U.S. Energy Corp. has entered into an agreement to acquire operated oil and gas producing properties in an all-cash transaction. The properties are located in Anderson and Henderson Counties, Texas adjacent to the company’s existing assets in the area.

Acquisition Highlights

• Bolt-on acquisition of low-decline, core focus properties in East Texas for $11.8 million from a private party.
• Estimated $22.7 million Proved Developed Producing PV-10 (“PV-10”) 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).
• Forward 1-year unhedged free cash flow expected to represent an initial purchase price transaction multiple of 1.7x.3
• Approximately 16,600 net acres.
• Includes two pipeline gathering systems and related infrastructure.
• All cash purchase price consideration is expected to drive immediate accretion across 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 building scale in focus areas that we have current operations,” said Ryan Smith, Chief Executive Officer of U.S. Energy, who continued, “U.S. Energy continues to add to its existing low-decline, high free cash flow production base while maintaining balance sheet strength and demonstrating the Company’s ability to acquire assets at compelling valuations. The assets to be acquired are a complementary addition to our existing East Texas footprint and fit perfectly with our cash flow-based strategy. As we move into the second half of 2022, U.S. Energy will remain steadfast in our focus of consolidating high quality assets and commitment to shareholder returns.”

Overview of to be acquired properties

As of June 1, 2022, the properties had total estimated Proved Developed Reserves of 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 operated acres and all assets are located in Anderson and Henderson Counties, Texas.

The consideration payable for the assets is $11.8 million which is expected to be funded with cash on hand and borrowings under the company’s senior secured revolving credit facility. The transaction is expected to close in July 2022.