HOUSTON, June 30, 2022 (GLOBE NEWSWIRE) — US Energy Corp. (NASDAQCM: USEG) (“US Energy” or the “Company”) today announced that the Company has entered into an agreement (the “Agreement”) to acquire operating oil and gas properties in an all-cash transaction (the ” Transaction “). The properties (the “Properties”) are located in Anderson and Henderson counties, Texas, adjacent to the Company’s existing assets in the area.
- Targeted acquisition of central low decline properties in East Texas for $11.8 million from a third party.
- Estimated $22.7 million of proven developed PV-10 (“PV-10”) production as of June 1, 2022 with estimated reserves of approximately 1.3 million barrels of oil equivalent (“MMBOE”).1.2
- April 2022 net production averaged 418 barrels of oil equivalent per day (“Boepd”) (40% oil, 60% natural gas).
- The 1-year forward unhedged free cash flow is expected to represent a multiple of the original purchase price of the transaction of 1.7x.3
- Approximately 16,600 net acres.
- Includes two pipeline gathering systems and associated infrastructure.
- Any consideration for the cash purchase price should result in an immediate increase in all relevant metrics while maintaining the company’s low leverage balance sheet.
“We are pleased to announce our plans to complete our most recent acquisition which we believe will allow us to continue to grow in the priority areas where we currently operate,” said Ryan Smith, Chief Executive Officer of US Energy, who continued, “U.S. Energy continues to grow its existing low-decline, high-free-cash-flow generation base while maintaining balance sheet strength and demonstrating the company’s ability to acquire assets. at attractive valuations. The assets to be acquired are a complementary addition to our existing presence in East Texas and fit well with our cash flow-based strategy. As we enter the second half of 2022, US Energy will remain true to its goal of consolidating high-quality assets and its commitment to shareholder returns.”
Overview of properties to acquire
As of June 1, 2022, the properties had proven developed reserves estimated at approximately 1.3 million barrels of oil equivalent and had a PV-10 value of approximately $22.7 million. The properties contain approximately 16,600 net working acres and all of the assets are located in Anderson and Henderson counties, Texas.
The consideration payable for the assets is $11.8 million and is expected to be funded with cash and borrowings under the Company’s senior secured revolving credit facility. The transaction is expected to close in July 2022.
|Internal estimates for
Properties as of June 1, 2022
|Proven Developed Oil Producing Reserves (Bbls)||475 590|
|Proven developed gas production reserves (Mcf)||5,206,660|
|Total proved developed reserves (boe)||1,343,367|
|PV10 (thousands of dollars)*||$22,691|
*Pricing per band as of June 3, 2022.
About US Energy Corp.
We are a growth company focused on consolidating high-quality U.S. production assets with the potential to optimize production and generate free cash flow through low-risk development while maintaining a program attractive return for shareholders. We are committed to respecting ESG and to being a leader in reducing our carbon footprint in the areas where we operate. For more information about US Energy Corp., visit www.usnrg.com.
1 PV-10 is a non-GAAP measure that differs from a GAAP measure known as a “standardized measure of discounted future net cash flows” in that PV-10 is calculated without including future taxes. .
2 US Energy’s management estimate of the volumes and values of proved developed reserves as of June 1, 2022, discounting cash flows at a rate of 10% and using NYMEX strip prices as of June 3, 2022.
3 Free cash flow is defined as operating cash flow minus capital expenditures.
Certain of the matters discussed in this communication that are not statements of historical fact constitute forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy”, “expect”, “continue”, “plan”, “anticipate”, “believe”, “would”, “will”, “estimate”, “intend” , “projects”, “goals”, “targets” and other words of similar meaning are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.
Important factors that may cause actual results and results to differ materially from those contained in these forward-looking statements include, without limitation, our ability to complete the pending acquisition on the terms announced and within the timeframe contemplated, the risks associated with the integration of certain acquired assets and future acquired assets; the Company’s ability to recognize the expected benefits of acquisitions and the risk that the expected benefits and synergies of acquisitions will not be fully realized in a timely manner, if at all; the amount of fees, commissions, costs and charges related to the Company’s acquisitions; the Company’s ability to comply with the terms of its senior credit facilities and repay amounts borrowed thereunder; the Company’s ability to retain and hire key personnel; the business, economic and political conditions of the markets in which the Company operates; fluctuations in oil and natural gas prices, uncertainties inherent in estimating quantities of oil and natural gas reserves and projecting future production rates and timing of development activities; competition; operational risks; drilling, completions, workovers and other activities and the expected costs and results of such activities; the Company’s anticipated operating results for 2022, including, but not limited to, estimated or planned production levels, capital expenditures and drilling plans; acquisition risks; liquidity and capital requirements; the effects of government regulation; expected future production and revenues; drilling plans, including the timing of drilling, commissioning and start-up and the impact of delays thereon; adverse changes in the market for the Company’s oil and natural gas production; dependence on third-party suppliers; risks associated with COVID-19, global efforts to stop the spread of COVID-19, potential slowdowns in the U.S. and global economies due to COVID-19 and efforts to stop the spread of the virus, and COVID-19 in general ; economic uncertainty related to rising inflation, risks of recessions, rising interest rates and global conflicts; the lack of capital available on acceptable terms to fund the Company’s continued growth and acquisitions; and other risk factors included from time to time in US Energy’s filings with the Securities and Exchange Commission, including, but not limited to, its Forms 10-K, 10-Q, and 8-K . Other important factors that could cause actual results or results to differ materially from those contained in the forward-looking statements included in this communication are described in the company’s public reports, including, but not limited to, the company’s annual report on Form 10-K for the fiscal year ended December 31, 2021. These reports and documents are available at www.sec.gov. Without limiting the foregoing, future dividend payments, if any, and their level are uncertain, as the Company’s dividend policy and the funds available for the payment of dividends from time to time depend, among other things, on the free cash flow the financial requirements for the Company’s operations and the execution of its growth strategy, fluctuations in working capital and the timing and amount of capital expenditures, debt service requirements and other factors beyond the Company’s control. In addition, the Company’s ability to pay dividends will be subject to applicable laws (including satisfaction of the solvency test contained in applicable corporate law) and contractual restrictions contained in the instruments governing its indebtedness.
The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors could also materially adversely affect US Energy’s future results. The forward-looking statements included in this press release speak only as of the date hereof. US Energy cannot guarantee future results, activity levels, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, US Energy undertakes no obligation to update these statements after the date of this release, except as required by law, and undertakes no obligation to update or correct information prepared by third parties that are not paid by US Energy. If we update one or more forward-looking statements, no conclusion should be drawn that we will make additional updates with respect to such or other forward-looking statements.
Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured exactly. The accuracy of any reserve estimate depends on the quality of the data available, the interpretation of that data, and the price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing and production activities may warrant revisions to estimates made previously. If material, these revisions would alter the timing of any further production and development drilling. In addition, the results of drilling, testing and production activities may warrant revisions to estimates made previously. If material, these revisions could impact the Company’s strategy and alter the timing of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered and/or disclosed herein.