US ENERGY CORP (USEG)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $4.2M, with Adjusted EBITDA of $0.4M; LOE fell sharply to $1.8M ($20.58/BOE), driven by divestitures and lower property taxes, but the quarter posted a net loss of $12.0M largely due to non‑cash items .
• Management pushed out industrial gas commercial sales timing to 2026 (~12–13 months from Q1’25), prioritizing larger CO2-dominant development and plant design; offtake agreements are targeted for 2H 2025, with planned plant inlet capacity of 16–20 MMcf/d .
• U.S. Energy ended FY24 debt‑free with $7.7M cash and subsequently raised ~$12.1M net in January 2025; share repurchase program was extended to June 30, 2026 with 1.67M total shares repurchased to date (≈4.9% of outstanding) .
• Asset monetization continued in Q4: East Texas sale closed for $6.825M on Dec 31, 2024, funding Montana industrial gas development and streamlining the portfolio .
• Near‑term stock reaction catalysts: clarity on MRV submission (Q2’25), April workovers, June drilling (4 wells total), plant FID in Q2’25, and offtake progress; downside risk stems from the timeline push from “early Q4 2025” to 2026 and near‑term revenue compression from asset divestitures .

What Went Well and What Went Wrong

• What Went Well

  • LOE efficiency: LOE/BOE dropped to $20.58 from $28.95 in Q3; LOE dollars fell ~40% QoQ, aided by divestitures and lower taxes .
  • Balance sheet strengthened: ended FY24 with $7.7M cash and no debt; added ~$12.1M net equity proceeds in Jan 2025; borrowing capacity remained unchanged .
  • Strategic focus sharpened: industrial gas program advanced (dominant 160k net acres via acquisitions; 2025 plan with April workovers, June drills, Q2 plant FID and MRV initiation). “We are confident in our ability to…position U.S. Energy as a first mover in the rapidly growing industrial gas complex” .

• What Went Wrong

  • Revenue compression: Q4 revenue declined 15% QoQ to $4.2M and YoY from $7.3M (Q4’23), primarily on asset divestitures and lower realized oil pricing .
  • Timeline push: commercial industrial gas sales shifted from “very early Q4 2025” to 2026 due to CO2 plant lead times and extreme Montana winter conditions—risking investor expectations and delaying cash flows .
  • Adjusted EBITDA fell to $0.4M from $1.8M in Q3; Q4 net loss was $12.0M, heavily influenced by non‑cash DD&A, impairments, and loss on disposal (98% of YTD loss non‑cash per CFO) .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Through disciplined execution, we strengthened our financial position, eliminated all outstanding debt, optimized our legacy asset portfolio, and made significant strides in advancing our Montana‑based industrial gas project… With a strong balance sheet, zero debt, and a clear strategic roadmap, we are confident in our ability to generate long‑term shareholder value while positioning U.S. Energy as a first mover in the rapidly growing industrial gas complex” .
• CEO on acreage and 2025 plan: “With this latest acquisition, U.S. Energy now controls… approximately 160,000 net acres… Beginning in April, we plan to initiate workover operations on 2 wells… In June, we plan to commence drilling and completing 2 additional wells… [and] move into the manufacturing phase of our gas processing plant” .
• CFO: “Total oil and gas sales for the quarter amounted to $4.2 million… lease operating expense… $1.8 million, equivalent to $20.58 per BOE… The company reported a net loss of $12 million… Our adjusted EBITDA stood at $0.4 million… As of 12/31/2024… no debt… cash position… over $7.7 million” .

Q&A Highlights

• Commercial timing: Industrial gas sales are now expected in 2026 (~12–13 months from Q1’25); CO2 and helium move “in lockstep” once the plant is online, with winter conditions driving timing .
• Offtake path and pricing: Offtakes are “simple to secure” with high interest; plan to target bespoke end users (aerospace/semiconductor/medical) for better pricing; expect activity in 2H 2025 .
• Plant design: Targeting 16–20 MMcf/d inlet; upcoming wells/workovers will refine flow rates, gas composition, and reservoir characteristics to finalize plant specs .
• Well costs and zones: CO2‑heavy wells likely ~$1.5M each when batched to reduce mobilization costs; primary targets are Duperow zone wells, with nitrogen zones used for data or injection .
• MRV and permitting: MRV is federal, enabling sequestration incentives; initiation planned for Q2’25 with 7–8 months to approval; Class II permits at state level support injection .

Estimates Context

• We attempted to retrieve S&P Global consensus estimates for Q4 2024 EPS, revenue, and EBITDA, but the request encountered an SPGI limit error, so consensus comparisons are unavailable in this session [GetEstimates error].
• Given unavailability, we cannot assess beats/misses versus Wall Street consensus for Q4 2024. Future review should anchor on S&P Global consensus once accessible.

Key Takeaways for Investors

• The pivot to a larger CO2‑based plant increases long‑term scale but pushes first industrial gas sales to 2026; monitor H1’25 well data, MRV submission, and plant FID for de‑risking milestones .
• Efficiency gains are evident: LOE/BOE improved to $20.58; continued portfolio optimization should sustain lower operating costs and overhead .
• Balance sheet flexibility supports development: debt‑free with year‑end cash, Jan 2025 equity proceeds, and extended buyback program; expect disciplined capital allocation and potential further non‑core divestitures .
• Near‑term valuation drivers: clarity on offtake strategy (pricing uplift via direct end‑users), plant capacity confirmation (16–20 MMcf/d), and regulatory advances (MRV) .
• Risk factors: timeline slippage (weather/equipment lead times), commodity price sensitivity for legacy assets, and execution risk on CO2 sequestration permitting .
• Trading implications: absence of consensus comparisons may mute immediate “beat/miss” narratives; catalysts line up across Q2–Q3’25 (MRV, FID, offtake progress), with potential re‑rating as execution milestones accrue .
• Medium‑term thesis: a first‑mover, non‑hydrocarbon industrial gas platform with potential pricing advantages and lower environmental footprint; success depends on delivering H1’25 well results and locking in offtake at favorable prices .