US ENERGY CORP (USEG)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 results reflected the transition toward industrial gases: revenue was $2.193M and Adjusted EBITDA was –$1.498M, with net loss of –$3.111M (–$0.10 per diluted share) as legacy hydrocarbon volumes declined after 2024 divestitures .
• Significant operational milestones: two new Duperow wells underway (budgeted $1.3M each), successful Kiefer Farms well workover and 3.2 MMcf/d flow test, and processing plant engineering finalized (17.0 MMcf/d capacity; ~$15M capex; construction start July 2025) .
• Carbon management advanced: sustained injection of 17.0 MMcf/d across two wells (projected ~240,000 metric tons CO₂/year), Class II injection well approval anticipated June 2025, MRV submission targeted late June 2025 .
• Balance sheet remains conservative: debt-free with $10.502M cash and $30.502M total liquidity at quarter-end; 832,000 shares repurchased YTD (~2.5% float), supporting capital discipline and shareholder returns .
• Against S&P Global consensus, Q1 missed: revenue $3.504M* vs actual $2.193M, EPS –$0.04* vs actual –$0.10, and EBITDA $0.172M* vs Adjusted EBITDA –$1.498M; misses driven by post-divestiture volume declines and lower commodity pricing while industrial gas monetization is still pre-plant .

Note: * Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Processing plant design finalized; construction to begin July 2025 with 17.0 MMcf/d capacity at ~$15M, enabling multi‑revenue streams (helium sales, processing/gathering fees, CO₂ management) .
• Upstream progress: Kiefer Farms well showed ~0.6% helium; post-workover flow test exceeded 3.2 MMcf/d, expected near-term contributor to the plant .
• Strong CO₂ injection performance and regulatory progress (Class II application and MRV plan underway), positioning carbon management as an integral cash flow component .

Management quotes:

• “We’re positioned to deliver a fully integrated, multi‑revenue stream operation… monetization of helium while permanently sequestering up to 240,000 metric tons of CO₂ annually” – Ryan Smith, CEO .
• “Our capital plan remains measured and achievable… funded by our strong balance sheet and supported by a thoughtful capital strategy” – Ryan Smith .

What Went Wrong

• Material revenue decline versus prior year due to asset sales and weaker oil pricing: $2.193M in Q1 vs $5.391M in Q1 2024; Adjusted EBITDA turned to –$1.498M vs $0.237M in Q1 2024 .
• Production fell to ~47,008 BOE (64% oil), and LOE/BOE increased to $34.23 due to portfolio mix after divestitures .
• Slightly divergent cost/timing signals: wells budgeted at $1.3M in the press release vs ~$1.5M for CO₂ wells in Q4 call commentary; CO₂ sequestration projection refined from ~250k to ~240k metric tons/year, and plant completion window pushed to late Q1/early Q2 2026 due to equipment lead times and Montana winter .

Financial Results

Key Financials vs Prior Quarters

EPS vs Prior Year and Estimates (Q1 2025)

Note: * Values retrieved from S&P Global.

Revenue vs Estimates (Q1 2025)

Note: * Values retrieved from S&P Global.

Segment Revenue Breakdown

KPIs and Operating Metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our Montana development is progressing on schedule… positioned to deliver a fully integrated, multi‑revenue stream operation… monetization of helium while permanently sequestering up to 240,000 metric tons of CO₂ annually” – Ryan Smith, CEO .
• “Our capital plan remains measured and achievable… initial phases funded by our strong balance sheet” – Ryan Smith .
• “Normalized quarterly general and administrative costs are expected to be approximately $1.6 million, or an 18% reduction from the same period last year” – Mark Zajac, CFO .

Q&A Highlights

• Plant completion timing: management modeled an April 1, 2026 “clean date” with ±2–3 weeks due to weather/equipment lead times; completion could spill into early Q2 2026 .
• Helium pricing/offtake: gaseous helium ~$400/Mcf; typical offtake 2–5 years; preference for shorter tenors and direct end users to capture higher pricing; offtake could be secured within ~6 weeks when volumes are defined .
• Well costs: CO₂‑targeted wells ~$1.5M (with back‑to‑back execution offsetting mobilization costs), while current release budgets cite $1.3M per well for two Duperow wells .
• MRV and permitting: Class II permits at the state level feed into federal MRV eligibility for tax incentives; MRV submission targeted late June/July 2025 with 7–8 month approval window .

Estimates Context

• Q1 2025 consensus vs actual: revenue $3.504M* vs $2.193M (miss), EPS –$0.04* vs –$0.10 (miss); “EBITDA Consensus Mean” $0.172M* vs Adjusted EBITDA –$1.498M (miss). The gap reflects post‑divestiture volumes and pre‑plant phase before industrial gas monetization begins .
• Coverage depth: EPS had 2 estimates; revenue had 1 estimate, limiting breadth of consensus*.

Note: * Values retrieved from S&P Global.

Key Takeaways for Investors

• Near‑term P&L under pressure until the Kevin Dome plant is operational; focus shifts from hydrocarbon revenues to industrial gas monetization in 2026 .
• Execution milestones de‑risk the story: finalized plant specs (17 MMcf/d), sustained CO₂ injection, two new wells underway, and regulatory cadence (Class II approval June; MRV late June) .
• Pricing and offtake dynamics are favorable, with management targeting higher‑value, shorter‑tenor agreements and bespoke end users; gaseous helium ~$400/Mcf provides baseline economics .
• Cost/timing signals refined: plant capex ~$15M; well costs $1.3–$1.5M depending on CO₂ service requirements and efficiency of back‑to‑back campaigns .
• Balance sheet strength (debt‑free; $30.5M liquidity) and ongoing buybacks (~2.5% float YTD) create optionality for disciplined build‑out and opportunistic capital deployment .
• Watch near‑term catalysts: July 2025 plant start, June MRV/Class II milestones, well test data guiding offtake commitments in 2H 2025 .
• Estimate revisions likely trend lower near term given revenue/EBITDA misses and hydrocarbon volume declines, with upward inflection possible as plant construction progresses and commercial agreements are struck* .

Note: * Values retrieved from S&P Global.