Announces Initial Production Rates From Three Wells Under the Zavanna Program in North Dakota Provides an Operational Update RIVERTON, Wyo., Aug. 9, 2012 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (Nasdaq:USEG) (the "Company"), today reported its second quarter 2012 highlights, selected financial results for the quarter ended June 30, 2012, and provided an operational update. Selected Highlights for the Second Quarter of 2012 Financial and Operational Results
- Revenues from the sale of crude oil and natural gas were $8.5 million as compared to $7.0 million in revenues in the second quarter of 2011, an increase of 21%.
- Produced 118,783 BOE during the quarter, or 1,305 BOE/D, from 48 gross (13.96 net) producing wells at June 30, 2012. This represents a 16% increase from production volumes in the second quarter of 2011 and a 6% sequential increase from production volumes in the first quarter of 2012.
- During the quarter ended June 30, 2012, the Company recorded income from continuing operations of $245,000 and a loss from discontinued operations of $1,235,000. As a result, we recorded a net loss after taxes of $990,000 or $0.04 per share basic and diluted, as compared to a net loss after taxes of $75,000 or less than $0.01 per share basic and diluted during the same period of 2011.
- During the six months ended June 30, 2012, we received an average of $2.8 million per month from our producing wells with an average operating cost of $425,000 per month (excluding workover costs), and production taxes of $302,000 before non-cash depletion expense, for an average cash flow of $2.1 million per month from oil and gas production.
- At June 30, 2012, the Company had $3.9 million in cash and cash equivalents on hand. Working capital (current assets minus current liabilities) was $13.1 million.
- On April 10, 2012 the commitment amount for our senior credit facility with Wells Fargo, NA increased to $100 million (from $75 million) and the borrowing base increased to $30 million (from $28 million). On May 1, 2012 the Company borrowed $5.0 million to fund our drilling programs.
- On June 8, 2012, the Company sold an undivided 87.5% of its acreage in Daniels County, Montana to a third party for $3.7 million. Under the terms of the agreement, the Company retained a 12.5% working interest in the acreage and reserved overriding royalty interests ("ORRI") equal to the positive difference, if any, between existing lease burdens of record and 20%. The purchaser also committed to drill a vertical test well to depths sufficient to core the Bakken and Three Forks formations on or before December 31, 2015. The Company delivered an 80% NRI to the purchaser and a 1% ORRI to a land broker. The Company also paid the land broker a 10% commission for the cash consideration paid by the purchaser.
- The Skorpil 11-2 #1H well had an early 24-hour flow back rate of 1,533 BOE/D on a 36/64" restricted choke. The Company has an approximate 23% working interest ("WI") and an 18% net revenue interest ("NRI") in this well.
- The CDK 15-22 #1H well had an early 24-hour flow back rate of 1,449 BOE/D on a 36/64" restricted choke. The Company has an approximate 32% WI and a 25% NRI in this well.
- The Larsen 32-29 #1H well had an early 24-hour flow back rate of 1,215 BOE/D on a 28/64"restricted choke. The Company has an approximate 28% WI and a 21% NRI in this well.
- Slawson Exploration Company operates one unit in the SE HR acreage block. The Hatchet #1-23-14H well was drilled to total depth in April 2012 and was fracture stimulated with 34 stages using a sliding sleeve completion method in May. The well commenced production on May 7 th with an early 24-hour flow back rate of 1,091 BOE/D on a 28/64" restricted choke. The initial production rate consisted of 1,007 barrels of oil and 503 MCF of natural gas. The Company has an approximate 1% WI and 0.8% NRI in the well.
- The State 36-1 #3H well had an early 24-hour flow back rate of 4,182 BOE/D on an unrestricted choke. The Company has an approximate 3.64% WI and a 2.91% NRI in this well.
Funds allocated to our drilling programs are contingent upon timing, well costs and success . If our drilling initiatives in any program are not initially successful, or do not progress as quickly as projected, funds allocated for those drilling programs may be allocated to other drilling initiatives in due course.Initial Production Rates - Subsequent to Quarter Ended June 30, 2012
- The Skogen 17-20 #1H was fracture stimulated with 35 stages and had an early 24-hour flow back rate of 1,839 BOE/D on a 32/64" restricted choke in early July. The initial production rate consisted of approximately 1,758 barrels of oil and 486 MCF of natural gas. The Company has an approximate 6.6% WI and 5% NRI in this well.
- The Kepner 9-4 #1H was fracture stimulated with 35 stages and had an early 24-hour flow back rate of 1,871 BOE/D on a 16/64" restricted choke in mid-July. The initial production rate consisted of approximately 1,717 barrels of oil and 923 MCF of natural gas. The Company has an approximate 9.1% WI and 7.0% NRI in this well.
- The Wells 6-7 #1H was fracture stimulated with 35 stages and had an early 24-hour flow back rate of 1,017 BOE/D on a 26/64" restricted choke during the third week of July. The initial production rate consisted of approximately 950 barrels of oil and 403 MCF of natural gas. The Company has an approximate 9.1% WI and 7.0% NRI in this well.
- Two additional gross (0.10 net) wells are expected to be drilled during the balance of 2012.
- The Witt 34-27 #1H well is currently drilling in the horizontal section of the wellbore. The well is scheduled to be fracture stimulated in September, 2012. The Company has an approximate 6.7% WI and 5.2% NRI in this well.
- An initial well has now been drilled in each of the Yellowstone acreage units, and therefore all of the leases are held by production. The operator is now focusing on drilling the remaining SE HR initial well units through early summer of 2013.
- The KM Ranch #2H well in Zavala County, our second well in the Leona-River acreage block, was drilled to a total measured depth of 12,875 feet, including a 6,100 foot lateral, in the first quarter of 2012. The operator recently began completion initiatives on the well and anticipates completing the well with ~16-20 stages of fracture stimulation. As previously disclosed, Crimson delayed completing the KM Ranch #2H well in order to further analyze completion techniques being utilized by other area operators, which have resulted in recent successes in the area. The Company has an approximate 30% WI and 22.5% NRI in this well and the overall program.
- In May 2012, we acquired a 26.5% initial working interest in approximately 6,766 gross acres in the Woodbine Sub-Clarksville 7 project area through a cash payment of $1.7 million. The promoted amount covers our portion of the dry hole costs for an initial test well in each of seven different prospects. Upon payout, our working interest will be reduced to 19.8%. Currently, the sixth well is drilling towards its targeted depth. The Company will evaluate the full results of the program upon completion of the drilling of the seventh well and provide an update on the results at that time.
Financial HighlightsAsset held for Sale: Remington Village On July 9, 2012, the Company entered into a Letter of Intent ("LOI") to sell Remington Village for $16.0 million. As a result of the anticipated sale amount, at June 30, 2012, the Company recorded a non-cash impairment of $2.0 million to adjust the carrying value of the project to the expected sale value. Ultimately, we could not reach mutually agreeable terms for the sale and the LOI was terminated. We will continue to market the property for sale. The following table sets forth selected financial information for the quarters ended June 30, 2012 and 2011. This information is derived from the financial statements filed with Company's Form 10-Q for the quarter ended June 30, 2012, and should be read in conjunction with the financial statements contained therein, including the notes to the financial statements.
|U.S. ENERGY CORP.|
|(Amounts in thousands, except per share amounts)|
|June 30,||December 31,|
|Cash and cash equivalents||$ 3,882||$ 12,874|
|Current assets||$ 27,707||$ 37,136|
|Current liabilities||$ 14,585||$ 20,937|
|Working capital||$ 13,122||$ 16,199|
|Total assets||$ 147,283||$ 162,439|
|Long-term obligations||$ 6,614||$ 13,532|
|Shareholders' equity||$ 125,659||$ 126,781|
|For the six months ended June 30,|
|Operating revenues||$ 16,857||$ 13,704|
|Loss from continuing operations||$ (1,703)||$ (3,791)|
|Other income & expenses||$ 1,494||$ (721)|
|Benefit from income taxes||$ 9||$ 1,976|
|Discontinued operations||$ (1,171)||$ 252|
|Net loss||$ (1,371)||$ (2,284)|
|Net loss per share|
|Basic and diluted||$ (0.05)||$ (0.08)|
|Weighted average shares outstanding|
|Basic and diluted||27,449,534||27,203,336|
CONTACT: Reggie Larsen Director of Investor Relations U.S. Energy Corp. 1-800-776-9271 Reggie@usnrg.com