U.S. Energy Corp. (ticker: USEG), a natural resource exploration and development company with a primary focus on the exploration and development of oil and gas assets in the Williston Basin in North Dakota and Montana, Eagle Ford Shale play in South Texas, as well as its most recent entrance into the Woodbine play in Texas, entered into a letter of intent (LOI) to sell its Remington Village Apartment Complex located in Gillette, Wyoming.

The undisclosed buyer has offered to pay $16.0 million for the Apartment Complex; however, a purchase and sale agreement (PSA) has not yet been executed. USEG reported that the PSA is expected to be closed within 15 days.

OAG360 Comments:

Directly reflective of USEG’s current operational focus on its oil and natural gas properties, we view the planned non-core divestiture of its apartment complex as a positive. Even though the company will take a non-cash impairment loss of $1.97 million during Q2’12, USEG expects to net $15.76 million from this sale and will retire the $9.8 million note related to this asset with the proceeds from the sale. Keep in mind, the current cost basis for Remington Village is $17.73 million. By removing this item from its balance sheet, it should enhance the company’s ability to allocate additional capital to its high impact oil and natural gas exploration projects in the Woodbine, Eagle Ford and Bakken/Three Forks plays.

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OAG360 notes that from 2009 to 2011, USEG grew its proved reserves by 144% primarily through its Williston Basin drilling partnership with Brigham Exploration (now Statoil). USEG has added another operational catalyst to the table through its recent entrance into the Woodbine play in Texas where USEG and its partner, privately held Mueller Exploration, plan to target seven oil prospects in Anderson and Cherokee counties. Six of the wells will target the Woodbine, and one will target the Sub-Clarksville. All seven wells will be drilled with the same rig utilizing a pad drilling program.

Additional catalyst to look for during 2012:

  • Eagle Ford shale well results with operating partner Crimson Exploration (ticker: CXPO).
  • Mount Emmons Molybdenum project update on possible land exchange proposal.

The story continues to refine itself to a pure oil and natural gas exploration and production company. We believe the company will continue to target oil and liquids rich regions, maintain its strong balance sheet, generate strong cash margins, and partner in some of the country’s leading oil and gas plays. Today’s announcement was simply another step in the right direction.


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