U.S. Energy Corp. Announces Second Quarter Financial and Operating Results

Rhea-AI Summary

U.S. Energy Corp. (NASDAQCM: USEG) reported a significant decline in financial performance for Q2 2020, with revenues plummeting to $0.2 million from $1.9 million in Q2 2019, primarily due to low commodity prices and reduced production volumes. Total production was 13,897 BOE (84% oil), averaging 151 BOE per day. The company recorded a net loss of $3.7 million and impairments totaling $2.9 million related to its oil and gas properties. However, management remains optimistic, citing a strong balance sheet and plans to pursue acquisition opportunities as commodity prices improve.

Positive

• Management optimistic about future commodity pricing improvements.
• Strong balance sheet with no outstanding debt.

Negative

• Revenue dropped from $1.9 million in Q2 2019 to $0.2 million in Q2 2020.
• Net loss of $3.7 million for Q2 2020.
• Impairments of $2.9 million on oil and gas properties.

HOUSTON, Aug. 14, 2020 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (NASDAQCM: USEG) (“We”, “U.S. Energy” or the “Company”) today announced financial and operating results for the second quarter ended June 30, 2020. 

Management Comments

“Despite the continuation of the challenging commodity price backdrop and unprecedented shut-in activity taking place across large portions of the upstream industry, U.S. Energy is uniquely well positioned to take advantage of the turmoil in the commodity markets,” said Ryan Smith, U.S. Energy’s Chief Executive Officer. “While we were undoubtedly affected by shut-in activity and low prices, our low-cost corporate structure and strong balance sheet have enabled us to weather the storm and continue pursuing our stated strategy of acquiring PDP heavy assets that are immediately cash flow accretive. With the recent sustained improvement in commodity strip pricing, U.S. Energy is beginning to see a slow but steady return of curtailed and shut-in production since the end of the second quarter. Going forward, our priorities will continue to be focused on taking measures to strengthen our balance sheet and liquidity position while continuing to identify asset value dislocations and the associated acquisition opportunities.”

Second Quarter 2020 Production Update

During the quarter ended June 30, 2020, U.S. Energy produced volumes of 13,897 BOE (84% oil), an average of approximately 151 BOE per day. Production declines were experienced due to many of U.S. Energy’s operating partners actions to shut-in or curtail production and defer development plans as a result of the low commodity price environment.

		2q2020
Sales Volume (Total)
Oil (Bbls)		11,710
Gas (Mcf)		13,124
Sales volume (Boe)		13,897
Average daily production (Boe)		151
Average Sales Prices
Oil (Bbl)	$	17.18
Gas (Mcf)	$	(0.95)
Average price (Boe)	$	13.58

Current Liquidity Position

At June 30, 2020, the Company had approximately $0.8 million in cash. As of August 14, 2020, we had approximately $0.8 million in cash, no outstanding debt and 1,399,754 shares outstanding.

Second Quarter Ended June 30, 2020 Financial Results

Revenues from sales of oil and natural gas during the second quarter of 2020 were $0.2 million compared to $1.9 million during the comparable period of 2019. The change in revenue was primarily attributable to a decrease in commodity prices combined with a decrease in production volumes. For the second quarter of 2020 we realized an average oil sales price of $17.18 per Bbl and an average gas sales price of $(0.95) per Mcf for an overall average sales price of $13.58 per BOE compared to an average oil sales price of $59.89 per Bbl and an average gas sales price of $1.86 per Mcf for an average sales price of $47.51 BOE during the comparable period of 2019. Our average realized oil price per Bbl for April 2020, May 2020 and June 2020 was $4.72, $20.26 and $30.20, respectively. Revenue from oil production represented the entirety of our revenue during the quarter.

Lease operating expenses during the second quarter of 2020 were $0.3 million, or $23.96 per BOE, compared to $0.5 million, or $11.95 per BOE, during the comparable period of 2019. The decrease in overall lease operating expenses was the result of reduced overall field activity. The increase in lease operating expenses on a per BOE basis was driven by operators shutting in existing production along with the expected natural decline of wells drilled in late 2018 and early 2019, primarily from the participation in development on our South Texas acreage.

We recorded an impairment of our oil and natural gas properties of $1.8 million during the second quarter of 2020 related to a full cost ceiling test limitation driven by the reduction in the value of our reserves due to a decline in commodity prices. We had no such impairment during the comparable period of 2019.

Additionally, during the second quarter of 2020 we recorded impairment charges of $1.1 million related to our Riverton, Wyoming property. Included in the impairment charge is an adjustment of the carrying value of our building and land, which we have transferred to real estate held for sale of $0.7 million. We adjusted the value of the building and land to $0.7 million, which we expect to realize from the sale of the property in the second half of 2020. We also adjusted the carrying value of additional parcels of land we own in Riverton, Wyoming not currently offered for sale by $0.4 million.

General and administrative (“G&A”) expenses totaled $376 thousand during the second quarter of 2020 compared to $848 thousand during the comparable period of 2019. The reduction was primarily attributable to a decrease in professional service fees combined with savings realized as a result of the Company’s successful implementation of a reduction in corporate overhead. We believe expenditures related to the litigation involving the Company during 2019 are substantially behind us and expect to continue reducing professional fees throughout the remainder of 2020.

Net loss was $3.7 million and Adjusted EBITDAX was $(510) thousand for the second quarter of 2020. Adjusted EBITDAX is a non-GAAP financial measure. Please see the below table that provides an unaudited reconciliation of net loss to Adjusted EBITDAX for the three months ended June 30, 2020 and 2019.

		2q2020				2q2019
		(in thousands)
Income (loss) from continuing operations (GAAP)		$	(3,651	)		$	20
Depreciation, depletion, accretion and amortization			68				168
Unrealized loss (gain) loss on marketable equity securities			45				7
Loss (gain) on warrant revaluation			114				(234	)
Impairment of oil and gas properties			1,794				-
Loss on real estate held for sale			651				-
Impairment of real estate			403				-
Stock-based compensation expense			64				13
Interest, net			2				(1	)
Adjusted EBITDA (Non-GAAP)		$	(510	)		$	(27	)

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 target low decline assets with existing infrastructure that allows us to maximize our return on capital in a cost effective and sustainable manner. 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 concerning 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 Smith
Chief Executive Officer
(303) 993-3200
www.usnrg.com

FAQ

What were the financial results for U.S. Energy Corp. (USEG) in Q2 2020?

U.S. Energy Corp. reported revenues of $0.2 million for Q2 2020, a decrease from $1.9 million in Q2 2019, with a net loss of $3.7 million.

How much oil and gas did U.S. Energy Corp. (USEG) produce in Q2 2020?

In Q2 2020, U.S. Energy produced 13,897 BOE, averaging approximately 151 BOE per day, with 84% being oil.

What impairments did U.S. Energy Corp. (USEG) report in Q2 2020?

The company reported impairments totaling $2.9 million related to its oil and gas properties due to a decline in commodity prices.

What is U.S. Energy Corp.'s (USEG) outlook following Q2 2020 results?

Management is optimistic about future commodity pricing and plans to pursue acquisition opportunities as prices improve.