U.S. Energy Corp. (Nasdaq:USEG) ("we", "us" or the "Company"),
today reported its fourth quarter and year end 2014 highlights and
selected financial results for the year ended December 31, 2014 and
provided an operational update.
Selected highlights for the three and twelve months
ended December 31, 2014
Three months ended December 31, 2014
- During the three months ended December 31, 2014, the Company
produced 101,265 barrels of oil equivalent ("BOE"), or 1,101 BOE
per day ("BOE/D"), from 136 gross (20.02 net) wells.
- We recorded a net loss of $2.3 million or $0.08 per share basic
and diluted for the quarter ended December 31, 2014 as compared to
a net loss after taxes of $1.2 million, or $0.04 per share basic
and diluted, during the same period of 2013.
- Adjusted Net Income (Loss), a non-GAAP measure that excludes
non-recurring items and mark-to-market gains and losses on
derivative instruments, was an Adjusted Net (Loss) of $2.3 million
during the three months ended December 31, 2014, or $0.08 per basic
and diluted share. Adjusted Net Income was $593,000 for the fourth
quarter of 2013, or $0.02 per basic and diluted share. Please refer
to the reconciliation in this release for additional information
about this measure.
- Oil and gas operations generated an operating loss of $1.2
million during the quarter ended December 31, 2014 as compared to
operating income of $3.3 million during the quarter ended December
31, 2013.
- At December 31, 2014, we had $4.0 million in cash and cash
equivalents and our working capital deficit (current assets minus
current liabilities) was $466,000.
- The Company recognized $5.1 million in revenues during the
three months ended December 31, 2014 as compared to $9.3 million
during the same period of the prior year. The $4.2 million decrease
in revenue is primarily due to lower realized oil prices and lower
oil sales volumes in the three months ended December 31, 2014 when
compared to the same period in 2013.
- Earnings before interest, income taxes, depreciation, depletion
and amortization, accretion of discount on asset retirement
obligations, non-cash impairments, unrealized derivative gains and
losses and non-cash compensation expense ("Modified EBITDAX"), was
$1.2 million for the three months ended December 31, 2014, compared
to a Modified EBITDAX of $4.6 million for the three months ended
December 31, 2013. Modified EBITDAX is a non-GAAP financial
measure. Please refer to the reconciliation in this release for
additional information about this measure.
Highlights and Results for the 12 Months Ended December 31,
2014
- During the twelve months ended December 31, 2014 the Company
produced 465,342 BOE or 1,275 BOE/D from 136 gross (20.02 net)
producing wells. In South Texas, production increased 148% when
compared to the prior year, from 76,773 BOE to 190,760 BOE as a
result of our Buda limestone drilling program. We do not anticipate
this growth to continue due to lower oil prices and a decreased
pace of drilling in the region.
- During the year ended December 31, 2014, we recorded a net loss
after taxes of $2.1 million or $0.08 per share basic and diluted,
as compared to a net loss after taxes of $7.4 million, or $0.27 per
share basic and diluted, during 2013.
- Adjusted Net Income (Loss), a non-GAAP measure that excludes
non-recurring items and mark-to-market gains and losses on
derivative instruments, was a loss of $1.8 million during the
twelve months ended December 31, 2014, or $0.06 per basic and
diluted share. Adjusted Net Income was $279,000 for 2013, or $0.01
per basic and diluted share. Please refer to the
reconciliation in this release for additional information about
this measure.
- We recognized $32.4 million in revenue during 2014, compared to
revenues of $33.6 million during the prior year. The $1.2
million decrease in revenue is primarily due to lower oil sales
volumes and lower average oil prices in 2014 as compared to
2013.
- During the year ended December 31, 2014, we received an average
of $2.7 million per month from our producing wells with an average
operating cost of $657,000 per month (including workover costs) and
production taxes of $230,000, for average net cash flows of $1.8
million per month from oil and gas production before non-cash
depletion expense.
- Modified EBITDAX was $14.1 million for 2014, which is equal to
the Modified EBITDAX of $16.2 million for 2013. Modified
EBITDAX is a non-GAAP financial measure. Please refer to the
reconciliation in this release for additional information about
this measure.
2014 Oil and Gas Reserves
- At year-end 2014, the Company had estimated proved reserves of
4,654,944 BOE (89% oil and 11% natural gas) as compared to
3,855,033 BOE at December 31, 2013, a 20.7% increase year over
year.
- At December 31, 2014, 43% of our estimated proved reserves were
producing, 1% were proved developed non-producing and 56% were
proved undeveloped.
- The estimated proved reserves at December 31, 2014 have a
standardized measure value of $81.9 million and a PV10 of $85.2
million. PV10 is a non-GAAP financial measure. Please
refer to the reconciliation in this release for additional
information about this measure.*
Senior Credit Facility
- Our Credit Agreement with Wells Fargo Bank, N.A., provides a
$100.0 million senior secured credit facility, with a current
borrowing base of $24.5 million and a maturity date of July 30,
2017. At December 31, 2014 we had $6.0 million drawn on the
facility and available borrowing capacity of $18.5 million.
Appointment of President and Chief Operating
Officer
On December 15, 2014 the Company announced the appointment of
Mr. David Veltri as President and Chief Operating Officer of the
Company, effective January 1, 2015. Prior to joining the
Company, Mr. Veltri was the Chief Operating Officer of Denver,
Colorado based Emerald Oil, Inc. While at Emerald, Mr. Veltri
managed all aspects of oil and gas operations and supporting
activities, including oversight of a three rig drilling program and
field operations from well spud to sales, evaluation of acquisition
targets including both producing properties and undeveloped leases,
and was integral in converting Emerald from a non-operated position
into an operator in North Dakota during his tenure. Mr. Veltri
brings with him over 33 years of oil and gas industry
experience.
Operational Update
The Company's oil and gas development activities are currently
focused in South Texas and in the Williston Basin of North
Dakota. Our focus through these development activities is to
increase production, reserves, revenues and cash flow from
operations while prudently managing out level of risk and
debt.
2015 Capital Budget
We have established an oil and gas capital expenditures budget
of $8.2 million for 2015, all of which has been allocated to the
anticipated drilling of four gross wells located in South
Texas.
Actual capital expenditures are contingent upon timing, well
costs and success. If our drilling initiatives in any program
are not initially successful, or do not progress as projected,
funds allocated for those drilling programs may be allocated to
other drilling and/or acquisitions in due course. The
projected number of gross and net wells could vary in each of these
cases.
South Texas - Buda Limestone – Eagle Ford and Austin Chalk
formations
The Company currently participates with four operating partners
in its proportionate share of approximately 31,554 gross (7,724
net) leasehold acres in Zavala and Dimmit Counties, Texas.
The acreage currently has production from the Buda Limestone,
Eagle Ford and Austin Chalk formations. At December 31, 2014
the Company was participating in 34 gross (9.19 net) producing
wells and one gross (0.33 net) wells in progress in South
Texas.
Buda Limestone formation wells status table:
Well Name |
Operator |
Spud Date |
Working Interest |
Net Revenue Interest |
Status |
Beeler Unit H 26H |
Contango |
9/12/2014 |
30.00% |
23.14% |
Producing |
South McKnight 1317HB |
U.S. Enercorp. |
9/28/2014 |
33.30% |
25.00% |
Producing |
Richard #1 |
CML |
3/16/2015 |
12.90% |
9.87% |
To Spud |
|
|
|
25.40% |
19.34% |
|
During the fourth quarter of 2014 the operator drilled the
Beeler Unit 24H well as a vertical pilot well to evaluate the Eagle
Ford and other formations in Zavala and Dimmit Counties. As a
result of this activity, the operator has stated that it currently
plans to drill an Eagle Ford test well in the second half of
2015.
Williston Basin, North Dakota
The Company participates with ten operating partners in its
proportionate share of approximately 84,810 gross (3,511 net) acres
in Williams, McKenzie and Mountrail Counties, North Dakota which
currently have production from the Bakken and Three Forks
formations. At December 31, 2014 the Company was participating
in 99 gross (10.27 net) producing wells and six gross (0.02 net)
wells in progress.
Williston Basin Wells in Progress:
Well Name |
Operator |
Formation |
Spud Date |
Working
Interest |
Net Revenue
Interest |
Status |
Slugger 5-16-21H |
Emerald Oil Inc. |
Bakken |
3/9/2014 |
0.37% |
0.28% |
Producing |
Talon 5-9-4H |
Emerald Oil Inc. |
Bakken |
4/23/2014 |
0.34% |
0.27% |
Producing |
Talon 6-9-4H |
Emerald Oil Inc. |
Three Forks |
7/21/2014 |
0.34% |
0.27% |
Producing |
Slugger 6-16-21H |
Emerald Oil Inc. |
Bakken |
8/17/2014 |
0.37% |
0.28% |
Producing |
Talon 7-9-4H |
Emerald Oil Inc. |
Bakken |
9/13/2014 |
0.34% |
0.27% |
Producing |
Slugger 7-16-21H |
Emerald Oil Inc. |
Bakken |
10/10/2014 |
0.37% |
0.28% |
Producing |
Excalibur 6-25-36H |
Emerald Oil Inc. |
Bakken |
10/26/2014 |
0.82% |
0.63% |
Completing |
Excalibur 7-25-36H |
Emerald Oil Inc. |
Bakken |
11/8/2014 |
0.82% |
0.63% |
Drilled - Comp. Pending |
Satter 21X-01B |
XTO |
Bakken |
10/22/2014 |
0.13% |
0.10% |
Drilled - Comp. Pending |
Satter 21X-01F |
XTO |
Three Forks |
10/26/2014 |
0.13% |
0.10% |
Drilled - Comp. Pending |
Satter 21X-01C |
XTO |
Three Forks |
10/27/2014 |
0.13% |
0.10% |
Drilled - Comp. Pending |
|
|
|
Average: |
0.38% |
0.29% |
|
CEO Statement
"Although we had a strong year of development activity in both
South Texas and in our Williston Basin of North Dakota drilling
programs during 2014, we began to realize decreased drilling
activity in both regions during the fourth quarter of 2014 and this
has continued to date. This decreased activity is a direct
result of the steep downturn in commodity prices during this
timeframe and has led us to significantly reduce our 2015 Capex
budget as we continue to monitor the commodity pricing metrics,"
said Keith Larsen, CEO of U.S. Energy Corp. "Through this
cycle we will prudently manage the balance sheet and intend to fund
our reduced drilling and testing commitments on a well-by-well
basis to ensure prudent investment of our development capital while
focusing on some key testing in our South Texas region which may
lead to an increased inventory of drilling in multiple targeted
formations in that region," he added.
In addition, Mr. Larsen stated, "To date, we have explored for
and produced oil and gas through a non-operated business
model. However, with the recent appointment of David Veltri to
the position of President and Chief Operating Officer we are
actively looking to transition into an operator. David has
proven his ability to successfully orchestrate such a transition by
doing so with his last two previous employers, Baytex Energy and
Emerald Oil and Gas. With operatorship come the ability to
control drilling and production timing, capital costs and future
planning of operations. We plan to achieve this through the
acquisition of new assets and/or by consolidating ownership in and
around the areas in which we currently participate. We believe
that the current commodity price environment will provide the
market opportunities needed in order for us to transition into this
position during the course of 2015."
President Statement
"I believe that there is significant upside potential in the
Company's portfolio of assets through the consolidation of acreage,
the testing of multiple formations in South Texas and through our
stated goal of transforming the Company into operations in order to
better control our destiny during more robust times," stated David
Veltri, President of U.S. Energy Corp. "In addition, we are
committed to finding accretive acquisitions and believe that we
will see favorable market opportunities in the near term as the
redetermination cycle takes place over the course of the next
couple of months along with continued suppressed pricing. We
are currently screening multiple opportunities which I believe have
the potential to significantly enhance the Company's already
impressive oil and gas asset base," he added.
Financial Highlights
The following table sets forth selected financial information
for the three months and years ended December 31, 2014 and
2013. The annual information is derived from the audited
financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2014. All of this information
should be read in conjunction with the Form 10-K and the financial
statements contained therein, including the notes to the financial
statements.
U.S. ENERGY
CORP. |
SELECTED FINANCIAL
DATA |
(Amounts in thousands,
except per share amounts) |
|
|
|
|
December 31, |
December 31, |
|
2014 |
2013 |
Balance Sheets: |
|
|
Cash and cash equivalents |
$ 4,010 |
$ 5,855 |
Current assets |
$ 7,500 |
$ 13,161 |
Current liabilities |
$ 7,966 |
$ 7,191 |
Working capital |
$ (466) |
$ 5,970 |
Total assets |
$ 123,523 |
$ 126,801 |
Long-term obligations |
$ 8,162 |
$ 10,553 |
Shareholders' equity |
$ 107,395 |
$ 109,057 |
|
|
|
Shares Outstanding |
28,047,661 |
27,735,878 |
|
|
|
|
For the three months
ended December 31, |
For the years ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
Statements of Operations: |
|
|
|
|
Operating revenues |
$ 5,067 |
$ 9,271 |
$ 32,379 |
$ 33,647 |
Income (loss) from operations |
$ (3,203) |
$ 726 |
$ (2,488) |
$ (4,846) |
Other income & expenses |
$ 869 |
$ (1,943) |
$ 397 |
$ (2,840) |
Discontinued operations, net of
taxes |
$ -- |
$ (3) |
$ -- |
$ 307 |
Net (loss) |
$ (2,334) |
$ (1,220) |
$ (2,091) |
$ (7,379) |
Net (loss) per share: |
|
|
|
|
Basic and diluted |
$ (0.08) |
$ (0.04) |
$ (0.08) |
$ (0.27) |
Weighted average shares outstanding |
|
|
|
|
Basic |
27,905,940 |
27,475,813 |
27,832,859 |
27,678,698 |
Diluted |
27,905,940 |
27,475,813 |
27,832,859 |
27,678,698 |
Non-GAAP Financial Measures
Modified EBITDAX
In addition to reporting net income (loss) as defined under
GAAP, in this release we also present net earnings before interest,
income taxes, depreciation, depletion, and amortization, accretion
of discount on asset retirement obligations, non-cash impairments,
unrealized derivative gains and losses and non-cash compensation
expense ("Modified EBITDAX"), which is a non-GAAP performance
measure. Modified EBITDAX excludes certain items that the
Company believes affect the comparability of operating results and
can exclude items that are generally one-time or whose timing
and/or amount cannot be reasonably estimated. Modified EBITDAX
is a non-GAAP measure that is presented because the Company
believes that it provides useful additional information to
investors as a performance measure. We believe that Modified
EBITDAX is useful to investors because similar measures are
frequently used by securities analysts, investors, and other
interested parties in their evaluation of companies in the energy
industry. Our management uses Modified EBITDAX to manage our
business, including preparation of our annual operating budget and
financial projections. Modified EBITDAX does not represent,
and should not be considered an alternative to, GAAP measurements
such as net income (loss) (its most directly comparable GAAP
measure) or as a measure of liquidity, and our calculations thereof
may not be comparable to similarly titled measures reported by
other companies. Our management does not view Modified
EBITDAX in isolation and also uses other measurements, such as net
income (loss) and revenues to measure operating
performance. The following table provides a reconciliation of
net income (loss) to Modified EBITDAX for the periods
presented:
|
For the three months
ended December 31, |
For the years ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
Net (loss) |
$ (2,334) |
$ (1,220) |
$ (2,091) |
$ (7,379) |
Impairment of oil and natural gas
properties |
-- |
-- |
-- |
5,828 |
Impairment of unconsolidated investment |
-- |
2,160 |
-- |
2,160 |
Accretion of asset retirement obligation |
11 |
10 |
40 |
38 |
Non-cash compensation expense |
99 |
116 |
1,112 |
516 |
Unrealized (gain) loss on commodity
derivatives |
103 |
(319) |
(266) |
737 |
Interest expense |
71 |
89 |
385 |
429 |
Depreciation, depletion and amortization |
3,254 |
3,812 |
14,956 |
13,898 |
Modified EBITDAX (Non-GAAP) |
$ 1,203 |
$ 4,648 |
$ 14,136 |
$ 16,227 |
Adjusted Net Income (Loss)
Adjusted Net Income (Loss) is another supplemental non-GAAP
financial measure that is used by management and external users of
the Company's condensed consolidated financial statements. The
Company defines Adjusted Net Income (Loss) as net income after
adjusting for the impact of certain non-recurring items, changes in
the fair value of derivative instruments, impairments of oil and
gas properties.
The following table provides a reconciliation of net (loss)
(GAAP) to Adjusted Net Income (Loss) (non-GAAP):
|
For the three months
ended December 31, |
For the years ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
Net (loss) |
$ (2,334) |
$ (1,220) |
$ (2,091) |
$ (7,379) |
Impairment of oil and natural gas
properties |
-- |
-- |
-- |
5,828 |
Impairment of unconsolidated investment |
-- |
2,160 |
-- |
2,160 |
Gain on sale of assets |
(84) |
(31) |
(112) |
(760) |
Discontinued operations |
-- |
3 |
-- |
(307) |
Change in fair value of derivative
instruments |
103 |
(319) |
(266) |
737 |
Non-recurring retirement expense |
-- |
-- |
707 |
-- |
Adjusted net income (loss) |
$ (2,315) |
$ 593 |
$ (1,762) |
$ 279 |
|
|
|
|
|
Adjusted earnings (loss) per share: |
|
|
|
|
Basic and diluted |
$ (0.08) |
$ 0.02 |
$ (0.06) |
$ 0.01 |
Weighted average shares outstanding |
|
|
|
|
Basic and diluted |
27,905,940 |
27,475,813 |
27,832,859 |
27,678,698 |
PV-10 Reconciliation
PV10 is widely used in the oil and gas industry and is
considered by institutional investors and professional analysts
when comparing companies. However, PV10 data is not an
alternative to the standardized measure of discounted future net
cash flows, which is calculated under GAAP and includes the effects
of income taxes. The difference between the Company's PV10 of
$85.2 million and its standardized measure value of $81.9 million
as of December 31, 2014 is the effect of estimated income
taxes.
About: U.S. Energy Corp.
U.S. Energy Corp. is a natural resource exploration and
development company with a primary focus on the exploration and
development of its oil and gas assets. The Company also owns
the Mount Emmons molybdenum deposit located in west central
Colorado. The Company is headquartered in Riverton, Wyoming
and trades on the NASDAQ Capital Market under the symbol
"USEG".
To view the Company's Financial Statements and Management's
Discussion and Analysis, please see the Company's 10-K for the
twelve months ended December 31, 2014 which is available at
www.sec.gov and www.usnrg.com.
The U.S. Energy Corp. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5043
Disclosure Regarding Forward-Looking
Statement
This news release includes statements which may constitute
"forward-looking" statements, usually containing the words "will,"
"anticipates," "believe," "estimate," "project," "expect,"
"target," "goal," or similar expressions. Forward looking
statements in this release relate to, among other things, U.S.
Energy's expected future capital expenditures and projects
(including projects to be pursued with its industry partners), its
drilling and fracing of wells with industry partners and potential
additional drilling opportunities, the results of planned drilling
activities in South Texas, and the oil and natural gas targets or
goals for the wells, the acquisition of operatorship of existing or
acquired properties and potential future transactions and the
benefits to the Company of such transactions.. There is no
assurance that any of the wells referenced in this press release
will be economic. Initial and current production results from
a well are not necessarily indicative of its longer-term
performance. The forward-looking statements are made pursuant
to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements inherently
involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors
that would cause or contribute to such differences include, but are
not limited to, dry holes and other unsuccessful development
activities, higher than expected expenses or decline rates from
production wells, future trends in commodity and/or mineral prices,
the availability of capital, competitive factors, and other risks
described in the Company's filings with the SEC (including, without
limitation, the Form 10-K for the year ended December 31, 2014) all
of which are incorporated herein by reference. By making these
forward-looking statements, the Company undertakes no obligation to
update these statements for revision or changes after the date of
this release.
CONTACT: Reggie Larsen
Director of Investor Relations
U.S. Energy Corp.
1-800-776-9271
Reggie@usnrg.com
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