U.S. Energy Corp. Reports Third Quarter 2012 Operational and Selected Financial Results

U.S. Energy Corp. Reports Third Quarter 2012 Operational and Selected
Financial Results

Provides an Operational Update

RIVERTON, Wyo., Nov. 9, 2012 (GLOBE NEWSWIRE) -- U.S. Energy Corp.
(Nasdaq:USEG) (the "Company") today reported its third quarter 2012
operational and selected financial results for the three and nine months ended
September 30, 2012, and provided an operations update.

Selected highlights for the three and nine months ended September 30, 2012

Financial and Operational Results

  *Produced 106,060 BOE during the quarter, or 1,153 BOE/D, from 79 gross
    (14.88 net) producing wells at September 30, 2012.
  *During the quarter ended September 30, 2012, the Company recognized $7.6
    million in revenue as compared to $8.4 million during the same period of
    the prior year. This $769,000 decrease in revenue is primarily due to
    lower natural gas sales volumes in 2012 when compared to 2011, primarily
    due to production declines from wells in the Gulf Coast.
  *At September 30, 2012, the Company had $3.7 million in cash and cash
    equivalents on hand. Working capital (current assets minus current
    liabilities) was $13.9 million.
  *During the nine months ended September 30, 2012, oil and gas operations
    produced operating income of $4.9 million as compared to operating income
    of $3.7 million during the nine months ended September 30, 2011.The
    increase in earnings from oil and gas operations is primarily due to a
    $4.9 million increase in oil revenues during 2012 compared to 2011 and
    $1.1 million lower lease operating expenses during the same period of the
    prior year.This increase was partially offset by a $1.3 million higher
    depletion expense in 2012 and a $2.5 million decrease in natural gas and
    natural gas liquids revenues.
  *The Company recognized $24.5 million in revenues during the nine months
    ended September 30, 2012 as compared to $22.1 million during the same
    period of 2011.This $2.4 million increase in revenue is primarily due to
    higher oil sales volumes in 2012 as compared to 2011.
  *During the nine months ended September 30, 2012 the Company received an
    average of $2.7 million per month from its producing wells with an average
    operating cost of $423,000 per month (excluding workover costs) and
    production taxes of $293,000, for an average cash flow of $2.0 million per
    month from oil and gas production before non-cash depletion expense.
  *Cash flow from operations was $9.3 million for the nine months ending
    September 30, 2012, an increase of 383% from $2.4 million for the same
    period of 2011.
  *During the nine months ended September 30, 2012, we recorded a net loss
    after taxes of $3.3 million as compared to a net loss after taxes of $2.0
    million during the same period of 2011.Earnings before interest, taxes,
    depreciation, depletion, amortization, accretion, and exploration expense
    ("EBITDAX") was $9.8 million for the nine months ending September 30,
    2012, an increase of 66% from $5.9 million for the same period of 2011.
    EBITDAX is a non-GAAP financial measure — please refer to the respective
    reconciliations in this release for additional information about this

Bakken/Three Forks Asset Package Acquisition

On September 21, 2012, but effective July 2, 2012, the Company acquired
working interests in producing Bakken and Three Forks formation wells and
related acreage in McKenzie, Williams and Mountrail Counties, North
Dakota.Under the agreement, the Company acquired working interests in 23
drilling units with an estimated 294,000 BOE in proved reserves for $2.3
million after adjusting for related revenue and operating expenses from the
effective date through September 1, 2012.The Company's working interest in
the drilling units averages 1.45% and ranges from less than 1% to
approximately 5%. There are currently 27 gross producing wells in the acreage.
Of these wells, 25 are producing from the Bakken formation and two are
producing from the Three Forks formation.All acreage (~400 net acres) is
currently held by production and produces approximately 47 BOE/D net to the
Company. On a going forward basis, there is a potential for the Company to
participate in an estimated additional 135 gross wells from the Bakken and
Three Forks formations combined and the Company will be heads up for its
proportionate interests on all new wells drilled within the units.

Eagle Ford Program – Dimmit and Zavalla Counties, TX

The KM Ranch #2 well in Zavalla County TX, our second well in the Leona River
acreage block, was drilled to a total measured depth of 12,875 feet, including
a 5,250 foot perforated lateral, in the first quarter of 2012. The operator
completed the well in August with 16 stages of fracture stimulation. The well
had a peak 24-hour gross flow back rate of 511 BOE, which consisted of 457
barrels of oil and 326 MCF of natural gas. The Company has an approximate 30%
WI and 22.5% NRI in this well and the overall program.In addition to Eagle
Ford formation drilling, another operator has begun drilling Buda formation
wells immediately east of our Booth-Tortuga prospect.Field reports have
suggested over 1,000 BOE/D IP rates although these rates have not been
confirmed with the Texas Railroad Commission as the wells have been tight
holed.Further, the Company has not independently verified these reports.The
Company and Crimson have discussed drilling a Buda formation well in the
Booth-Tortuga prospect in the near future.We expect to provide further
updates on our South Texas drilling program when our 2013 budget is finalized
before year-end.

Assets Held for Sale

The Remington Village apartment complex continues to be marketed for
sale.Additionally, in September 2012, the Company made the decision to sell
its corporate aircraft and related facilities to reduce overhead costs and
plans to use the proceeds to further develop its oil and gas business.As of
September 30, 2012 the accompanying consolidated balance sheets include
approximately $2.4 million in book value of assets held for sale, net of
accumulated depreciation.Since the aircraft has been classified as an asset
held for sale, we will no longer record any scheduled depreciation.As a
result of the anticipated sale amount for the aircraft, at September 30, 2012,
the Company recorded a non-cash impairment of $1.8 million to adjust the
carrying value to the expected sale value.

Financial Highlights

The following table sets forth selected financial information for the quarters
ended September 30, 2012 and 2011.This information is derived from the
financial statements filed with Company's Form 10-Q for the quarter ended
September 30, 2012, and should be read in conjunction with the financial
statements contained therein, including the notes to the financial statements.

(Amounts in thousands, except per share amounts)
                                   September 30,        December 31,
                                   2012                 2011
Balance Sheet:                                          
Cash and cash equivalents           $3,723             $12,874
Current assets                      $28,763            $41,604
Current liabilities                 $14,815            $20,937
Working capital                     $13,948            $20,667
Total assets                        $148,186           $162,439
Long-term obligations               $9,653             $13,532
Shareholders' equity                $123,718           $126,781
Shares Outstanding                  27,475,978          27,409,908
                                   For the nine months ended September 30,
                                   2012                 2011
Income Statement:                                       
Operating revenues                  $24,496            $22,112
Loss from operations                $(4,412)           $(4,480)
Other income & expenses             $1,048             $909
Benefit from income taxes           $1,294             $1,084
Discontinued operations             $(1,246)           $471
Net loss                            $(3,316)           $(2,016)
Net loss per share                                      
Basic and diluted                   $(0.12)            $ (0.07)
Weighted average shares outstanding                     
Basic and diluted                   27,458,249          27,222,153

Non-GAAP Financial Measures


In addition to reporting net income (loss) as defined under GAAP, in this
release we also present net earnings before interest, income taxes,
depreciation, depletion, and amortization, accretion of discount on asset
retirement obligations, non-cash impairments, unrealized derivative gains and
losses and non-cash stock compensation expense ("EBITDAX"), which is a
non-GAAP performance measure. EBITDAX excludes certain items that the Company
believes affect the comparability of operating results and can exclude items
that are generally one-time or whose timing and/or amount cannot be reasonably
estimated. EBITDAX is a non-GAAP measure that is presented because the Company
believes that it provides useful additional information to investors, as a
performance measure, for analysis of its ability to internally generate funds
for exploration, development, acquisitions, and to service debt. EBITDAX does
not represent, and should not be considered an alternative to GAAP
measurements, such as net income (loss) (its most directly comparable GAAP
measure), or as a measure of liquidity, and our calculations thereof may not
be comparable to similarly titled measures reported by other companies. We
also believe that EBITDAX is useful to investors because similar measures are
frequently used by securities analysts, investors, and other interested
parties in their evaluation of companies in similar industries. Our
management uses EBITDAX to manage our business, including preparation of our
annual operating budget and financial projections. Our management does not
view EBITDAX in isolation and also uses other measurements, such as net income
(loss) and revenues, to measure operating performance. The following table
provides a reconciliation of net income (loss) to EBITDAX for the periods

                         For the three months ended For the nine months ended
                          September 30,              September 30,
                         2012           2011        2012         2011
Net (loss) income         $(1,945)     $268      $(3,316)   $(2,016)
Impairment of oil and     --           --        523         --
natural gas properties
Impairment of corporate   1,756         --        1,756       --
aircraft and facilities
Impairment of Remington   --           --        1,261       --
Village, net of tax
Accretion of asset        9             7          25          17
retirement obligation
Stock-based compensation  104           380        422         1,354
Unrealized (gain) loss on 478           (1,886)    (1,233)     (2,783)
commodity derivates
Income taxes              (1,285)       892        (1,294)     (1,084)
Interest expense          53            69         128         207
Depreciation, depletion   3,562         4,073      11,542      10,215
and amortization
EBITDAX (Non-GAAP)        $2,732       $3,803    $9,814     $5,910

Operations Update

Williston Basin, North Dakota

  *The Witt 34-27 #1H well completed in late October, 2012.In early November
    the well had an early 24-hour flow back rate of 1,564 BOE/D on a 38/64'
    restricted choke during the drill out of the plugs.The initial production
    rate consisted of approximately 1,372 barrels of oil and 1,153 MCF of
    natural gas.The Company has an approximate 6.7% WI and 5.2% NRI in this
  *The Barker 24-13 # 1H well was drilled to its total depth in October,
    2012.The well is scheduled to be completed in mid-November, 2012.The
    Company has an approximate 4.74% WI and 3.65% NRI in this well.
  *The Bunning 35-26 #1H well has reached a total depth of 20,600
    feet.Completion operations are expected to commence in December,
    2012.The Company has an approximate 7.77% WI and a 5.98% NRI in this
  *The Ash Federal 5300 11-18T well operated by Oasis has been fraced with 36
    stages.Drill out of the plugs is pending at this time.The Company has an
    approximate 4.69% WI and 3.52% NRI in this well.
  *The State 36-1 #4H well is a Three Forks formation test well and is
    scheduled to spud in December, 2012.The well is the fourth well in the
    State unit and the second Three Forks well in the State unit.The State
    36-1 #2H well was our first participated Three Forks formation test well
    and had an initial production rate of 2,356 BOE/D in October 2010.The
    Company has an approximate 3.64% WI and 2.88% NRI in the State 36-1 #4H
  *The Mongoose 1-8-5H well is scheduled to be drilled by Emerald Oil and Gas
    in November.The Company has an approximate .29% WI and .23% NRI in this

Permitted wells

Oasis Petroleum has permitted four additional gross wells near the Ash Federal
location.Of these wells, two are targeting the Bakken formation and two will
target the Three Forks formation.Statoil has also permitted three additional
gross wells in the Hovde unit, one of which is targeting the Bakken formation
with the remaining two targeting the Three Forks formation.Additionally,
Emerald has permitted three additional Bakken wells in the SE HR Prospect.At
this time, the Company expects these wells to begin to be spud in the first
quarter of 2013.


In addition to the ongoing drilling in the Zavanna program, the Company has
elected to participate in the drilling of two salt water disposal wells (one
in each acreage block under the drilling program with Zavanna).The project is
currently underway and is expected to be completed in the fourth quarter of
2012.These facilities consist of gathering lines and a water disposal well in
each acreage block, and are expected to significantly reduce water disposal
costs and to ultimately reduce our cost per barrel of oil produced in each

Daniels County, Montana

During the third quarter, Apache Corp. spudded two Bakken and two Three Forks
wells approximately 15 miles northwest of the Company's Wolverine Prospect in
Daniels County, Montana.Two of the wells (one Bakken and one Three Forks)
were spud in T36N R46E and the other two wells were spud in T36N R48E.Apache
recently announced that they had acquired in excess of 300,000 net acres in
Daniels County.The Company has a 12.5% WI in ~20,000 net acres in close
proximity to where the drilling and additional permitting activity is
occurring and we will be closely monitoring the Apache results as they become
available.Ongoing leasing activities are still occurring in the Wolverine

U.S. Gulf Coast (Onshore) — Woodbine Sub-Clarksville 7 Project

In May 2012, we acquired a 26.5% initial working interest in approximately
6,766 gross acres in the Woodbine Sub-Clarksville 7 project area in
Northeastern Texas.The seven prospects were drilled in succession from June
through August of 2012.Two of the gross wells (0.40 net) are currently being
evaluated for production potential, and the remaining five gross wells (1.33
net) were deemed to be nonproductive.

Mount Emmons

On October 10, 2012, the Company filed a preliminary Mine Plan of Operations
("MPO") with the U.S. Forest Service ("USFS") in Delta, Colorado.The
preliminary plan is currently under review by the USFS as to its
completeness.We expect that the preliminary review will be completed in the
coming weeks and that the MPO, upon acceptance by the USFS, will be released
to the public in its entirety in due course.There has been no significant
advancement of the federal land exchange effort since it was suspended in June
2012, primarily due to the uncertainty of the outcome of the federal elections
and the unknown makeup of Congress.A re-initiation of this effort at this
point in time will depend on the efforts of the town parties as well as
Congressional leaders involved in the effort.The Company's primary focus at
this time is to finalize and pursue the Mine Plan of Operations, particularly
the initiation of the National Environmental Policy Act ("NEPA") process which
is expected to follow the MPO acceptance by the USFS.Once the MPO has been
formally accepted by the USFS, the Company plans to issue a follow-up release
outlining the major components of the MPO in greater detail.

In addition to the filing of the MPO, the Company has made significant
advancement towards reducing metals loading at its Water Treatment Plant
("WTP").In January 2012, the Company completed the installation of a plumbing
system that has allowed for the capture and control of the water flowing from
Mount Emmons.By capturing the water via the plumbing system, the Company has
reduced the influent metals loading by 33% to as much as 50% of some metals as
the system does not allow the water to oxidize (as it previously did through
mine floor exposure) on its path to the WTP.By reducing the influent metals
loading, we have also reduced the chemical costs at the plant.The Company has
also installed and tested a new filtration system designed to allow for
continuous operations in the future.It is believed that the new filtration
system will allow us to reduce our overall water recycle volumes by
approximately 40% when converted to 24-hour operations.The overall goal of
the combined projects is to ultimately reduce the WTP operational costs by
$300,000 to $500,000 annually beginning in 2013.

CEO Statement

"During the quarter we continued to acquire new properties and participate in
the drilling and development of our oil and gas assets in North Dakota to
maintain and to add new production from the Company's growing oil and gas
portfolio in the region.We continue to evaluate the nearby activity in our
Eagle Ford programs and we are closely monitoring current drilling and
permitting activity in Daniels County, Montana which may provide additional
development potential if the initial test wells in the area prove to be
economic," said Keith Larsen, CEO of U.S. Energy Corp."Additionally, we have
met a major milestone with the filing of the preliminary Mine Plan of
Operations with the U.S. Forest Service.The Company has spent considerable
time and effort in reaching this milestone and we look forward to entering the
NEPA process and to engaging the local communities regarding the significant
employment potential associated with the project," he added.

About U.S. Energy Corp.

U.S. Energy Corp. is a natural resource exploration and development company
with a primary focus on the exploration and development of its oil and gas
assets.The Company also owns the Mount Emmons molybdenum deposit located in
west central Colorado.The Company is headquartered in Riverton, Wyoming and
trades on the NASDAQ Capital Market under the symbol "USEG".

To view the Company's Financial Statements and Management's Discussion and
Analysis, please see the Company's third quarter 2012 10-Q which is available
at www.sec.gov and www.usnrg.com.

The U.S. Energy Corp. logo is available at

                Disclosure Regarding Forward-Looking Statement

This news release includes statements which may constitute "forward-looking"
statements, usually containing the words "will," "anticipates," "believe,"
"estimate," "project," "expect," "target," "goal," or similar
expressions.Forward looking statements in this release relate to, among other
things, U.S. Energy's expected future production and capital expenditures and
projects, its drilling and fracing of wells with industry partners and
potential additional drilling opportunities, its ownership interests in those
wells, the oil and natural gas targets or goals for the wells, future capital
expenditures and projects, future expenses, production, costs and sale
transactions, and activities relating to the Mount Emmons project.There is no
assurance that any of the wells referenced in this press release will be
economic.Initial and current production results from a well are not
necessarily indicative of its longer-term performance.Future transactions may
not close on the terms we anticipate or at all. Results from exploration and
development activities conducted on properties near properties in which the
Company has an interest, may not be indicative of the results the Company will
generate from its properties or the value of those properties. The
forward-looking statements are made pursuant to the safe harbor provision of
the Private Securities Litigation Reform Act of 1995.Forward-looking
statements inherently involve risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements.Factors that
would cause or contribute to such differences include, but are not limited to,
dry holes and other unsuccessful development activities, higher than expected
expenses or decline rates from production wells, future trends in commodity
and/or mineral prices, the availability of capital, competitive factors, and
other risks described in the Company's filings with the SEC (including,
without limitation, the Form 10-K for the year ended December 31, 2011, and
the Form 10-Q for the quarter ended September 30, 2012), all of which
descriptions are incorporated herein by reference.By making these
forward-looking statements, the Company undertakes no obligation to update
these statements for revision or changes after the date of this release.

CONTACT: Reggie Larsen
         Director of Investor Relations
         U.S. Energy Corp.

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