What changed in US ENERGY CORP's 10-K — 2023 vs 2024

Our business strategy going forward is to enhance the value of our acquired operated assets through evaluation of selected properties with the goal of increasing production and reserves. We plan to deploy our capital in a conservative and strategic manner and pursue value-enhancing transactions. We also continuously evaluate strategic alternative opportunities that we believe will enhance stockholder value.

Industrial Gas Operations In June 2024, the Company acquired approximately 144,000 acres across the Kevin Dome in Toole County, Montana for the purposes of exploring and exploiting multiple, industrial gas streams. We are in the early stages of our exploration and development program primarily focusing on drilling and completing wells and evaluating processing plant designs and supporting infrastructure.

Contemporaneously, we are also pursuing disposal well permits and regulatory approvals for the sequestration carbon, which we believe are complementary to our ongoing development activities. We will also evaluate potential acquisitions we believe advance our project’s progress.

On January 7, 2025, we acquired an additional 24,000 net acres that are contiguous to our existing positions in Toole County including a non-producing well that is expected to be completed and tested in the first half of 2025. Additionally, we anticipate drilling 2 new exploratory wells on the acquired acreage in the first half of 2025.

The Company was also relieved of associated asset retirement obligations of $5.4 million.

The divestitures included primarily operated properties in Texas and Mid-Continent ("Mid-con") and encompassed 408 gross wells, with two prior dispositions, one relating to our South Texas properties and one relating to our East Texas properties, each discussed in greater detail below, accounting for the majority of the proceeds.

In South Texas, the Company divested its assets in Karnes County, Texas, for approximately $5.2 million in net cash proceeds after customary purchase price adjustments, effective April 1, 2024, with the transaction closing on July 31, 2024.

These primarily operated properties, consisting of 8 gross wells, which averaged 155 barrels of oil equivalent per day (85% oil) during the first quarter of 2024, representing 13% of our total production over that period.

In East Texas, the Company sold the majority of its assets across Anderson, Chambers, Henderson, and Liberty Counties, Texas, for $6.8 million in net cash proceeds, effective November 1, 2024, with the transaction closing on December 31, 2024.

This package, comprising 122 gross wells, averaged approximately 1.1 million cubic feet per day of natural gas and 168 barrels of oil per day (48% oil) for the quarter ending September 30, 2024.

In the Mid-con region, the Company divested all of its operated properties in the state of Kansas and Kay County, Oklahoma, for $1.2 million in net cash proceeds, effective November 1, 2024, with the transaction closing on October 31, 2024. This package comprised 21 gross wells. Properties divested during 2024 represented 42% of the beginning of the year reserve volumes.

The Company recognized a $5.0 million loss on the sale of its East Texas properties in the fourth quarter of 2024.

The Company considered this a significant divestment that would significantly alter the relationship between capitalized costs and proved reserves as the divestiture represented 36% of our reserve volumes and 30% of our reserve value at the date of the divestiture.

These divestitures reflect the Company's strategic portfolio management, exiting non-core geographic regions to enhance liquidity, strengthen the balance sheet, and redirect capital toward high-growth opportunities. Acquisition of Properties Wavetech On June 26, 2024, we entered into and closed the transactions contemplated by, a purchase and sale agreement with Wavetech Helium (“Wavetech” and the “Purchase Agreement”).

Pursuant to the Purchase Agreement, effective June 1, 2024, we acquired 82.5% of Wavetech's rights under a farmout agreement for approximately 144,000 net acres located across the Kevin Dome Structure in Toole County, Montana (“the Assigned Rights”). The Assigned Rights vest upon the drilling of two wells on the property.

In consideration for the Assigned Rights, the Company paid Wavetech $2.0 million in cash and 2.6 million shares of restricted common stock, which were valued at $2.7 million on June 26, 2024. In addition, prior to the closing of the Purchase Agreement, the Company incurred $0.4 million of transaction costs related to the acquisition of the Assigned Rights.

Additionally, we agreed to be responsible for 100% of capital costs, including costs related to project exploration, appraisal, development drilling and completion until $20 million has been incurred related to Wavetech's 17.5% interest. The Company accounted for the acquisition of the Assigned Rights as an asset acquisition.

As of March 10, 2025, we had drilled one of the two wells required to vest the Assigned Rights, and we expect this to be completed in the first half of 2025. Synergy On January 7, 2025, we entered and simultaneously closed the transactions contemplated by, a purchase and sale agreement, with Synergy Offshore LLC (“Synergy”).

Synergy is controlled by Mr. Duane H. King, a member of the Board of Directors of the Company, who serves as the Chief Executive Officer and Manager of Synergy, and John A. Weinzierl, the Company’s Chairman, who is an approximate sixty percent beneficial owner of Synergy.

We acquired approximately 24,000 net operated acres located across the Kevin Dome structure in Toole County, Montana, including all leases, wells, rights and interests in, under or derived from the acquired acreage subject to Synergy retaining an undivided twenty percent (20%) of Synergy’s right title and interest in the property.

Consideration for the transaction consisted of the following: (a) $2.0 million in cash, subject to customary adjustments; (b) 1,400,000 shares of the Company’s common stock; (c) a carried working interest whereby the Company agreed to cover and pay for 100% of Synergy’s costs attributable to the Synergy acreage, until the earlier of (i) 78 months from the closing date; or (ii) the date the total costs associated therewith total $20 million; (d) our agreement to pay Synergy 18% of the cash amounts we actually realize from any law or regulation from our sequestration of carbon oxides or similar substances derived directly from an agreed area of mutual interest including Synergy’s acreage; and (e) our agreement to pay Synergy 18% of the gain we may receive in connection with the sale of the future, first, gas processing plant located on Synergy’s acreage.

Derivative Activities On September 10, 2024, the Company settled all of its then outstanding commodity derivative contracts for 2024 and 2025 production receiving $1.8 million. As of December 31, 2024, we no longer have any commodity derivative contracts outstanding.

Underwritten Offering On January 22, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC (the “Representative”), as representative of the several underwriters named in the Underwriting Agreement (the “Underwriters”), relating to an underwritten offering of 4,236,000 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”), at a price to the public of $2.65 per share (such offering, the “Offering”).

Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to 635,400 additional shares of Common Stock (the “Option”), which was exercised in full on January 25, 2025. The sale of 4,871,400 shares of Common Stock (including the full 635,400 Option) in connection with the Offering, closed on January 23, 2025.

The Company intends to use the approximately $12.1 million of net proceeds from the Offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, for the development of its recent acquisition in Montana, general corporate purposes, and working capital, or for other purposes that our board of directors, in their good faith, deems to be in the best interest of the Company.

Additionally, management had the ability, pursuant to the terms of the Underwriting Agreement, to use up to the entire amount of proceeds from the Option exercise to purchase shares of Common Stock from Sage Road Capital, LLC (a current shareholder of the Company whose co-manager is Joshua L.

Batchelor, a member of the Board of Directors of the Company) or its affiliates at a price up to the public offering price of the Offering, less underwriting discounts, which sale took place in January 2025, as discussed below.

Under the terms of the Underwriting Agreement, the Company and the Company’s directors and executive officers and their affiliates, also agreed not to sell or transfer any Common Stock without first obtaining the written consent of the Representative, subject to certain exceptions (including the Sage Road Purchase, discussed below), for 60 days after January 22, 2025, the date of the final prospectus supplement relating to the Offering.

Related Party Share Repurchase On January 27, 2025, the Company entered into a Share Repurchase Agreement with Banner Oil & Gas, LLC (“Banner”), Woodford Petroleum, LLC (“Woodford”), and Sage Road Energy II, LP, (“Sage Road”, and together with Banner and Woodford, the “Selling Stockholders”).

In his capacity as co-Managing Partner of Sage Road Capital, LLC, which indirectly controls and manages certain funds which own a majority interest in Banner, Woodford and Sage Road, Joshua L. Batchelor, a member of the Board of Directors of the Company, may be deemed to beneficially own the shares of Common Stock held by the Selling Stockholders.

Pursuant to the Share Repurchase Agreement, the Company, in a private transaction, outside of, and separate from the Company’s previously disclosed share repurchase program, on January 27, 2025, repurchased (a) 534,020 shares of Common Stock held by Banner, (b) 41,229 shares of Common Stock held by Woodford, and (c) 60,151 shares of Common Stock held by Sage Road, for an aggregate of $1,574,362 or $2.47775 per share, which is the price per share of the 4,871,400 shares of Common Stock which we sold in our underwritten public offering which closed on January 23, 2025, less underwriting discounts and commissions, and which represented an 8.2% premium to the closing sales price of the Company’s Common Stock on January 27, 2025.

The Share Repurchase Agreement contains customary representations, warranties and covenants of the parties. The share repurchase was approved by the disinterested members of the Board of Directors of the Company, as well as the Company’s Audit Committee, comprised solely of independent directors not affiliated with Mr. Batchelor or the Selling Stockholders.

The Compensation Committee of our Board of Directors oversees our compensation programs and designs programs to incentivize achievement of our corporate strategy and the matters of importance to our stakeholders.

We will continue to monetize legacy assets and redeploy capital into our core focus areas. During the first half of 2025 we intend to complete two wells (including the well we drilled in the fourth quarter 2024) and drill two additional new wells targeting an industrial gas zone.

Share repurchases under our approved share repurchase program continued in 2024, and we have extended the share repurchase program until June 30, 2026. These repurchases may resume so long as share prices remain attractive and repurchases remain in the best interests of both the Company and its stockholders.

As part of our development activities, we will focus on performing two industrial gas well completions (including the well we drilled in the fourth quarter 2024) and drilling two new industrial gas wells. We may also participate in development projects with other operators near our acreage position in Toole County, Montana.