Filing Summary
Entity note: The supplied filing is Houston American Energy Corp. (NYSE American: HUSA), not Abundia Global Impact Group, Inc. This summary reflects the filing text provided and should not be attributed to Abundia without verification.
Business context and reporting period
Unaudited Form 10-Q for the quarter and nine months ended September 30, 2020, filed November 13, 2020. Houston American is an oil and gas company with properties in the United States and Colombia, including Permian Basin acreage. It reported four gross producing wells during the periods presented.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Oil and gas revenue | $126,425 | $264,935 | $351,489 | $724,848 |
| Operating loss | $262,494 | $284,445 | $1,432,446 | $1,008,375 |
| Net loss | $259,765 | $304,633 | $1,447,257 | $1,026,676 |
| Net loss attributable to common shareholders | $329,365 | $362,233 | $1,620,057 | $1,199,476 |
- Revenue fell 52% year over year for both the quarter and nine-month period. For nine months, operating costs included a $429,116 oil and gas property impairment; the filing attributes it mainly to lower energy prices.
- Nine-month operating cash outflow was $836,060, versus $546,355 in 2019. Investing cash outflow was $1,327,397, versus $645,507. Financing provided $3,640,317, primarily from common stock sales.
- Cash at September 30 was $1,574,775, versus $97,915 at December 31, 2019. Working capital was $1,499,486, compared with a $748,426 deficit at year-end 2019; current liabilities were $171,450.
- Total liabilities were $359,787, including $245,282 of operating lease liabilities. The related-party bridge loan was repaid in January 2020; no notes payable remained at September 30.
- Common shares outstanding increased from 5,275,816 at year-end 2019 to 6,977,718 at September 30, 2020. The company raised approximately $4.4 million net through its ATM offering during the nine months.
Material changes versus the prior comparable period
- Revenue and production declined: nine-month net oil production was 7,372 barrels versus 10,227, and net gas production was 64,269 Mcf versus 78,430. Lower realized commodity prices, lower production, the O’Brien #3-H well being shut in for repairs, natural declines in Reeves County, and reduced Crown Paper royalties were cited.
- Average nine-month oil sales price fell to $34.45 per barrel from $56.12; natural gas price fell to $0.77 per Mcf from $1.92.
- Nine-month net loss increased to $1.45 million from $1.03 million, including the 2020 impairment charge. Q3 net loss narrowed to $260,000 from $305,000.
- The company completed a 1-for-12.5 reverse stock split effective July 31, 2020; historical share and per-share data were retrospectively adjusted.
Outlook, commentary, risks and unusual items
- Management said cash on hand was expected to fund operating costs and anticipated drilling operations for at least the next 12 months from the financial-statement issuance date. The ATM offering had no remaining capacity, and the company had no commitments for additional funding.
- COVID-19-related demand and price weakness adversely affected revenue and caused the impairment; management warned that continued weakness could cause further impairments and delay or end uneconomic drilling plans. Additional funding may be difficult to obtain.
- Drilling and development had been deferred through June 2020, then selectively resumed. Frost #2H began production in the final week of Q3 and was still unloading water; hydraulic fracturing of Lou Brock #1-H began in October and was expected to finish in November. Colombia’s Montuno-1 was a dry hole.
- The company reported continuing losses since 2011 but stated it believed it could meet near-term needs. It had no commodity hedges and no off-balance-sheet arrangements.
- Disclosure controls and procedures were deemed ineffective at September 30, 2020, due to a lack of segregation of duties following the CFO’s 2013 departure and the CEO’s assumption of principal financial officer duties. The company relied on third-party consultants and its accounting firm for reporting support.
Important facts for investors to verify
- Confirm the registrant identity: the supplied filing names Houston American Energy Corp., while the request metadata names Abundia Global Impact Group, Inc.
- Review the drivers and potential persistence of lower production and realized prices, the status and output of new wells, and the possibility of additional ceiling-test impairments.
- Assess the company’s cash runway against drilling plans, lease obligations, preferred dividends, and the absence of committed additional financing.
- Review share dilution from the ATM offering, preferred-stock conversion rights, warrants and options, and the effect of the reverse split.
- Evaluate the disclosed ineffective controls and the company’s progress toward addressing the segregation-of-duties weakness.