U.S. ENERGY CORP. ENERCOM PRESENTATION August 16, 2017
Safe Harbor Disclosure Carefully read the following disclaimer: The information discussed in this Presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the Securities Act ) and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act ). All statements made in or in conjunction with this Presentation, other than statements of historical fact, are forward-looking statements. Examples of such statements in this Presentation may relate to planned capital expenditures for oil and gas exploration and development projects; cash expected to be available for continued work programs with all our industry partners, and for those projects as to which we do not presently have industry partners; recovered volumes and values of oil and gas approximating third-party estimates of oil and gas reserves; projected increases in oil and gas production; current and anticipated drilling and completion activities; anticipated production and price differentials and decline rates from initial production rates, over time, of the daily volume of oil and natural gas produced from wells completed in the Williston Basin and elsewhere; the relationship of national oil and gas natural prices to prices paid for such production in the Williston Basin and other areas in which we operate; expected well spacing for wells to be drilled; future cash flows and borrowings; pursuit of potential acquisition opportunities; our expected financial position; our business strategy; and other plans and objectives for future operations. These forward-looking statements are typically identified by their use of terms and phrases such as may, expect, estimate, project, plan, believe, intend, achievable, anticipate, will, continue, potential, should, could, and similar terms and phrases. Though we believe that the expectations reflected in these statements are reasonable, they do involve certain assumptions, risks and uncertainties. Results could differ materially from those anticipated in these statements as a result of numerous factors. Our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the section entitled Risk Factors in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and other filings we make with the Securities and Exchange Commission, all of which are incorporated by reference in this Presentation. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements made above, elsewhere in this Presentation and as incorporated from our public filings. All of such forwardlooking statements are made as of the date of this Presentation, and except as otherwise required under securities laws, we do not assume a duty to update any forward-looking statement, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise. Actual timing of drilling and completing wells, well performance and the anticipated number of gross and net wells could vary in each of these cases. Amounts budgeted for each regional drilling program are also subject to change based on a number of factors including, but not limited to, timing, well costs, drilling and completion success, availability of capital and weather-related issues. Anticipated well performance could also vary significantly from those modeled internally. Furthermore, funds allocated for specific drilling programs under the 2015 CAPEX budget may be re-allocated to other drilling programs if initial results are below expectations. IP rates, test results and similar data from exploration and development activities are not necessarily reflective of the production, reserves or cash flow that may ultimately be generated from the well in question. Our ability, or the ability of the relevant operator, to maintain expected levels of production from a well is subject to numerous risks and uncertainties, including those discussed and referenced above. NASDAQ: USEG WWW.USNRG.COM 2
Market Data Independent E&P Company Focused on Exploring for and Producing Domestic Oil and Natural Gas Exchange: Ticker Symbol: NASDAQ (41 years) USEG Price per Share (08/16/2017) $0.73 Market Capitalization (08/16/2017) $4.50MM Avg. Daily Trade Volume (Last 3 Months) ~40K 52 Week Price Range 0.60 2.74 Shares Outstanding (1/09/2017) 6.1 MM NASDAQ: USEG WWW.USNRG.COM 3
Recent History COMPANY OVERHANG Restructure Credit Facility Address Liquidity Deficiency Reduce G&A Eliminate Mining Liability Eliminate Mining Costs Relocate Company Transition to Oil & Gas Staff Address Statoil Interest Differences Participate in Organic Growth Evaluate Growth through M&A Eliminate Unprofitable Wells SOLUTION Replaced Wells Fargo as Company lender Agreed on Credit Facility Amendments Decreased from $6mm to $2mm per year. Assigned Claims to Freeport All Mining Assets Divested to Freeport Moved Company to Denver from Wyoming Reduced non-essential staff by 75% Finalizing settlement of all differences Drilling with current partners Currently evaluating potential acquisitions Actively engaging 10 operators and reviewing all activity on a monthly basis Results from Company Achievements Have Begun To Be Improve the Company s Financial and Operation Profile NASDAQ: USEG WWW.USNRG.COM 4
5 Focused on Living within Cash Flow U.S. Energy has positive net income at today s commodity prices. Net Income ($000 s) ($10,602) ($4,216) ($265) ($740) $336 1Q2016 2Q2016 3Q2016 1Q2017 2Q2017 NASDAQ: USEG WWW.USNRG.COM 5
6 Returning to Profitability U.S. Energy has optimized current operations and returned to positive quarterly EBITDA. Adjusted EBITDA ($000 s) $404 $260 $243 ($51) ($545) 1Q2016 2Q2016 3Q2016 1Q2017 2Q2017 NASDAQ: USEG WWW.USNRG.COM 6
7 Improving Liquidity Profile U.S. Energy has remained focused on improving the liquidity profile of the Company. Current Ratio 5.60 0.30 0.33 0.35 0.41 0.91 1Q2016 2Q2016 3Q2016 1Q2017 2Q2017 Per Covenant Calculation NASDAQ: USEG WWW.USNRG.COM 7
8 Focused on Reducing Costs U.S. Energy has worked with the Company s partners to implement cost reduction strategies across its entire asset base. Lease Operating Expenses per BOE $17.22 $16.38 $15.51 $14.03 $9.18 1Q2016 2Q2016 3Q2016 1Q2017 2Q2017 NASDAQ: USEG WWW.USNRG.COM 8
Company Overview Williston Basin Oil & Gas Assets Bakken/Three Forks North Dakota Corporate HQ Eagle Ford/Buda/Austin Chalk/Georgetown Texas South Texas Gulf Coast Conventional Louisiana Founded in 1966 (In business over 51 years) Listed on the Nasdaq (41 years) Trading Symbol: USEG Background in Natural Resource and Oil & Gas Development Production in Traditional US Basins Active Development South Texas NASDAQ: USEG WWW.USNRG.COM 9
Corporate Overview - Operations Participate in 155 gross (21.7 net) producing wells in North Dakota / Texas / Louisiana (June 2017) 2nd Quarter 2017 Average Daily Production 649 BOE/D (60% oil) Interest ( currently non-op) in approximately 4,600 net acres primarily located in South Texas and the Williston Basin in North Dakota Proved Reserves (2 nd Quarter 2016) 1.23 MMBOE NASDAQ: USEG WWW.USNRG.COM 10
2017 CAPEX The Company s capital focus will be on: Acquiring drilling opportunities Acquisition of producing properties Funding our drilling obligation in the South Texas Development in the Georgetown Formation NASDAQ: USEG WWW.USNRG.COM 11
E&P Assets U.S. ENERGY CORP. NASDAQ: USEG WWW.USNRG.COM 12
Williston Basin North Dakota NASDAQ: USEG WWW.USNRG.COM 13
North Dakota - Williston Basin Assets 115 Gross (11.2 net) wells (6/30/2017) Approximately Net 2,518 acres ( 58 DSU s) Average 2 wells per DSU Continue to rationalize the acreage position thru trades, swaps or divestment NASDAQ: USEG WWW.USNRG.COM 14
Williston Basin Drilling Locations High EUR DSUs with drilling opportunities: State Williston NASDAQ: USEG WWW.USNRG.COM 15
Williston Basin Operations & Drilling Programs Bakken / Three Forks Formations Producing Operations in Williams, McKenzie and Mountrail Counties, North Dakota Interest in 58 participated drilling units (HBP) (majority 1,280 acre spacing) Under 7 Operators ( Utilize JOA provisions to gain access to development) 66,00 Gross & 2,514 Net participated acres ( 43% to 0.1%) Overall potential for 342* gross drilling locations ~10* - 15** net wells on a going forward basis which would nearly double our net well count USEG can add significantly to the net wells and production with strategic drilling Active in the Williston Basin consolidating current assets with partners Transition to operations to use our experience and skill sets Qualified and Experienced in the Williston Basin to operate profitably at current commodity prices NASDAQ: USEG WWW.USNRG.COM 16
South Texas - Eagle Ford Trend NASDAQ: USEG WWW.USNRG.COM 17
South Texas Assets Eagleford Trend of South Texas MULTIPLE HORIZONS EAGLEFORD AUSTIN CHALK GEORGETOWN Development Opportunities with Contango in Dimmit County Georgetown is being explored by CML in Zavalla County Eagle Ford at Leona Rivers remains to be tested adequately NASDAQ: USEG WWW.USNRG.COM 18
Eagle Ford Potential 12,321 gross (2,468 net) acres in Zavala and Dimmit County, TX with Contango and CML Neighboring operators CHK has extensively drilled and established production rates of 1900 BOE/D Participating in 2 Georgetown Formation wells with CML in September Technology Gains are making the Eagle Ford/Chalk attractive for further development potential at Booth - Tortuga Contango Operated 2017 Test Well Anticipated Booth-Tortuga Acreage Block Leona River Acreage Block NASDAQ: USEG WWW.USNRG.COM 19
Eagle Ford / Chalk Update Recent Completions Resulting in 1,900 BOED Rates. Concentrating on Upper Eagle Ford, Lower Eagle Ford and Chalk Competitor s Acreage Longer Laterals & Improved Completions NASDAQ: USEG WWW.USNRG.COM 20
Leona River Prospect Regional GOR NASDAQ: USEG WWW.USNRG.COM 21
Winterbotham ZAV A 1H Geological Assessment ZVS BH L Seismic Section and Seismic Structure Map B B B A TP EAGLEFORD TPBUDA, A B NASDAQ: USEG WWW.USNRG.COM 22
Winterbotham ZAV A 1H Geological Assessment Offset Petrophysical Log Target Zone(red) Drilled Horizontal zone (green) NASDAQ: USEG WWW.USNRG.COM 2 23
Winterbotham ZAV A 1H Geological Assessment TerraVu Geosteering Cross Section and Correlation Plot Target Line: 6406 KBTVD @ 0 VS, 88.8 degree inclination Last Survey: MD: 13,166' TVD: 6,547.15' INC: 88.6 AZM: 328.7 TEMP: 211 F DL 6.23, ABOVE/BELOW: 4.4 Below, LEFT/RIGHT: 62' Right ofthe Line Last Survey: MD: MD: 13,166' TVD: 6,547.15' INC: 88.6 AZM: 328.7 TEMP: 211 F DL 6.23, ABOVE/BELOW: 4.4 Below, LEFT/RIGHT: 62' Right of the Line NASDAQ: USEG WWW.USNRG.COM 24 2
Winterbotham ZAV A 1H Geological Assessment Map Development Plan Planned Lateral On Drill Schedule Drilled CHK New Permit CHKWOC CHK EGFDProducer BHL Industry New Permit IndustryWOC Industry EGFD Producer Industry EGFDWatch Winterbotham ZAV A 1H SHL 1234 1234 PUD (existing) PUD(expected) IP -Gas IP -Oil NASDAQ: USEG WWW.USNRG.COM 25 2
Eagle Ford Potential Offset Lease Program Results LEONA RIVER PROSPECT Average Results 47 Total Wells 493 MBO/Well 144 MMcf/Well NASDAQ: USEG WWW.USNRG.COM 26
Eagle Ford Potential Offset Lease Program Results LEONA RIVER PROSPECT Average Results 28 Total Wells 295 MBO/Well 166 MMcf/Well NASDAQ: USEG WWW.USNRG.COM 27
Eagle Ford Potential 3,000 acres in Zavala County, TX LEONA RIVER PROSPECT Neighboring operator EXCO has extensively drilled and established production rates of 839 BO/D Revised well costs ~ $5.0 million Monitoring regional drilling and completion techniques 5-10 Prospect Wells to be drilled Capital Costs $25-50 million for Drilling and Completion IROR 83% ROI 1.93 DROI(10) 1.59 Payout 1.58 Years Life 15.00 Years NASDAQ: USEG WWW.USNRG.COM 28
Overview of Areas and Economics Expectations 1. Bakken - North Dakota: requires multi well plan and negotiated prices, and redeploying capital from non-op position 2. Eagle Ford - South Texas: requires consolidation of interests 3. Georgetown South Texas; A successful test by CML sets up a substantial multi well growth project NASDAQ: USEG WWW.USNRG.COM 29
INDUSTRY DRIVERS U.S. ENERGY CORP. NASDAQ: USEG WWW.USNRG.COM 30
Industry Outlook NASDAQ: USEG WWW.USNRG.COM 31
NASDAQ: USEG WWW.USNRG.COM 32
Crude Oil Outlook NASDAQ: USEG WWW.USNRG.COM 33
Current Status Completed 2015-2017 Strategic Goals and Plan: Reduced operational costs by 2/3rds Executed sale of the Mt. Emmons Mine Company Headquarters established in Denver, Colorado Manageable level of debt and streamlined organizational restructuring completed Stable base production and development portfolio in North Dakota and South Texas Focused on producing resource and conventional projects that provide growth and accretive value for shareholders Actively seeking bolt on acquisition opportunities to current portfolio Consolidate non-operator interests to transition to an operated Position Experienced Team with track record of success to Execute the Plan NASDAQ: USEG WWW.USNRG.COM 34
Shareholder Contact: NASDAQCM: USEG Headquarters: U.S. Energy Corp. 4643 S. Ulster St. Suite 970 Denver, CO 80237 Investor Relations: P. 1-800-776-9271 IR@usnrg.com Web site: www.usrng.com P. 1-303-993-3200 NASDAQ: USEG WWW.USNRG.COM 35