US ENERGY CORP

Previous wording

With our recent acquisition of unproved properties from Wavetech Helium, we have significantly increased our acreage position in Montana with the focus to explore and produce helium in non-hydrocarbon-based reservoirs. During the third and fourth quarter of 2024, we plan to drill two exploratory wells at an estimated total cost of $2.8 million with the first well estimated to be begin drilling in September. The results of these two wells are expected to allow us to assess our next steps in the development of helium acreage and are further expected to allow us to vest the Assigned Rights.

Current wording

With our June 2024, acquisition of unproved properties from Wavetech Helium (as discussed below), we have significantly increased our acreage position in Montana with the focus to explore and produce helium and industrial gases in non-hydrocarbon-based reservoirs. During October 2024, we drilled our first helium well on the acreage. For the remainder of 2024, our capital budget will be substantially allocated to the completion of the well. The results of the well and the additional 3-5 wells we expect to drill in 2025 are expected to allow us to assess our next steps in the development of helium acreage and are further expected to allow us to vest the Assigned Rights.

Previous wording

On June 26, 2024, the Company entered into and closed the transactions contemplated by a purchase and sale agreement with Wavetech Helium ("Wavetech" and the "Purchase Agreement"). Pursuant to the Purchase Agreement, effective June 1, 2024, the Company acquired 82.5% of Wavetech's rights under a farmout agreement for approximately 144,000 net acres located across the Kevin Dome Structure in Toole County, Montana ("the Assigned Rights"). The Assigned Rights vest upon the drilling of two wells on the property. In consideration for the Assigned Rights, the Company paid Wavetech $2 million in cash and 2.6 million shares of restricted common stock, which were valued at $2.7 million on June 26, 2024. In addition, during the three months ended June 30, 2024, the Company incurred $0.4 million in transaction costs related to the acquisition of the Assigned Rights. Additionally, the Company agreed to be responsible for 100% of capital costs, including costs related to project exploration, appraisal, development drilling and completion until $20 million has been incurred related to Wavetech's 17.5% interest.

Current wording

On June 26, 2024, the Company entered into and closed the transactions contemplated by a purchase and sale agreement with Wavetech Helium ("Wavetech" and the "Purchase Agreement"). Pursuant to the Purchase Agreement, effective June 1, 2024, the Company acquired 82.5%of Wavetech's rights under a farmout agreement for approximately 144 thousand net acres located across the Kevin Dome Structure in Toole County, Montana (the "Assigned Rights"). The Assigned Rights vest upon the drilling of two wells on the property. In consideration for the Assigned Rights, the Company paid Wavetech $2.0 million in cash and 2.6 million shares of restricted common stock, which were valued at $2.7 million on June 26, 2024. In addition, during the three months ended June 30, 2024, the Company incurred $0.4 million of transaction costs related to the acquisition of the Assigned Rights. Additionally, the Company agreed to be responsible for 100% of capital costs, including costs related to project exploration, appraisal, development drilling and completion until $20 million has been incurred related to Wavetech's 17.5% interest.

Previous wording

On June 25, 2024, the Company entered into a related party non-binding letter of intent with Synergy Offshore LLC 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 wording

On June 25, 2024, the Company entered into a related party, non-binding letter of intent with Synergy Offshore LLC ("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, was then an approximate thirty percent beneficial owner of Synergy.

Previous wording

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. During the six months ended June 30, 2023. the Company repurchased 163,300 shares for $240 thousand at a weighted average price of $1.47 per share. As of June 30, 2024, a total of $4.1 million remained available under the repurchase program for future repurchases.

Current wording

During the nine months ended September 30, 2024, the Company repurchased 482,500 shares for $525 thousand, at a weighted average price of $1.09 per share. During the nine months ended September 30, 2023 the Company repurchased 163,300 shares for $240 thousand at a weighted average price of $1.48 per share. As of September 30, 2024, a total of $4.0 million remained available under the repurchase program for future repurchases.

Previous wording

The reserves used in the ceiling test incorporate assumptions regarding pricing and discount rates over which management has no influence in the determination of present value. 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%.

Current wording

The reserves used in the ceiling test incorporate assumptions regarding pricing and discount rates over which management has no influence in the determination of present value. In the calculation of the ceiling test as of September 30, 2024, the Company used $78.64 per barrel for oil and $2.21 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%.

Previous wording

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 updates to the decline curves for certain wells.

Current wording

The Company recorded ceiling test write-downs of its oil and gas properties during the three and nine months ended September 30, 2024 of $1.4 million and $6.8 million respectively 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, and reduction in oil and natural gas reserves from divestitures, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and updates to the decline curves for certain wells.

Previous 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.

Current wording

We expect to record a further write-down of our oil and gas properties in the fourth quarter of 2024 due to the sale of oil and natural gas properties in Pratt County and Sumner County, Kansas and Kay County, Oklahoma, which closed on October 31, 2024 and lower commodity prices used in the calculation of the ceiling test as higher fourth quarter 2023 commodity prices will be removed from the ceiling test calculation and replaced with what we expect to be lower fourth 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 $3.0 million to $4.0 million in the fourth quarter of 2024.

Previous wording

Continuing through the end of 2024 and beyond, we intend to develop the recently acquired helium acreage by drilling two exploratory wells in the third and fourth quarters of 2024. The results of these two wells are expected to allow us to assess our next steps in the development of our helium acreage. We also plan to actively manage our portfolio of oil and gas assets to maximize their value.

Current wording

Continuing through the end of 2024 and beyond, we intend to develop the recently acquired helium acreage by drilling exploratory wells along with the related helium development activities. The first well was drilled in October. We have plans to drill 3-5 wells over the next twelve months. The costs to drill these wells is estimated to cost an aggregate of between $4.0 million and $6.5 million depending primarily on the number of wells drilled. The results from the completion and testing of these wells will allow us to assess our next steps in the development of our helium acreage. We also plan to actively manage our portfolio of oil and gas assets to maximize their value.

Previous wording

For the three months ended June 30, 2024, we recorded a net loss of $2.0 million, which was primarily due to lower production resulting in reduced revenue for the period. In the following sections we discuss our revenue, operating expenses, and other income (expense) for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

For the Three Months Ended September 30, 2024, we recorded a net loss of $2.3 million, which was primarily due to lower production resulting in reduced revenue for the period as a result of property sales. In the following sections we discuss our revenue, operating expenses, and other income (expense) for the three months ended September 30, 2024compared to the three months ended September 30, 2023.

Previous wording

The decrease in our oil and gas revenue of $1.9 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a decrease of 38% in production quantities, which were partially offset by an increase in realized commodity pricing of 22% on a per barrel of oil equivalent (BOE) basis. For the three months ended June 30, 2024, we produced 111,090 BOE, or an average of 1,221 BOE per day, as compared to 178,303 BOE or an average of 1,959 BOE per day during the comparable period in 2023. The decrease in our production quantities relates to the divestiture of substantially all of our non-operated properties in the fourth quarter of 2023, as well as temporary weather-related events, such as flooding and winter weather, and natural production declines. During the three months ended June 30, 2024, our production was 64% oil and 36% natural gas and liquids compared to 64% oil and 36% natural gas and liquids produced during the three months ended June 30, 2023.

Current wording

The decrease in our oil and gas revenue of $3.8 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a decrease of 30% in production quantities and a decrease in realized commodity pricing of 18% on a per barrel of oil equivalent (BOE) basis. For the three months ended September 30, 2024, we produced 105,699 BOE, or an average of 1,149 BOE per day, as compared to 152,013 BOE or an average of 1,652 BOE per day during the comparable period in 2023. The decrease in our production quantities relates to the divestiture of substantially all of our non-operated properties in the fourth quarter of 2023, and the divestiture of additional operated properties during 2024 as wells as temporary weather-related events, such as severe storms and flooding and natural production declines. During the three months ended September 30, 2024, our production was 58% oil and 42% natural gas and liquids compared to 66% oil and 34% natural gas and liquids produced during the three months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, lease operating expenses were $3.1 million or $27.69 per BOE, a decrease of $0.7 million when compared to the $3.7 million or $20.97 per BOE for the three months ended June 30, 2023. The decrease in lease operating expense was due to the divestment of substantially all of our non-operated properties and a reduction in well workover activity in 2024 when compared to 2023. The increase on a per BOE basis is the result of lower production volumes being compared to relatively fixed recurring lease operated expenses.

Current wording

For the three months ended September 30, 2024, lease operating expenses were $3.1 million or $28.95 per BOE, a decrease of $0.9 million when compared to the $4.0 million or $26.31 per BOE for the three months ended September 30, 2023. The decrease in lease operating expense was due to the divestment of substantially all of our non-operated properties and a reduction in well workover activity in 2024 when compared to 2023. The increase on a per BOE basis is the result of lower production volumes being compared to relatively fixed recurring lease operated expenses.

Previous wording

For the three months ended June 30, 2024, gathering, transportation, and treating costs were $63 thousand, a decrease of $75 thousand, or 54%, compared to the comparable period of 2023. This decrease was attributable to the divestiture of substantially all of our non-operated activities in the fourth quarter of 2023.

Current wording

For the three months ended September 30, 2024, gathering, transportation, and treating costs were $43 thousand, a decrease of $124 thousand, or 74%, compared to the comparable period of 2023. This decrease was attributable to the divestiture of substantially all of our non-operated activities in the fourth quarter of 2023.

Previous wording

For the three months ended June 30, 2024, production taxes were $367 thousand, a decrease of $171 thousand, or 32%, compared to the comparable period of 2023. This decrease was attributable to the decrease in revenue of 24% discussed above, as production taxes remained flat at 6% of revenue.

Current wording

For the three months ended September 30, 2024, production taxes were $298 thousand, a decrease of $298 thousand, or 50%, compared to the comparable period of 2023. This decrease was attributable to the decrease in revenue of 43% discussed above, as production taxes remained flat at 6% of revenue.

Previous wording

*Depreciation, Depletion and Amortization.*Our depreciation, depletion and amortization (“DD&A”) was $2.2 million and $2.9 million for the three months ended June 30, 2024 and 2023, respectively. Depletion expense on our oil and gas properties is the primary driver of DD&A expense. Our depletion rate was $15.30 per BOE and $14.39 per BOE for the three months ended June 30, 2024 and 2023, respectively. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated future development costs.

Current wording

*Depreciation, Depletion and Amortization.*Our depreciation, depletion and amortization (“DD&A”) was $2.0 million and $2.9 million for the three months ended September 30, 2024 and 2023, respectively. Depletion expense on our oil and gas properties is the primary driver of DD&A expense. Our depletion rate was $14.94 per BOE and $16.39 per BOE for the three months ended September 30, 2024 and 2023, respectively. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated future development costs.

Previous wording

General and administrative expenses decreased by $1.3 million for the three months ended June 30, 2024, as compared to the prior year period. The decrease was primarily attributable to a decrease in both professional fees, insurance, and other due to lower accounting, consulting, and recruitment fees. Compensation and benefits were lower due to a reduction in headcount. The value of the restricted stock awards being amortized for the three months ended June 30, 2024 was lower than those being amortized during the three months ended June 30, 2023due to a decrease in our stock price

Current wording

General and administrative expenses decreased by $0.9 million for the three months ended September 30, 2024, as compared to the prior year period. The decrease was primarily attributable both to a decrease in both professional fees, insurance, and other due to lower accounting, consulting, and recruitment fees and a decrease in compensation and benefits due to a reduction in headcount. Stock-based compensation was lower due to the value of the restricted stock awards being amortized for the three months ended September 30, 2024 being lower than those being amortized during the three months ended September 30, 2023 due to a decrease in our stock price.

Previous wording

Commodity derivative gain (loss), net, is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. For the six months ended June 30, 2024, we recognized losses on commodity derivative contracts of $1.5 million, primarily as the result of a decrease in the fair value of our outstanding commodity derivative contracts from settlements of open positions and higher WTI prices as compared to December 31, 2023.See Note 7 Commodity Derivativesin the notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Commodity derivative gain (loss), net, is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. For the three months ended September 30, 2024, we recognized gains on commodity derivative contracts of $2.0 million, primarily as the result of the settlement in September 2024, of all of our remaining commodity derivative contracts for $1.8 million.See Note 7 Commodity Derivativesin the notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

Interest expense primarily represents the interest on our credit facility with FirstBank Southwest. The decrease in interest expense is primarily driven by the decrease in the balance outstanding period over period. As of June 30, 2024, we had borrowed $7.0 million on the credit facility as compared to $12.0 million borrowed as of June 30, 2023. The average interest rate increased to 9.0% per annum for the three months ended June 30, 2024, as compared to 8.9% per annum for the three months ended June 30, 2023.See Note 6 Debtin the notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Interest expense primarily represents the interest on our credit facility with FirstBank Southwest. The increase in interest expense is primarily driven by the decrease in the balance outstanding period-over-period. As of September 30, 2024, we had fully repaid all outstanding amounts borrowed on the credit facility, as compared to $12.0 million borrowed as of September 30, 2023. The average interest rate increased to 9.3% per annum for the three months ended September 30, 2024, as compared to 9.1% per annum for the three months ended September 30, 2023.See Note 6 Debtin the notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

Comparison of our Statements of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of our Statements of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

For the six months ended June 30, 2024, we recorded a net loss of $11.5 million which was primarily due to oil and natural gas property impairment expense of $5.4 million from reduced commodity prices used in the full cost pool ceiling test and lower production resulting in reduced revenue for the period. In the following sections we discuss our revenue, operating expenses, and other income (expense) for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, we recorded a net loss of $13.8 million which was primarily due to lower production resulting in reduced revenue for the period. In addition, the Company recorded impairment of its oil and natural gas properties of $6.8 million from reduced commodity prices used in the full cost pool ceiling test and lower production resulting in reduced revenue for the period. In the following sections we discuss our revenue, operating expenses, and other income (expense) for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

*Revenue.*Presented below is a comparison of our oil and gas sales, production quantities and average sales prices for the six months ended June 30, 2024 and 2023:

Current wording

*Revenue.*Presented below is a comparison of our oil and gas sales, production quantities and average sales prices for the nine months ended September 30, 2024 and 2023:

Previous wording

The decrease in our oil and gas revenue of $4.8 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a decrease of 34% in production quantities, offset by an increase in realized commodity pricing of 6% on a per BOE basis. For the six months ended June 30, 2024, we produced 220,890 BOE, or an average of 1,214 BOE per day, as compared to 333,620 BOE or an average of 1,843 BOE per day during the comparable period in 2023. The decrease in our production quantities relates to the divestiture of substantially all of our non-operated properties in the fourth quarter of 2023, as well as temporary weather-related events, such as flooding and winter weather, and natural production declines. During the six months ended June 30, 2024, our production was 63% oil and 37% natural gas and liquids compared to 62% oil and 38% natural gas and liquids produced during the six months ended June 30, 2023.

Current wording

The decrease in our oil and gas revenue of $8.6 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a decrease of 33% in production quantities and a decrease in realized commodity pricing of 2% on a per BOE basis. For the nine months ended September 30, 2024, we produced 326,589 BOE, or an average of 1,192 BOE per day, as compared to 485,633 BOE or an average of 1,779 BOE per day during the comparable period in 2023. The decrease in our production quantities relates to the divestiture of substantially all of our non-operated properties in the fourth quarter of 2023, and the divestiture of additional operated properties during 2024as well as temporary weather-related events, such as severe storms, flooding and winter weather, and natural production declines. During the nine months ended September 30, 2024, our production was 62% oil and 38% natural gas and liquids compared to 63% oil and 37% natural gas and liquids produced during the nine months ended September 30, 2023.

Previous wording

Oil and Gas Production Costs. Presented below is a comparison of our oil and gas production costs for the six months ended June 30, 2024 and 2023:

Current wording

Oil and Gas Production Costs. Presented below is a comparison of our oil and gas production costs for the nine months ended September 30, 2024 and 2023:

Previous wording

For the six months ended June 30, 2024, lease operating expenses were $6.2 million or $28.35 per BOE, a decrease of $1.8 million when compared to the $8.1 million or $24.42 per BOE for the six months ended June 30, 2023. The decrease in lease operating expense was due almost entirely to a reduction in well workover activity in 2024 , when compared to 2023. The increase on a per BOE basis is the result of lower production volumes being compared to relatively fixed recurring lease operated expenses.

Current wording

For the nine months ended September 30, 2024, lease operating expenses were $9.3 million or $28.54 per BOE, a decrease of $2.8 million when compared to the $12.1 million or $25.01 per BOE for the nine months ended September 30, 2023. The decrease in lease operating expense was due almost entirely to a reduction in well workover activity in 2024, when compared to 2023. The increase in lease operating expense on a per BOE basis is the result of lower production volumes being compared to relatively fixed recurring lease operated expenses.

Previous wording

For the six months ended June 30, 2024, gathering, transportation, and treating costs were $127 thousand, a decrease of $125 thousand, or 50%, compared to the comparable period of 2023. This decrease was attributable to the divestiture of substantially all of our non-operated activities in the fourth quarter of 2023.

Current wording

For the nine months ended September 30, 2024, gathering, transportation, and treating costs were $170 thousand, a decrease of $249 thousand, or 59%, compared to the comparable period of 2023. This decrease was attributable to the divestiture of substantially all of our non-operated activities in the fourth quarter of 2023.

Previous wording

For the six months ended June 30, 2024, production taxes were $710,000, a decrease of $348 thousand, or 33%, compared to the comparable period of 2023. This decrease was attributable to the decrease in revenue of 24% discussed above, as production taxes remained flat at 6% of revenue.

Current wording

For the nine months ended September 30, 2024, production taxes were $1.0 million, a decrease of $0.6 million, or 39%, compared to the comparable period of 2023. This decrease was attributable to the decrease in revenue of (34)% discussed above, as production taxes remained flat at 6% of revenue.

Previous wording

*Depreciation, Depletion and Amortization.*Our depreciation, depletion and amortization (“DD&A”) was $4.4 million and $5.3 million for the six months ended June 30, 2024 and 2023, respectively. Depletion expense on our oil and gas properties is the primary driver of DD&A expense. Our depletion rate was $15.60 per BOE and $13.99 per BOE for the six months ended June 30, 2024 and 2023, respectively. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated future development costs.

Current wording

*Depreciation, Depletion and Amortization.*Our depreciation, depletion and amortization (“DD&A”) was $6.4 million and $8.2 million for the nine months ended September 30, 2024 and 2023, respectively. Depletion expense on our oil and gas properties is the primary driver of DD&A expense. Our depletion rate was $15.39 per BOE and $14.74 per BOE for the nine months ended September 30, 2024 and 2023, respectively. Our depletion rate can fluctuate because of acquisitions, changes in drilling and completion costs, impairments, revisions in asset retirement obligation cost estimates or timing, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated future development costs.

Previous wording

Impairment of oil and natural gas properties. Impairment of $5.4 million for the six months ended June 30, 2024 was driven by a reduction in value of oil and gas reserves. The reduction was primarily due to lower commodity prices used in the full cost pool ceiling test, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and updates to the decline curves for certain wells.

Current wording

Impairment of oil and natural gas properties. Impairment of $6.8 million for the nine months ended September 30, 2024 was driven by a reduction in value of oil and gas reserves. The reduction was primarily due to lower commodity prices used in the full cost pool ceiling test, divestitures of oil and natural gas properties, as well as reserves revisions related to wells shut-in during the first quarter of 2024 and updates to the decline curves for certain wells.

Previous wording

*General and Administrative Expenses.*Presented below is a comparison of our general and administrative expenses for the six months ended June 30, 2024 and 2023:

Current wording

*General and Administrative Expenses.*Presented below is a comparison of our general and administrative expenses for the nine months ended September 30, 2024 and 2023:

Previous wording

General and administrative expenses decreased by $1.8 million for the six months ended June 30, 2024, as compared to the prior year period. The decrease was primarily attributable to a decrease in both professional fees, insurance, and other due to lower accounting, consulting, and recruitment fees and compensation and benefits due to lower headcount. The value of the restricted stock awards being amortized for the six months ended June 30, 2024 was lower than those being amortized during the six months ended June 30, 2023.

Current wording

General and administrative expenses decreased by $2.8 million for the nine months ended September 30, 2024, as compared to the prior year period. The decrease was primarily attributable to a decrease in both professional fees, insurance, and other due to lower accounting, consulting, and recruitment fees and compensation and benefits, due to lower headcount. Stock-based compensation was lower due to the value of the restricted stock awards being amortized for the nine months ended September 30, 2024 being lower than those being amortized during the nine months ended September 30, 2023, due to the decline in our stock price.

Previous wording

Other Income (Expense). Presented below is a comparison of our other income (expense) for the six months ended June 30, 2024 and 2023:

Current wording

Other Income (Expense). Presented below is a comparison of our other income (expense) for the nine months ended September 30, 2024 and 2023:

Previous wording

Commodity derivative gain (loss), net, is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. For the three months ended June 30, 2024, we recognized losses on commodity derivative contracts of $0.1 million, primarily as the result of a decrease in the fair value of our outstanding commodity derivative contracts from settlements of open positions and higher West Texas Intermediate (WTI) prices as compared to December 31, 2023. During the three months ended June 30, 2024, we entered into crude oil swap agreements for a total of 164,125 barrels for January through December 2025 production at a weighted average fixed price of $73.71.See Note 7 Commodity Derivativesin the notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Commodity derivative gain (loss), net, is the result of changes in derivative fair values associated with fluctuations in forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. For the nine months ended September 30, 2024, we recognized gains on commodity derivative contracts of $0.5 million, primarily as the result of the settlement in September 2024 of all our remaining commodity derivative contracts for $1.8 million.See Note 7 Commodity Derivativesin the notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

Interest expense primarily represents the interest on our credit facility with FirstBank Southwest. The decrease in interest expense is primarily driven by the decrease in the balance outstanding period over period. As of June 30, 2024, we had borrowed $7.0 million on the credit facility as compared to $12.0 million borrowed as of June 30, 2023. The average interest rate increased to 9.0% per annum for the six months ended June 30, 2024, as compared to 8.9% per annum for the six months ended June 30, 2023.See Note 6 Debtin the notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Interest expense primarily represents the interest on our credit facility with FirstBank Southwest. The increase in interest expense is primarily driven by the decrease in the balance outstanding period over period. As of September 30, 2024, we had fully repaid all outstanding amounts borrowed on the credit facility as compared to $12.0 million borrowed as of September 30, 2023. The average interest rate increased to 9.2% per annum for the nine months ended September 30, 2024, as compared to 8.8% per annum for the nine months ended September 30, 2023.See Note 6 Debtin the notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

For the remainder of 2024 our capital budget of will be allocated substantially to the development of our recently acquired helium acreage. We plan to spend approximately $2.8 million to drill two exploratory wells. In addition, we plan to incur costs for plugging and abandonment ranging from $0.6 million to $1.0 million, depending on timing, regulatory requirements and weather. We view some of these investments as discretionary for which we can control both the timing and amount of the expenditures. Other activities, such as some repairs and maintenance and plugging activities, may be required from time to time by regulatory bodies. For the next twelve months, we also expect to incur approximately $0.2 million on lease commitments and approximately $0.6 million on interest expense assuming no material changes to interest rates over the next twelve months. We will actively manage the outstanding balance of our credit facility. We anticipate our expenditures will be funded primarily by operating cash flows, borrowings under our credit facility and proceeds from divestitures of oil and gas properties. In the event that readily available sources of cash flow are insufficient to fund our capital needs, we may utilize equity and credit markets as a funding mechanism.

Current wording

For the remainder of 2024 and into 2025, our capital budget will be substantially allocated to the completion of our recent helium discovery. Over the next year, we anticipate drilling 3 – 5 wells along with related helium development activities with costs ranging between $4.0 and $6.5 million depending primarily on the number of wells drilled. In addition, depending on timing, regulatory requirements and weather, we plan to incur costs for plugging and abandonment of approximately $1.0 million, We view much of these capital activities as discretionary for which we can control both the timing and amount of the expenditures. Other activities, such as some repairs and maintenance may be required from time to time by regulatory bodies. We anticipate our expenditures will be funded primarily by operating cash flows, borrowings under our credit facility and proceeds from divestitures of oil and gas properties. In the event that readily available sources of cash flow are insufficient to fund our capital needs, we may utilize equity and credit markets as a funding mechanism.

Previous wording

For the six months ended June 30, 2024, we funded our capital expenditures with cash on hand, cash flows from operating activities, proceeds from the divestiture of oil and gas producing properties and borrowings under our credit facility. In future quarters, if cash flows are not sufficient to fund our capital expenditures and operations, we may also raise funds through new equity offerings or from other sources of financing and re-evaluate our capital spend program as economic conditions warrant. Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain development programs. All of our sources of liquidity can be affected by the changes in economic conditions, rising interest rate, changes in debt and equity markets, force majeure events, fluctuations in commodity prices, operating costs, tax law changes, and volumes produced, all of which would affect us and our industry.

Current wording

For the nine months ended September 30, 2024, we funded our capital expenditures with cash on hand, cash flows from operating activities, proceeds from the divestiture of oil and gas producing properties and borrowings under our credit facility. In future quarters, if cash flows are not sufficient to fund our capital expenditures and operations, we may also raise funds through new equity offerings or from other sources of financing and re-evaluate our capital spend program as economic conditions warrant. Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain development programs. All of our sources of liquidity can be affected by the changes in economic conditions, rising interest rates, changes in debt and equity markets, force majeure events, fluctuations in commodity prices, operating costs, tax law changes, and volumes produced, all of which would affect us and our industry.

Previous wording

Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving Credit Agreement. The amount outstanding on the Credit Agreement as of June 30, 2024, was $7.0 million. With the proceeds from the sale of our Karnes County, Texas properties, we repaid $5.0 million on the Credit Agreement, reducing the amount outstanding to $2.0 million.

Current wording

Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving Credit Agreement. The amount outstanding on the Credit Agreement as of September 30, 2024, was $0.0 million. With the proceeds from the sale of our Karnes County, Texas properties, we repaid $5.0 million on the Credit Agreement, reducing the amount outstanding to $2.0 million as of July 31, 2024. In addition, in September 2024, with the proceeds from the settlement of our outstanding commodity derivative contracts of $1.8 million and cash on hand, we repaid the remaining $2.0 million outstanding on the credit facility.

Previous wording

We use cash for the acquisition and development of helium and oil and gas properties, workovers and capital expenditures, operating and general and administrative costs, settlements of commodity derivative contracts, debt obligations including interest, and share repurchases. During the six months ended June 30, 2024, we spent approximately $3.1 million on the acquisition of helium properties and capital expenditures.

Current wording

We use cash for the acquisition and development of helium and oil and gas properties, workovers and capital expenditures, operating and general and administrative costs, settlements of commodity derivative contracts, debt obligations including interest, and share repurchases. During the nine months ended September 30, 2024, we spent approximately $3.7 million on the acquisition of helium properties and capital expenditures.

Previous wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023:

Previous wording

Operating Activities. Cash provided by operating activities for the six months ended June 30, 2024 was $0.3 million as compared to cash provided by operating activities of $1.4 million for the comparable period in 2023. The decrease in cash provided by operating activities is mainly attributable to a reduction in cash receipts from revenues as a result of a decrease in production during the six months ended June 30, 2024associated with the sale, during the fourth quarter of 2023, of virtually all of our non-operated properties.

Current wording

Operating Activities. Cash provided by operating activities of $2.9 million for the nine months ended September 30, 2024 remained consistent with cash provided by operating activities of $3.0 million for the comparable period in 2023.

Previous wording

Investing Activities. Cash used in investing activities for the six months ended June 30, 2024 was $2.7 million as compared to $2.8 million for the comparable period in 2023. The primary use of cash in our investing activities for the six months ended June 30, 2024 was the acquisition of helium properties and capital expenditures. For the six months ended June 30, 2023, the primary use of cash in our investing activities was capital expenditures related to returning idle wells to production and improvements to our gathering system in East Texas.

Current wording

Investing Activities. Cash provided by investing activities for the nine months ended September 30, 2024 was $0.7 million as compared to cash used in investing activities of $3.4 million for the comparable period in 2023. The primary use of cash in our investing activities for the nine months ended September 30, 2024 was the acquisition of helium properties and capital expenditures, which were offset by proceeds received from the divesture of oil and gas properties. For the nine months ended September 30, 2023, the primary use of cash in our investing activities was capital expenditures related to returning idle wells to production and improvements to our gathering system in East Texas.

Previous wording

Financing Activities. Cash provided by financing activities for the six months ended June 30, 2024 was $1.2 million as compared cash used in financing activities of $1.9 million for the comparable period in 2023. Cash provided by financing activities during the six months ended June 30, 2024 was primarily attributable to borrowings of $2 million under our credit facility to fund the acquisition of our recently acquired helium properties, which were partially offset by share repurchases of $0.6 million. Cash used in financing activities during the six months ended June 30, 2023 primarily related to cash dividends paid of $1.2 million.

Current wording

Financing Activities. Cash used in financing activities for the nine months ended September 30, 2024 was $5.8 million as compared cash used in financing activities of $2.1 million for the comparable period in 2023. Cash used in financing activities during the nine months ended September 30, 2024 was primarily attributable to repayments of $7.0 million on our credit facility, which were partially offset by borrowings under the credit facility of $2.0 million to fund the acquisition of our recently acquired helium properties. In addition, we spent $0.6 million on share repurchases. Cash used in financing activities during the nine months ended September 30, 2023 primarily related to cash dividends paid of $1.2 million, payments on the insurance premium finance note of $0.5 million and share repurchases of $0.2 million