Acquisitions

3 Months Ended

Dec. 31, 2021

Acquisitions

Business Combination Between REP LLC and Tengasco

Immediately prior to the closing of the Merger on February 26, 2021, REP LLC converted all of its issued and outstanding Series A Preferred Units into common units of REP LLC. In connection with the Merger, holders of common units of REP LLC were entitled to receive, in exchange for each common unit, shares of common stock of Tengasco (which was renamed Riley Exploration Permian, Inc.), par value $0.001 per share (“Tengasco common stock”) based on the exchange ratio set forth in the Merger Agreement (the “Exchange Ratio”), with cash paid in lieu of the issuance of any fractional shares. The Exchange Ratio was 97.796467 shares of Tengasco common stock for each common unit of REP LLC (as adjusted for the reverse stock split). Immediately prior to the closing of the Merger, Tengasco effected a one-for-twelve reverse stock split resulting in outstanding common stock of approximately 17.8 million shares including shares of Tengasco common stock issued in the Merger.

The combination between REP LLC and Tengasco qualified as a business combination, with REP LLC being treated as the accounting acquirer. The assets acquired and liabilities assumed were recognized on the consolidated balance sheet at fair value as of the acquisition date.

The consideration paid in the Merger by REP LLC as the accounting acquirer totaled approximately $26.4 million and was determined based on the closing price of Tengasco’s common stock on February 26, 2021 and the total number of shares outstanding immediately prior to the Merger. The Merger was structured as a tax-free reorganization for United States federal income tax purposes.

The following table summarizes the consideration for the Merger (presented in thousands, except stock price):



Tengasco common stock price	$	29.64
Tengasco common stock - issued and outstanding as of February 26, 2021	891
Total consideration	$	26,392

The Company incurred $1.0 million of costs related to the Merger during the three months ended December 31, 2020, which is included in transaction costs on the condensed consolidated statement of operations.

The Company completed the determination of the fair value attributable to the assets acquired and liabilities assumed as of September 30, 2021. The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values on February 26, 2021 (in thousands):



Assets
Cash and cash equivalents	$	860
Account receivable	325
Prepaid and other current assets	759
Total current assets	1,944

Oil and gas properties	4,525
Other property and equipment	91
Right of use assets	42
Other non-current assets	4
Deferred tax assets	2,987


Total assets acquired	9,593

Liabilities
Accounts payable	130
Accrued liabilities	409
Current lease liabilities, operating	42
Current lease liabilities, financing	68
Total current liabilities	649

Asset retirement obligations	1,565


Total liabilities assumed	2,214

Net identifiable assets acquired	7,379
Goodwill	19,013
Net assets acquired	$	26,392

The goodwill recognized was primarily attributable to a substantial increase in the stock price of Tengasco on the Closing Date, which increased the amount of the consideration transferred.

Pro Forma Operating Results (Unaudited)

The following unaudited pro forma combined results for the three months ended December 31, 2020 reflect the consolidated results of operations of the Company as if the Merger had occurred on October 1, 2019. The unaudited pro forma information includes adjustments for $0.9 million of transaction costs being reclassified to the first quarter of fiscal year 2020 which were incurred during the three months ended December 31, 2020. Additionally, the Company adjusted for $0.9 million of oil and natural gas property impairment Tengasco recognized under the full-cost method of accounting, which would not have been recognized under the successful efforts method, during the three months ended December 31, 2020. Also, the unaudited pro forma information has been tax affected using a 21% tax rate. The common stock was also adjusted for the

conversion of the REP LLC preferred units into common units and retroactively adjusted for the Exchange Ratio and one-for-twelve reverse stock split.


	Three Months Ended December 31, 2020

	(In thousands, except per share/unit amounts)

Total Revenues		$	23,014


Pro Forma Net Income (Loss) before Taxes		(6,647)
Pro forma income tax benefit (expense)		1,396
Pro Forma Net Income (Loss)		$	(5,251)
Net Income (Loss) per Share/Unit from Continuing Operations:
Basic		$	(0.30)
Diluted		$	(0.30)

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Merger been completed as of October 1, 2019 and should not be taken as indicative of the Company's future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.