U.S. Energy Corp. Reports Fourth Quarter and Full Year 2022 Financial and Operating Results
U.S. Energy Corp. (USEG) reported strong financial results for 2022, highlighting a record production of 1,700 Boe/d and adjusted EBITDA of $15.0 million. During Q4 2022, production reached 1,918 Boe/d, and net cash from operations totaled $2.3 million. A quarterly cash dividend of $1.7 million was returned to shareholders. The company’s oil and gas capital expenditures were $6.2 million, with year-end debt standing at $12.0 million. Proved reserves increased by 24% to 7.9 MMBoe, with a present value of $174.2 million. Notably, revenue decreased by 20% in Q4 due to falling realized prices. Despite these challenges, U.S. Energy is focused on disciplined acquisitions and maintaining strong cash flow.
- Record production of 1,700 Boe/d for the year 2022.
- Adjusted EBITDA of $15.0 million.
- Free cash flow of $4.7 million, excluding acquisition expenses.
- Returned $1.7 million to shareholders via dividends.
- 24% increase in proved reserves to 7.9 MMBoe.
- Revenue declined by 20% in Q4 2022 due to falling realized prices.
- Net loss of $1.8 million in Q4 2022 compared to net income of $4.1 million in Q3.
HOUSTON, April 13, 2023 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (Nasdaq: USEG, “U.S. Energy” or the “Company”), a growth-focused energy company engaged in the operation of high-quality producing oil and natural gas assets, today reported financial and operating results for the three and twelve months-ended December 31, 2022.
FULL YEAR 2022 HIGHLIGHTS
- Record production of 1,700 barrels of oil equivalent per day (“Boe/d”);
- Adjusted EBITDA of
$15.0 million ; - Net cash provided by operating activities of
$10.9 million ; - Free cash flow, excluding expenditures for acquisitions, of
$4.7 million ; - Initiated a quarterly cash dividend, and returned
$1.7 million to shareholders; - Oil and gas related capital expenditures of
$6.2 million ; - Year-end outstanding debt balance of
$12.0 million ,$4.4 million of cash, total liquidity of$12.4 million , and net debt to EBITDA of 0.5x.
FOURTH QUARTER 2022 HIGHLIGHTS
- Record production of 1,918 Boe/d;
- Adjusted EBITDA of
$2.7 million ; - Net cash provided by operating activities of
$2.3 million ; - Oil and gas related capital expenditures of
$1.0 million .
MANAGEMENT COMMENTARY
“During the fourth quarter and full-year 2022, we delivered profitable growth across our portfolio of low-decline producing assets, while generating record production volumes,” stated Ryan Smith, Chief Executive Officer of U.S. Energy Corp. “Total production increased
“Last year, we continued to advance a disciplined, programmatic acquisition strategy, completing five transactions that added 6.3 MMBoe of proved producing reserves to our portfolio. Looking ahead, we continue to target assets in our core areas that we can acquire at attractive multiples while maintaining the strength of our balance sheet and proven track record of asset integration. Through the first quarter of 2023, our asset portfolio continues to perform well, resulting in continued free cash flow generation,” concluded Smith. “We expect to maintain our production profile with minimal capital expenditures during 2023 while focusing our capital allocation efforts on high rate of return initiatives, maintaining a strong balance sheet and supporting shareholder returns, principles we believe will support long-term sustained value creation.”
BUSINESS OUTLOOK
U.S. Energy has grown its portfolio of mature, producing assets through multiple acquisitions at below market valuation multiples. The Company will continue to target opportunities within its core focus areas that demonstrate high margin free cash flow and provide complementary operating synergies that drive sustained margin expansion. We remain committed to this disciplined acquisition strategy, while continuing to prioritize free cash flow allocation towards shareholder returns and further debt reduction under our revolving credit facility.
PRODUCTION UPDATE
For the three months ended December 31, 2022, the Company produced 176,432 Boe, or an average of 1,918 Boe/d, as compared to 161,206 Boe, or an average of 1,752 Boe/d, during the prior quarter.
| 4Q 2022 | 3Q 2022 | |
| Sales Volume (Total) | ||
| Oil (Bbls) | 102,361 | 95,429 |
| Gas and liquids (Mcfe) | 444,425 | 394,659 |
| Sales volumes (Boe) | 176,432 | 161,206 |
| Average Daily Production (Boe/d) | 1,918 | 1,752 |
| Average Sales Prices | ||
| Oil (Bbl) | ||
| Gas and liquids (Mcfe) | ||
| Barrel of Oil Equivalent (Boe) | ||
YEAR-END 2022 PROVED RESERVES
The Company’s year-end 2022 SEC proved reserves, as prepared by an independent third-party reserve engineer, were 7.9 MMBoe compared to 6.3 MMBoe at year-end 2021, a
The SEC twelve-month first day of the month average used for year-end 2022 was
The present value of the Company’s reported SEC proved reserves, discounted at
FOURTH QUARTER 2022 FINANCIAL RESULTS
U.S. Energy reported oil and gas sales in the fourth quarter 2022 of approximately
The Company recorded lease operating expense (“LOE”) in the fourth quarter 2022 of approximately
Severance and Ad Valorem taxes in the fourth quarter 2022 were approximately
Realized price in the fourth quarter 2022 averaged
Adjusted EBITDA for the fourth quarter 2022 was
HEDGING PROGRAM UPDATE
The following table reflects the hedged volumes under U.S. Energy’s commodity derivative contracts and the average fixed, floor and ceiling prices at which production is hedged for full year 2023, as of April 12, 2023:
| Collars | |||||||||
| Period | Commodity | Volume (Bbls) | Floor ($ / Bbl) | Ceiling ($ / Bbl) | |||||
| Q1 2023 | Crude Oil | 66,200 | |||||||
| Q2 2023 | Crude Oil | 53,500 | |||||||
| Q3 2023 | Crude Oil | 52,600 | |||||||
| Q4 2023 | Crude Oil | 51,200 | |||||||
| Swaps | |||
| Period | Commodity | Volume (Bbls / MMBtu) | Avg Price ($/Bbl / $/MMBtu) |
| Q1 2023 | Crude Oil | 3,000 | |
| Q1 2023 | Natural Gas | 60,000 | |
| Q2 2023 | Crude Oil | 3,000 | |
BALANCE SHEET UPDATE
As of December 31, 2022, the Company had debt outstanding of
CONFERENCE CALL AND WEBCAST
U.S. Energy will not host an investor conference call for its fourth quarter and full year 2022 earnings report as it expects to host a conference call concurrent with its upcoming first quarter 2023 earnings release.
ABOUT U.S. ENERGY
We are a growth company focused on consolidating high-quality producing 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 ESG stewardship and 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.
1) 2021 year end reserves includes assets acquired from transaction closed on January 5, 2022.
ADJUSTED EBITDA RECONCILIATION
In addition to our results calculated under generally accepted accounting principles in the United States (“GAAP”), in this earnings release we also present Adjusted EBITDA. Adjusted EBITDA is a “non-GAAP financial measure” presented as supplemental measures of the Company’s performance. It is not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company defines Adjusted EBITDA as net income (loss), plus net interest expense, net unrealized loss (gain) on change in fair value of derivatives, income tax (benefit) expense, deferred income taxes, depreciation, depletion, accretion and amortization, one-time costs associated with completed transactions and the associated assumed derivative contracts, non-cash share-based compensation, transaction related expenses, transaction related acquired realized derivative loss (gain), and loss (gain) on marketable securities. Company management believes this presentation is relevant and useful because it helps investors understand U.S. Energy’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA is presented because we believe it provides additional useful information to investors due to the various noncash items during the period. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: Adjusted EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments; Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments; although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and other companies in this industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.
The Company’s presentation of this measure should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of this non-GAAP measure to the most comparable GAAP measure, below. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view this non-GAAP measure in conjunction with the most directly comparable GAAP financial measure.
| Three Months Ended | Year Ended | ||||
| December 31, | September 30, | December 31, | |||
| 2022 | 2022 | 2022 | |||
| Net Income | |||||
| Depreciation, depletion, accretion and amortization | 2,622 | 2,528 | 9,607 | ||
| Unrealized loss (gain) on commodity derivatives | (316) | (5,636) | (1,458) | ||
| Interest Expense, net | 247 | 187 | 544 | ||
| Deferred income taxes | 499 | 29 | (1,893) | ||
| Non-cash stock based compensation | 423 | 485 | 3,017 | ||
| Transaction related expenses | - | 712 | |||
| Transaction related acquired realized derivative losses | 1,041 | 1,371 | 5,347 | ||
| Loss (gain) on marketable securities | (2) | 45 | 83 | ||
| Total Adjustments | 4,514 | (991) | 15,959 | ||
| Total Adjusted EBITDA | $2,703 | $3,119 | $14,996 | ||
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; 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, 2021. 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.
INVESTOR RELATIONS CONTACT
U.S. Energy Corp.
IR@usnrg.com
(303) 993-3200
www.usnrg.com
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