US ENERGY CORP

Previous wording

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 wording

U.S. Energy Corp. (collectively with its wholly-owned subsidiaries 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.

Previous 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.

Current wording

On January 7, 2025, we entered into 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 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 wording

On January 22, 2025, the Company entered into an underwriting agreement for the offering of 4,871,400 shares of common stock, at a price to the public of $2.65 per share (such offering, the “Offering”).

Previous wording

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 wording

The sale of 4,871,400 shares of common stock (including the full 635,400 over-allotment 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, and has used, and continues to use such proceeds for the development of its Montana assets, 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 used $1.574 million from the over-allotment option exercise to purchase shares of common stock from Sage Road Capital, LLC (whose co-manager, Joshua L. Batchelor, was a then member of the Board of Directors of the Company) and its affiliates at a price equal to the public offering price of the Offering, less underwriting discounts, which sale took place in January 2025, as discussed below.

Previous 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.

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 outstanding shares of the Company’s common stock originally approved by the Board of Directors on April 26, 2023 and subsequently extended, subject to any future extensions 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 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.

Current wording

During the six months ended June 30, 2025, the Company repurchased 197,400 shares for $317 thousand, at a weighted average price of $ 1.61 per share. 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. As of June 30, 2025, a total of $3.5 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 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.

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 June 30, 2025, the Company used $70.48 per barrel for oil and $2.86 per one million British Thermal Units (MMbtu) for natural gas (as further adjusted for property, specific gravity, quality, local markets and distance from markets) to compute the future cash flows of the Company’s producing properties. The discount factor used was 10%. The Company recorded a $2.8 million ceiling test write-down of its oil and natural gas properties during the three months ended June 30, 2025, due to a reduction in the value of proved oil and natural gas reserves primarily as a result of a decrease in crude oil prices.

Previous 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.

Current wording

We expect to record a further write-down of our oil and natural gas properties in the third 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 $0.5 million to $1.5 million in the third quarter of 2025.

Previous wording

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 wording

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.

Previous 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.

Current wording

For the three months ended June 30, 2025, we recorded a net loss of $6.1 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 divestitures. In the following sections, we discuss our revenue, operating expenses, and other income (expense) for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Previous 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.

Current wording

The decrease in our oil and natural gas revenue of $4.0 million for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily due to a decrease of 56% in production quantities and a decrease in realized commodity pricing of 24% on a per barrel of oil equivalent (BOE) basis. For the three months ended June 30, 2025, we produced 48,816 BOE, or an average of 536 BOE per day, as compared to 111,091 BOE or an average of 1,221 BOE per day during the comparable period in 2024. The decrease in our production quantities primarily relates to the divestitures of our properties in the Karnes County, East Texas and Mid-con regions which occurred in the second half of 2024 and the natural decline in production in remaining producing assets. During the three months ended June 30, 2025, our production was 69% oil and 31% natural gas and liquids compared to 64% oil and 36% natural gas and liquids produced during the three months ended June 30, 2024.

Previous wording

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 wording

For the three months ended June 30, 2025, lease operating expenses were $1.6 million or $32.14 per BOE. While lease operating expenses decreased by $1.5 million when compared to $3.1 million or $27.69 per BOE for the three months ended June 30, 2024, the cost on a BOE basis increased as the mix of properties changed because of the divestment of our Karnes County, East Texas, and Mid-con properties.

Previous 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.

Current wording

For the three months ended June 30, 2025, gathering, transportation, and treating expense 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 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.

Current wording

For the three months ended June 30, 2025, production taxes consistently remain between 6% and 7% of revenue. This decrease in production taxes was attributable to the decrease in revenue of 66% discussed above.

Previous 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.

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 June 30, 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 $15.37 per BOE and $15.30 per BOE for the three months ended June 30, 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. 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.

Current wording

Impairment of oil and natural gas properties. The Company recorded a ceiling test write down of $2.8 million for the three months ended June 30, 2025, resulting from a reduction in commodity prices in the second quarter. The Company recorded a $5.4 million ceiling test write-down of its oil and gas properties during the three months ended June 30, 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 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.

Current wording

General and administrative expenses increased by $0.2 million for the three months ended June 30, 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 offset by compensation and benefits. Stock-based compensation was higher because of the value of the restricted stock awards being amortized for the three months ended June 30, 2025, than those being amortized during the three months ended June 30, 2024.

Previous wording

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 wording

For the three months ended June 30, 2025, we did not have any open commodity derivative positions. For the first three months of 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.

Previous wording

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 wording

Interest expense primarily represents the interest and fees on our credit facility with FirstBank Southwest. As of December 31, 2024 and June 30, 2025, we had no amounts outstanding on our credit facility. For the three months ended June 30, 2025, while there was no balance outstanding on the credit facility, we did incur fees to maintain our credit facility.

Previous 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.

Current wording

For the remainder of 2025, we anticipate our industrial gas development cost to total between $1.0 to $2.5 million, representing funds required to complete our recently drilled industrial gas wells, and onsite and preliminary design for our anticipated industrial gas processing plant and related infrastructure. The total costs depend primarily on the timing of these activities. The extent of capital deployment over the next 12 months will depend largely on the timing of the construction of our industrial gas processing plant. In addition, depending on timing, regulatory requirements and weather, we may incur costs for plugging and abandonment of oil and natural gas wells of up to $ 800 thousand. 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 and project specific financing. 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 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.

Current wording

For the six months ended June 30, 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 repurchase of certain shares of common stock held by affiliates of Sage Road Capital, which entities are related parties (see alsoMaterial Developments-Related Party Share Repurchase, above, 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 (public and/or private) 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

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.

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.

Previous 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.

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 six months ended June 30, 2025, we spent approximately $4.7 million on the acquisition and development of industrial gas properties and capital expenditures.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024:

Previous wording

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 wording

Operating Activities. Cash used in operating activities of $6.1 million for the six months ended June 30, 2025 was mainly due to a $9.2 million net loss and a reduction of accounts payable and accrued liabilities of $3.0 million, offset by $2.2 million of depreciation, depletion, accretion, and amortization and a $3.2 million impairment of oil and natural gas properties and loss on sale of assets. Cash used in operating activities of $0.3 million for the six months ended June 30, 2024, was mainly due to of net loss of $11.5 million, offset by $4.4 million of depreciation, depletion, accretion, and amortization and a $5.4 million impairment of oil and natural gas properties.

Previous 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.

Current wording

Investing Activities. Cash used in investing activities for the six months ended June 30, 2025 was $4.5 million as compared to cash used in investing activities of $2.7 million for the comparable period in 2024. The primary use of cash in our investing activities for the six months ended June 30, 2025 was attributable to the Synergy acquisition noted above inMaterial Developments - Synergy - acquisition of industrial gas propertiesand recent drilling activity*.*For the six months ended June 30, 2024, the primary use of cash in our investing activities related to the Wavetech acquisition and 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 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.

Current wording

Financing Activities. Cash provided by financing activities for the six months ended June 30, 2025 was $9.6 million as compared to cash used in financing activities of $1.2 million for the comparable period in 2024. As discussed inMaterial Developments - Underwritten Offering above, the primary driver of finance cash inflow during the first half of 2025 was our first quarter equity offering which generated net proceeds of $11.9 million offset by a share repurchases. Cash provided by financing activities during the six months ended June 30, 2024 primarily related to borrowings under our credit facility reduced by share repurchases of $0.6 million and tax withholdings related to share based compensation.