U.S. Energy Corp. Announces First Quarter 2018 Results

DENVER, May 14, 2018 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (NASDAQCM:USEG) (“U.S. Energy” or the “Company”) today announced financial and operational results for the first quarter ended March 31, 2018. 

Highlights

• Production of 37,413 BOE, or daily production of 416 BOEPD, a 5% sequential increase;
• Oil and gas revenues of $1.6 million, a 23% sequential increase;
• Lease operating expenses of $0.4 million or $11.33 per BOE;
• Cash and cash equivalents of $2.1 million at 3/31/2018;
• Total outstanding debt of $0.9 million at 3/31/2018;
• Shares outstanding of 12,460,220 at 3/31/2018

Management Comment

David Veltri, U.S. Energy’s Chief Executive Officer, stated, “We are pleased to announce a strong operational quarter as a result of resumed drilling activity, well performance exceeding our initial expectations and strengthening commodity prices.  Over the first quarter of 2018, U.S. Energy returned to sequential production and revenue growth while driving down operating costs and maintaining low levels of leverage.  We continue to evaluate a number of opportunities around our existing assets with the ultimate objective being to build scale through participating in organic development and acreage trades, while working toward larger acquisitions that will lead to efficient and economic asset development. We look forward to updating the market on the results of these efforts.”

First Quarter 2018 Production

Operations Update

CML Beeler Ranch #1H:  The CML Beeler Ranch #1H came on line in January 2018. The well is located in our Zavala county leasehold in South Texas and is a dual lateral with each lateral comprising approximately 10,000 feet of open hole completion within the Georgetown formation. The completion resulted in an initial 24-hour max IP rate of 1,046 barrels of oil and 1,085 mcf of natural gas and a 30-day average IP of 773 barrels of oil and 850 mcf of natural gas.  After 90 days of production the well produced an average rate of 716 barrels of oil and 626 mcf of natural gas while maintaining an oil rate of 93% of the initial average. U.S. Energy expects continued development of the Georgetown Formation on existing and surrounding acreage over the course of 2018.

Financial Results

Revenues from sales of oil and natural gas during the first quarter of 2018 were $1.6 million compared to $1.3 million during the fourth quarter of 2017 and $1.7 million during the first quarter of 2017.  The increase in revenue from the fourth quarter of 2017 was driven by both an increase in production combined with increased oil prices. The primary cause of the decrease in revenue from the first quarter of 2017 is driven by the assets associated with the October 2017 asset divestiture. Revenue from oil production represented 79% of Company revenue during the first quarter of 2018.

Lease operating expenses for the first quarter of 2018 were $0.4 million, or $11.33 per BOE, during the first quarter of 2018 compared to $0.7 million or $14.03 per BOE during the first quarter of 2017. This decrease was primarily attributed to the divestment of high-cost properties by the Company during 2017.

G&A expenses totaled $1.1 million during the first quarter of 2018 compared to $1.3 million during the first quarter of 2017. The decrease was primarily attributable to a $0.7 million reduction in professional fees due to the completion of Company transactions during 2017. The decrease was partially offset by a $0.6 million increase in incentive compensation.

Adjusted EBITDAX was ($0.4) million for the first quarter of 2018 as compared to $(0.6) million for the first quarter of 2017.  Net Loss was $0.2 million for the first quarter of 2018 compared to $0.7 million for the first quarter of 2017.  Adjusted EBITDAX is a non-GAAP financial measure.  For additional information please refer to the reconciliation of this measure at the end of this news release.

Credit Facility Update

As of March 31, 2018, the Company was in compliance with all financial covenants and fully conforming with all requirements under its credit facility.

Update to Hedging Activity

U.S. Energy hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. As of Mach 31, 2018, U.S. Energy had an unrealized loss on commodity price derivatives of $0.1 million. The following table summarizes U.S. Energy’s open crude oil and natural gas derivative contracts scheduled to settle after March 31, 2018.

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 continue to focus on increasing production, reserves, and cash flow from operations while pro-actively managing our debt levels. 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 regarding 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 Financial Officer
(303) 993-3200
www.usnrg.com

In addition to reporting net income (loss) as defined under GAAP, we also present net earnings before interest, income taxes, depletion, depreciation, and amortization, accretion of discount on asset retirement obligations, impairment of oil and natural gas properties, warrant revaluation (gains) and expenses, net gain (loss) from mark-to-market on commodity derivatives, cash settlements received (paid), standby rig expenses and non-cash expenses relating to share based payments recognized under ASC Topic 718 (“Adjusted EBITDAX”), which is a non-GAAP performance measure. Adjusted EBITDAX consists of net earnings after adjustment for those items described in the table below. Adjusted EBITDAX does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss) (its most directly comparable GAAP measure), and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating its fundamental core operating performance. We also believe that Adjusted EBITDAX is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Our management uses Adjusted EBITDAX to manage our business, including in preparing our annual operating budget and financial projections. Our management does not view Adjusted EBITDAX in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net loss to Adjusted EBITDAX for the periods presented: