F. SUPPLEMENTAL FINANCIAL INFORMATION ON OIL AND NATURAL GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES

Capitalized Costs

The following table presents information regarding USE's net costs incurred in the purchase of proved and unproved properties, and in exploration and development activities:

	(In thousands)
	December 31,		December 31,
	2012		2011
Unproved oil and gas properties	$	9,169	$	20,007
Proved oil and gas properties		119,919		99,496
	$	129,088	$	119,503

USE's DD&A per equivalent BOE was $33.49 in 2012, $31.64 in 2011 and $23.64 in 2010.

Undeveloped properties as of December 31, 2012 include costs incurred in the following years:

	(In thousands)
	Acquisitions		Exploration		Development		Total
2010	$	994	$	--	$	--	$	994
2011		7,947		--		--		7,947
2012		228		--		--		228
Total	$	9,169	$	--	$	--	$	9,169

Costs Incurred

Costs incurred in oil and natural gas property acquisition, exploration and development activities are summarized below:

	(In thousands)
	For the years ending December 31,
	2012		2011		2010
Property acquisition costs:
Proved	$	2,987	$	1,288	$	--
Unproved		1,416		10,679		14,237
Exploration costs		10,943		32,787		35,899
Development costs		20,134		4,550		4,846
Total costs incurred	$	35,480	$	49,304	$	54,982

Results of Operations

Results of operations from oil and natural gas producing activities are presented below:

	(In thousands)
	For the years ending December 31,
	2012		2011		2010
Oil and gas revenues	$	32,534	$	30,958	$	26,548
Less:
Operating expenses		10,788		11,552		6,073
Depreciation, depletion and amortization		14,893		13,997		10,610
Impairment		5,189		--		--
		30,870		25,549		16,683
Operating income	$	1,664	$	5,409	$	9,865

Oil and Natural Gas Reserves (Unaudited)

Proved reserves are estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods.

Proved oil and natural gas reserve quantities at December 31, 2012 and the related discounted future net cash flows before income taxes are based on the estimates prepared by Cawley, Gillespie & Associates, Inc. The reserve reports for the period ended December 31, 2011 were prepared by Cawley, Gillespie & Associates, Inc., Ryder Scott Company, L.P and Netherland, Sewell & Associates, Inc. The reserve reports for the period ended December 31, 2010 were prepared by Cawley, Gillespie & Associates, Inc. and Ryder Scott Company, L.P. Such estimates have been prepared in accordance with guidelines established by the Securities and Exchange Commission.

USE's net ownership interests in estimated quantities of proved oil and natural gas reserves and changes in net proved reserves, all of which are located in the continental United States, are summarized below:

December 31, 2012	Oil (BBLS)	Natural Gas or NGL (MCFE)
Beginning of year	2,737,969	2,744,128
Revisions of previous quantity estimates	(145,596)	(481,583)
Extensions, discoveries and improved recoveries	763,125	369,169
Purchase of reserves in place	75,948	30,457
Sales of reserves in place	(444,272)	(437,057)
Production	(373,531)	(427,026)
End of year	2,613,643	1,798,088

Proved developed reserves at end of year	1,770,659	1,420,295


December 31, 2011	Oil (BBLS)	Natural Gas or NGL (MCFE)
Beginning of year	1,546,446	2,450,968
Revisions of previous quantity estimates	4,913	(864,513)
Extensions, discoveries and improved recoveries	1,516,797	2,004,535
Purchase of reserves in place	48,615	49,065
Sales of reserves in place	(78,477)	(43,716)
Production	(300,325)	(852,211)
End of year	2,737,969	2,744,128

Proved developed reserves at end of year	1,884,068	1,983,581

Standardized Measure (Unaudited)

The standardized measure of discounted future net cash flows relating to USE's ownership interests in proved oil and natural gas reserves as of year-end is shown below:

	(In thousands)
	Year Ended December 31,
	2012			2011			2010
Future cash inflows	$	237,148		$	259,533		$	124,629
Future costs:
Production		(96,616	)		(77,813	)		(36,299	)
Development		(21,461	)		(42,972	)		(6,774	)
Future income tax expense		(8,483	)		(19,790	)		(11,622	)
Future net cash flows		110,588			118,958			69,934
10% discount factor		(39,571	)		(56,767	)		(25,281	)
Standardized measure of discounted future net cash flows	$	71,017		$	62,191		$	44,653

Future cash flows are computed by applying average prices per barrel of oil and per MMbtu of natural gas at the first day of each month in the 12-month period prior to the end of the reporting period to year-end quantities of proved oil and natural gas reserves. Prices used in computing year end 2012, 2011 and 2010 future cash flows were $94.71/barrel, $96.19/barrel and $79.43/barrel, respectively, for oil and $2.757/MMbtu, $4.12/MMbtu and $4.38/MMbtu for natural gas, respectively, in each case adjusted for regional price differentials and other factors. Future operating expenses and development costs are computed primarily by USE's petroleum engineers by estimating the expenditures to be incurred in developing and producing USE's proved oil and natural gas reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future income taxes are based on year-end statutory rates, adjusted for the tax basis of oil and gas properties and available applicable tax assets. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair market value of USE's oil and natural gas properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.

Change in Standardized Measure (Unaudited)

Changes in standardized measure of future net cash flows relating to proved oil and natural gas reserves are summarized below:

	(In thousands)
	Year Ended December 31,
	2012			2011			2010
Balance at beginning of period	$	62,191		$	44,653		$	19,984
Sales of oil and gas, net of production costs		(21,747	)		(19,406	)		(20,476	)
Net change in prices and production costs		(4,548	)		1,401			3,895
Net change in future development costs		--			--			--
Extensions and discoveries		23,297			26,574			40,011
Purchase of reserves in place		2,573			3,082			--
Sale of reserves in place		(13,573	)		(1,947	)		--
Revisions of previous quantity estimates		(5,927	)		(3,158	)		(2,519	)
Development costs incurred during year		22,808			14,930			--
Previously estimated development costs incurred		(9,706	)		(2,719	)		--
Net change in income taxes		7,261			(4,270	)		(2,138	)
Accretion of discount		7,254			5,207			2,576
Changes in production rates, timing and other		1,134			(2,156	)		3,320
Balance at end of period	$	71,017		$	62,191		$	44,653

Sales of oil and natural gas, net of oil and natural gas operating expenses, are based on historical pretax results. Extensions and discoveries and the changes due to revisions in standardized variables are reported on a pretax discounted basis.