Filing summary
Entity and period: The supplied filing is Houston American Energy Corp.’s Form 10-K for the fiscal year ended December 31, 2018, signed April 1, 2019. This does not match the request metadata identifying Abundia Global Impact Group, Inc.; confirm the filing is for the intended company. The filing is an annual report, not a standalone fourth-quarter report.
Business context and financial results
Houston American is a non-operating oil and gas company with its producing interests concentrated in the U.S. Permian Basin and additional interests in the Gulf Coast and Colombia. It relies on third-party operators to plan and conduct drilling and production.
| Metric | 2018 | 2017 |
|---|---|---|
| Oil and gas revenue | $2.243 million | $0.630 million |
| Total operating revenue, including lease bonus | $2.357 million | $0.630 million |
| Operating loss | $0.338 million | $1.876 million |
| Net loss | $0.251 million | $2.038 million |
| Net loss attributable to common shareholders | $0.490 million | $2.178 million |
| Operating cash flow | $0.361 million provided | $1.717 million used |
| Cash at year-end | $0.756 million | $0.392 million |
| Working capital at year-end | $0.895 million | $0.592 million |
| Total liabilities at year-end | $0.145 million | $0.237 million |
Oil and gas revenue rose 256%, primarily because production from two Reeves County wells began in late 2017 and 2018 production and prices increased. Net production was 23,842 barrels of oil and 253,053 Mcf of gas, versus 10,038 barrels and 30,997 Mcf in 2017. Average realized prices were $57.43 per barrel of oil (up from $50.81) and $3.27 per Mcf of gas (down from $3.88). Lease operating expense increased to $0.914 million from $0.216 million; general and administrative expense fell to $1.423 million from $2.129 million. Production costs were $53.19 per BOE, up from $14.23. A conventional gross or operating margin percentage is not stated.
Fourth-quarter 2018 operating revenue was $474,977 and net income was $64,665, following losses in each of the first three quarters. The filing attributes $86,553 of full-year other income to recovery of escrow funds previously written off; this was non-recurring. The filing reports no 2018 interest expense and no debt outstanding at year-end. Preferred stock remained outstanding, with stated liquidation preferences totaling $1.920 million; 12% cumulative dividends were paid during the year.
Investing activities used $0.505 million and financing activities provided $0.508 million in 2018. The company raised $0.747 million net through at-the-market common-stock sales and paid $0.239 million in preferred dividends. Outstanding common shares were 62,425,140 at year-end, up from 59,260,101. Total assets were $7.823 million and shareholders’ equity was $7.677 million at December 31, 2018.
Proved reserves were reported as 804,687 BOE at year-end, all in the United States; reported PV-10 and standardized measure were each $7.715 million. These estimates use prescribed pricing and assumptions and are not presented as current market value. Reserve disclosures contain a small internal discrepancy: the headline table reports 350,697 barrels of oil, while a supplemental table reports 350,697 barrels in total but elsewhere lists developed oil reserves as 107,548 versus 107,748. Verify the underlying reserve report.
Outlook, risks and notable matters
- Management expected to fund operations for the twelve months following issuance from cash on hand, including an estimated $325,000 company share for a second Yoakum County well. Additional Reeves County drilling could require new capital; no definitive Reeves drilling plan or budget had been provided. The filing warns that financing may not be available on acceptable terms or at all.
- The Frost #1H well in Yoakum County was drilled in early 2019; completion and production facilities were expected in the second quarter. Further drilling depended on the operator’s assessment. The new Reeves County operator had not provided a development plan after taking over in 2018.
- All three Colombian concessions remained undeveloped, with no wells drilled or production. Permitting disputes and local opposition led Hupecol to defer Serrania drilling and suspend work on Los Picachos and Macaya while seeking resolution with Colombia’s hydrocarbon agency. The company could lose some or all value of its Colombian interests if development or compensation is not secured.
- The company has incurred losses continuously since 2011. Management said reduced overhead, increased revenue and positive operating cash flow mitigated going-concern concerns, but the business remains dependent on financing, commodity prices, operator decisions, and a small number of wells and properties.
- Disclosure controls and internal control over financial reporting were both deemed ineffective at year-end. Management identified a material weakness arising from inadequate segregation of duties after the interim CEO also assumed the principal financial officer role; the company relied on outside consultants. The auditor did not attest to internal controls.
- Other material risks include oil and gas price volatility, drilling and cost uncertainty, infrastructure and purchaser dependence, environmental and hydraulic-fracturing regulation, Colombia political and security risks, and potential dilution from further equity issuance. The company did not report using commodity hedges.
Most important facts to verify
- Confirm the issuer: the filing is for Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Check current cash needs, remaining ATM capacity, preferred-stock conversion and dividend terms, and potential dilution.
- Obtain updated operator plans, well costs and production results for Yoakum and Reeves County, including the outcome of the Frost #1H well.
- Review the independent reserve reports and reconcile the oil-reserve figures and PUD totals in the filing.
- Track Colombia permit or settlement developments and assess whether the carrying value of those interests remains recoverable.
- Monitor remediation of the disclosed material weakness and whether disclosure and financial-reporting controls become effective.