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SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2011
SHAREHOLDERS' EQUITY [Abstract]  
SHAREHOLDERS' EQUITY
M.           SHAREHOLDERS' EQUITY

Stock Option Plans

The Board of Directors adopted the U.S. Energy Corp. 1989 Stock Option Plan for the benefit of USE's employees.  The Option Plan, as amended and renamed the 1998 Incentive Stock Option Plan (“1998 ISOP”), reserved 3,250,000 shares of USE's $.01 par value common stock for issuance under the 1998 ISOP.  Options which expired without exercise were available for reissue until the 1998 ISOP was replaced by the 2001 ISOP.  All options issued under the 1998 ISOP have been exercised or have expired and the 1998 ISOP terminated on January 9, 2011.

In December 2001, the Board of Directors adopted (and the shareholders subsequently approved) the U.S. Energy Corp. 2001 Incentive Stock Option Plan (the "2001 ISOP") for the benefit of USE's employees.  The 2001 ISOP (amended by approval of the shareholders in 2004 and 2007) reserved for issuance 25% of USE's shares of common stock issued and outstanding at any time.  The 2001 ISOP had a term of 10 years and expired on December 6, 2011.  Options issued under the 2001 ISOP remain exercisable until their expiration date under the terms of the 2001 ISOP.

A summary of the Employee Stock Option Plans activity in all plans for the year ended December 31, 2011, 2010 and 2009 is as follows:
 
    Year ended December 31, 
   
2011
  
2010
  
2009
 
   
Options
  
Weighted Average Exercise Price
  
Options
  
Weighted Average Exercise Price
  
Options
  
Weighted Average Exercise Price
 
Outstanding at beginning
                  
of the period
  3,011,647  $3.87   3,711,114  $3.64   3,717,098  $3.63 
Granted
  --  $--   --  $--   --  $-- 
Forfeited
  --  $--   --  $--   --  $-- 
Expired
  (200,000) $3.90   --  $--   (4,000) $2.46 
Exercised
  (493,248) $3.51   (699,467) $2.63   (1,984) $2.52 
Outstanding at period end
  2,318,399  $3.94   3,011,647  $3.87   3,711,114  $3.64 
Exercisable at period end
  2,108,399  $3.84   2,404,148  $3.78   2,614,453  $3.43 
                          
Weighted average fair
                        
value of options
                        
granted during
                        
the period
     $--      $--      $-- 
                          
 
 
During the year ended December 31, 2011, a total of 493,248 options were exercised by employees by the payment of $34,000 in cash and the surrender of 368,804 shares valued at $1.9 million.  In the year ended December 31, 2010, 699,467 options were exercised by the payment of $63,000 in cash and surrender of 325,195 shares valued at $1.8 million.  In the year ended December 31, 2009, 1,984 options were exercised by the payment of $5,000.

Option related compensation expense is recognized over the vesting period of the options and is calculated using the Black Scholes option pricing model.  USE initially assumed no forfeitures, but has subsequently reduced the cumulative expense based on historical forfeiture.  Total future expense for the option plan is $2,000 to be recognized in 2012.

The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2011:
 
Grant Price Range
  
Options Outstanding at December 31, 2011
  
Weighted average remaining contractual life in years
  
Weighted average exercise price
  
Options exercisable at December 31, 2011
  
Weighted average exercise price
 
                 
$2.46   389,319   2.50  $2.46   389,319  $2.46 
$2.47 - $2.52   450,312   6.67  $2.52   450,312  $2.52 
$2.53 - $3.86   273,768   3.79  $3.86   273,768  $3.86 
$3.91 - $4.97   1,205,000   5.34  $4.97   995,000  $4.97 
                       
     2,318,399   4.94  $3.94   2,108,399  $3.84 
                       

The following table sets forth the number of options available for grant as well as the intrinsic value of the options outstanding and exercisable:
 
   
2011
  
2010
  
2009
 
Available for future grant
  --   3,765,506   3,327,780 
Intrinsic value of option exercised
 $888,000  $1,956,000  $14,000 
Aggregate intrinsic value of options outstanding
 $351,000  $6,660,000  $8,514,000 
Aggregate intrinsic value of options exercisable
 $351,000  $5,526,000  $6,543,000 
 
Employee Stock Ownership Plan

The Board of Directors of USE adopted the U.S. Energy Corp. 1989 Employee Stock Ownership Plan ("ESOP") in 1989, for the benefit of all USE's employees.  Employees become eligible to participate in the ESOP after one year of service which must consist of at least 1,000 hours worked.  After the employee becomes a participant in the plan, he or she must have a minimum of 1,000 hours of service in each plan year to be considered for allocations of funding from USE.  Employees become 20% vested after three years of service and increase their vesting by 20% each year thereafter until such time as they are fully vested after eight years of service.
 
An employee's total compensation paid, which is subject to federal income tax, up to an annual limit of $245,000 for the years ended December 31, 2011, 2010 and 2009, is the basis for computing how much of the total annual funding is contributed into his or her personal account.  An employee's compensation divided by the total eligible compensation paid to all plan participants is the percentage that each participant receives on an annual basis.  USE funds 10% of all eligible compensation annually in the form of common stock and may fund up to an additional 15% to the plan in common stock.  As of December 31, 2011, all shares of USE's stock that have been contributed to the ESOP have been allocated.  The estimated fair value of shares that are not vested is approximately $37,000.

During the year ended December 31, 2011, the Board of Directors of USE approved a contribution of 98,958 shares to the ESOP at the price of $2.91 for a total expense of $287,000.  This compares to contributions to the ESOP during the year ended December 31, 2010 and 2009 of 42,802 and 36,583 shares to the ESOP at prices of $6.08 and $5.93 per share, respectively.  The expense for the contributions during the years ended December 31, 2010 and 2009 were $260,000 and $217,000, respectively.

Warrants to Others

As of December 31, 2011, there were 210,000 warrants outstanding to purchase shares of USE's common stock.  Of the total outstanding warrants, 183,334 were exercisable.  USE values these warrants using the Black-Scholes option pricing model and expenses that value over various terms based on the nature of the award.  Activity for the periods ended December 31, 2011, 2010 and 2009 for warrants is presented in the following table:

   
Year ended December 31,
 
   
2011
  
2010
  
2009
 
   
Warrants
  
Weighted Average Exercise Price
  
Warrants
  
Weighted Average Exercise Price
  
Warrants
  
Weighted Average Exercise Price
 
Outstanding at beginning
                  
of the period
  320,000  $2.95   581,367  $2.91   1,036,387  $3.43 
Granted
  20,000  $4.19   10,000  $5.04   --  $-- 
Forfeited
  (20,000) $2.52   (20,000) $2.52   --  $-- 
Expired
  (5,000) $3.90   --  $--   (383,932) $4.26 
Exercised
  (105,000) $2.92   (251,367) $2.97   (71,088) $3.27 
Outstanding at period end
  210,000  $3.10   320,000  $2.95   581,367  $2.91 
Exercisable at period end
  183,334  $2.91   276,667  $2.93   494,701  $2.98 
                          
Weighted average fair
                        
value of options
                        
granted during
                        
the period
     $2.34      $2.99      $-- 
                          
 
 
During the year ended December 31, 2011, a total of 105,000 warrants were exercised by the payment of $62,000 in cash and the surrender of 62,104 shares valued at $245,000.  In the year ended December 31, 2010, 251,367 warrants were exercised by the payment of $746,000 in cash.  In the year ended December 31, 2009, 71,088 warrants were exercised by the payment of $232,000 in cash.

The following table summarizes information about non-employee warrants outstanding and exercisable at December 31, 2011:

Grant Price Range
  
Warrants Outstanding at December 31, 2011
  
Weighted average remaining contractual life in years
  
Weighted average exercise price
  
Warrants exercisable at December 31, 2011
  
Weighted average exercise price
 
                 
$2.46   50,000   0.48  $2.46   50,000  $2.46 
$2.47 - $2.52   80,000   3.61  $2.52   80,000  $2.52 
$2.53 - $3.86   50,000   0.48  $3.86   50,000  $3.86 
$3.87 - $4.19   20,000   9.48  $4.19   3,334  $4.19 
$3.91 - $5.04   10,000   8.48  $5.04   --  $5.04 
                       
     210,000   2.91  $3.10   183,334  $2.91 
                       
 
These warrants are held by current and former directors of USE.

USE has computed the fair values of its options and warrants using the Black Scholes pricing model and the following weighted average assumptions:

 
Year Ended
 
December 31,
 
2011
2010
2009
Risk-free interest rate
1.77%
2.24%
 --
Expected lives (years)
 6.0
 6.0
 --
Expected volatility
59.64%
63.79%
 --
Expected dividend yield
 --
 --
 --