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Liquidity

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

2.	LIQUIDITY

As of December 31, 2017, the Company had a working capital surplus of $4.3 million and an accumulated deficit of $125.2 million. Additionally, the Company incurred a net loss of $1.4 million for the year ended December 31, 2017. As of December 31, 2017, the Company was in full compliance with all covenants under its credit agreement.

During the 2017, the Company completed the following actions which are expected to improve the Company’s operating results going forward while increasing the ability of the Company to grow in the current oil and gas industry price environment.

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On October 3, 2017, U.S. Energy Corp. (the “Company”), the Company’s wholly owned subsidiary Energy One LLC and Statoil Oil and Gas LP (“Statoil”) entered into a purchase and sale agreement (the “Purchase Agreement”), under which, the Company assigned certain non-operated assets in the Williston Basin, North Dakota in consideration for the elimination of $4.0 million in outstanding liabilities and payment by Statoil to the Company of $2.0 million in cash. U.S. Energy has historically accounted for the eliminated liabilities on the Company’s balance sheet under “Payable to major operator” and “Contingent ownership interests.” The Purchase Agreement has an effective date of August 1, 2017 and was unanimously approved by the board of directors of the Company.

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On December 27, 2017, U.S. Energy Corp. received shareholder approval for the exchange agreement (“Exchange Agreement”) by and among the Company, the Company’s wholly owned subsidiary Energy One LLC and APEG Energy II, L.P., (“APEG”), an entity controlled by Angelus Private Equity Group, LLC pursuant to which, on the terms and subject to the conditions of the Exchange Agreement, APEG exchanged $4,463,380 of outstanding borrowings under the Company’s Credit Facility, for 5,819,270 new shares of common stock of the Company, par value $0.01 per share, representing an exchange price of $0.767 representing a 1.3% premium over the 30-day volume weighted average price of the Company’s common stock on September 20, 2017 (the “Exchange Shares”). Accrued, unpaid interest on the Credit Facility held by APEG was paid in cash at the closing of the transaction. Following the close of the transaction, APEG holds approximately 49.3% of the outstanding Common Stock of U.S. Energy. The Transaction was approved by the Company’s shareholders and closed in the fourth quarter of 2017. Additionally, the transaction was recorded based on a $1.53 stock price which represented the Company’s stock price on the date of shareholder approval.

As of December 31, 2017, the Company had cash and equivalents of $3.3 million. Management believes overhead and mining expense eliminations have positioned the Company to survive the continued low commodity price environment. However, there can be no assurance that the Company will be able to complete future financings, dispositions or acquisitions on acceptable terms or at all.

Our strategy is to continue to (1) maintain adequate liquidity and selectively participate in new drilling and completion activities, subject to economic and industry conditions, (2) pursue acquisition and disposition opportunities, and (3) evaluate various avenues to strengthen our balance sheet and improve our liquidity position. We expect to fund any near-term capital requirements and working capital needs from existing cash on hand. Because production from existing oil and natural gas wells declines over time, further reductions of capital expenditures used to drill and complete new oil and natural gas wells would likely result in lower levels of oil and natural gas production in the future.