Business context and reporting period
Entity discrepancy: The request identifies Abundia Global Impact Group, Inc., but the supplied 10-K is for Houston American Energy Corp. (NYSE MKT: HUSA). This summary covers Houston American Energy’s fiscal year ended December 31, 2012, compared with 2011; it is an annual report, not a quarterly filing.
The company is a non-operating oil and gas exploration and production company with interests in the U.S. Gulf Coast and Colombia. It relies on third-party operators and pursues early-stage prospects, drilling, and opportunistic asset sales. In March 2013, it transferred its 37.5% interest in Colombia’s CPO 4 prospect to SK Innovation and was released from related past and future funding obligations.
Financial and operating results
| Metric | 2012 | 2011 |
|---|---|---|
| Oil and gas revenue | $411,349 | $1,156,178 |
| Operating loss | $56,467,207 | $5,877,170 |
| Net loss | $56,757,449 | $4,335,374 |
| Basic and diluted loss per share | $1.46 | $0.14 |
| Cash used in operating activities | $2,620,837 | $4,633,032 |
| Cash used in investing activities | $23,041,556 | $11,930,534 |
| Cash from financing activities | $21,358,454 | Cash used: $162,600 |
- Revenue fell 64.4%, principally following the first-quarter 2012 sale of the company’s La Cuerva and LLA 62 interests. Net oil production fell to 2,787 barrels from 11,016; gas production rose to 12,066 Mcf from 10,838.
- The 2012 net loss included a $46.2 million impairment tied to three noncommercial CPO 4 test wells that were plugged and abandoned, a $4.0 million write-off of a receivable from Gulf United Energy, and $1.7 million of Colombian equity tax expense. The company also recorded a $387,314 gain on oil and gas property sales.
- Year-end cash was $5.63 million, down from $9.93 million; working capital was $9.14 million versus $19.64 million. Restricted cash of $3.06 million backed a CPO 4 letter of credit; the company said it expected release after the letter expired in April 2013. Pro forma working capital, reflecting the CPO 4 commitment release, was $12.36 million.
- Accounts payable and accrued cash calls formed most current liabilities; the balance sheet reported no conventional borrowings. Long-term liabilities were $201,270, including $193,398 of foreign taxes payable. The filing reports no interest paid in either year.
- Proved reserves at year-end were 20,383 boe, all developed U.S. reserves, versus 101,159 boe in 2011. Proved undeveloped reserves fell from 63,774 barrels to zero, following the sale of La Cuerva/LLA 62 interests. The standardized measure and PV-10 were each $298,070, down from a 2011 standardized measure of $3.05 million.
- 2012 capital spending on oil and gas properties was $26.03 million, including $25.92 million in Colombia. The company raised $23.14 million gross through two stock-and-warrant offerings. Shares outstanding increased from 31.17 million at year-end 2011 to 52.18 million at year-end 2012.
Changes, outlook, risks, and unusual items
- Outlook: Management estimated a 2013 budget of about $2.5 million for two planned Serrania wells and seismic work on Los Picachos and Macaya. It expected to fund this with cash on hand, an approximately $3.34 million U.S. tax refund, and release of approximately $3.06 million of restricted cash. These receipts and plans were not assured; management noted possible need for additional financing.
- Drilling timing in Colombia depends on Hupecol and security conditions. The company is a minority, non-operating participant with limited control over operators’ budgets, schedules, and decisions. The company reported no Colombian production from its remaining concessions at year-end.
- The company recorded a $1.69 million current Colombian equity-tax liability, principally relating to a newly enacted tax measure; it expected to pay most in 2013 and the remaining $193,398 in 2014. It cautioned that additional Colombian tax exposure was possible. It also expected a U.S. tax refund of approximately $3.4 million from carrying back net operating losses, while fully reserving deferred tax assets.
- Material contingencies include an ongoing SEC investigation focused on disclosures about CPO 4 resource potential and consolidated securities class actions alleging misleading statements about the prospect and the Tamandua #1 well. The company said the outcomes could not be predicted. A shareholder derivative suit over executive compensation was dismissed in February 2013; the plaintiff’s period to amend expired without an amendment.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor issued an unqualified opinion on the financial statements. The auditor did not attest to internal control, as permitted for smaller reporting companies.
- Other risks include commodity-price volatility, reserve-estimation uncertainty, environmental and operating liabilities, Colombia political and security conditions, partner performance, and concentration in undeveloped properties. The company reported no commodity hedging and no contractual oil or gas sales arrangements.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Verify the status and receipt of the anticipated U.S. tax refund and release of restricted cash, and whether available liquidity covered subsequent spending.
- Review the effect of the CPO 4 settlement, including the release of $3.22 million of accrued cash-call commitments and the transfer of the company’s interest.
- Track outcomes and potential costs of the SEC investigation, securities litigation, and Colombian tax review.
- Assess dilution and potential warrant exercises from the 2012 financings, and confirm subsequent share counts and equity-plan approvals.
- Check whether the planned 2013 Serrania drilling and seismic program proceeded, its results, and any resulting reserve or funding changes.