Filing summary
Entity mismatch: The request identifies ABUNDIA GLOBAL IMPACT GROUP, INC., but the supplied Form 10-Q is for Houston American Energy Corp. The summary below reflects the filing provided; verify the issuer before relying on it.
Business context and reporting period
Unaudited quarterly report for the three and nine months ended September 30, 2012. Houston American Energy is an oil and gas company with U.S. and Colombian interests. During the quarter, it was developing Colombian prospects, including CPO 4, after selling its interest in the La Cuerva and LLA 62 blocks earlier in 2012.
Financial performance and position
- Revenue: Third-quarter oil and gas revenue was $30,752, down from $319,261 in 2011. Nine-month revenue was $387,609, down from $797,068. The filing attributes the decline principally to the La Cuerva sale. The MD&A contains a conflicting third-quarter figure of $30,572; the statements report $30,752.
- Loss: Third-quarter net loss was $5.94 million ($0.16 per share), versus $1.09 million ($0.03 per share) in 2011. Nine-month net loss was $48.63 million ($1.41 per share), versus $4.02 million ($0.13 per share). The 2012 nine-month loss included $37.80 million of oil-and-gas property impairment, $3.95 million of bad-debt expense, and $3.20 million of income tax expense, substantially related to a deferred-tax valuation allowance.
- Cash flow: Nine-month operating cash use was $2.44 million; investing cash use was $19.42 million; financing provided $12.13 million, primarily from the May stock-and-warrant offering. Cash fell by $9.74 million to $190,245.
- Liquidity: Working capital was $2.46 million at September 30, compared with $19.64 million at December 31, 2011. Current assets were $6.22 million and current liabilities $3.76 million. Restricted cash of $3.06 million was pledged for a CPO 4 letter of credit and was not available as ordinary cash.
- Debt and assets: The balance sheet reports no borrowing debt. Long-term liabilities were $7,734. Total assets were $16.99 million, down from $48.66 million at year-end 2011; shareholders’ equity was $13.22 million.
- Operating costs: Nine-month general and administrative expense was $4.08 million, up from $3.81 million. The filing reports no meaningful operating margin; revenue was small relative to operating expenses and impairment charges.
Material changes versus the prior period
- The company sold its indirect interest in Hupecol Cuerva, LLC, eliminating its interests in La Cuerva and LLA 62; the sale generated a reported gain of $315,119.
- Two CPO 4 wells were deemed non-commercial: the company ceased work on the Tamandua #1 sidetrack and decided to plug and abandon Cachirre #1. Nine-month impairment charges for these wells were $26.53 million and $11.28 million, respectively.
- The company wrote off a $3.95 million receivable from Gulf United Energy after its delinquency. Gulf United’s continuing inability to meet obligations could increase the company’s share of CPO 4 costs.
- Oil and gas development spending was $24.03 million during the first nine months, including $3.59 million accrued at quarter-end.
Outlook, risks, and unusual items
- The Zorro Gris #1 well reached total depth on October 23, 2012 and was scheduled for testing in the fourth quarter. The estimated fourth-quarter 2012 budget was approximately $10 million, including well completion and testing, seismic work, and related costs.
- After quarter-end, the company raised approximately $10 million gross, or approximately $9.2 million net, in an October 2012 stock-and-warrant offering. Management stated this was not expected to fund the full remaining 2012 budget or subsequent needs. Further financing was uncertain; failure to fund commitments could result in penalties or loss of prospect interests.
- The SEC was conducting a non-public investigation focused on disclosures about CPO 4 resource potential. The company said it was cooperating and that no violation finding had been communicated. Consolidated securities class actions and a shareholder derivative suit were also pending; outcomes and potential costs were uncertain.
- A potential Colombian equity tax of approximately $1.2 million had not been accrued; tax advisers were reviewing inconsistent filings. Management also recorded a full valuation allowance against deferred tax assets, estimated at $16.2 million.
- The company’s board reviewed strategic alternatives and concluded satisfactory alternatives were unavailable, choosing to seek additional financing. Commodity prices are volatile, and the company reported no historical hedging activity.
- Management concluded disclosure controls were effective as of September 30, 2012 and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Houston American Energy Corp., not the company named in the request.
- Reconcile the third-quarter revenue discrepancy ($30,752 in the statements versus $30,572 in MD&A).
- Check current liquidity and subsequent financing needs, including restricted cash and the October offering’s net proceeds.
- Track Zorro Gris #1 test results, remaining CPO 4 commitments, and any additional costs resulting from Gulf United’s default.
- Monitor the SEC investigation, securities litigation, derivative action, and the unresolved potential Colombian tax exposure.