US ENERGY CORP

1. ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations

U.S. Energy Corp. and its wholly-owned subsidiaries are referred to as the “Company” in these Notes to Condensed Consolidated Financial Statements. The Company is incorporated in the State of Delaware and its principal business activities are focused on the acquisition, exploration and development of industrial gas and oil and natural gas properties in the United States.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included.

For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Annual Report on Form10-K for the year ended* December 31, 2025*, as filed with the SEC on* March 13, 2026*. The Company’s significant accounting policies are also described in Note1 in those Consolidated Financial Statements. There have beenno material changes to those policies during thethree months ended* March 31, 2026*.

Our financial condition as of* March 31, 2026*, and operating results for thethree months ended* March 31, 2026*, arenot necessarily indicative of the financial condition and results of operations that* maybe expected for any future interim period or for the year ending December 31, 2026.*

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include oil and natural gas reserves that are used in the calculation of depreciation, depletion, amortization ("DD&A") and impairment of the carrying value of proved oil and natural gas properties, and the cost and timing of future asset retirement obligations. The Company evaluates its estimates on an on-going basis and bases its estimates on historical experience and on various other assumptions the Company believes to be reasonable. Due to inherent uncertainties, including the future prices of oil and natural gas, these estimates could change in the near term and such changes could be material.

Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in conformity with GAAP and include the accounts of U.S. Energy Corp. and its wholly-owned subsidiaries. U.S. Energy Corp. accounts for its share of oil and natural gas exploration and production activities, and industrial gas activities in which it has a direct working interest, by reporting its proportionate share of assets, liabilities, revenues, costs, and cash flows within the relevant lines on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows. All inter-company balances and transactions have been eliminated in consolidation.

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Industry Segment and Geographic Information

The Company operates primarily in the exploration and production segment of the oil and gas industry, conducting onshore operations within the United States. All current revenues are derived from the production and sale of oil and natural gas.

In addition, the Company has commenced development activities related to industrial gas assets. These activities are currently in the development stage and havenot yet generated revenues. Development activities primarily consist of resource evaluation, permitting, engineering and related capital expenditures.

The Company manages its operations as asingle reportable segment under ASC280 Segment Reporting. The Company’s Chief Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and reviews financial information on a consolidated basis for purposes of allocating resources and assessing performance. While industrial gas development costs and capital expenditures are tracked separately for internal project management purposes, such activities donot currently constitute a separate operating segment, as discrete operating results arenot reviewed by the CODM andno revenues have been generated.

The Company’s principal oil and natural gas properties and operations are located in:

The CODM evaluates performance primarily based on operating income (loss), defined as revenues less lease operating expenses. Other significant items reviewed include total assets, depreciation, depletion and amortization (“DD&A”), general and administrative expense, gain or loss on derivative activity, interest expense and income tax expense (benefit). These amounts are presented in the Consolidated Balance Sheets and Consolidated Statements of Operations.

Recently Issued Accounting PronouncementsNot Yet Adopted

In* November 2024,the Financial Accounting Standards Board issued Accounting Standards UpdateNo.* 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220*-40)*, which requires additional disaggregation of certain expense captions presented on the face of the income statement, including further detail regarding the nature of expenses such as employee compensation, depreciation, and amortization. The guidance is intended to enhance transparency into the composition of an entity’s expenses.

The amendments in ASU2024-03 are effective for public business entities for fiscal years beginning after* December 15, 2026,*and interim periods within those fiscal years. Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures. The Company expects the adoption will result in expanded disclosures but doesnot anticipate a material impact on its results of operations, financial position, or cash flows.

Related Party Transaction

During thethree months ended* March 31, 2026,the Company entered into a consulting engagement with a related party, as defined under applicable accounting guidance. The related party relationship arises from the entity being controlled by a member of the Company’s board of directors. The Company engaged the related party to provide electrical infrastructure consulting services in connection with the development of its gas processing facility. For thethree* months ended* March 31, 2026,the Company incurred approximately $25,000 in costs related to these services. The arrangement provides for a fixed fee of up to $50,000, and the Company believes the terms are customary and reasonable for similar services. The Company’s Audit Committee reviewed and approved the engagement in accordance with the Company’s related party transaction policy. As of March 31, 2026,*no amounts were payable to the related party.

2. ACQUISITIONS AND DIVESTITURES

Acquisition of industrial gas acreage

On* January 7, 2025,*the Company entered into, and simultaneously closed the related party transactions contemplated by, a Purchase and Sale Agreement (the “Synergy Purchase 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 was an approximate sixty percent beneficial owner of Synergy at the time of the entry into the purchase and sale agreement.

Pursuant to the Synergy Purchase Agreement, the Company purchased from Synergy,24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana, which are highly contiguous to the 144,000 net acres located across the Kevin Dome structure in Toole County, Montana acquired by the Company in* June 2024*from Wavetech Helium, Inc. ("Wavetech"), including all leases, wells, rights and interests in, under or derived from all communalization, unitization, or pooling agreements or pooling orders, easements, mineral interests, contracts, production, equipment, claims, receivables, indemnities, permits, seismic studies and records, associated therewith (collectively, the “Property”), subject to Synergy retaining an undivided twenty percent (20.00%) of Synergy’s right, title, and interest in the Property, and certain excluded assets (the “Synergy Reserved Interest”).

The Property was acquired in consideration for (a) $2.0 million in cash, subject to customary adjustments; (b)1,400,000 shares of the Company’s common stock (representing 4.76% of the Company’s outstanding common stock at the time of the entry into the Purchase Agreement) (the “Closing Shares”); (c) a carried working interest whereby the Company agreed to cover and pay for 100% of Synergy’s costs attributable to the Synergy Reserved Interest, until the earlier of (i)78 months from the closing date; or (ii) the date the total costs associated therewith total $20 million; (d) the Company's agreement to pay Synergy18% of the cash amounts it actually realizes from our sequestration of carbon oxides or similar substances derived directly from the area of mutual interest (“AMI”) surrounding the Property; and (e) the Company's 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 the Property (which includes any expansions connected to the initial installation that processes production from within the AMI in which the Company has a financial interest), in the same form as the consideration we receive upon such sale. Total consideration was $4.7 million. The transaction was accounted for as an asset acquisition and recorded as an unevaluated industrial gas asset upon closing.

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3. REVENUE RECOGNITION

The Company disaggregates revenues from its share of revenue from the sale of oil and natural gas and liquids by region. The Company’s revenues in the Rockies region and the Mid-Continent and Other region for thethree months ended* March 31, 2026and2025*, are presented in the following table:

Cumulative oil and natural gas divestitures have reduced production in the Company’s West Texas, South Texas and Gulf Coast region to an insignificant level during thethree months ended* March 31, 2026*. Accordingly, revenues for these areas are included within the Mid-Continent region in the current period, and prior-period amounts have been reclassified to conform to the current presentation. For thethree months ended* March 31, 2025,*oil and natural gas revenues attributable to the West Texas, South Texas and Gulf Coast region were $233 thousand and $10 thousand, respectively.

Significant concentrations of credit risk

The Company has exposure to credit risk in the event of non-payment of oil and natural gas receivables by purchasers of its operated oil and natural gas properties. The following table presents the purchasers that accounted for10% or more of the Company’s total oil and natural gas revenue for at leastone of the periods presented:

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4. LEASES

The Company’s operating lease right-of-use asset and lease obligation are recognized at their discounted present value under the following captions in the Condensed Consolidated Balance Sheets as of* March 31, 2026* and* December 31, 2025*:

The Company recognizes lease expense on a straight-line basis excluding short-term and variable lease payments, which are recognized as incurred. Short-term lease cost represents payments for oilfield equipment with original lease terms less thanone year. The following are the amounts recognized as components of lease cost for thethree months ended* March 31, 2026and2025*:

The Company’s Houston office operating lease doesnot contain implicit interest rates that can be readily determined; therefore, the Company used the incremental borrowing rates in effect at the time the Company entered into the leases.

Maturity of operating lease liabilities with terms ofone year or more as of* March 31, 2026* is presented in the following table:

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5. OIL AND NATURAL GAS PRODUCING ACTIVITIES

Full Cost Method Ceiling Test and Impairment

The reserves used in the ceiling test incorporate assumptions regarding pricing and discount rates over which management hasno influence in the determination of present value. In the calculation of the ceiling test as of* March 31, 2026*, the Company used $63.31 per barrel for oil and $3.72 perone million British Thermal Units 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%. No ceiling test write down was recorded for thethree months ended* March 31, 2026*.

In the calculation of the ceiling test as of* March 31, 2025,the Company used $74.52 per barrel for oil and $2.44 perone million** British Thermal Units 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%. No ceiling test write down was recorded for thethree** months ended ** March 31, 2025**.*

6. Credit Facility

On* January 5, 2022,the Company entered into afour-year credit agreement (“Credit Agreement”) with FirstBank Southwest (“FirstBank”) as administrative agent forone* or more lenders (the “Lenders”), which provided for a revolving line of credit with an initial borrowing base of $15 million, and a maximum credit amount of $100 million. Borrowings under the Credit Agreement are collateralized by afirst priority, perfected lien and security interests on substantially all assets of the Company (subject to permitted liens and other customary exceptions). On* July 26, 2022,the Company entered into a letter agreement with FirstBank whereby it increased the borrowing base under the Credit Agreement from $15 million to $20 million. Under the Credit Agreement, revolving loans maybe borrowed, repaid and re-borrowed until January 5, 2026,*when all outstanding amounts must be repaid.

On* September 16, 2025,effective August 1, 2025,the Company entered into a First Amendment to Credit Agreement and Limited Waiver ("Amendment") with FirstBank, as administrative agent for the lenders party thereto, and such lenders. Significant revisions made to the Credit Amendment as a result of the Amendment include extending the maturity date of amounts owed from January 5, 2026to May 31, 2029,lowering the borrowing base from $20 million to $10 million and deferring the next test period for the ratio of total debt to EBITDAX to March 31, 2026.During2025,* the Company expensed $53 thousand of remaining capitalized deferred financing costs associated with the Credit Agreement and capitalized $60 thousand of deferred financing costs attributable to the Amendment.

Under the Credit Agreement, revolving loans* maybe borrowed, repaid and re-borrowed until May 31, 2029,when all outstanding amounts must be repaid. Interest on the outstanding amounts under the Credit Agreement will accrue at an interest rate equal to the greater of (i) the prime rate in effect on such day, and (ii) the Federal Funds rate in effect on such day (as determined in the Credit Agreement) plus 0.50%, and an applicable margin that ranges between 0.25% to 1.25% depending on utilization of the amount of the borrowing base (the “Applicable Margin”). In addition, there is a fee on the unused borrowing commitment of 0.5%. Interest expense from drawn balances recognized on the Credit Agreement and the weighted average interest rates for thethree* months ended* March 31, 2026and2025* are presented in the following table:

The Credit Agreement contains various restrictive covenants and compliance requirements, which include: (i) maintenance of certain financial ratios, as defined in the Credit Agreement tested quarterly, that limit the Company’s ratio of total debt to EBITDAX (as defined in the Credit Agreement) to 3:1 and require its ratio of consolidated current assets to consolidated current liabilities (as each is described in the Credit Agreement) to remain at 1:1 or higher; (ii) restrictions on making certain payments as defined in the Credit Agreement, including the payment of cash dividends and repurchases of equity interests (subject to certain limited rights to make restricted payments as long asno event of default has occurred, or would result from the restricted payment, certain financial ratios are met and the borrowing availability after giving pro forma effect to any borrowing to be made on the date of the restricted payment is greater than, or equal to,20% of the then existing borrowing base); (iii) limits on the incurrence of additional indebtedness; (iv) a prohibition on the entry into commodity swap contracts exceeding a specified percentage of our expected production; and (v) restrictions on the disposition of assets.

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7. COMMODITY DERIVATIVES

The Company’s results of operations and cash flows are affected by changes in market prices for crude oil and natural gas. To manage a portion of its exposure to price volatility from producing crude oil and natural gas, the Company* mayenter into commodity derivative contracts to protect against price declines in future periods. The Company doesnot* enter into derivative contracts for speculative or trading purposes. The Company doesnot apply hedge accounting. Accordingly, changes in the fair value of the derivative contracts are recorded in the Condensed Consolidated Statements of Operations and are included as a non-cash adjustment to net loss in the operating activities section in the Condensed Consolidated Statements of Cash Flows.

As of* March 31, 2026* and* December 31, 2025*, the Company hadno commodity derivative contracts outstanding.

8. COMMITMENTS AND CONTINGENCIES

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the anticipated results of any pending litigation and claims arenot expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.

9. SHAREHOLDERS’** EQUITY**

As of* March 31, 2026*, and* December 31, 2025*, the Company had 245,000,000 common stock shares authorized. In addition, as of* March 31, 2026*, and* December 31, 2025*, the Company had 5,000,000 authorized but unissued shares of preferred stock.

Equity Issuances

On* March 10, 2026,*the Company closed on an underwritten offering of 8,800,000 shares of common stock, at a price to the public of $1.00 per share generating $8.1 million net of underwriting discounts and offering expenses.

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”).

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 plans to use such proceeds for the development of its 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 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.

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Related Party Share Repurchase

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.

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 was the net price per share of the 4,871,400 shares of common stock 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.*

Committed Equity Facility

On* October 9, 2025**,* the Company entered into a Common Stock Purchase Agreement and related Registration Rights Agreement with Roth Principal Investments, LLC (“Roth Principal”), providing a discretionary equity facility of up to $25.0 million. Beginning* December 1, 2025,the Company may**,* at its option over24 months from the date the resale registration is declared effective and certain other conditions are met, sell shares of common stock to Roth Principal at a price based on the Nasdaq volume weighted average prices during a specific pricing period, less a 2.5% discount, subject to pricing and ownership limits. The facility is capped at 19.99% of outstanding shares of the Company’s common stock as of the date of the Company’s entry into the Common Stock Purchase Agreement, absent shareholder approval or satisfaction of the Nasdaq pricing exemption and includes a 4.99% beneficial-ownership blocker. As consideration, the Company paid a $25 thousand structuring fee, issued 223,141 shares of common stock as a partial commitment fee (valued at $270,000) (the “Stock Commitment Fee”), agreed to a $180 thousand cash commitment fee, and to reimburse legal fees. Proceeds, if any, are expected to be used for working capital and general corporate purposes.

During thethree months ended* March 31, 2026*, the Company issued 8,548,382 shares under the Committed Equity Facility and generated $9.1 million in proceeds net of financing costs. As of* March 31, 2026*, the availability under the Committed Equity Facility is the lesser of $15.9 million or the issuance of 15,328,477 shares.

Stock Option Plans

The Company* may*grant stock options under its incentive plan covering shares of common stock to employees and directors of the Company. Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. These awards typically expireten years from the grant date.

As of* March 31, 2026and2025*, stock options to purchase approximately 16.5 thousand shares of common stock were vested, with weighted-average exercise prices of $10.00. As of* March 31, 2026*, these options had a weighted-average remaining contractual term of 1.8 years. There wasno stock-based compensation expense recognized during thethree months ended* March 31, 2026* or2025 related to these options.

In addition, on* March 4, 2026,the Company granted stock options to employees and directors to purchase 3,517,500 shares of common stock at an exercise price of $1.11 per share. Of these options, approximately 1.38 million vest overten months inclusive of March 2026,1.50 million vest ratably over four years, beginning January 2, 2027,and 637,500 vest ratably overtwo years, beginning January 2, 2027.*

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The grant-date fair value of these options was approximately $0.77 per option, or $2.7 million in the aggregate, as determined using the Black-Scholes option pricing model utilizing the following assumptions:

Expected volatility was estimated based on the historical volatility of the Company’s common stock over a lookback period deemed representative of the expected life of the options, taking into consideration the Company’s historical trading data and significant corporate developments. The Company evaluated historical volatility using daily stock price data and considered the impact of changes in its business strategy and market conditions over the look-back period. Due to limited historical exercise data and changes in the Company’s operations, management applied judgment in selecting an appropriate volatility assumption reflective of the expected term of the awards.

During thethree months ended* March 31, 2026*, the Company recognized stock-based compensation of approximately $194 thousand related to the* March 4, 2026grants. As of March 31, 2026*, total unrecognized compensation cost related to these awards was approximately $2.5 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock

The Company grants restricted stock under its incentive plans covering shares of common stock to employees and directors of the Company. All of the restricted stock awards are time-based awards and are amortized ratably from grant date over a requisite service period. Forfeitures of restricted stock awards are recognized as they occur. Restricted stock granted to employees is reduced by shares forfeited to pay withholding tax. Non-vested shares of restricted stock arenot included in common shares outstanding until vesting has occurred.

The following table presents the changes in non-vested restricted stock awards to all employees and directors for thethree months ended* March 31, 2026*:

For thethree months ended* March 31, 2026and2025*, the Company recognized $0.3 million and $0.4 million, respectively, of stock compensation expense related to restricted stock grants. Unrecognized compensation cost related to non-vested awardsnot yet recorded in the Company’s Condensed Consolidated Statements of Operations as of* March 31, 2026* was $0.7 million. This cost is expected to be recognized over a weighted average period of 1.3 years.

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Share Repurchase Program

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 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.

Under the stock repurchase program, shares are repurchased from time to time in the open market or through negotiated transactions at prevailing market prices, or by other means in accordance with federal securities laws. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. The repurchase program is funded using the Company’s working capital. The repurchased shares are cancelled and therefore willnot be held in treasury or reissued.

The following table presents the activity in the share repurchase program for thethree months ended* March 31, 2026and2025*:

10. ASSET RETIREMENT OBLIGATIONS

The Company has asset retirement obligations (“ARO”) associated with the future plugging and abandonment of proved properties. Initially, the fair value of a liability for an ARO is recorded in the period in which the ARO is incurred with a corresponding increase in the carrying amount of the related asset. The liability is accreted to its present value each period and the capitalized cost is depleted over the life of the related asset. If the liability is settled for an amount other than the recorded amount, an adjustment to the full cost pool is recognized. The Company hadno assets that are restricted for the purpose of settling ARO.

In the fair value calculation for the ARO there are a number of assumptions and judgments, including the ultimate retirement cost, inflation factors, credit-adjusted risk-free discount rates, timing of retirement and changes in legal, regulatory, environmental, and political environments. To the extent future revisions to assumptions and judgments impact the present value of the existing ARO, a corresponding adjustment is made to the oil and natural gas property balance.

The following is a reconciliation of the changes in the Company’s liabilities for asset retirement obligations as of* March 31, 2026* and* December 31, 2025*:

11. INCOME TAXES

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. The Company’s effective tax rate was approximately 0% and 0% for thethree months ended* March 31, 2026and2025*, respectively. The primary difference in the Company’s effective tax rate and the statutory rate for both periods is related to the movement in the valuation allowance against the Company’s net deferred tax assets.

Deferred taxes are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets, liabilities, net operating losses and tax credit carry-forwards. We review our deferred tax assets (“DTAs”) and valuation allowance on a quarterly basis. As part of our review, we consider positive and negative evidence, including cumulative results in recent years.

The Company recognizes, measures, and discloses uncertain tax positions whereby tax positions must meet a “more-likely-than-not” threshold to be recognized. During thethree months ended* March 31, 2026and2025*, no adjustments were recognized for uncertain tax positions.

12. INCOME (LOSS) PER SHARE

Basic net income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the respective period. Diluted net income (loss) per common share is calculated by dividing adjusted net income by the diluted weighted average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist of stock options and unvested shares of restricted common stock, which are measured using the treasury stock method. When the Company recognizes a net loss, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of dilutive net loss per common share. Unvested shares of restricted stock participate in dividend distributions; however, they donot participate in losses. Therefore, dividends, if any, attributable to participating securities arenot included as a reduction in the calculation of loss attributable to common shareholders.

The following table sets forth the calculation of basic and diluted net loss per share for thethree months ended* March 31, 2026and2025*:

Potential common shares, including restricted stock and stock options issued to employees and directors disclosed inNote9* – Shareholders*’* Equity*, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

13. FAIR VALUE MEASUREMENTS

The Company’s fair value measurements are estimated pursuant to a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, giving highest priority to quoted prices in active markets (Level1) and the lowest priority to unobservable data (Level3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability, and* mayaffect the valuation of the assets and liabilities and their placement within the hierarchy level. Thethree* levels of inputs that* may*be used to measure fair value are defined as:

Level1 - Quoted prices for identical assets and liabilities traded in active markets.

Level2 - Observable inputs other than Level1 that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in active markets, or other observable inputs that can be corroborated by observable market data.

Level3 - Unobservable inputs supported by little orno market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following is a description of the valuation methodologies used for complex financial instruments measured at fair value:

Recurring Fair Value Measurements

Marketable Equity Securities

We measure the fair value of marketable equity securities based on quoted market prices obtained from independent pricing services. The Company has an investment in the marketable equity securities of Anfield Energy (“Anfield”), which it acquired as consideration for sales of certain mining operations. Anfield is traded in an active market under the trading symbol AEC:TSXV and has been classified as Level1.

We have approximately 32.3 thousand shares of marketable equity securities valued at $168 thousand and $145 thousand as of* March 31, 2026* and* December 31, 2025*, respectively.

Credit Facility

The Company’s credit facility approximates fair value because the interest rate is variable and reflective of market rates.

Other Financial Instruments

The carrying value of financial instruments included in current assets and current liabilities approximate fair value due to the short-term nature of those instruments.

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Nonrecurring Fair Value Measurements

Asset Retirement Obligations

The Company measures the fair value of asset retirement obligations as of the date a well is acquired, the date a well begins drilling, or the date the Company revises its ARO assumptions. The Company’s estimated AROs are based on historical experience in plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment costs and federal and state regulatory requirements, all unobservable inputs, and therefore, are designated as Level3 within the valuation hierarchy. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised upwards. The credit adjusted risk-free rate used to discount the Company’s plugging and abandonment liabilities range from 7.30% to 19.00%. SeeNote10**-Asset Retirement Obligations.

Stock Options

The Company measures the fair value of stock option awards as of the grant date using a Black-Scholes option pricing model. The fair value of stock options is based on a number of assumptions, including the expected term of the awards, expected volatility of the Company’s common stock, risk-free interest rate, and expected dividend yield. These inputs involve significant management judgment and are therefore classified as Level3 within the fair value hierarchy.

Expected volatility is estimated based on the historical volatility of the Company’s common stock over a lookback period deemed representative of the expected life of the options, taking into consideration the Company’s historical trading data and significant corporate developments. The expected term is estimated using the simplified method, as the Company doesnot have sufficient historical exercise data. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for maturities consistent with the expected term of the awards. The expected dividend yield is assumed to be zero, as the Company hasnot paid dividends since2023 and doesnot anticipate doing so in the foreseeable future. SeeNote9**—Shareholders’* Equity.*

14. OTHER CURRENT ASSETS AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Other Current Assets

The following table presents the components of other current assets as of the dates indicated:

Accounts Payable and Accrued Liabilities.

The following table presents the components of accounts payable and accrued liabilities as of the dates indicated:

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

16. SUBSEQUENT EVENTS

Credit Facility

On* April 17, 2026,the Company entered into a Second Amendment (the “Second Amendment”) to its Credit Agreement, dated January 5, 2022 (as previously amended, the “Credit Agreement”), with FirstBank Southwest, as administrative agent, and the lenders party thereto. The Second Amendment, among other things, (i) increased the borrowing base from $10.0 million to $20.0 million, (ii) revised the applicable margin on outstanding borrowings to a fixed 2.00% per annum, (iii) suspended testing of financial covenants through the fiscal quarter ending March 31, 2027,and (iv) made certain other modifications to the Credit Agreement. The Credit Agreement maturity date remains May 31, 2029.*

Costless Collar Derivative Contracts

Subsequent to* March 31, 2026*, the Company entered into costless collar derivative contracts covering a portion of its anticipated crude oil production. The collars reference WTI crude oil (calendar monthly average) and cover approximately 3,800 barrels per month for the period* June 2026through July 2027 (approximately 53,200 barrels in total). Under the terms of the agreements, the Company purchased put options with a floor price of $65.00 per barrel and sold call options with a ceiling price of $88.09 per barrel. The contracts were executed atno* upfront cost.

Helium Sales Agreement

On* April 27, 2026,the Company executed afive-year helium sales agreement with an investment-grade global industrial gas company for the sale of contained helium to be produced at the Company’s Big Sky Carbon Hub in Montana. The Agreement provides for a 100% take-or-pay commitment by the Counterparty for up to approximately 1.2 MMCF per month (14.4 MMCF annually) of helium production, with fixed pricing of $285 per MCF at the plant gate, subject to annual CPI-based escalation beginning March 1, 2028,and includes a price redetermination mechanism in yearthree* with a right offirst refusal.