US Energy (USEG) Q3 2024 earnings summary

Executive summary

• Significant progress on the Montana industrial gas project, with the first well completed below projected costs and confirmed helium concentrations up to 1.5% in non-hydrocarbon zones; plans for additional drilling in 2025.

• Divested South Texas, Kansas, and other oil and gas properties for up to $7.7 million, reallocating proceeds to repay debt, fund the Montana project, and support share repurchases.

• Strategic shift toward becoming a pure-play industrial gas company, with ongoing divestiture of legacy E&P assets and focus on expanding the industrial gas platform.

• Share repurchase program intensified, with up to 0.9 million shares (3% of outstanding) bought at an average price of $1.17; $4.0 million remains available under the buyback program.

• Fully repaid $7.0 million credit facility, ending the quarter debt-free with $21.2 million in liquidity.

Financial highlights

• Q3 2024 revenue was $5.0 million, down from $8.7 million year-over-year due to a 30% volume reduction and asset divestitures, partially offset by an 18% increase in realized prices.

• Net loss for Q3 2024 was $2.2–$2.3 million, an improvement from $8.8 million in Q3 2023, driven by lower operating costs.

• Adjusted EBITDA was $1.1–$1.8 million, reflecting lower G&A expenses and prior period hedge proceeds.

• Lease operating expense per BOE was $28.95 in Q3 2024, up from $26.31 in Q3 2023 due to lower volumes.

• Cash G&A expenses fell 27% year-over-year to $1.6 million, with a $1.8 million YTD reduction.

Outlook and guidance

• Full-cycle helium production and sales expected by early Q4 2025, with potential for an accelerated timeline.

• First helium plant projected to generate $5–$6 million in annual EBITDA, with formal guidance to be provided as project parameters are finalized.

• Capital budget for late 2024 and 2025 will focus on helium well completions and drilling 3–5 wells, with expected costs of $4.0–$6.5 million.

• Anticipates further oil and gas property write-downs of $3.0–$4.0 million in Q4 2024 due to recent divestitures and lower commodity prices.

• Plans to fund capital needs through operating cash flow, asset sales, and credit facility as needed.