US ENERGY CORP
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
BSIN$1.33+0.8%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001437749-24-015698
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresOther InformationCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001437749-24-025184
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresOther InformationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 27 previous paragraphs and 69 current paragraphs.
24 unchanged; 3 reworded; 42 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (42)
Current report
The future value and reserves associated with our helium development are unknown and the Company may never realize the value of any reserves.
Current report
No reserves have been assigned in connection with helium property interests to date, given their early stage of development. The future value of the Company is therefore dependent on the success or otherwise of drilling and development activities, which are principally directed toward the further exploration, appraisal and development of its assets in Montana, and construction of a helium gas processing facility. Exploration, appraisal and development of helium reserves are speculative and involve a significant degree of risk. There is no guarantee that exploration or appraisal of the helium property will lead to a commercial discovery or, if there is a commercial discovery, that the Company will be able to realize the value of such reserves as intended. If at any stage the Company is precluded from pursuing its exploration and development programs, or construction of a processing facility, or such programs are otherwise not continued, the Company’s business, financial condition and/or results of operations and, accordingly, the price of the Company’s shares, is likely to be materially adversely affected. Helium exploration involves a high degree of risk and there is no assurance that expenditures made for future exploration or development activities will result in discoveries reserves that are commercially or economically viable.
Current report
The Company’s helium properties are in the exploration stage; such properties may never yield commercial quantities of helium; and the Company may not be able to commercially extract any helium, if present.
Current report
The Company’s helium properties are in the exploration stage only. The Company has never had any material interest in helium producing properties. There is no assurance that commercial quantities of helium will be discovered at any of the properties or any future properties, nor is there any assurance that the exploration or development programs of will yield any positive results. Even if commercial quantities of helium are discovered, there can be no assurance that any development will result in profitable helium production. Factors which may limit the ability the Company’s ability to produce helium include, but are not limited to, commodity prices, availability of additional capital and financing and the nature of any helium deposits.
Current report
Our helium, oil and natural gas operations are subject to environmental, legislative and regulatory initiatives that can materially adversely affect the timing and cost of operations and the demand for helium, crude oil, natural gas, and NGLs.
Current report
Our operations are subject to stringent and complex federal, state and local laws and regulations relating to the protection of human health and safety, the environment and natural resources. These laws and regulations can restrict or impact our business activities in many ways including, but not limited to the following:
Current report
Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial or restoration obligations, and the issuance of orders enjoining future operations or imposing additional compliance requirements. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances, hydrocarbons or wastes have been disposed or otherwise released. Moreover, local restrictions, such as state or local moratoria, city ordinances, zoning laws and traffic regulations, may restrict or prohibit the execution of operational plans. In addition, third parties, such as neighboring landowners, may file claims alleging property damage, nuisance or personal injury arising from our operations or from the release of hazardous substances, hydrocarbons or other waste products into the environment.
Current report
The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. We monitor developments at the federal, state and local levels to keep informed of actions pertaining to future regulatory requirements that might be imposed in order to mitigate the costs of compliance with any such requirements. We also monitor industry groups that help formulate recommendations for addressing existing or future regulations and that share best practices and lessons learned in relation to pollution prevention and incident investigations.
Current report
We cannot reasonably predict what applicable laws, regulations or guidance may eventually be adopted with respect to our operations or the ultimate cost to comply with such requirements. It is also possible that such regulations, or our requirement to comply with such regulations, could have a material adverse effect on our operations, negatively affect our margins, and/or force us to curtail certain business operations.
Current report
Our helium operations will require us to obtain licenses and permits which may not be obtained, may be delayed, or may limit our ability to undertake exploration and production activities.
Current report
The helium operations of the Company will require it to obtain licenses for operating, permits, and in some cases, renewals of existing licenses and permits from government agencies. There can be no assurances that the Company will attain all permits and licenses necessary to achieve profitable production of helium in the future. Further, the ability of the Company to obtain, sustain or renew any such licenses and permits on acceptable terms is subject to changes in regulations and policies and to the discretion of the applicable authorities or other governmental agencies.
Current report
Our helium operations are subject to risks and hazards which may not be covered by insurance.
Current report
The Company’s helium operations is subject to a number of risks and hazards generally, including adverse environmental conditions, accidents, mechanical failures, labor shortages, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to our helium properties and/or facilities, personal injury or death, environmental damage to the properties, or delays in exploration, development and production activities, monetary losses and possible legal liability. Although the Company maintains insurance to protect against certain risks in such amounts as it considers reasonable, its insurance will not cover all the potential risks associated with helium operations. The Company may also be unable to maintain insurance to cover these risks at reasonable costs. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. These events and limits to insurability may result in significant costs that could have a material adverse effect upon its financial performance and results of operations.
Current report
We may never complete the acquisition of operated acres from Synergy Offshore LLC, and such failure could negatively impact our stock price and future business and financial results.
Current report
On June 25, 2024, the Company entered into a non-binding letter of intent with Synergy, relating to the proposed acquisition by the Company of 24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana, which are highly contiguous to the property acquired from Wavetech. Synergy is controlled by Mr. Duane H. King, a member of the Board of Directors of the Company, who serves as the Chief Executive Officer and Manager of Synergy, and John A. Weinzierl, the Company’s Chairman, is an approximate thirty percent beneficial owner of Synergy.
Current report
The Synergy acquisition is subject to among other things, the negotiation of definitive agreements, and the Company coming to agreement with Synergy on definitive agreements and terms, satisfactory due diligence, shareholder approval of the issuance of shares of common stock expected to be issued to Synergy in the transaction, and other customary conditions to closing, and we cannot estimate the expected closing date of such acquisition. The parties may not be able to come to terms on definitive acquisition agreements, and for that or other reasons, the acquisition of the Synergy assets may not close on a timely basis, on the terms set forth in the LOI, or at all.
Current report
If the acquisition is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:
Current report
We face risks associated with our ability to locate and commercially extract helium.
Current report
The future value of the Company will depend in part on its ability to find and develop helium resources that are economically recoverable within the Kevin Dome Structure in Toole County, Montana. The circumstances in which a discovered helium accumulation becomes or remains commercially viable depends on a number of factors. These include the particular attributes of the deposit, such as size, depth concentration, development cost and proximity to infrastructure as well as key external factors such as helium supply and demand. This, along with other factors such as maintaining title to licenses, leases and permits, successful design, construction, commissioning and operating of wells and processing facilities may result in projects not being developed, or operations becoming unprofitable. Helium exploration involves exploration activities and drilling operations which may not generate a positive return on investment. This may arise from dry wells, but also from wells that are productive but do not produce sufficient revenues to return a profit after accounting for drilling, operating and other associated costs. The outcome of any drilling program may be dependent on matters which include the reservoir’s composition, the flow rate and the rate of any decrease in pressure as the gas flows to the surface. These matters cannot be known until the Company undertakes initial drilling programs. The production from successful wells may also be impacted by various operating conditions, including insufficient storage or transportation capacity, or other geological and mechanical conditions. In addition, managing drilling hazards or environmental damage and pollution caused by exploration and development operations could greatly increase the associated cost and profitability of individual wells. The future exploration activities of the Company may be affected by a range of factors including geological conditions, limitations on activities due to seasonal weather patterns, unanticipated operational and technical difficulties, industrial and environmental accidents, landholder disputes, changing government regulations and many other factors beyond the control of the Company.
Current report
The success of the Company will also depend upon the Company having access to sufficient development capital, being able to maintain title to its projects and obtain all required approvals for its activities. In the event that exploration programs prove to be unsuccessful this could lead to a diminution in the value of the Company’s projects, a reduction in the cash reserves of the Company and possible relinquishment of the Company’s projects.
Current report
The exploration costs of the Company are based on certain assumptions with respect to the method and timing of exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying assumptions will be realized in practice, which may materially and adversely affect the Company’s results of operations. Helium exploration involves significant risk since few properties that are explored contain reserves that would be commercially economic to develop into producing wells. As such, there can be no assurance that existing or future exploration programs will result in discovery of commercially viable reserves. If there are resources located, there is no guarantee they can be commercially produced.
Current report
The Company has never had any helium producing properties and such properties may not result in profitable helium production.
Current report
The Company’s helium interests are exploration stage only. The Company has never had any material interest in helium producing properties. Even with application of best science, there is no assurance that commercial quantities of helium will be discovered at any of the properties of the Company or any future properties, nor is there any assurance that the exploration or development programs of the Company thereon will yield any positive results. The future development of any properties found to be economically feasible will require the construction and operation of wells and related infrastructure. Even if commercial quantities of helium are discovered, there can be no assurance that any property of the Company will ever be brought to a stage where helium can profitably be produced thereon. Factors which may limit the ability of the Company to produce helium from its properties include, but are not limited to, commodity prices, availability of additional capital and financing and the nature of any helium deposits. It is common in helium operations to experience unexpected costs, problems and delays during construction and development. In addition, delays in the early stages of helium production often occur. Accordingly, there cannot be any assurance that activities will result in profitable helium operations at its operations.
Current report
The Company’s helium exploration and development activities are dependent on the availability of drilling rigs and related equipment in the Kevin Dome Structure in Toole County, Montana. Increases in oil and gas exploration activities could result in higher demand and limited availability for some types of drilling rigs and equipment in certain areas, which may result in delays to the Company’s planned exploration and development activities.
Current report
The Company may encounter hazards inherent in drilling activities. Examples of such hazards include unusual or unexpected formations, abnormal pressures or rock properties, adverse weather conditions, mechanical difficulties, conditions which could result in damage to plant or equipment or shortages or delays in the delivery of rigs and/or other equipment. Drilling may result in wells that, which encountering resources, may not achieve economically viable results.
Current report
While the Company intends to take adequate precautions to minimize risks associated with drilling activities, there can be no guarantee that the Company will not experience one or more material incidents during drilling activities that may have an adverse impact on the operating and financial performances of the Company, including costs associated with control of well operation, recovery of plant and equipment, environmental rectification and compensation along with delays and other impacts on anticipated results.
Current report
The Company may be unable or unwilling to develop commercially viable helium operations.
Current report
On a long-term basis, in order for the Company’s helium operations to be successful, the Company must explore, develop and produce, or acquire interests in producing helium properties. The success depends on the ability to locate, identify, and acquire prospective helium exploration lands and productive helium property interests, find markets for any helium developed on such properties, and effectively distribute the helium into those markets. The helium development activities may not be economically viable because of unproductive helium properties, as well as helium properties that are productive but do not generate sufficient revenue to return a profit. Investing in a property does not ensure that the investment will be profitable since profitability depends on the cost of drilling and operating any wells on the property may exceed the amount of helium extracted from such wells. In addition, drilling hazards or environmental damage could increase the cost of operating any property. If the developmental costs exceed the Company’s estimate or if the development efforts of the Company’s do not produce results which meet its expectations, such efforts may not be commercially viable.
Current report
There are numerous risk associated with estimating helium reserves.
Current report
No reserves have been assigned in connection with the Company’s helium property interests to date, given their early stage of development. The future value of the Company’s helium reserves, if any, is therefore dependent on the success or otherwise of its activities, which are principally directed toward the future exploration, appraisal and development of its helium assets, and potential acquisition of property interests in the future. Estimating helium volumes is subject to significant uncertainties associated with technical data and the interpretation of that data, future commodity prices, and development and operating costs. There can be no guarantee that the Company will successfully convert any helium located on its properties to reserves and produce such estimated volume, if any. Estimates may alter significantly or become more uncertain when new information becomes available due to for example, additional drilling or production tests over the life of field. As estimates change, development and production plans may also vary. Downward revision of helium volume estimates may adversely affect the Company’s operational or financial performance.
Current report
Helium volume estimates are expressions of judgement based on knowledge, experience and industry practice. These estimates are imprecise and depend to some extent on interpretations, which may ultimately prove to be inaccurate and require adjustment or, even if valid when originally calculated, may alter significantly when new information or techniques become available. As further information becomes available through additional drilling and analysis the estimates are likely to change. Any adjustments to volume could affect the Company’s exploration and development plans which may, in turn, affect the Company’s performance. The process of estimating helium resources is complex and requires significant decisions and assumptions to be made in evaluating the reliability of available geological, geophysical, engineering, and economic date for each property. Different engineers may make different estimates of resources, cash flows, or other variables based on the same available data.
Current report
Estimates include numerous assumptions relating to operating conditions and economic factors, including price at which recovered helium can be sold, future operating costs, costs associated with operations on producing well to restore or increase production, and prevailing environment conditions associated with drilling.
Current report
The Company faces risks associated with its current lack of distribution agreements.
Current report
While the Company intends to partner with or sell to major industrial gas companies, the Company’s strategy is to become a fully integrated helium developer and processor and to sell directly to a limited number of major distributors and end-users in order to capture higher margins on its products. The Company currently does not have any formal agreements in place for accomplishing these strategic objectives, and the associated costs of and estimated timeline for the completion of these strategic objectives will not be able to be determined until such time that an appraisal wells have been drilled and feasibility studies have been completed. Although the Company intends to enter into such formal agreements in the future, they may never be entered into. The absence of formal agreements could adversely affect the oversight and operations of any arrangement with these major industrial gas companies, major distributors and end-users, and the lack of clarity and specifically defined roles could lead to a strain on, or breakdown of, the working relationships between the Company and any of these major industrial gas companies, major distributor or end-users. Furthermore, in the event of a dispute prior to entry into formal agreements, it will not be immediately clear what recourse each party has against the other, if any.
Current report
The Company’s helium production and margins thereon, if any, will be subject to changing helium prices.
Current report
The Company’s possible future helium operation revenues may be derived from helium or from royalties gained from potential joint ventures or other arrangements. Consequently, the Company’s potential future earnings will likely be closely related to the price of helium.
Current report
Helium prices fluctuate and are affected by numerous industry factors including demand for the resource, forward selling by producers, production cost levels in major producing regions and macroeconomic factors, such as inflation, interest rates, currency exchange rates and global and regional demand for, and supply of, helium. If the Company is producing helium and the market price of helium were to fall below the costs of production and remain at such a level for any sustained period, the Company would experience losses and could have to curtail or suspend some or all of its proposed activities. In such circumstances, the Company would also have to assess the economic impact of any sustained lower commodity prices on recoverability.
Current report
The Company’s helium operations will be subject to transportation costs and risks.
Current report
Disruption in or increased costs of transportation services could make helium a less competitive product or could make the Company’s future helium production, if any, less competitive than other sources. The industry depends on trucking, ocean-going vessels, pipeline facilities, and barge transportation to deliver shipment, and transportation costs are a significant component of the total cost of supplying helium. Disruptions of these transportation services due to weather problems, strikes, delays, lockouts, or other events could temporarily impair the ability to supply helium to customers and may result in lost sales. In addition, increases in transportation costs could adversely affect profitability.
Showing the first 40 of 42 passages. Open the source sections for the rest.
Reworded paragraphs (3)
Previous wording
On March 19, 2024, the Board of Directors authorized and approved an extension of the ongoing share repurchase program for up to $5.0 million of the currently outstanding shares of the Company’s common stock originally approved by the Board of Directors on April 26, 2023, and set to expire on June 30, 2024. Subject to any future extension in the discretion of the Board of Directors of the Company, the repurchase program is now scheduled to expire on June 30, 2025, or when a maximum of $5.0 million of the Company’s common stock has been repurchased, or when such program is discontinued by the Board of Directors. Under the stock repurchase program, shares may be repurchased from time to time in the open market or through negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. During the three months ended March 31, 2024, the Company repurchased 318,200 shares for $337 thousand, at a weighted average price of $1.06 per share, in open market transactions. The program does not obligate the Company to acquire a minimum amount of shares.
Current wording
On March 19, 2024, the Board of Directors authorized and approved an extension of the ongoing share repurchase program for up to $5.0 million of the currently outstanding shares of the Company’s common stock originally approved by the Board of Directors on April 26, 2023, and set to expire on June 30, 2024. Subject to any future extension in the discretion of the Board of Directors of the Company, the repurchase program is now scheduled to expire on June 30, 2025, or when a maximum of $5.0 million of the Company’s common stock has been repurchased, or when such program is discontinued by the Board of Directors. Under the stock repurchase program, shares may be repurchased from time to time in the open market or through negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. During the six months ended June 30, 2024, the Company repurchased 463,500 shares for $505 thousand, at a weighted average price of $1.09 per share, in open market transactions. The program does not obligate the Company to acquire a minimum amount of shares.
Previous wording
In the calculation of the ceiling test as of March 31, 2024, the Company used $77.48 per barrel for oil and $2.45 per one million British Thermal Units (MMbtu) for natural gas (as further adjusted for property, specific gravity, quality, local markets and distance from markets) to compute the future cash flows of the Company’s producing properties. The discount factor used was 10%. The Company recorded a $5.4 million ceiling test write-down of its oil and gas properties during the three months ended March 31, 2024, due to a reduction in the value of proved oil and natural gas reserves primarily as a result of a decrease in crude oil and natural gas prices, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and decline curve updates.
Current wording
In the calculation of the ceiling test as of June 30, 2024, the Company used $79.00 per barrel for oil and $2.33 per one million British Thermal Units (MMbtu) for natural gas (as further adjusted for property, specific gravity, quality, local markets and distance from markets) to compute the future cash flows of the Company’s producing properties. The discount factor used was 10%. The Company recorded a $5.4 million ceiling test write-down of its oil and gas properties during the six months ended June 30, 2024, due to a reduction in the value of proved oil and natural gas reserves primarily as a result of a decrease in crude oil and natural gas prices, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and decline curve updates.
Previous wording
Depending on actual commodity prices, estimated price differentials, lease operating costs, revisions to reserve estimates, and the amount and timing of capital expenditures, additional write-downs could be incurred in the future.
Current wording
We expect to record a further write-down of our oil and gas properties in the third quarter of 2024 due to the sale of the Karnes County, Texas properties, which closed on July 31, 2024 and lower commodity prices used in the calculation of the ceiling test as higher third quarter 2023 commodity prices will be removed from the ceiling test calculation and replaced with what we expect to be lower third quarter 2024 commodity prices. Depending on actual commodity prices, estimated price differentials, lease operating costs, revisions to reserve estimates, and the amount and timing of capital expenditures, the write-down could be approximately $1 million to $3 million in the third quarter of 2024.