U.S. Energy Corp. (Nasdaq:USEG), reported its second quarter 2012 highlights, selected financial results for the quarter ended June 30, 2012, and provided an operational update.
Financial and Operational Results
• Revenues from the sale of crude oil and natural gas were $8.5 million as compared to $7.0 million in revenues in the second quarter of 2011, an increase of 21%.
• Produced 118,783 BOE during the quarter, or 1,305 BOE/D, from 48 gross (13.96 net) producing wells at June 30, 2012. This represents a 16% increase from production volumes in the second quarter of 2011 and a 6% sequential increase from production volumes in the first quarter of 2012.
• During the quarter ended June 30, 2012, the Company recorded income from continuing operations of $245,000 and a loss from discontinued operations of $1,235,000. As a result, we recorded a net loss after taxes of $990,000 or $0.04 per share basic and diluted, as compared to a net loss after taxes of $75,000 or less than $0.01 per share basic and diluted during the same period of 2011.
• During the six months ended June 30, 2012, we received an average of $2.8 million per month from our producing wells with an average operating cost of $425,000 per month (excluding workover costs), and production taxes of $302,000 before non-cash depletion expense, for an average cash flow of $2.1 million per month from oil and gas production.
• At June 30, 2012, the Company had $3.9 million in cash and cash equivalents on hand. Working capital (current assets minus current liabilities) was $13.1 million.
• On April 10, 2012 the commitment amount for our senior credit facility with Wells Fargo, NA increased to $100 million (from $75 million) and the borrowing base increased to $30 million (from $28 million). On May 1, 2012 the Company borrowed $5.0 million to fund our drilling programs.
• On June 8, 2012, the Company sold an undivided 87.5% of its acreage in Daniels County, Montana to a third party for $3.7 million. Under the terms of the agreement, the Company retained a 12.5% working interest in the acreage and reserved overriding royalty interests ("ORRI") equal to the positive difference, if any, between existing lease burdens of record and 20%. The purchaser also committed to drill a vertical test well to depths sufficient to core the Bakken and Three Forks formations on or before December 31, 2015. The Company delivered an 80% NRI to the purchaser and a 1% ORRI to a land broker. The Company also paid the land broker a 10% commission for the cash consideration paid by the purchaser.
The Skorpil 11-2 #1H well had an early 24-hour flow back rate of 1,533 BOE/D on a 36/64" restricted choke. The Company has an approximate 23% working interest ("WI") and an 18% net revenue interest ("NRI") in this well.
• The CDK 15-22 #1H well had an early 24-hour flow back rate of 1,449 BOE/D on a 36/64" restricted choke. The Company has an approximate 32% WI and a 25% NRI in this well.
• The Larsen 32-29 #1H well had an early 24-hour flow back rate of 1,215 BOE/D on a 28/64"restricted choke. The Company has an approximate 28% WI and a 21% NRI in this well.
• Slawson Exploration Company operates one unit in the SE HR acreage block. The Hatchet #1-23-14H well was drilled to total depth in April 2012 and was fracture stimulated with 34 stages using a sliding sleeve completion method in May. The well commenced production on May 7th with an early 24-hour flow back rate of 1,091 BOE/D on a 28/64" restricted choke. The initial production rate consisted of 1,007 barrels of oil and 503 MCF of natural gas. The Company has an approximate 1% WI and 0.8% NRI in the well.
• The State 36-1 #3H well had an early 24-hour flow back rate of 4,182 BOE/D on an unrestricted choke. The Company has an approximate 3.64% WI and a 2.91% NRI in this well.
2012 Capital Budget
Under our revised $43.3 million capital expenditures budget for 2012, we have spent approximately $23.4 million to fund our 2012 oil and gas drilling programs through June 30, 2012. The remaining $19.9 million in capital expenditures is budgeted to be spent on development, exploration and acquisition initiatives in the Williston Basin of North Dakota and in Texas.
Funds allocated to our drilling programs are contingent upon timing, well costs and success. If our drilling initiatives in any program are not initially successful, or do not progress as quickly as projected, funds allocated for those drilling programs may be allocated to other drilling initiatives in due course.