US Energy (USEG) Announces Asset Acquisition

U.S. Energy Corp. (NASDAQCM: USEG) (“U.S. Energy” or the “Company”) today announced that the Company has entered into an Asset Purchase Agreement and closed a transaction (the “Transaction”) to acquire operated and non-operated producing assets (the “Properties”) primarily located in Lea County, New Mexico and Converse County, Wyoming. The acquired Properties consist of select upstream assets of FieldPoint Petroleum Corporation (“FieldPoint”) and were acquired pursuant to Fieldpoint’s Chapter 7 bankruptcy process.

Acquisition Highlights

• Proved Developed Producing (“PDP”) reserves estimated at approximately 237,263 barrels of oil equivalent (Boe) (63% oil).
• PDP PV-10 estimated at $2.5 million.
• Lea County, New Mexico assets comprise approximately 82% of total PDP volumes.
• Converse County, Wyoming assets comprise approximately 15% of total PDP volumes.
• Assets acquired for $500,000 in cash.

“We are pleased to announce this acquisition, which represents U.S. Energy’s second acquisition of 2020 and follows our previously stated strategy of seeking to acquire assets that represent mature, PDP heavy properties which we believe have significant upside potential from existing operations,” said Ryan Smith, Chief Executive Officer of U.S. Energy, who continued, “The Properties, acquired at an approximate 80% discount to their current PDP PV-10 reserve value, add reserves and immediate free cash flow, with operated acreage positions that are held by production to provide optionality for future opportunities. As we continue to execute our consolidation strategy moving forward in 2020 and into 2021, U.S. Energy will continue to pursue attractive opportunities that allow for capital efficient growth and increased shareholder value, while maintaining a low-cost corporate structure and clean balance sheet.”

Acquired Properties Overview

As of August 1, 2020, the Properties had total estimated proved reserves of approximately 237,263 Boe (63% oil), all of which are Proved Developed Producing reserves, and had a present value of estimated future net revenues before income taxes discounted at 10% (“PV10”) value of approximately $2.5 million. The properties are 59% non-operated and 41% operated, with the non-operated assets being operated primarily by Cimarex Energy and ConocoPhillips in Lea County, New Mexico.

The consideration paid at closing by U.S. Energy consisted of $500,000 in cash.

*Strip Pricing as of September 9, 2020.** Estimated pursuant to the August 1, 2020 report of the Company’s 3rd party reserve engineer, On Point Resources, LLC.

Promissory Note

U.S. Energy also announced that the Company entered into a $375,000 Secured Promissory Note (the “Note”) with the Company’s largest shareholder, APEG Energy II, L.P., which entity is controlled by a member of the Board of Directors. All proceeds from the financing were used to fund the Company’s recent acquisition. For more information on the acquisition and the Note, please see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2020.

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