Filing summary
Entity mismatch: The supplied filing is Houston American Energy Corp. (NYSE American: HUSA), not Abundia Global Impact Group, Inc. This is its unaudited Form 10-Q for the quarter ended March 31, 2021.
Business context and financial results
The company holds oil and gas interests in the United States and Colombia. First-quarter 2021 revenue was entirely from U.S. production; no drilling occurred during the quarter.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Oil and gas revenue | $328,488 | $147,136 |
| Operating expenses | $607,338 | $975,234 |
| Loss from operations | $(278,850) | $(828,098) |
| Net loss | $(268,476) | $(850,990) |
| Net loss attributable to common shareholders | $(305,677) | $(908,590) |
| Basic and diluted loss per share | $(0.03) | $(0.13) |
| Cash used in operating activities | $(365,191) | $(378,402) |
Revenue rose 123%, driven by higher realized oil and gas prices and increased oil production. The filing does not provide a gross margin; operating loss was approximately 85% of revenue, compared with approximately 563% in Q1 2020. The improvement in reported loss also reflects the absence of the prior-year $429,116 property impairment and lower interest expense.
Liquidity, cash flow and capital
- Cash at March 31, 2021 was $5.27 million, versus $1.24 million at December 31, 2020; working capital was $5.31 million, versus $1.14 million.
- Investing activities used $177,031, mainly for U.S. property development and the Hupecol Meta investment. Financing provided $4.57 million.
- The company raised $6.58 million net through January and February at-the-market common-stock offerings, issuing 2,921,620 shares. It used $1.97 million to redeem its remaining Series A and B preferred stock and paid $37,201 in preferred dividends.
- Total liabilities were $433,254. The filing reports no outstanding notes payable at quarter-end; liabilities principally included operating leases and a $68,209 plugging-and-abandonment reserve. Long-term liabilities were $145,197.
Changes, outlook and risks
- Oil and gas revenue increased from $147,136 to $328,488. Oil production rose 56%; natural gas production declined. Average realized oil price increased 28% to $52.08 per barrel and natural gas price increased to $4.90 per Mcf from $1.27.
- Lease operating expense rose 105% to $166,214, principally because higher sales increased severance taxes. General and administrative expense, excluding stock compensation, rose 24% to $393,651, primarily due to professional fees for the stock offerings and preferred-stock redemption.
- Management said cash on hand was expected to fund operations and its share of planned 2021 wells for at least the next 12 months. It anticipated Colombia CPO-11 drilling could begin in mid-to-late 2021; timing and activity depend on operators, commodity prices, financing, costs and other factors. No formal revenue or earnings guidance was provided.
- Management identified continuing losses and COVID-19-related uncertainty around energy demand and prices. Lower prices could pressure revenue, make drilling uneconomic, or cause further property impairments. The company has no committed additional financing; inability to fund well costs could result in penalties or loss of interests.
- The company reported no hedging of commodity-price exposure. It also disclosed that disclosure controls were not effective at quarter-end because of a lack of segregation of duties; management relies on outside consultants and its accounting firm for reporting assistance.
- At March 31, $4.92 million of cash deposits exceeded the FDIC insured limit, and $4,039 was held in Colombian banks without FDIC insurance.
Important facts for investors to verify
- Confirm the intended issuer: the supplied 10-Q is for Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Review the share issuance, net proceeds, offering costs and resulting dilution from the two ATM offerings.
- Monitor actual timing, funding requirements and results of planned U.S. and Colombia drilling, including the CPO-11 program.
- Assess production, realized commodity prices, operating costs and any subsequent impairment charges.
- Track remediation of the disclosed ineffective disclosure controls and the company’s dependence on external financing if plans expand.