U.S. Energy (USEG) - 2025 Q2 - Quarterly Results

Executive Summary & Management Commentary 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 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] - The Montana project is moving forward with disciplined execution across upstream development, infrastructure design, and carbon management planning[3] - 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] - 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] Industrial Gas Operations & Development 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 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] Advancing Full-Cycle Industrial Gas Development 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] Upstream Development 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] - 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] - 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] - Strengthened carbon management platform with the acquisition of a Class II permitted injection well, enabling both CO₂ sequestration and enhanced oil recovery opportunities[8] Infrastructure Development 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] - Installation of the initial gathering system is scheduled to begin in Q3 and be completed by year-end[11] - Once operational, facilities are expected to immediately generate diversified cash flow from upstream gas sales, helium recovery, and carbon management[11] Carbon Management Initiatives 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] - Evaluating near-term EOR opportunities leveraging CO₂ resources and nearby legacy hydrocarbon assets[11] - Submitted an application for a new Class II injection well, with approval anticipated in August 2025[11] - 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] Financial Performance 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 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] 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 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] Revenue and Production 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] 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] Operating Expenses 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] 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] Profitability Metrics 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] Company Information 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. 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] - The company is committed to being a leader in reducing its carbon footprint in its operating areas[19] Investor Relations Contact 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 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] - 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] - 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] Unaudited Condensed Consolidated Financial Statements 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 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 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 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 This section provides definitions and reconciliations for non-GAAP financial measures, specifically focusing on Adjusted EBITDA Adjusted EBITDA Reconciliation 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] 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 |