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USEG > SEC Filings for USEG > Form 10-K on 18-Mar-2013All Recent SEC Filings

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Form 10-K for US ENERGY CORP


18-Mar-2013

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 55
CONDITION AND RESULT OF OPERATIONS

Forward Looking Statement                                      55

General Overview                                               55

Results of Operations                                          60

Overview of Liquidity and Capital Resources                    70

Capital Resources                                              71

Capital Requirements                                           72

Overview of Cash Flow Activities                               73

Critical Accounting Policies                                   74

Future Operations                                              77

Effects of Changes in Prices                                   77

Contractual Obligations                                        77

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT        78
MARKET RISK

ITEM 8. FINANCIAL STATEMENTS                                   80

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON      129
ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES                              129

ITEM 9B. OTHER INFORMATION                                    132

PART III                                                      132

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE          132
GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION                               132

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  132
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND  133
DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES               133

PART IV                                                       136

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES           136

SIGNATURES                                                    139

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information discussed in this Annual Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts are forward-looking statements.

Examples of forward-looking statements in this Annual Report include:

planned capital expenditures for oil and gas exploration and environmental compliance;

potential drilling locations and available spacing units, and possible changes in spacing rules;

cash expected to be available for continued work programs;

recovered volumes and values of oil and gas approximating third-party estimates of oil and gas reserves;

anticipated increases in oil and gas production;

drilling and completion activities in the Williston Basin in North Dakota, the Eagle Ford shale in Texas and other areas;

timing of drilling additional wells and performing other exploration and development projects;

expected spacing and the number of wells to be drilled with our oil and gas industry partners;

when "Pooled Payout" or similar thresholds will be reached for the purposes of our agreements with Brigham and Zavanna;

expected working and net revenue interests, and costs of wells, relating to the drilling programs with our partners;

actual decline rates for producing wells in the Bakken/Three Forks and Eagle Ford formations;

submission of a plan of operations to the U.S. Forest Service and approval of such plan in connection with the Mt. Emmons molybdenum project ("Mt. Emmons Project"), the receipt of necessary permits relating to the project, and the expected length of time to permit and develop the project;

future cash flows, expenses and borrowings;

pursuit of potential acquisition opportunities;

anticipated business activities in the Gillette, Wyoming area and their impact on our multi-family housing complex;

our expected financial position;

other plans and objectives for future operations.

These forward-looking statements are identified by their use of terms and phrases such as "may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "will," "continue," "potential," "should," "could," "up to," and similar terms and phrases. Though we believe that the expectations reflected in these statements are reasonable, they involve certain assumptions, risks and uncertainties. Results could differ materially from those anticipated in these statements as a result of numerous factors, including, among others:

For oil and gas:

our ability to obtain sufficient cash flow from operations, borrowing and/or other sources to fully develop our undeveloped acreage positions;

volatility in oil and natural gas prices, including potentially depressed natural gas prices and/or declines in oil prices, which would have a negative impact on operating cash flow and could require ceiling test write-downs on our oil and gas assets, and which could adversely impact the borrowing base available under our credit facility with Wells Fargo Bank;

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the possibility that the oil and gas industry may be subject to new adverse regulatory or legislative actions (including changes to existing tax rules and regulations and changes in environmental regulation);

the general risks of exploration and development activities, including the failure to find oil and natural gas in sufficient commercial quantities to provide a reasonable return on investment;

future oil and natural gas production rates, and/or the ultimate recoverability of reserves, falling below estimates;

the ability to replace oil and natural gas reserves as they deplete from production;

environmental risks;

availability of pipeline capacity and other means of transporting crude oil and natural gas production, and related midstream infrastructure and services;

competition in leasing new acreage and for drilling programs with operating companies, resulting in less favorable terms or fewer opportunities being available;

higher drilling and completion costs related to competition for drilling and completion services and shortages of labor and materials;

unanticipated weather events resulting in possible delays of drilling and completions and the interruption of anticipated production streams of hydrocarbons, which could impact expenses and revenues, respectively; and

unanticipated down-hole mechanical problems, which could result in higher than expected drilling and completion expenses and/or the loss of the wellbore or a portion thereof.

For the molybdenum property:

the ability to obtain permits required to initiate mining and processing operations; and the risks associated with adverse rulings concerning these permits;

completion of a feasibility study based on a comprehensive mine plan, which indicates that the property warrants construction and operation of mine and processing facilities, taking into account projected capital expenditures and operating costs in the context of molybdenum price trends;

the ability to fund the capital expenditures required to build the mine and its infrastructure, and the related processing facilities, after all permits and a favorable feasibility study have been received;

the ability to find a suitable joint venture partner or raise sufficient capital for the project;

continued compliance with current environmental regulations and the possibility of new legislation, environmental regulations or permit requirements adverse to the mining industry;

molybdenum prices and operating costs staying within the parameters established by the feasibility study;

successfully managing the substantial operating risks attendant to a large scale mining and processing operations; and

compliance and operating costs associated with the wastewater treatment plant and stormwater management system.

For real estate:

insufficient demand for apartments in our multi-family apartment project in Gillette, Wyoming ("Remington Village") which could impact our ability to sell the property;

inability of the Company to sell Remington Village on acceptable terms; and

an economic downturn could affect rental rates, occupancy and bad debt collection.

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Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the section entitled "Risk Factors" in this Annual Report. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements made above and elsewhere in this Annual Report. We do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise.

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