U.S. Energy Corp. Closes Asset Sale for East Texas Properties

Rhea-AI Summary

U.S. Energy Corp. (NASDAQ: USEG) has completed the sale of its East Texas assets for $6.825 million in cash. The divested assets produced approximately 1.0 million cubic feet per day of natural gas and 149 barrels of oil per day during Q3 2024. The transaction, which closed on December 31, 2024, has an effective date of November 1, 2024.

The company plans to use the proceeds to fund the development of its industrial gas project in Montana, marking a strategic shift towards becoming a leading industrial gas company. The sale strengthens U.S. Energy's balance sheet and provides increased liquidity for future growth initiatives.

Positive

• Secured $6.825 million in immediate cash proceeds
• Strategic shift towards industrial gas sector with Montana project
• Improved balance sheet strength and liquidity position

Negative

• Loss of revenue-generating assets producing 149 barrels of oil and 1.0 million cubic feet of natural gas per day

Insights

Energy Industry Analyst

The $6.825 million asset sale of East Texas properties marks a strategic pivot for U.S. Energy Corp. The divested assets, producing 1 million cubic feet per day of natural gas and 149 barrels of oil per day, represent a significant portion of their legacy operations. The transaction's timing aligns with the broader industry trend of companies repositioning their portfolios toward industrial gas operations, which typically offer more stable cash flows and lower operational volatility compared to traditional oil and gas assets. The deal's valuation appears reasonable given current market conditions and the assets' production profile. Most notably, this move strengthens their balance sheet by providing immediate liquidity without incurring debt, while simultaneously streamlining operations by reducing operational complexity. For a company with a market cap of $46.7 million, this cash injection represents approximately 14.6% of their market value, providing substantial financial flexibility for their Montana industrial gas project development.

Financial Analyst

This transaction demonstrates strong financial engineering with multiple benefits:

• Immediate balance sheet improvement with all-cash proceeds
• Strategic redeployment of capital from legacy assets to higher-growth industrial gas operations
• Reduction in operational costs associated with maintaining aging oil & gas infrastructure

The two-month retroactive effective date (November 1, 2024) suggests favorable deal terms, as the buyer assumes the operational costs while U.S. Energy retains the benefits from the interim period. The timing of the closure before year-end 2024 also has potential tax advantages. The company's transition toward industrial gas operations could lead to a potential market re-rating, as industrial gas companies typically trade at higher multiples compared to traditional oil & gas producers due to more predictable revenue streams and lower commodity price exposure.

HOUSTON, Dec. 31, 2024 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (NASDAQ: USEG, “U.S. Energy” or the “Company”) today announced that the Company has closed the sale (the “Transaction”) of assets located in East Texas (the “East Texas Assets”). The Transaction was previously announced on December 12, 2024.

HIGHLIGHTS

• All cash proceeds of $6,825,000.
• Proceeds are expected to be used to fund the continued development of U.S. Energy’s industrial gas project in Montana.
• Divested assets averaged approximately 1.0 million cubic feet per day of natural gas and 149 barrels of oil per day for the quarter ending September 30, 2024.
• The transaction closed on December 31, 2024 with an effective date of November 1, 2024.

MANAGEMENT COMMENTARY

“We are pleased to announce the successful closing of U.S. Energy's recent transaction, completing the divestment of a significant portion of our legacy East Texas assets,” stated Ryan Smith, Chief Executive Officer of U.S. Energy Corp. “The proceeds from this sale will be strategically allocated to advancing our industrial gas project in Montana. With this milestone behind us, U.S. Energy is now poised with greater liquidity and a stronger balance sheet, enabling us to focus on our growth into a leading industrial gas company.”

ABOUT U.S. ENERGY CORP.

We are a growth company focused on consolidating high-quality energy and industrial gas 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: (1) the ability of the Company to grow and manage growth profitably and retain its key employees; (2) the ability of the Company to close previously announced transactions and the terms of such transactions, including the closing of the Transaction on the terms and timeline set forth above, including, but not limited to the ability to meet conditions to closing the Transaction and the use of proceeds associated therewith; (3) risks associated with the integration of acquired assets; (4) the Company’s ability to comply with the terms of its senior credit facilities; (5) the ability of the Company to retain and hire key personnel; (6) the business, economic and political conditions in the markets in which the Company operates; (7) the volatility of oil and natural gas prices; (8) the Company’s success in discovering, estimating, developing and replacing oil and natural gas reserves; (9) risks of the Company’s operations not being profitable or generating sufficient cash flow to meet its obligations; (10) risks relating to the future price of oil, natural gas and NGLs; (11) risks related to the status and availability of oil and natural gas gathering, transportation, and storage facilities; (12) risks related to changes in the legal and regulatory environment governing the oil and gas industry, and new or amended environmental legislation and regulatory initiatives; (13) risks relating to crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries and other producing countries; (14) technological advancements; (15) changing economic, regulatory and political environments in the markets in which the Company operates; (16) general domestic and international economic, market and political conditions, including the military conflict between Russia and Ukraine and the global response to such conflict; (17) actions of competitors or regulators; (18) the potential disruption or interruption of the Company’s operations due to war, accidents, political events, severe weather, cyber threats, terrorist acts, or other natural or human causes beyond the Company’s control; (19) pandemics, governmental responses thereto, economic downturns and possible recessions caused thereby; (20) inflationary risks and recent changes in inflation and interest rates, and the risks of recessions and economic downturns caused thereby or by efforts to reduce inflation; (21) risks related to military conflicts in oil producing countries; (22) changes in economic conditions; limitations in the availability of, and costs of, supplies, materials, contractors and services that may delay the drilling or completion of wells or make such wells more expensive; (23) the amount and timing of future development costs; (24) the availability and demand for alternative energy sources; (25) regulatory changes, including those related to carbon dioxide and greenhouse gas emissions; (26) uncertainties inherent in estimating quantities of oil and natural gas reserves and projecting future rates of production and timing of development activities; (27) risks relating to the lack of capital available on acceptable terms to finance the Company’s continued growth, potential future sales of debt or equity and dilution caused thereby; (28) the review and evaluation of potential strategic transactions and their impact on stockholder value and the process by which the Company engages in evaluation of strategic transactions; and (29) 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 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, and future annual reports and quarterly reports. These reports and filings are available at www.sec.gov. Unknown or unpredictable factors also could have material adverse effects on the Company’s future results.

FAQ

How much did U.S. Energy Corp. (USEG) sell its East Texas assets for?

U.S. Energy Corp. sold its East Texas assets for $6,825,000 in cash.

What was the daily production of USEG's sold East Texas assets?

The sold assets averaged approximately 1.0 million cubic feet per day of natural gas and 149 barrels of oil per day for Q3 2024.

How will USEG use the proceeds from the East Texas asset sale?

The proceeds will be used to fund the continued development of U.S. Energy's industrial gas project in Montana.

When did the USEG East Texas asset sale transaction close?

The transaction closed on December 31, 2024, with an effective date of November 1, 2024.

What is USEG's new strategic focus following the East Texas asset sale?

Following the sale, USEG is focusing on becoming a leading industrial gas company while maintaining a commitment to reducing carbon footprint.