U.S. Energy Corp. divests South Texas assets for $6.5 million

HOUSTON - U.S. Energy Corp. (NASDAQ: USEG), an American energy company, has entered into a definitive agreement to sell its South Texas assets for approximately $6.5 million in cash. The assets, located in Karnes County, Texas, were responsible for an average production of roughly 155 barrels of oil equivalent per day during the first quarter of 2024, which constituted about 13% of the company's total production for the same period.

The transaction, which has an effective date of April 1, 2024, is anticipated to close by July 31, 2024, subject to customary closing conditions. The proceeds from this sale are expected to be allocated towards the development of recently acquired helium assets and to repay outstanding debt. This sale marks U.S. Energy's exit from operations in South Texas, as part of its strategy to optimize its asset portfolio.

Ryan Smith, Chief Executive Officer of U.S. Energy Corp., expressed that the divestiture is aimed at enhancing the company's financial position by increasing liquidity and strengthening the balance sheet. Smith highlighted the transaction's alignment with the company's strategy of actively managing its assets and focusing on areas that are more likely to compete for capital.

The company's recent acquisition targeting helium assets is part of its broader strategy to consolidate high-quality assets in the United States. U.S. Energy Corp. is committed to optimizing production and generating free cash flow while maintaining programs that offer attractive returns to shareholders. The company also emphasizes its dedication to reducing its carbon footprint in its operational areas.

Due to the impact of Hurricane Beryl on U.S. Energy's headquarters and employees, a previously scheduled investor call to discuss the transaction and the recent acquisition has been postponed. The call has been rescheduled for Wednesday, July 17, 2024, at 10:00 a.m. ET/9:00 a.m. CT. Interested parties can access a webcast of the conference call through the Investor Relations section of the company's website.

InvestingPro Insights

As U.S. Energy Corp. (NASDAQ: USEG) moves forward with its strategic divestiture in South Texas, investors may find it worthwhile to consider the company's financial health and market performance. With a market capitalization of $28.07 million, the company's size is a reflection of its niche position within the energy sector. Notably, U.S. Energy Corp. offers a substantial dividend yield of 7.96%, which could appeal to income-focused investors, especially in the context of the company's recent moves to streamline operations and focus on high-quality asset consolidation.

However, a closer look at the company's financials reveals some challenges. The negative P/E ratio of -0.69 for the last twelve months as of Q1 2024 indicates that the company has not been profitable during this period. This is underscored by an operating income margin of -147.32%, reflecting significant operational costs relative to its revenue. Additionally, with the InvestingPro Tip that short-term obligations exceed liquid assets, there is a liquidity risk that investors should be aware of.

Despite these challenges, the company's strategy to optimize its asset portfolio and pivot towards potentially lucrative helium assets could be a step in the right direction. For those considering an investment in U.S. Energy Corp., further analysis is available through InvestingPro, which offers additional tips and metrics for a comprehensive understanding of the company's financial state and future prospects. In fact, there are 5 additional InvestingPro Tips available at https://www.investing.com/pro/USEG. To access these insights and more, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

Investors are also reminded of the upcoming investor call rescheduled for July 17, 2024, which will provide further details on the South Texas asset sale and the company's helium asset acquisition, offering a clearer picture of U.S. Energy's strategic direction and its implications for shareholder value.

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