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,
	2014		2013
Proved oil and gas properties	$	147,486	$	136,521
Unproved		10,188		7,478
Exploratory wells in progress		2,357		--
	$	160,031	$	143,999

USE's DD&A per equivalent BOE was $31.56 in 2014, $32.06 in 2013, and $33.49 in 2012.

Undeveloped properties as of December 31, 2014 include costs incurred in the following years:

	(In thousands)
	Acquisitions		Exploration		Development		Total
2010	$	103	$	--	$	--	$	103
2011		4,015		--		--		4,015
2012		271		--		--		271
2013		2,067		--		--		2,067
2014		3,732		--		--		3,732
Total	$	10,188	$	--	$	--	$	10,188

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

	(In thousands)
	Year Ended December 31,
	2014		2013		2012
Property acquisition costs:
Proved	$	552	$	445	$	2,987
Unproved		4,167		1,760		1,416
Exploration costs		14,791		9,138		10,943
Development costs		8,037		9,403		20,134
Total costs incurred	$	27,547	$	20,746	$	35,480

Results of Operations

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


	(In thousands)
	For the years ending December 31,
	2014		2013		2012
Revenues	$	32,379	$	33,647	$	32,534
Operating expenses		10,638		10,469		10,788
Depreciation, depletion and amortization		14,685		13,623		14,893
Impairment		--		5,828		5,189
		25,323		29,920		30,870
Operating income	$	7,056	$	3,727	$	1,664

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, 2014, 2013 and 2012 and the related discounted future net cash flows before income taxes are based on the estimates prepared by Cawley, Gillespie & Associates, Inc. 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, 2014	Oil (BBLS)			Natural Gas or NGL (MCFE)
Beginning of year		3,459,713			2,371,908
Revisions of previous quantity estimates		(262,570	)		802,241
Extensions, discoveries and improved recoveries		1,583,292			1,006,659
Purchase of reserves in place		--			--
Sales of reserves in place		(330,871	)		(156,482	)
Production		(329,828	)		(813,081	)
End of year		4,119,736			3,211,245

Proved developed reserves at end of year		1,754,668			1,892,446


December 31, 2013	Oil (BBLS)			Natural Gas or NGL (MCFE)
Beginning of year		2,613,643			1,798,088
Revisions of previous quantity estimates		(162,957	)		382,690
Extensions, discoveries and improved recoveries		1,352,746			678,412
Purchase of reserves in place		--			--
Sales of reserves in place		--			--
Production		(343,719	)		(487,282	)
End of year		3,459,713			2,371,908

Proved developed reserves at end of year		1,875,528			1,701,282

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,
	2014			2013			2012
Future cash inflows	$	381,156		$	330,245		$	237,148
Future costs:
Production		(149,450	)		(129,392	)		(96,616	)
Development		(70,770	)		(37,739	)		(21,461	)
Future income tax expense		(12,719	)		(14,500	)		(8,483	)
Future net cash flows		148,217			148,614			110,588
10% discount factor		(66,328	)		(43,761	)		(39,571	)
Standardized measure of discounted future net cash flows	$	81,889		$	104,853		$	71,017

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 2014, 2013 and 2012 future cash flows were $94.99/barrel, $96.78/barrel and $94.71/barrel, respectively, for oil and $4.35/MMbtu, $3.67/MMbtu and $2.757/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 independent 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,
	2014			2013			2012
Balance at beginning of period	$	104,853		$	71,017		$	62,191
Sales of oil and gas, net of production costs		(21,741	)		(23,179	)		(21,747	)
Net change in prices and production costs		(17,376	)		2,543			(4,548	)
Changes in estimated future development costs		(1,869	)		(6,414	)		(9,706	)
Extensions and discoveries		14,706			54,360			23,297
Purchase of reserves in place		--			--			2,573
Sale of reserves in place		(13,339	)		--			(13,573	)
Revisions of previous quantity estimates		(4,815	)		(2,961	)		(5,927	)
Previously estimated development costs incurred during the period		7,175			8,344			22,808
Net change in income taxes		6,924			(4,245	)		7,261
Accretion of discount		10,090			7,647			7,254
Changes in production rates, timing and other		(2,719	)		(2,259	)		1,134
Balance at end of period	$	81,889		$	104,853		$	71,017

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.