U.S. Energy Corp. (NASDAQCM:USEG) (“U.S. Energy”
or the “Company”) today announced financial and operational results
for the first quarter ended March 31, 2018.
Highlights
- Production of 37,413 BOE, or daily production of 416 BOEPD, a
5% sequential increase;
- Oil and gas revenues of $1.6 million, a 23% sequential
increase;
- Lease operating expenses of $0.4 million or $11.33 per
BOE;
- Cash and cash equivalents of $2.1 million at 3/31/2018;
- Total outstanding debt of $0.9 million at 3/31/2018;
- Shares outstanding of 12,460,220 at 3/31/2018
Management Comment
David Veltri, U.S. Energy’s Chief Executive
Officer, stated, “We are pleased to announce a strong operational
quarter as a result of resumed drilling activity, well performance
exceeding our initial expectations and strengthening commodity
prices. Over the first quarter of 2018, U.S. Energy returned
to sequential production and revenue growth while driving down
operating costs and maintaining low levels of leverage. We
continue to evaluate a number of opportunities around our existing
assets with the ultimate objective being to build scale through
participating in organic development and acreage trades, while
working toward larger acquisitions that will lead to efficient and
economic asset development. We look forward to updating the market
on the results of these efforts.”
First Quarter 2018
Production
|
|
1st Quarter 2018 |
|
4th Quarter 2017 |
Sales Volume
(Total) |
|
|
|
|
Oil (Bbls) |
|
20,379 |
|
16,875 |
Gas (Mcf) |
|
102,205 |
|
113,469 |
Sales volumes
(BOE) |
|
37,413 |
|
35,786 |
|
|
|
|
|
Average Daily
Production (BOEPD) |
|
416 |
|
389 |
|
|
|
|
|
Average Sales
Prices |
|
|
|
|
Oil (Bbl) |
$ |
60.39 |
$ |
54.09 |
Gas (Mcf) |
$ |
3.18 |
$ |
3.13 |
Barrel of Oil
Equivalent |
$ |
41.57 |
$ |
35.44 |
Operations Update
CML Beeler Ranch #1H: The CML Beeler Ranch
#1H came on line in January 2018. The well is located in our Zavala
county leasehold in South Texas and is a dual lateral with each
lateral comprising approximately 10,000 feet of open hole
completion within the Georgetown formation. The completion resulted
in an initial 24-hour max IP rate of 1,046 barrels of oil and 1,085
mcf of natural gas and a 30-day average IP of 773 barrels of oil
and 850 mcf of natural gas. After 90 days of production the
well produced an average rate of 716 barrels of oil and 626 mcf of
natural gas while maintaining an oil rate of 93% of the initial
average. U.S. Energy expects continued development of the
Georgetown Formation on existing and surrounding acreage over the
course of 2018.
Financial Results
Revenues from sales of oil and natural gas
during the first quarter of 2018 were $1.6 million compared to $1.3
million during the fourth quarter of 2017 and $1.7 million during
the first quarter of 2017. The increase in revenue from the
fourth quarter of 2017 was driven by both an increase in production
combined with increased oil prices. The primary cause of the
decrease in revenue from the first quarter of 2017 is driven by the
assets associated with the October 2017 asset divestiture. Revenue
from oil production represented 79% of Company revenue during the
first quarter of 2018.
Lease operating expenses for the first quarter
of 2018 were $0.4 million, or $11.33 per BOE, during the first
quarter of 2018 compared to $0.7 million or $14.03 per BOE during
the first quarter of 2017. This decrease was primarily attributed
to the divestment of high-cost properties by the Company during
2017.
G&A expenses totaled $1.1 million during the
first quarter of 2018 compared to $1.3 million during the first
quarter of 2017. The decrease was primarily attributable to a $0.7
million reduction in professional fees due to the completion of
Company transactions during 2017. The decrease was partially offset
by a $0.6 million increase in incentive compensation.
Adjusted EBITDAX was ($0.4) million for the
first quarter of 2018 as compared to $(0.6) million for the first
quarter of 2017. Net Loss was $0.2 million for the first
quarter of 2018 compared to $0.7 million for the first quarter of
2017. Adjusted EBITDAX is a non-GAAP financial measure.
For additional information please refer to the reconciliation of
this measure at the end of this news release.
Credit Facility Update
As of March 31, 2018, the Company was in
compliance with all financial covenants and fully conforming with
all requirements under its credit facility.
Credit Facility
Covenants |
Required Covenant Ratio |
U.S.
Energy at 3/31/2018 |
Current
Ratio |
Greater
than 1.0 to 1.0 |
7.3 to
1.0 |
PDP to Secured
Debt* |
Greater
than 1.2 to 1.0 |
10.0 to
1.0 |
*Represents
outstanding indebtedness of $0.9 million under the Credit Facility
at 3/31/18. |
Update to Hedging Activity
U.S. Energy hedges portions of its expected
production volumes to increase the predictability of its cash flow
and to help maintain a strong financial position. As of Mach 31,
2018, U.S. Energy had an unrealized loss on commodity price
derivatives of $0.1 million. The following table summarizes U.S.
Energy’s open crude oil and natural gas derivative contracts
scheduled to settle after March 31, 2018.
|
Position |
|
Begin |
|
End |
|
Quantity (bbls/d) |
|
Price |
Crude oil price
swaps |
Bought |
|
4/1/18 |
|
6/30/18 |
|
150 |
|
52.20 |
Crude oil call
option |
Bought |
|
4/1/18 |
|
4/30/18 |
|
150 |
|
60.00 |
|
|
|
|
|
|
|
|
|
|
|
Position |
|
Begin |
|
End |
|
Quantity (mcf/d) |
|
Price |
Natural gas price
swaps |
Bought |
|
4/1/18 |
|
12/31/18 |
|
500 |
|
3.01 |
About U.S. Energy Corp.
We are an independent energy company focused on
the lease acquisition and development of oil and gas producing
properties in the continental United States. Our business is
currently focused in the Williston Basin of North Dakota and South
Texas. We continue to focus on increasing production, reserves, and
cash flow from operations while pro-actively managing our debt
levels. More information about U.S. Energy Corp. can be found at
www.usnrg.com.
Forward-Looking Statements
This press release may include “forward-looking
statements” within the meaning of the securities laws. All
statements other than statements of historical facts included
herein may constitute forward-looking statements. Forward-looking
statements in this document may include statements regarding the
Company’s expectations regarding the Company’s operational,
exploration and development plans; expectations regarding the
nature and amount of the Company’s reserves; and expectations
regarding production, revenues, cash flows and recoveries. When
used in this press release, the words "will," "potential,"
"believe," "estimate," "intend," "expect," "may," "should,"
"anticipate," "could," "plan," "predict," "project," "profile,"
"model," or their negatives, other similar expressions or the
statements that include those words, are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. Such statements are
subject to a number of assumptions, risks and uncertainties, many
of which are beyond the control of the Company, which may cause
actual results to differ materially from those implied or expressed
by the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to,
fluctuations in oil and natural gas prices, uncertainties inherent
in estimating quantities of oil and natural gas reserves and
projecting future rates of production and timing of development
activities, competition, operating risks, acquisition risks,
liquidity and capital requirements, the effects of governmental
regulation, adverse changes in the market for the Company’s oil and
natural gas production, dependence upon third-party vendors, and
other risks detailed in the Company’s periodic report filings with
the Securities and Exchange Commission.
Corporate Contact:
U.S. Energy Corp. Ryan SmithChief Financial Officer(303)
993-3200www.usnrg.com
U.S. ENERGY CORP. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(Unaudited) |
|
March 31, 2018 |
|
December 31, 2017 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and
equivalents |
$ |
2,095 |
|
$ |
3,277 |
|
Oil and
gas sales receivable |
|
1,078 |
|
|
687 |
|
Discontinued operations - assets of mining segment |
|
114 |
|
|
114 |
|
Assets
available for sale |
|
- |
|
|
653 |
|
Marketable securities |
|
798 |
|
|
876 |
|
Transaction deposit |
|
374 |
|
|
250 |
|
Other
current assets |
|
316 |
|
|
61 |
|
|
|
|
|
|
|
|
Total current assets |
|
4,775 |
|
|
5,918 |
|
|
|
|
|
|
|
|
Oil and gas
properties under full cost method: |
|
|
|
|
|
|
Unevaluated properties |
|
4,664 |
|
|
4,664 |
|
Evaluated
properties |
|
86,356 |
|
|
86,313 |
|
Less
accumulated depreciation, depletion and amortization |
|
(83,500 |
) |
|
(83,362 |
) |
|
|
|
|
|
|
|
Net oil and gas properties |
|
7,520 |
|
|
7,615 |
|
|
|
|
|
|
|
|
Other
assets: |
|
|
|
|
|
|
Property
and equipment, net |
|
2,340 |
|
|
1,717 |
|
Other
assets |
|
62 |
|
|
66 |
|
|
|
|
|
|
|
|
Total other assets |
|
2,402 |
|
|
1,783 |
|
|
|
|
|
|
|
|
Total assets |
$ |
14,697 |
|
$ |
15,316 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable and accrued liabilities: |
|
|
|
|
|
|
Oil and
gas payables |
|
464 |
|
|
707 |
|
Related
party payable |
|
- |
|
|
50 |
|
Accrued
compensation and benefits |
|
82 |
|
|
64 |
|
Liabilities from derivative contracts |
|
107 |
|
|
161 |
|
Current
portion of long-term debt |
|
- |
|
|
600 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
653 |
|
|
1,582 |
|
|
|
|
|
|
|
|
Noncurrent
liabilities: |
|
|
|
|
|
|
Asset
retirement obligations |
|
919 |
|
|
913 |
|
Revolving
credit facility |
|
937 |
|
|
937 |
|
Warrant
liability |
|
930 |
|
|
1,200 |
|
Other
liabilities |
|
28 |
|
|
22 |
|
Total noncurrent liabilities |
|
2,814 |
|
|
3,072 |
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 7) |
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
|
Preferred
stock, par value $0.01 per share. Authorized 100,000 shares, 50,000
shares of series A Convertible Preferred Stock as of 3/31/2018;
liquidation preference of $2,606 as of 3/31/2018. |
|
1 |
|
|
1 |
|
Common
stock, $0.01 par value; unlimited shares authorized; 12,460,220 and
6,134,506 shares issued and outstanding as of 3/31/2018 and
12/31/2017, respectively |
|
124 |
|
|
118 |
|
Additional paid-in capital |
|
137,515 |
|
|
136,631 |
|
Accumulated deficit |
|
(125,429 |
) |
|
(125,185 |
) |
Other
comprehensive loss |
|
(981 |
) |
|
(903 |
) |
|
|
|
|
|
|
|
Total shareholders' equity |
|
11,230 |
|
|
10,662 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
14,697 |
|
$ |
15,316 |
|
U.S. ENERGY CORP. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS |
(Unaudited) |
|
2018 |
|
2017 |
|
|
|
|
Revenue: |
|
|
|
|
|
Oil |
$ |
1,230 |
|
$ |
1,240 |
|
Natural
gas and liquids |
|
325 |
|
|
507 |
|
|
|
|
|
|
|
Total
revenue |
|
1,555 |
|
|
1,747 |
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
Oil and
gas operations: |
|
|
|
|
|
Production costs |
|
633 |
|
|
1,053 |
|
Depreciation, depletion and amortization |
|
145 |
|
|
270 |
|
General
and administrative: |
|
|
|
|
|
Compensation and benefits, including directors and contract
employees |
|
783 |
|
|
176 |
|
Stock-based compensation |
|
13 |
|
|
106 |
|
Professional fees, insurance and other |
|
320 |
|
|
880 |
|
|
|
|
|
|
|
Total
operating expenses |
|
1,894 |
|
|
2,485 |
|
|
|
|
|
|
|
Operating loss |
|
(339 |
) |
|
(738 |
) |
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
Realized
loss on oil price risk derivatives |
|
(179 |
) |
|
- |
|
Unrealized gain on oil price risk derivatives |
|
54 |
|
|
- |
|
Rental
and other loss |
|
(14 |
) |
|
(216 |
) |
Warrant
fair value adjustment |
|
270 |
|
|
340 |
|
Interest
expense |
|
(36 |
) |
|
(125 |
) |
Other
expense |
|
- |
|
|
(1 |
) |
Total
other income (expense) |
|
95 |
|
|
(2 |
) |
|
|
|
|
|
|
Net
loss |
|
(244 |
) |
|
(740 |
) |
|
|
|
|
|
|
Change in
fair value of marketable equity securities, net of tax |
|
(78 |
) |
|
(86 |
) |
|
|
|
|
|
|
Comprehensive
loss |
$ |
(322 |
) |
$ |
(826 |
) |
|
|
|
|
|
|
Loss applicable
to common shareholders |
|
|
|
|
|
Loss from
operations |
|
(244 |
) |
|
(740 |
) |
Accrued
dividends related to Series A Convertible Preferred Stock |
|
(79 |
) |
|
(69 |
) |
Loss applicable
to common shareholders |
|
(323 |
) |
|
(809 |
) |
|
|
|
|
|
|
Loss per share-
basic & diluted |
|
|
|
|
|
Total |
$ |
(0.03 |
) |
$ |
(0.14 |
) |
Weighted
average shares outstanding |
|
|
|
|
|
Basic
& diluted |
|
12,148,527 |
|
|
5,834,568 |
|
U.S. ENERGY CORP. AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND
2017 (In Thousands) |
|
2018 |
|
2017 |
|
|
|
|
|
|
Cash flows from
operating activities: |
|
|
|
|
|
|
Net
loss |
$ |
(244 |
) |
$ |
(740 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
178 |
|
|
304 |
|
Change in
fair value of oil price risk derivative |
|
(54 |
) |
|
- |
|
Stock-based compensation and services |
|
13 |
|
|
106 |
|
Warrant
fair value adjustment |
|
(270 |
) |
|
(340 |
) |
Other |
|
8 |
|
|
28 |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
Decrease
(increase) in: |
|
|
|
|
|
|
Oil and
gas sales receivable |
|
(391 |
) |
|
(96 |
) |
Other
assets |
|
(5 |
) |
|
(140 |
) |
Transaction deposit |
|
(374 |
) |
|
- |
|
Increase
(decrease) in: |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
(293 |
) |
|
533 |
|
Accrued
compensation and benefits |
|
19 |
|
|
12 |
|
|
|
|
|
|
|
|
Net cash
used in operating activities |
|
(1,413 |
) |
|
(333 |
) |
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
Capital
expenditures |
|
(46 |
) |
|
(21 |
) |
|
|
|
|
|
|
|
Net cash
used in investing activities: |
|
(46 |
) |
|
(21 |
) |
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
Payment
on short-term debt |
|
(600 |
) |
|
- |
|
Proceeds
from issuance of common stock, net |
|
877 |
|
|
- |
|
|
|
|
|
|
|
|
Net cash
provided by financing activities |
|
277 |
|
|
- |
|
|
|
|
|
|
|
|
Net
decrease in cash and equivalents |
|
(1,182 |
) |
|
(354 |
) |
|
|
|
|
|
|
|
Cash and equivalents,
beginning of period |
|
3,277 |
|
|
2,518 |
|
|
|
|
|
|
|
|
Cash and equivalents,
end of period |
$ |
2,095 |
|
$ |
2,164 |
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities: |
|
|
|
|
|
|
Unrealized loss on
marketable securities |
|
78 |
|
|
86 |
|
In addition to reporting net income (loss) as defined under
GAAP, we also present net earnings before interest, income taxes,
depletion, depreciation, and amortization, accretion of discount on
asset retirement obligations, impairment of oil and natural gas
properties, warrant revaluation (gains) and expenses, net gain
(loss) from mark-to-market on commodity derivatives, cash
settlements received (paid), standby rig expenses and non-cash
expenses relating to share based payments recognized under ASC
Topic 718 (“Adjusted EBITDAX”), which is a non-GAAP performance
measure. Adjusted EBITDAX consists of net earnings after adjustment
for those items described in the table below. Adjusted EBITDAX does
not represent, and should not be considered an alternative to GAAP
measurements, such as net income (loss) (its most directly
comparable GAAP measure), and our calculations thereof may not be
comparable to similarly titled measures reported by other
companies. By eliminating the items described below, we believe the
measure is useful in evaluating its fundamental core operating
performance. We also believe that Adjusted EBITDAX is useful to
investors because similar measures are frequently used by
securities analysts, investors, and other interested parties in
their evaluation of companies in similar industries. Our management
uses Adjusted EBITDAX to manage our business, including in
preparing our annual operating budget and financial projections.
Our management does not view Adjusted EBITDAX in isolation and also
uses other measurements, such as net income (loss) and revenues to
measure operating performance. The following table provides a
reconciliation of net loss to Adjusted EBITDAX for the periods
presented:
|
2018 |
|
2017 |
|
|
|
|
Loss from continuing
operations (GAAP) |
$ |
(244 |
) |
|
$ |
(740 |
) |
Depreciation, depletion
and amortization |
|
145 |
|
|
|
304 |
|
Unrealized gain on oil
price risk derivatives |
|
(54 |
) |
|
|
- |
|
Stock-based
compensation |
|
13 |
|
|
|
106 |
|
Warrant fair value
adjustment (gain) loss |
|
(270 |
) |
|
|
(340 |
) |
Interest expense |
|
36 |
|
|
|
125 |
|
|
|
|
|
|
|
Total |
$ |
(374 |
) |
|
$ |
(545 |
) |
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