Market Overview

Houston American Energy To Explore Strategic Alternatives


Houston American Energy (NYSE: HUSA) shares shot up nearly 7 percent on Thursday after announcing that its Board of Directors approved the exploration of strategic alternatives for the company. Shares have tapered off since early morning gains, but the stock is still up 2.86 percent at the time of writing. Based out of Houston, Texas, the energy company focuses on oil and natural gas wells and prospects. The company's oil and gas properties are mostly in Colombia.

Houston American Energy plans to seek an investment banking firm for assistance in the evaluation of a range of financial alternatives. Some areas the company is seeking assistance in are financing to support long-term development of its oil and gas properties, financial or industry partners to help in the development in its properties, selling some or all of the company's assets, and the possible sale of the company. Thus far, no decisions have been made to enter into a transaction.

During the first quarter 2012, the company announced a net loss of $20,668,095, or $0.66 per share. The net loss was largely due to the Houston American Energy's decision to cease testing and complete its Tamandu #1 well in Colombia. The company stopped research and investment in the well because of the possibility of damage while drilling.

On July 5, the company announced results for testing on its well-called Cachirre #1. Results were unfavorable because the well was unable to create oil during a swab test. The well was sealed and abandoned because of the bad test results. The Chacirre and Tamandu wells are both on the CPO-4 block of Colombia that Houston American Energy has failed to drill and extract oil from.

Houston American Energy tried to raise capital by directly issuing 6,200,000 shares of the company's common stock for $2.12 per share. The offering was to raise $13.14 million. Houston American Energy stated that it planned to use the capital towards the development of its properties.

Two companies that could be potential buyers or partners of Houston American Energy are Global Energy Development and Pacific Rubiales Energy. Both Global Energy Development and Pacific Rubiales are oil and gas producers that have a large presence in Colombia.

Year-to-date, Houston American Energy is down about 91%. Houston American Energy is set to report second quarter earnings on August 10. Analysts estimate that the company will have an earnings loss of $0.04 per share.

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