READ THE FULL USEG RESEARCH REPORT
2nd Quarter 2025 Financial and Operating Results
On August 12, 2025, U.S. Energy (NASDAQ:USEG) reported 2nd quarter 2025 financial and operating results. The year over year revenue comparisons were mostly not relevant due to recent oil & gas divestitures that occurred in 2024. Total oil and gas revenue in the 2nd quarter was approximately $2.0 million, of which $1.84 million was oil and $184,000 was natural gas and liquids.
In the 2nd quarter, lease operating expenses (LOE) were approximately $1.6 million, or $32.14 per Boe, compared to $3.1 million, or $27.69 per Boe, in the prior year period. The reduction in LOE is primarily due to fewer producing wells as a result of recent asset divestitures..
Cash general and administrative expenses in the 2nd quarter of 2025 were approximately $1.7 million compared to $1.6 million in the 2nd quarter of 2024. Compensation and benefits in the 2nd quarter decreased 30% from the prior year period and was offset by higher consultants and professional services. The decrease in compensation and benefits reflects a more streamlined corporate overhead, offset by one-time costs associated with business development efforts in Montana, which we expect to stabilize in the next two quarters.
The company recorded a non-cash impairment charge of $2.8 million related to lower oil & gas prices.
The company generated an adjusted EBITDA loss of ($1.2) million in the 2nd quarter of 2025. The reported net loss was ($6.1) million, or ($0.19) per diluted share. Excluding the impairment charge, adjusted net loss was approximately ($3.3) million, an adjusted loss per share of ($0.10).
As of 6/30/25, the company had no outstanding debt, cash balances of $6.7 million, and $20.0 million of availability on its bank line of credit. In January 2025, the company raised approximately $10.5 million in net proceeds from an equity offering. In the 1st half of 2025, the company spent $2.0 million in cash and 1.4 million common shares to acquire additional acreage and one productive industrial gas well in Montana.
With $26.7 million in available liquidity, $10.0-$15.0 million in processing plant capex, and quarterly burn rates expected to be under $1.0 million per quarter – we believe the company is fully funded until high margin industrial gas revenues can be generated in the 1st half of 2026.
U.S. Energy continues to execute on its share repurchase program. Year-to-date it has bought back approximately 832,000 shares, including related-party transactions, which represent about 2.5% of total outstanding shares.
Helium Program Updates
The company has five active industrial gas wells under various stages of development, as well as one additional well planned for spring of 2026.
#1) This was the company’s first well of its industrial gas program and was completed in October 2024. It was drilled to the nitrogen-rich Precambrian formation at approximately 5,000 feet and produced helium concentrations of 1.5%. However, the volumetric flow was not sufficient to make this a viable well to develop required helium extraction at the processing plant. This well is being converted to a CO2 injector well and is seeking Class II approval status from the state of Montana.
#2) In January 2025, the company acquired 24,000 net acres across the Kevin Dome, which included the already drilled Kiefer Farms well targeting the CO2-rich Duperow formation. CO2 wells are drilled at a shallower formation than nitrogen wells at approximately 3,000 feet. This well has shown helium concentrations of approximately 0.6%. The company has completed workover operations and conducted a successful flow test with rates exceeding 3.2 MMcf/d. This well is expected to become a near-term economic contributor to the industrial gas processing facility that is being developed.
#3) In April 2025, the company acquired approximately 2,300 net acres with CO2 rights that are contiguous to its existing positions across Montana’s Kevin Dome structure. This acquisition includes an active Class II injection well to sequester CO2 captured from the company’s industrial gas processing facility (see below for more details).
#4) and #5) In July 2025, the company drilled and completed two producing wells in CO2 zones with helium concentrations in the 0.4%-0.5% range. These wells, located within 1-2 miles of the Keifer Farms well (#2 well), together with the Keifer well, make three productive wells.
#6) A 6th producing well may be drilled in Spring 2026. This is expected to be located in the same area as wells #2, #4, and #5.
The company is still in the process of drafting and submitting the Monitoring, Reporting, and Verification report (“MRV”), which is required before launching the carbon sequestration business, which will occur in CO2-focused wells to be drilled.
The company has made the final investment decision around design capacity and execution of contract for the industrial gas processing plant. Installation of the initial gathering system will likely begin in the 3rd quarter of 2025. The final plant design will cost approximately $10-$15 million and provide capacity of roughly 8.0-10 Mmcf per day, which could provide helium revenues between $15-$20 million on an annual basis. Completion date is expected to occur within 36-40 weeks from now. Once operational, facilities are expected to immediately generate diversified cash flow from upstream gas sales, helium recovery, and carbon management.
Valuation & Estimates
We maintain our price target of $3.00 per share.
We utilize multiple valuation methodologies to arrive at our target price of $3.00 for USEG stock. These include Discounted Cash Flow (DCF) calculations, peer multiples, price to book value, price to asset value, and others.
Our DCF calculation assumes monetization of helium extraction begins in the 2nd quarter of 2026. For calendar year 2026, we believe that helium revenues could total approximately $9.0 million, and EBITDA generation would be in the range of $5.0 to $6.0 million. We assume the oil and gas properties produce steady state revenues in the $10.0-$11.0 million range with EBITDA generation of approximately $1.0 million. Under this scenario, our DCF calculation is approximately $3.00 per share. This may prove to be conservative as we utilize a high discount rate of 12.5%. In addition, we do not incorporate any other industrial gas revenues or carbon sequestration-related benefits into our model at this time.
On a forward looking basis, assuming the helium extraction efforts are successful and create $8.0-$10.0 of annual industrial gas EBITDA, we can look at industrial gas peer valuations. Using a peer group including APD, LIN, and AIQUY, the average peer EV/EBITDA multiple is approximately 16x. Applying that multiple to the range of estimates for USEG’s industrial gas business would create a stock price in the $4.50- $5.70 range. We don’t incorporate that range into our target price at this time, but we are demonstrating the potential upside for USEG if the helium business is successful over time.
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