U.S. Energy Corp. (NASDAQ: USEG) Paying $9.6 Million For Interest In DJ Basin


U.S. Energy Corp. (NASDAQ: USEG) is in the process of acquiring interest in the DJ basin’s Wattenberg field in Colorado. According to U.S. Energy, it has entered into a non-binding agreement with Iron Horse Resources LLC for the acquisition of 40% interest in the latter’s farmout agreement.

With that interest acquisition, U.S. Energy Corp. (NASDAQ: USEG) will get the opportunity to participate in the development of three key areas in Wattenberg field.

11.6% working interest in 21 wells                                             

If U.S. Energy closes the 40% interest acquisition deal with Iron Horse, it will get working interests of about 11.6% in some 21 horizontal wells. Those wells will be drilled in the A, B and C benches of the Codell formation and Niobrara formation.

Where is DJ basin and what does it have?

DJ basin is located in southeastern Wyoming and northeastern Colorado. It is a filed rich in crude oil and natural gas. According to U.S. Energy Corp. (NASDAQ:USEG), DJ basin’s Wattenberg field is a lucrative play that offers highly attractive economics if you take into account the prevailing oil and gas strip prices. Wattenberg field, which was discovered in 1970, is among the 15 largest gas developments in the U.S.

U.S. Energy expects Wattenberg field development program to begin later in 2016 and the work to continue into mid-2017. The company hopes that it will generate revenue of about $4.9 million in each of the initial two years of work on the program.

Part of transformation

U.S. Energy Corp. (NASDAQ:USEG) is in the middle of a transformation whereby the company wants to focus primarily on ongoing gas and oil business. As such, the acquisition of the participating interest in Wattenberg field is part of the company’s transformation.

Earlier, the company announced restructuring measures that included shifting of its corporate headquarters to Denver. The management said at that time that the move was aimed to improve the company’s access to financial services as well as access to oil and gas deals. U.S. Energy is also working to trim its operating expenses, especially reducing overhead costs.

Financial performance – U.S. Energy Corp. (NASDAQ:USEG)

U.S. Energy Corp. (NASDAQ:USEG) logged a net loss of $10.6 million in 1Q2016, which indicated a significantly bottom-line improvement from a net loss of $23.7 million a year earlier. Revenue in the quarter stood at $1.1 million.


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