US ENERGY CORP Q1 FY2024 earnings call

Production

• Net daily production exceeded 1,200 barrels of oil equivalent per day, the first full quarter since asset divestitures closed in Q4 2023. Oil accounted for 62% of total production, with natural gas and NGLs each at ~19%.

Weather Impact

• Severe flooding in East Texas and Gulf Coast during the quarter impacted operations, but nearly all affected production was back online by late March. Second quarter may be impacted by additional heavy rains in the Gulf Coast area.

Cost Management

• Lease operating expense was $3.2 million, flat vs prior quarter and a reduction from Q1 2023. Per barrel cost was ~$29 per BOE, expected to be lower when weather issues resolved.

Capital Allocation

• Continued share repurchase plan extended through June 2025; repurchased over 0.5 million shares (>2% of outstanding) since Dec 2023. Efficient capital spending on existing assets and evaluating refrac/other projects in existing portfolio as more attractive than upstream M&A.

The company achieved net daily production of greater than 1,200 barrels of oil equivalent per day. Oil production accounted for 62% of total production, with natural gas and NGLs each making up approximately an even split. Lease operating expense for the first quarter was approximately $3.2 million, equivalent to $29.02 per BOE. Sales from oil production contributed 88% of the total revenues for the quarter.

Production

• Expecting net daily production average around 1,400 BOE/day or similar range with organic activity and recompletion efforts.

Capital Spending

• Disciplined deployment of CapEx on refrac candidates in East Texas, Montana, and Mid-Con; already started on East Texas assets.

Share Repurchase

• Extended $5 million share repurchase program through June 2025, continuing repurchase activity.

Weather

• Second quarter may be impacted by additional heavy rains in Gulf Coast, potentially affecting production.

Commodity Prices

• Volatility in oil and gas prices can impact revenues and profitability.

Asset Impairment

• Previous impairment due to lower SEC pricing and shut-in wells, but no projection for Q2 2024 impairment.

Q: Elaborate on weather impact in 1Q and carry into 2Q, including potential permanent asset loss.

A: Early Jan and mid-Q1 flooding affected production, mostly back online by late March. Second quarter may have 1/3 to 1/2 of first quarter's affected production, but no long-term productivity/integrity issues expected.

Q: Elaborate on projects more attractive than traditional upstream M&A.

A: Small-cap asset sales often have ARO/environmental concerns; existing portfolio projects like refrac in East Texas are lower risk, higher return.

Q: BOE net production daily average exit rate and CapEx allocation.

A: Expect around 1,400 BOE/day exit rate with organic activity; CapEx on East Texas refrac, Montana assets, and Mid-Con (gas-heavy) where economic.

Q: Workover timing and comparison to last year.

A: No calendar year timing issues; workover activity delayed by weather, but no greater drag than last year.

Q: Insider ownership increase.

A: Largest shareholder acquired significant shares as support, part of strategic alternatives process but not directly tied to immediate strategic moves.