Quarterly / Earnings Reports | Third Quarter (3Q) Update

US Energy Reports Q3 2019 Results

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U.S. Energy Corp. reported its Q3 2019 results.

Third Quarter 2019 Highlights

• Production of 34,596 BOE, or daily production of 376 BOEPD (82% oil);
• Oil and gas revenues of $1.6 million;
• Lease operating expenses of $0.4 million, or $11.85 per BOE;
• Production taxes of $0.1 million;
• Adjusted EBITDA of $0.2 million; and
• Free cash flow of $0.2 million.

Current Liquidity Position

As of November 12, 2019, we had $1.7 million in cash, no outstanding debt and 13,405,838 shares outstanding. The Company produced $0.2 million in free cash flow during the quarter ended September 30, 2019, which we define as net cash provided by operating activities less net cash used in investing activities.

Production

We produced approximately 34,596 BOE (82% oil), or 376 BOEPD, during the third quarter of 2019. Throughout 2019, we have participated in new development on both our legacy South Texas and North Dakota acreage. This activity and the associated sustained production results have contributed to driving an increase in the Company’s oil production over the comparable period of 2018.  Driven by the overall industry focus on efficient maintenance operations, we participated in increased workover activity on existing producing wells, primarily in North Dakota, which helped optimize legacy production. These low capital, high return projects help increase run time and keep existing production online. The Company plans on participating in organic development across its legacy acreage positions in North Dakota beginning in Spring 2020. 

The below table represents our production quantities and realized pricing for the quarterly periods ending September 30, 2019 and 2018:

Financial Results

Revenues from sales of oil and natural gas during the third quarter of 2019 were $1.6 million compared to $1.2 million during the third quarter of 2018. The increase in revenue was primarily attributable to an increase in our oil production as further described above.  Revenue from oil production represented 96% of Company revenue during the third quarter of 2019. During the third quarter of 2019, we realized an average oil sales price of $55.58 per Bbl and an average gas sales price of $1.63 per Mcf for an overall average sales price of $47.20 per BOE. 

Lease operating expenses for the third quarter of 2019 were $0.4 million, or $11.85 per BOE, compared to $0.5 million, or $16.89 per BOE, during the third quarter of 2018. The decrease in lease operating expenses on a per BOE basis was driven by continued strong production from the Company’s recent development activities, primarily from the participation in development on our legacy South Texas acreage, combined with cost efficiencies achieved by our operating partners.

General and administrative (“G&A”) expenses totaled $1.0 million during the third quarter of 2019 compared to $0.6 million during the third quarter of 2018. The increase was primarily attributable to an increase in professional fees as a result of litigation involving the Company. To offset this increase and permanently maintain future G&A rates at efficient levels, the Company has implemented a significant reduction in corporate overhead involving employees, permanent contractors and certain service providers. In addition to these already implemented reductions, the Company has relocated its corporate headquarters to Houston, Texas.  The Company believes the monetary benefits from these initiatives will begin to have a meaningful impact during the first quarter of 2020 and allow us to continue strengthening our free cash flow profile going forward.

Net loss was $281 thousand and Adjusted EBITDAX was $170 thousand for the third quarter of 2019. Adjusted EBITDAX is a non-GAAP financial measure.  Please see the below table that provides an unaudited reconciliation of net income to Adjusted EBITDAX for the quarters ended September 30, 2019 and 2018.