U.S. Energy Corp. (NASDAQ:USEG) filed Quarterly Report for the period ended 2010-06-30.
U.s. Energy Corp. has a market cap of $141.71 million; its shares were traded at around $5.3 with and P/S ratio of 14.72. USEG is in the portfolios of Jeremy Grantham of GMO LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:At June 30, 2010, the Company had $6.1 million in cash and cash equivalents and $34.4 million in U.S. Treasuries with longer than 90-day maturities from date of purchase for a total of $40.5 million or $1.51 per outstanding common share. The Company s working capital (current assets minus current liabilities) was $43.1 million. As discussed below in Capital Resources and Capital Requirements, the Company projects that its capital resources at June 30, 2010 will be sufficient to fund its operations and capital projects through the balance of 2010. On July 30, 2010, the Company established a Senior Secured Revolving Credit Facility (the “Facility”) to borrow up to $75 million from a syndicate of banks, financial institutions and other entities, including BNP Paribas (“BNPP”). The Company formed a wholly owned subsidiary, Energy One LLC (“Energy One”), to own all of its oil and gas properties as well as the Credit Facility. The Company through Energy One may borrow, pay, and re-borrow funds under the Facility, up to an amount equal to the Borrowing Base, which has been initially established at $12 million. See Note 11 to the financial statements. Additionally, the Company has in place a line of credit with a commercial bank in the amount of $10.0 million.
At June 30, 2010, the Company had thirteen producing wells. During the six months ended June 30, 2010, the Company received on average $2.3 million per month from these producing wells with average operating cost of $145,000 per month, production taxes of $293,000 before non cash depletion expense, for average cash flows of $1.9 million per month from oil and gas production. The Company anticipates that cash flows from oil and gas operations will increase through the balance of 2010 as the remaining wells being drilled with Brigham Oil & Gas, L.P. (“Brigham”) a Delaware limited partnership wholly-owned by Brigham Exploration Company (a Delaware corporation), begin to produce. Decreases in the price of oil and natural gas and declines in production rates however could decrease these monthly cash flow amounts.
At June 30, 2010, the Company had $6.1 million in cash and cash equivalents and $34.4 million in U.S. Treasuries. The Company has invested its cash in interest bearing accounts, with the majority invested in U.S. Government Treasuries. During the past two years, this investment policy has insured the preservation of principal and yielded a return.
Under its agreement with Brigham, the Company is committed to drill and complete an additional four wells in the Williston Basin during 2010. Additionally, Brigham intends to drill and USE has committed to drill and complete two infill Bakken formation wells and a Three Forks formation test well. The Company projects expenditures of $13.2 million for these combined activities. The actual amount expended on the six wells will vary from the budgeted amount as a result of larger or smaller ownership interests of Brigham. Other factors which can cause actual amounts spent to vary from budgeted amounts are drilling conditions, problems encountered on site and weather. The wells to be drilled in 2010 will be approximately 10,000 feet in depth with 10,000 foot laterals and each well is expected to be completed with 28 to 32 frac stages. Projected 8/8ths cost for each of the remaining wells is $7.6 million for the Bakken formation wells and up to $8.9 million for the Three Forks formation test.
The Company had an investment of $3.0 million in a geothermal company, SST, as of December 31, 2009, representing an ownership interest of 23.8%. This investment was increased by equity income of $1.1 million during the six months ended June 30, 2010, and decreased from a capital distribution from SST of $1.1 million. Because of the equity income and capital distribution being equal, the net investment in SST at June 30, 2010 remains at $3.0 million. As a result of not funding a cash call in the first quarter of 2010, the Company s ownership interest of SST was reduced from 23.8% to 22.8%.
The Company recorded a net loss after taxes of $130,000, or less than a penny per share basic and diluted, for the quarter ended June 30, 2010 as compared to a net loss after taxes of $2.9 million, or $0.13 per share basic and diluted, during the quarter ended June 30, 2009.
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