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FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. These forwarding-looking statements include without limitation statements regarding our expectations and beliefs about the market and industry, our goals, plans, and expectations regarding our properties and drilling activities and results, our intentions and strategies regarding future acquisitions and sales of properties, our intentions and strategies regarding the formation of strategic relationships, our beliefs regarding the future success of our properties, our expectations and beliefs regarding competition, competitors, the basis of competition and our ability to compete, our beliefs and expectations regarding our ability to hire and retain personnel, our beliefs regarding period to period results of operations, our expectations regarding revenues, our expectations regarding future growth and financial performance, our beliefs and expectations regarding the adequacy of our facilities, and our beliefs and expectations regarding our financial position, ability to finance operations and growth and the amount of financing necessary to support operations. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially. See “Item 1A. Risk Factors” for a discussion of certain risk factors. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this annual report on Form 10-K.
As used in this annual report on Form 10-K, unless the context otherwise requires, the terms “we,” “us,” “the Company,” and “Houston American” refer to Houston American Energy Corp., a Delaware corporation.
Item 1.
Buss
General
Houston American Energy Corp is an independent oil and gas company focused on the development, exploration, exploitation, acquisition, and production of natural gas and crude oil properties in the U.S. Gulf Coast region and in South America. Our oil and gas reserves and operations are concentrated primarily in the South American country of Colombia and in the onshore Gulf Coast region, particularly Texas and Louisiana.
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 entrance into, existing and emerging resource plays, particularly in South America and the U.S. Gulf Coast. We typically seek to partner with larger operators in the 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 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.
Exploration Projects
Our exploration projects are focused on existing property interests, and future acquisition of additional property interests, in South America, particularly Colombia, and in the onshore Texas Gulf Coast region and Louisiana.
Each of our exploration projects differs in scope and character and consists of one or more types of assets, such as 3-D seismic data, leasehold positions, lease options, working interests in leases, partnership or limited liability company interests or other mineral rights. Our percentage interest in each exploration project (“Project Interest”) represents the portion of the interest in the exploration project we share with other project partners. Because each exploration project consists of a bundle of assets that may or may not include a working interest in the project, our Project Interest simply represents our proportional ownership in the bundle of assets that constitute the exploration project. Therefore, our Project Interest in an exploration project should not be confused with the working interest that we will own when a given well is drilled. Each exploration project represents a negotiated transaction between the project partners. Our working interest may be higher or lower than our Project Interest.
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Consistent with our strategy of opportunistically divesting holdings and redeploying financial resources to grow our reserve positions, in late 2010, our indirect interests in four concessions in Colombia were sold for net proceeds, before escrow holdbacks, of $29.4 million. The interests sold accounted for 96.9% of our estimated proved oil and natural gas reserves at December 31, 2009 and 96.8% of our oil and natural gas revenues in 2010. During 2011, proceeds from that sale were redeployed principally to exploration costs associated with our CPO 4 prospect in Colombia.
The following table sets forth information relating to our principal exploration projects as of December 31, 2011:
Average
Gross
Net proved
2011 Net Production
Net
acreage
working
interest %
producing
wells
reserves
(boe)
Oil
(bbls)
Natural Gas
(mcf)
Oklahoma
Louisiana
Texas
Total U.S.
Colombia
Total
- United States Properties:
In the United States, our properties and operations are principally located in the on-shore Gulf Coast region of Louisiana and Texas.
Louisiana Properties
Our principal producing and exploration properties in Louisiana consist of the following:
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East Baton Rouge Parish — we hold a 37.50% working interest in the Profit Island and North Profit Island prospects, covering 3,805 gross acres in East Baton Rouge Parish, Louisiana. In addition, we hold a 7.29% royalty interest in 2,485 royalty acres, as well as a 5.675% royalty interest in the Crown Paper #01 well.
Plaquemines Parish — we hold a 1.80% working interest in the SL 180771 well and prospect which covers 300 gross acres. We have no present plans to drill additional wells on the South Sibley Prospect.
Vermilion Parish — we hold a 2.25% working interest in the 830 acre La Furs, Inc. F-16 well and prospect. We have no present plans to drill additional wells on the South Sibley Prospect.
Texas Properties
Our principal exploration properties in Texas consist of the following:
Jim Hogg County — we hold a 4.375% working interest in the 340 acre Hog Heaven Prospect in Jim Hogg County, Texas. At December 31, 2011, the Hog Heaven Prospect produced gas from a single 6,200-foot well. We have no present plans to drill additional wells on the Hog Heaven Prospect.
Matagorda Country — we hold a 3.50% working interest in the 779 acre Harrison Prospect in Matagorda County, Texas. We have no present plans to drill additional wells on the Harrison Prospect.
Our exploration properties in Texas at December 31, 2011 reflect our sale, during 2010, of a 2.5% working interest in 6000+ acres and a 1.25% overriding royalty interest in approximately 50,000 gross acres in Karnes County, Texas.
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- Colombian Properties:
At December 31, 2011, we held interests in multiple prospects in Colombia covering 825,657 gross acres. The majority of our holdings in Colombia are located within the Llanos and the Caguan Putumayo Basins. We identify our Colombian prospects by the prospect operator and concessions operated.