US ENERGY CORP
For the period ended Mar 31, 2025. Filed May 12, 2025.
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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.
Mar 31, 2025 · Filed May 12, 2025
BSIN$1.33+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001437749-24-034310
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001437749-25-015919
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe 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 90 previous paragraphs and 73 current paragraphs.
30 unchanged; 25 reworded; 18 added; 27 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 9 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 (18)
Current report
U.S. Energy Corp. (collectively with its wholly-owned subsidiaries, Energy One LLC (“Energy One”), New Horizon Resources LLC (“New Horizon Resources”) and Coyote Resources LLC ("Coyote Resources"), which was formed on August 6, 2024, are referred to as the “Company”) is incorporated in the State of Delaware. The Company’s principal business activities are focused on the acquisition, exploration, and development of industrial gases, oil and natural gas properties in the United States.
Current report
Synergy–*** acquisition of industrial gas properties***
Current report
We acquired approximately 24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana, including all leases, wells, rights and interests in, under or derived from the acquired acreage subject to Synergy retaining an undivided twenty percent (20%) of Synergy’s right title and interest in the property.
Current report
Consideration for the transaction consisted of the following: (a) $2.0 million in cash, subject to customary adjustments; (b) 1,400,000 shares of the Company’s common stock; (c) a carried working interest whereby the Company agreed to cover and pay for 100% of Synergy’s costs attributable to the Synergy acreage, until the earlier of (i) 78 months from the closing date; or (ii) the date the total costs associated therewith total $20 million; (d) our agreement to pay Synergy 18% of the cash amounts we actually realize from any law or regulation from our sequestration of carbon oxides or similar substances derived directly from an agreed area of mutual interest including Synergy’s acreage; and (e) our agreement to pay Synergy 18% of the gain we may receive in connection with the sale of the future, first, gas processing plant located on Synergy’s acreage.
Current report
Underwritten Offering
Current report
On January 22, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC (the “Representative”), as representative of the several underwriters named in the Underwriting Agreement (the “Underwriters”), relating to an underwritten offering of 4,871,400 shares of common stock, at a price to the public of $2.65 per share (such offering, the “Offering”).
Current report
The sale of 4,871,400 shares of common stock (including the full 635,400 Option) in connection with the Offering, closed on January 23, 2025. The Company generated approximately $11.9 million of net proceeds from the Offering, after deducting the underwriting discounts and commissions and offering costs payable by us, which we expect to use for the development of our recent acquisition in Montana, general corporate purposes, and working capital, or for other purposes that our board of directors, in their good faith, deems to be in the best interest of the Company. Additionally, management, pursuant to the terms of the Underwriting Agreement, used $1.574 million from the Option exercise to purchase shares of common stock from Sage Road Capital, LLC (a current shareholder of the Company whose co-manager is Joshua L. Batchelor, a then member of the Board of Directors of the Company) or its affiliates at a price up to the public offering price of the Offering, less underwriting discounts, which sale took place in January 2025, as discussed below.
Current report
Related Party Share Repurchase
Current report
On January 27, 2025, the Company entered into a Share Repurchase Agreement with Banner Oil & Gas, LLC (“Banner”), Woodford Petroleum, LLC (“Woodford”), and Sage Road Energy II, LP, (“Sage Road”, and together with Banner and Woodford, the “Selling Stockholders”). In his capacity as co-Managing Partner of Sage Road Capital, LLC, which indirectly controls and manages certain funds which own a majority interest in Banner, Woodford and Sage Road, Joshua L. Batchelor, a then member of the Board of Directors of the Company, may be deemed to beneficially own the shares of common stock held by the Selling Stockholders.
Current report
Pursuant to the Share Repurchase Agreement, the Company, in a private transaction, outside of, and separate from the Company’s previously disclosed share repurchase program, on January 27, 2025, repurchased (a) 534,020 shares of common stock held by Banner, (b) 41,229 shares of common stock held by Woodford, and (c) 60,151 shares of common stock held by Sage Road, for an aggregate of $1.574 million or approximately $2.48 per share, which is the net price per share of the 4,871,400 shares of common stock which we sold in our underwritten public offering which closed on January 23, 2025, less underwriting discounts and commissions, and which represented an 8.2% premium to the closing sales price of the Company’s common stock on January 27, 2025.
Current report
The share repurchase program was approved by the disinterested members of the Board of Directors of the Company, as well as the Company’s Audit Committee, comprised solely of independent directors not affiliated with Mr. Batchelor or the Selling Stockholders.
Current report
During the remainder of 2025 and beyond, we intend to seek additional opportunities in the oil, natural gas and industrial gas sectors, including but not limited to further acquisition of assets, participation with industry partners in exploration and development projects, acquisition of existing companies, and the purchase of other industrial gas assets. We plan to continue to monetize legacy assets and redeploy capital into our core focus areas. During the first half of 2025 we intend to complete two wells and drill two additional new wells targeting an industrial gas zone. Share repurchases under our approved share repurchase program continued in the first quarter of 2025, and the Board of Directors has extended the share repurchase program until June 30, 2026. These repurchases may continue so long as share prices remain attractive and repurchases remain in the best interests of both the Company and its stockholders.
Current report
For the three months ended March 31, 2025, lease operating expenses were $1.6 million or $34.23 per BOE. While lease operating expenses decreased by $1.6 million when compared to the $3.2 million or $29.02 per BOE for the three months ended March 31, 2024 the cost on a BOE basis increased as the mix of properties changed as a result of the divestment of Karnes County, East Texas, and Mid-con properties.
Current report
For the three months ended March 31, 2025, we did not have any open commodity derivative positions. For the three months ended March 31, 2024, we recognized losses on commodity derivative contracts of $1.4 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.
Current report
Interest expense primarily represents the interest and fees on our credit facility with FirstBank Southwest. As of December 31, 2023, we had a balance outstanding of $5.0 million on our credit facility that was repaid during the third quarter of 2024. For the three months ended March 31, 2025, there was no balance outstanding on the credit facility, but we incurred fees to maintain our credit facility.
Current report
As of March 31, 2025, the Company was in compliance with all financial covenants related to the credit facility.
Current report
Operating Activities. Cash used in operating activities of $4.5 million for the three months ended March 31, 2025 was mainly due to $3.1 million of net loss and reduction in $2.6 million of accounts payable and accrued liabilities, offset by $1.1 million of depreciation, depletion, accretion, and amortization. Cash used in operating activities of $0.6 million for the three months ended March 31, 2024, was mainly due to $9.5 million of net loss, offset by $5.4 million of impairment of oil and gas properties and $2.2 million of depreciation, depletion, accretion, and amortization.
Current report
Financing Activities. Cash provided by financing activities for the three months ended March 31, 2025 was $9.7 million as compared cash used in financing activities of $0.6 million for the comparable period in 2024. As discussed inMaterial Developments above, the primary driver of finance cash inflow was our first quarter equity offering which generated net proceeds of $11.9 million offset by a share repurchases. Cash used in financing activities during the three months ended March 31, 2024 primarily related to share repurchases of $0.4 million and tax withholdings related to share based compensation.
Removed paragraphs (27)
Previous report
U.S. Energy Corp. was incorporated in the State of Wyoming on January 26, 1966, and reincorporated to Delaware effective on August 3, 2022. We are an independent energy company focused on the acquisition and development of oil and natural gas producing properties in the continental United States. Our principal properties and operations are in the Rockies region (Montana, Wyoming and North Dakota), the Mid-Continent region (Oklahoma, Kansas, and North and East Texas), and the West Texas, South Texas, and Gulf Coast region.
Previous report
We have historically explored for and produced oil and natural gas through a non-operator business model, however, during 2020 we acquired operated properties in North Dakota, New Mexico, Wyoming, and the Texas Gulf Coast, and on January 5, 2022, we closed the acquisitions of certain oil and gas properties from three separate sellers, representing a diversified portfolio of primarily operated, producing, oil-weighted assets located across the Rockies, West Texas, South Texas, and Mid-Continent regions. During the fourth quarter of 2023, we sold virtually all of our non-operated properties and as of September 30, 2024, operated 99% of our reserves.
Previous report
Our business strategy going forward is to enhance the value of our acquired operated assets through evaluation of selected properties with the goal of increasing production and reserves. We plan to deploy our capital in a conservative and strategic manner and pursue value-enhancing transactions. We also continue to evaluate strategic alternative opportunities that we believe will enhance stockholder value.
Previous report
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 report
Acquisition of helium properties
Previous report
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 report
In September 2024, the related party non-binding letter of intent expired with the Company and Synergy unable to reach agreement on the definitive terms of a purchase and sale agreement. Through September 30, 2024 the Company incurred $547 thousand of transaction costs related to the related-party non-binding letter of intent of which $368 thousand were written-off during the period and reflected as acquisition transaction costs on the Condensed Consolidated Statement of Operations. The remaining $179 thousand relates to land and helium reserve evaluation. The Company is continuing negotiations with Synergy for a potential joint venture for the development of their helium acreage.
Previous report
Divestment of Properties
Previous report
In the fourth quarter of 2023, the Company closed on a series of individual divestitures for a total of $7.0 million in net proceeds before transaction costs of $0.4 million. The divestitures included the Company’s non-operated interests in 152 wells across North Dakota, New Mexico, and Texas, and overriding royalty interests in seven wells in Karnes County, Texas. These divestitures did not have a significant impact to reserves volumes or the full cost pool depletion rate. As such, the Company recorded the proceeds, net of transaction costs and purchase price adjustments, to the full cost pool with no gain or loss recognized. Relief of associated asset retirement obligations of $0.5 million were also recorded to the full cost pool. The net proceeds from these divestitures were used to repay a portion of the outstanding balance on our credit facility.
Previous report
During the nine months ended September 30, 2024, the Company closed several divestment transactions of its oil and gas properties for net proceeds totaling $5.9 million. The divestitures included a total of 245 wells in Karnes County and Archer County, Texas and Lea County, New Mexico. These divestitures did not have a significant impact to reserves volumes or the full cost pool depletion rate. As such, the Company recorded the proceeds, net of transaction costs and purchase price adjustments, to the full cost pool, with no gain or loss recognized in the Condensed Consolidated Statement of Operations. Relief of associated asset retirement obligations of $1.4 million were also recorded to the full cost pool.
Previous report
On October 31, 2024, the Company closed on the divestment of oil and gas properties in Pratt County and Sumner County, Kansas and Kay County, Oklahoma for net proceeds of $1.2 million.
Previous report
Derivative Activities
Previous report
On September 10, 2024, the Company received $1.8 million on the settlement of all of its then outstanding commodity derivative contracts.
Previous report
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 report
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 report
Impairment of oil and natural gas properties. Impairment of $1.4 million for the three 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, as well as divestitures of oil and gas properties during the third quarter of 2024.
Previous report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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
Reworded paragraphs (25)
Previous wording
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 26, 2024 (the “Annual Report”).
Current wording
This information should be read in conjunction with the interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited Consolidated Financial Statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 13, 2025 (the “Annual Report”).
Previous 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.
Current wording
On January 7, 2025, we entered and simultaneously closed the transactions contemplated by, a purchase and sale agreement, with Synergy Offshore LLC (“Synergy”). 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, who is an approximate sixty percent beneficial owner of Synergy.
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.
Current wording
On January 29, 2025, the Board of Directors of the Company 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 extended on March 19, 2024, and set to expire on June 30, 2025. 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, 2026, 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.
Previous 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.
Current wording
During the three months ended March 31, 2025, the Company repurchased 125,600 shares for $0.23 million, at a weighted average price of $1.87 per share. During the three months ended March 31, 2024 the Company repurchased 318,200 shares for $0.34 million at a weighted average price of $1.06 per share. As of March 31, 2025, a total of $3.6 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 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%.
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 March 31, 2025, the Company used $74.52 per barrel for oil and $2.44 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 did not incur a ceiling test write-down of its oil and natural gas properties during the three months ended March 31, 2025.
Previous 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.
Current wording
We expect to record a further write-down of our oil and natural gas properties in the second quarter of 2025 due to lower commodity prices used in the calculation of the ceiling test. 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 $7.0 million to $8.0 million in the second quarter of 2025.
Previous 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.
Current wording
For the Three Months Ended March 31, 2025, we recorded a net loss of $3.1 million, which was primarily due to declining commodity prices and lower production, resulting in reduced revenue for the period, which was also affected by property sales. In the following sections, we discuss our revenue, operating expenses, and other income (expense) for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
Previous wording
*Revenue.*Presented below is a comparison of our oil and gas sales, production quantities and average sales prices for the three months ended September 30, 2024 and 2023:
Current wording
*Revenue.*Presented below is a comparison of our oil and natural gas sales, production quantities and average sales prices for the three months ended March 31, 2025 and 2024:
Previous 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.
Current wording
The decrease in our oil and natural gas revenue of $3.2 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily due to a decrease of 57% in production quantities and a decrease in realized commodity pricing of 5% on a per barrel of oil equivalent (BOE) basis. For the three months ended March 31, 2025, we produced 47,008 BOE, or an average of 522 BOE per day, as compared to 109,800 BOE or an average of 1,207 BOE per day during the comparable period in 2024. The decrease in our production quantities primarily relates to the divestitures of Karnes County, East Texas and Mid-con regions which occurred in second half of 2024 and the natural decline in production in remaining producing assets. During the three months ended March 31, 2025, our production was 64% oil and 36% natural gas and liquids compared to 62% oil and 38% natural gas and liquids produced during the three months ended March 31, 2024.
Previous wording
Oil and Gas Production Costs. Presented below is a comparison of our oil and gas production costs for the three months ended September 30, 2024 and 2023:
Current wording
Oil and Natural Gas Production Costs. Presented below is a comparison of our oil and natural gas production costs for the three months ended March 31, 2025 and 2024:
Previous 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.
Current wording
For the three months ended March 31, 2025, gathering, transportation, and treating costs were $16 thousand, a decrease of $48 thousand, or 75%, compared to the comparable period of 2024. This decrease was attributable to the divestiture of properties that included gathering and transportation costs in the second half of 2024.
Previous 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.
Current wording
For the three months ended March 31, 2025, production taxes were $148 thousand, a decrease of $195 thousand, or 57%, compared to the comparable period of 2024. Production taxes consistently remain between 6% and 7% of revenue. This decrease in production taxes was attributable to the decrease in revenue of 59% discussed above.
Previous 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.
Current wording
*Depreciation, Depletion and Amortization.*Our depreciation, depletion, and amortization (“DD&A”) was $1.1 million and $2.2 million for the three months ended March 31, 2025 and 2024, respectively. Depletion expense on our oil and natural gas properties is the primary driver of DD&A expense. Our depletion rate was $13.35 per BOE and $15.90 per BOE for the three months ended March 31, 2025 and 2024, 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 $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.
Current wording
Impairment of oil and natural gas properties. The Company did not incur a ceiling test write down for the three months ended March 31, 2025. 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. 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.
Previous 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.
Current wording
General and administrative expenses increased by $0.2 million for the three months ended March 31, 2025 as compared to the prior year period. The increase was primarily attributable to an increase in both professional fees primarily attributable to divestitures, and acquisition related activities as well as incremental costs associated with a partial outsourcing of our accounting function to a third-party provider including transition costs. Stock-based compensation was higher because of the value of the restricted stock awards being amortized for the three months ended March 31, 2025 than those being amortized during the three months ended March 31, 2024.
Previous wording
Based on the current commodity price environment, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations. We continue to manage our commitments in order to maintain flexibility with regard to our activity level and capital expenditures.
Current wording
Based on the current commodity price environment and our current working capital, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations. We continue to manage our commitments in order to maintain flexibility with regard to our activity level and capital expenditures.
Previous 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.
Current wording
During 2025, we anticipate our industrial gas development to cost between $3.5 and $4.5 million on drilling and completing 2 – 4 industrial gas wells, acreage extension payments as well as site and preliminary design for our anticipated industrial gas processing plant and related infrastructure. The total costs depend primarily on the number of industrial gas wells drilled and the timing of construction on an industrial gas processing plant. In addition, depending on timing, regulatory requirements and weather, we plan to incur costs for plugging and abandonment of oil and natural gas wells of up to $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 cash on hand, operating cash flows, proceeds from divestitures of oil and natural gas properties, and if necessary, borrowings under our credit facility. 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 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.
Current wording
For the three months ended March 31, 2025, we funded our capital expenditures with cash on hand and proceeds from our January 2025 equity offering. In January 2025, we raised $11.9 million ($10.3 million after the Related Party Share Repurchase and related issuance costs) in an underwritten offering of 4,871,400 shares of our common stock. In future quarters, if cash flows are not sufficient to fund our capital expenditures and operations, we may raise funds through additional equity offerings or from other sources of financing. We also may 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
On January 5, 2022, we entered into a four-year credit agreement with FirstBank Southwest as administrative agent, which provides for a revolving line of credit with a borrowing base of $20 million, and a maximum credit amount of $100 million (the “Credit Agreement”). Under the Credit Agreement, revolving loans may be borrowed, repaid and re-borrowed until January 5, 2026, when all outstanding amounts must be repaid. The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries. In addition, the Credit Agreement contains financial covenants, tested quarterly, that limit our ratio of total debt to EBITDAX (as defined in the Credit Agreement) to 3:1 and require our ratio of consolidated current assets to consolidated current liabilities (as each is described in the Credit Agreement) to remain at 1:1 or higher. We were in compliance with all financial covenants as of September 30, 2024. Please refer toNote 6 - Debt in Part I, Item 1 of this report for additional discussion.
Current wording
On January 5, 2022, we entered into a four-year credit agreement with FirstBank Southwest as administrative agent, which provides for a revolving line of credit with a borrowing base of $20 million, and a maximum credit amount of $100 million (the “Credit Agreement”). Under the Credit Agreement, revolving loans may be borrowed, repaid and re-borrowed until January 5, 2026, when all outstanding amounts must be repaid. The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries. In addition, the Credit Agreement contains financial covenants, tested quarterly, that limit our ratio of total debt to EBITDAX (as defined in the Credit Agreement) to 3:1 and require our ratio of consolidated current assets to consolidated current liabilities (as each is described in the Credit Agreement) to remain at 1:1 or higher. We were in compliance with all financial covenants as of March 31, 2025.
Previous wording
The borrowing base is subject to being redetermined semi-annually, commencing on or about April 1 and October 1 of each year during the four-year term of the Credit agreement. Our borrowing base can be adjusted as a result of changes in commodity prices, acquisitions or divestitures of proved properties, or financing activities, all as provided for in the Credit Agreement.
Current wording
The borrowing base is subject to redetermination semi-annually, commencing on or about April 1 and October 1 of each year during the four-year term of the Credit Agreement. Our borrowing base can be adjusted as a result of changes in commodity prices, acquisitions or divestitures of proved properties, or financing activities, all as provided for in the Credit Agreement. We are currently in talks with our bank to renew and extend the Credit Agreement through 2029. We anticipate the process to be completed in the second quarter of 2025.
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 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.
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. There were no amounts outstanding on the Credit Agreement as of March 31, 2025.
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 nine months ended September 30, 2024, we spent approximately $3.7 million on the acquisition of helium properties and capital expenditures.
Current wording
We use cash for the acquisition and development of industrial gas 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 three months ended March 31, 2025, we spent approximately $2.1 million on the acquisition of industrial gas properties and capital expenditures.
Previous wording
The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, and the number and size of acquisitions that we complete. In addition, the impact of helium, oil and gas prices on investment opportunities, the availability of capital, tax law changes, and the timing and results of our development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, and other factors. We will continue to monitor the economic environment through the remainder of the year and adjust our activity level as warranted.
Current wording
The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, and the number and size of acquisitions that we complete. In addition, the impact of industrial gas and oil and natural gas prices on investment opportunities, the availability of capital, tax law changes, and the timing and results of our development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, and other factors. We will continue to monitor the economic environment through the remainder of the year and adjust our activity level as warranted.
Previous wording
The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023:
Current wording
The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:
Previous 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.
Current wording
Investing Activities. Cash used in investing activities for the three months ended March 31, 2025 was $2.4 million as compared to cash used in investing activities of $0.2 million for the comparable period in 2024. The primary use of cash in our investing activities for the three months ended March 31, 2025 was attributable to the Synergy acquisition noted above in*Material Developments.*For the three months ended March 31, 2024, the primary use of cash in our investing activities related to returning idle wells to production and improvements to our gathering system in East Texas.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Comparison of our Statements of Operations for the Nine Months Ended September 30, 2024 and 2023
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
*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 report — wording carried elsewhere
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 report — wording carried elsewhere
*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 report — wording carried elsewhere
*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 report — wording carried elsewhere
Other Income (Expense). Presented below is a comparison of our other income (expense) for the nine months ended September 30, 2024 and 2023: