USEG - US Energy Corp.

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USEG - US Energy Corp.

Website: U.S. Energy Corp. - Home
Chart & Quote: finance.google.com
News: finance.google.com

Recommendation:
Market: Nasdaq
Profile Price: 2.00 (price when pick is posted)
Buy Opinion: 1.95 - 2.05
Short Term Sell: 2.48 - 2.63
Long Term Sell: 2.85 - 3.4

Highlights:

• Diversified natural resources company.
• Over $45 million in cash and equivalents.
• Announced positive drilling results.
• Initiated geothermal drilling program.
• New well to begin production in Q3.

Outlook:
A natural resources exploration and development company, U.S. Energy Corp. (USEG) is a financially robust company with growing revenues, a strong balance sheet, and an expanding portfolio of properties. The company recently reported strong first quarter revenue growth and that it continues to aggressively repurchase shares. In addition, USEG announced positive drill results and the initiation of a geothermal drilling program.

The ability of molybdenum to withstand extreme temperatures without significantly expanding or softening makes it useful in applications that involve intense heat, including the manufacture of aircraft parts, electrical contacts, industrial motors, and filaments.

Most high-strength steel alloys are 0.25% to 8% molybdenum. Despite being used in such small portions, more than 43 million kg of molybdenum is used as an alloying agent each year in stainless steels, tool steels, cast irons, and high-temperature superalloys.

Geothermal power (from the Greek roots geo, meaning earth, and thermos, meaning heat) is power extracted from heat stored in the earth. This geothermal energy originates from the original formation of the planet, from radioactive decay of minerals, and from solar energy absorbed at the surface.

It has been used for space heating and bathing since ancient roman times, but is now better known for generating electricity. About 10 GW of geothermal electric capacity is installed around the world as of 2007, generating 0.3% of global electricity demand.

Business Profile:
U.S. Energy has put its energy in many places, including oil and gas exploration and production, geothermal energy projects, and molybdenum mining.

It operates oil and gas wells on the coast of the Gulf of Mexico and in Texas. The company bought a quarter stake in Standard Steam Trust in 2008, giving USEG entry into the geothermal energy market.

The company has entered into a $400 million option agreement with Thompson Creek Metals to develop the Mt. Emmons molybdenum project and has a goal of exiting 2009 with a daily oil and gas production rate of 7,000 MCFE/D (Average daily production).

Fundamental Analysis:
On May 13, USEG announced its financial results for the first quarter ended March 31, 2009. The company reported first quarter revenue of $1.41 million, a significant increase over the $149,000 reported in the same prior-year period.

USEG reported a first quarter (loss) of ($2.34 million), or $(0.11) per share. During the first quarter of 2008, USEG reported a (loss) of ($1.71 million), or ($0.07) per share.

In addition, the company had $3.0 million in cash and cash equivalents and $41.8 million in U.S. Government Treasuries. These balances total $44.8 million or $2.09 per outstanding common share at March 31, 2009.

Through March 31, 2009, the company purchased 2,917,429 shares of its common stock for $7.6 million or an average of $2.61 per share under its $8.0 million stock buyback plan.

Conclusion:
A natural resources exploration and development company, USEG is a financially robust company with growing revenues, a strong balance sheet, and an expanding portfolio of properties. The company recently reported strong first quarter revenue growth and that it continues to aggressively repurchase shares. In addition, USEG announced positive drill results and the initiation of a geothermal drilling program.

In mid-May USEG announced that first quarter revenue increased by $1.26 million year-over-year to $1.41 million. First quarter 2009 net (loss) increased to ($2.34 million), or $(0.11) per share.

During the quarter, and subsequent to quarter end, USEG received a $1 million option payment from Thompson Creek Metals Company Inc., pursuant to the terms of the definitive Exploration, Development and Mine Operating Agreement for the Mount Emmons molybdenum property.

USEG entered into a Participation Agreement with Houston, Texas-based Houston Energy L.P. to acquire a 10% working interest in multiple oil and gas prospects located in southeast Texas. The company also retired the $16.8 million construction loan on its 216-unit Remington Village housing complex in Gillette, Wyoming; gross revenues are now at $240,000 per month.

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Reserved for important updates.


July 13th, 2009
USEG announced that it entered into a third Participation Agreement with Houston, Texas-based Houston Energy L.P. to acquire a 25% working interest in an oil prospect located in southeast Louisiana.

Houston Energy has estimated that the prospect has a potential reserve of 2.1 million barrels of oil. Houston Energy is a privately held, independent oil and gas company with oil and gas interests in the Gulf of Mexico, South Louisiana, Texas Gulf Coast, West Texas and Southeastern New Mexico.

"Our expanded relationship with Houston Energy allows us to access additional opportunities in a region where we have already experienced drilling success," stated Keith Larsen, CEO. "This prospect is in a known oil producing field and it is a very attractive drilling target at a relatively shallow depth."