Business context and reporting period
The filing is Houston American Energy Corp.’s unaudited Form 10-Q for the three months ended March 31, 2015. This differs from the request metadata, which identifies Abundia Global Impact Group, Inc.; verify that this is the intended filing. Houston American Energy is an oil and gas company with U.S. and Colombian interests. It drilled no wells during the quarter; drilling was ongoing on one well at quarter-end.
Financial results and position
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Oil and gas revenue | $101,971 | $106,023; down 4% |
| Operating loss | $1,191,769 | $536,105 loss |
| Net loss | $1,187,064 | $535,368 loss |
| Loss per share | $0.02 | $0.01 |
| Cash used in operations | $684,529 | $700,678 |
| Cash at period end | $3,342,836 | $4,052,212 at Dec. 31, 2014 |
| Working capital | $3,414,237 | $3,796,817 at Dec. 31, 2014 |
| Total liabilities | $8,344,636 | $9,342,611 at Dec. 31, 2014 |
| Long-term liabilities | $28,729 | Primarily plugging-and-abandonment reserve |
There was no reported interest expense or material borrowing debt. Current liabilities included a $7.0 million litigation settlement payable, offset by a $7.0 million insurance claim receivable. The filing reports a $677,051 oil and gas property impairment charge. No separate gross margin is presented.
Material changes versus the prior period
- Revenue fell modestly as lower commodity prices more than offset higher production. Oil and gas production volumes increased year over year, while average realized oil price fell to $59.81 per barrel from $92.91 and gas price to $3.92 per Mcf from $4.77.
- Net loss more than doubled, principally reflecting the $677,051 impairment and higher depreciation and depletion ($131,903 versus $6,716). General and administrative expense decreased 25% to $455,873, mainly due to lower stock-based compensation.
- Cash declined by $709,376 during the quarter. Investing activities used $24,847, compared with $621,416 provided in Q1 2014, when the company received $1,565,862 from escrow.
Outlook, risks, contingencies, and unusual items
- Management estimated approximately $1.064 million of capital expenditures for the remainder of 2015, including about $984,000 for pre-drilling work and a first test well on Colombia’s Serrania concession, and $80,000 to complete a U.S. test well. Management expected cash on hand to fund 2015 operations and this budget, but cautioned that plans and costs may change and additional financing is not assured.
- The operator expected to drill a first Serrania exploratory well before year-end 2015; a second well was planned for 2016, subject to conditions. One domestic planned well was shelved because of weak oil prices. The company warned that failure to fund commitments could result in penalties or loss of prospect interests.
- The $7.0 million shareholder class-action settlement was preliminarily approved in April 2015; insurers deposited the settlement funds into escrow in May. Final court approval was scheduled for July 29, 2015. If the settlement is not approved and consummated, the company warned that exposure beyond insurance could materially harm its financial position, results, or cash flows.
- The SEC administrative proceeding was settled in April 2015. The company agreed to a $400,000 penalty, already accrued in 2014; its CEO resigned and agreed to pay a separate $150,000 penalty. John Boylan became chairman, president, and CEO. These were subsequent events, not Q1 operating results.
- Disclosure controls and procedures were deemed ineffective at March 31, 2015 because of a lack of segregation of duties following the CFO’s departure. The company relied on outside consultants and its accounting firm for reporting assistance.
- Commodity prices are a significant risk; the company stated it had not historically used hedges. At March 31, $2,753,578 of cash deposits exceeded the FDIC insurance limit stated in the filing.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Check final court approval and completion of the shareholder settlement, and confirm removal of the matching receivable and payable from later balance sheets.
- Review the status and costs of Serrania and domestic drilling plans, funding commitments, and any changes to the 2015 capital budget.
- Assess whether disclosure-control weaknesses were remediated and whether the leadership transition affected reporting or operations.
- Track commodity prices, production, and any further impairments; the filing cautions that quarterly results may not indicate full-year results.