8-K
US ENERGY CORP (USEG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 12, 2024
U.S. ENERGY CORP.
US ENERGY CORP
(Exact name of registrant as specified in its charter)
| Delaware | 000-06814 | 83-0205516 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Identification No.) |
| 1616 S. Voss, Suite 725 , Houston, Texas | 77057 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 993-3200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | USEG | The NASDAQ Stock Market LLC<br><br> <br>(Nasdaq Capital Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
As previously announced, on December 12, 2024, U.S. Energy Corp. (the “Company”, “we” and “us”), and our wholly-owned subsidiary, New Horizon Resources LLC (“New Horizon”), entered into a Purchase and Sale Agreement (the “Sale Agreement”), with 84 Resources Holdings, LLC (“84 Resources”). Pursuant to the Sale Agreement, we agreed to sell 84 Resources primarily operated oil and gas producing properties, including all oil and gas leases, wells (122), surface rights, rights of ways, personal property, permits, contracts, records and facilities, associated therewith located primarily in Liberty and Henderson Counties, Texas (the “Property”), in consideration for $6.825 million, subject to customary adjustments (the “Purchase Price” and the “Sale”).
On December 31, 2024, the Company completed the Sale, and sold the Property to 84 Resources in consideration for the Purchase Price, which is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.
Item 2.01 Completion of Acquisition or Disposition of Assets
The information included in the Introductory Note is incorporated into this Item 2.01 by reference in its entirety. The foregoing description of the Purchase Agreement and the Sale does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which was attached as Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 13, 2024, the terms of which are incorporated herein by reference.
Item 8.01 Other Events.
On December 31, 2024, the Company issued a press release announcing the completion of the Sale. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The information set forth in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference. The unaudited pro forma condensed combined financial information and the related notes are filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference. They present the unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of operations of the Company after giving pro forma effect to the Sale. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2024 and for the year ended December 31, 2023 were prepared as though the Sale occurred at the beginning of the periods presented. The unaudited pro forma condensed combined balance sheet as of September 30, 2024 was prepared as though the Disposition and related transactions occurred on September 30, 2024.
(d) Exhibits.
| Exhibit<br><br> <br>No. | Description |
|---|---|
| 99.1 | Press Release of U.S. Energy Corp., dated December 31, 2024 |
| 99.2 | Unaudited pro forma condensed combined financial information of U.S. Energy Corp. as of and for the nine months ended September 30, 2024 and the year ended December 31, 2023 |
| 104 | Cover page Interactive Data file (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| U.S. ENERGY CORP. | |
|---|---|
| By: | /s/ Ryan Smith |
| Ryan Smith | |
| Chief Executive Officer | |
| Dated: | December 31, 2024 |
| --- | --- |
ex_761408.htm
Exhibit 99.1
U.S. Energy Corp. Closes Asset Sale
for East Texas Properties
HOUSTON, Texas, December 31, 2024 — **** U.S. Energy Corp. (NASDAQ: USEG, “U.S. Energy” or the “Company”) today announced that the Company has closed the sale (the “Transaction”) of assets located in East Texas (the “East Texas Assets”). The Transaction was previously announced on December 12, 2024.
HIGHLIGHTS
| ■ | All cash proceeds of $6,825,000. |
|---|---|
| ■ | Proceeds are expected to be used to fund the continued development of U.S. Energy’s industrial gas project in Montana. |
| --- | --- |
| ■ | Divested assets averaged approximately 1.0 million cubic feet per day of natural gas and 149 barrels of oil per day for the quarter ending September 30, 2024. |
| --- | --- |
| ■ | The transaction closed on December 31, 2024 with an effective date of November 1, 2024. |
| --- | --- |
MANAGEMENT COMMENTARY
“We are pleased to announce the successful closing of U.S. Energy's recent transaction, completing the divestment of a significant portion of our legacy East Texas assets,” stated Ryan Smith, Chief Executive Officer of U.S. Energy Corp. “The proceeds from this sale will be strategically allocated to advancing our industrial gas project in Montana. With this milestone behind us, U.S. Energy is now poised with greater liquidity and a stronger balance sheet, enabling us to focus on our growth into a leading industrial gas company.”
ABOUT U.S. ENERGY CORP.
We are a growth company focused on consolidating high-quality energy and industrial gas assets in the United States with the potential to optimize production and generate free cash flow through low-risk development while maintaining an attractive shareholder returns program. We are committed to being a leader in reducing our carbon footprint in the areas in which we operate. More information about U.S. Energy Corp. can be found at www.usnrg.com.
INVESTOR RELATIONS CONTACT
Mason McGuire
IR@usnrg.com
(303) 993-3200
www.usnrg.com
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements.
Important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation: (1) the ability of the Company to grow and manage growth profitably and retain its key employees; (2) the ability of the Company to close previously announced transactions and the terms of such transactions, including the closing of the Transaction on the terms and timeline set forth above, including, but not limited to the ability to meet conditions to closing the Transaction and the use of proceeds associated therewith; (3) risks associated with the integration of acquired assets; (4) the Company’s ability to comply with the terms of its senior credit facilities; (5) the ability of the Company to retain and hire key personnel; (6) the business, economic and political conditions in the markets in which the Company operates; (7) the volatility of oil and natural gas prices; (8) the Company’s success in discovering, estimating, developing and replacing oil and natural gas reserves; (9) risks of the Company’s operations not being profitable or generating sufficient cash flow to meet its obligations; (10) risks relating to the future price of oil, natural gas and NGLs; (11) risks related to the status and availability of oil and natural gas gathering, transportation, and storage facilities; (12) risks related to changes in the legal and regulatory environment governing the oil and gas industry, and new or amended environmental legislation and regulatory initiatives; (13) risks relating to crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries and other producing countries; (14) technological advancements; (15) changing economic, regulatory and political environments in the markets in which the Company operates; (16) general domestic and international economic, market and political conditions, including the military conflict between Russia and Ukraine and the global response to such conflict; (17) actions of competitors or regulators; (18) the potential disruption or interruption of the Company’s operations due to war, accidents, political events, severe weather, cyber threats, terrorist acts, or other natural or human causes beyond the Company’s control; (19) pandemics, governmental responses thereto, economic downturns and possible recessions caused thereby; (20) inflationary risks and recent changes in inflation and interest rates, and the risks of recessions and economic downturns caused thereby or by efforts to reduce inflation; (21) risks related to military conflicts in oil producing countries; (22) changes in economic conditions; limitations in the availability of, and costs of, supplies, materials, contractors and services that may delay the drilling or completion of wells or make such wells more expensive; (23) the amount and timing of future development costs; (24) the availability and demand for alternative energy sources; (25) regulatory changes, including those related to carbon dioxide and greenhouse gas emissions; (26) uncertainties inherent in estimating quantities of oil and natural gas reserves and projecting future rates of production and timing of development activities; (27) risks relating to the lack of capital available on acceptable terms to finance the Company’s continued growth, potential future sales of debt or equity and dilution caused thereby; (28) the review and evaluation of potential strategic transactions and their impact on stockholder value and the process by which the Company engages in evaluation of strategic transactions; and (29) other risk factors included from time to time in documents U.S. Energy files with the Securities and Exchange Commission, including, but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, and future annual reports and quarterly reports. These reports and filings are available at www.sec.gov. Unknown or unpredictable factors also could have material adverse effects on the Company’s future results.
ex_759814.htm
Exhibit 99.2 Pro forma financial statements
U.S. Energy Corp. and Subsidiaries
Unaudited Pro Forma Consolidated Financial Information
On December 31, 2024, the Company closed on the sale of its oil and gas assets located in East Texas and Liberty County ("Property Sale") with an effective date of November 1, 2024 for approximately $6.825 million subject to customary closing adjustments.
The following unaudited proforma consolidated financial information reflects adjustments to the Company's historical financial results and give effect to the divestiture as described in the accompanying notes to the unaudited pro forma consolidated financial information.
Historical information has been adjusted in the pro forma consolidated financial information for pro forma events that are: (1) directly attributable to the transaction; (2) factually supportable; and (3) expect to have a continuing impact on the resulting operations. The unaudited pro forma consolidated financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company included in its Quarterly Reports on Form 10-Q for the quarter period ended September 30, 2024, and its Form 10-K for the year ended December 31, 2023.
The unaudited pro forma consolidated financial information are presented for illustrative purposes only and are not intended to be indicative of actual financial position and results of operations had the divestiture been in effect during the periods presented, or of the financial condition or results of operations that may be reported in the future.
U.S. Energy Corp. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2024
| Adjustments | Pro Forma | ||||||||
| ASSETS | **** | **** | **** | **** | **** | **** | **** | **** | |
| Current assets: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Cash and equivalents | 1,155 | $ | 6,825 | (a) | $ | 7,980 | |||
| Oil and natural gas sales receivables | 1,416 | - | 1,416 | ||||||
| Marketable equity securities | 107 | - | 107 | ||||||
| Commodity derivative asset | - | - | - | ||||||
| Other current assets | 708 | - | 708 | ||||||
| Real estate assets held for sale, net of selling costs | - | - | - | ||||||
| Total current assets | 3,386 | 6,825 | 10,211 | ||||||
| Oil, natural gas and helium properties under full cost method: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Proved oil and natural gas properties | 163,554 | (12,730 | ) | (b) | 150,824 | ||||
| Less accumulated depreciation, depletion and amortization | (111,531 | ) | - | (111,531 | ) | ||||
| Net oil and natural gas properties | 52,023 | (12,730 | ) | 39,293 | |||||
| Unproved helium properties, not subject to amortization | 6,931 | - | 6,931 | ||||||
| Net oil, natural gas and helium properties | 58,954 | (12,730 | ) | 46,224 | |||||
| Other Assets: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Property and equipment, net | 725 | - | 725 | ||||||
| Right-of-use asset | 570 | - | 570 | ||||||
| Other assets | 441 | - | 441 | ||||||
| Total assets | 64,076 | $ | (5,905 | ) | $ | 58,171 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | **** | **** | **** | **** | **** | **** | **** | **** | |
| Current liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Accounts payable and accrued liabilities | 4,312 | $ | - | $ | 4,312 | ||||
| Accrued compensation and benefits | 610 | - | 610 | ||||||
| Revenue and royalties payable | 4,769 | - | 4,769 | ||||||
| Asset retirement obligations | 1,000 | - | 1,000 | ||||||
| Current lease obligation | 193 | - | 193 | ||||||
| Total current liabilities | 10,884 | - | 10,884 | ||||||
| Noncurrent liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Credit facility | - | - | - | ||||||
| Asset retirement obligations | 16,991 | (2,769 | ) | (c) | 14,222 | ||||
| Long-term lease obligation, net of current portion | 466 | - | 466 | ||||||
| Deferred tax liability | 1 | - | (i) | 1 | |||||
| Total liabilities | 28,342 | (2,769 | ) | 25,573 | |||||
| Commitments and contingencies (Note 8) | **** | **** | **** | **** | **** | **** | **** | **** | |
| Shareholders’ equity: | **** | **** | **** | **** | **** | **** | **** | **** | |
| Common stock, 0.01 par value; 245,000,000 shares authorized; 28,035,613 and 25,333,870 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | 280 | - | 280 | ||||||
| Additional paid-in capital | 221,346 | - | 221,346 | ||||||
| Accumulated deficit | (185,892 | ) | (3,136 | ) | (d) | (189,028 | ) | ||
| Total shareholders’ equity | 35,734 | (3,136 | ) | 32,598 | |||||
| Total liabilities and shareholders’ equity | 64,076 | $ | (5,905 | ) | $ | 58,171 |
All values are in US Dollars.
U.S. Energy Corp. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For The Year Ended December 31, 2023
| Twelve Months Ended December 31, 2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| As Reported | Adjustments | Pro-forma | ||||||||
| Revenue: | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Oil | $ | 28,352 | $ | (5,830 | ) | (e) | $ | 22,522 | ||
| Natural gas and liquids | 3,964 | (1,294 | ) | (e) | 2,670 | |||||
| Total revenue | 32,316 | (7,124 | ) | 25,192 | ||||||
| Operating expenses: | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Lease operating expenses | 15,254 | (3,560 | ) | (f) | 11,694 | |||||
| Gathering, transportation, and treating | 557 | 257 | (f) | 814 | ||||||
| Production taxes | 2,107 | (366 | ) | (f) | 1,741 | |||||
| Depreciation, depletion, accretion, and amortization | 11,235 | (2,416 | ) | (g) | 8,819 | |||||
| Impairment of oil and natural gas properties | 26,680 | - | 26,680 | |||||||
| General and administrative expenses | 11,523 | - | 11,523 | |||||||
| Total operating expenses | 67,356 | (6,085 | ) | 61,271 | ||||||
| Operating income (loss) | (35,040 | ) | (1,039 | ) | (36,079 | ) | ||||
| Other income (expense): | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Commodity derivative gain (loss), net | 2,882 | - | 2,882 | |||||||
| Interest (expense), net | (1,114 | ) | - | (1,114 | ) | |||||
| Loss on disposal | - | (3,136 | ) | (h) | (3,136 | ) | ||||
| Other income (expense), net | 25 | - | 25 | |||||||
| Total other income (expense) | 1,793 | (3,136 | ) | (1,343 | ) | |||||
| Net income (loss) before income taxes | $ | (33,247 | ) | $ | (4,175 | ) | $ | (37,422 | ) | |
| Income tax (expense) benefit | 891 | - | (i) | 891 | ||||||
| Net income (loss) | $ | (32,356 | ) | $ | (4,175 | ) | $ | (36,531 | ) | |
| Basic and diluted weighted average shares outstanding | 25,322,382 | 25,322,382 | 25,322,382 | |||||||
| Basic and diluted loss per share | $ | (1.28 | ) | $ | (0.16 | ) | $ | (1.44 | ) |
U.S. Energy Corp. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For The Nine Months Ended September 30, 2024
| Nine Months Ended September 30, 2024 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| As Reported | Adjustments | Pro-forma | ||||||||
| Revenue: | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Oil | $ | 14,574 | $ | (3,264 | ) | (e) | $ | 11,310 | ||
| Natural gas and liquids | 1,820 | (645 | ) | (e) | 1,175 | |||||
| Total revenue | 16,394 | (3,909 | ) | 12,485 | ||||||
| Operating expenses: | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Lease operating expenses | 9,322 | (2,572 | ) | (f) | 6,750 | |||||
| Gathering, transportation and treating | 170 | 109 | (f) | 279 | ||||||
| Production taxes | 1,008 | (199 | ) | (f) | 809 | |||||
| Depreciation, depletion, accretion and amortization | 6,392 | (1,407 | ) | (g) | 4,985 | |||||
| Impairment of oil and natural gas properties | 6,843 | 6,843 | ||||||||
| Acquisition transaction costs | 368 | - | 368 | |||||||
| General and administrative expenses | 6,181 | - | 6,181 | |||||||
| Total operating expenses | 30,284 | (4,069 | ) | 26,215 | ||||||
| Operating income (loss) | (13,890 | ) | 160 | (13,730 | ) | |||||
| Other income (expense): | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Commodity derivative gain (loss), net | 537 | - | 537 | |||||||
| Interest (expense), net | (344 | ) | - | (344 | ) | |||||
| Loss on disposal | - | (3,136 | ) | (h) | (3,136 | ) | ||||
| Other income (expense), net | (67 | ) | - | (67 | ) | |||||
| Total other income (expense) | 126 | (3,136 | ) | (3,010 | ) | |||||
| Net income (loss) before income taxes | $ | (13,764 | ) | $ | (2,976 | ) | $ | (16,740 | ) | |
| Income tax (expense) benefit | 6 | - | (i) | 6 | ||||||
| Net income (loss) | $ | (13,758 | ) | $ | (2,976 | ) | $ | (16,734 | ) | |
| Basic and diluted weighted average shares outstanding | 26,304,200 | 26,304,200 | 26,304,200 | |||||||
| Basic and diluted income (loss) per share | $ | (0.52 | ) | $ | (0.11 | ) | $ | (0.64 | ) |
U.S. Energy Corp. and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
On December 31, 2024, the Company completed the Property Sale effective November 1, 2024, for cash proceeds of $6.825 million subject to customary closing costs, which will be finalized in 2025. The Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2023, and the nine-months ended September 30, 2024, have been prepared with the assumption that the transaction closed effective January 1, 2023 and January 1, 2024, respectively. The Unaudited Pro Forma Consolidated Balance Sheet has been prepared as if the transaction closed September 30, 2024.
Adjustments to Unaudited Pro Forma Consolidated Financial Statements
(a) Cash received from sale upon closing less estimated preliminary closing costs of $6.825 million.
(b) The Company applies the full cost method for accounting for its oil and gas operations. Sales of oil and gas properties are accounted for as adjustments to capitalized costs unless such adjustments significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to the full cost center. The Property Sale reduced the Company's reserves by approximately 36 percent and as a result a loss on disposal of $3.1 million was recognized in the Unaudited Pro Forma Consolidated Statement of Operations with an offsetting reduction in capitalized costs associated with the sale of oil and gas properties.
(c) Adjustment to loss on disposal for the removal of the associated oil and gas asset retirement cost assumed by the buyer.
(d) Adjustment reflects the accumulated retained earnings adjustment from the divestiture.
(e) Adjustments to remove the actual recorded oil and natural gas and liquids revenue associated with oil and gas properties sold assuming the Property Sale had occurred January 1 of the respective year.
(f) Adjustments to remove the actual recorded lease operating expense; gathering, transportation and treating expense; and production taxes assuming the Property Sale had occurred on January 1 of the respective year.
(g) Adjustments to remove the amortization of capitalized costs attributable to the actual production assuming the Property Sale occurred January 1 of the respective period. Production was 154,262 and 91,404 barrels of oil equivalent (BOE) for the year ended December 31, 2023 and the nine months ended September 30, 2024, respectively. Depreciation, depletion and amortization rate was $15.66/BOE and $15.39/BOE for the year ended December 31, 2023, and the nine months ended September 30, 2024, respectively.
(h) Adjustments to recognize the estimated loss on disposal resulting from a significant alteration between capitalized costs and proved reserves of oil and gas attributed to the full cost center.
(i) Adjustments to tax-effect the net adjustments associated with Property Sale at statutory rates. As the Company is in an overall cumulative loss position with a corresponding valuation allowance, the tax loss generated from the transaction would not have a material impact on the Company’s overall tax position in neither the balance sheet nor the statements of operations in either of the periods presented.