General Overview

U.S. Energy Corp. is a company focused on the acquisition, exploration, and development of industrial gases, oil and natural gas properties in the United States. The company has undergone several key developments in the past year:

Material Developments

1. Synergy Acquisition: In January 2025, the company acquired approximately 24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana from Synergy Offshore LLC. The consideration included $2 million in cash, 1.4 million shares of the company’s common stock, a carried working interest, and revenue sharing agreements.

2. Underwritten Offering: In January 2025, the company completed an underwritten public offering of 4,871,400 shares of common stock, raising approximately $11.9 million in net proceeds.

3. Related Party Share Repurchase: Also in January 2025, the company repurchased 635,400 shares of common stock from certain related parties for $1.574 million.

4. Stock Repurchase Program: The company’s board of directors authorized an extension of the ongoing share repurchase program, allowing for up to $5 million in repurchases until June 2026.

5. Ceiling Test and Impairment: The company expects to record a write-down of $7-8 million on its oil and gas properties in the second quarter of 2025 due to lower commodity prices.

Plan of Operations and Strategy

The company’s key strategic priorities include deploying capital conservatively, evaluating value-enhancing transactions, and continuing its share repurchase program. The company plans to focus on its recent industrial gas acquisition in Montana, while also seeking additional opportunities in the oil, natural gas, and industrial gas sectors.

Results of Operations

For the three months ended March 31, 2025, the company recorded a net loss of $3.1 million, primarily due to declining commodity prices and lower production volumes. Revenue decreased by 59% compared to the prior year period, driven by a 57% decline in production and a 5% decrease in average realized prices. Operating expenses, including lease operating, gathering/transportation, and depreciation, also declined due to the reduced production levels. The company did not incur a ceiling test write-down during the first quarter of 2025 but expects to record a $7-8 million write-down in the second quarter.

Liquidity and Capital Resources

As of March 31, 2025, the company had sufficient liquidity and capital resources to execute its business plan, with no outstanding balance on its $20 million credit facility. The company plans to fund its 2025 capital expenditures, estimated at $3.5-$4.5 million, primarily through cash on hand, operating cash flows, and proceeds from divestitures. The company is currently in talks to renew and extend its credit facility through 2029.

Overall, U.S. Energy Corp. has undergone significant changes in the past year, including strategic acquisitions, equity financing, and share repurchases. The company’s focus on industrial gas development and prudent capital management aims to position it for future growth and value creation.