Filing summary
Entity mismatch: The supplied filing is Houston American Energy Corp.’s Form 10-Q, not a filing for Abundia Global Impact Group, Inc. Confirm that this is the intended filing before relying on this summary.
Business context and reporting period
Unaudited results cover the three and nine months ended September 30, 2015, compared with the corresponding 2014 periods. Houston American Energy is an oil and gas company with U.S. operations and interests in Colombia. It reported 52,169,945 common shares outstanding as of November 4, 2015.
Financial performance and position
| Metric | 2015 | Comparable 2014 |
|---|---|---|
| Nine-month oil and gas revenue | $340,541 | $230,278 |
| Nine-month operating loss | $1,999,589 | $1,733,752 |
| Nine-month net loss | $2,002,438 | $1,730,665 |
| Nine-month operating cash used | $1,494,704 | $1,479,733 |
| Q3 revenue | $124,448 | $56,805 |
| Q3 net loss | $463,566 | $511,653 |
At September 30, 2015, cash was $2.53 million, working capital was $2.88 million, total assets were $7.45 million, and shareholders’ equity was $7.34 million. Total liabilities were $108,475, including a $29,338 plugging-and-abandonment reserve; the filing reports no debt. Cash declined $1.52 million from year-end 2014. Investing activities used $25,029, and there were no financing cash flows. The filing does not present a gross margin measure.
Material changes and unusual items
- Nine-month revenue rose 48% and Q3 revenue rose 119%, reflecting increased production from two wells brought online over the prior year; lower oil and gas prices partly offset the volume gains.
- Nine-month production increased: net oil volumes were 4,737 barrels versus 1,925, and net gas was 23,112 mcf versus 8,268. Average realized oil and gas prices fell to $55.69 per barrel and $3.32 per mcf, from $98.07 and $5.02.
- Nine-month operating expenses included a $677,051 oil and gas property impairment attributed to declining energy prices. Depreciation and depletion rose to $427,792 from $126,677, while general and administrative expense declined to $1.12 million from $1.76 million, mainly due to lower share-based compensation.
- The company drilled one U.S. well during the nine-month period; the 11,996-foot test well was a dry hole. It also sold interests in three non-producing domestic prospects for $56,705.
- The $7 million shareholder class-action settlement was finally approved in July 2015 and funded by insurance. The SEC administrative proceeding was settled in April 2015; the company paid a previously accrued $400,000 penalty, and its CEO resigned and paid a separate $150,000 penalty.
Outlook, risks, and controls
- The company expected to spend approximately $500,000 on pre-drilling work and an initial test well on the Serrania concession, including $61,375 already incurred in the first nine months. Drilling was expected to begin in Q1 2016. Timing and costs could change with field conditions and other factors.
- Management anticipated cash on hand would fund operations and the capital budget for the twelve months ending September 30, 2016. It warned that failure to fund drilling commitments could result in penalties or loss of prospect interests; additional financing was not committed or assured.
- No additional U.S. drilling was planned for 2015 given weak oil and gas prices. The company identified commodity-price volatility as a material risk and reported no historical hedging.
- Disclosure controls and procedures were concluded to be ineffective as of September 30, 2015 because of a lack of segregation of duties following the CFO’s departure. The company relied on consultants and its accounting firm for financial-reporting assistance.
- Cash deposits of $2,212,757 exceeded the FDIC insured limit. The company also reported $160,336 of future office lease payments through May 2017.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Verify available cash and funding needs against the Serrania budget and the company’s stated twelve-month liquidity expectation.
- Track Serrania drilling timing, partner/operator plans, and the outcome and cost of the exploratory program.
- Assess the effect of commodity prices, production levels, and the reported property impairment on future results.
- Review remediation of the disclosed material weakness in disclosure controls and the status of any remaining legal or insurance receivables.