U.S. Energy Corp. Announces Transformative Acquisition Targeting Helium Production
U.S. Energy Corp. (NASDAQ: USEG) has announced the acquisition of Wavetech Helium Inc.'s assets targeting helium production in Montana's Kevin Dome structure. The deal includes approximately 140,000 net acres with multiple helium pay zones. Additionally, U.S. Energy signed a letter of intent with Synergy Offshore to acquire an additional 24,000 net acres, forming a contiguous acreage position totaling 164,000 net acres. The transactions are structured to minimize dilution and funded through cash on hand, cash flow, and non-core asset sales. The company plans to start drilling in late July and early August 2024, focusing on multiple helium zones. U.S. Energy also initiated a carbon sequestration business. An investor call is scheduled for July 10, 2024, to discuss the transactions further.
- Acquisition of 140,000 net acres from Wavetech Helium Inc.
- Signed letter of intent to acquire 24,000 net acres from Synergy Offshore.
- Contiguous acreage position totaling 164,000 net acres in Kevin Dome.
- Multiple prospective helium pay zones identified.
- Upcoming drilling operations planned for late July and early August 2024.
- Initiation of carbon sequestration business.
- Transactions structured to minimize dilution.
- Funding through cash on hand, cash flow, and non-core asset sales.
- Synergy acquisition subject to definitive agreements, shareholder approval, and other conditions.
- Potential delays or failure to close the Synergy acquisition.
Insights
U.S. Energy Corp.'s recent acquisition of Wavetech Helium Inc. and its non-binding LOI with Synergy Offshore are significant moves in the company's strategic expansion. The highlight of the acquisition is the approximately 164,000 net acres in Toole County, Montana, targeting helium production. With
Key financial implications include the
Moreover, the company’s plan to drill two wells by late July and early August, costing
In the short term, the company’s stock might experience volatility as investors digest these developments. Long-term projections will depend on the execution of these plans and the economic viability of the helium resources.
This acquisition positions U.S. Energy Corp. to capitalize on the growing global demand for helium, which is critical for industries like aerospace, semiconductors and medicine. Recent global helium shortages have highlighted the need for reliable, domestically sourced helium. The company’s focus on the Kevin Dome structure, known for its robust resource extraction capabilities, is a strategic choice.
The initiation of carbon sequestration efforts, although secondary to helium production, aligns with increasing regulatory and market demands for environmentally sustainable operations. This move can enhance the company’s reputation and may attract environmentally conscious investors. However, the efficacy and economic benefits of these sequestration efforts remain to be proven.
The potential volatility of helium prices, given its niche market and geopolitical factors, may present both an opportunity and a risk. U.S. Energy’s ability to navigate these market dynamics will be important to realizing the full potential of this acquisition.
The focus on maintaining a low environmental footprint through non-hydrocarbon helium production also positions the company favorably in the current market, where ESG (Environmental, Social, Governance) considerations are increasingly influencing investment decisions.
Acquiring and planning to develop multiple prospective helium pay zones is a noteworthy move for U.S. Energy Corp. The Kevin Dome structure has shown promising helium concentrations in both nitrogen and carbon dioxide dominated gas systems. The company’s development of these zones, starting with two wells, could significantly enhance resource conversion and economic valuation if successful.
The transaction’s structure, focusing on a largely contiguous acreage position, allows for economies of scale and operational synergies. This can potentially reduce costs and improve resource management efficiency, benefiting the company’s bottom line.
The industry-leading low environmental footprint and alignment with local, state and federal legislation for helium production and carbon sequestration are strategic advantages. This is not only a compliance measure but also a proactive approach to sustainability, which can provide long-term benefits in terms of regulatory support and public perception.
Furthermore, the anticipated collaboration with local stakeholders and government entities indicates a sound approach to community and regulatory relations, which is important for smooth operational execution and potential future expansions.
HOUSTON, July 01, 2024 (GLOBE NEWSWIRE) -- U.S. Energy Corporation (NASDAQ: USEG, “U.S. Energy” or the “Company”) today announced that the Company has closed a transaction (the “Agreement”) with Wavetech Helium Inc (“Wavetech” or “WT”) for the acquisition of operated acreage targeting helium production across the Kevin Dome structure in Toole County, Montana (the “WT Asset”). Additionally, the Company has executed a non-binding letter of intent (the “LOI”) with Synergy Offshore, LLC (“Synergy” or “SOG”) to acquire offsetting operated acreage (the “SOG Asset”), forming a largely contiguous acreage position across the Kevin Dome of approximately 164,000 net acres, as discussed in greater detail below (collectively the “Assets”).
HIGHLIGHTS
- Closed Wavetech Agreement on June 26, 2024. The WT Asset includes:
- Approximately 140,000 net acres.
- Multiple prospective helium pay zones consisting primarily of inert nitrogen and carbon dioxide heavy zones.
- Executed Synergy LOI on June 25, 2024. The SOG Asset includes:
- Approximately 24,000 net acres, highly contiguous to Wavetech acreage.
- Multiple prospective helium pay zones, initially targeting carbon dioxide heavy zones.
- Planned and permitted two upcoming drilling locations on WT Asset.
- Wells expected to be spud in late July and early August 2024.
- Industry leading low environmental footprint through the production of non-hydrocarbon helium.
- Initiation of carbon sequestration business significantly expands opportunity.
- Company development plans are highly aligned with local, state, and federal legislation.
- Transactions are structured to minimize existing dilution while maintaining current attractive leverage profile.
- The Company does not anticipate raising outside capital to execute on this asset move, with cash on hand, cash flow, and anticipated proceeds from non-core asset sales expected to fund considerations and near-term development.
- Upcoming investor call to further discuss the transactions is scheduled for Wednesday, July 10, 2024 at 10:00 a.m. ET/9:00 a.m. CT, details below.
MANAGEMENT COMMENTARY
“With U.S. Energy’s acquisition of the Wavetech assets covering a vast resource position across Montana’s Kevin Dome structure, the Company believes that it has positioned itself to exploit what we anticipate will be a transformational resource and economic opportunity in an area with which we have a longstanding community footprint,” said Ryan Smith, U.S. Energy’s Chief Executive Officer, who continued, “Simply put, we believe the Kevin Dome structure holds tremendous overall resource potential and full-cycle helium economics competitive with any location in North America. We also believe in future acquisition opportunities across the structure that highly complement this acquisition, as evidenced by U.S. Energy’s letter of intent to acquire an additional position which is highly contiguous to the acquired assets. Together, as U.S. Energy begins development, these positions are expected to drive valuable cost synergies, flexible planning capabilities, and continued balance sheet strength.”
Mr. Smith continued, “While the most recent global helium shortage has eased in recent months, the world continues to struggle with supporting the growing helium needs of the aerospace, semi-conductor, and medical industries as well as the major risks to other global sources of helium. Issues ranging from global shipping disruptions to trade restrictions that impact foreign supply highlight the importance of reliable, clean helium that is domestically sourced. We expect to begin operations in the near term, with U.S. Energy currently scheduled to begin drilling two wells on the acquired acreage, with expected start dates in late July and early August 2024. Throughout this process, our geoscience and reservoir engineering has been focused on development optimization and resource management and we expect that this initial drilling will result in significant proved resource conversion with highly compelling economics.
“Across the vast asset base that U.S. Energy now controls, we expect to produce helium from multiple underground zones consisting primarily of both inert nitrogen and carbon dioxide. To that end, U.S. Energy is pleased to have initiated our new carbon sequestration business and have begun the planning and permitting phase where we intend to utilize U.S. Energy-owned infrastructure to sequester carbon. Greening the global helium production process while supporting recent state and federal legislation to do so is a win for all stakeholders, and we plan to pursue that strategy.”
“In closing, we are delighted to work with our new partners moving forward, the state of Montana, and all of U.S. Energy’s stakeholders, to work to effectuate this transformational transaction which we believe creates a unique and powerful platform that will drive value creation. We look forward to further updating the market in the coming weeks on our scheduled investor call,” said Mr. Smith.
OVERVIEW OF ASSETS
The collective Assets comprise control of approximately 164,000 net acres across the Kevin Dome, a significant geological structure which has historically been a robust area for resource extraction. The Assets are highly contiguous and complimentary, and the area has seen recent successes with wells drilled for helium in multiple formations primarily consisting of inert nitrogen and carbon dioxide. The vast majority of the Assets are located on fee acreage, with a non-material amount on federal lands. We expect to go into further geologic and technical detail on our upcoming investor call.
| Acreage Summary |
 |
| Asset | Net Acres | ||
 | Wavetech: | 140,000* | |
 | Synergy: | 24,000** |
* Acquired June 26, 2024.
** Subject to letter of intent.
Wavetech Asset:
The WT Asset covers 140,000 net acres spanning the majority of the economically targeted positions across the Kevin Dome. While the initial primary targeted helium pay zone beneath the acreage will be the Flathead Sandstone, which we believe contains nitrogen dominated gas systems with recent data points of highly economic helium concentrations, we are optimistic about the testing of further helium pay zones across the Asset. Results from the two wells being drilled in late July and early August 2024 by U.S. Energy are expected to provide insight into the helium concentrations of other pay zones across the Asset.
Synergy Asset:
The SOG Asset, covering 24,000 net acres, is positioned atop the center of the Kevin Dome structure. The initially targeted helium pay zone beneath the acreage is the Duperow, which contains carbon dioxide dominated gas systems with recent data points of highly economic helium concentrations. Additionally, U.S. Energy would be acquiring an active well within the SOG Asset with recent gas analysis showing highly economic helium concentrations being produced from the Duperow zone. Additionally, U.S. Energy expects its carbon sequestration focus to initially focus on the SOG Asset. The company anticipates initiating activity in 2024 with the drilling of additional evaluation wells.
Synergy is controlled by Mr. Duane H. King, a member of the Board of Directors of U.S. Energy, who serves as the Chief Executive Officer and Manager of Synergy, and John A. Weinzierl, U.S. Energy’s Chairman, is an approximate thirty percent beneficial owner of Synergy. The Synergy acquisition is subject to U.S. Energy coming to agreement with Synergy on definitive agreements and terms, shareholder approval of the issuance of shares of common stock to Synergy in the transaction, and other customary conditions to closing, and we cannot estimate the expected closing date of such acquisition. The acquisition of the SOG Asset may not close on a timely basis, on the terms set forth below, or at all.
TRANSACTION CONSIDERATION DETAILS
Wavetech Consideration:
Under the terms of the Agreement, Wavetech will assign to U.S. Energy
$2.0m m in cash.- 2,600,000 shares of U.S. Energy restricted common stock.
$20.0m m carried working interest for which U.S. Energy commits to pay Wavetech’s exploration, drilling, and completion costs attributable to Wavetech’s17.5% retained working interest.
Synergy Consideration:
Under the terms of the LOI, SOG will assign to U.S. Energy
$2.0m m in cash.- 4,845,900 shares of U.S. Energy restricted common stock.
- Warrants to purchase 6,250,000 shares of USEG common stock (at
$0.01 per share), contingent on achieving future helium sales. $12.5m m carried working interest for which U.S. Energy commits to pay Synergy’s exploration, drilling, and completion costs attributable to Synergy’s12.5% retained working interest.18.0% of future amounts realized by U.S. Energy in connection with tax credits obtained for carbon sequestration.- An Area of Mutual Interest (the “SOG AMI”) under which Synergy will have the right to participate for its proportionate interest of
12.5% in any new leases.
UPCOMING DRILLING AND DEVELOPMENT CATALYSTS
U.S. Energy plans to drill and complete two wells beginning in late July on the Wavetech Asset. The locations are permitted and prepared, and the Company expects to encounter and test multiple pay zones across the Duperow, Souris River and Flathead Sands formations. These multi-zone tests will further delineate our internal reserve evaluation and allow for near term 3rd party reserve bookings. The two wells are expected to cost
ADVISORS
Roth Capital Partners and Johnson Rice & Company LLC are acting as advisors to U.S. Energy.
UPCOMING INVESTOR CALL
A conference call will be held Wednesday, July 10, 2024, at 10:00 a.m. ET/9:00 a.m. CT to discuss the recent acquisition and letter of intent and conduct a question-and-answer session.
A webcast of the conference call will be available in the Investor Relations section of the Company’s website at www.usnrg.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register, download, and install any necessary audio software.
To participate in the live teleconference:
| Domestic Live: | 877-407-3982 |
| International Live: | 201-493-6780 |
| Call me link: | Call me active link. |
| Webcast Participant Link: | Webcast active link. |
To listen to a replay of the teleconference, which subsequently will be available through July 24, 2024:
| Domestic Replay: | 844-512-2921 |
| International Replay: | 412-317-6671 |
| Conference ID: | 13747559 |
ABOUT U.S. ENERGY CORP.
We are a growth company focused on consolidating high-quality assets in the United States with the potential to optimize production and generate free cash flow through low-risk development while maintaining an attractive shareholder returns program. We are committed to being a leader in reducing our carbon footprint in the areas in which we operate. More information about U.S. Energy Corp. can be found at www.usnrg.com.
INVESTOR RELATIONS CONTACT
Mason McGuire
IR@usnrg.com
(303) 993-3200
www.usnrg.com
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements.
Important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation, risks associated with the integration of the recently acquired assets; the Company’s ability to recognize the expected benefits of the acquisitions and the risk that the expected benefits and synergies of the acquisition may not be fully achieved in a timely manner, or at all; the amount of the costs, fees, expenses and charges related to the acquisitions; the Company’s ability to comply with the terms of its senior credit facilities; the ability of the Company to retain and hire key personnel; the business, economic and political conditions in the markets in which the Company operates; 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; risks associated with COVID-19, the global efforts to stop the spread of COVID-19, potential downturns in the U.S. and global economies due to COVID-19 and the efforts to stop the spread of the virus, and COVID-19 in general; economic uncertainty relating to increased inflation and global conflicts; the lack of capital available on acceptable terms to finance the Company’s continued growth; the review and evaluation of potential strategic transactions and their impact on stockholder value; the process by which the Company engages in evaluation of strategic transactions; the outcome of potential future strategic transactions and the terms thereof; and other risk factors included from time to time in documents U.S. Energy files with the Securities and Exchange Commission, including, but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. These reports and filings are available at www.sec.gov.
The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of any Sale Agreement Parties are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors also could have material adverse effects on U.S. Energy’s future results. The forward-looking statements included in this press release are made only as of the date hereof. U.S. Energy cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, U.S. Energy undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by U.S. Energy. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/a647fa18-0229-43ce-91e5-6fdb9c705249
FAQ
What is U.S. Energy Corp.'s latest acquisition targeting?
How many net acres did U.S. Energy Corp. acquire from Wavetech Helium Inc.?
What is the total contiguous acreage position formed by U.S. Energy Corp.'s recent acquisitions?
When will U.S. Energy Corp. begin drilling operations on the newly acquired assets?
What is the focus of U.S. Energy Corp.'s new business initiative?
How is U.S. Energy Corp. funding the acquisitions and near-term development?
What are the conditions for the closure of the Synergy Offshore acquisition?
When is the investor call to discuss U.S. Energy Corp.'s recent transactions?
