US ENERGY CORP Q4 FY2023 earnings call

• Production: Achieved annual net daily production >1,700 barrels of oil equivalent per day, with oil accounting for 63% of total production, and natural gas and NGLs each at ~18.5%.
• Cost Management: Lease operating expense was $3.1 million ($22.38 per BOE) in Q4 2023, a 28% reduction from Q4 2022, with cost reductions in certain materials.
• Asset Divestitures: Closed $7.3 million in asset divestitures in Q4 2023, which were non-operated properties representing ~11% of production, with proceeds used for debt reduction.
• Share Repurchase: Continued the $5 million share repurchase program, repurchasing nearly 0.5 million shares (~2% of outstanding shares) post-divestitures in December 2023.
• Strategic Outlook: Focus on operational efficiency, balance sheet discipline, and responsible resource management; existing assets require minimal capital for steady production, leading to predictable cash flow.

Annual net daily production of U.S. Energy Corporation exceeded 1,700 barrels of oil equivalent per day in 2023, an increase from 2022. Oil production accounted for 63% of total production, with natural gas and NGLs each making up approximately 18.5%. For the fourth quarter of 2023, total oil and gas sales were $7.3 million, a decrease from $10.4 million in the same period of 2022, due to a 21% reduction in volumes and a 10% reduction in realized prices. Lease operating expense for the fourth quarter was $3.1 million ($22.38 per BOE), a significant reduction of 28% compared to the fourth quarter of 2022. The company reported a net loss of $19.8 million in the fourth quarter of 2023, largely due to an oil and gas impairment expense of $20.2 million. Adjusted EBITDA excluding hedges was $1.4 million in Q4 2023, down from $2.7 million in the same period of 2022. As of December 31, 2023, the company had $5 million in outstanding debt on a $20 million revolving credit facility and a cash position of $3.4 million.

• Production: Annual net daily production >1,700 barrels of oil equivalent per day. If crude oil prices stay above $70, potential for organic production growth, with more details to be shared in future calls.
• Impairment: Projected one impairment in Q1 2024 due to SEC rolling prices; potential for additional impairments if prices decrease.

• Market Volatility: Actual results may differ from forward-looking statements due to risks like oil price fluctuations, borrowing cost changes, and regulatory environment uncertainties.
• Asset Divestiture Risks: Challenges in monetizing assets at desired prices, with P&A obligations affecting transactions.

Q: Charles Meade asked about organic growth initiatives compared to outside M&A opportunities.

A: Ryan Smith stated that existing portfolio has higher return opportunities due to high borrowing costs, depressed equity valuations, and better risk/reward in existing assets, with specific initiatives to be detailed in future calls.

Q: Tim Moore asked about asset growth initiatives and impairment.

A: Ryan Smith discussed strategic alternatives to leverage balance sheet value, and Mark Zajac mentioned projected impairment in Q1 2024 due to SEC rolling prices