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Related Party Transactions
3 Months Ended
Mar. 31, 2013
Related Party Transactions [Abstract]  
Related Party Transactions

(5) Related Party Transactions

     On September 17, 2007, the Company entered into a drilling program with Hoactzin Partners, L.P. ("Hoactzin") for ten wells to be drilled on the Company's Kansas Properties (the "Ten Well Program"). 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 Energy MGMT, Inc., the general partner of Dolphin Offshore Partners, L.P., and a member of SSB Ventures LLC which is the Company's largest shareholder. The terms of the Ten Well Program provided that Hoactzin would receive all the working interest in the ten wells in the Program, but will pay an initial fee to the Company of 25% of its working interest revenues net of operating expenses. This is referred to as a management fee but, as defined, is in the nature of a net profits interest. The fee paid to the Company by Hoactzin will increase to 85% when and if net revenues received by Hoactzin reach an agreed payout point of approximately 1.35 times Hoactzin's purchase price (the "Payout Point") for its interest in the Ten Well Program. Hoactzin paid a total of $3.85 million (the "Purchase Price") for its interest in the Ten Well Program resulting in the Payout Point being determined as $5.2 million. As of March 31, 2013, net revenues received by Hoactzin from the Ten Well Program totaled $4.7 million which leaves a balance of approximately $460,000 until the Payout Point is reached.

     On September 17, 2007, Hoactzin, simultaneously with subscribing in the Ten Well Program, was conveyed a 75% net profits interest in the methane extraction project developed by MMC at the Carter Valley landfill owned and operated by Republic Services in Church Hill, Tennessee (the "Methane Project"). Net profits, if any, from the Methane Project received by Hoactzin were be applied towards the determination of the Payout Point (as defined above) for the Ten Well Program. Through March 31, 2013, no payments have been made to Hoactzin for its 75% net profits interest in the Methane Project, because no net profits have been generated. When the Payout Point is reached (even if only from the revenues from the wells drilled in the Ten Well Program), Hoactzin's 75% net profits interest in the Methane Project will decrease to 7.5%.

     On December 18, 2007, the Company entered into a Management Agreement with Hoactzin. On the same date, the Company entered into an agreement with C. Patrick McInturff employing him as a Vice-President of the Company. Pursuant to the Management Agreement with Hoactzin, Mr. McInturff's duties would include the management on behalf of Hoactzin of its working interest in oil and gas properties owned by Hoactzin and located in the onshore Texas Gulf Coast, and offshore Texas and offshore Louisiana. The Management Agreement terminated on December 18, 2012.

     During the course of the Management Agreement, the Company became the operator of certain managed properties under the agreement. The Company obtained from IndemCo, over time, bonds in the face amount of approximately $9.6 million for the purpose of covering plugging and abandonment obligations for Hoactzin's operated properties located in federal offshore waters in favor of the Bureau of Ocean Energy Management ("BOEM"), as well as certain private parties. In connection with the issuance of these bonds, a Payment and Indemnity Agreement with IndemCo was executed by Dolphin Direct Equity Partners, LP ("Dolphin Direct") guaranteeing payment of any bonding liabilities incurred by IndemCo. Dolphin Direct is a private equity fund controlled by Peter E. Salas that has a significant economic interest in Hoactzin. The Company co-signed the Payment and Indemnity Agreement, thereby becoming jointly and severally liable with Dolphin Direct for the obligations to IndemCo under the Payment and Indemnity Agreement. Hoactzin has provided $6.6 million in cash to IndemCo as collateral for these potential obligations. The Company has not provided any cash or other collateral for these potential obligations.

     As operator of the managed Hoactzin properties, 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. Hoactzin currently has significant past due balances to several vendors, a portion of which are included on the Company's balance sheet. Payables related to these past due vendors as well as ongoing operations remained outstanding at March 31, 2013 and December 31, 2012 in the amounts of $559,000 and $325,000, respectively. The Company has recorded the Hoactzin-related payables and the corresponding receivable from Hoactzin as of March 31, 2013 and December 31, 2012 in its Consolidated Balance Sheets under "Accounts payable – other" and "Accounts receivable – related party". The amounts recorded in accounts receivable are net of a $257,000 allowance.

     As of the date of this Report, the Company is assisting Hoactzin with becoming operator of record of these wells and transferring the corresponding bonding liability from the Company to Hoactzin. In order to facilitate this transition, the Company has entered into an agreement with Hoactzin whereby Hoactzin and its controlling member are indemnifying Tengasco for any costs or liabilities incurred by Tengasco resulting from such assistance, or the fact that Tengasco is still the operator of record on certain of these wells.

     No Tengasco funds have been advanced by Tengasco to pay any obligations of Hoactzin. No borrowing capability of Tengasco has been used by the Company in connection with its obligations under the Management Agreement, except for those funds used to collateralize the appeal bond with RLI Insurance Company. (see Note 13. Commitments and Contingencies)