Filing summary
Entity note: The filing is Houston American Energy Corp.’s Form 10-K, not a filing identified as Abundia Global Impact Group, Inc. It covers the fiscal year ended December 31, 2019; quarterly figures below include the three months ended December 31, 2019.
Business context
Houston American Energy is a non-operating oil and gas company with producing interests primarily in the U.S. Permian Basin and additional interests in the U.S. Gulf Coast and Colombia. It relies on third-party operators for drilling and production. At year-end, it reported four gross U.S. producing wells and no producing wells in Colombia.
Financial performance and position
| Metric | 2019 | 2018 |
|---|---|---|
| Oil and gas revenue | $997,992 | $2,243,325 |
| Total operating revenue, including lease bonuses | $997,992 | $2,356,660 |
| Operating loss | $2,333,683 | $337,991 |
| Net loss | $2,515,694 | $251,336 |
| Net loss attributable to common shareholders | $2,746,094 | $490,286 |
| Operating cash flow | $(725,019) | $360,792 |
| Investing cash flow | $(889,328) | $(505,407) |
| Cash at year-end | $97,915 | $755,702 |
- Oil and gas revenue fell 56%. Net oil production declined to 13,674 barrels from 23,842; gas production fell to 116,629 Mcf from 253,053. Average realized oil price was $55.73/barrel versus $57.43; gas was $2.02/Mcf versus $3.27.
- Lease operating expense decreased 14% to $789,708; general and administrative expense declined 5% to $1,357,723. Depreciation and depletion rose to $438,553, and the company recorded a $745,691 impairment charge.
- Operating margin was approximately negative 234% of revenue in 2019, compared with negative 14% in 2018, reflecting higher operating losses and reduced revenue.
- Working capital was negative $748,426 at year-end, versus positive $895,366 in 2018. Total liabilities were $1,229,637, including $597,585 of current related-party notes payable, net of debt discount, and $317,300 in lease liabilities. The $621,052 bridge loan principal was repaid in January 2020.
- Proved reserves were reported at 582,348 BOE, all in the United States. The standardized measure of discounted future net cash flows was $3.57 million, down from $7.71 million in 2018. These reserve-based measures are estimates, not market valuations.
- Fourth-quarter 2019 revenue was $273,144; operating loss was $1,325,308 and net loss was $1,489,018.
Changes, outlook, risks and unusual items
- 2019 losses widened substantially, chiefly as production and realized prices declined, and the company recognized an impairment not recorded in 2018. The 2018 comparison included $113,335 of non-recurring lease-bonus revenue and $86,553 of recovered escrow income.
- The company drilled the Frost #1H well in Texas, which began production in June 2019, and acquired interests in Northern Shelf Permian acreage and Colombia’s CPO-11 block. Colombia’s Daisy-1 well was a dry hole in early 2020. Drilling on other Colombian concessions remained delayed amid permitting disputes and local opposition.
- Management reported that the COVID-19 outbreak and oil-price decline—crude oil was below $25/barrel by mid-March 2020—were expected to hurt 2020 revenue and profitability. Planned additional drilling was on hold pending improved conditions; management did not anticipate material 2020 capital expenditures under then-current conditions.
- After year-end, the company sold 21,059,499 shares through its ATM program for net proceeds of $4,376,549. Management said cash and this financing were expected to fund operating costs and anticipated drilling for at least the next 12 months, while noting further expansion or acquisitions could require additional capital. The equity issuance materially increased the share count and diluted existing holders.
- Other key risks include dependence on operators, commodity-price volatility, limited liquidity and recurring losses, potential impairment, financing availability, Colombian political and permitting risks, environmental and hydraulic-fracturing regulation, and NYSE American listing compliance. The exchange had notified the company of a low-share-price listing deficiency, with a stated deadline of April 16, 2020, subject to an informal reverse-split extension.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing lack of segregation of duties after the CEO also assumed the principal financial officer role. The financial statements received an unqualified audit opinion; the auditor did not attest to internal control effectiveness.
Investor verification priorities
- Confirm the issuer identity: the supplied filing is for Houston American Energy Corp. (HUSA), inconsistent with the request metadata naming Abundia Global Impact Group, Inc.
- Review subsequent filings for the ATM share issuance, resulting dilution, and the company’s cash, liquidity and ability to fund operations after the January 2020 financing.
- Verify the status of the NYSE American listing deficiency and any reverse stock split or other compliance action.
- Assess whether drilling plans, well economics and reserve estimates changed after the severe 2020 commodity-price decline; note that the filing’s reserve valuation uses prescribed year-end assumptions.
- Check reported figures against the full financial statements: the MD&A states 2019 financing cash flow of $956,560, while the cash-flow statement reports $966,560; the filing also presents differing reserve totals in separate sections.