Houston American Energy Corp. (AMEX: HUSA) has disclosed that it is the subject of formal investigation by the Securities and Exchange Commission.
Houston America, which was the subject of an earlier Sharesleuth investigation, said it had received three subpoenas from the SEC since February. The subpoenas called for testimony by the company’s chief executive officer, John F. Terwilliger and its chief financial officer, John J. Jacobs, as well as the delivery of certain documents.
Houston America said the SEC’s probe began as an informal inquiry in October 2010. The company said it was disclosing the investigation after determining that certain third parties had become aware of it.
Houston American also announced that the company and its partners were abandoning their initial well on a new Colombian oil prospect known as CPO-4. It had previously said that although the well, the Tamandua No.1, showed possible signs of oil or natural gas, the formation had become damaged during the drilling process.
Houston American said the partners in the well had reached the conclusion that continued investment in testing and completion of the well was inadvisable. It said the drilling rig would be moved to the next exploration site at CPO-4, with a start date for that well scheduled for May or June.
Houston American has a 37.5 percent interest in CPO-4, which is controlled by a Korean energy company called SK Innovation. Houston American has claimed in SEC filings that the prospect in Colombia’s Llanos Basin is estimated to hold anywhere from 1 billion to 4 billion barrels of “recoverable reserves.’’
Houston American’s stock fell by more than 40 percent after it announced the news about the unsuccessful well and the SEC investigation.
(Disclaimer: Mark Cuban, the majority owner of Sharesleuth.com LLC, has a short position in Houston American’s shares. Chris Carey, the editor of Sharesleuth, does not invest in individual stocks and has no position in Houston American’s shares. )
Houston American said it was uncertain of the scope of the SEC’s probe.
“The Company has cooperated fully, and is committed to continuing to cooperate fully, with the SEC in this matter,’’ it said in its release. “It is now possible at this time to preduct the timing our outcome of the SEC investigation, including whether or when any proceedings might be initiated, when these matters might be resolved or what, if any, penalties or other remedies would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.”
Houston American said the SEC began a nonpublic informal inquiry into activities involving the company in October 2010. It said the SEC ordered nonpublic formal investigation in March 2011.
Houston American said it received a copy of that order for a formal investigation in February of this year, in connection with the first subpoena from the agency.