LIQUIDITY

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY

2.        LIQUIDITY

As of March 31, 2016, the Company has a working capital deficit of $10,419 and an accumulated deficit of $120,307. Additionally, the Company incurred a net loss of $10,602 for the three months ended March 31, 2016. As of March 31, 2016, the Company failed to remain in compliance with financial covenants in its credit agreement and management does not expect the Company will regain compliance through the second quarter of 2016. Accordingly, the entire balance of $6,000 is required to be classified as a current liability. While no assurance can be provided, management believes the lender will not demand repayment until an alternative lender can be obtained.

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:

• 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. During the first quarter of 2016, the Company began to realize the benefits of these actions as aggregate general and administrative expenses were reduced by 48% compared to the first quarter of 2015.

• As discussed in Note 5, 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. A significant objective for completing the disposition was to improve future profitability through the elimination of the obligations to operate the water treatment plant and mine holding costs, which are expected to result in estimated annual cash savings of $3,000. During the first quarter of 2016, the Company began to realize the benefits of this disposition as aggregate operating expenses associated with the mining segment were reduced by 58% compared to the first quarter of 2015. 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.

Management believes approximately $7,000 of annualized 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 87,050 barrels of oil which is 60% of expected production for the last nine months of 2016.

As of March 31, 2016, the Company had cash and equivalents of $1,921, management expects to maintain cash balances in this range 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.