Houston American Energy Corp. 2023 Annual Report Analysis

Houston American Energy Corp. (HUSA) is an independent energy company focused on the exploration, development, exploitation, acquisition, and production of natural gas and crude oil properties. The company's principal properties are located in the U.S. Permian Basin and Colombia, with additional holdings in the U.S. Gulf Coast region. This analysis aims to provide an in-depth review of HUSA's 2023 annual report, highlighting key financial data, operational achievements, and potential investment opportunities.

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Business Overview

HUSA operates as a non-operating joint owner in oil and gas properties, relying on partnerships with larger operators for drilling and operational activities. The company's strategy involves early identification of and opportunistic entrance into existing and emerging resource plays. By partnering with or promoting to larger operators, HUSA aims to capture larger resource potential at lower costs while minimizing exposure to drilling risks and costs.

Key Financial Highlights

• Net Loss: HUSA reported a net loss of $3,211,277 for the year ended December 31, 2023, compared to a net loss of $744,279 in 2022. The increased loss is primarily attributed to a full cost ceiling test impairment of $537,686 and a loss on disposal of oil and gas properties of $2,343,126.
• Revenue: Total oil and gas revenues decreased by 52% to $794,027 in 2023 from $1,638,841 in 2022. The decline in revenues was due to decreases in oil production, gas production, and average sales prices of oil and natural gas.
• Operating Expenses: Total operating expenses increased to $5,374,823 in 2023 from $2,416,761 in 2022, mainly due to the impairment charge and loss on disposal of oil and gas properties.
• Cash and Cash Equivalents: As of December 31, 2023, HUSA had a cash balance of $4,059,182, compared to $4,547,210 at the end of 2022.

Operational Achievements

• HUSA's principal properties in the Permian Basin and Colombia continue to be the focus of its operations. In 2023, the company received distributions totaling $1,220,954 from its equity investment in Hupecol Meta LLC, representing its share of distributable net profits.
• The company invested $2,403,219 in Hupecol Meta for required capital contributions related to drilling operations in Colombia.

Investment Considerations

• Market Volatility: HUSA's financial performance is heavily influenced by the volatility in oil and gas prices. The company's strategy of partnering with larger operators may mitigate some risks, but market fluctuations remain a significant factor.
• Geopolitical Risks: Operations in Colombia expose HUSA to geopolitical risks, including political instability and regulatory challenges. Investors should consider these risks when evaluating HUSA's investment potential.
• Growth Opportunities: HUSA's focus on the Permian Basin and Colombia, regions with significant oil and gas potential, presents growth opportunities. The company's ability to identify and enter emerging resource plays early could yield substantial returns.

Conclusion

Houston American Energy Corp.'s 2023 annual report reveals a challenging year marked by increased losses due to impairment charges and the disposal of oil and gas properties. However, the company's strategic partnerships and focus on key regions offer potential for future growth. Investors should weigh the inherent risks of the oil and gas industry, including market volatility and geopolitical factors, against the opportunities presented by HUSA's operational strategy.

This analysis is based on HUSA's 2023 annual report and is intended for informational purposes only. It does not constitute investment advice.