Core Insights - U.S. Energy Corporation reported operational progress in Q3 2025, particularly in advancing its Montana industrial gas project, with a focus on upstream development, infrastructure, and carbon management [2][3] - The company aims to unlock new revenue streams through the construction of a gas processing facility and carbon initiatives, enhancing oil recovery and maximizing value realization [2][3] Upstream Development - The company drilled two additional industrial gas wells in Q3 2025, totaling three high-deliverability wells in the Duperow Formation, achieving a combined peak rate of 12.2 million cubic feet per day (MMcf/d) [7] - The wells have a composition of approximately 0.5% helium and 85% CO₂, with flows restricted to preserve reservoir value until infrastructure is operational [7] Infrastructure Development - The design for the initial gas processing facility is complete, with construction expected to begin in early 2026 [7] - The company acquired 80 acres in Toole County, MT for $240,000 to serve as the facility site, with construction of the infill gathering system scheduled for early 2026 [7] Carbon Management Initiatives - The company submitted an EPA Monitoring, Reporting, and Verification (MRV) plan in October 2025, with approval anticipated by Spring-Summer 2026, enabling the capture of federal carbon credits [7] - The company is progressing with near-term enhanced oil recovery (EOR) projects using recycled CO₂ on legacy oil assets [7] Financial Results - U.S. Energy reported total hydrocarbon production of approximately 35,326 barrels of oil equivalent (BOE) in Q3 2025, with total oil and gas sales of approximately $1.7 million, down from $5.0 million in Q3 2024 [13] - Lease operating expenses (LOE) for Q3 2025 were approximately $1.0 million, or $29.36 per BOE, compared to $3.1 million, or $28.95 per BOE, in the prior year [14] - The company reported a net loss of $3.3 million, or a loss of $0.10 per diluted share, in Q3 2025, compared to an adjusted EBITDA of ($1.3) million [16][24] Resource Report - An industrial gas resource report indicated 1.28 billion cubic feet (BCF) of net helium resources and 443.8 BCF of net CO₂ resources in the Kevin Dome asset [8] - The report reflects gas concentrations of 0.4% - 0.5% helium and 84% - 85% CO₂, consistent with the company's recent development activities [8] Balance Sheet and Liquidity - As of September 30, 2025, U.S. Energy had approximately $11.4 million in available liquidity, providing flexibility for growth initiatives [10] - The company ended the third quarter with a cash balance of $1.4 million and no outstanding debt [10][11]

Market Overview - Analysts expect markets to remain firm, driven by positive global cues, macro-economic data, and domestic Q2 earnings [1][13] - GIFT Nifty traded higher by 55 points, or 0.21%, at 26,145, indicating a positive start for Dalal Street [2][13] U.S. Market Performance - All three major U.S. stock indexes reached record closing highs, with Nvidia shares rising due to its announcement of building AI supercomputers for the U.S. Department of Energy [3][13] - Nvidia has $500 billion in bookings for its AI chips, reflecting strong demand in the technology sector [3][13] Asian Market Trends - Asian stocks opened higher, supported by Wall Street's optimism regarding AI's impact on technology profits and expectations of a Federal Reserve interest-rate cut [7][13] Currency and Economic Indicators - The U.S. dollar is near a one-week low against major peers ahead of a widely anticipated interest rate cut from the Federal Reserve [8][13] - The Indian rupee depreciated by 8 paise to close at 88.27 against the U.S. dollar, influenced by weak domestic stock markets and foreign fund outflows [12][13]

Core Insights - Fermi Ord Shs (NASDAQ:FRMI) experienced a significant price increase following its Nasdaq debut, closing at $35.50 after-hours, a 9.14% rise from the previous day [1] - The company debuted at $25, reflecting a 19% increase from its initial public offering (IPO) price of $21, resulting in a valuation of $14.8 billion [2] Company Overview - Fermi, a data center real estate investment trust (REIT), sold 32.5 million shares at $21 each, after initially pricing them between $18 and $22 [3] - Founded in January 2025, Fermi achieved a $12.5 billion IPO valuation shortly after issuing convertible bonds at a $3 billion valuation, marking it as a rare pre-revenue company with a valuation exceeding $10 billion [4] Project and Future Plans - Co-founded by Rick Perry, Fermi aims to build an energy and data complex powered by nuclear, natural gas, and solar energy, with Project Matador expected to deliver 1.1 gigawatts by the end of 2026 and plans to scale up to 11 gigawatts [5] - The company has entered a non-binding 20-year letter of intent with its first tenant, with revenue anticipated to start in 2027 [5] Market Sentiment - Despite the positive debut, Benzinga's Edge Stock Rankings indicate that FRMI has a negative price trend across all time frames [6]

Core Insights - Fermi America, a real estate investment trust focused on data centers, went public on Nasdaq, creating at least three new billionaires, including CEO Toby Neugebauer, with the stock closing 55% higher at $32.53, valuing the company at $19 billion despite no sales yet [3][4][5] Company Overview - Fermi was founded in January and has reported a loss of $6.4 million in its first six months, with no customers yet [6] - The company is targeting potential clients in the AI sector, citing Musk's xAI, OpenAI, and Anthropic as potential tenants [6] - Fermi aims to deliver up to 11 gigawatts of energy from its 5,236-acre site in Amarillo, Texas, with plans to bring 1.1 gigawatts online by the end of 2026 [8][9] Business Model - The firm has signed a letter of intent for its first gigawatt of power with an unnamed investment-grade tenant, estimating potential revenues of $1.5 billion from a lease for 1 gigawatt of capacity [6] - Fermi's business plan includes a mix of natural gas, nuclear, and solar energy, with initial reliance on natural gas [10][11] Competitive Landscape - Fermi will compete with established data center operators like Coreweave, which has seen significant stock growth and has a valuation of $60 billion [7] Leadership and Stakeholders - Toby Neugebauer holds a 28% stake worth $6 billion, while Griffin Perry and Steven Meisel hold stakes worth $2.3 billion and $1.8 billion, respectively [4][5][17] - Rick Perry, a cofounder, has a stake valued at approximately $540 million [5][18]

Economic Data and Market Reaction - ADP private sector payrolls fell by 32,000 in September, contrary to expectations of a 50,000 gain, with August revised down to a 3,000 loss from a 54,000 gain [3] - The market reacted swiftly, with stocks cutting losses and long-term Treasury yields falling, while the odds of two quarter-point Fed rate cuts this year rose about 10 percentage points to nearly 90% [4] Company Updates - Nike's stock rose post-earnings as investors viewed the report as an early sign of a turnaround, despite a forecast for another quarter of negative growth, with wholesale revenue being a bright spot [7] - AES is experiencing a rally following reports that BlackRock's Global Infrastructure Partners is set to acquire the utility company for about $38 billion, including $29 billion in debt [9] - Fermi, a data center REIT co-founded by former U.S. Energy Secretary Rick Perry, priced 32.5 million shares at $21 each in its IPO, raising approximately $683 million and valuing the company at $10 billion [10] Consumer Sector Insights - The Golden Week in China, running from October 1-7, is expected to see 2.4 billion journeys, a 3.2% increase from last year, which is significant for domestic tourism and retail spending [10][11] - Analysts predict double-digit growth in sales for various companies during this period, including JD.com, Alibaba, Trip.com, H World Group, LVMH, Disney, Yum China, Starbucks, and Chow Tai Fook Jewellery Group [11][12]

Energy Markets - The global oil market is experiencing significant challenges, with Brent crude prices struggling to remain above $70 per barrel due to a persistent supply glut and subdued global demand [2][8] - The U.S. Energy Information Administration (EIA) forecasts Brent crude prices to decline to an average of $59 per barrel in Q4 2025 and around $51 per barrel in early 2026, driven by large oil inventory builds as OPEC+ increases production by approximately 547,000 barrels per day starting September 2025 [2] - China's liquefied natural gas (LNG) imports are expected to decline for the eleventh consecutive month, with a year-to-date drop of 22% in 2025 and a 30% decrease in the first four months compared to 2024, primarily due to weak industrial demand and increased domestic gas production [3] Currency Movements and Central Bank Actions - The USD/JPY exchange rate has seen a significant drop of 0.6% to 148.61, with the Japanese Yen weakening 1.26% over the past month and 3.64% over the last year, driven by divergent economic performances between the US and Japan [4][8] - The Riksbank in Sweden has cut its policy rate by 0.25 percentage points to 1.75% to stimulate the weak economy, marking the eighth rate reduction since spring last year [5] Corporate Strategies - Verisure, a Switzerland-based security services company, is targeting a valuation of up to €13.9 billion (approximately $16.29 billion) in its planned IPO on Nasdaq Stockholm, aiming to raise €3.1 billion (around $3.7 billion) by selling new shares [6][8] - AstraZeneca plans a direct listing of its ordinary shares on the New York Stock Exchange, maintaining its primary listing in London, to attract a broader global investor base while investing $50 billion in the US over the next five years [7][8] Global Developments - Russia and Vietnam are strengthening energy ties, with new projects expected to begin in January 2026 and a memorandum of understanding signed for cooperation on Vietnam's first nuclear power plant [9] - China's Communist Party will hold its fourth plenary session from October 20 to 23 to deliberate on the 15th Five-Year Plan for National Economic and Social Development, which is closely monitored for its implications on China's economic rebalancing and geopolitical strategy [10]

Group 1: Market Dynamics - The financial markets have become increasingly volatile, influenced more by social media and presidential statements than traditional economic indicators [1][2] - Recent months have showcased a blend of panic and resilience in market reactions, often defying logical expectations based on economic fundamentals [2] Group 2: Tariff Impacts - President Trump's administration has utilized tariffs as a primary tool for negotiation, with new rates established in August 2025 ranging from 10% to 41% on various goods [3] - The global response to tariff threats has been mixed, with Indian IT stocks rallying despite escalating tariff demands, indicating a selective market perception [4] - Brazil faced a 50% tariff on imports, which initially caused U.S. equity futures to drop, yet the Nasdaq and S&P 500 reached record highs, showcasing a disconnect between tariff fears and market performance [5] Group 3: Trade Agreements and Negotiations - A recent trade agreement between the U.S. and EU capped new tariffs at 15%, while the EU agreed to lift most tariffs on U.S. industrial goods, highlighting ongoing negotiations despite existing tariff structures [12] - The legality of Trump's tariffs is under scrutiny, with potential implications for up to $100 billion in tariffs collected this year if deemed illegal [12] Group 4: Market Reactions to Policy Announcements - President Trump's use of social media for policy announcements has created a unique market environment, where even significant fines against companies like Alphabet do not deter stock price increases [9][10] - The U.S. market has shown resilience, rallying on bad economic news due to expectations of interest rate cuts, illustrating a paradoxical relationship between tariffs, inflation, and market optimism [13][14] Group 5: Overall Market Sentiment - The current market environment under President Trump is characterized by unpredictability, where traditional economic forecasting is less relevant than anticipating the next headline [15]

Financial Data and Key Metrics Changes - Revenue for the second quarter of 2025 was approximately $2 million, down from $6 million in the same quarter last year, reflecting the impact of divestitures in 2024 [15] - Lease operating expense for the quarter was $1.6 million or $32.14 per BOE, compared to $3.1 million or $27.69 per BOE in the same quarter last year, indicating a decrease due to divestitures [16] - Cash, general, and administrative expenses were $1.7 million for 2025, aligning with quarterly run rate expectations [16] - As of June 30, 2025, the company had no debt outstanding on its $20 million revolving credit facility and a cash position of over $6.7 million [17] Business Line Data and Key Metrics Changes - The company drilled its second and third industrial gas wells targeting the helium and CO2 rich Dupro formation, achieving peak rates of approximately 12.2 million cubic feet per day with a gas composition of 85% CO2, 5% natural gas, and 0.4% helium [6][7] - The independent resource report confirmed net contingent resources of 444 billion cubic feet of CO2 and 1.3 billion cubic feet of helium, among the largest known deposits of its kind [7] Market Data and Key Metrics Changes - The company emphasized its unique competitive positioning in the helium market, as most US helium production is tied to heavy hydrocarbon gas streams, while its project is sourced from a limited hydrocarbon stream, resulting in a lower environmental footprint [8] Company Strategy and Development Direction - The primary focus is on the development of the Montana-based industrial gas project, which is expected to meet growing demand and deliver strong economics [5] - The company aims to build a full cycle platform that spans upstream production, midstream processing, and long-term carbon management while maintaining strict capital discipline [12] - The strategy includes investing in the core Montana industrial gas project, monetizing non-core legacy assets, and maintaining capital discipline to position 2026 as a breakout year [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the Kievan Dome as a first mover opportunity in the industrial gas sector that cannot be replicated [11] - The company is set up for 2026 to be a stellar year as it advances its projects [54] Other Important Information - The company has initiated its EPA monitoring reporting and verification plan, targeting submission in September and approval by spring 2026, which may allow access to federal carbon credits under section 45Q [11] - Construction costs for the processing plant are expected to be under $10 million, funded by the existing balance sheet and modest strategic use of debt [9] Q&A Session Summary Question: Details on the resource report - Management was pleased with the resource report, confirming previously held beliefs about the large resource potential, with no surprises in the final numbers [24][25] Question: Goals for different offtake streams - Management aims to control offtakes for CO2 and helium, with expectations to enter into helium offtake agreements by the end of the year [31][32] Question: Helium concentration on drilled wells - Management acknowledged variations in helium concentration, stating that while current levels are slightly lower than expected, they remain economically viable [38][40] Question: Processing plant development changes - Management indicated that the development of the processing plant is being fine-tuned to optimize costs and economics, with no significant complications reported [46][47] Question: Future SG&A expenses - Management expects SG&A expenses to decrease in the near term as one-time costs associated with project development lessen [50]

[Executive Summary & Management Commentary](index=1&type=section&id=Executive%20Summary%20%26%20Management%20Commentary) U.S. Energy is transforming into an integrated industrial gas company, with its Montana project anticipating first revenues from its processing facility in H1 2026, leveraging CO₂ and helium assets [Management Highlights](index=1&type=section&id=Management%20Highlights) U.S. Energy is transforming into an integrated industrial gas company, with its Montana project anticipating first revenues from its processing facility in H1 2026, leveraging CO₂ and helium assets - U.S. Energy is advancing its transformation into an **integrated industrial gas company**[3](index=3&type=chunk) - The Montana project is moving forward with disciplined execution across upstream development, infrastructure design, and carbon management planning[3](index=3&type=chunk) - Initial processing facility construction is expected to commence in the coming months, projected to deliver **first revenues in the first half of 2026** from upstream production and carbon management initiatives[3](index=3&type=chunk) - A third-party resource report confirms the Kevin Dome asset as one of the **largest naturally occurring CO₂ and helium deposits** in the United States[3](index=3&type=chunk) [Industrial Gas Operations & Development](index=1&type=section&id=Industrial%20Gas%20Operations%20%26%20Development) The company is advancing its industrial gas operations in Montana, confirming significant CO₂ and helium resources and progressing full-cycle development from upstream to carbon management [Industrial Gas Resource Report](index=1&type=section&id=Industrial%20Gas%20Resource%20Report) A recent third-party resource report by Ryder Scott confirmed significant contingent resources of helium and CO₂ on the Kevin Dome asset, highlighting the high concentrations of these gases Contingent Resource (1C) - Kevin Dome Asset | | Gross Volumes (BCF) | Net Volumes (BCF) | | :--- | :--- | :--- | | Helium resource | 2.3 | 1.3 | | CO2 resource | 1,322.6 | 443.8 | - Gas concentrations for the report were **0.4% - 0.5% helium** and **84% - 85% CO₂**[4](index=4&type=chunk) [Advancing Full-Cycle Industrial Gas Development](index=1&type=section&id=Advancing%20Full-Cycle%20Industrial%20Gas%20Development) The Company is achieving significant milestones in the full-cycle development of its industrial gas assets in Montana, encompassing upstream drilling, infrastructure build-out, and carbon management initiatives - The Company continues to achieve significant milestones while advancing the **full-cycle development** of its industrial gas assets across the Kevin Dome in Montana[6](index=6&type=chunk) [Upstream Development](index=1&type=section&id=Upstream%20Development) U.S. Energy successfully drilled two additional industrial gas wells, bringing the total to three high-deliverability wells with strong production rates and premium gas composition. The company plans to focus on monetization and infrastructure build-out for the remainder of 2025, with the next phase of upstream growth targeted for 2026 - Successfully drilled two additional industrial gas wells in late July, bringing the total to **three high-deliverability wells** in the CO₂- and helium-rich Duperow Formation[7](index=7&type=chunk) - The three wells delivered a combined peak production rate of **12.2 MMcf/d**, with premium gas composition of **0.47% helium** and **85.2% CO₂**[7](index=7&type=chunk) - No additional drilling is planned for the remainder of 2025, allowing focus on monetization and infrastructure build-out, with the next phase of upstream growth targeted for **2026**[7](index=7&type=chunk) - Strengthened carbon management platform with the acquisition of a **Class II permitted injection well**, enabling both CO₂ sequestration and enhanced oil recovery opportunities[8](index=8&type=chunk) [Infrastructure Development](index=2&type=section&id=Infrastructure%20Development) The company is advancing the design of its first processing facility, with capital deployment expected in Q3 2025, and plans to install the initial gathering system by year-end. These facilities are expected to generate diversified cash flow upon operation - Advancing design for the first processing facility, targeting high-margin recovery of CO₂, helium, and natural gas, with **capital deployment expected to begin in Q3 2025**[11](index=11&type=chunk) - Installation of the initial gathering system is scheduled to begin in Q3 and be **completed by year-end**[11](index=11&type=chunk) - Once operational, facilities are expected to immediately generate **diversified cash flow** from upstream gas sales, helium recovery, and carbon management[11](index=11&type=chunk) [Carbon Management Initiatives](index=2&type=section&id=Carbon%20Management%20Initiatives) U.S. Energy has achieved sustained CO₂ injection rates, equating to significant annual sequestration capacity, and is actively pursuing enhanced oil recovery opportunities. The company is also progressing with regulatory approvals for new injection wells and an EPA MRV plan to capture federal carbon credits - Achieved sustained injection of **17.0 MMcf/d** across two Company-owned wells, equating to an annual sequestration capacity of **~240,000 metric tons of CO₂**[11](index=11&type=chunk) - Evaluating near-term **EOR opportunities** leveraging CO₂ resources and nearby legacy hydrocarbon assets[11](index=11&type=chunk) - Submitted an application for a new Class II injection well, with approval anticipated in **August 2025**[11](index=11&type=chunk) - EPA Monitoring, Reporting, and Verification (MRV) plan is underway, with submission targeted for **September 2025** and approval expected by **Spring 2026**, creating the potential to capture federal carbon credits[11](index=11&type=chunk) [Financial Performance](index=3&type=section&id=Financial%20Performance) U.S. Energy maintained a debt-free balance sheet with $26.7 million in liquidity, while reporting a Q2 2025 net loss of $6.1 million and adjusted EBITDA of ($1.2) million [Balance Sheet and Liquidity Update](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity%20Update) U.S. Energy maintained a debt-free balance sheet throughout Q2 2025, ending the period with approximately $26.7 million in available liquidity, providing financial flexibility for growth - U.S. Energy remained entirely **debt-free** throughout the second quarter of 2025[12](index=12&type=chunk) Cash and Debt Balance & Liquidity (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and debt balance:** | | | | Total debt outstanding | $ - | $ - | | Less: Cash balance | $ 6,728 | $ 7,723 | | Net debt balance | $ (6,728) | $ (7,723) | | **Liquidity:** | | | | Cash balance | $ 6,728 | $ 7,723 | | Plus Credit facility availability | $ 20,000 | $ 20,000 | | Total Liquidity | $ 26,728 | $ 27,723 | [Second Quarter 2025 Financial Results](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Results) For Q2 2025, U.S. Energy reported a net loss of $6.1 million, or $0.19 per diluted share, and adjusted EBITDA of ($1.2) million. Total hydrocarbon production was 48,816 BOE, with total oil and gas sales of $2.0 million, a decrease primarily due to asset divestitures and lower oil pricing - The Company's proved developed producing (PDP) oil and gas reserve base as of July 1, 2025, consisted of approximately **1.6 million BOE**, comprised of approximately **77% oil**, with a PV-10 of approximately **$22.3 million** at SEC pricing[14](index=14&type=chunk) [Revenue and Production](index=3&type=section&id=Revenue%20and%20Production) Total hydrocarbon production for Q2 2025 was 48,816 BOE, leading to total oil and gas sales of $2.0 million, a significant decrease from Q2 2024, primarily attributed to asset divestitures and declining oil prices - Total hydrocarbon production for Q2 2025 was approximately **48,816 BOE**, consisting of **69% oil production**[15](index=15&type=chunk) Total Revenue (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Oil | $1,844 | $5,472 | | Natural gas and liquids | $184 | $574 | | **Total revenue** | **$2,028** | **$6,046** | - The decrease in production and revenue primarily reflects the effects of the Company's **divestiture program** throughout 2024 and the **decline in oil pricing**[15](index=15&type=chunk) [Operating Expenses](index=3&type=section&id=Operating%20Expenses) Lease operating expenses (LOE) decreased to $1.6 million in Q2 2025 due to fewer producing assets from divestitures, while cash general and administrative (G&A) expenses slightly increased to $1.7 million, with a 30% decrease in compensation and benefits offset by higher consultant costs Lease Operating Expenses (LOE) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | LOE (in millions) | $1.6 | $3.1 | | LOE per Boe | $32.14 | $27.69 | - The overall reduction in LOE is primarily attributable to **fewer producing assets** as a result of asset divestitures[16](index=16&type=chunk) Cash General and Administrative (G&A) Expenses (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Cash G&A expenses | $1.7 | $1.6 | - Compensation and benefits in Q2 decreased **30%** from the same period in 2024, offset by higher consultants and professional services[17](index=17&type=chunk) [Profitability Metrics](index=3&type=section&id=Profitability%20Metrics) U.S. Energy reported an Adjusted EBITDA of ($1.2) million in Q2 2025, down from $1.1 million in Q2 2024, and a net loss of $6.1 million, or $0.19 per diluted share Adjusted EBITDA (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Adjusted EBITDA | ($1.2) | $1.1 | - The Company reported a **net loss of $6.1 million**, or a loss of **$0.19 per diluted share**, in Q2 2025[18](index=18&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) This section provides an overview of U.S. Energy Corp.'s growth strategy and commitment to sustainability, along with essential investor relations contact details [About U.S. Energy Corp.](index=4&type=section&id=About%20U.S.%20Energy%20Corp.) U.S. Energy Corp. is a growth-focused company developing and operating high-quality energy and industrial gas assets in the United States, committed to low-risk development, attractive shareholder returns, and reducing its carbon footprint - U.S. Energy Corp. is a **growth company** focused on developing and operating high-quality energy and industrial gas assets in the United States through low-risk development[19](index=19&type=chunk) - The company is committed to being a leader in **reducing its carbon footprint** in its operating areas[19](index=19&type=chunk) [Investor Relations Contact](index=4&type=section&id=Investor%20Relations%20Contact) Contact information for investor relations is provided for inquiries - Investor Relations Contact: Mason McGuire, IR@usnrg.com, (303) 993-3200, www.usnrg.com[20](index=20&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements that involve risks and uncertainties, cautioning that actual results may differ materially due to various factors including market conditions, regulatory changes, and operational risks. The company does not undertake to update these statements except as required by law - The communication contains **forward-looking statements** that involve risks and uncertainties, as defined by federal securities laws[21](index=21&type=chunk) - Important factors that may cause actual results to differ materially include the ability to grow profitably, transaction risks, **commodity price volatility**, regulatory changes, economic conditions, and other risks detailed in SEC filings[22](index=22&type=chunk) - The Company cautions that the list of important factors is not complete and does not undertake to update any forward-looking statements except as required by applicable law[23](index=23&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows for the specified periods [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets of U.S. Energy Corp. and its subsidiaries as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Unaudited Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Current assets: | | | | Cash and equivalents | $6,728 | $7,723 | | Oil and natural gas sales receivables | 567 | 1,298 | | Marketable equity securities | 210 | 131 | | Other current assets | 710 | 572 | | Total current assets | 8,215 | 9,724 | | Oil and natural gas under full cost method and industrial gas properties, net | 41,718 | 38,455 | | Other Assets, net | 1,060 | 1,488 | | **Total assets** | **$50,993** | **$49,667** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Current liabilities: | | | | Accounts payable and accrued liabilities | $5,186 | $5,466 | | Accrued compensation and benefits | 46 | 850 | | Revenue and royalties payable | 4,532 | 4,836 | | Asset retirement obligations | 800 | 1,000 | | Current lease obligation | 203 | 196 | | Total current liabilities | 10,767 | 12,348 | | Noncurrent liabilities | 12,266 | 13,498 | | **Total liabilities** | **23,033** | **25,846** | | Shareholders' equity | 27,960 | 23,821 | | **Total liabilities and shareholders' equity** | **$50,993** | **$49,667** | [Unaudited Condensed Consolidated Statements of Operations](index=8&type=section&id=Statements%20of%20Operations) This section provides the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025, and 2024, detailing revenue, operating expenses, and net loss Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Revenue:** | | | | | | Oil | $1,844 | $5,472 | $3,615 | $10,199 | | Natural gas and liquids | 184 | 574 | 607 | 1,238 | | **Total revenue** | **2,028** | **6,046** | **4,222** | **11,437** | | **Operating expenses:** | | | | | | Lease operating expenses | 1,569 | 3,076 | 3,178 | 6,262 | | Gathering, transportation and treating | 2 | 63 | 18 | 127 | | Production taxes | 148 | 367 | 296 | 710 | | Depreciation, depletion, accretion and amortization | 1,118 | 2,165 | 2,237 | 4,360 | | Impairment of oil and natural gas properties | 2,760 | - | 2,760 | 5,419 | | General and administrative expenses | 2,246 | 2,091 | 4,635 | 4,297 | | Loss on sale of assets | 424 | - | 424 | - | | **Total operating expenses** | **8,267** | **7,762** | **13,548** | **21,175** | | **Operating loss** | **(6,239)** | **(1,716)** | **(9,326)** | **(9,738)** | | **Other income (expense):** | | | | | | Commodity derivative loss, net | - | (112) | - | (1,493) | | Interest expense, net | (47) | (131) | (95) | (251) | | Other income, net | 228 | (19) | 252 | (15) | | **Total other income (expense)** | **181** | **(262)** | **157** | **(1,759)** | | **Net loss before income taxes** | **$(6,058)** | **$(1,978)** | **$(9,169)** | **$(11,497)** | | Income tax expense | - | 4 | - | (14) | | **Net loss** | **$(6,058)** | **$(1,974)** | **$(9,169)** | **$(11,511)** | | Basic and diluted loss per share | $(0.19) | $(0.08) | $(0.27) | $(0.45) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024, detailing cash flows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Cash flows from operating activities:** | | | | Net loss | $(9,169) | $(11,511) | | Adjustments to reconcile net loss to net cash (used in) provided by operating activities | 3,043 | 12,100 | | **Net cash provided by (used in) operating activities** | **$(6,126)** | **$326** | | **Cash flows from investing activities:** | | | | Acquisition of industrial gas properties | $(2,128) | $(2,213) | | Industrial gas capital expenditures | $(2,504) | - | | Oil and natural gas capital expenditures | $(18) | $(667) | | Property and equipment expenditures | $(3) | $(202) | | Net proceeds from sale of oil and natural gas properties | 144 | 247 | | Proceeds from sale of real estate assets | - | 139 | | **Net cash used in investing activities** | **$(4,509)** | **$(2,696)** | | **Cash flows from financing activities:** | | | | Borrowings on credit facility | - | 2,000 | | Payments on insurance premium finance note | - | (62) | | Shares withheld to settle tax withholding obligations for restricted stock awards | (346) | (132) | | Repurchases of common stock | (316) | (564) | | Related party share repurchase | (1,574) | - | | Proceeds from underwritten offering | 11,877 | - | | **Net cash provided by financing activities** | **$9,641** | **$1,242** | | **Net decrease in cash and equivalents** | **$(995)** | **$(1,128)** | | Cash and equivalents, beginning of period | 7,723 | 3,351 | | **Cash and equivalents, end of period** | **$6,728** | **$2,223** | [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) This section provides definitions and reconciliations for non-GAAP financial measures, specifically focusing on Adjusted EBITDA [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) This section defines Adjusted EBITDA as a non-GAAP financial measure and provides a reconciliation to the most comparable GAAP measure, net income (loss), for the three months ended June 30, 2025, and 2024 - Adjusted EBITDA is defined 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, non-cash share-based compensation, transaction related expenses, transaction related acquired realized derivative loss (gain), and loss (gain) on marketable securities[30](index=30&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(6,058) | $(1,974) | | Depreciation, depletion, accretion and amortization | 1,118 | 2,206 | | Non-cash loss on commodity derivatives | - | 233 | | Interest Expense, net | 47 | 131 | | Income tax benefit | - | (4) | | Non-cash stock based compensation | 563 | 476 | | Loss on sale of assets | 424 | - | | Loss (gain) on marketable securities | (79) | 19 | | Impairment of oil and natural gas properties | 2,760 | - | | **Total Adjustments** | **4,833** | **3,061** | | **Total Adjusted EBITDA** | **$(1,225)** | **$1,087** |

[Cautionary Note About Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20About%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks and uncertainties, not guarantees of future results - This report contains forward-looking statements regarding future operations and financial performance, which are subject to risks and uncertainties and are not guarantees of future results[9](index=9&type=chunk)[10](index=10&type=chunk) - Examples of forward-looking statements include plans for capital expenditures, drilling activities, future cash flows, potential acquisitions, and the ability to raise additional financing[12](index=12&type=chunk) Part I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for U.S. Energy Corp. as of June 30, 2025, and for the three and six-month periods then ended [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows a slight increase in total assets to $51.0 million from $49.7 million at year-end 2024, primarily driven by an increase in unevaluated industrial gas properties Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $8,215 | $9,724 | | **Oil, natural gas and industrial gas properties, net** | $41,718 | $38,455 | | **Total Assets** | **$50,993** | **$49,667** | | **Total Current Liabilities** | $10,767 | $12,348 | | **Total Liabilities** | **$23,033** | **$25,846** | | **Total Shareholders' Equity** | **$27,960** | **$23,821** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, revenue decreased to $2.0 million from $6.0 million in Q2 2024, widening the net loss to $6.1 million due to lower sales and an impairment charge Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $2,028 | $6,046 | $4,222 | $11,437 | | **Operating Loss** | $(6,239) | $(1,716) | $(9,326) | $(9,738) | | **Net Loss** | **$(6,058)** | **$(1,974)** | **$(9,169)** | **$(11,511)** | | **Basic and Diluted Loss Per Share** | **$(0.19)** | **$(0.08)** | **$(0.27)** | **$(0.45)** | - The company recorded a **$2.8 million impairment charge** on oil and natural gas properties in Q2 2025, contributing significantly to the operating loss[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $6.1 million for the six months ended June 30, 2025, with financing activities providing $9.6 million from an equity offering Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $(6,126) | $326 | | **Net cash used in investing activities** | $(4,509) | $(2,696) | | **Net cash provided by financing activities** | $9,641 | $1,242 | | **Net decrease in cash and equivalents** | $(995) | $(1,128) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, acquisitions, revenue recognition, including an industrial gas acreage acquisition, an impairment charge, and a January 2025 equity issuance - On January 7, 2025, the Company acquired **24,000 net operated acres** in Montana from Synergy Offshore LLC, a related party, for total consideration of **$4.7 million**, consisting of cash, common stock, and a carried working interest[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - A **$2.8 million ceiling test write-down** of oil and natural gas properties was recorded in Q2 2025 due to a decrease in crude oil prices and reserve reductions from recent divestitures[44](index=44&type=chunk) - In January 2025, the Company completed an underwritten offering of **4,871,400 shares of common stock**, generating approximately **$11.9 million in net proceeds** to be used for development of its Montana assets and general corporate purposes[54](index=54&type=chunk)[55](index=55&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 66% revenue decrease in Q2 2025, driven by lower production and prices, alongside strategic shifts to industrial gas development and an equity offering [Material Developments](index=29&type=section&id=Material%20Developments) Key events include the acquisition of 24,000 net acres of industrial gas properties, an $11.9 million equity offering, and an extended share repurchase program - Acquired **24,000 net operated acres** in the Kevin Dome structure in Montana from Synergy Offshore LLC, a related party[99](index=99&type=chunk)[100](index=100&type=chunk) - Closed an underwritten offering of **4,871,400 shares of common stock** on January 23, 2025, generating net proceeds of approximately **$11.9 million**[103](index=103&type=chunk)[104](index=104&type=chunk) - Extended the ongoing share repurchase program for up to **$5.0 million**, now scheduled to expire on June 30, 2026, with **$3.5 million** remaining available as of June 30, 2025[107](index=107&type=chunk)[109](index=109&type=chunk) - Drilled **2 new industrial gas wells** in Montana during Q2 2025, targeting first production in 2026[111](index=111&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Financial results worsened in H1 2025, with Q2 revenue down 66% to $2.0 million and a net loss of $6.1 million, primarily due to divestitures and lower commodity prices Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $2,028k | $6,046k | (66)% | | **Production (BOE)** | 48,816 | 111,091 | (56)% | | **Average Sales Price ($/BOE)** | $41.54 | $54.42 | (24)% | | **Lease Operating Expense ($/BOE)** | $32.14 | $27.69 | 16% | Six Months 2025 vs Six Months 2024 Performance | Metric | 6M 2025 | 6M 2024 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $4,222k | $11,437k | (63)% | | **Production (BOE)** | 95,824 | 220,890 | (57)% | | **Average Sales Price ($/BOE)** | $44.06 | $51.78 | (15)% | | **Lease Operating Expense ($/BOE)** | $33.16 | $28.35 | 17% | - The decrease in production quantities is primarily attributed to divestitures of properties in the Karnes County, East Texas, and Mid-con regions during the second half of 2024, as well as natural production declines[119](index=119&type=chunk)[130](index=130&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity was strengthened by an $11.9 million equity offering, with planned industrial gas development costs of $1.0-$2.5 million for the remainder of 2025 - The company raised **$11.9 million in net proceeds** from an equity offering in January 2025 to fund capital expenditures[142](index=142&type=chunk) - Anticipated industrial gas development costs for the remainder of 2025 are projected to be between **$1.0 million and $2.5 million**[141](index=141&type=chunk) - As of June 30, 2025, there were no amounts outstanding on the credit facility, which has a borrowing base of **$20 million**[143](index=143&type=chunk)[145](index=145&type=chunk) - Effective August 1, 2025, the company agreed to an amended Credit Agreement with a reduced borrowing base of **$10.0 million** and an extended maturity date of May 31, 2029[90](index=90&type=chunk)[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," U.S. Energy Corp. is exempt from providing market risk disclosures - The Company is a "smaller reporting company" and is not required to provide the information requested by this item[152](index=152&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of June 30, 2025, due to a material weakness in the accounting system, now being remediated by outsourcing - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025[154](index=154&type=chunk) - The ineffectiveness is due to a **material weakness** in internal control over financial reporting related to the accounting system, as identified on December 31, 2024[154](index=154&type=chunk)[155](index=155&type=chunk) - In January 2025, the company initiated remediation by outsourcing much of its day-to-day accounting to a third-party provider using a new system, which is expected to resolve the material weakness by year-end 2025[157](index=157&type=chunk) Part II. OTHER INFORMATION [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The Company is not currently involved in any legal proceedings that it believes could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations[160](index=160&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[162](index=162&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales occurred, but 71,800 shares were repurchased in Q2 2025, and the program was extended to June 30, 2026, with $3.5 million remaining Share Repurchase Activity for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 - April 30, 2025 | 71,800 | $1.153 | | May 1 - May 31, 2025 | — | $— | | June 1 - June 30, 2025 | — | $— | | **Total** | **71,800** | **$1.153** | - The share repurchase program was extended and is scheduled to expire on June 30, 2026, with approximately **$3.5 million** remaining for repurchases as of April 30, 2025[164](index=164&type=chunk) [Other Information](index=29&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading plans during the quarter ended June 30, 2025[168](index=168&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents[169](index=169&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report was signed on August 12, 2025, by Ryan L. Smith, Chief Executive Officer, and Mark L. Zajac, Chief Financial Officer - The report was signed on **August 12, 2025**, by Ryan L. Smith, Chief Executive Officer, and Mark L. Zajac, Chief Financial Officer[172](index=172&type=chunk)[174](index=174&type=chunk)