Houston American Energy Corp. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. The supplied filing is for Houston American Energy Corp. (NYSE American: HUSA), not Abundia Global Impact Group, Inc. Financial statements are unaudited.
Business context and financial performance
The company produces oil and gas in the United States and holds an indirect interest in Colombia’s CPO-11 block through Hupecol Meta. All reported nine-month oil and gas revenue came from U.S. properties; Colombia contributed no revenue in the period.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Oil and gas revenue | $427,256 | $290,375 | $1,314,065 | $922,862 |
| Operating expenses | $829,324 | $642,218 | $1,879,817 | $1,599,686 |
| Operating loss | ($402,068) | ($351,843) | ($565,752) | ($676,824) |
| Net loss | ($391,280) | ($350,875) | ($552,475) | ($664,695) |
| Loss per common share | ($0.04) | ($0.04) | ($0.06) | ($0.07) |
Revenue increased 47% for the quarter and 42% for the nine-month period. Higher gas volumes and commodity prices drove the increase; nine-month oil volumes declined. Operating losses widened in Q3 but narrowed for the nine-month period. Operating loss was approximately 94% of revenue for Q3 and 43% for the nine-month period. No gross or net profit margin was reported.
For the nine months, operating cash outflow was $202,900 versus $648,816 in 2021; investing cash outflow was $795,315 versus $221,451. Financing cash flow was zero, compared with $4,570,888 provided in 2021, largely from stock offerings. Cash declined by $998,215 to $3,896,362. Working capital was $4,072,422, down from $5,052,685 at year-end 2021.
Balance sheet and material changes
At September 30, 2022, total assets were $10.35 million, shareholders’ equity was $9.97 million, and total liabilities were $385,410. The filing reports no borrowings; liabilities principally comprise operating lease obligations and plugging-and-abandonment reserves. Current liabilities were $149,872 and current assets were $4.22 million. Long-term lease liability was $163,632; the plugging-and-abandonment reserve was $71,906.
The cost-method investment in Hupecol Meta rose to $1,236,934 from $455,779 at December 31, 2021. The company reports an approximately 11% interest in the Venus Exploration Area and approximately 5.5% in the remainder of the CPO-11 block. During the first nine months, Hupecol Meta drilled and completed Bugalu 1 and Saturno ST1 and began drilling Caonabo; Caonabo was determined to be a dry hole. Saturno ST1 and legacy Venus 2A were expected to resume production after a water-injection permit was issued in November 2022; Bugalu 1 was awaiting testing.
Quarterly general and administrative expense included a $200,000 CEO bonus. Management said the CEO’s annual base salary would rise from $120,000 to $180,000, potentially increasing future G&A. Nine-month depletion expense increased to $160,495 from $79,680, attributed to a higher depletable base.
Outlook, risks and controls
Management believes available cash can fund operating costs and anticipated drilling for at least the 12 months following issuance of the statements. No specific drilling budget was set; well timing and participation depend on operators, financing, commodity prices, costs, permits and other factors. Additional acquisitions or expanded drilling may require new capital. The company has no funding commitments and disclosed fewer than one million shares available for equity capital raising; inability to fund well costs could lead to penalties, loss of interests or curtailed activity.
Colombia’s president had expressed opposition to future fossil-fuel development. Management noted that existing contracts appeared to be honored but warned that the government’s position could make drilling on existing acreage more challenging. The company has no historical oil or gas hedging program and is exposed to commodity-price volatility. It reported continuing losses since 2011. Also, $3,603,319 of cash deposits exceeded the FDIC insurance limit, and $3,722 held in Colombian banks was not FDIC-insured.
Management concluded disclosure controls and procedures were ineffective as of September 30, 2022, citing lack of segregation of duties because the CEO also served as principal financial officer. The company relied on third-party consultants for financial reporting; no material change in internal control was reported during the quarter. No formal financial guidance was provided.
Important facts for investors to verify
- Confirm the issuer identity: this filing identifies Houston American Energy Corp., not the company named in the request metadata.
- Reconcile investment and capital-spending figures: the filing gives Hupecol contributions of $781,155 in notes and elsewhere, but MD&A also cites $681,155; total investment cash flow is $795,315, while another MD&A passage reports $795,311.
- Monitor production, testing and permitting updates for Saturno ST1, Venus 2A and Bugalu 1, as well as the Colombia policy and regulatory environment.
- Assess cash runway against planned drilling, potential capital needs and the limited share availability for equity financing.
- Track remediation of the disclosed ineffective controls and CEO/principal-financial-officer duty concentration.