Business context and reporting period
Filing identity: The supplied metadata names Abundia Global Impact Group, Inc., but the filing identifies the registrant as Houston American Energy Corp. (NYSE American: HUSA), an oil and gas company with interests in the United States and Colombia. This unaudited Form 10-Q covers the three and nine months ended September 30, 2021; it was signed November 12, 2021.
Financial performance and condition
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Oil and gas revenue, 2021 | $290,375 | $922,862 |
| Oil and gas revenue, 2020 | $126,425 | $351,489 |
| Operating loss, 2021 | $351,843 | $676,824 |
| Net loss, 2021 | $350,875 | $664,695 |
| Net loss attributable to common shareholders, 2021 | $350,875 | $701,896 |
| Basic and diluted loss per share, 2021 | $0.04 | $0.07 |
Revenue rose 130% for the quarter and 163% for the nine-month period year over year. Management attributed the increase to stronger realized commodity prices and higher oil production, partly offset by lower natural gas production. Nine-month oil and gas sales were entirely from U.S. operations; Colombia generated no revenue.
At September 30, cash was $4.94 million, working capital was $5.12 million, and total assets were $10.94 million. Cash increased from $1.24 million at December 31, 2020, primarily reflecting equity offerings. Nine-month operating cash use was $648,816; investing cash use was $221,451; financing provided $4.57 million. The filing reports no outstanding notes payable at period-end. Total liabilities were $410,053, including $282,500 in operating lease liabilities and a $68,209 plugging-and-abandonment reserve. No income tax expense was recorded.
Material changes versus the prior comparable period
- Nine-month revenue increased from $351,489 to $922,862, while net loss narrowed from $1.45 million to $664,695. The 2020 period included a $429,116 oil and gas property impairment; none was recorded in 2021.
- Nine-month lease operating expense rose 90% to $443,614, mainly due to higher severance taxes and non-recurring water-disposal and operating costs. General and administrative expense rose 15% to $1.08 million, including increased professional fees and higher stock-based compensation.
- Oil production increased 55% for the nine months, while natural gas production declined 38%. Average realized oil and gas prices increased substantially year over year.
- In January and February 2021, the company raised $6.58 million net through two at-the-market common-stock offerings, issuing 2,921,620 shares. It also redeemed its remaining Series A and Series B preferred stock for $1.97 million plus accrued dividends, and converted 60 Series A shares into 24,000 common shares.
- The company increased its Hupecol Meta ownership to 7.85% through additional contributions; its indirect interests include 6.99% of the Venus Exploration Area and 3.495% of the rest of Colombia’s CPO-11 block.
Outlook, risks, and notable items
- Management said cash on hand should fund operating costs and anticipated drilling over at least the next 12 months. It cautioned that expansion, acquisitions, or additional drilling could require financing for which there are no commitments or assurance of availability.
- Management anticipated Colombia CPO-11 drilling would begin in early 2022, subject to operator decisions and industry conditions. It also expected increased production from Reeves County wells after gas-lift work.
- The operator recommended plugging and abandoning the Lou Brock #1-H well following fracking issues; the company expected associated costs in fourth-quarter 2021. The amount of those costs is not stated.
- The company has incurred continuing losses since 2011. Commodity-price volatility, a possible COVID-19 resurgence, drilling costs, operator decisions, and access to capital could adversely affect results. The company reported no hedging activity.
- Disclosure controls and procedures were deemed ineffective as of September 30, 2021, due to a lack of segregation of duties; management said it relied on consultants and its accounting firm for financial reporting assistance.
- At September 30, $4.62 million of cash deposits exceeded the stated FDIC-insured limit, and $4,695 was held in Colombian banks without FDIC insurance.
Important facts for investors to verify
- Confirm the filing belongs to Houston American Energy Corp. (HUSA), not the company named in the request metadata.
- Review the terms and dilution effects of the 2021 ATM offerings, and the status of any future equity financing.
- Monitor actual timing, funding requirements, and results of planned Colombia and Permian Basin drilling, including the Lou Brock #1-H abandonment and costs.
- Assess whether cash resources remain sufficient given continuing losses, operating cash use, commodity-price exposure, and the lack of hedges.
- Track remediation of the disclosed material weakness in disclosure controls and the company’s reliance on external reporting support.