. This increase was primarily related to increase in oil prices. The credit facility is secured by substantially all of the Company’s producing and non-producing oil and gas properties. The credit facility includes certain covenants with which the Company is required to comply. At December 31, 2017, t hese covenants include the following: (a) Current Ratio > 1:1; (b) Funded Debt to EBITDA < 3.5x; and (c) Interest Coverage > 3.0x. The Company was incompliance with all covenants each quarter end during 2017.

On March 21, 2018, the Company’s senior credit facility with Prosperity Bank after Prosperity Bank’s most recent review of the Company’s currently owned producing properties was amended to increase the borrowing base to $2.0 million and the maturity date was extended to July 31, 2020. The borrowing base remains subject to the existing periodic redetermination provisions in the credit facility. The interest rate remained prime plus 0.50% per annum. This rate was 5.00% at the date of the amendment. The maximum line of credit of the Company under the Prosperity Bank credit facility remained $50 million and the Company had no outstanding borrowing under the facility as of March 28, 2018.

The total borrowing by the Company under the facility at December 31, 2017 and December 31, 2016 was $0 and $2.4 million, respectively. As disclosed in previous Company filings, on February 13, 2017, 4,498,698 common shares were issued to participants of the Company’s rights offering which closed on February 2, 2017. Of the 4,498,698 common shares issued, 3,293,407 were issued to the Company’s directors, management, and affiliates. The Company received approximately $2.7 million in proceed from this offering. The proceeds were used primarily to pay off the Company’s credit facility. The next borrowing base review will take place in July 2018.

8. Liquidity

The Company incurred a net loss of approximately $574,000 in 2017 and $4.2 million in 2016. In January 2018, the Company sold its methane facility for $2.65 million. During 2018, the Company believes its revenues as well as the proceeds received from the sale of the methane facility will be sufficient to fund operating and general and administrative expenses and to remain in compliance with its bank covenants. If revenues and the proceeds from the sale of the methane facility are not sufficient to fund these expenses or if the Company needs additional funds for capital spending, the Company could borrow funds against the credit facility as this facility currently has a $2.0 million borrowing base with no funds currently drawn. In addition, if required, the Company could also issue additional shares of stock and/or sell assets as needed to further fund operations.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

9. Commitments and Contingencies

The Company as designated operator of the Hoactzin properties was administratively issued an “Incident of Non-Compliance” by BSEE during the quarter ended September 30, 2012 concerning one of Hoactzin’s operated properties. This action called for payment of a civil penalty of $386,000 for failure to provide, upon request, documentation to the BSEE evidencing that certain safety inspections and tests had been conducted in 2011. On July 14, 2015, the federal district court in the Eastern District of Louisiana affirmed the civil penalty without reduction. The Company did not further appeal. In the third quarter of 2015, the Company paid the civil penalty and statutory interest thereon from funds borrowed under its credit facility. In the fourth quarter of 2015, the Company received a return of the cash collateral previously provided to RLI Insurance Company. The Company has not advanced any funds to pay any obligations of Hoactzin and no borrowing capability of the Company has been used in connection with its obligations under the Management Agreement, except for those funds used to pay the civil penalty and interest thereon.

During the second quarter of 2015, the Company received from Hoactzin a copy of an internal analysis prepared by Hoactzin setting out certain issues that Hoactzin may consider to form the basis of operational and other claims against the Company primarily under the Management Agreement. This analysis raised issues other than the “Incident of Non-Compliance” discussed above. The Company is discussing this analysis, as well as the civil penalty discussed above, with Hoactzin in an effort to determine whether there is possibility of a reasonable resolution of some or all of these matters on a negotiated basis.

Cost Reduction Measures

Commencing in the quarter ended March 31, 2015 and continuing through the quarter ended December 31, 2017, the Company implemented cost reduction measures including compensation reductions for each employee as well as members of the Board of Directors. These compensation reductions will remain in place until such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $70 per barrel when compensation shall revert to the levels in place before the reductions became effective. At such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $85 per barrel, all previous reductions made will be reimbursed, a portion which may be paid in stock, to each employee and members of the Board of Directors if is still employed by the Company or still a member of the Board of Directors. For the period January 1, 2015 through December 31, 2017, the reductions were approximately $395,000. The Company has not accrued any liabilities associated with these compensation reductions.

Legal Proceedings

The Company was named as a defendant in a breach of contract lawsuit titled Offshore Oilfield Services, Inc. v. Prime 8 Offshore, LLC and Tengasco, Inc. , No 201657156 in the 270 ^th District Court of Harris County, Texas (the “Litigation”) filed in October 2016. The Litigation was dismissed with prejudice to refiling by court order dated October 20, 2017.

The Litigation sought recovery of approximately $188,000 in unpaid material and labor costs (plus plaintiff’s attorney’s fees and interest) for offshore operations contracted by Prime8 to be performed by the plaintiff Offshore Oilfield Services, Inc. (“Offshore Oilfield”) upon several properties owned by Hoactzin Partners, LP (“Hoactzin”) in the Gulf of Mexico under a master services agreement signed between Prime8 and Offshore Oilfield in May 2014 (“MSA”). Offshore Oilfield alleged breach of the MSA by Prime8 and Tengasco for failure to pay for materials provided or services performed in 2014 and 2015. Tengasco did not sign the MSA and had no knowledge of it or any other agreement utilized in operation by Hoactzin, Prime8, or any subcontractor on Hoactzin’s Gulf properties. No allegation was made in the Litigation that Tengasco directed or was involved in the performance of the services rendered or materials provided or failure to pay for same. Hoactzin, as opposed to Tengasco, directed Prime8 in the conduct of all matters described in the Litigation and either paid or failed to pay any and all charges for services and materials provided at all of Hoactzin’s properties in the Gulf owned and physically operated exclusively by Hoactzin.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Hoactzin has also specifically agreed in writing to protect, defend, indemnify, and hold harmless Tengasco from and against any and all claims, demands, and causes of action made or awarded against Tengasco in the Litigation and to pay in the first instance all related losses, damages, costs and expenses relating to the Litigation including damages and plaintiff’s attorney’s fees awarded, and all litigation expenses incurred, the Company’s currently billed attorneys’ fees and court costs, relating to or arising out of Tengasco’s status as a defendant in the Litigation. Hoactzin has borne all the Company’s attorneys’ fees and all costs or obligations upon which the Litigation was settled by agreement. Accordingly, there is no further exposure to the Company as a result of the dismissal of the Litigation with prejudice to refiling.

10. Fair Value Measurements

FASB ASC 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets, for substantially identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management. The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Upon completion of wells, the Company records an asset retirement obligation at fair value using Level 3 assumptions.

Nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis upon impairment. The carrying amounts of other financial instruments including cash and cash equivalents, accounts receivable, account payables, accrued liabilities and long term debt in our balance sheet approximates fair value as of December 31, 2017 and December 31, 2016.

11. Asset Retirement Obligation

Our asset retirement obligations represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the end of their productive lives in accordance with applicable laws. The following table summarizes the Company’s Asset Retirement Obligation transactions for the years ended December 31, 2016 and 2017 (in thousands):

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Balance December 31, 2015	$	2,222

Accretion expense		143
Liabilities incurred		2
Liabilities settled		(86	)
Liabilities sold properties		(25	)
Revisions in estimated liabilities		(210	)
Balance December 31, 2016	$	2,046

Accretion expense		141
Liabilities incurred		1
Liabilities settled		(45	)
Liabilities sold properties		(11	)
Revisions in estimated liabilities		138
Balance December 31, 2017	$	2,270

The revisions in estimated liabilities resulted from change in timing of wells to be plugged, change in inflation factor, and change in current plugging costs.

12. Stock and Stock Options

In October 2000, the Company approved a Stock Incentive Plan which was effective for a ten-year period commencing on October 25, 2000 and ending on October 24, 2010. The aggregate number of shares of Common Stock as to which options and Stock Appreciation Rights may be granted to participants under the original Plan was not to exceed 7,000,000. An amendment to the Plan increasing the number of shares that may be issued under the Plan by 3,500,000 shares and extending the Plan for another ten years was approved by the Company’s Board of Directors on February 1, 2008 and approved by the Company’s shareholders at the Annual Meeting of Stockholders held on June 2, 2008. On March 21, 2016 at a special meeting of the shareholders, the Plan was amended to permit grant of common stock. Options are not transferable, are exercisable for 3 months after voluntary resignation from the Company, and terminate immediately upon involuntary termination from the Company. The purchase price of shares subject to this Plan shall be determined at the time the options are granted, but are not permitted to be less than 85% of the fair market value of such shares on the date of grant.

On March 21, 2016, the Company’s shareholders approved a 1 for 10 reverse stock split, effective with trading on March 24, 2016. All share and per share information in the following tables has been adjusted to reflect the impact of this reverse stock split.

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The following table summarizes stock option activity in 2017, 2016, and 2015:

	2017					2016					2015
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of year		37,500		$	4.70		45,625		$	6.10		90,025		$	5.70
Granted		—		$	—		2,500		$	1.20		10,000		$	2.40
Exercised		—		$	—		—		$	—		—		$	—
Expired/cancelled		(7,500	)	$	8.40		(10,625	)	$	9.88		(54,400	)	$	4.80
Outstanding, end of year		30,000		$	3.73		37,500		$	4.70		45,625		$	6.10
Exercisable, end of year		30,000		$	3.73		37,500		$	4.70		45,625		$	6.10

The following table summarizes information about stock options outstanding and exercisable at December 31, 2017:

Weighted Average Exercise Price		Options Outstanding (shares)		Weighted Average Remaining Contractual Life (years)		Options Exercisable (shares)
$	6.40		1,875		—		1,875
$	6.20		1,875		0.3		1,875
$	4.80		1,875		0.5		1,875
$	4.10		1,875		0.8		1,875
$	4.10		2,500		1.0		2,500
$	4.80		2,500		1.2		2,500
$	4.40		2,500		1.5		2,500
$	4.40		2,500		1.8		2,500
$	2.50		2,500		2.0		2,500
$	2.30		2,500		2.2		2,500
$	2.70		2,500		2.5		2,500
$	2.20		2,500		2.8		2,500
$	1.20		2,500		3.0		2,500
			30,000				30,000

During 2017, the Company issued no additional options to each of the four non-executive directors.

Compensation expense related to stock options was $3,000 in 2016, and $12,000 in 2015. This expense is recorded in “General and administrative” in the Consolidated Statements of Operations . The fair value of stock options used to compute share based compensation is the estimated present value at grant date using the Black Scholes option pricing model with weighted average assumptions for 2016 were an expected volatility of 122.7%; a risk free interest rate of 2.67%; and an expected option life remaining from 0.3 to 4.8 years. The weighted average assumptions for 2015 were an expected volatility of 61.7%; a risk free interest rate of 2.53%; and an expected option life remaining from 0.3 to 4.8 years.

In addition, during 2017, the Company issued 23,503 shares of common stock to the Directors and to the CEO. The shares issued to Directors was in lieu of stock options and vested immediately. The shares issued to the CEO was in lieu of a portion of the quarterly cash payment paid for service as the Company’s CEO and vested immediately. The company recorded compensation expense of approximately $14,000 as a result of the stock issuances. During 2016, the Company issued 12,641 shares of common stock to the Directors and to the CEO. The shares issued to Directors was in lieu of stock options. The shares issued to the CEO was in lieu of a portion of the quarterly cash payment paid for service as the Company’s CEO. The company recorded compensation expense of approximately $14,000 as a result of the stock issuances

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

13. Income Taxes

The Company did not have taxable income for the years ended December 31, 2017, 2016, and 2015.

A reconciliation of the statutory U.S. Federal income tax and the income tax provision included in the accompanying consolidated statements of operations is as follows (in thousands):

Year Ended December 31, 2017	Total
Statutory rate		34	%
Tax (benefit) expense at statutory rate	$	(278	)
State income tax (benefit) expense		(42	)
Permanent difference		1
Impact of 2017 Tax Act		5,319
Other		14
Net change in deferred tax asset valuation allowance		(5,256	)
Total income tax provision (benefit)	$	(242	)

Year Ended December 31, 2016	Total
Statutory rate		34	%
Tax (benefit) expense at statutory rate	$	(1,428	)
State income tax (benefit) expense		(216	)
Permanent difference		1
Other		—
Net change in deferred tax asset valuation allowance		1,643
Total income tax provision (benefit)	$	—

Year Ended December 31, 2015	Total
Statutory rate		34	%
Tax (benefit) expense at statutory rate	$	(5,906	)
State income tax (benefit) expense		(893	)
Permanent difference		3
Other		—
Net change in deferred tax asset valuation allowance		14,147
Total income tax provision (benefit)	$	7,351

Management has evaluated the positions taken in connection with the tax provisions and tax compliance for the years included in these financial statements. The Company believes that all of the positions it has taken will prevail on a more likely than not basis. As such no disclosure of such positions was deemed necessary. Management continuously estimates its ability to recognize a deferred tax asset related to prior period net operating loss carry forwards based on its anticipation of the likely timing and adequacy of future net income.

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Notes to Consolidated Financial Statements

At December 31, 2017, federal net operating loss carryforwards amounted to approximately $30.2 million which expire between 2019 and 2036. The total net deferred tax asset was $242,000 at December 31, 2017 and $0 at 2016. In 2017, the Company released a portion of the allowance related to its MTC as a result of the 2017 Tax Act. The Company recorded an allowance on the remaining deferred tax asset at December 31, 2017 primarily due to cumulative losses incurred during the 3 years ended December 31, 2017. The Company recorded a full allowance against the deferred tax asset at December 31, 2016 primarily due to cumulative losses incurred during the 3 years ended December 31, 2016. The total valuation allowance at December 31, 2017 was $12.1 million, $16.6 million at December 31, 2016, and $15.0 million at December 31, 2015. As the Company adopted ASU 2016-09 during the first quarter of 2017, the excess tax benefits associated with certain stock compensation deductions that have not been previously recognized are recorded to retained earnings net of valuation allowance. The effect on the valuation allowance on this adoption is an increase of $687,000 recorded to retained earnings.

As of December 31, 2017, the Company had net operating loss carry forwards of approximately $30.2 million which will expire between 2019 and 2036 if not utilized. Our open tax years include all returns filed for 2014 and later. In addition, any of the Company’s NOLs for tax reporting purposes are still subject to review and adjustment by both the Company and the IRS to the extent such NOLs should be carried forward into an open tax year.

Comprehensive tax reform legislation enacted in December 2017, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”), makes significant changes to U.S. federal income tax laws. The 2017 Tax Act, among other things, reduces the corporate income tax rate to 21%, repeal of the corporate Alternative Minimum tax, partially limits the deductibility of business interest expense and net operating losses, and allows the immediate deduction of certain new investments instead of deductions for depreciation expense over time. The Company has not completed its determination of the accounting implications of the 2017 Tax Act on its tax accruals. However the Company has reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in its financial statements as of December 31, 2017. The Company has recorded the following provisional amounts for the effects of the 2017 Tax Act.

Beginning January 1, 2018, the U.S. corporate income tax rate will be 21%. The Company is required to recognize the impacts of this rate change on its deferred tax assets and liabilities in the period enacted. The provisional tax effect of the change in tax rate is a decrease to the deferred tax asset of $5.3 million. However, as the Company has a full valuation allowance on its net deferred tax asset, the deferred tax recognized due to the change in rate will be offset with a change in the valuation allowance. Therefore, there was no overall impact to the Financial Statements in 2017 due to this change in rate.

The 2017 Tax Act also repealed the corporate AMT for tax years beginning on or after January 1, 2018 and provides for existing alternative minimum tax credit carryovers to be refunded beginning in 2018. The Company has approximately $0.3 million in refundable credits, and it expects that a substantial portion will be refunded between 2018 and 2021. As such, most of the valuation allowance in place at the end of 2017 related to these credits has been released and a deferred tax asset of $0.2 million is reflected related to the expected benefit in future years.

The Company will continue to evaluate the 2017 Tax Act and adjust the provisional amounts as additional information is obtained. The ultimate impact of the 2017 Tax Act may differ from the provisional amounts recorded due to additional information becoming available, changes in interpretation of the 2017 Tax Act as well as additional regulatory guidance that may be issued.

F-22

Table of Contents

Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company’s deferred tax assets and liabilities are as follows: (in thousands)

	Year Ended December 31,
	2017			2016
Net deferred tax assets – current :
Bad debt	$	—		$	68
Valuation allowance		—			(68	)
Total deferred tax assets – current	$	—		$	—

Net deferred tax assets (liabilities) – noncurrent:
Net operating loss carryforwards	$	8,187		$	10,339
Oil and gas properties		2,735			4,445
Property, Plant and Equipment		419			646
Asset retirement obligation		616			801
Tax credits		260			260
Miscellaneous		92			78
Valuation allowance		(12,067	)		(16,569	)
Total deferred tax assets – noncurrent	$	242		$	—

Net deferred tax asset	$	242		$	—

14. Quarterly Data and Share Information (unaudited)

The following tables sets forth for the fiscal periods indicated, selected consolidated financial data (In thousands, except per share data)

Fiscal Year Ended 2017	1st Qtr			2nd Qtr			3rd Qtr			4th Qtr
Revenues	$	1,344		$	1,318		$	1,179		$	1,422
Net income (loss) from continuing operations		(213	)		(178	)		(315	)		132
Loss per common share from continuing operations	$	(0.03	)	$	(0.02	)	$	(0.03	)	$	0.02

Fiscal Year Ended 2016	1st Qtr			2nd Qtr			3rd Qtr			4th Qtr
Revenues	$	932		$	1,282		$	1,242		$	1,216
Net loss from continuing operations		(1,404	)		(1,627	)		(908	)		(260	)
Loss per common share from continuing operations	$	(0.23	)	$	(0.27	)	$	(0.15	)	$	(0.04	)

15. Supplemental Oil and Gas Information (unaudited)

Information with respect to the Company’s oil and gas producing activities is presented in the following tables. Estimates of reserves quantities, as well as future production and discounted cash flows before income taxes, were determined by LaRoche Petroleum Consultants Ltd. All of the Company’s reserves were located in the United States.

F-23

Table of Contents

Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Capitalized Costs Related to Oil and Gas Producing Activities

The table below reflects our capitalized costs related to our oil and gas producing activities at December 31, 2017 and 2016 (in thousands):

	Years Ended December 31,
	2017			2016
Proved oil and gas properties	$	5,704		$	5,315
Unproved properties		—			106
Total proved and unproved oil and gas properties	$	5,704		$	5,421
Less accumulated depreciation, depletion and amortization		(984	)		(196	)
Net oil and gas properties	$	4,720		$	5,225

As a result of the ceiling test impairments during 2015 and the first three quarters of 2016, the accumulated depreciation, depletion, and amortization was been netted against the cost to reflect the post impairment value of the oil and gas properties. As no ceiling test impairment was recorded during the quarter ended December 31, 2016, nor during any of the quarters ended in 2017, these amounts were not netted against cost, but remained in accumulated depreciation, depletion, and amortization at December 31, 2017 and December 31, 2016.

Oil and Gas Related Costs

The following table sets forth information concerning costs incurred, including accruals, related to the Company’s oil and gas property acquisition, exploration and development activities (in thousands):

	Years Ended December 31,
	2017		2016		2015
Property acquisitions proved	$	—	$	—	$	—
Property acquisitions unproved		93		8		90
Exploration cost		69		396		22
Development cost		—		—		252
Total	$	162	$	404	$	364

Results of Operations from Oil and Gas Producing Activities

The following table sets forth the Company’s results of operations from oil and gas producing activities (in thousands):

	Years Ended December 31,
	2017			2016			2015
Revenues	$	4,683		$	4,113		$	5,631
Production costs and taxes		(3,444	)		(3,064	)		(3,731	)
Depreciation, depletion and amortization		(796	)		(1,009	)		(2,538	)
Impairment		—			(2,805	)		(14,526	)
Income (loss) from oil and gas producing activities	$	443		$	(2,765	)	$	(15,164	)

In the presentation above, no deduction has been made for indirect costs such as general corporate overhead or interest expense. No income taxes are reflected above due to the Company’s operating tax loss carry-forward position.

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Table of Contents

Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Estimated Quantities of Oil and Gas Reserves

The following table sets forth the Company’s net proved oil and gas reserves and the changes in net proved oil and gas reserves for the years ended December 31, 2015, 2016 and 2017. All of the Company’s proved reserves are located in the United States of America.

	Oil (MBbl)			Gas (MMcf)		MBOE
Proved reserves at December 31, 2014		1,797			—		1,797
Revisions of previous estimates		(790	)		—		(790	)
Improved recovery		—			—		—
Purchase of reserves in place		—			—		—
Extensions and discoveries		1			—		1
Production		(131	)		—		(131	)
Sales of reserves in place		—			—		—
Proved reserves at December 31, 2015		877			—		877
Revisions of previous estimates		(36	)		—		(36	)
Improved recovery		—			—		—
Purchase of reserves in place		—			—		—
Extensions and discoveries		3			—		3
Production		(108	)		—		(108	)
Sales of reserves in place		(6	)		—		(6	)
Proved reserves at December 31, 2016		730			—		730
Revisions of previous estimates		195			—		195
Improved recovery		—			—		—
Purchase of reserves in place		—			—		—
Extensions and discoveries		47			—		47
Production		(102	)		—		(102	)
Sales of reserves in place		—			—		—
Proved reserves at December 31, 2017		870			—		870

Proved developed reserves at:
December 31, 2014		1,438			—		1,438
December 31, 2015		877			—		877
December 31, 2016		730			—		730
December 31, 2017		832			—		832

Proved undeveloped reserves at:
December 31, 2014		359			—		359
December 31, 2015		—			—		—
December 31, 2016		—			—		—
December 31, 2017		38			—		38

F-25

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company’s Proved Undeveloped Reserves at December 31, 2017 included 3 locations, and December 31, 2016 and 2015 included no locations as compared to 27 locations at December 31, 2014. During 2016 and 2015, all Proved Undeveloped locations were removed from the Company’s Proved Reserves primarily due to the low oil prices experienced during these years. During 2017, increases in prices allowed the company to include 3 Proved Undeveloped locations in its December 31, 2017 reserves.

The following table identifies the reserve value by category and the respective present values, before income taxes, discounted at 10% as a percentage of total proved reserves (in thousands):

	Year Ended 12/31/2017								Year Ended 12/31/2016								Year Ended 12/31/2015
	Oil			Gas		Total			Oil			Gas		Total			Oil			Gas		Total
Total proved reserves year-end reserve report	$	8,170			—	$	8,170		$	5,815			—	$	5,815		$	8,287			—	$	8,287
Proved developed producing reserves (PDP)	$	7,065			—	$	7,065		$	5,397			—	$	5,397		$	7,686			—	$	7,686
% of PDP reserves to total proved reserves		87	%		—		87	%		93	%		—		93	%		93	%		—		93	%
Proved developed non- producing reserves	$	1,082			—	$	1,082		$	418			—	$	418		$	601			—	$	601
% of PDNP reserves to total proved reserves		13	%		—		13	%		7	%		—		7	%		7	%		—		7	%
Proved undeveloped reserves (PUD)	$	23			—	$	23		$	—			—	$	—		$	—			—	$	—
% of PUD reserves to total proved reserves		—			—		—			—			—		—			—			—		—

S tandardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows from the Company’s proved oil and gas reserves is presented in the following table (in thousands):

	Years Ended December 31,
	2017			2016			2015
Future cash inflows	$	39,889		$	27,253		$	38,566
Future production costs and taxes		(23,343	)		(16,270	)		(23,500	)
Future development costs		(1,586	)		(553	)		(951	)
Future income tax expenses		—			—			—
Future net cash flows		14,960			10,430			14,115

Discount at 10% for timing of cash flows		(6,790	)		(4,615	)		(5,828	)
Standardized measure of discounted future net cash flows	$	8,170		$	5,815		$	8,287

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Tengasco, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The following are the principal sources of change in the standardized measure of discounted future net cash flows from the Company’s proved oil and gas reserves (in thousands):

	Years Ended December 31,
	2017			2016			2015
Balance, beginning of year	$	5,815		$	8,287		$	34,531
Sales, net of production costs and taxes		(1,239	)		(2,037	)		(1,901	)
Discoveries and extensions, net of costs		123			35			5
Purchase of reserves in place		—			—			—
Sale of reserves in place		—			(10	)		—
Net changes in prices and production costs		1,780			(863	)		(16,009	)
Revisions of quantity estimates		1,611			(412	)		(22,431	)
Previously estimated development cost incurred during the year		—			—			—
Changes in future development costs		(228	)		196			4,890
Changes in timing and other		(164	)		(20	)		(56	)
Accretion of discount		472			639			3,373
Net change in income taxes		—			—			5,885
Balance, end of year	$	8,170		$	5,815		$	8,287

Estimated future net cash flows represent an estimate of future net revenues from the production of proved reserves using average sales prices, along with estimates of the operating costs, production taxes and future development and abandonment cost (less salvage value) necessary to produce such reserves. Future income taxes were calculated by applying the statutory federal and state income tax rates to pre-tax future net cash flows, net of the tax basis of the properties and utilizing available tax loss carryforwards related to oil and gas operations. The oil prices used for December 31, 2017, 2016, and 2015 were $45.83, and $37.35, and $43.98 per barrel of oil, respectively. The Company’s proved reserves as of December 31, 2017, 2016 and 2015 were measured by using commodity prices based on the twelve month unweighted arithmetic average of the first day of the month price for the period January through December. No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest expense.

16. Subsequent Events

On January 2, 2018, 4,569 common shares were issued in the aggregate to the Company’s four directors and CFO and interim CEO. This issuance will result in compensation expense of approximately $4,000 to be recorded during the quarter ended March 31, 2018.

On January 26, 2018, the Company closed a sale to Tennessee Renewable Group LLC for all of the Company’s Manufactured Methane physical facilities for $2.65 million. In the quarter ended March 31, 2018, the Company expects to record a gain on the sale of these assets of approximately $1.1 million.

F-27

P ROSPERITY B ANK

1330 S. Harvard

Tulsa, Oklahoma 74112

March 16, 2017

T ENGASCO , I NC .

Attention: Michael J. Rugen

8000 E. Maplewood Ave, Suite 130

Greenwood Village, Colorado 80111

Re: Amended and Restated Loan Agreement

Ladies and Gentlemen:

This letter sets forth the Loan Agreement (this “ Loan Agreement ”) among T ENGASCO , I NC . (“ Borrower ”), a Delaware corporation; T ENNESSEE L AND & M INERAL C ORPORATION (“ TLMC ”), T ENGASCO P IPELINE C ORPORATION (“ TPC ”) and M ANUFACTURED M ETHANE C ORPORATION (“ MMC” ) (each of TLMC, TPC, and MMC are a “ Guarantor ” and collectively “ Guarantors ”); and P ROSPERITY B ANK , successor by merger to The F&M Bank & Trust Company (“ Lender ”), a Texas state banking association, with respect to loans from Lender to Borrower and obligations of Borrower and Guarantors to Lender. This Loan Agreement amends and restates the Loan and Security Agreement dated June 29, 2006, between Borrower and Lender’s predecessor-in-interest, Citibank, N.A., a national banking association formerly known as Citibank Texas, N.A., as Agent and as a Bank, which was succeeded first by Sovereign Bank and then by Lender.

1. Loans . (a) Subject to the terms and conditions set forth in this Loan Agreement and the other agreements, instruments, and documents executed and delivered in connection herewith (collectively the “ Loan Documents ”), Lender agrees to make a revolving loan in the maximum amount of $50,000,000.00 to Borrower (the “ Revolving Loan ”) on the terms set forth in the Revolving Promissory Note attached as Exhibit A to this Loan Agreement (the “ Revolving Note ”). Subject to the terms and conditions hereof, Borrower may borrow, repay, and reborrow on a revolving basis from time to time during the period commencing on the date hereof and continuing through 11:00 a.m. (Dallas, Texas time) on July 31, 2018 (the “ Maturity Date ”) such amounts as Borrower may request under the Revolving Loan; provided, however, the total principal amount outstanding at any time shall not exceed the lesser of (i) the aggregate sums permitted under the Borrowing Base (as defined below), which is initially set at $1,250,000.00 or (ii) $50,000,000.00. All sums advanced under the Revolving Loan, together with all accrued but unpaid interest thereon, shall be due and payable in full on the Maturity Date. Notwithstanding the foregoing or any other term hereof, Borrower shall reduce the principal balance to $0 for at least one period of thirty (30) consecutive days during the period between March 16, 2017 and the Maturity Date.

T ENGASCO , I NC .

March 16, 2017

Page 2 of 34

(b) The unpaid principal balance of the Revolving Note shall bear interest from the date advanced until paid or until Event of Default (as defined below) or the Maturity Date at the floating rate per annum set forth in the Revolving Note.

(c) Advances on the Revolving Loan may be used only for the following purposes: (i) the acquisition and development of oil and natural gas reserves, (ii) the issuance of Letters of Credit (as defined below), (iii) capital expenditures, and (iv) working capital purposes.

Lender may require Borrower to give notice to Lender of any requested advance on the Revolving Loan, in the form of the Request for Borrowing attached as Exhibit B , not later than 10:00 a.m. (Tulsa, Oklahoma time) on the date of the requested advance. Lender may also allow Borrower to provide the notice of advance telephonically if promptly confirmed in writing by delivery of Request for Borrowing. Lender may also allow Borrower to transfer funds from Borrower’s operating account to the Revolving Loan via Lender’s online banking system in lieu of the Request for Borrowing.

(d) At the request of Borrower, Lender may from time to time issue one or more letters of credit for the account of Borrower or any affiliates (the “ Letters of Credit ”); provided, however, that Lender shall not be obligated to issue a Letter of Credit if: (i) the conditions set forth in Subsection (b) of Section 5 are not met, (ii) the form of the Letter of Credit is not acceptable to Lender, (iii) issuance of the Letter of Credit will not comply with the purposes and provisions of Subsection (c) of Section 1 of the Loan Agreement, or (iv) the aggregate undrawn amount of all outstanding Letters of Credit (the “ LC Exposure ”) will exceed ten percent (10%) of the Borrowing Base. Borrower’s availability on the Revolving Loan will be reduced by the LC Exposure. Any fundings under any Letters of Credit will be treated as an advance on the Revolving Loan and will be secured by the Security Documents (as defined below). All Letters of Credit shall be for a term of up to one year (or longer if necessary for regulatory requirements) but shall expire not later than five days prior to the Maturity Date unless adequately secured by cash collateral held by Lender. Unless Lender expressly agrees otherwise, no Letter of Credit will be issued for the benefit of a third-party counterparty as security for any Hedge Transactions (as defined below). Borrower will sign and deliver Lender’s customary forms for the issuance of Letters of Credit and pay the Letter of Credit Fee set forth below.

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March 16, 2017

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(e) At the request of Borrower and in the sole discretion of Lender, Lender may from time to time issue one or more auction letters or letters of guarantee in connection with auctions or other purchases of oil and gas properties by Borrower. Each auction letter and letter of guarantee will have an expiration date not longer than ten (10) days from the date of the letter. Notwithstanding any provision to the contrary, Borrower’s availability on the Revolving Loan will be reduced by the aggregate maximum amount stated in all unexpired auction letters and letters of guarantee until Lender is satisfied that (i) Borrower was unsuccessful in the auction or purchase, or (ii) Borrower consummates the purchase of the oil and gas properties. Any

fundings pursuant to an auction letter or letter of guarantee will be treated as an advance on the Revolving Loan and will be secured by the Security Documents. Borrower agrees to pay to Lender its customary fees for issuance of each auction letter and letter of guarantee.

(f) Borrower agrees to pay to Lender the following fees that are non- refundable and earned by Lender upon execution of this Loan Agreement unless otherwise stated:

(i) Upon execution of this Loan Agreement, Borrower agrees to pay

Lender an Origination Fee in the amount of $9,375.00.

(ii) Borrower agrees to pay to Lender an Unused Fee equal to three- eighths of one percent (0.375%) per annum (computed on the basis of actual days elapsed and as if each calendar year consisted of 360 days) of the average for the period of calculation of an amount determined daily equal to the difference between the Borrowing Base and the sum of the following (collectively the “ Aggregate Exposure ”): (i) the aggregate outstanding principal balance of the Revolving Loan at such time, plus (ii) the LC Exposure. This Unused Fee is payable quarterly within ten (10) days of Borrower’s receipt of an invoice from Lender, setting forth evidence of the calculation of the Unused Fee for the preceding calendar quarter.

(iii) Borrower agrees to pay to Lender a Letter of Credit Fee equal to the greater of (x) $500 or (y) two percent (2.0%) per annum, calculated on the aggregated stated amount of each Letter of Credit for the stated duration thereof (computed on the basis of actual days elapsed as if each year consisted of 360 days), due upon issuance. Any renewal or extension of a Letter of Credit will be treated as a new issuance for the purpose of the Letter of Credit fees.

(iv) Upon each subsequent unscheduled redetermination of the Borrowing Base requested by Borrower, Borrower will pay a Redetermination Fee in the amount of $5,000.00, in addition to applicable fees.

T ENGASCO , I NC .

March 16, 2017

Page 4 of 34

(g) The Revolving Loan, all other loans now or hereafter made by Lender to Borrower, and any renewals or extensions of or substitutions for those loans, will be referred to collectively as the “ Loans .” The Revolving Note, all other promissory notes now or hereafter payable by Borrower to Lender, and any renewals or extensions of or substitutions for those notes, will be referred to collectively as the “ Notes .”

(h) So long as there are no amounts outstanding on the Revolving Note, no outstanding Letters of Credit, and no outstanding Hedge Transactions with Lender or any Hedge Provider, Borrower may terminate the Revolving Loan by providing three (3) days written notice to Lender. After Borrower has provided such notice to Lender, Borrower may not make any additional advances on the Revolving Loan, request the issuance of any Letter of Credit, or enter into any Hedge Transaction with Lender or any Hedge Provider. Upon expiration of the three

day notice, this Loan Agreement shall terminate, except for any provisions that expressly survive the termination.

2. Collateral . (a) Payment of the Notes, the Hedge Liabilities (as defined below), all obligations with respect to Letters of Credit, all other obligations, fees, and expenses due pursuant to this Loan Agreement or the other Loan Documents, all obligations, fees, and expenses with respect to treasury and cash management services, and all other secured indebtedness under the Security Documents (collectively the “ Secured Obligations ”) will be secured by the first liens and first security interests created or described in the following (collectively the “ Security Documents ”): (i) a Kansas Mortgage, Assignment of Production, Security Agreement and Financing Statement dated as of June 29, 2006, executed by Tengasco, Inc. and Tennessee Land & Mineral Corporation originally in favor of Citibank Texas, N.A. (now known as Citibank, N.A.) and now in favor of Lender, as from time to time amended (the “ Mortgage ”); (ii) a Security Agreement (the “ Security Agreement ”) dated March 16, 2017, executed by Borrower in favor of Lender, and covering all personal property of Borrower; and (iii) any other security documents now or hereafter executed in connection with the Loans, the Hedge Liabilities, or any other Secured Obligations. All oil and gas properties now or hereafter mortgaged to Lender by Borrower, including the oil and gas properties covered by the Mortgage will be referred to as the “ Properties .” If requested by Lender, Borrower will execute in favor of Lender mortgages, deeds of trust, security agreements, or amendments, in Proper Form (as defined below), mortgaging any additional oil and gas properties and all additional interests in the Properties acquired by Borrower so that Lender will continuously maintain under mortgage not less than eighty percent (80%) of the aggregate present value (as calculated by Lender in its sole discretion in accordance with the methods set forth below for the Borrowing Base) assigned to Borrower’s oil and gas properties based upon Lender’s most-recent in-house evaluation. The term “ Proper Form ” means in form, substance, and detail satisfactory to Lender in its sole discretion.

T ENGASCO , I NC .

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(b) (i) Payment of the Secured Obligations are guaranteed by each Guarantor pursuant to a Restated Guaranty (collectively the “ Guaranties ” and each a “ Guaranty ”). The Secured Obligations shall also be guaranteed by all existing and hereafter acquired companies, subsidiaries, or partnerships of Borrower; and Borrower agrees to cause all such companies, subsidiaries, and partnerships to execute and deliver guaranties in Proper Form to Lender; provided, however, that notwithstanding the provisions of any Guaranties, to the extent that a Guarantor is not an “eligible contract participant” and is not deemed to be an “eligible contract participant” by virtue of the keepwell covenant set forth in Subparagraph (ii) of Subsection (b) of Section 2 below, in either case, when required under the Commodity Exchange Act, the Hedge Liabilities that are guaranteed under such Guarantor’s Guaranty shall exclude any Excluded

Swap Obligation. As used in this Loan Agreement, the following terms have the meanings assigned below:

(1) “ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, any successor statute, and all regulations promulgated thereunder.

(2) “ Excluded Swap Obligation ” means, with respect to any Guarantor, any Hedge Liability if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, as applicable, such Hedge Liability (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act, or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof), by virtue of such Guarantor’s failure to constitute an “eligible contract participant,” as defined in the Commodity Exchange Act, at the time the guarantee of such Guarantor or grant of security by such Guarantor becomes or would become effective with respect to such Hedge Liability. If a Hedge Liability arises under a master agreement governing more than one Hedge Liability, such exclusion shall apply only to the portion of such Hedge Liabilities that is attributable to the Hedge Liability for which such guarantee or security interest, as applicable, is or becomes illegal.

(3) “ Qualified ECP Guarantor ” means, in respect of any Hedge Liability, each Guarantor that is not an individual and that has total assets exceeding $10,000,000.00 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to such Hedge Liability, or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act, and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell covenant under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

T ENGASCO , I NC .

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(4) “ Subsidiaries ” shall mean entities for which Borrower owns, directly or indirectly, interests having more than fifty-one percent (51%) of the outstanding ownership or fifty-one percent (51%) of the ordinary voting power for the election of directors or managers of such entity.

(ii) Borrower and each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally, and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Guarantor to honor all of its obligations under its respective Guaranty in respect of Hedge Liabilities; provided, however, that each Qualified ECP Guarantor shall only be liable under this Subparagraph (ii) for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Subparagraph (ii), or otherwise under its own Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. The obligations of each Qualified ECP Guarantor under this Subparagraph (ii) shall remain in full force and effect until discharged. Each Qualified ECP Guarantor intends that this Subparagraph (ii) constitute, and this Subparagraph (ii) shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act. The terms and provisions of this Subparagraph (ii) of Subsection (b) of Section 2 are hereby incorporated by reference into each of the Guaranties.

(c) In connection with the Mortgage and at such time as Lender requires Borrower to mortgage additional oil and gas properties, Borrower shall, upon request of Lender, deliver to Lender title opinions and/or other title information acceptable to Lender covering at least eighty percent (80%) of the present value (as determined by Lender in the manner set forth for Borrowing Base determinations below) of the Properties and the oil and gas properties which are to become Properties, along with such other information regarding title as Lender shall reasonably request, all in Proper Form and from attorneys or landmen acceptable to Lender. Lender reserves the right to immediately exclude any oil and gas property from the Borrowing Base if Lender learns of any material title issue with respect to the oil and gas property or if Lender’s review of Borrower’s title to the oil and gas property indicates that Borrower’s title is unacceptable to Lender, in its sole discretion.

T ENGASCO , I NC .

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(d) After an Event of Default (as defined below) that remains uncured after the expiration of any notice and cure period required by this Loan Agreement, or if there is an existing Borrowing Base deficiency that is not addressed by Borrower in accordance with Subsection (b) of Section 3 below, Lender reserves the right to require Borrower to set up a lockbox account to be managed by Lender for the purpose of collection of production proceeds attributable to Borrower’s interest in the Properties. Borrower agrees that upon Lender’s election to require the lockbox after an Event of Default, Lender will receive the proceeds of oil and gas produced from or attributable to Borrower’s interest in the Properties for application to the Secured Obligations in such order as Lender shall determine in its discretion; and Borrower hereby directs all production purchasers or operators distributing proceeds to pay Borrower’s distributions attributable to Borrower’s interest in the Properties directly to Lender, if Lender so elects. All production proceeds attributable to the Properties received in the lockbox account by Lender that are attributable to another person’s or entities’ interest in the Properties shall be released immediately to Borrower upon Borrower’s request. All production proceeds attributable to Borrower’s interest in the Properties received in the lockbox account by Lender in excess of the current scheduled monthly payment and any other fees or expenses owed to Lender will be transferred to Borrower at the end of each month for its use consistent with the provisions of this Loan Agreement, so long as there is no existing Event of Default. If the production proceeds attributable to Borrower’s interest in the Properties received by Lender during any month are not sufficient to make the scheduled monthly payment, Borrower will pay Lender the deficiency within ten (10) days. Contemporaneously with the execution of this Loan Agreement, Borrower will sign and deliver to Lender letters in lieu of transfer orders to all purchasers of production directing those parties to pay all proceeds attributable to Borrower’s interest in the Properties to the lockbox account, and these letters, signed in blank, will be held by Lender until such time as Lender elects to require the lockbox after an Event of Default in accordance with this Subsection (d) of Section 2 .

(e) Unless a security interest would be prohibited by law or would render a nontaxable account taxable, Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, pledges, and transfers to Lender all Borrower’s rights in any deposits or accounts now or hereafter maintained with Lender (whether checking, savings, or any other account), excluding, however, accounts maintained by Borrower at Lender for the purpose of revenue distribution to third parties entitled to those revenues and any other accounts held by Borrower for the benefit of a third party. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff any sums owing on the Secured Obligations against any and all such deposits and accounts; and Lender shall be entitled to exercise the rights of offset and banker’s lien against all such accounts and other property or assets of Borrower with or in the possession of Lender to the extent of the full amount of the Secured Obligations.

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3. Borrowing Base . (a) On or about March 31 st and September 30 th of each year, and at any other time and from time to time while this Loan Agreement is in force, Lender may determine or redetermine, in its sole discretion, a Borrowing Base. In addition, Lender may require an unscheduled redetermination at any time and from time to time, and Borrower shall have the right to request an unscheduled redetermination of the Borrowing Base by Lender once per six-month period between scheduled redeterminations, and Lender shall conduct such redetermination using the methods described in this Section. The term “ Borrowing Base ” refers to the designated loan value (as calculated by Lender in its sole discretion) assigned to the discounted present value of future net income accruing to Borrower’s oil and gas properties (and related gathering systems and processing and plant operations) based upon Lender’s in-house evaluation. Lender’s determination of the Borrowing Base will use such methodology, assumptions, and discount rates customarily used by Lender with respect to credits of a similar size and nature in assigning collateral value to oil and gas properties and will be based upon such other credit factors or financial information available to Lender at the time of each determination, including, without limitation, current market conditions and Borrower’s assets, liabilities, cash flow, liquidity, business, properties, prospects, management, and ownership. Borrower acknowledges that increases in the Borrowing Base are subject to appropriate credit approval by Lender and may be subject to additional terms and conditions.

(b) The sum of the outstanding principal balance owing on the Revolving Notes, plus the LC Exposure (collectively the “ Aggregate Exposure ”), may not exceed the Borrowing Base at any time, subject to the payout provisions below in the event of a Borrowing Base decrease. A decrease in the Borrowing Base will result in an immediate decrease in Lender’s commitment under the Revolving Loan. If the redetermined Borrowing Base is less than the Aggregate Exposure, Lender will notify Borrower of the amount of the Borrowing Base and the amount of the deficiency. Within ten (10) days after notice is sent by Lender, Borrower shall provide written notice to Lender of its intention to remedy the deficiency by one or more of the following: (i) making a lump sum payment on the Revolving Note within thirty (30) days after the deficiency notice is sent by Lender to reduce the Aggregate Exposure to an amount equal to or less than the new Borrowing Base; or (ii) mortgaging additional collateral, which must be acceptable to Lender as to type, value, and title, within thirty (30) days after the deficiency notice is sent by Lender .

(c) At the time of any redetermination, Lender reserves the right to establish an equal Monthly Commitment Reduction (“ MCR ”) amount by which the Borrowing Base shall be automatically reduced effective as of each calendar month until the next Borrowing Base redetermination. Lender’s determination of the MCR will use such methodology, assumptions, and discount rates customarily used by Lender with respect to credits of a similar size and nature in determining commitment reductions and will be based upon such other credit factors or financial information available to Lender at the time of each determination, including, without limitation, the economic half-life of the Properties, and Borrower’s assets, liabilities, cash flow, liquidity, business, properties, prospects, management, and ownership. The MCR will initially be set at zero dollars ($0). If the Aggregate Exposure shall exceed the Borrowing Base solely because of an MCR reduction, Borrower shall promptly make a single lump sum payment in an amount not to exceed the MCR to reduce the Aggregate Exposure below the Borrowing Base. If the Aggregate Exposure shall exceed the Borrowing Base because of a Borrowing Base redetermination (or a Borrowing Base redetermination combined with a required MCR), Borrower shall have the right to cure set forth in Subsection (b) above; provided, however, that if the MCR was applicable before the Borrowing Base redetermination, then the MCR amount will be due in a lump sum and Lender may continue the MCR at the same amount or change the MCR effective on the redetermination date.

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(d) If Borrower sells, transfers, or otherwise disposes of any oil and gas properties included in the Borrowing Base that have a present value according to the reserve report meeting the requirements of Section 9(a)(4) below (the “ Reserve Report ”) used for the most-recent Borrowing Base redetermination in excess of five percent (5%) of the most-recent Borrowing Base, Lender reserves the right to redetermine the Borrowing Base in accordance with this Section 3 , which redetermination will be in addition to any special redeterminations

permitted to Lender under Subsection (a) above. Any Borrowing Base deficiency resulting from

the sale of any oil and gas properties shall be immediately reduced by a single lump sum payment in an amount not to exceed the net proceeds from the sale of the oil and gas properties, and any remaining deficiency after the Borrowing Base redetermination shall be cured by Borrower pursuant to Subsection (b) above.

4. Hedges and Swaps . (a) Definitions . As used in this Loan Agreement and the

Loan Documents, the following terms have the meanings assigned below:

(i) “ ISDA Agreement ” means any International Swaps and Derivatives Association, Inc. master agreement or any similar agreement (with all related schedules, annexes, exhibits, amendments, and confirmations), now existing or hereafter entered into by Borrower, as amended, modified, replaced, consolidated, extended, renewed, or supplemented from time to time.

(ii) “ Hedge Transaction ” means all Transactions (as defined in the ISDA Agreement) and any other commodity swap (including price protection for future production of oil, gas, or other hydrocarbons or mineral or mining interests and rights therein), commodity option, interest rate swap (including rate hedge products), basis or currency or cross- currency rate swap, forward rate, cap, call, floor, put, collar, future rate, forward agreement, spot contract, or other credit, price, foreign exchange, rate, equity, equity index option, bond option, interest rate option, rate protection agreement, currency option, or other option, or commodities derivative, exchange, risk management, or protection agreement, or commodity, securities, index, market, or price-linked transaction or agreement, or any option with respect to any such transaction or similar transaction or combination of any of the foregoing, now existing or hereafter entered into by Borrower, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices, indexes, or other financial measures and whether such transactions or combinations thereof are governed by or subject to any ISDA Agreement or other similar agreement or arrangement, including all obligations and liabilities thereunder, and including all renewals, extensions, amendments, and other modifications or substitutions.

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(iii) “ Hedge Liabilities ” means any and all liabilities and obligations of every nature and howsoever created, direct, indirect, absolute, contingent, or otherwise, whether now existing or hereafter arising, created, or accrued, of Borrower from time to time owed or owing to any Hedge Provider in connection with any ISDA Agreement [and each Transaction (as defined in the ISDA Agreement) and each Confirmation (as defined in the ISDA Agreement)] or any Hedge Transaction, including, but not limited to, obligations and liabilities arising in connection with or as a result of early or premature termination, cancellation, rescission, buy back, reversal, or assignment or other transfer of a Hedge Transaction , and including any obligations or liabilities under any Letters of Credit issued in connection with Hedge Transactions to which another entity is a counter-party , whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such obligor, would have accrued on such obligation, whether or not a claim is allowed for such interest in the related bankruptcy proceedings), reimbursement obligations, fees, expenses, indemnification, or otherwise.

(iv) “ Hedge Provider ” means Lender, any affiliate of Lender, or any other third party approved by Lender now or hereafter entering into an agreement with Borrower with respect to any Hedge Transactions; provided, however, it is agreed and understood that Borrower is not obligated to enter into any Hedge Transaction and Borrower may hedge at its sole option and election as long as the terms of such Hedge Transaction are in accordance with the hedging terms in this Loan Agreement.

(b) ISDA Agreement . At Borrower’s sole option and discretion, Borrower and Hedge Provider may enter into an ISDA Agreement, governing certain Hedge Transactions available to Borrower from Hedge Provider; provided, however, that any ISDA Agreement among Borrower and any Hedge Provider must not provide for any collateral or credit support other than as provided under the Security Documents. Borrower may enter into Transactions (as defined in the ISDA Agreement) subject to the provisions of Confirmations (as defined in the ISDA Agreement).

(c) Security. Upon the written agreement of Borrower and Lender, the Security Documents and the Guaranties shall secure payment of all Hedge Liabilities.

(d) Required Hedges and Termination. Borrower, at its sole option and discretion, may enter into Hedge Transactions at such volumes and prices as Lender may reasonably approve in writing in connection with the Properties included in the calculation of the Borrowing Base including, without limitation, those set forth herein. If Borrower elects to enter into a Hedge Transaction, to the extent any Hedge Transaction is used in calculation of the Borrowing Base even if not required, then such Hedge Transaction cannot be cancelled, liquidated, or “unwound” without the prior written consent of Lender.

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(e) Hedging Limitations . Borrower shall not enter into any Hedge Transaction related to crude oil, natural gas, or other commodities, except hedging approved in writing by Lender and except for Hedge Transactions which meet the following requirements:

(i) Hedge Transactions resulting in a cap or ceiling on the price to be received by Borrower, involving in the aggregate at any time not more than eighty percent (80%) of Borrower’s anticipated production from its proved developed producing oil and gas

properties (as forecast in Lender’s most recent engineering valuation of Borrower’s oil and gas properties) and calculated separately for oil and for natural gas; provided, however, that Borrower may enter into Hedge Transactions resulting only in a floor price per barrel or mcf that exceed these volume limitations to the extent that Borrower reasonably anticipates increased production from its oil and gas properties; and

(ii) Hedge Transactions that would not result in a cap or ceiling price per barrel or mcf lower than the base case price used by Lender in the most-recent engineering evaluation of Borrower’s oil and gas properties, adjusted for variances between the hedging price and Borrower’s actual product price as determined by Lender, or otherwise at hedging prices acceptable to Lender; and

(iii) Hedge Transactions that would result in a cap or ceiling price per barrel or mcf higher than or equal to the base case price used by Lender in the most-recent engineering evaluation of Borrower’s oil and gas properties, adjusted for variances between the hedging price and Borrower’s actual product price as determined by Lender, or otherwise at hedging prices acceptable to Lender; and

(iv) Hedge Transactions that would result in a fixed price per barrel or mcf higher than or equal to the base case price used by Lender in the most-recent engineering evaluation of Borrower’s oil and gas properties, adjusted for variances between the hedging price and Borrower’s actual product price as determined by Lender, or otherwise at hedging prices acceptable to Lender; and

(v) Hedge Transactions that include a “price floor” or comparable financial hedge or risk management agreement acceptable to Lender in all respects (including, without limitation, price and term); and

(vi) Hedge Transactions that are each for a period not to exceed twenty-four (24) months or twelve (12) months beyond the Maturity Date; and

(vii) Hedge Transactions where, in each case, the underlying contracts are with Hedge Provider, as counterparty, with a counter-party (or the parent entity thereof) approved in writing by Lender and who at the time the contract is made has long-term obligations rated BBB+ or better by Standard & Poor’s Ratings Group or Baa1 or better by Moody’s Investors Services, Inc., or with a counter-party that is otherwise approved by Lender in writing; and

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(viii) Hedge Transactions that are not effective at concurrent or overlapping periods of time on the same volumes of production on both a physical and financial basis, unless the combined volumes are in compliance with the volume limitations set forth above; and

(ix) Hedge Transactions with respect to which no margin account is established or maintained and which provide for no collateral security or posted collateral to be due from Borrower under any circumstances, other than the security provided to Hedge Providers under the Security Documents; and

(x) Hedge Transactions that are otherwise in form, content, and substance acceptable to Lender.

At its sole option and discretion, Borrower may also enter into swaps, collars, floors, caps, options, corridors, or other contracts, as such terms are commonly known within the capital markets, which are intended to reduce or eliminate the risk of fluctuation in interest rates for the purpose and effect of fixing and capping interest rates on a principal amount of indebtedness of Borrower; provided that (A) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness of Borrower to be hedged by such contract and the interest rate exposure would not cause the notional amount of all such Hedge Transactions then in effect for the purpose of hedging interest rate exposure to exceed seventy-five percent (75%) of the total consolidated funded indebtedness of Borrower projected to be outstanding for any period covered by such Hedge Transaction, and (B) Borrower shall not establish or maintain any margin accounts with respect to such contracts.

(f) Speculation . Borrower shall not invest for speculative purposes in any

Hedge Transactions or in any other options, futures, or derivatives.

(g) Third Party Hedge Transactions . If a Hedge Transaction is entered into with an outside counter-party, (i) notwithstanding Subsection (d) of Section 1 of this Loan Agreement, Lender shall not be required to provide any Letter of Credit with respect to any margin call on the Hedge Transactions, unless Lender, in its sole discretion, agrees to do so; and (ii) Borrower shall collaterally assign and pledge in favor of Lender a first-priority continuing security interest in the applicable trading account and the Hedge Transactions, including the Hedge Transactions listed in Schedule 1 attached, as additional security for the Secured Obligations. In connection therewith, Borrower shall execute and deliver to Lender such security agreements, control agreements, and financing statements as deemed appropriate by Lender to create and perfect the continuing security interest therein.

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5. Conditions Precedent . (a) The obligation of Lender to make the initial advance on the Revolving Loan is subject to Borrower’s satisfaction, in Lender’s sole discretion, of the following conditions precedent:

(1) Lender’s receipt and satisfactory review by Lender of the 2017 year-to-date financial statements of Borrower, including a balance sheet, an income statement, and a cash flow statement, prepared in conformity with generally accepted accounting principles, consistently applied (“ GAAP ”).

(2) Borrower shall be in compliance in all material respects with all existing obligations, there shall be no default at closing, and all representations and warranties in connection with existing obligations must be true in all material respects.

(3) the negotiation, execution, and delivery of Loan Documents in Proper Form, including, but not limited to, the following:

(i) this Loan Agreement;

(ii) the Revolving Note;

(iii) the Security Documents;

(iv) the Guaranties; and

(v) Borrowing Resolution.

(4) satisfactory evidence that Lender holds perfected liens and security interests in all collateral for the Secured Obligations, subject to no other liens or security interests other than the Permitted Liens (as defined below).

(5) receipt and satisfactory review by Lender of a Reserve Report for the Borrowing Base properties.

(6) there shall not have occurred any result, occurrence, condition, change, fact, event, circumstance, or effect that, individually or in the aggregate, has caused or would reasonably be expected to cause a material adverse change in (i) the financial condition, business, assets, properties, liabilities (actual and contingent), operations or results of operations of Borrower or Guarantor or any subsidiaries, (ii) the ability of Borrower or Guarantor or any subsidiaries to own their assets and conduct business in the ordinary course as presently owned and conducted, or (iii) the ability of Borrower or Guarantor or any subsidiaries to perform their obligations under or consummate the transactions contemplated by the Loan Documents (collectively “ Material Adverse Change ”).

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(7) there being no order or injunction or other pending or threatened litigation in which there is a reasonable possibility, in Lender’s judgment, of a decision which could result in a Material Adverse Change.

(8) Lender shall have completed and approved a review of title to Borrower’s oil and gas properties, including the Borrowing Base properties, and the results of such review shall be acceptable to Lender in its sole discretion.

(9) Lender’s receipt and review, with results satisfactory to Lender and its counsel, of information regarding litigation, tax, accounting, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership, and contingent liabilities of Borrower.

(10) Borrower’s establishment of an operating account with Lender.

(11) Borrower shall deliver legal opinions in Proper Form, from Borrower’s counsel, regarding Borrower’s authority, and other matters reasonably required by Lender.

(12) Borrower shall deliver certificates of the appropriate government officials of the state of incorporation of Borrower as to the existence and good standing of Borrower, dated within ten (10) days prior to the date of this Loan Agreement.

(b) Lender will not be obligated to make the Loans or any subsequent advance on the Loans or issue any Letter of Credit, if, prior to the time that a loan or advance is made or a Letter of Credit is issued, (i) there has been any Material Adverse Change, (ii) any representation or warranty made by Borrower in this Loan Agreement or the other Loan Documents is untrue or incorrect in any material respect as of the date of the advance or loan, (iii) Lender has not received all Loan Documents appropriately executed by Borrower, each Guarantor, and all other proper parties, (iv) Lender has requested that Borrower or any Guarantor execute additional loan or security documents and those documents have not yet been properly executed, delivered, and recorded, (v) Borrower is not in compliance with the Borrowing Base and all reporting requirements, or (vi) an Event of Default (as defined below) has occurred and is continuing.

6. Representations and Warranties . (a) Borrower hereby represents and warrants to Lender as follows:

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(1) The execution, delivery, and performance of this Loan Agreement, the Notes, the Security Documents, and all of the other Loan Documents by Borrower have been duly authorized by Borrower’s board of directors, and this Loan Agreement, the Notes, the Security Documents, and all of the other Loan Documents executed by Borrower constitute legal, valid, and binding obligations of Borrower, enforceable in accordance with their respective terms;

(2) The execution, delivery, and performance of this Loan Agreement, the Notes, the Security Documents, and the other Loan Documents by Borrower, and the consummation of the transaction contemplated, do not require the consent, approval, or authorization of any third party and do not and will not conflict with, result in a violation of, or constitute a default under (i) any provision of Borrower’s certificate of incorporation or bylaws or any other agreement or instrument binding upon Borrower, or (ii) any law, governmental regulation, court decree, or order applicable to Borrower;

(3) Each financial statement of Borrower, now or hereafter supplied to Lender, was (or will be) prepared in accordance with GAAP, in Proper Form, and truly discloses and fairly presents in all material respects Borrower’s financial condition as of the date of each such statement, and there has been no Material Adverse Change subsequent to the date of the most recent financial statement supplied to Lender;

(4) There are no actions, suits, or proceedings pending or, to Borrower’s knowledge, threatened against or affecting Borrower or the Properties, before any court or governmental department, commission, or board, which, if determined adversely, would reasonably be expected to cause a Material Adverse Change;

(5) Borrower has filed all federal, state, and local tax reports and returns required by any law or regulation to be filed and has either duly paid all taxes, duties, and charges indicated due on the basis of such returns and reports, or made adequate provision for

the payment thereof, and the assessment of any material amount of additional taxes in excess of those paid and reported is not reasonably expected;

(6) Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ ERISA ”); Borrower has not violated any provision of any “defined benefit plan” (as defined in ERISA) maintained or contributed to by Borrower (each a “ Plan ”); no “Reportable Event” as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower, unless the reporting requirements have been waived by the Pension Benefit Guaranty Corporation; and Borrower has met its minimum funding requirements under ERISA with respect to each Plan;

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(7) Borrower has disclosed to Lender all of the terms of all material agreements affecting Borrower’s oil and gas properties or its operations, including all gas balancing agreements and advance payment contracts;

(8) Borrower certifies that Borrower has no existing subsidiaries or other entities owned by Borrower except those disclosed on Schedule 2 attached;

(9) As of the date of this Loan Agreement, Borrower has entered into no existing ISDA Agreements or Hedge Transactions with any parties except those disclosed on Schedule 1 attached;

(10) (i) Borrower is not in violation of any laws relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act (collectively “ Anti-Terrorism Laws ”) or knowingly engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(ii) Borrower is not any of the following (each a “ Blocked Person ”): (A) a person or entity that is listed in the annex, to, or is otherwise subject to the provisions of, Executive Order No. 13224; (B) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (C) a person or entity with which any bank or other financial institution is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (D) a person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224; or (E) a person or entity who is affiliated with any person or entity covered by this Subsection.

(iii) Borrower does not (i) conduct any business or engage in making or receiving any contribution of funds, goods, or services to or for the benefit of any Blocked Person, or (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224.

(iv) Borrower is not in violation of any rules or regulations promulgated by the Office of Foreign Asset Controls (“ OFAC ”) or of any economic or trade sanctions or administered and enforced by OFAC, or is not conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any rules or regulations promulgated by OFAC.

(b) Each Guarantor hereby represents and warrants as follows:

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(1) This Loan Agreement and the Guaranty executed by each Guarantor constitute legal, valid, and binding obligations of each Guarantor, enforceable in accordance with their respective terms;

(2) There are no actions, suits, or proceedings pending or threatened against or affecting any Guarantor, before any court or governmental department, commission, or board, which, if determined adversely, would reasonably be expected to cause a Material Adverse Change with respect to any Guarantor; and

(3) Each Guarantor has filed all federal, state, and local tax reports and returns required by any law or regulation to be filed and has either duly paid all taxes, duties, and charges indicated due on the basis of such returns and reports, or made adequate provision for the payment thereof, and the assessment of any material amount of additional taxes in excess of those paid and reported is not reasonably expected.

7. Covenants . (a) Until the Loans, the Hedge Liabilities, and all other Secured Obligations are fully paid and satisfied, no Letters of Credit are outstanding, and any commitment of Lender under this Loan Agreement is terminated, each of Borrower and Guarantors shall, unless Lender otherwise consents in writing:

(1) (i) Maintain its existence in good standing in the state of its formation, maintain its authority to do business in all other states in which either is required to qualify, and maintain full legal capacity to perform all its obligations under this Loan Agreement and the Loan Documents, (ii) continue to operate its business as presently conducted and preserve and maintain the rights, licenses, permits, privileges, and franchises material to the conduct of its business, (iii) not permit Peter Salas (individually and collectively with his other entities) to hold less than 30% of the outstanding and issued shares of Borrower at any time, (iv) not permit its dissolution, liquidation, or other termination of existence or forfeiture of right to do business, (v) not form any subsidiary without notifying Lender in writing at least thirty (30) days in advance, (vi) not permit a merger or consolidation (unless Borrower is the surviving entity), and (vii) not acquire all or substantially all of the assets of any other entity without first notifying Lender in writing at least thirty (30) days in advance.

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(2) Manage the Properties in an orderly and efficient manner consistent with good business practices, and perform and comply in all material respects with all statutes, rules, regulations, and ordinances imposed by any governmental unit upon the Properties, Borrower, or its operations, except where the failure to do so could not reasonably be expected to result in a Material Adverse Change, including, without limitation, (i) the Natural Gas Policy Act of 1978, (ii) all environmental laws, and (iii) all permits, licenses, registrations, approvals, and authorizations (x) related to any natural or environmental resource or media located on, above, within, related to or affected by any Properties, (y) required for the performance of the operations of Borrower, or (z) applicable to the use, generation, handling, storage, treatment, transport, or disposal of any hazardous substances; use its best efforts to cause all employees, agents, contractors, subcontractors, while such are acting within the scope of their relationship with Borrower, to comply with all such laws as may be necessary or appropriate to enable Borrower to so comply; and not do anything or permit anything to be done that would subject any of the Properties to any remedial obligations under any environmental law, assuming disclosure to applicable governmental authorities of all relevant facts, conditions, and circumstances.

(3) Maintain insurance as customary in the industry or as reasonably required by Lender, including but not limited to, casualty, comprehensive property damage, commercial general liability, and other insurance, including worker’s compensation (if necessary to comply with law), naming Lender as an additional insured and a loss payee, as applicable, and containing provisions prohibiting their cancellation without prior written notice to Lender, and provide Lender with evidence of the continual coverage of those policies prior to the lapse of any policy.

(4) Not sell, assign, transfer, or otherwise dispose of all or any interest in the Properties, any oil and gas properties included in the Borrowing Base, or any other material assets, except for (i) the sale of hydrocarbons in the ordinary course of business, (ii) the sale or transfer of equipment that is no longer necessary for the business of Borrower or that is replaced by equipment of at least comparable value and use, (iii) the sale of oil and gas properties having an aggregate present value according to the Reserve Report used for the most- recent Borrowing Base redetermination less than five percent (5%) of the most-recent Borrowing Base per fiscal year, and (iv) the sale of oil and gas properties having an aggregate present value according to the Reserve Report used for the most-recent Borrowing Base redetermination in excess of five percent (5%) of the most-recent Borrowing Base per fiscal year, with the prior written consent of Lender, provided that Lender shall not unreasonably withhold its consent for any sale, farmout, farmin, or other disposition of any oil and gas properties or any interest therein, so long as: (x) the net sales proceeds received by Borrower are equal to or greater than the net present value of the proved developed producing oil and gas reserves attributable to such properties or interest, as of the most recent redetermination date (scheduled or otherwise) discounted at nine percent (9%); (y) any resulting Borrowing Base deficiency after exclusion of the sale properties from the Borrowing Base is immediately eliminated by a single lump sum payment; and (z) there is no existing Event of Default.

(5) Promptly inform Lender of (i) any Material Adverse Change, (ii) all litigation and claims which would reasonably be expected to cause a Material Adverse Change, (iii) all actual or contingent material liabilities of Borrower, (iv) any change in name, identity, or structure of Borrower, and (v) any uninsured or partially insured loss of any collateral through fire, theft, liability, or property damage.

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(6) Maintain Borrower’s books and records in accordance with GAAP, and permit Lender to examine, audit, and make and take away copies or reproductions of Borrower’s books and records, reasonably required by Lender, at all reasonable times; and permit such persons as Lender may designate at reasonable times to visit and inspect the Properties and examine all records with respect to the Properties; and pay for the reasonable cost of such examinations, audits, and inspections required by Lender.

(7) Pay and discharge when due all indebtedness and obligations, including without limitation, all assessments, taxes, governmental charges, levies, and liens, of every kind and nature, imposed upon Borrower or the Properties, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon the Properties, income, or profits, and pay all trade payables and other current liabilities incurred in the ordinary course of business within ninety (90) days of their due date; provided, however, Borrower will not be required to pay and discharge any such indebtedness, obligation, payable, assessment, tax, charge, levy, lien, or claim, so long as (i) the same shall be contested in good faith by appropriate judicial, administrative, or other legal proceedings, and (ii) Borrower has established adequate reserves with respect to such contested indebtedness, obligation, payable, assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

(8) Not directly or indirectly create, incur, assume, or permit to exist any indebtedness (including guaranties), secured or unsecured, absolute or contingent, except for the following (the “ Permitted Indebtedness ”): (i) the indebtedness to Lender, (ii) any trade payables, taxes, and current liabilities incurred in the ordinary course of business, not to exceed $500,000.00 in the aggregate, (iii) the existing indebtedness disclosed in Schedule 3 attached, (iv) obligations related to Hedge Transactions permitted by this Loan Agreement, and (v) additional indebtedness secured by purchase money security interests that attach solely to the asset acquired, not to exceed $300,000.00 in the aggregate.

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(9) Not mortgage, collaterally assign, hypothecate, pledge, or encumber, and not create, incur, or assume any lien or security interest on or in, the Properties (or any interest in the Properties), any oil and gas properties included in the calculation of the Borrowing Base, or any of Borrower’s property or assets, except the following (collectively the “ Permitted Liens ”): (i) those in favor of Lender, (ii) those existing and disclosed to Lender in writing, (iii) liens for taxes not delinquent or being contested in good faith, (iv) landlord’s liens, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction, or other like liens with respect to obligations not overdue or being contested in good faith, (v) liens resulting from deposits to secure the payments of workers’ compensation or social security, (vi) purchase money security interests, capital leases, or construction liens that attach solely to the asset acquired, leased, or constructed, that secure indebtedness in an amount less than the cost and the fair market value of the asset acquired or constructed, and that are in an aggregate amount not to exceed $300,000.00, (vii) contractual liens that arise in the ordinary course of business under or in connection with operating agreements, oil and gas leases, farm-out agreements, contracts for the sale, transportation, or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, marketing agreements, processing agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring, and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith, (viii) rights of set-off or similar rights and remedies and burdening only accounts or other funds maintained with a depository institution, and (ix) easements, restrictions, servitudes, permits, conditions, covenants, exceptions, or reservations for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines, and other like purposes, or for the joint or common use of real estate, rights of way, facilities, and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such Properties for the purposes of which such Properties are held by the Borrower or materially impair the value of such Properties subject thereto.

(10) Not make any loans, advances, dividends, or other distributions to any party, including without limitation, shareholders, officers, directors, partners, joint venturers, members, managers, relatives, or affiliates, or any profit sharing or retirement plan.

(11) Not purchase, acquire, redeem, or retire any stock or other ownership interest in Borrower; and not permit any transaction or contract with any affiliates or related parties, except at arms length and on market terms.

(12) Maintain its primary depository accounts and principal banking relationship at Lender.

(13) INDEMNIFY LENDER AGAINST ALL LOSSES, LIABILITIES, WITHHOLDING AND OTHER TAXES, CLAIMS, DAMAGES, OR EXPENSES RELATING TO THE LOANS, THE LOAN DOCUMENTS, OR BORROWER’S USE OF THE LOAN PROCEEDS, INCLUDING BUT NOT LIMITED TO ATTORNEYS AND OTHER PROFESSIONAL FEES AND SETTLEMENT COSTS, BUT EXCLUDING, HOWEVER, THOSE CAUSED SOLELY BY OR RESULTING SOLELY FROM ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY LENDER; AND THIS INDEMNITY SHALL SURVIVE THE TERMINATION OF THIS LOAN AGREEMENT.

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(14) Comply in all material respects with all applicable provisions of ERISA, not violate any provision of any Plan, meet its minimum funding requirements under ERISA with respect to each Plan, and notify Lender in writing of the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan.

(15) Not (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving of any contribution of funds, goods, or services to or for the benefit of any Blocked Person; (ii) deal in, or otherwise engage in any transaction relating to, any properties or assets or interests in properties or assets blocked pursuant to Executive Order No. 13224; or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, (x) any of the prohibitions set forth in Executive Order No. 13224 or the USA Patriot Act, or (y) any prohibitions set forth in the rules or regulations issued by OFAC.

(16) If Borrower now or hereafter acquires any wholly-owned subsidiary or owns any issued and outstanding capital stock or partnership interests of any companies or partnerships, Borrower shall sign and deliver to Lender within fifteen (15) days a pledge agreement in Proper Form, creating a first-priority security interest covering the issued and outstanding capital stock or partnership interests of all existing and hereafter acquired companies, subsidiaries, or partnerships of Borrower, and Borrower shall cause the wholly- owned subsidiary to sign and deliver to Lender within fifteen (15) days a guaranty in Proper Form, guaranteeing payment of the Secured Obligations.

(17) Limit all investments to the following (the “ Permitted Investments ”): (i) direct investments in oil and gas properties or the methane gas or electricity generation business and related equipment of Borrower, (ii) investments in wholly-owned subsidiaries engaged in the oil and gas business or the methane gas or electricity generation business, (iii) deposits, money-market accounts, and certificates of deposit maintained with Lender, (iv) readily-marketable direct obligations of the United States of America, or (v) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest ratings categories of Standard and Poor’s Corporation or Moody’s Investors Service.

(18) Execute and deliver, or cause to be executed and delivered, within ten (10) days of Lender’s written request, any and all other agreements, instruments, or documents which Lender may reasonably request in order to give effect to the transactions contemplated under this Loan Agreement and the Loan Documents, and to grant, perfect, and maintain liens and security interests on or in the Properties and related collateral, and promptly cure any defects in the execution and delivery of any Loan Documents.

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(1) Not make any loans, advances, dividends, or other distributions to any party other than Borrower;

(2) Promptly inform Lender of (i) any Material Adverse Change with respect to any Guarantor, (ii) all litigation and claims which could reasonably be expected to cause a Material Adverse Change with respect to any Guarantor, and (iii) all actual or contingent material liabilities of any Guarantor; and

(3) Execute and deliver, or cause to be executed and delivered, any and all other agreements, instruments, or documents which Lender may reasonably request in order to give effect to the transactions contemplated under this Loan Agreement and the Loan Documents, and promptly cure any defects in the execution and delivery of any Loan Documents.

8. Financial Covenants . Until the Loans, the Hedge Liabilities, and all other Secured Obligations are fully paid and satisfied, no Letters of Credit are outstanding, and any commitment of Lender under this Loan Agreement is terminated, Borrower shall, unless Lender otherwise consents in writing, maintain the following financial covenants:

(a) Maintain at the end of each fiscal quarter a Funded Debt to EBITDA Ratio less than or equal to 3.5 to 1.0. “ Funded Debt to EBITDA Ratio ” is defined as the ratio of (i) the total amount outstanding on the Loans, divided by (ii) the sum of Borrower’s net income for the prior four fiscal quarters on a rolling basis, plus , without duplication and to the extent deducted in the calculation of net income for such period, (1) cash interest expense on all indebtedness, including the Loans , for the same period, (2) depletion, depreciation, amortization, accretion related to asset retirement obligations, and other non-cash charges for the same period, (3) costs associated with intangible drilling costs for the same period, and minus gains from the sale of assets (or plus losses from the sale of assets) for the same period; provided, however, that (i) the mark-to-market values for hedging positions in accordance with FASB 133 shall be excluded from this calculation until such time as the gains or losses from the Hedge Transactions are actually realized or the Hedge Transactions expire; and (ii) EBITDA from acquisitions may only be included in this covenant after Lender has reviewed and approved pro-forma financial statements demonstrating the effect of the acquisition.

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(b) Maintain at the end of each fiscal quarter an Interest Coverage Ratio greater than or equal to 3.0 to 1.0. “ Interest Coverage Ratio ” is defined as the ratio of (i) the sum of Borrower’s most recent quarter’s net income, plus , without duplication and to the extent deducted in the calculation of net income for such period, (1) interest expense related to the Revolving Loan for the same period, (2) income taxes for the same period, (3) depreciation, depletion, amortization, accretion related to asset retirement obligations, and other non-cash charges for the same period, (4) Exploration Expense for the same period, divided by (ii) interest expense related to the Revolving Loan for the same period; provided, however, that the mark-to-market values for hedging positions in accordance with FASB 133 shall be excluded from this calculation until such time as the gains or losses from the Hedge Transactions are actually realized or the Hedge Transactions expire. “ Exploration Expense ” is defined as the sum of the costs shown on Borrower’s financial statements, prepared consistently with past statements, under the following categories: (i) drilling costs, (ii) leasehold costs, (iii) dry hole costs, (iv) geological costs, (v) geophysical costs, and (vi) delay rentals.

(c) Maintain at the end of each fiscal quarter a Current Ratio greater than or equal to 1.0 to 1.0. “ Current Ratio ” is defined as the ratio of (x) Borrower’s current assets to (y) Borrower’s current liabilities. This ratio excludes current maturity of long-term debt, and the mark-to-market values for hedging positions in accordance with FASB 133 shall be excluded from this calculation until such time as the gains or losses from the Hedge Transactions are actually realized or the Hedge Transactions expire.

Unless otherwise specified, all accounting and financial terms and covenants set forth above are to be determined according to GAAP, consistently applied.

9. Reporting Requirements . (a) Until the Loans, the Hedge Liabilities, and all other Secured Obligations are fully paid and satisfied, no Letters of Credit are outstanding, and any commitment of Lender under this Loan Agreement is terminated, Borrower shall, unless Lender otherwise consents in writing, furnish to Lender in Proper Form:

(1) As soon as available, and in any event within one hundred twenty (120) days of the end of Borrower’s fiscal year, annual financial statements for Borrower, consisting of at least a balance sheet, an income statement, a statement of cash flows, a statement of changes in owners’ equity, and a statement of contingent liabilities, audited and certified by an independent certified public accounting firm acceptable to Lender and certified by an authorized officer of Borrower (i) as being true and correct in all material aspects to the best of his knowledge, (ii) as fairly reporting in all material respects the financial condition of Borrower as of the close of the fiscal year and the results of its operations for the year, and (iii) as having been prepared in accordance with GAAP;

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(2) As soon as available, and in any event within sixty (60) days of the end of each fiscal quarter, quarterly financial statements for Borrower, consisting of at least a balance sheet, an income statement, a statement of cash flows, a statement of changes in owners’ equity, and a statement of contingent liabilities, for the quarter and for the period from the beginning of the fiscal year to the close of the quarter, certified by an authorized officer of Borrower (i) as being true and correct in all material aspects to the best of his knowledge, (ii) as fairly reporting in all material respects the financial condition of Borrower as of the close of the fiscal quarter and the results of its operations for the quarter, and (iii) as having been prepared in accordance with GAAP, subject to normal year-end adjustments and the absence of footnotes;

(3) With the quarterly and annual financial statements required above, a quarterly compliance and borrowing base certificate in the form of Exhibit C attached, signed by an authorized officer of Borrower and certifying compliance with the financial covenants, and other matters in this Loan Agreement;

(4) On or before February 1 st and August 1 st of each year (and within thirty (30) days of Lender’s request in connection with a special redetermination of the Borrowing Base), a current reserve report prepared by an independent petroleum engineering firm acceptable to Lender, all reports to be prepared on a consistent basis in accordance with the customary standards and procedures of the petroleum industry, estimating the quantity of oil, gas, and associated hydrocarbons recoverable from the Properties and all of Borrower’s oil and gas properties, and the projected income and expense attributable to the Properties and all of Borrower’s oil and gas properties, including, without limitation, a description of reserves, net revenue interests and working interests attributable to the reserves, rates of production, gross revenues, operating expenses, ad valorem taxes, capital expenditures necessary to cause the Properties and all of Borrower’s oil and gas properties to achieve the rate of production set forth in the report, net revenues and present value of future net revenues attributable to the reserves and production therefrom, a statement of the assumptions upon which the determinations were made and any other matters related to the operations of the Properties and all of Borrower’s oil and gas properties and the estimated income therefrom;

(5) Within fifteen (15) days of filing, copies of Borrower’s federal, state, and local income tax filings or returns, with all schedules, attachments, forms, and exhibits;

(6) As soon as available, and in any event within thirty (30) days after the end of each calendar quarter, a hedging report setting forth as of the last business day of such prior fiscal quarter end, a summary of Borrower’s existing hedging positions under all Hedge Transactions (including physical and financial hedges, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas, and other commodities), including the counterparties, type, term, effective date, termination date, and notional volumes and prices for such volumes, the hedged prices, interest rates, or exchange rates, as applicable, the current mark-to-market on each Hedge Transaction, and any new credit support agreements relating thereto not previously disclosed to Lender;

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(7) Within five (5) days of Lender’s request, Borrower shall provide to Lender full and complete copies of all agreements, documents, and instruments evidencing all existing Hedge Transactions and such other information regarding Hedge Transactions as Lender may reasonably request;

(8) As soon as available, and in any event within sixty (60) days of the end of each fiscal quarter , a quarterly production report for the trailing three-month period, on a company basis, showing the net proceeds from the sale of oil, gas, and associated hydrocarbons produced from the Properties, the quantity of oil, gas, and associated hydrocarbons sold, the severance, net sales volumes, occupation, or gathering taxes deducted from or paid out of the proceeds, the lease operating expenses, and such other information as Lender may reasonably request;

(9) With the semi-annual Reserve Report required above and within thirty (30) days of Lender’s request , a gas balancing report, in Proper Form and duly certified by an authorized representative of Borrower as being true and correct in all material aspects to the best of his or her knowledge;

(10) As soon as available, and in any event within ninety (90) days of the end of each fiscal year or upon Lender’s request, copies of all of Borrower’s current insurance, including but not limited to, casualty, comprehensive property damage, business interruption, and commercial general liability, and other insurance, including worker’s compensation (if necessary to comply with law);

(11) At any time upon request by Lender and within thirty (30) days of any change thereafter, a list showing the name and address of each purchaser of oil, gas, and associated hydrocarbons produced from or attributable to the Properties;

(12) Within five (5) days after Borrower learns of any such occurrence, a written report of any pending or threatened litigation which would reasonably be expected to cause a Material Adverse Change in an amount in excess of $100,000;

(13) Within five (5) days after Borrower learns of any default under one or more Hedge Transactions that results in an obligation of Borrower to make one or more material payments, written notice of the default and copies of all documentation relating to the default;

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(14) As soon as possible and in any event within five (5) days after the occurrence of any Event of Default, or any event which, with the giving of notice or lapse of time or both, would constitute an Event of Default, the written statement of Borrower setting forth the details of such Event of Default and the action which Borrower proposes to take with respect thereto; and

(15) Within ten (10) days of Lender’s written request, such other information respecting the condition and the operations, financial or otherwise, of Borrower and the Properties as Lender may from time to time reasonably request.

(b) Until the Loans, the Hedge Liabilities, and all other Secured Obligations are fully paid and satisfied, no Letters of Credit are outstanding, any commitment of Lender under this Loan Agreement is terminated, and all other obligations and liabilities of Guarantors under this Loan Agreement, the Guaranties, and the other Loan Documents are fully paid and satisfied, each Guarantor shall, unless Lender otherwise consents in writing, furnish to Lender in Proper Form within ten (10) days of Lender’s written request, such other information respecting the condition and the operations, financial or otherwise, of each Guarantor as Lender may from time to time reasonably request.

10. Events of Default . (a) The occurrence at any time of any of the following events or the existence of any of the following conditions shall be called an “ Event of Default ”:

(1) Failure to make punctual payment when due of any sums owing on any of the Notes or any other Secured Obligations; or

(2) Failure of any of the Obligated Parties (as defined below) to properly perform in all material respects any of the obligations, covenants, or agreements, contained in this Loan Agreement or any of the other Loan Documents; or any representation or warranty made by Borrower or Guarantor proves to have been false, misleading, or erroneous in any material respect; or

(3) A material default by Borrower under any ISDA Agreement or with respect to any Hedge Liabilities; or non-payment when due or the material breach by Borrower or any Obligated Parties of any term, provision, or condition contained in any Hedge Transaction or any confirmation or other transaction consummated thereunder, whether or not Lender is a party thereto; or

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(4) If production payments for oil and gas produced from or attributable to Borrower’s oil and gas properties are directed to any party other than the lockbox maintained by Lender following the establishment of the lockbox under Subsection (d) of Section 2 of this Loan Agreement; or

(5) A failure by Borrower to resolve a Borrowing Base deficiency in accordance with Subsection (b) of Section 3 of this Loan Agreement; or

(6) Levy, execution, attachment, sequestration, or other writ against any real or personal property, representing the security for the Secured Obligations; or

(7) Any “Event of Default” under the Notes or any of the other Loan Documents, the Events of Default defined in the Notes and Loan Documents being cumulative to those contained in this Loan Agreement; or

(8) Except as expressly permitted by this Loan Agreement, the transfer, whether voluntarily or by operation of law, of all or any portion of the Properties without obtaining Lender's consent; or

(9) The failure of any of the Obligated Parties to pay any money judgment in excess of $100,000.00, against that party before the expiration of thirty (30) days after the judgment becomes final, or the failure of any of the Obligated Parties to obtain dismissal within ninety (90) days of any involuntary proceeding filed against that party under any Debtor Relief Laws (as defined below); or

(10) Borrower’s liquidation, termination of existence, merger or consolidation with another (unless Borrower is the surviving entity), forfeiture of right to do business, or appointment of a trustee or receiver for any part of its property or the filing of an action seeking to appoint a trustee or receiver; or

(11) A filing by any of the Obligated Parties of a voluntary petition in bankruptcy, or taking advantage of any Debtor Relief Laws; or an answer admitting the material allegations of a petition filed against any of the Obligated Parties, under any Debtor Relief Laws; or an admission by any of the Obligated Parties in writing of an inability to pay its or their debts as they become due; or the calling of any meeting of creditors of any of the Obligated Parties for the purpose of considering an arrangement or composition; or

(12) Any of the Obligated Parties revokes, or disputes the validity of or liability under, any of the Loan Documents, including any guaranty or security document.

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(b) The term “ Obligated Parties ” means Borrower, Guarantors, or any other party liable, in whole or in part, for the payment of any of the Secured Obligations, whether as maker, endorser, guarantor, surety, or otherwise, and any party executing any deed of trust, mortgage, security agreement, pledge agreement, assignment, or other contract of any kind executed as security in connection with or pertaining to the Secured Obligations, the Notes, or the Loans. The term “ Debtor Relief Laws ” means any applicable liquidation, conservatorship, receivership, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar laws affecting the rights or remedies of creditors generally, as in effect from time to time.

11. Remedies . (a) Upon the occurrence and during the continuance of any one or more of the foregoing Events of Default and the expiration of any notice, cure, or grace period required by Subsection (b) below, the entire unpaid principal balances of the Notes, together with all accrued but unpaid interest thereon, and all other Secured Obligations then owing by Borrower to Lender, shall, at the option of Lender, become immediately due and payable without further presentation, demand for payment, notice of intent to accelerate, notice of acceleration or dishonor, protest or notice of protest of any kind, all of which are expressly waived by Borrower. Any and all rights and remedies of Lender pursuant to this Loan Agreement or any of the other Loan Documents may be exercised by Lender, at its option, upon the occurrence and during the continuance of an Event of Default and the expiration of any notice, cure, or grace period required by Subsection (b) below. All remedies of Lender may be exercised singularly, concurrently, or consecutively, without waiver or election.

(b) Upon any Event of Default described in Subsection 10 (a)(1) above regarding payment of sums owing to Lender, Borrower shall have five (5) days grace after the due date in the invoice provided by Lender in order to cure the default prior to acceleration of the Notes and exercise of any remedies. Upon any other Event of Default described in Subsection 10 (a) above, Lender shall provide Borrower with written notice of the Event of Default and Borrower shall have ten (10) days after notice in order to cure the Event of Default prior to acceleration of the Notes and exercise of any remedies; except Borrower shall have no cure period for any voluntary filing by Borrower under any Debtor Relief Laws, for any voluntary transfer of any portion of the Properties, without obtaining Lender’s partial release, for any liquidation or termination of existence of Borrower, or for any Event of Default that is not capable of cure during that period, including, without limitation, breaches of any negative covenants, and provided that Lender is not obligated to provide written notice of any Event of Default which Borrower reports to Lender, but Borrower shall have the benefit of any applicable grace or cure period required herein.

(c) All rights of Lender under the terms of this Loan Agreement shall be cumulative of, and in addition to, the rights of Lender under any and all other agreements between Borrower and Lender (including, but not limited to, the other Loan Documents), and not any other agreement.

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12. Waiver and Amendment . Neither the failure nor any delay on the part of Lender to exercise any right, power, or privilege herein or under any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. No waiver of any provision in this Loan Agreement or in any of the other Loan Documents and no departure by Borrower therefrom shall be effective unless the same shall be in writing and signed by Lender, and then shall be effective only in the specific instance and for the purpose for which given and to the extent specified in such writing. No modification or amendment to this Loan Agreement or to any of the other Loan Documents shall be valid or effective unless the same is signed by the party against whom it is sought to be enforced.

13. Savings Clause . Regardless of any provision contained in this Loan Agreement, the Notes, or any of the Loan Documents, it is the express intent of the parties that at no time shall Borrower or any of the Obligated Parties pay interest in excess of the Maximum Rate (or any other interest amount which might in any way be deemed usurious), and Lender will never be considered to have contracted for or to be entitled to charge, receive, collect, or apply as interest on any of the Notes or the other Secured Obligations, any amount in excess of the Maximum Rate (or any other interest amount which might in any way be deemed usurious). In the event that Lender ever receives, collects, or applies as interest any such excess, the amount which would be excessive interest will be applied to the reduction of the principal balances of the Notes or the Secured Obligations, and, if the principal balances of the Notes and the Secured Obligations are paid in full, any remaining excess shall forthwith be paid to Borrower. In determining whether the interest paid or payable exceeds the Maximum Rate (or any other interest amount which might in any way be deemed usurious), Borrower and Lender shall, to the maximum extent permitted under applicable law: (i) characterize any non-principal payment (other than payments which are expressly designated as interest payments hereunder) as an expense or fee rather than as interest; (ii) exclude voluntary prepayments and the effect thereof; and (iii) amortize, pro rate, or spread the total amount of interest throughout the entire contemplated term of the Notes so that the interest rate is uniform throughout the term. The term “ Maximum Rate ” means the maximum interest rate which may be lawfully charged under applicable law.

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14. Notices . Any notice or other communications provided for in this Loan Agreement shall be in writing and shall be given to the party at the address shown below:

	Lender:	P ROSPERITY B ANK
		Attention: Alan Greenfield
		1330 S. Harvard
		Tulsa, Oklahoma 74112

	With a copy
	to counsel
	for Lender:	Merrill E. Jones
		H ARRIS , F INLEY & B OGLE , P.C.
		777 Main Street, Suite 1800
		Fort Worth, Texas 76102-5341

	Borrower and
	Guarantors:	T ENGASCO , I NC .
		Attention: Michael J. Rugen
		8000 E. Maplewood Ave, Suite 130
		Greenwood Village, Colorado 80111

Any such notice or other communication shall be deemed to have been given on the day it is personally delivered or, if mailed, on the third day after it is deposited in an official receptacle for the United States mail, or, if e-mailed or faxed, on the date it is received by the party. Any party may change its address for the purposes of this Loan Agreement by giving notice of such change in accordance with this paragraph.

15. Miscellaneous . (a) This Loan Agreement shall be binding upon and inure to the benefit of Lender, Borrower, and Guarantors, and their respective heirs, personal representatives, successors, and assigns; provided, however, that Borrower and Guarantors may not, without the prior written consent of Lender, assign any rights, powers, duties, or obligations under this Loan Agreement or any of the other Loan Documents.

(b) THIS LOAN AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA AND SHALL BE PERFORMED IN DALLAS COUNTY, TEXAS. BORROWER, GUARANTORS, AND LENDER IRREVOCABLY AGREE THAT VENUE FOR ANY ACTION OR CLAIM RELATED TO THIS LOAN AGREEMENT, THE NOTES, THE LOANS, THE SECURED OBLIGATIONS, THE GUARANTIES, OR THE PROPERTIES SHALL BE IN COURT IN DALLAS COUNTY, TEXAS.

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(c) If any provision of this Loan Agreement or any other Loan Documents is held to be illegal, invalid, or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of this Loan Agreement or any of the other Loan Documents shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.

(d) All covenants, agreements, undertakings, representations, and warranties made in this Loan Agreement and the other Loan Documents shall survive any closing hereunder.

(e) All documents delivered by Borrower or Guarantors to Lender must be in Proper Form.

(f) Without limiting the effect of any provision of any Loan Document which provides for the payment of expenses and attorneys fees upon the occurrence of certain events, Borrower shall pay all costs and expenses of Lender (including, without limitation, the reasonable attorneys fees of Lender’s inside or independent legal counsel) in connection with (i) the preparation of this Loan Agreement and the other Loan Documents, and any and all extensions, renewals, amendments, supplements, extensions, or modifications thereof, (ii) any action reasonably required in the course of administration of the Loans or the Secured Obligations, (iii) resolution of any disputes with Borrower or Guarantors related to the Loans, the Secured Obligations, or this Loan Agreement, (iv) any action in any state or federal court, including, without limitation, in any bankruptcy court, in connection with Borrower, the Loans, or any of the collateral for the Loans, (v) the appointment of a receiver or a petition seeking the same, including, without limitation, the costs and expenses of the receiver, insofar as it relates to Borrower, the Loans, or any of the collateral for the Loans, and (v) any other action in the enforcement of Lender’s rights upon the occurrence of an Event of Default.

(g) If there is a conflict between the terms of this Loan Agreement and the terms of any of the other Loan Documents, the terms of this Loan Agreement will control.

(h) Lender shall have the right, with the consent of Borrower (unless an Event of Default has occurred and is continuing, in which case no consent is needed), which will not be unreasonably withheld, (i) to assign the Loans or commitment and be released from liability thereunder, and (ii) to transfer or sell participations in the Loans or commitment with the transferability of voting rights limited to principal, rate, fees, and term.

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(i) This Loan Agreement may be separately executed in any number of counterparts, each of which will be an original, but all of which, taken together, shall be deemed to constitute one agreement, and Lender is authorized to attach the signature pages from the counterparts to copies for Lender and Borrower. At Lender’s option, this Loan Agreement and the Loan Documents may also be executed by Borrower and Guarantors in remote locations with signature pages faxed or scanned and e-mailed to Lender. Borrower and Guarantors agree that the faxed or scanned signatures are binding upon Borrower and Guarantors, and Borrower and Guarantors further agree to deliver the original signatures for this Loan Agreement and all Loan Documents by overnight mail or expedited delivery. It will be an Event of Default if they fail to promptly deliver all required original signatures to Lender and Lender does not receive all required original signatures within five (5) business days.

16. Notice of Final Agreement . (a) In connection with the Loans, Borrower, Guarantors, and Lender have executed and delivered this Loan Agreement and the Loan Documents (collectively the “ Written Loan Agreement ”).

(b) It is the intention of Borrower, Guarantors, and Lender that this paragraph be incorporated by reference into each of the Loan Documents. Borrower, Guarantors, and Lender each warrant and represent that their entire agreement with respect to the Loans is contained within the Written Loan Agreement, and that no agreements or promises have been made by, or exist by or among, Borrower, Guarantors, and Lender that are not reflected in the Written Loan Agreement.

(c) THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

[Signatures on following pages.]

T ENGASCO , I NC .

March 16, 2017

Page 33 of 34

If the foregoing correctly sets forth our agreement, please so acknowledge by signing and returning the additional copy of this Loan Agreement enclosed to me.

	Yours very truly,
	P ROSPERITY B ANK

	By:		/s/ Allen Greenfield

			Alan Greenfield,
			Senior Vice President

Accepted and agreed to

this 16th day of March, 2017:

BORROWER:

T ENGASCO , I NC .,

a Delaware corporation

By:		/s/ Michael J. Rugen

		Michael J. Rugen,
		Chief Executive Officer

T ENGASCO , I NC .

March 16, 2017

Page 34 of 34

GUARANTORS:

T ENNESSEE L AND & M INERAL C ORPORATION ,

a Tennessee corporation

By:		/s/ Michael J. Rugen
		Michael J. Rugen, President

T ENGASCO P IPELINE C ORPORATION ,

a Tennessee corporation

By:		/s/ Michael J. Rugen
		Michael J. Rugen, President

M ANUFACTURED M ETHANE C ORPORATION ,

a Tennessee corporation

By:		/s/ Michael J. Rugen
		Michael J. Rugen,
		Vice-President

Exhibits and Schedules

Exhibit A - Revolving Note

Exhibit B - Request for Borrowing

Exhibit C - Compliance Certificate

Schedule 1 - Hedge Transactions

Schedule 2 - Subsidiaries

Schedule 3 - Existing Debt

Delaware		87-0267438
(state or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

8000 E. Maplewood Ave., Suite 130, Greenwood Village, CO		80111
(Address of Principal Executive Offices)		(Zip Code)

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☒
(Do not check if a Smaller Reporting Company)	Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

PART I			Page
	Item 1.	Business	6
	Item 1A.	Risk Factors	11
	Item 1B.	Unresolved Staff Comments	18
	Item 2.	Properties	18
	Item 3.	Legal Proceedings	21
	Item 4.	Mine Safety Disclosures	22

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
	Item 6.	Selected Financial Data	23
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 8.	Financial Statements and Supplementary Data	28
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	28
	Item 9A.	Controls and Procedures	28
	Item 9B.	Other Information	29

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	30
	Item 11.	Executive Compensation	34
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	37
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	38
	Item 14.	Principal Accounting Fees and Services	41

PART IV	Item 15.	Exhibits, Financial Statement and Schedules	42

		SIGNATURES	44

	Barrels Attributable to Party’s Interest		Undiscounted Future Net Cash Flows Attributable to Party’s Interest			Present Value of Future Net Cash Flows Discounted at 10% Attributable to Party’s Interest
	MBbl		(in thousands)			(in thousands)
Tengasco		75.3		$	1,823		$	853
Hoactzin		13.3		$	322		$	150

Area	Gross Production MBOE		Average Net Revenue Interest		Percentage of Total Oil Production
Rooks County, KS		78.6		0.820490		64.6	%
Trego County, KS		17.7		0.804843		14.5	%
Ellis County, KS		6.3		0.799657		5.2	%
Barton County, KS		5.9		0.816855		4.8	%
Graham County, KS		3.8		0.858440		3.1	%
Russell County, KS		3.1		0.856006		2.6	%
Rush County, KS		2.2		0.860696		1.8	%
Osborne County, KS		1.6		0.586787		1.3	%
Pawnee County, KS		1.4		0.799977		1.2	%
Stafford County, KS		1.1		0.716046		0.9	%
Total		121.7				100.0	%

Area	Proved Developed		Proved Undeveloped		Proved Reserves		% of Total
Rooks County, KS	$	5,510	$	23	$	5,533		67.7	%
Trego County, KS		1,299		—		1,299		15.9	%
Barton County, KS		527		—		527		6.5	%
Graham County, KS		464		—		464		5.7	%
Rush County, KS		144		—		144		1.8	%
Ellis County, KS		105		—		105		1.3	%
Russell County, KS		58		—		58		0.7	%
Osborne County, KS		19		—		19		0.2	%
Pawnee County, KS		17		—		17		0.2	%
Stafford County, KS		4		—		4		—	%
Ness County, KS		—		—		—		—	%
Logan County, KS		—		—		—		—	%
Total	$	8,147	$	23	$	8,170		100.0	%

	Producing		Non Producing		Undeveloped		Total
Oil (MBbl)		774		58		38		870
Future net cash flows before income taxes discounted at 10% (in thousands)	$	7,065	$	1,082	$	23	$	8,170

	Producing		Non-producing		Undeveloped		Total
Oil (MBbl)		690		40		—		730
Future net cash flows before income taxes discounted at 10% (in thousands)	$	5,397	$	418	$	—	$	5,815

Kansas
	Gross Production				Net Production				Cost of Net Production			Average Sales Price
Years Ended December 31,	Oil (MBbl)		Gas (MMcf)		Oil (MBbl)		Gas (MMcf)		(Per BOE)			Oil (Bbl)			Gas (Per Mcf)
2017		122		—		99		—		$	29.77		$	45.43		—
2016		132		—		107		—		$	27.82		$	37.53		—
2015		158		—		129		—		$	25.67		$	42.66		—

	For Years Ending December 31,
	2017				2016				2015
	Gross		Net		Gross		Net		Gross		Net
Kansas
Productive Wells		1		0.15		1		0.25		—		—
Dry Holes		—		—		—		—		1		1

For the Quarters Ending	High		Low
March 31, 2017	$	0.76	$	0.37
June 30, 2017	$	1.56	$	0.39
September 30, 2017	$	0.83	$	0.55
December 31, 2017	$	1.19	$	0.57

March 31, 2016	$	1.60	$	1.00
June 30, 2016	$	1.60	$	0.60
September 30, 2016	$	1.59	$	0.67
December 31, 2016	$	1.25	$	0.52

Contractual Obligations	Total		2018		2019		2020
Long-Term Debt Obligations ¹	$	90	$	41	$	49	$	—
Operating Lease Obligations		129		48		48		33
Estimated Interest on Long-Term Debt Obligations		14		9		4		1
Total	$	233	$	98	$	101	$	34

NAME	POSITIONS HELD	DATE OF INITIAL ELECTION OR DESIGNATION	AGE
Matthew K. Behrent	Director	3/27/2007	47
Peter E. Salas	Director;	10/8/2002	63
	Chairman of the Board	10/21/2004
Richard M. Thon	Director	11/22/2013	62
Michael J. Rugen	Chief Financial Officer;	9/28/2009	57
	Chief Executive Officer (interim)	6/24/2013
Cary V. Sorensen	Vice-President; General Counsel; Secretary	7/9/1999	69

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		All Other Compensation ² ($)		Total ($)
Michael J. Rugen,	2017		163,857		19,276		9,149		6,673		198,955
Chief Financial Officer	2016		163,857		21,685		6,931		6,737		199,210
Chief Executive Officer (interim) ³
Cary V. Sorensen,	2017		81,900		—		—		3,454		85,354
General Counsel	2016		81,900		—		—		3,495		85,395

Name	Fees earned or paid in cash ($)		Stock awards compensation ⁴ ($)		Total ($)
Matthew K. Behrent	$	7,500	$	1,235	$	8,735
Hughree F. Brooks	$	7,113	$	1,235	$	8,348
Richard M. Thon	$	7,500	$	1,235	$	8,735
Peter E. Salas	$	7,500	$	1,235	$	8,735

Name and Address	Title		Number of Shares Beneficially Owned				Percent of Class
Dolphin Offshore Partners, L.P. c/o Dolphin Mgmt. Services, Inc. P.O. Box 16867 Fernandina Beach, FL 32035	Stockholder			5,292,241				49.8	%

Name and Address	Title	Number of Shares Beneficially Owned ⁶		Percent of Class ⁷
Matthew K. Behrent ⁽⁸⁾	Director		66,400	Less than 1		%
Michael J. Rugen ⁽⁹⁾	Chief Executive Officer (interim); Chief Financial Officer		38,098	Less than 1		%
Peter E. Salas ⁽¹⁰⁾	Director; Chairman of the Board		5,299,741		49.8	%
Cary V. Sorensen ⁽¹¹⁾	Vice President; General Counsel; Secretary		23,623	Less than 1		%
Richard M. Thon ⁽¹²⁾	Director		32,625	Less than 1		%
All Officers and Directors as a group ⁽¹³⁾			5,460,487		51.3	%

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(a)		Weighted-average exercise price of outstanding, options, warrants and rights(b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approve by security holders ¹⁴		30,000	$	3.73		3,647,724
Equity compensation plans not approved by security holders		—		—		—
Total		30,000	$	3.73		3,647,724

	2017 Moss Adams		2017 Hein		2016 Hein

Audit Fees	$	73,500	$	37,800	$	111,300
Audit-Related Fees		—		—		18,322
Tax Fees		—		—		—
All Other Fees		—		—		—
Total Fees	$	73,500	$	37,800	$	129,622

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation as of March 23, 2016 (Incorporated by reference to Exhibit 3 to registrant’s Report on Form 10-Q for the period ended September 30, 2016 filed November 14, 2016).
3.2	Amended and Restated Bylaws as of November 13, 2014 (Incorporated by reference to Exhibit 3.2 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 30, 2015).
3.3	Agreement and Plan of Merger of Tengasco, Inc. (a Tennessee corporation with and into Tengasco, Inc., a Delaware corporation dated as of April 15, 2011 (Incorporated by reference to Exhibit B to registrant’s Definitive Proxy Statement pursuant to Schedule 14a filed May 2, 2011).
10.1	Tengasco, Inc. Incentive Stock Plan, as amended March 21, 2016 (Incorporated by reference to Appendix B, beginning page 26 in the registrant’s Definitive Proxy Statement pursuant to Schedule 14a filed February 10, 2016)
10.2	Loan and Security Agreement dated as of June 29, 2006 between Tengasco, Inc. and Citibank Texas, N.A. (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated June 29, 2006).
10.3	Subscription Agreement of Hoactzin Partners, L.P. for the Company’s ten well drilling program on its Kansas Properties dated August 3, 2007 (Incorporated by reference to Exhibit 10.15 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed March 31, 2008 [the “2007 Form 10-K”]).
10.4	Agreement and Conveyance of Net Profits Interest dated September 17, 2007 between Manufactured Methane Corporation as Grantor and Hoactzin Partners, LP as Grantee (Incorporated by reference to Exhibit 10.16 to the 2007 Form 10-K).
10.5	Agreement for Conditional Option for Exchange of Net Profits Interest for Convertible Preferred Stock dated September 17, 2007 between Tengasco, Inc., as Grantor and Hoactzin Partners, L.P., as Grantee (Incorporated by reference to Exhibit 10.17 to the 2007 Form 10-K).
10.6	Assignment of Notes and Liens Dated December 17, 2007 between Citibank, N.A., as Assignor, Sovereign Bank, as Assignee and Tengasco, Inc., Tengasco Land & Mineral Corporation and Tengasco Pipeline Corporation as Debtors (Incorporated by reference to Exhibit 10.18 to the 2007 Form 10-K).

10.7	Management Agreement dated December 18, 2007 between Tengasco, Inc. and Hoactzin Partners, L.P. (Incorporated by reference to Exhibit 10.20 to the 2007 Form 10-K).
10.8	Assignment of Credit Facility to F&M Bank and Trust Company (Incorporated by reference to Exhibit 10.15 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011).
10.9	Fourteenth Amendment to Loan and Security Agreement dated October 24, 2013 between Tengasco, Inc. as borrower and F&M Bank & Trust Company as Lender (Incorporated by reference to Exhibit 10.16 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on March 31, 2014).
10.10	Fifteenth Amendment to Loan and Security Agreement dated March 17, 2014 between Tengasco, Inc. as borrower and F&M Bank & Trust Company as Lender (Incorporated by reference to Exhibit 10.17 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on March 31, 2014).
10.11	Sixteenth Amendment to Loan and Security Agreement dated September 23, 2014 between Tengasco, Inc. as borrower and Prosperity Bank as Lender (Incorporated by reference to Exhibit 10.18 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 30, 2015).
10.12	Seventeenth Amendment to Loan and Security Agreement dated March 16, 2015 between Tengasco, Inc. as borrower and Prosperity Bank as Lender (Incorporated by reference to Exhibit 10.19 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 30, 2015).
10.13	Eighteenth Amendment to Loan and Security Agreement between Tengasco, Inc. as borrower and Prosperity Bank as Lender dated March 28, 2016 (Incorporated by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 30, 2016).
10.14*	Amended and Restated Loan Agreement between Tengasco, Inc. and Prosperity Bank, effective March 16, 2017.
14	Code of Ethics (Incorporated by reference to Exhibit 14 to the registrant’s Annual Report on Form 10-K filed March 30, 2004).
23.1*	Consent of LaRoche Petroleum Consultants, Ltd.
31*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*	Report of LaRoche Petroleum Consultants, Ltd. has been added to the filing for the year ended December, 31, 2017
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Definition Linkbase Document
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Presentation Linkbase Document

Signature	Title	Date

s/ Matthew K. Behrent	Director	March 28, 2018
Matthew K. Behrent

s/ Peter E. Salas	Director	March 28, 2018
Peter E. Salas

s/ Richard M. Thon	Director	March 28, 2018
Richard M. Thon

s/ Michael J. Rugen	Chief Executive Officer and	March 28, 2018
Michael J. Rugen	Principal Financial Accounting Officer

Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Financial Statements
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-6
Consolidated Statements of Stockholders’ Equity	F-7
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2014		6,084,241	$	6	$	55,758	$	(23,595	)	$	32,169
Net loss		—		—		—		(24,721	)		(24,721	)
Compensation expense related to options issued		—		—		12		—			12
Balance, December 31, 2015		6,084,241	$	6	$	55,770	$	(48,316	)	$	7,460
Net loss		—		—		—		(4,199	)		(4,199	)
Compensation expense related to options issued		—		—		3		—			3
Compensation expense related to stock issued		12,641		—		14		—			14
True up shares due to reverse stock split		841		—		—		—			—
Balance, December 31, 2016		6,097,723	$	6	$	55,787	$	(52,515	)	$	3,278
Net loss		—		—		—		(574	)		(574	)
Compensation expense related to stock issued		23,503		—		14		—			14
Shares issued for rights offering		4,498,698		5		2,452		—			2,457
Balance, December 31, 2017		10,619,924	$	11	$	58,253	$	(53,089	)	$	5,175

	For the years ended December 31,
	2017			2016			2015
Income (numerator):
Net loss	$	(574	)	$	(4,199	)	$	(24,721	)
Weighted average shares (denominator):
Weighted average shares - basic		10,081,218			6,091,028			6,084,241
Dilution effect of share-based compensation, treasury method		—			—			—
Weighted average shares - dilutive		10,081,218			6,091,028			6,084,241
Loss per share – Basic and Dilutive:
Basic	$	(0.06	)	$	(0.69	)	$	(4.06	)
Dilutive	$	(0.06	)	$	(0.69	)	$	(4.06	)

	LAROCHE PETROLEUM CONSULTANTS, LTD.
	By LPC, Inc. General Partner

	By:	/s Stephen W. Daniel
	Name: Stephen W. Daniel
	Title: Vice President

Dallas, Texas
March 20, 2018

	Net Reserves				Future Net Cash Flow ($)
Category	Oil (barrels)		Gas (Mcf)		Total		Present Worth at 10%
Proved Developed
Producing		774,467		0	$	12,850,871	$	7,065,215
Non-Producing		57,544		0		1,933,470		1,082,075
Proved Undeveloped		38,354		0		175,669		22,472
Total Proved ⁽¹⁾		870,365		0	$	14,960,010	$	8,169,762

	Very truly yours,

	LaRoche Petroleum Consultants, Ltd.
	State of Texas Registration Number F-1360
	By LPC, Inc. General Partner

	/s Stephen W. Daniel
	Stephen W. Daniel
	Licensed Professional Engineer
	State of Texas No. 58581

SWD:ss
Job 17-908 SEC