US ENERGY CORP

Our oil and gas properties are described below and under Item 8, Notes 5 and 16 of the Notes to Consolidated Financial Statements under the captions “Oil and Natural Gas Producing Activities” and “Supplemental Oil and Natural Gas Information (Unaudited)”, respectively.

Oil and Natural Gas Interests

Reserve estimates are based on average prices per barrel of oil and per Mmbtu of natural gas at the first day of each month of the 12-month period prior to the end of the reporting period. Reserve estimates as of December 31, 2023, 2022 and 2021 are based on the following average prices, in each case as adjusted for transportation, quality, and basis differentials applicable to our properties on a weighted average basis:

Presented below is a summary of our proved oil and natural gas reserve quantities, all of which are located in the United States, as of the end of each of our last three fiscal years:

Internal Controls Over Proved Reserve Estimates

Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC’s regulations. Our process for managing and monitoring our proved reserves is delegated to On Point Resources, a third-party independent petroleum engineering company. Oversight is provided by management and the Audit Committee of our Board of Directors, as discussed below.

On Point Resources, Inc.'s President, Don Jacks has worked in the energy industry since 1981 and has been contracted by the Company to perform our proved reserve estimates since 2019. He holds a Bachelor of Science Degree and a Master of Science Degree in Petroleum Engineering from The University of Texas at Austin and has been a Registered Professional Petroleum Engineer in the state of Texas since 1992. He is also a member of the Society of Petroleum Evaluation Engineers (SPEE) and has been a chapter officer since 2005. Technical and engineering reviews of our assets are performed quarterly by Mr. Jacks and reported to our management. Data obtained from these reviews, in conjunction with economic data and our ownership information, is used in making a determination of estimated proved reserve quantities.

Our reserves are reviewed by our management quarterly and by the Audit Committee of our Board of Directors at least annually. Our management, which includes our Chief Executive Officer and Chief Financial Officer, are responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate and meets independently with Mr. Jacks separate from our management to discuss processes and findings in the reserve report. The Audit Committee can and does request reports and information from Mr. Jacks to independently verify values reported by the management team.

As of December 31, 2023, our proved reserves totaled 4,863,259 MBOE, of which 100% were classified as proved developed. On a BOE basis, approximately 65% of the total proved reserves are derived from 3,183 MBbls of oil and 35% is derived from 10,082 MMcfe of natural gas and NGLs. See the “Glossary of Oil and Natural Gas Terms” above for an explanation of these and other terms.

You should not place undue reliance on estimates of proved reserves. See “Risk Factors - Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or the relevant underlying assumptions will materially affect the quantity and present value of our reserves.” A variety of methodologies are used to determine our proved reserve estimates. The principal methodologies employed are reservoir simulation, decline curve analysis, volumetrics, material balance, advance production type curve matching, petrophysics/log analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of our fields.

The primary inputs to the reserve estimation process are comprised of technical information, financial data, ownership interests and production data. All field and reservoir technical information is assessed for validity when meetings are held with management, land personnel and third-party operators to discuss field performance and to validate future development plans. Current revenue and expense information is obtained from our accounting records, which are subject to their own set of internal controls over financial reporting. All current financial data such as commodity prices, lease operating expenses, production taxes and field commodity price differentials are updated in the reserve database and then analyzed to ensure that they have been entered accurately and that all updates are complete. Our current ownership in mineral interests and well production data are also subject to the aforementioned internal controls over financial reporting, and they are incorporated into the reserve database as well and verified to ensure their accuracy and completeness. Our reserve database is currently maintained by Don Jacks of On Point Resources, Inc. Mr. Jacks works with our personnel to review field performance, future development plans, current revenues and expense information. Following these reviews, the reserve database and supporting data is updated so that Mr. Jacks can prepare his independent reserve estimates and final report.

*Proved Undeveloped Reserves.*As of December 31, 2023, 2022 and 2021, we did not record any proved undeveloped (“PUD”) reserves due to the lack of an approved development plan for development of potential PUD reserves and uncertainty in 2023 and 2022 regarding the availability of capital that would be required to develop any PUD reserves. Currently, we are evaluating potential PUD locations, which may result in future PUD reserves.

*Oil and Natural Gas Production, Production Prices, and Production Costs.*The following table sets forth certain information regarding our net production volumes, average sales prices realized and certain expenses associated with sales of oil and natural gas for the years ended December 31, 2023, 2022 and 2021.

We encourage you to read this information in conjunction with the information contained in our financial statements and related notes included in Item 8 of this annual report on Form 10-K under “Financial Statements and Supplemental Data”.

The following table provides a regional summary of our production for the years ended December 31, 2023, 2022 and 2021

*Drilling and Other Exploratory and Development Activities.*The following table sets forth information with respect to development and exploratory activity on wells in which we own an interest during the periods ended December 31, 2023, 2022 and 2021.

The number of gross wells is the total number of wells we participated in, regardless of our ownership interest in the wells. The information above should not be considered indicative of future drilling performance, nor should it be assumed that there is any correlation between the number of productive wells drilled and the amount of oil and natural gas that may ultimately be recovered. SeeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operationsin this annual report on Form 10-K.

Present Activities. As of April 12, 2023, we are not drilling or participating in the drilling of any wells, however, we are in the process of returning to production idle wells we acquired in 2022.

*Oil and Natural Gas Properties, Wells, Operations and Acreage.*The following table summarizes information about our gross and net productive wells as of December 31, 2023.

Wells are classified as oil or natural gas wells according to the predominant production stream.

*Acreage.*The following table summarizes our estimated developed and undeveloped leasehold acreage as of December 31, 2023:

For our non-operated properties, we are subject to lease expiration if the operator does not commence the development of operations within the agreed terms of our leases. In addition, our leases typically provide that the lease does not expire at the end of the primary term if drilling operations have commenced. As of December 31, 2023, all of our acreage is held by production.

Real Estate

We own three city lots covering 13.84 acres in Riverton, Wyoming that are currently listed for sale. In February 2024 we accepted an offer to purchase the lots for $150 thousand, less closing costs, and we expect to complete the sale later in 2024. However, there can be no assurance that the sales of these lots will be completed on the terms, or in the time frame, we expect or at all.

Office Space

As of March 26, 2024, we have leased office space for our Company headquarters in Houston, Texas of 11,000 square feet. The lease is described in greater detail in “Note 4. Leases”, to the footnotes to the financial statements included herein under “Item 8. Financial Statements and Supplementary Data”

The Company believes its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business.