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Note 1 - Organization, Operations and Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | 1. ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Organization and Operations U.S. Energy Corp. (collectively with its wholly-owned subsidiaries, Energy One LLC (“Energy One”) and New Horizon Resources LLC (“New Horizon Resources”), referred to as the “Company” in these Notes to Consolidated Financial Statements) was originally incorporated in the State of Wyoming on January 26, 1966. The Company’s principal business activities are focused on the acquisition, exploration and development of oil and natural gas properties in the United States. Effective August 3, 2022, the Company changed its state of incorporation from the State of Wyoming to the State of Delaware (the “Reincorporation”) by means of a Plan of Conversion, effective August 3, 2022 (the “Plan of Conversion”). The Reincorporation, including the Plan of Conversion, was submitted to a vote of, and approved by, the Company’s stockholders at the Company’s 2022 Annual Meeting of Stockholders held on June 21, 2022. The Reincorporation was accomplished by filing: (i) an Application for Certificate of Transfer with the Secretary of State of the State of Wyoming (the “Wyoming Certificate of Transfer”); (ii) a Certificate of Conversion with the Secretary of State of the State of Delaware (the “Delaware Certificate of Conversion”); and (iii) a Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Delaware Certificate of Incorporation”). The Reincorporation did not result in any change in headquarters, business, jobs, management, location of any of the offices or facilities, number of employees, assets, liabilities or net worth (other than as a result of the costs incident to the Reincorporation) of the Company. The resulting Delaware corporation (“U.S. Energy-Delaware”) (i) is deemed to be the same entity as the Company as incorporated in Wyoming (“U.S. Energy-Wyoming”) for all purposes under Wyoming and Delaware law, (ii) continues to have all of the rights, privileges, and powers of U.S. Energy-Wyoming, (iii) continues to possess all of the properties of U.S. Energy-Wyoming, and (iv) continues to have all of the debts, liabilities, and duties of U.S. Energy-Wyoming. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of oil and gas properties acquired, oil and natural gas reserves that are used in the calculation of depreciation, depletion, amortization and impairment of the carrying value of evaluated oil and natural gas properties; production and commodity price estimates used to record accrued oil and natural gas sales receivables; future prices of commodities used in the valuation of commodity derivative contracts; and the cost and timing of future asset retirement obligations. The Company evaluates its estimates on an on-going basis and bases its estimates on historical experience and on various other assumptions the Company believes to be reasonable. Due to inherent uncertainties, including the future prices of oil and natural gas, these estimates could change in the near term and such changes could be material. Principles of Consolidation The accompanying financial statements have been prepared in conformity with GAAP and include the accounts of U.S. Energy Corp. and its wholly-owned subsidiaries Energy One and New Horizon Resources. U.S. Energy Corp. accounts for its share of oil and gas exploration and production activities, in which it has a direct working interest, by reporting its proportionate share of assets, liabilities, revenues, costs, and cash flows within the relevant lines on the balance sheets, statements of operations, and statements of cash flows. All inter-company balances and transactions have been eliminated in consolidation. Industry Segment and Geographic Information The Company operates in the exploration and production segment of the oil and gas industry, onshore in the United States. The Company reports as a single industry segment. Our principal properties and operations are in the Rockies region (Montana, Wyoming and North Dakota), the Mid-Continent region (Oklahoma, Kansas and North and East Texas), and the West Texas, South Texas, and Gulf Coast region. Cash and Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents potentially subject the Company to a concentration of credit risk as substantially all of its deposits held in financial institutions were in excess of the federal deposit insurance limits as of December 31, 2023 and 2022. The Company maintains its cash and cash equivalents in the form of checking accounts or short-term investments with financial institutions that it believes are creditworthy. The Company's checking accounts are with the same financial institution as its credit facility. Oil and Natural Gas Receivables The Company’s oil and natural gas sales receivables consist of receivables from purchasers of the Company’s operated oil, natural gas, and natural gas liquids (“NGLs”) sales. Generally, the Company’s oil and natural gas and natural gas liquids sales receivables from operated properties are collected within one month. The Company also has joint operating agreements as a non-operator of oil and natural gas properties. Generally, receivables from the joint interest operator are collected within one to three months. The Company monitors the credit quality of its counterparties through review of collections, credit ratings, and other analyses as appropriate given relevant facts and circumstances. The Company develops its estimated allowance for credit losses primarily using an aging method and analyses of historical loss rates as well as consideration of current and future conditions that could impact its counterparties’ credit quality and liquidity. Receivables are not collateralized. As of December 31, 2023, and 2022, the Company had not provided an allowance for credit loss on its oil and natural gas sales receivable or its joint interest accounts receivable. The balance of the oil and natural gas sales receivable reported on the Consolidated Balance Sheets is comprised entirely of receivables associated with sales under contracts with customers. Concentration of Credit Risk The Company has exposure to credit risk in the event of nonpayment of oil and natural gas receivables by purchasers of the Company’s share of oil and natural gas production and its operated production. The following table presents the purchasers that accounted for 10% or more of the Company’s total oil and natural gas revenue for at least one of the periods presented:
|  | Year Ended |
|  | December 31, |
Purchaser |  | 2023 |  |  | 2022 |
Purchaser A |  |  | 24 | % |  |  | 21 | %
Purchaser B |  |  | 20 | % |  |  | 19 | %
Marketable Equity Securities Marketable equity securities are reported at fair value based on end of period quoted prices. Changes in fair value are recorded in other income (expense), net on the Consolidated Statements of Operations at the end of each reporting period. Gains or losses from sales of marketable equity securities are recorded in other income (expense), net on the Consolidated Statements of Operations when the sale is completed. Oil and Natural Gas Properties The Company follows the full cost method of accounting for its oil and natural gas properties. Under the full cost method, all costs associated with the acquisition, exploration and development of oil and natural gas properties are capitalized and accumulated in a country-wide cost center. This includes any internal costs that are directly related to development and exploration activities but does not include any costs related to production, general corporate overhead or similar activities. The sum of net capitalized costs and estimated future development and dismantlement costs for each cost center are subject to depreciation, depletion and amortization (“DD&A”) using the equivalent unit-of-production method, based on total proved oil and natural gas reserves. For consolidated financial statement presentation, DD&A includes accretion expense related to asset retirement obligations. Excluded from amounts subject to DD&A are costs associated with unevaluated properties. Under the full cost method, net capitalized costs are limited to the lower of unamortized cost reduced by the related net deferred tax liability, or the cost center ceiling (the “Ceiling Test”). The cost center ceiling is defined as the sum of (i) estimated future net revenue, discounted at 10% per annum, from proved reserves, based on average prices per barrel of oil and per Mcf of natural gas at the first day of each month in the 12-month period prior to the end of the reporting period; and costs, adjusted for contract provisions and financial derivatives qualifying as accounting hedges and asset retirement obligations, (ii) the cost of unevaluated properties not being amortized, and (iii) the lower of cost or market value of unproved properties included in the cost being amortized, reduced by (iv) the income tax effects related to differences between the book and tax basis of the crude oil and natural gas properties. If the net book value reduced by the related net deferred income tax liability (if any) exceeds the cost center ceiling limitation, a non-cash impairment charge is required in the period in which the impairment occurs. Since all of the Company’s oil and natural gas properties are located within the United States, the Company only has one cost center for which a quarterly Ceiling Test is performed. Acquisitions The Company accounts for acquisitions as business combinations if the acquired assets meet the definition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar assets, the acquisition is not considered a business and is accounted for as an asset acquisition. This determination of whether the gross assets acquired are concentrated in a group of similar assets is based on whether the risks associated with managing and creating outputs from the assets are similar. Divestitures For divestitures involving oil and gas assets included in the full cost pool, the Company evaluates if a given divestiture has a significant impact to either our reserves volumes or the full cost pool unit-of-production depletion rate. If a divestiture has a significant impact to reserves volumes or the full cost pool depletion rate, the Company will consider if recognizing gain or loss on the transaction is appropriate. If a divestiture does not have a significant impact to reserves volumes or the full cost pool depletion rate, the Company records proceeds, net of transaction costs and purchase price adjustments, to the full cost pool, with no gain or loss recognized on the consolidated statements of operations. Relief of any associated asset retirement obligations are also recorded to the full cost pool. Revenue and expenditures are recorded following our standard accounting policies up until the month that a divestment closes. Other Property and Equipment Land classified as held for sale is carried at the estimated realizable value, less costs to sell. Such assets are classified within current assets if there is reasonable certainty that the sale will take place within one year. Long-lived assets are classified as held for sale when the Company meets certain criteria, such as committing to a plan to sell the assets and the sale of the asset is probable with recognition of a completed sale expected within one year. While land is not subject to depreciation, upon classification as held for sale, long-lived assets that were subject to DD&A are no longer depreciated or depleted, and a measurement for impairment is performed to determine if there is any excess of carrying value over fair value less costs to sell. Subsequent changes to estimated fair value less the cost to sell will impact the measurement of assets held for sale if the fair value is determined to be less than the carrying value of the assets. Administrative assets are carried at cost. Depreciation of administrative assets is provided principally by the straight-line method over estimated useful lives as follows:
|  | Years |
Administrative assets: |  |  |  |
Computers and software |  |  | 3 |
Office furniture and equipment |  |  | 5 |
Autos and trucks |  |  | 5 |
Other equipment |  |  | 10 |
Impairment of Long-Lived Assets The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. If estimated future cash flows, on an undiscounted basis, are less than the carrying amount of the related asset, an asset impairment charge is recognized, and measured as the amount by which the carrying value exceeds the estimated fair value. Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company’s financial position and results of operations. Leases The Company accounts for leases in accordance with Accounting Standards Codification (“ASC”) Topic 842, Leases, (“Topic 842”), which requires lessees to recognize operating and finance leases with terms greater than 12 months on the Consolidated Balance Sheets. The Company evaluates a contractual arrangement at its inception to determine if it is a lease or contains an identifiable lease component. Certain leases may contain both lease and non-lease components. The Company’s policy for all asset classes is to combine lease and non-lease components together and account for the arrangement as a single lease. Certain assumptions and judgements are made by the Company when evaluating a contract that meets the definition of a lease under Topic 842, which include those to determine the discount rate and lease term. Unless implicitly defined, the Company determines the present value of the future lease payments using an estimated incremental borrowing rate at the lease inception. The Company evaluates each contract containing a lease arrangement at inception to determine the length of the lease term when recognizing a right-of-use (“ROU”) asset and corresponding lease liability. The Company excludes from the Consolidated Balance Sheets leases with terms that are less than one year. A ROU asset represents a lessee’s right to use an underlying asset for the lease term, while the associated lease liability represents the lessee’s obligations to make lease payments. At the commencement date a lease ROU asset and corresponding lease liability is recognized based on the present value of the future lease payments. The initial measurement excludes certain variable lease payments, such as payments that vary depending on actual usage. Please see “Note 4-Leases”. Derivative Financial Instruments The Company periodically enters into commodity derivative instruments to mitigate a portion of its exposure to oil price volatility for its expected future oil production. The Company does not designate commodity derivative contracts as fair value or cash flow hedges, and therefore the contracts do not qualify for hedge accounting. Changes in fair value of derivative contracts are recorded in the Consolidated Statement of Operations. The fair value of derivative contracts is recorded as either an asset or a liability on the Consolidated Balance Sheet. Revenue Recognition The Company derives revenue from the sale of produced oil, natural gas and NGLs. Revenue is recognized at the point in time when custody and title of the product transfers to the purchaser, which may differ depending on the applicable contractual terms. Revenue accruals are recorded based on the Company’s share of estimated production and the expected price to be received. The Company uses its knowledge of its properties, contractual arrangements, historical performance, NYMEX differentials, and other factors as the basis of these estimates. Variances between estimates and the actual amounts received are recorded in the month payment is received. The Company does not disclose the values of unsatisfied performance obligations under its contracts with customers as it applies the practical exemption in accordance with ASC 606. The exemption applies to variable consideration that is recognized as control of the product is transferred to the customer. Since each unit of product represents a separate performance obligation, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to the remaining performance obligations is not required. The Company reports revenue as its proportionate share of the gross amount received before taking into account transportation costs. Production taxes and gathering, transportation, and treating costs are reported separately on the Consolidated Statements of Operations. Asset Retirement Obligations The Company records the estimated fair value of restoration and reclamation liabilities related to its oil and natural gas properties as of the date that the liability is incurred. The Company reviews the liability each quarter and determines if a change in estimate is required, and accretion of the discounted liability is recorded based on the passage of time. The Company deducts any actual funds expended for restoration and reclamation during the quarter in which it occurs. Stock-Based Compensation The Company measures the cost of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair value of the award as of the grant date. The Company's policy is to compute the fair values of any options granted to employees using the Black-Scholes option pricing model unless the fair value is expected to be inconsequential. The Company recognizes the cost of the equity awards over the period during which an employee or director is required to provide services in exchange for the award, usually the vesting period. Forfeitures are recognized as they occur. Unvested shares of restricted stock grants are not included in common shares outstanding until vesting has occurred. Income Taxes The Company recognizes deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets, liabilities and carry forwards. Additionally, the Company recognizes deferred tax assets for the expected future effects of all deductible temporary differences, loss carry forwards, and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance for any tax benefits that, based on current circumstances. are considered more likely than not they will not be realized. As of December 31, 2023 and 2022, management did not believe it was more likely than not that such a tax benefit would be realized and as such, a valuation allowance has been recorded. In assessing the need for a valuation allowance for the Company’s deferred tax assets, a significant item of negative evidence considered was the cumulative book loss over the three-year period ended December 31, 2023. The Company assesses its uncertain tax positions annually. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that is probable of being realized upon ultimate settlement. The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. Income (Loss) Per Share Basic net income (loss) per share is computed based on the weighted average number of common shares outstanding. Diluted net income (loss) per share is calculated by dividing net income or loss by the diluted weighted average common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist of in-the-money outstanding stock options, and unvested restricted stock. When there is a loss from continuing operations, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of net income (loss) per share. The treasury stock method is used to measure the dilutive impact of unvested restricted stock and in-the-money stock options. Recently Adopted Accounting Standards On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 to Topic 326, Financial Instruments-Credit Losses, as amended by other related ASUs that provided targeted improvements. The standard changes the impairment model for trade receivables and other financial assets measured at amortized cost. This ASU requires the use of a new forward-looking “expected loss” model compared to the previous “incurred loss” model, resulting in accelerated recognition of credit losses. This ASU primarily applies to the Company’s accounts receivable balances, of which the majority are received within a short-term period of one to three months. The Company monitors the credit quality of its counterparties through review of collections, credit ratings, and other analyses as appropriate given relevant facts and circumstances. The Company develops its estimated allowance for credit losses primarily using an aging method and analyses of historical loss rates as well as consideration of current and future conditions that could impact its counterparties’ credit quality and liquidity. The adoption and implementation of this ASU did not have a material impact on the Company’s consolidated financial statements. Reclassifications Historically, the Company included gathering, transportation, and treating costs within lease operating expense on the Consolidated Statement of Operations. Effective July 1, 2023, the Company began classifying gathering, treating, and transportation costs in a separate line item, titled gathering, transportation, and treating, on the Consolidated Statement of Operations and recast prior period results for this reclassification. This reclassification had no impact on the Company's net income (loss), income (loss) per share, cash flows, or financial position. The Company revised historical periods to reflect this change in presentation. The Company has historically included revenue and royalties payable within accounts payables and accrued liabilities on the Consolidated Balance Sheets. Effective December 31, 2023, the Company began classifying revenue and royalties payable as a separate line item on the Consolidated Balance Sheet. The consolidated statement of cash flows has been updated to separate changes in operating assets and liabilities from revenue and royalties payable and accounts payable and accrued liabilities. This reclassification had no impact on the Company's net income (loss), income (loss) per share, cash flows, or financial position. The Company revised historical periods to reflect this change in presentation.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205/tableOfContent + Details
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