Legal Proceedings
−Removed: We may, from time to time, be a claimant or defendant to various legal proceedings, disputes and claims arising in the course of our business, including those that arise from interpretation of federal and state laws and regulations affecting the natural gas and crude oil industry, personal injury claims, title disputes, royalty disputes, contract claims, contamination claims relating to oil and natural gas exploration and development and environmental claims, including claims involving assets previously sold to third parties and no longer part of our current operations.
+Added: We may, from time to time, be a claimant or defendant to various legal proceedings, disputes and claims arising in the course of our business, including those that arise from interpretation of federal and state laws and regulations affecting the oil and natural gas industry, personal injury claims, title disputes, royalty disputes, contract claims, contamination claims relating to oil and natural gas exploration and development and environmental claims, including claims involving assets previously sold to third parties and no longer part of our current operations.
While the ultimate outcome of the pending proceedings, disputes or claims, and any resulting impact on us, cannot be predicted with certainty, we believe that none of these matters, if ultimately decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations.
−Removed: The Company has been named as a defendant in an action commenced on November 30, 2021 in United States Bankruptcy Court For the Northern District of Texas Dallas Division by the Trustee for the Chapter 11 Bankruptcy of Hoactzin Partners, L.P.
−Removed: (“Hoactzin”), an affiliate of Peter Salas (“Salas”).
−Removed: The complaint alleges that, through a series of transactions involving Salas and various Hoactzin affiliates spanning 2014 through 2018, Hoactzin fraudulently transferred its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to Dolphin Direct Equity Partners, L.P.
−Removed: (“DDEP”), an entity substantially owned and controlled by Salas.
−Removed: Subsequently, DDEP sold the Kansas Working Interests to the Company in October 2018, one year prior to Hoactzin bankruptcy filing in October 2019, for an amount the complaint alleges was purportedly less than the reasonable value of such Kansas Working Interests.
−Removed: The action seeks, among other things, to recover approximately $14 million in damages, as well as an unspecified amount of punitive damages and attorney’s fees.
−Removed: The complaint alleges that Salas, DDEP and the Company are jointly and severally liable for the damages incurred by Hoactzin, During the period of the purported fraudulent transfers giving rise to the claims set forth in the complaint, Salas was Chairman of the Board of Tengasco, Inc., which subsequently merged with Riley Exploration - Permian, LLC on February 26, 2021 and was renamed Riley Exploration Permian, Inc.
−Removed: Concurrently with the closing of the merger, Salas resigned his position from the Board and no longer holds any position as a director or officer of the Company.
−Removed: On April 2, 2021, the Company closed on the sale of all assets it held in Kansas to a third party for an adjusted purchase price of $3.3 million, after customary closing adjustments.This lawsuit is in the early stages and, accordingly, an estimate of reasonably possible losses associated with this action, if any, cannot be made until the facts, circumstances and legal theories relating to the claims and the defenses are fully disclosed and analyzed.
−Removed: The Company has not established any reserves relating to this action.
+Added: The Company was named as a defendant in an adversary proceeding (the "Adversary Proceeding") commenced on October 25, 2021 in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court"), by the Trustee of the Chapter 7 bankruptcy of the Hoactzin Partners, L.P.
+Added: ("Hoactzin").
+Added: The complaint in the Adversary Proceeding alleges that in October of 2018, one year prior to the Hoactzin bankruptcy filing in October of 2019, Peter Salas ("Salas"), Chairman of the Board of Tengasco during the period of the purported fraudulent transfers, caused Hoactzin to transfer its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to the Company for an amount the complaint alleges was purportedly less than the reasonable equivalent value of such Kansas Working Interests.
+Added: The complaint includes avoidance actions and other causes of action in connection with the transfer of the Kansas Working Interests, as well as other causes of action alleged related to certain transactions to which the Company was not a party.
+Added: On October 13, 2022, the Company entered into a Compromise Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the Trustee for the bankruptcy estate for Hoactzin to resolve certain claims against the Company in the Adversary Proceeding.
+Added: Under the terms of the Settlement Agreement, the Company agreed to pay $80 thousand to the Trustee in full settlement and satisfaction of (a) all claims, causes of action, and damages that have been asserted against the Company or could be asserted against the Company in the Adversary Proceeding;
+Added: and (b) all claims which might arise from or relate to any actions taken by the Company while acting in connection with Debtor.
+Added: In November 2022, the Bankruptcy Court approved the Settlement Agreement, and the Company made the settlement payment to the Trustee in accordance with the Settlement Agreement.
+Added: Subsequently, the Bankruptcy Court entered an Order Granting the Joint Motion to Dismiss resulting in the dismissal of the Adversary Proceeding with prejudice (the "Dismissal Order"), as contemplated by the Settlement Agreement.
+Added: Neither the Settlement Agreement nor the Dismissal Order has any effect on the Trustee’s claims against any of the other defendants in the Adversary Proceeding, including without limitation, those claims against Peter Salas, our former Chief Executive Officer.
For additional information regarding contingencies, see Note 14 - Commitments and Contingencies included in notes to the consolidated financial statements included elsewhere in this Annual Report.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.