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)

Core Viewpoint - U.S. Energy Corporation is advancing its transformation into an integrated industrial gas company, focusing on the development of its Kevin Dome asset, which has significant potential for helium and CO₂ resources [2][3][5]. Financial and Operational Results - For the second quarter of 2025, U.S. Energy reported total hydrocarbon production of approximately 48,816 BOE, with oil production accounting for 69% [14]. - Total oil and gas sales for the quarter were approximately $2.0 million, a decrease from $6.1 million in the same quarter of 2024, primarily due to divestitures and declining oil prices [14]. - The company reported a net loss of $6.1 million, or a loss of $0.19 per diluted share, compared to a net loss of $1.97 million in the same quarter of 2024 [17][25]. Resource Report - An industrial gas resource report confirmed U.S. Energy controls 1.28 billion cubic feet (BCF) of net helium resources and 443.8 BCF of net CO₂ resources at the Kevin Dome [3][4]. Upstream Development - The company successfully drilled two additional industrial gas wells, bringing the total to three, with a combined peak production rate of 12.2 MMcf/d [6][7]. - The wells have a premium gas composition of 0.47% helium and 85.2% CO₂, indicating strong marketability and revenue potential [6]. Infrastructure and Carbon Management - The design and planning of the initial processing facility are advancing, with construction expected to start soon, projected to generate first revenues in the first half of 2026 [2][12]. - The company achieved sustained injection of 17.0 MMcf/d across two wells, equating to an annual sequestration capacity of approximately 240,000 metric tons of CO₂ [12]. Balance Sheet and Liquidity - U.S. Energy remained entirely debt-free as of June 30, 2025, with approximately $26.7 million in available liquidity [10][11]. - The company’s cash balance decreased from $7.7 million at the end of 2024 to $6.7 million by mid-2025 [11][23]. Future Outlook - The company is targeting high-margin recovery of CO₂, helium, and natural gas from existing production, with capital deployment expected to begin in Q3 2025 [12]. - The next phase of upstream growth is planned for 2026, focusing on monetization opportunities and infrastructure build-out [12].

Core Points - U.S. Energy Corporation will release its second quarter 2025 financial results on August 12, 2025, before market opens [1] - A conference call to discuss the financial results and recent events will take place on the same day at 9:00 a.m. ET [2] - The company focuses on developing and operating high-quality energy and industrial gas assets while aiming to reduce its carbon footprint [3] Company Overview - U.S. Energy Corporation is a growth-focused company engaged in the development and operation of energy and industrial gas assets in the U.S. [3] - The company emphasizes low-risk development and maintaining attractive shareholder returns [3] - More information about the company can be found on its website [3]

Core Viewpoint - U.S. Energy Corp. is advancing its development of an industrial gas processing plant with a finalized capacity of 17 MMCF, expected to be operational soon [1]. Company Summary - The industrial gas processing plant being constructed by U.S. Energy Corp. is a significant step in its development strategy [1]. - The finalized capacity of the plant is 17 million cubic feet per day (MMCF) [1]. Industry Context - The construction of gas processing facilities is crucial for enhancing the efficiency and output of energy production in the sector [1].

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was approximately $2.2 million, down from $5.4 million in the same quarter last year, reflecting the impact of divestitures in the second half of 2024 [20] - Lease operating expense for the quarter was $1.6 million or $34.23 per BOE, compared to $3.2 million or $29.2 per BOE in the same quarter last year, indicating a decrease due to divestitures [21] - Cash position stood at over $10.5 million as of March 31, 2025, reflecting net cash proceeds of $10.3 million from a successful equity offering [22] Business Line Data and Key Metrics Changes - The company is focusing on the development of its Montana industrial gas project, which includes workovers, flow testing, and drilling new development wells [7][8] - The processing plant at Ki Bin Dome is expected to process approximately 17 million cubic feet of raw gas per day, with an estimated cost of $15 million [11] - The company anticipates sequestering approximately 250,000 metric tons of CO2 annually once the processing plant is operational [13] Market Data and Key Metrics Changes - The helium market remains steady, with current pricing around $400 per Mcf, down from previous peaks [34] - The largest growth forecast for helium demand is in the semiconductor industry, which is expected to drive future growth [33] Company Strategy and Development Direction - The company aims to build a full cycle platform from production and processing to long-term carbon storage while maintaining disciplined capital allocation [15] - The strategy includes monetizing legacy hydrocarbon assets while investing in the core Montana project [16] - The company positions itself as a first mover in the industrial gas sector with a unique non-hydrocarbon gas stream, providing a competitive advantage [14] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the transformational opportunity presented by the Montana project [14] - The company has de-risked its project year to date and is on track to launch and grow its initiatives within the next twelve months [41] Other Important Information - The company has repurchased approximately 832,000 shares, representing roughly 2.5% of its outstanding float, reflecting management's confidence in the stock's value [17] - The company is in talks to renew and extend its credit agreement, expected to be completed in Q2 2025 [22] Q&A Session Summary Question: Was the cost of the processing plant higher than expectations? - Management clarified that the cost was in line with expectations, considering the complexity of the infrastructure and production requirements [27][29] Question: Could the completion of the processing plant bleed into Q2 2026? - Management indicated that completion could be at the end of Q1 or the beginning of Q2 2026, depending on weather conditions [31] Question: Can you provide an update on the helium markets? - Management noted that the helium market remains steady, with pricing around $400 per Mcf, and highlighted the semiconductor industry as a key growth area [34][36]

Financial Data and Key Metrics Changes - Revenue for the first quarter of 2025 was approximately $2.2 million, down from $5.4 million in the same quarter last year, reflecting the impact of divestitures in the second half of 2024 [18] - Lease operating expense for the quarter was $1.6 million or $34.23 per BOE, compared to $3.2 million or $29.2 per BOE in the same quarter last year, indicating a decrease due to divestitures [19] - Cash position stood at over $10.5 million, reflecting net cash proceeds of $10.3 million from a successful equity offering during the first quarter [20] Business Line Data and Key Metrics Changes - The company’s primary focus is on the development of the Montana industrial gas project, which includes workovers, flow testing, and drilling new development wells [6][7] - The company acquired 24,000 net acres in the Cuban Dome structure, targeting helium and CO2-rich formations [8] - The processing plant at Ki Bin Dome is expected to process approximately 17 million cubic feet of raw gas per day, with an estimated cost of $15 million [9][10] Market Data and Key Metrics Changes - The helium market remains steady, with current pricing around $400 per Mcf, down from previous peaks [30][34] - The largest growth forecast for helium demand is in the semiconductor industry, which is expected to drive future growth [30] Company Strategy and Development Direction - The company aims to build a full cycle platform from production and processing to long-term carbon storage while maintaining disciplined capital allocation [14] - The strategy includes monetizing legacy hydrocarbon assets while focusing on the core Montana project [15] - The company is positioned as a first mover in the industrial gas sector, leveraging its unique non-hydrocarbon gas stream for competitive advantage [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the transformational opportunity presented by the Montana project [13] - The company is focused on de-risking its projects and expects to reach scale within the next twelve months [38] Other Important Information - The company has repurchased approximately 832,000 shares, representing roughly 2.5% of its outstanding float, reflecting management's confidence in the stock's value [16] - The company controls one of the largest known CO2 deposits in the U.S., which is crucial for its carbon management initiatives [11] Q&A Session Summary Question: Was the cost of the processing plant higher than expected? - Management clarified that the cost was in line with expectations, considering the complexity of the infrastructure and production requirements [25][26] Question: Could the completion of the processing plant bleed into the second quarter of 2026? - Management indicated that weather could affect the timeline, but they are currently targeting a completion date around the end of the first quarter or early second quarter of 2026 [28] Question: Can you provide an update on the helium markets? - Management noted that the helium market remains stable, with significant demand from the semiconductor industry and current pricing around $400 per Mcf [30][34]

Core Insights - U.S. Energy Corp will participate in the D. Boral Capital Inaugural Global Conference in New York City on May 14, 2025, with CEO Ryan Smith hosting one-on-one meetings with institutional investors [1] Company Overview - U.S. Energy Corp is focused on consolidating high-quality producing assets in the United States, aiming to optimize production and generate free cash flow through low-risk development while providing attractive shareholder returns [3] - The company is committed to reducing its carbon footprint in its operational areas [3]