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LIQUIDITY

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

2.	LIQUIDITY

As of December 31, 2015, the Company has a working capital deficit of $9,778 and an accumulated deficit of $109,705. Additionally, the Company incurred a net loss of $92,896 for the year ended December 31, 2015. During 2015, the Company was in violation of certain covenants in its credit agreement and the Company expects future violations in 2016, which requires the entire balance to be classified as a current liability. While the lender has provided limited waivers for the Company’s past noncompliance, there is no assurance that it will continue to do so in the future.

During the period from September 2015 through February 2016, the Company completed the following actions which are expected to improve the Company’s operating results in 2016 and enable the Company to survive the current oil and gas industry price environment:

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During the third quarter of 2015, the Company began to implement restructuring actions to reduce corporate overhead through a reduction in the size of the Company’s workforce from 14 employees at the end of 2014 to one employee by January 2016. Additionally, in December 2015 the Company completed a move of its corporate headquarters to Denver, Colorado for better access to financial services and to improve access to oil and gas deal flow. Management expects its restructuring and other cost-cutting actions will result in an overhead reduction of approximately $4,000 on an annualized basis.

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As discussed in Note 6, in February 2016 the Company completed the disposition of its mining segment, including the Keystone Mine, a related water treatment plant and other related properties. While an impairment charge of $22,620 was recognized related to this disposition, a significant objective for completing the disposition was to improve future profitability. Following the disposition, the Company is no longer required to operate the water treatment plant and will not be responsible for mine holding costs, which are expected to result in estimated annual cash savings of $3,000. Management believes the disposition of the Company’s mining segment is a major step in the transformation of U.S. Energy Corp. to solely focus on its existing oil and gas business.

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As discussed in Note 19, in April 2016 the Company’s lender provided a limited waiver for the Company’s noncompliance with the credit agreement covenants as of December 31, 2015, and management believes the lender will not demand repayment until an alternative lender can be obtained.

Management believes approximately $7,000 of combined overhead and mining expense reductions have poised the Company to survive the current low commodity price environment, in combination with our attractive oil price risk derivative contracts for 118,900 barrels of oil which is 60% of expected production for 2016.

As of December 31, 2015, the Company had cash and equivalents of $3,354, and after payment of severance and retirement liabilities in January 2016, the Company expects to maintain cash balances of approximately $2,000 for some time. Management also expects potential investors and lenders will find the Company’s new singular industry focus, combined with attractive producing properties and a low-cost overhead structure to be an attractive vehicle to partner with the Company during this industry downturn and low commodity price environment.