Filing identity and reporting period
Important mismatch: The request identifies Abundia Global Impact Group, Inc., but the supplied filing is Houston American Energy Corp.’s Form 10-Q for the quarter ended September 30, 2013. This summary covers the filing text provided; verify the company and filing before relying on it.
Houston American Energy is an oil and gas company with interests in U.S. and Colombian prospects. It reported no wells drilled during the first nine months of 2013 and had no drilling underway at September 30.
Financial results and condition
| Metric | Three months ended September 30, 2013 | Nine months ended September 30, 2013 | Comparable 2012 period |
|---|---|---|---|
| Oil and gas revenue | $170,311 | $204,566 | $30,752 quarter; $387,609 nine months |
| Operating loss | $526,248 | $2,607,667 | $5,910,504 quarter; $45,197,994 nine months |
| Net loss | $526,464 | $2,598,906 | $5,935,713 quarter; $48,625,888 nine months |
| Basic and diluted loss per share | $0.01 | $0.05 | $0.16 quarter; $1.41 nine months |
| Operating cash flow | $39,543 for nine months | $(2,443,083) for nine months |
At September 30, cash was $8.45 million, working capital was $10.48 million, total assets were $13.74 million, and total liabilities were $232,000. The filing reports no borrowings or interest paid; liabilities included $8,286 for plugging and abandonment. Gross margin is not separately presented.
Cash increased $2.82 million in the first nine months. Investing activities provided $2.78 million, largely reflecting release of $3.06 million of restricted cash after the CPO 4 letter of credit ended. The company collected an approximately $3.3 million federal tax refund. Oil and gas properties, net, were $3.04 million, down from $5.89 million at year-end 2012.
Material changes versus 2012
- Nine-month revenue fell 47%, principally because the company sold its interest in Colombia’s La Cuerva concession in 2012. Third-quarter revenue rose year over year as production increased from the Crown Paper #1 well after recompletion.
- Nine-month losses were substantially lower than in 2012, when the company recorded major oil and gas property impairments and a $3.95 million bad-debt charge. No impairment or bad-debt expense was reported for the 2013 periods.
- General and administrative expense declined 31% for the nine months to $2.83 million. Management attributed the decline mainly to lower stock and cash compensation; it expected officer departures to reduce annual overhead by more than $500,000.
- The company surrendered its CPO 4 interest under a settlement, eliminating a $3.22 million accrued cash-call obligation and enabling release of the letter-of-credit collateral. It also sold its La Cuerva and LLA 62 interests in 2012 and no longer has interests in those blocks.
- Common shares outstanding were 52,169,945 at November 1, 2013. Options outstanding were 4.33 million at September 30, including grants and previously approved options; these may create dilution if exercised.
Outlook, risks, and unusual matters
- Management budgeted approximately $4.38 million of capital expenditures for the remainder of 2013: Colombian drilling and seismic work and drilling on U.S. prospects. It expected cash on hand to fund operations and this budget for the next 12 months, but cautioned that additional capital might be needed depending on drilling costs and results. No additional financing was committed.
- Planned work included two test wells on Colombia’s Serrania concession, seismic acquisition on Los Picachos and Macaya, and four U.S. test wells. Timing and plans could change; failure to fund commitments could result in penalties or loss of interests.
- The SEC investigation concerning historical CPO 4 disclosures advanced: on August 29, 2013, the company and an individual received Wells notices stating SEC staff had preliminarily recommended an enforcement action. The timing, outcome, and potential penalties were uncertain.
- A securities class action was dismissed in August 2013, but plaintiffs appealed. The company said it intended to defend the claims and could not predict the outcome.
- Disclosure controls were deemed ineffective at September 30, citing the CFO’s departure, lack of accounting expertise in the acting principal financial officer, and insufficient segregation of duties. Management relied on consultants and its accounting firm while addressing these weaknesses.
- The company disclosed commodity-price volatility and said it had not historically used hedges. It also reported a valuation allowance of approximately $20.7 million against deferred tax assets and Colombian tax liabilities related primarily to an equity-tax measure.
Facts investors should verify
- Confirm that the intended filing is Houston American Energy’s 2013 third-quarter 10-Q, not a filing for Abundia Global Impact Group.
- Review subsequent developments in the SEC investigation and class-action appeal, including any financial or operational consequences.
- Check whether the planned drilling and seismic programs proceeded, their results and costs, and whether the company needed additional financing.
- Assess the remediation of ineffective disclosure controls and the status of the CFO position.
- Verify collectability and timing of the approximately $2.07 million in escrow receivables and the remaining Colombian tax obligations.