Deep Analyses of $HUSA – Is it worth investing now?

HUSA -HOUSTON AMERICAN ENERGY CORPORATION

A comprehensive research on the operations of $HUSA

HUSA BACKGROUND AND INCEPTION

The Houston American Energy Corporation, publicly traded as HUSA on the American New York stock Exchange, is a hydrocarbon exploration company based in Houston, Texas state in USA. It was founded on 2001 by John F Terwilliger, a military veteran and former executive of Moose Oil and Gas Co. It is a relatively small corporation with a market cap of $11.07 million US dollars.

Since its inception it has maintained an overhead corporate structure, in which it employs only two full-time individuals and outsources third party expertise to be more cost effective in its activities.

It operates debt-free and although it yet to post a profit since inception, revenue generated has been on an upward trajectory over the years. Houston is not only its headquarters but also a base of operations as it has several well leases and reserves in the region.

Other properties that it is exploring in Texas are the Permian basin and the Gulf coast region. Internationally, it has vested interest in oil wells in Colombia where it operates alongside other industry players.

Executives (Insiders) of the company hold 8.5% of its total shares, while institutions hold 20.7 % and majority being owned by the general public at 70.8%.

Their institutional holders are renowned organizations the likes of the Vanguard group, Morgan Stanley, Wells Fargo and many others. This is an indicator on the potential the company has and goes on to show that many believe its fundamentals are strong.

Despite the fundamental and technical factors that affect its operations, market forces have also played a significant role in its market.

Historically, it has been subject to the swings in the stock market, with more recently a lot of volatility being witnessed in its stock over the past year. Day traders are particularly appealed by such volatility and some have capitalized on it to make significant gains.

HUSA has seen stock surges and downturns. All this raise the question, what is driving the craze? Is it due to internal factors relating to the operations of HUSA or external factors of the markets? It is vital to examine both to understand the direction of the stock and overall performance of the company long-term.

HUSA’s exploration exploits

HUSA began their drilling in 2001.There are likely to have gone public in 2002 according to its annual financial reports. The Texan Permian Basin which is the primary location of HUSA, is endowed with hydrocarbon reserves.

Houston is considered the world’s energy capital as it leads all sectors of the energy industry.

Therefore, HUSA’s choice of operating in this area was very strategic. From the latter century in the early 1920’s, oil exploration commenced and showed positive results in the region. HUSA stock traded at average of $4.77 a stock price in 2002.

This was a good beginning and allowed the company to take on its projects. Data by the US geological survey shows that the resource estimate in the Permian basin is at par with reserves in the middle east.

Being the early days of exploration by HUSA in this very area, the company’s valuation soared exponentially. It basically doubled every year from its $5.3 stock price in 2003 and by 2006 had reached a record high of $99.38 stock price.

This was definitely a hype and a market correction consequently occurred the following year. The share price plummeted to an average $55 stock price in 2007 and closed at $38 by the end of the year. That year saw -58% in annual change.

HUSA was back up again the following year in 2008 and did averagely well for the year closing at $42 per share at the end of the year, with a new record high achieved of $140 stock price.

Interestingly this was during the peak of the subprime bubble in the US and the market was artificially propped therefore initiating a bull market. The Great financial recession hit in 2009 and HUSA saw its average stock price decline to a low $20.5. Luckily for HUSA, 2009 was the year it began international exploration in Columbia.

Columbia exploration and failures

In late 2009, HUSA obtained a 25% non-operating interest in 345,452-acre oil and gas exploration area in Columbia’s Llanos basin. The area was named the ‘‘CPO-4 block”. HUSA and Terwilliger claimed that the area had strong shows for hydrocarbons and estimated reserves of about 1.4 to 2 billion barrels of oil.

The valuation of the CPO-4 block was in the billions of dollars and this saw the stock of HUSA rise to astronomical heights. Between 2009 to 2011, traders rushed in to buy HUSA considering its reports further elevating the market capitalization of HUSA from $150 million to over $600 million.

After drilling three dry wells in the CPO-4 block, HUSA saw its capitalization of $600 million wiped out and the share price dropped to $0.40 cents per share. HUSA instantly went from a booming multinational to a penny stock.

To date the stock is yet to recover from this blow. Mr Terwilliger stepped down as CEO. After probing. the SEC accused him and HUSA of misleading investors regarding the CPO-4 block.

HUSA faced threats to be delisted from the NASDAQ index on which it was traded at the time due to constant low share price. They were forced to sell operating assets in Columbia to meet the settlements.

HUSA Milestones after near Collapse

• 2012- 2014: Clearance of SEC charges and restructuring the corporation for better operations. John Boylan takes over as CEO.
• 2015: Operations continue- HUSA returns to active exploration activities with positive outlooks. Increased revenues as they start successful operations again.
• 2016: The Johnson #1H well is drilled and successful production achieved. Minimal growth in stock performance.
• 2017: HUSA successful in Reeves County wells. Production volume of 6150 barrels of oil in the 4^th quarter and 19,518 thousand cubic feet of gas.
• 2018-2019: 7,978 barrels of oil and 63,409 cubic feet of gas. Management changes as John Boylan is replaced by James Schoonover. HUSA acquires acreage in San Andreas drilling program. HUSA raises $4.49 million in sale of common stock to fund drilling program.

Recent years activities and future expectations

As of 2020, HUSA’s drilling projects were halted by the pandemic and hence deferred to the future. The stock price further plummeted due to no exploration activities taking place. They re-initiated exploration efforts in 2021. HUSA announced management changes as the interim CEO James Schoonover stepped down and John Terwilliger was to once again occupy the position of president and CEO.

HUSA made a major move that saw its stock rise in July 2020 and that was issuing a 1-for-12.5 reverse split of its common stock. This was an attempt to raise its share price to enable it to continue trading on the NYSE.

This triggered a lot of market reaction. HUSA stock became the subject of every day trader’s technical analysis as they recognized an arbitrage opportunity due the volatility witnessed.

Ault Global Holdings Inc acquired a 9.90 % stake in HUSA as of June 30^th. This further accelerated the upward surge of its stock price. This made HUSA one of the most valuable penny stocks with reported returns of up to 200% by day traders.

HUSA MOMENTARY SURGES

The stock surge witnessed by HUSA is based primarily on technical factors and market forces. Huge amounts of capital jumping into the stock caused the surge.

Warren Buffet, the infamous and seasoned investor released a statement saying and I quote, “I think the final value of the investment does not need to see numbers only, need to figure out what the business is doing with the most basic information to determine ….”

It is clear that the old oracle of Omaha, as he has been classically called, is concerned with the fundamental factors as opposed to the technical factors. He has expressed concern regarding oil drilling as the exploration company is not paid to drill but on produced crude oil and oil prices see fluctuations that could lead to losses for the drillers.

Fundamental components of HUSA

HUSA has seen stock surges and downturns in the past and will likely see more in the future. They have strong fundamentals in their prime reserves in the Permian basin and Columbia. However, this may not be enough to withstand the challenges facing hydrocarbon exploration. Key of which include speculations of peak oil production, declining oil reservoirs, environmental concerns and government policies against hydrocarbon companies.

In Columbia, political instability and civil wars could be a big disruptor to the operation of HUSA. All in all, HUSA is likely to do well in the near future as it is backed by a lot of private investors as well as bigger investors and has strong potential to scale to profitability.

Market analysts predict that almost ghostly upswings will be seen in the coming year. The future for HUSA seems lucrative short term but uncertain in the long run.

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