ENERCOM PRESENTATION August 16, · PDF fileNASDAQ: USEG 2 Safe Harbor Disclosure Carefully...

U.S. ENERGY CORP.

ENERCOM PRESENTATION

August 16, 2017

NASDAQ: USEG WWW.USNRG.COM 2

Safe Harbor Disclosure

Carefully read the following disclaimer:

The information discussed in this Presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements made in or in conjunction with this Presentation,other than statements of historical fact, are forward-looking statements. Examples of such statements in this Presentation may relate to planned capitalexpenditures for oil and gas exploration and development projects; cash expected to be available for continued work programs with all our industry partners,and for those projects as to which we do not presently have industry partners; recovered volumes and values of oil and gas approximating third-partyestimates of oil and gas reserves; projected increases in oil and gas production; current and anticipated drilling and completion activities; anticipatedproduction and price differentials and decline rates from initial production rates, over time, of the daily volume of oil and natural gas produced from wellscompleted in the Williston Basin and elsewhere; the relationship of national oil and gas natural prices to prices paid for such production in the Williston Basinand other areas in which we operate; expected well spacing for wells to be drilled; future cash flows and borrowings; pursuit of potential acquisitionopportunities; our expected financial position; our business strategy; and other plans and objectives for future operations.

These forward-looking statements are typically identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,”“intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. Though we believe that theexpectations reflected in these statements are reasonable, they do involve certain assumptions, risks and uncertainties. Results could differ materially fromthose anticipated in these statements as a result of numerous factors.

Our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the section entitled “Risk Factors” inour Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and other filings we make with the Securities and Exchange Commission, all of whichare incorporated by reference in this Presentation. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified intheir entirety by the cautionary statements made above, elsewhere in this Presentation and as incorporated from our public filings. All of such forward-looking statements are made as of the date of this Presentation, and except as otherwise required under securities laws, we do not assume a duty to updateany forward-looking statement, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

Actual timing of drilling and completing wells, well performance and the anticipated number of gross and net wells could vary in each of these cases. Amountsbudgeted for each regional drilling program are also subject to change based on a number of factors including, but not limited to, timing, well costs, drillingand completion success, availability of capital and weather-related issues.

Anticipated well performance could also vary significantly from those modeled internally. Furthermore, funds allocated for specific drilling programs underthe 2015 CAPEX budget may be re-allocated to other drilling programs if initial results are below expectations.

IP rates, test results and similar data from exploration and development activities are not necessarily reflective of the production, reserves or cash flow thatmay ultimately be generated from the well in question. Our ability, or the ability of the relevant operator, to maintain expected levels of production from awell is subject to numerous risks and uncertainties, including those discussed and referenced above.


Independent E&P Company Focused on Exploring for and Producing Domestic Oil and Natural Gas

Exchange: NASDAQ (41 years)

Ticker Symbol: USEG

Price per Share (08/16/2017) $0.73

Market Capitalization (08/16/2017) $4.50MM

Avg. Daily Trade Volume (Last 3 Months) ~40K

52 Week Price Range 0.60 – 2.74

Shares Outstanding (1/09/2017) 6.1 MM

Market Data


Recent History

COMPANY OVERHANG

• Restructure Credit Facility

• Address Liquidity Deficiency

• Reduce G&A

• Eliminate Mining Liability

• Eliminate Mining Costs

• Relocate Company

• Transition to Oil & Gas Staff

• Address Statoil Interest Differences

• Participate in Organic Growth

• Evaluate Growth through M&A

• Eliminate Unprofitable Wells

SOLUTION

✓ Replaced Wells Fargo as Company lender

✓ Agreed on Credit Facility Amendments

✓ Decreased from $6mm to $2mm per year.

✓ Assigned Claims to Freeport

✓ All Mining Assets Divested to Freeport

✓ Moved Company to Denver from Wyoming

✓ Reduced non-essential staff by 75%

✓ Finalizing settlement of all differences

✓ Drilling with current partners

✓ Currently evaluating potential acquisitions

✓ Actively engaging 10 operators and reviewing all activity on a monthly basis

Results from Company Achievements Have Begun To Be Improve the Company’s Financial and Operation Profile


($10,602) ($4,216) ($265) ($740) $336

1Q2016 2Q2016 3Q2016 1Q2017 2Q2017

Focused on Living within Cash Flow

Net Income ($000’s)

▪ U.S. Energy has positive net income at today’s commodity prices.

5


$260 $243

($51) ($545)

$404

1Q2016 2Q2016 3Q2016 1Q2017 2Q2017

Returning to Profitability

Adjusted EBITDA ($000’s)

▪ U.S. Energy has optimized current operations and returned to positive quarterly EBITDA.

6


0.30 0.33 0.35 0.41

0.91

5.60

1Q2016 2Q2016 3Q2016 1Q2017 2Q2017 Per CovenantCalculation

Improving Liquidity Profile

Current Ratio

▪ U.S. Energy has remained focused on improving the liquidity profile of the Company.

7


$17.22 $16.38

$15.51

$14.03

$9.18

1Q2016 2Q2016 3Q2016 1Q2017 2Q2017

Focused on Reducing Costs

Lease Operating Expenses per BOE

▪ U.S. Energy has worked with the Company’s partners to implement cost reduction strategies across its entire asset base.

8


Oil & Gas Assets

• Bakken/Three Forks

• North Dakota

• Eagle Ford/Buda/Austin Chalk/Georgetown

• Texas

• Conventional

• Louisiana

• Active Development

• South Texas

• Founded in 1966 (In business over 51 years)

• Listed on the Nasdaq (41 years)

• Trading Symbol: USEG

• Background in Natural Resource and Oil & Gas Development

• Production in Traditional US Basins

Company Overview

Williston Basin

Corporate HQ

South Texas

Gulf Coast


Corporate Overview - Operations

• Participate in 155 gross (21.7 net) producing wells in North Dakota / Texas / Louisiana (June 2017)

•2nd Quarter 2017 Average Daily Production 649 BOE/D (60% oil)

• Interest ( currently non-op) in approximately 4,600 net acres primarily located in South Texas and the Williston Basin in North Dakota

• Proved Reserves (2nd Quarter 2016) 1.23 MMBOE


2017 CAPEX

The Company’s capital focus will be on:

• Acquiring drilling opportunities

• Acquisition of producing properties

• Funding our drilling obligation in the South Texas Development in the Georgetown Formation


U.S. ENERGY CORP.

E&P Assets


Williston Basin North Dakota


• 115 Gross (11.2 net) wells (6/30/2017)

• Approximately Net 2,518 acres ( 58 DSU’s)

• Average 2 wells per DSU

• Continue to rationalize the acreage position thru trades, swaps or divestment

North Dakota - Williston Basin Assets


Williston Basin Drilling Locations

• High EUR DSUs with drilling opportunities:

State Williston


Williston Basin Operations & Drilling ProgramsBakken / Three Forks Formations

Producing Operations in Williams, McKenzie and Mountrail Counties, North Dakota

• Interest in 58 participated drilling units (HBP) (majority 1,280 acre spacing)

• Under 7 Operators ( Utilize JOA provisions to gain access to development)

• 66,00 Gross & 2,514 Net participated acres ( 43% to 0.1%)

• Overall potential for 342* gross drilling locations

• ~10* - 15** net wells on a going forward basis which would nearly double our net well count

• USEG can add significantly to the net wells and production with strategic drilling

• Active in the Williston Basin consolidating current assets with partners

• Transition to operations to use our experience and skill sets

• Qualified and Experienced in the Williston Basin to operate profitably at current commodity prices


South Texas - Eagle Ford Trend


South Texas Assets

• Eagleford Trend of South Texas– MULTIPLE HORIZONS

• EAGLEFORD

• AUSTIN CHALK

• GEORGETOWN

• Development Opportunities with Contango in Dimmit County

• Georgetown is being explored by CML in Zavalla County

• Eagle Ford at Leona Rivers remains to be tested adequately


Contango Operated• 12,321 gross (2,468 net) acres in Zavala and Dimmit County, TX with Contango and CML

• Neighboring operators CHK has extensively drilled and established production rates of 1900 BOE/D

• Participating in 2 Georgetown Formation wells with CML in September

• Technology Gains are making the Eagle Ford/Chalk attractive for further development potential at Booth - Tortuga

2017 Test Well Anticipated

Booth-TortugaAcreage Block

Leona RiverAcreage Block

Eagle Ford Potential


Recent Completions

Resulting in 1,900

BOED Rates.

Concentrating on

Upper Eagle Ford,

Lower Eagle Ford and

Chalk

Longer Laterals &

Improved Completions

Eagle Ford / Chalk Update

Competitor’s Acreage


Leona River Prospect Regional GOR


Winterbotham ZAV A 1H Geological Assessment

Seismic Section and Seismic Structure Map

B B’

TP EAGLEFORD

TPBUDA,

ZVS

BH L A

B

A’

B’


Winterbotham ZAV A 1H Geological

AssessmentOffset Petrophysical Log

Target Zone(red)Drilled Horizontal zone (green)

23


Winterbotham ZAV A 1H Geological AssessmentTerraVu Geosteering Cross Section and Correlation Plot

Last Survey: MD: 13,166' TVD: 6,547.15' INC: 88.6°AZM: 328.7° TEMP: 211°F DL 6.23,ABOVE/BELOW:4.4 Below , LEFT/RIGHT: 62' Right ofthe Line

Target Line: 6406’ KBTVD @ 0’ VS, 88.8 degree inclination

Last Survey: MD: MD:

13,166' TVD: 6,547.15' INC:88.6° AZM: 328.7° TEMP:

211°F DL 6.23,

ABOVE/BELOW: 4.4 Below ,

LEFT/RIGHT: 62' Right of the

Line

24


Winterbotham ZAV A 1H Geological AssessmentMap

BHL

Winterbotham ZAV A 1H SHL

1234

1234

Development Plan

Planned Lateral

On Drill Schedule

Drilled

CHK New Permit

CHKWOC

CHK EGFDProducer

Industry New Permit

IndustryWOC

Industry EGFD Producer

Industry EGFDWatch

PUD (existing)

PUD(expected)

IP -Gas

IP -Oil

25



Offset Lease Program Results

Average Results

• 47 Total Wells

• 493 MBO/Well

• 144 MMcf/Well

LEONA RIVER PROSPECT


LEONA RIVER PROSPECT


Offset Lease Program Results

Average Results

• 28 Total Wells

• 295 MBO/Well

• 166 MMcf/Well


LEONA RIVER PROSPECT• 3,000 acres in Zavala

County, TX

• Neighboring operator EXCO has extensively drilled and established production rates of 839 BO/D

• Revised well costs ~ $5.0 million

• Monitoring regional drilling and completion techniques

• 5-10 Prospect Wells to be drilled

• Capital Costs $25-50 million for Drilling and Completion


IROR 83%

ROI 1.93

DROI(10) 1.59

Payout 1.58 Years

Life 15.00 Years


Overview of Areas and Economics Expectations

1. Bakken - North Dakota: requires multi well plan and

negotiated prices, and redeploying capital from non-op

position

2. Eagle Ford - South Texas: requires consolidation of

interests

3. Georgetown – South Texas; A successful test by CML sets

up a substantial multi well growth project


U.S. ENERGY CORP.

INDUSTRY DRIVERS


Industry Outlook


Crude Oil Outlook


Current Status

• Completed 2015 - 2017 Strategic Goals and Plan:

– Reduced operational costs by 2/3rds

– Executed sale of the Mt. Emmons Mine

– Company Headquarters established in Denver, Colorado

– Manageable level of debt and streamlined organizational restructuring completed

• Stable base production and development portfolio in North Dakota and South Texas

• Focused on producing resource and conventional projects that provide growth and accretive value for shareholders

• Actively seeking bolt on acquisition opportunities to current portfolio

• Consolidate non-operator interests to transition to an operated Position

• Experienced Team with track record of success to Execute the Plan


Shareholder Contact:

NASDAQCM: USEG

Headquarters: U.S. Energy Corp.4643 S. Ulster St.Suite 970Denver, CO 80237

P. 1-303-993-3200

Investor Relations:

P. [email protected]

Web site: www.usrng.com

mailto:[email protected]

http://www.usrng.com/

ENERCOM PRESENTATION August 16, · PDF fileNASDAQ: USEG 2 Safe Harbor Disclosure Carefully...

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