Houston American Energy Corp. — Q1 2024 Form 10-Q
Entity note: The request identifies Abundia Global Impact Group, Inc., but the supplied filing is for Houston American Energy Corp. (NYSE American: HUSA). Confirm the filing matches the intended company.
Business context and reporting period
Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. Houston American has four U.S. Permian Basin wells on production and an approximately 18% interest in Hupecol Meta LLC, which operates in Colombia. No drilling occurred during the quarter on the company’s properties or Hupecol Meta’s properties.
Financial performance and position
- Oil and gas revenue was $147,686, down 36% from $230,024. Net oil production fell to 1,393 barrels from 2,242; natural gas production fell to 12,686 Mcf from 17,594. Average oil price rose 2% to $73.98 per barrel, while natural gas price declined 9% to $1.29 per Mcf.
- Operating expenses rose to $555,815 from $490,460; operating loss widened to $408,129 from $260,436. Higher lease operating costs included approximately $24,500 of severance taxes attributable to prior periods. G&A increased, while depreciation and depletion and stock-based compensation declined.
- Other income was $392,430, mainly comprising a $361,216 distribution from Hupecol Meta, plus $31,214 of interest income. The company recorded a net loss of $15,699, versus net income of $104,175 in Q1 2023; reported loss per share was $0.00.
- Operating cash flow was positive $122,770, compared with $19,243 in Q1 2023. Investing activities used $430,803, primarily capital contributions to Hupecol Meta; financing provided no cash. Cash declined to $3.75 million from $4.06 million at year-end.
- Working capital was $3.56 million, down from $3.92 million at December 31, 2023. Total liabilities were $460,802, including $128,435 of lease liabilities and a $64,189 plugging-and-abandonment reserve; the filing reports no borrowings. Total assets were $10.49 million, including a $4.94 million Hupecol Meta investment. Accumulated deficit was $77.0 million.
Material changes, outlook and risks
- Revenue declined primarily because of lower production and lower natural gas prices. Management attributes the production decline primarily to natural well decline; lease operating expense rose 43% year over year.
- Hupecol Meta’s four Venus-area wells were shut in from February 20 through March 18 because of a dispute with local residents over road maintenance.
- Management expected one additional vertical well on the CPO-11 block by mid-2024, subject to Hupecol’s evaluation of potential asset monetization. Houston American estimated its share of the well cost at approximately $500,000. No U.S. drilling was planned. Management said cash on hand should fund operating costs and anticipated 2024 drilling, but additional acquisitions or expanded drilling could require new capital.
- The company reports continuing losses since 2011 but believes cash on hand can fund operations and anticipated drilling for at least 12 months following issuance. It has no committed additional financing, limited shares available for equity raises, and warns that inability to fund well costs could lead to penalties, loss of interests, or forgone opportunities.
- Commodity prices are volatile; the company has not historically hedged production. Cash included $3.50 million above the FDIC-insured limit and $2,237 in Colombian bank deposits not insured by the FDIC.
- Disclosure controls were deemed ineffective at March 31, 2024, citing insufficient accounting expertise and lack of segregation of duties after the CFO’s departure; the company relies on third-party consultants. No material internal-control changes occurred during the quarter.
- The operator of the Reeves County wells advised in April that it had paid but failed to withhold the company’s share of severance taxes for certain periods; approximately $24,500 was accrued in Q1 2024.
Key facts for investors to verify
- Confirm the issuer identity: the provided filing is Houston American Energy Corp., not Abundia Global Impact Group, Inc.
- Check whether the planned Colombia well proceeded, its actual cost, and the outcome of Hupecol’s potential asset monetization.
- Monitor production declines, realized commodity prices, and whether the severance-tax under-withholding creates further expense or liabilities.
- Review cash use, future Hupecol contributions and distributions, and the company’s ability to fund commitments without additional financing.
- Track remediation of the disclosed material weaknesses in financial reporting controls.