Filing summary
Entity and period: The supplied filing is Houston American Energy Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2016, not a filing for Abundia Global Impact Group, Inc. Investors should confirm the intended issuer.
Business context and results
The company is an oil and gas exploration and production business with U.S. producing properties and exploration interests in Colombia. It drilled no wells during the quarter; Colombian development remained delayed by permitting issues. All reported quarterly oil and gas revenue came from the United States.
| Metric | Q1 2016 | Q1 2015 or comparison |
|---|---|---|
| Oil and gas revenue | $48,260 | $101,971; down 52.7% |
| Operating loss | $343,411 | $1,191,769 |
| Net loss | $339,451 | $1,187,064 |
| Basic and diluted loss per share | $0.01 | $0.02 |
| Cash used in operating activities | $295,045 | $684,529 |
| Cash and cash equivalents | $1,697,793 at March 31 | $2,123,520 at December 31, 2015 |
| Working capital | $1,962,169 at March 31 | $2,384,283 at December 31, 2015 |
| Total liabilities | $60,572 | $64,772 at December 31, 2015 |
No debt was reported. Long-term liabilities consisted of a $25,400 plugging and abandonment reserve. Gross margin is not stated; revenue less lease operating expense and severance tax was $37,872. The company reported $40,603 of oil and gas property investment and $90,079 spent to acquire treasury shares during the quarter.
Changes and management commentary
- Revenue fell with lower realized commodity prices and reduced oil production. Oil production was 882 barrels versus 1,294; gas production was 6,579 Mcf versus 6,221. Average realized oil price declined to $37.25 per barrel from $59.81, and gas price to $2.34 per Mcf from $3.92.
- General and administrative expense declined 22% to $356,270, primarily due to lower salaries and professional fees. The prior-year quarter included a $677,051 property impairment; no impairment was recorded in Q1 2016.
- Cash decreased by $425,727 during the quarter. Management cited continuing losses, negative operating cash flow, low commodity prices, and financial commitments as conditions raising substantial doubt about the company’s ability to continue as a going concern.
- The company agreed to invest $1 million for a 12.5% interest in Australia’s Tamboran Resources, subject to closing conditions, including Tamboran securing at least A$705,000 from other investors. Management’s 2016 capital budget included this planned investment. The investment would not itself generate revenue, profit, or cash flow unless the position is later sold.
- Management said Serrania drilling was shelved for 2016 absent a near-term resolution of permitting issues; work on the Los Picachos and Macaya concessions was also expected to be deferred. The company was pursuing strategic alternatives, including a merger partner or significant asset acquisition, and had engaged an advisor and contacted energy investment banks.
Risks, commitments, and controls
- Management stated that cash might not cover 2016 operations and planned commitments, potentially requiring financing or asset sales. No additional financing was committed, and management gave no assurance that financing or a strategic transaction could be completed on acceptable terms, or at all; transactions could be dilutive.
- The office lease required future payments of $112,613 through May 2017. The Tamboran investment remained conditional. The filing also reported $262,016 in escrow receivables related to previously held properties.
- The company had no oil or gas hedges and was exposed to commodity-price volatility. Cash deposits of $1,324,642 exceeded the stated FDIC insured limit at March 31, 2016.
- Disclosure controls and procedures were deemed ineffective because of a lack of segregation of duties following the CFO’s 2013 departure; management relied on outside consultants and its accounting firm for financial reporting assistance.
Important facts to verify
- Confirm that Houston American Energy Corp., rather than Abundia Global Impact Group, Inc., is the intended issuer and that the filing period is Q1 2016.
- Verify the status and funding conditions of the planned Tamboran investment and the company’s capacity to fund it alongside ongoing operations.
- Check for subsequent developments in Colombian permitting, concession rights, drilling plans, and any related funding commitments.
- Assess the going-concern risk, cash runway, potential financing or asset sales, and dilution risk from strategic transactions.
- Reconcile the MD&A statement that lease operating expenses “increased 64%” with the reported figures of $10,388 versus $28,913, which indicate a decrease of approximately 64%.