8-K

                    UNITED STATES
SECURITIES and EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):

September 17, 2007

Tengasco, Inc.

(Exact Name of Registrant as specified in its charter)

Commission File Number 0-20975

Tennessee 87-0267438

(State or other jurisdiction of (I.R.S. Employer Identification No.)

incorporation or organization)

10215 Technology Drive N.W., Suite 301, Knoxville, Tennessee 37932

(Address of Principal Executive Office

(865) 675-1554

(Registrant's Telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into A Material Definitive Agreement

On September 17, 2007, Tengasco, Inc. (the “Company”) entered into a drilling program (the “Drilling Program”) with Hoactzin Partners, LP (“Hoactzin”) for the Company to drill ten wells on its Kansas Properties targeting the production of oil during the remainder of 2007. Under the Drilling Program, Hoactzin will pay the Company $400,000 for each well completed in the Program that produces commercial quantities of oil and $250,000 per drilled well that is non-productive. Consequently, the purchase price for the Drilling Program to be paid by Hoactzin to the Company will be between $2.5 million and $4 million (the “Purchase Price”). The Drilling Program will provide the Company an immediate opportunity to accelerate drilling in its Kansas properties, and to explore additional prospects the Company has recently leased and analyzed with three dimensional seismic techniques. Peter E. Salas, the Chairman of the Board of Directors of the Company, is the controlling person of Hoactzin. He is also the sole shareholder and controlling person of Dolphin Management, Inc., the general partner of Dolphin Offshore Partners, LP, which is the Company’s largest shareholder. The Audit Committee of the Company’s Board of Directors, as well as the Board of Directors, approved and authorized the Company to enter into the Drilling Program in accordance with the Company’s related party transaction policy.

Hoactzin will receive all the working interest in the ten wells in the Drilling Program, but will pay an initial management fee to the Company in the amount of twenty-five percent (25%) of the revenues it receives from its working interest net of operating expenses. This management fee will increase to eighty-five percent (85%) of the revenues Hoactzin receives from its working interest when net revenues received by Hoactzin reach an agreed amount equal to approximately 1.35 times the Purchase Price paid by Hoactzin to the Company for the Drilling Program (hereinafter this amount is referred to as the “Payout Point”).

Also on September 17, 2007, the Company conveyed to Hoactzin a seventy-five percent (75%) net profits interest in the Carter Valley, Tennessee methane extraction project (the “Methane Project”) to be developed by its wholly-owned subsidiary, Manufactured Methane Corporation. When the Methane Project is completed and commences operations all revenues received by Hoactzin from the Project will be applied against reaching the Payout Point in the Drilling Program. Once the Payout Point is reached through Hoactzin’s receipt of revenues from either the Drilling Program and/or the Methane Project, Hoactzin’s net profits interest in the Methane Project will be reduced from seventy-five percent (75%) to seven and one-half percent (7.5%). The Company anticipates that revenues from commercial production from the Methane Project will commence in 2008 subject to equipment production schedules and completion of the construction of a 2.5 mile pipeline. To date, the Company has paid approximately $900,000 in equipment costs for the Methane Project from its ordinary cash flow and has placed orders for the two main equipment modules needed for the completion of the

Methane Project. The Company expects that institutional financing of the remaining $2.8 million of expected costs for the Methane Project will be concluded by year-end 2007.

The Company entered into an additional agreement with Hoactzin on September 17, 2007, which provided that if revenues received by Hoactzin from the Drilling Program and/or the Methane Project by December 31, 2009 did not equal at least twenty-five percent (25%) of the Purchase Price for the Drilling Program, then Hoactzin would have an option to exchange up to twenty percent of its net profits interest in the Methane Project for convertible preferred stock to be issued by the Company which would have a liquidation value equal to twenty percent (20%) of the Purchase Price less any net proceed revenues received by Hoactzin from the Drilling Program at the time of such exchange. Thereafter, Hoactzin has a similar option each year after 2009 provided that the difference between the amount of the Purchase Price and the amount of such aggregate revenues received by Hoactzin at the beginning of such year is not reduced by at least twenty percent (20%) by the end of that year. The Company, however, in any year in which such options are available to Hoacztin may make a cash payment to Hoacztin in the amount required to prevent such an exchange option for preferred stock from arising.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

99.1 Press Release issued by Tengasco, Inc. on September 21, 2007

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused and authorized this report to be signed on its behalf by the undersigned.

Dated: September 21, 2007

Tengasco, Inc.

By: s/Jeffrey R. Bailey  

Jeffrey R. Bailey,

Chief Executive Officer

EX-99

FOR IMMEDIATE RELEASE

Tengasco Announces New Kansas Oil Well Drilling Program

KNOXVILLE, Tenn., Sept. 21, 2007 -- Tengasco, Inc. (Amex: TGC) announced today that on September 17, 2007, it entered into a drilling program with Hoactzin Partners, LP (“Hoactzin”) for ten wells to be drilled in Kansas targeting production of oil during the remainder of 2007. Under the drilling program, Hoactzin will pay $400,000 per well drilled and completed as a producer, and $250,000 per drilled well that is nonproductive. Consequently the total purchase price for the drilling program will be between $2.5 million and $4 million. The controlling person of Hoactzin is Peter E. Salas, the Chairman of the Company’s Board of Directors and also the controlling person of Dolphin Offshore Partners, LP, the Company’s largest shareholder. On September 17, 2007 the Audit Committee of the Company’s Board of Directors, as well as the Board of Directors, authorized the transactions in accordance with the Company’s related party transaction policy.

Under the terms of the drilling program, Hoactzin will receive all the working interest in the ten wells, but will pay an initial management fee to the Company of 25% of its working interest revenues net of operating expenses. The management fee paid by Hoactzin to the Company will increase to 85% of its working interest revenues when net revenues received by Hoactzin reach an agreed payout point of approximately 1.35 times the purchase price the Hoactzin paid for the drilling program.

On September 17, 2007 Hoactzin was simultaneously conveyed a 75% net profits interest in the Company’s subsidiary Manufactured Methane Corporation’s Carter Valley, Tennessee methane extraction project. When the methane project comes online, the methane project revenues received by Hoactzin will also apply towards the determination of the payout point for the drilling program. When the payout point is reached from either one or both of the drilled wells or the methane project, Hoactzin’s net profits interest in this methane project will decrease to a 7.5% net profits interest. The Company expects commercial production from the Carter Valley methane project to begin in 2008 subject to equipment production schedules and completion of construction of a 2.5 mile pipeline. To date, the Company has paid from cash flow approximately $900,000 in equipment costs and has placed orders for the two main equipment modules needed for the Carter Valley methane project. The Company anticipates that financing of the remaining $2.8 million of expected project costs will be concluded by year end 2007.

The Company also announced that on September 17, 2007 it entered into an additional agreement with Hoactzin providing that if neither the new drilling program wells nor the methane project interest in combination return net revenues to Hoactzin equal to 25% of the actual drilling program purchase price by December 31, 2009, then Hoactzin has an option to exchange up to 20% of its net profits interest in the methane project for convertible preferred stock to be issued by the Company with a liquidation value equal to 20% of the drilling program price less net proceeds received at the time of any exchange.

Hoactzin has a similar option each year after 2009 in which Hoactzin’s unrecovered investment at the beginning of the year is not reduced 20% further by the end of that year. The Company, however, may in any year make a cash payment in the amount required to prevent such an exchange option for preferred stock from arising.

CEO Jeffrey R. Bailey said “We are pleased to have begun this new ten well drilling program in Kansas with Hoactzin. With current record oil prices, this will provide the Company an opportunity to accelerate drilling in its Kansas properties, and to explore additional prospects we have recently leased and analyzed with three dimensional seismic techniques. We believe that the benefits to the Company of the investment by Hoactzin in this program as it has been structured exceed those of either borrowing funds for additional drilling or entering conventional drilling programs with other private investors. Under this drilling program the Company will borrow no funds to drill, will use none of its own funds to drill, yet will still receive a larger after-payout revenue interest in the wells than would be available under conventional oil and gas drilling programs sold to private investors. The use of revenues from the methane extraction project will enable the Company to more quickly reach the payout point which, upon attainment, increases the Company’s effective interest in the drilling program wells from 25% to 85% and also increases the Company’s net revenue interest in the methane project from 25% to 92.5%. Management believes that the combination of the revenues from both the drilling program and the methane project, together with the Company’s option to fund with cash, makes it unlikely that preferred stock will be issued. The use of invested funds for additional drilling has allowed us to pay a larger portion of the methane project initial costs from Company cash flows.”

Forward-looking statements made in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risk and uncertainties which may cause actual results to differ from anticipated results, including risks associated with the timing and development of the Company's reserves and projects as well as risks of downturns in economic conditions generally, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.