U.S. Energy Corp. (NASDAQ:USEG) (“we”, “us” or the “Company”),
today reported its third quarter 2015 highlights and selected
financial results for the three and nine months ended September 30,
2015.
Selected Highlights for the Three Months
Ended September 30, 2015
- Third quarter 2015 production came from a total of 149 gross
(20.88 net) wells. During the quarter the Company produced
80,673 barrels of oil equivalent (“BOE”), or an average of 877 BOE
per day (“BOE/D”) as compared to 142,484 BOE or an average of 1,549
BOE/D during the three months ended September 30, 2014.
Sequentially from the second quarter of 2015, production during the
third quarter decreased approximately 2.2% as a result of normal
production declines and fewer wells being drilled due to low
commodity prices.
- During the third quarter 2015, we recorded a net loss after
taxes of $23.7 million or $0.84 per share basic and diluted, as
compared to a net loss after taxes of $63,000, or $0.00 per share
basic and diluted, during the same period of 2014. During the
three months ended September 30, 2015, the Company recorded a
proved property impairment of $21.4 million related to its oil and
gas assets, which represents $0.76 of the $0.84 per share
loss. The impairment was primarily due to a decline in the
price of oil. There were no proved property impairments
recorded during the three months ended September 30, 2014.
- At September 30, 2015, we had $3.9 million in cash and cash
equivalents.
- The Company recognized $2.6 million in revenues during the
three months ended September 30, 2015 as compared to $9.9 million
in revenues during the third quarter of 2015. The $7.3
million decrease in revenue is primarily due to lower oil and gas
sales volumes in the third quarter of 2015 when compared to the
third quarter of 2014.
- General and administrative expenses decreased by $206,000
during the three months ended September 30, 2015 as compared to
general and administrative expenses for the same period of
2014.
- 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 $3.5 million
during the three months ended September 30, 2015, or $0.13 per
basic and diluted share. Adjusted Net Loss was $774,000 for
the three months ended September 30, 2014, or $0.03 per basic and
diluted share. Please refer to the reconciliation in this
release for additional information about this measure.
- 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
a $1.4 million loss for the three months ended September 30, 2015,
compared to a $4.6 million gain for the three months ended
September 30, 2014. Modified EBITDAX is a non-GAAP financial
measure. Please refer to the reconciliation in this release
for additional information about this measure.
Selected Highlights for the Nine Months
Ended September 30, 2015
- During the nine months ended September 30, 2015 the Company
produced 248,518 barrels of oil equivalent (“BOE”), or an average
of 910 BOE per day (“BOE/D”) as compared to 364,076 BOE or an
average of 1,334 BOE/D during the nine months ended September 30,
2014. The decrease in production is a result of normal
production declines and fewer wells being drilled during the period
due to low commodity prices.
- During the nine months ended September 30, 2015 we received an
average of $954,000 per month from our producing wells with an
average operating cost of $515,000 per month (including workover
costs) and production taxes of $89,000, for average net cash flows
of $350,000 per month from oil and gas production before non-cash
depletion expense and impairments.
- During the nine months ended September 30, 2015, we recorded a
net loss after taxes of $53.6 million or $1.91 per share basic and
diluted, as compared to net income after taxes of $243,000, or
$0.01 per share basic and diluted, during the same period of
2014. During the nine months ended September 30, 2015, the
Company recorded proved property impairments totaling $43.9 million
related to its oil and gas assets, which represents $1.56 of the
$1.91 per share loss. The impairment was primarily due to a
decline in the price of oil. There were no proved property
impairments recorded during the first nine months of 2014.
- The Company recognized $8.6 million in revenues during the nine
months ended September 30, 2015 as compared to $27.3 million in
revenues during the same period in 2014. The $18.7 million decrease
in revenue is primarily due to lower oil and gas prices and lower
oil and gas sales volumes in the first nine months of 2015 as
compared to the first nine months of 2014.
- General and administrative expenses decreased by $645,000
during the nine months ended September 30, 2015 compared to general
and administrative expenses for the nine months ended September 30,
2014.
- 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 $10.6 million
during the nine months ended September 30, 2015, or $0.38 per basic
and diluted share. Adjusted Net Income was $160,000 for the
nine months ended September 30, 2014, or $0.01 per basic and
diluted share. Please refer to the reconciliation in this
release for additional information about this measure.
- 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
a $3.0 million loss for the nine months ended September 30, 2015,
compared to a $12.9 million gain for the nine months ended
September 30, 2014. Modified EBITDAX is a non-GAAP financial
measure. Please refer to the reconciliation in this release
for additional information about this measure.
Revolving Credit Facility
- Our Credit Agreement with Wells Fargo Bank, N.A. provides a
$100.0 million senior secured credit facility. Effective
July, 16, 2015 we have a redetermined borrowing base of $7.0
million with a maturity date of July 30, 2017. At September
30, 2015, we had $6.0 million drawn on the facility.
Hedging - Commodity Derivative
Contracts
The Company recognized an unrealized and
realized derivative gain of $1.4 million in the third quarter of
2015 compared to a gain of $696,000 for the same period in
2014. The 2015 amount includes a gain on unrealized changes
in the fair market value of our commodity derivative contacts of
$1.3 million and realized cash settlement gains on derivatives of
$33,000. For the first nine months of 2015 the Company
recognized an unrealized and realized derivative gain of $896,000
compared to a loss of $247,000 for the same period in 2014.
The 2015 amount includes a gain on unrealized changes in the fair
value of our commodity derivative contracts of $1.0 million and
realized cash settlement losses on derivatives of $106,000.
Energy One, a wholly owned subsidiary of the
Company, has the following commodity derivative contracts
(“economic hedges”) with Wells Fargo as presented below as of the
date of this release.
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Quantity |
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Settlement Period |
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Counterparty |
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Basis |
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(Bbls/day) |
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Strike Price |
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Crude Oil Costless
Collar |
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05/01/15 -
12/31/15 |
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Wells
Fargo |
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WTI |
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500 |
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Put: |
$ |
45.00 |
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Call: |
$ |
58.79 |
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Crude Oil Costless
Collar |
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01/01/16 -
06/30/16 |
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Wells
Fargo |
|
WTI |
|
350 |
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Put: |
$ |
57.50 |
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Call: |
$ |
66.80 |
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Crude Oil Costless
Collar |
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07/01/16 -
12/31/16 |
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Wells
Fargo |
|
WTI |
|
300 |
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Put: |
$ |
50.00 |
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Call: |
$ |
65.25 |
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Uranium Properties –
Anfield
On June 30, 2015, the Company entered into
Amendment No. 1 to the Amendment Assignment and Assumption
Agreement with Anfield Resources, Inc. (“Anfield”) dated as of
August 14, 2014. As amended, conditioned upon the closing of
a purchase and sale transaction between Anfield and Uranium One
Inc. (“Uranium One”) (the “Anfield-Uranium One Transaction”), the
Company agreed to release Anfield from the future payment and
royalty obligations stemming from the Company’s 2007 sale of its
uranium properties to Uranium One. In return, Anfield has
agreed to pay the Company the following:
- $750,000 in Anfield common shares upon closing of the
Anfield-Uranium One Transaction;
- $750,000 in Anfield common shares on the first anniversary of
the closing of the Anfield-Uranium One Transaction;
- $1.0 million in Anfield common shares on the second anniversary
of the closing of the Anfield-Uranium One Transaction;
- $2.5 million in cash paid upon 18 months of continuous
commercial production; and
- $2.5 million in cash paid upon 36 months of continuous
commercial production.
If any of the share issuances result in the
Company holding in excess of 20% of the then issued and outstanding
shares of Anfield (the “Threshold”), such shares in excess of the
Threshold will not be issued at that time, but will be deferred to
the next scheduled share issuance. If, upon the final
scheduled share issuance the number of shares to be issued exceeds
the Threshold, the value in excess of the Threshold shall be paid
to the Company in cash.
The Anfield-Uranium One Transaction closed on
September 1, 2015, and as a result, the Company received 7,436,505
shares of Anfield valued at $750,000 using a 10 day volume-weighted
average closing price for Anfield shares as of that date.
Pursuant to ASC 820-10-30, the Company determined that because
Anfield is a thinly traded stock, the transaction price of $750,000
did not equal the fair value of the Anfield shares.
Accordingly, the Company used alternate methods to determine a fair
value for the Anfield shares and established a fair value of
$238,000 at both initial measurement and as of September 30, 2015.
There can be no guarantee of the future value of Anfield shares
received or when, if ever, commercial production will commence.
CEO Statement
“I am pleased to report that our base production
has held up relatively well when compared sequentially over the
preceding quarters of this year. In lieu of a robust drilling
program we have implemented and are realizing cost cutting measures
as the downturn in the commodity price persists. We are
prudently managing the bottom line while we continuing to seek out
alternative funding, acquisition and divestiture opportunities and
a long term solution for the mine project,” stated David Veltri,
CEO, COO and President of the Company. “In addition, we have
begun the transition process of moving the corporate headquarters
and daily duties of the staff to the new Denver office. We
have begun the process of hiring key personnel and they are
currently working with the existing staff to ensure a smooth
transition to Denver prior to year-end,” he added.
Financial Highlights
The following table sets forth selected
financial information for the three and nine months ended September
30, 2015 and 2014. The information is derived from the
Company’s financial statements included in its Quarterly Report on
Form 10-Q for the three and nine months ended September 30,
2015. All of this information should be read in conjunction
with the Form 10-Q and the financial statements contained therein,
including the notes to the financial statements.
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U.S. ENERGY CORP. |
SELECTED FINANCIAL DATA |
(Unaudited) |
(Amounts in thousands, except per share
amounts) |
|
|
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|
|
September 30, |
|
December 31, |
|
|
|
2015 |
|
|
|
2014 |
|
Balance Sheets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
3,877 |
|
|
$ |
4,010 |
|
Current
assets |
|
$ |
6,449 |
|
|
$ |
7,500 |
|
Current
liabilities |
|
$ |
15,600 |
|
|
$ |
7,966 |
|
Working
capital |
|
$ |
(9,151 |
) |
|
$ |
(466 |
) |
Total
assets |
|
$ |
71,502 |
|
|
$ |
123,523 |
|
Long-term
obligations |
|
$ |
1,781 |
|
|
$ |
8,162 |
|
Shareholders' equity |
|
$ |
54,121 |
|
|
$ |
107,395 |
|
|
|
|
|
|
Shares Outstanding |
|
|
28,110,311 |
|
|
|
28,047,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, |
|
For the nine months ended September 30, |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Statements of
Operations: |
|
|
|
|
|
|
|
|
Operating
revenues |
|
$ |
2,622 |
|
|
$ |
9,928 |
|
|
$ |
8,586 |
|
|
$ |
27,312 |
|
Income
(loss) from operations |
|
$ |
(25,224 |
) |
|
$ |
(681 |
) |
|
$ |
(54,670 |
) |
|
$ |
715 |
|
Other
income & expenses |
|
$ |
1,573 |
|
|
$ |
618 |
|
|
$ |
1,036 |
|
|
$ |
(472 |
) |
Net
income (loss) |
|
$ |
(23,651 |
) |
|
$ |
(63 |
) |
|
$ |
(53,634 |
) |
|
$ |
243 |
|
Net
income (loss) per share |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.84 |
) |
|
$ |
-- |
|
|
$ |
(1.91 |
) |
|
$ |
0.01 |
|
Weighted
average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
28,051,066 |
|
|
|
27,899,505 |
|
|
|
28,048,808 |
|
|
|
27,808,231 |
|
Diluted |
|
|
28,051,066 |
|
|
|
27,899,505 |
|
|
|
28,048,808 |
|
|
|
28,200,388 |
|
|
|
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|
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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 the items set forth in the table below ("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:
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|
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|
|
|
|
|
For the three months ended September 30, |
|
For the nine months ended September 30, |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Net income
(loss) |
|
$ |
(23,651 |
) |
|
$ |
(63 |
) |
|
$ |
(53,634 |
) |
|
$ |
243 |
|
Impairment of oil and
natural gas properties |
|
|
21,446 |
|
|
|
-- |
|
|
|
43,894 |
|
|
|
-- |
|
Accretion of asset
retirement obligation |
|
|
11 |
|
|
|
10 |
|
|
|
35 |
|
|
|
29 |
|
Non-cash compensation
expense |
|
|
(138 |
) |
|
|
717 |
|
|
|
199 |
|
|
|
1,013 |
|
Unrealized (gain) loss
on commodity derivatives |
|
|
(1,337 |
) |
|
|
(780 |
) |
|
|
(1,002 |
) |
|
|
(369 |
) |
Interest expense |
|
|
67 |
|
|
|
69 |
|
|
|
196 |
|
|
|
314 |
|
Depreciation, depletion
and amortization |
|
|
2,243 |
|
|
|
4,689 |
|
|
|
7,306 |
|
|
|
11,702 |
|
Modified EBITDAX
(Non-GAAP) |
|
$ |
(1,359 |
) |
|
$ |
4,642 |
|
|
$ |
(3,006 |
) |
|
$ |
12,932 |
|
|
|
|
|
|
|
|
|
|
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 before the items set forth in the table
below. We believe that Adjusted Net Income (Loss) 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.
The following table provides a reconciliation of
net (loss) income (GAAP) to Adjusted Net Income (Loss)
(non-GAAP):
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, |
|
For the nine months ended September 30, |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Net (loss)
income |
|
$ |
(23,651 |
) |
|
$ |
(63 |
) |
|
$ |
(53,634 |
) |
|
$ |
243 |
|
Impairment of oil and
natural gas properties |
|
|
21,446 |
|
|
|
-- |
|
|
|
43,894 |
|
|
|
-- |
|
Gain on sale of
assets |
|
|
(41 |
) |
|
|
-- |
|
|
|
(57 |
) |
|
|
(28 |
) |
Change in fair value of
derivative instruments |
|
|
(1,337 |
) |
|
|
(780 |
) |
|
|
(1,002 |
) |
|
|
(369 |
) |
Interest expense |
|
|
67 |
|
|
|
69 |
|
|
|
196 |
|
|
|
314 |
|
Adjusted net (loss)
income |
|
$ |
(3,516 |
) |
|
$ |
(774 |
) |
|
$ |
(10,603 |
) |
|
$ |
160 |
|
|
|
|
|
|
|
|
|
|
Adjusted
earning per share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.38 |
) |
|
$ |
0.01 |
|
Weighted
average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
28,051,066 |
|
|
|
27,899,505 |
|
|
|
28,048,808 |
|
|
|
27,808,231 |
|
Diluted |
|
|
28,051,066 |
|
|
|
27,899,505 |
|
|
|
28,048,808 |
|
|
|
28,200,388 |
|
|
|
|
|
|
|
|
|
|
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 and its 10-Q for the
three and nine months ended September 30, 2015, which are available
at www.sec.gov and www.usnrg.com.
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 and
financial condition. There is no assurance that additional
financing, acquisition or other opportunities will be
available. 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.
For further information, please contact:
Reggie Larsen
Director of Investor Relations
U.S. Energy Corp.
1-800-776-9271
Reggie@usnrg.com
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