Filing summary: Houston American Energy Corp. Form 10-Q
Entity discrepancy: The request identifies Abundia Global Impact Group, Inc., but the supplied filing is for Houston American Energy Corp. This summary reflects the filing text provided, not an Abundia filing.
Business context and reporting period
Unaudited quarterly report for the quarter and nine months ended September 30, 2011. Houston American is an oil and gas company with operations in the United States and Colombia. Results are substantially affected by its 2010 sale of interests in Colombian producing properties; the company was investing in Colombian exploration and development, including the CPO-4 prospect.
Key financial metrics
| Metric | Three months ended September 30, 2011 | Nine months ended September 30, 2011 |
|---|---|---|
| Revenue | $319,261 | $797,068 |
| Operating income (loss) | $(1,051,697) | $(3,898,685) |
| Net income (loss) | $(1,088,574) | $(4,023,295) |
| Basic and diluted loss per share | $(0.03) | $(0.13) |
- Cash flow: Operating activities used $4.74 million and investing activities used $6.80 million in the first nine months. Cash decreased $11.54 million to $15.12 million. Capital expenditures and property investment were $7.27 million.
- Liquidity: Working capital was $25.31 million at September 30, 2011, versus $34.26 million at December 31, 2010. Current assets were $25.50 million and current liabilities $192,219.
- Assets and liabilities: Total assets were $48.33 million; shareholders’ equity was $48.09 million. Long-term liabilities were $41,820. The filing reports no material borrowings; restricted cash of $3.06 million secures a standby letter of credit.
- Margins: The filing does not state margin percentages. Operating and net results were losses in both the quarter and year-to-date period.
Material changes versus prior comparable periods
- Nine-month revenue fell 95.4% from $17.23 million in 2010; quarterly revenue fell 94% from $5.35 million. The decline principally reflects the 2010 sale of interests in the Dorotea, Cabiona, Leona and Las Garzas blocks, which had generated almost all of the company’s 2010 production.
- Nine-month results shifted from $2.97 million net income in 2010 to a $4.02 million net loss in 2011. Quarterly results shifted from $1.17 million net income to a $1.09 million net loss.
- Cash from operations shifted from $7.20 million provided in the first nine months of 2010 to $4.74 million used in 2011, reflecting reduced profitability and lower accounts payable, partly offset by reduced receivables.
- Cash declined from $26.66 million at year-end 2010. The company attributed the change to U.S. federal tax payments, lower profitability following the asset sale, and exploration and drilling expenditures.
Outlook, commentary, risks and unusual items
- Management expected available resources and anticipated operating cash flows to support planned activities for at least 12 months without additional capital, assuming anticipated commercial production from Tamandua #1 during 2012. It noted financing could be needed depending on well results, timing, acquisitions and drilling plans.
- Tamandua #1 encountered oil and gas indications, but drilling complications led to a sidetrack. Drilling was ongoing as of November 1, 2011; completion was anticipated before year-end, followed by testing and potentially a second CPO-4 test well. Commercially viable production is not assured.
- The company’s remaining-2011 acquisition and drilling budget was approximately $6.2 million. It anticipated drilling a Serrania test well between December 2011 and March 2012.
- Management disclosed a possible Hupecol transaction involving La Cuerva and potentially LLA 62. No transaction had been agreed or completed. These interests represent a substantial portion of the company’s Colombian assets and principal revenue-producing operations, and Houston American said it could not prevent or alter a transaction.
- Other matters include pending ANH approval of the company’s stated 12.5% interests in Macaya and Los Picachos; a $3.95 million receivable from Gulf United contingent on pending ANH approval; and escrow balances subject to post-closing claims, releases and reimbursement. The filing reports no current litigation.
- Environmental regulation and commodity-price volatility are identified risks. The company reported no historical hedging of oil and gas prices and noted it is not fully insured against environmental risks.
- Share-based compensation was $1.75 million for the first nine months. Management bonuses of $526,000 and restricted stock grants valued at $743,400 were reported. The office lease was amended in October 2011 and extended through May 2017.
- Management concluded disclosure controls were effective as of September 30, 2011, with no material change in internal control during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Track Tamandua #1 drilling, testing, commerciality, timing of any production and associated funding needs.
- Monitor the possible Hupecol transaction and its effect on the company’s Colombian assets and revenue base.
- Verify collections and timing for the Gulf United receivable, escrow releases and other contingent reimbursements, including required regulatory approvals.
- Assess cash use, the planned exploration budget, and whether operating cash flows meet management’s stated 12-month funding expectation.