HOUSTON AMERICAN ENERGY CORP. General
We are an independent energy company focused on the development, exploration,
exploitation, acquisition, and production of natural gas and crude oil
properties with principal holdings in the
Our mission is to deliver outstanding net asset value per share growth to our investors via attractive oil and gas investments. Our strategy is to focus on early identification of, and opportunistic entrance into, existing and emerging resource plays. We do not operate wells but typically seek to partner with larger operators in development of resources or retain interests, with or without contribution on our part, in prospects identified, packaged and promoted to larger operators. By entering these plays earlier, identifying stranded blocks and partnering with, or promoting to, larger operators, we believe we can capture larger resource potential at lower cost and minimize our exposure to drilling risks and costs and ongoing operating costs.
We, along with our partners, actively manage our resources through opportunistic acquisitions and divestitures where reserves can be identified, developed, monetized and financial resources redeployed with the objective of growing reserves, production and shareholder value.
Generally, we generate nearly all our revenues and cash flows from the sale of produced natural gas and crude oil, whether through royalty interests, working interests or other arrangements. We may also realize gains and additional cash flows from the periodic divestiture of assets.
Recent Developments Lease Activity
Hupecol Meta holds a working interest in the 639,405 gross acre CPO-11 block in
the
During 2022, we experienced lease expirations in
Drilling Activity and Well Operations
During 2022, Hupecol Meta drilled 3 vertical wells (the Saturno ST1, the Bugalu
1 and Caonabo) in the Venus Exploration Area of the CPO-11 block. In order to
handle disposal of produced water from wells, in
Capital Investments
During 2022, our capital investment expenditures for acreage acquisitions,
drilling, completion and related operations, as well as investments relating to
Hupecol Meta, totaled
27 Financing Activities
In
During 2022, we sold an aggregate of 394,678 shares in the 2022 ATM Offering and
received proceeds, net of commissions, of
Proceeds from the 2022 ATM Offering were used to support our acquisition of additional interest in Hupecol Meta and to support our future financial commitments relating to anticipated drilling operations on the CPO-11 block.
Colombian Election
In
Critical Accounting Policies
The following describes the critical accounting policies used in reporting our financial condition and results of operations. In some cases, accounting standards allow more than one alternative accounting method for reporting. Such is the case with accounting for oil and gas activities described below. In those cases, our reported results of operations would be different should we employ an alternative accounting method.
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Full Cost Method of Accounting for Oil and Gas Activities. We follow the full
cost method of accounting for oil and gas property acquisition, exploration and
development activities. Under this method, all productive and nonproductive
costs incurred in connection with the exploration for and development of oil and
gas reserves are capitalized. Capitalized costs include lease acquisition,
geological and geophysical work, delay rentals, costs of drilling, completing
and equipping successful and unsuccessful oil and gas wells and related internal
costs that can be directly identified with acquisition, exploration and
development activities, but does not include any cost related to production,
general corporate overhead or similar activities. Gain or loss on the sale or
other disposition of oil and gas properties is not recognized unless significant
amounts of oil and gas reserves are involved. No corporate overhead has been
capitalized as of
Revenue recognition. On
Our revenue is comprised principally of revenue from exploration and production activities. Our oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.
Contracts with customers have varying terms, including spot sales or month-to-month contracts, contracts with a finite term, and life-of-field contracts where all production from a well or group of wells is sold to one or more customers. We recognize sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.
Revenues are recognized for the sale of our net share of production volumes.
Unevaluated oil and gas properties not subject to amortization include the
following at
At At
December 31, 2022 December 31, 2021
Acquisition costs $ 143,847 $ 143,847
Evaluation costs 2,199,279 2,199,279
Total $ 2,343,126 $ 2,343,126
The carrying value of unevaluated oil and gas prospects includes
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Stock-Based Compensation. We use the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. These assumptions include estimating the volatility of our common stock price over the expected life of the options, dividend yield, an appropriate risk-free interest rate and the number of options that will ultimately not complete their vesting requirements. Changes in the subjective assumptions can materially affect the estimated fair value of stock-based compensation and consequently, the related amount recognized on the Statements of Operations.
Full Cost Method of Accounting for Oil and Gas Activities. We follow the full
cost method of accounting for oil and gas property acquisition, exploration and
development activities. Under this method, all productive and nonproductive
costs incurred in connection with the exploration for and development of oil and
gas reserves are capitalized. Capitalized costs include lease acquisition,
geological and geophysical work, delay rentals, costs of drilling, completing
and equipping successful and unsuccessful oil and gas wells and related internal
costs that can be directly identified with acquisition, exploration and
development activities, but does not include any cost related to production,
general corporate overhead or similar activities. Gain or loss on the sale or
other disposition of oil and gas properties is not recognized unless significant
amounts of oil and gas reserves are involved. No corporate overhead has been
capitalized as of
Results of Operations
Year Ended
Oil and Gas Revenues. Total oil and gas revenues increased 23% to
The increase in revenues was attributable to (i) improved commodity pricing, including 46% and 24% increases in crude oil prices and natural gas prices, respectively, realized during 2022 compared to 2021, and (ii) a 23% increases in natural gas production volumes during 2022 compared to 2021; partially offset by a 26% decline in crude oil production.
The following table sets forth the gross and net producing wells, net oil and gas production volumes and average hydrocarbon sales prices for 2022 and 2021 (excluding information pertaining to cost method investments):
2022 2021
Gross producing wells 4 4
Net producing wells 0.68 0.68
Net oil production (Bbls) 10,688 14,367
Net gas production (Mcf) 73,635 60,069
Oil-Average sales price per barrel
The change in production volumes reflects domestically, increased production
from our
The change in average sales prices realized reflects a spike in global energy
prices in early- to mid-2022 accompanying uncertainty associated with the
Russian invasion of
All oil and gas sales revenues for 2022 and 2021, by region, were as follows:
Colombia U.S. Total
2022
Oil sales $ - $ 995,083 $ 995,083
Gas sales $ - $ 377,534 $ 377,534
2021
Oil sales $ - $ 913,809 $ 913,809
Gas sales $ - $ 416,389 $ 416,389 Lease Operating Expenses. Lease operating expenses, excluding expenses
attributable to our cost method investment in
Lease operating expense, by region, for 2022 and 2021, were as follows:
Colombia U.S. Total
2022 $ - $ 631,033 $ 631,033
2021 $ - $ 626,210 $ 626,210 The change in lease operating expenses was principally attributable to a decrease in non-recurring water disposal and operating costs incurred on the Lou Brock well during testing in 2021, which well was ultimately plugged and abandoned.
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Depreciation and Depletion Expense. Depreciation and depletion expense decreased
by 16% to
General and Administrative Expenses (Excluding Stock-Based Compensation).
General and administrative expense increased by 18% to
Stock-Based Compensation. Stock-based compensation decreased to
Other Income (Expense). Other income/expense, net, totaled
Financial Condition
Liquidity and Capital Resources. At
Cash Flows. Operating activities used cash of
Investing activities used cash of
Financing activities provided cash of
Long-Term Liabilities. At
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Capital and Exploration Expenditures and Commitments. Our principal capital and
exploration expenditures relate to ongoing efforts to acquire, drill and
complete prospects, in particular our Colombian acreage held through Hupecol
Meta. During 2022, capital expenditures relating to Hupecol Meta increased
sharply with our acquisition of additional interests in Hupecol Meta and our
investments in Hupecol Meta to fund our share of costs associated with the
initial wells drilled on the CPO-11 block. Based on discussions with Hupecol
Meta, we anticipate that additional expenditures will be made to acquire seismic
data and to support additional drilling operations on the CPO-11 block in 2023
and beyond with an initial focus on drilling a horizontal well in the Venus
Exploration Area. There are no present plans to conduct additional drilling
operations on our
In addition to possible operations on our existing acreage holdings, we continue to evaluate drilling prospects in which we may acquire an interest and participate.
As our allocable share of well costs will vary depending on the timing and number of wells drilled as well as our working interest in each such well and the level of participation of other interest owners, we have not established a drilling budget but will budget on a well-by-well basis as our operators propose wells.
We believe that we have the ability, through our cash on-hand, to fund operations and our cost for all planned seismic expenditures and wells expected to be drilled during 2023 and for the twelve months following the issuance of these financial statements.
In the event that we pursue additional acreage acquisitions or expand our
drilling plans, we may be required to secure additional funding beyond our
resources on hand. While we may, among other efforts, seek additional funding
from "at-the-market" sales of common stock, and private sales of equity and debt
securities, we presently have, as of
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