Business context and reporting period
Filing identity: The supplied filing is Houston American Energy Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2019, not a filing identified as Abundia Global Impact Group, Inc. The company reports oil and gas operations in the United States and Colombia; first-quarter revenue came entirely from U.S. properties.
Financial performance and position
- Revenue: $250,720, down 67% from $754,157 in Q1 2018. Oil sales were $173,777, natural gas $27,788, and natural gas liquids $49,155.
- Profit and expenses: Net loss was $239,620 versus $52,911; loss attributable to common shareholders was $297,228 versus $256,181. Total operating expenses were $491,707 versus $807,068. The filing reports basic and diluted loss per share of $0.00 in both periods, rounded.
- Margins: The filing does not present gross margin. Operating loss was $240,987, compared with $52,911, reflecting lower revenue despite lower operating expenses.
- Cash flow: Operations used $202,071, versus $110,376 in Q1 2018; investing used $49,651 versus $7,277; financing used $57,600 versus $62,850, primarily for preferred dividends. Cash declined $309,322 to $446,380.
- Liquidity and liabilities: Working capital was $566,321, down from $895,366 at year-end 2018. Total liabilities were $521,256, including $381,820 of operating lease liabilities and a $39,584 plugging-and-abandonment reserve. No borrowings are reported.
- Assets and equity: Total assets were $7,915,548, including net oil and gas property and equipment of $6,818,601. Shareholders’ equity was $7,394,292. Series A and B preferred stock had a combined $1.92 million liquidation preference.
Material changes versus the prior comparable period
- Revenue fell 67%, attributed to natural production declines in Reeves County and lower realized prices. Net oil production declined to 3,969 barrels from 7,978; gas production to 24,810 Mcf from 63,409. Realized oil prices fell 28% to $43.79 per barrel and gas prices 27% to $3.08 per Mcf.
- Lease operating expense declined to $149,227, mainly because lower sales reduced severance taxes. General and administrative expense, excluding stock compensation, fell 44% to $235,732, primarily following the CEO’s departure in 2018.
- Adoption of the lease accounting standard on January 1, 2019 resulted in recognition of a right-of-use asset and lease liability. The filing gives an initial recognized amount of approximately $357,985 and period-end lease liabilities of $381,820.
Outlook, risks and unusual items
- The company says existing cash should fund operations for the 12 months after issuance and its expected share of a second Yoakum County well, estimated at approximately $325,000. The Reeves County operator had not provided definitive plans for another 2019 well; participation could require additional capital.
- In May 2019, the company established an at-the-market offering of up to $5.2 million of common stock. It reported selling 100,000 shares for net proceeds of $24,356 through the filing date; the sales agent receives a 3% commission, and the company reimbursed $18,000 of expenses.
- Management reports continuing losses since 2011 and warns that inability to raise capital could require it to forgo drilling, incur penalties, lose acreage rights, or curtail operations. Colombian drilling is on hold while the operator seeks permits or compensation for the Serrania concession.
- The company has no reported commodity hedges and is exposed to volatile oil and gas prices and Permian Basin transportation constraints. It also reports that disclosure controls were ineffective due to lack of segregation of duties; third-party consultants and the accounting firm assist with reporting.
Important facts for investors to verify
- Confirm the registrant identity: this filing names Houston American Energy Corp., despite the request metadata naming Abundia Global Impact Group, Inc.
- Reconcile the filing’s investing cash flow amount of $49,651 with MD&A’s stated $47,465, and confirm the reported operating-expense comparisons where amounts differ between sections.
- Review the planned Yoakum well’s timing and cost, Reeves County drilling plans, and whether additional funding will be needed.
- Assess the consequences of ineffective disclosure controls, continuing losses, commodity-price exposure, and unresolved Colombian concession matters.
- Verify preferred-stock dividend and common-share loss figures, and the dilution implications of the ATM offering and outstanding convertible securities, options, and warrants.