Filing summary
Registrant identification: The filing is for Houston American Energy Corp., not Abundia Global Impact Group, Inc. The filing covers the quarter ended June 30, 2014, and reports results for the three and six months ended that date.
Business context and financial results
The company is an oil and gas exploration and production business with U.S. and Colombian properties. It reported U.S. oil and gas revenue; Colombia generated no revenue in the first half of 2014.
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 |
|---|---|---|
| Oil and gas revenue | $67,450 | $173,473 |
| Operating expenses | $752,178 | $1,394,306 |
| Net loss | $683,644 | $1,219,012 |
| Loss per share, basic and diluted | $0.01 | $0.02 |
For the six months, operating cash flow was negative $1,121,102 and investing cash flow was negative $744,534. Cash declined $1,865,636 to $5,713,094. At June 30, current assets were $6,367,628, current liabilities were $112,573, and working capital was $6,255,055. Total liabilities were $121,273, including an $8,700 plugging-and-abandonment reserve; the filing reports no financing activities in the first half.
Six-month oil and gas property investment was $2,310,396. Total assets were $12,488,572, and shareholders’ equity was $12,367,299. The filing does not present a gross margin measure.
Changes versus prior comparable periods
- Six-month revenue rose 406% from $34,255 in 2013; second-quarter revenue rose 250% from $19,223. Management attributed the increases to the Crown Minerals well and production beginning from two new wells.
- Six-month net loss improved to $1,219,012 from $2,072,442. General and administrative expense fell 41% to $1,289,552, primarily due to lower headcount, lower stock compensation, and cost controls.
- Cash used in operations was $1,121,102, versus $316,926 provided in the prior-year period. The comparison was affected by a $3.3 million tax refund received in 2013.
- Cash fell from $7,578,730 at December 31, 2013, while oil and gas property investment increased. Escrow receivable declined to $355,355 after $1,565,862 was collected.
Outlook, operations, and risks
- Management estimated approximately $4.523 million of capital expenditures for the balance of 2014, including U.S. drilling and completion and planned Colombian drilling and seismic work. It expected cash on hand to fund 2014 operations and this budget, but noted plans and costs could change and that additional financing was not assured.
- Six wells were drilled in the first half: one was completed and producing, three awaited completion at quarter-end, and two were dry holes. Weather, equipment and scheduling delays, and land issues slowed activity relative to internal targets. An Oklahoma re-entry well was later determined non-commercial; the company reported approximately $54,000 in associated costs.
- Management warned that oil and gas prices are volatile and said it had not historically hedged commodity-price exposure. Cash deposits of $5,336,174 exceeded the FDIC insured limit at June 30, 2014.
- Disclosure controls and procedures were concluded to be ineffective as of June 30, 2014, citing inadequate accounting expertise in the principal financial officer role and lack of segregation of duties. The company relied on outside consultants and its accounting firm for financial reporting assistance.
- After quarter-end, the Fifth Circuit reversed dismissal of a shareholder class action and remanded it for further proceedings; the ruling addressed pleading sufficiency, not the merits. On August 4, 2014, the SEC instituted administrative proceedings alleging misleading statements about the CPO 4 prospect. The company said it intended to contest the allegations; outcomes and potential penalties were uncertain.
- Stock-based compensation was $412,278 for the first half. The company granted 800,000 options during the period, including 600,000 to an employee and 200,000 to non-employee directors.
Important facts for investors to verify
- Confirm the issuer identity: the supplied metadata names Abundia Global Impact Group, Inc., but this filing identifies Houston American Energy Corp.
- Review the status and potential financial consequences of the SEC administrative proceeding and the remanded shareholder class action.
- Assess whether operating cash, production growth, and escrow collections can support the stated 2014 capital program, particularly given drilling and project execution risks.
- Monitor remediation of the disclosed material weaknesses in disclosure controls and financial reporting.