Q2 2025 US Energy Corp Earnings Call
Operator: Greetings and welcome to the US Energy Corp. Second Quarter 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mason McGuire, VP of Finance and Strategy. Thank you. You may begin.
Speaker #2: A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.
Speaker #2: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mason McGuire, VP of Finance and Strategy. Thank you.
Speaker #2: You may begin.
Speaker #3: Thank you, Operator, and good morning, everyone. Welcome to US Energy Corp's second quarter 2025 results conference call. Ryan Smith, our Chief Executive Officer, will provide an overview of our operating results and discuss the company's strategic outlook and our chief financial officer, Mark Zajac, will give more detailed overview of our financial results.
Mason McGuire: Thank you, Operator, and good morning, everyone. Welcome to US Energy Corp's Second Quarter 2025 Results Conference Call. Ryan Smith, our Chief Executive Officer, will provide an overview of our operating results and discuss the company's strategic outlook. Our Chief Financial Officer, Mark Zajac, will give a more detailed overview of our financial results. Before this morning's market opening, US Energy issued a press release summarizing operating and financial results for the quarter ended June 30, 2025. This press release, together with accompanying presentation materials, is available in our Investor Relations section of our website at www.usenergy.com. Today's discussion may contain forward-looking statements about the future business and financial expectations, as control results may differ significantly from those projected in today's forward-looking statements due to the various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission.
Speaker #3: Before this morning's market opening, US Energy issued a press release summarizing operating and financial results for the quarter ended June 30, 2025. This press release, together with accompanying presentation materials, are available in our Investor Relations section of our website, at www.usenergy.com.
Speaker #3: Today's discussion may contain forward-looking statements about the future business and financial expectations, actual results may differ significantly from those projected in today's forward-looking statements due to the various risks and uncertainties including the risks described in our periodic reports filed with the Securities and Exchange Commission.
Speaker #3: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP AP financial measures may be disclosed during this call.
Mason McGuire: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. With that, I would like to turn the call over to Ryan Smith.
Speaker #3: A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. With that, I would like to turn the call over to Ryan Smith.
Speaker #4: Good morning, everyone. And thank you for joining us today. I'm pleased to walk you through our second quarter results, highlight key milestones, and share a strategic update as we continue advancing US Energy's transformation and growth.
Ryan Smith: Good morning, everyone, and thank you for joining us today. I am pleased to walk you through our second quarter results, highlight key milestones, and share a strategic update as we continue advancing US Energy Corp.'s transformation and growth. As we have discussed in prior quarters, our primary focus is the development of our Montana-based industrial gas project, an asset we believe is uniquely positioned to meet growing demand, deliver strong economics, and achieve meaningful scale in the public markets. This summer, we completed the initial phase of our development program and remain firmly on track to bring operations online. This first phase included drilling two new development wells, advancing engineering on an acquired already productive well, flow testing all existing producing wells, reaching a final investment decision on infrastructure, and making significant progress on our carbon management strategy. I will walk you through these in more detail now.
Speaker #4: As we've discussed in prior quarters, our primary focus is the development of our Montana-based industrial gas project. An asset we believe is uniquely positioned to meet growing demand and deliver strong economics and achieve meaningful scale in the public markets.
Speaker #4: This summer, we completed the initial phase of our development program and remain firmly on track to bring operations online. This first phase included drilling two new development wells, advancing engineering on an acquired, already productive well, flow testing all existing producing wells, reaching a final investment decision on infrastructure, and making significant progress in our carbon management strategy.
Speaker #4: I will walk you through these in more detail now. Starting with upstream development, in the second quarter, we drilled our second and third industrial gas wells, targeting the helium and CO2-rich DUPRO formation.
Ryan Smith: Starting with upstream development in the second quarter, we drilled our second and third industrial gas wells, targeting the helium and CO2-rich dupe row formation, both within budget. Including the productive well we acquired earlier this year, peak rates reached approximately 12.2 million cubic feet per day, with a premium gas composition of approximately 85% CO2, 5% natural gas, and 0.4% helium. To optimize reservoir performance and maximize value, we subsequently managed production in the 8 million cubic feet a day range with similar compositions. With three producing industrial gas wells and two injection wells, we are well positioned for near-term cash flow generation. These results validate the quality and scale of our resource, further reinforced by our independent resource report. Following drilling, we engaged Ryder Scott to prepare a volumetric resource assessment of our Montana asset.
Speaker #4: Both within budget. Including the productive well we acquired earlier this year, peak rates reached approximately 12.2 million cubic feet per day, with a premium gas composition of approximately 85% CO2, 5% natural gas, and 0.4% helium.
Speaker #4: To optimize reservoir performance and maximize value, we subsequently managed production in the 8 million cubic feet a day range, with similar compositions. With three producing industrial gas wells and two injection wells, we are well positioned for near-term cash flow generation.
Speaker #4: These results validate the quality and scale of our resource, further reinforced by our independent resource report. Following drilling, we engaged Ryder Scott to prepare a volumetric resource assessment of our Montana asset.
Speaker #4: The report confirmed net contingent resources, of 444 billion cubic feet of CO2, and 1.3 billion cubic feet of helium, among the largest known deposits of its kind.
Ryan Smith: The report confirmed net contingent resources of 444 billion cubic feet of CO2 and 1.3 billion cubic feet of helium, among the largest known deposits of its kind. We expect to release a commercial resource report once processing facility development plans are finalized. It is worth emphasizing the unique competitive positioning of the Kivan Dome. While most U.S. helium production is tied to heavy hydrocarbon gas streams, our project is sourced from a limited hydrocarbon stream, delivering a lower environmental footprint and aligning with growing market demand for sustainable solutions. With the initial development program concluding in September, we will break ground on our Kivan Dome processing plant. This facility will separate our upstream gas into helium, natural gas, and CO2 streams, each with its own monetization pathway. We expect construction costs of under $10 million, funded by our existing balance sheet, and a modest strategic use of debt.
Speaker #4: We expect to release a commercial resource report once processing facility development plans are finalized. It's worth emphasizing the unique competitive positioning of the Kievan Dome.
Speaker #4: While most US helium production is tied to heavy hydrocarbon gas streams, our project is sourced from a limited hydrocarbon stream, delivering a lower environmental footprint and aligning with growing market demand for sustainable solutions.
Speaker #4: With the initial development program concluding in September, we will break ground on our Kievan Dome processing plant. This facility will separate our upstream gas into helium, natural gas, and CO2 streams, each with its own monetization pathway.
Speaker #4: We expect construction costs of under 10 million dollars, funded by our existing balance sheet and a modest strategic use of debt. Importantly, this infrastructure will not only serve our operations but will also provide a platform to support under-capitalized producers in the region.
Ryan Smith: Importantly, this infrastructure will not only serve our operations but will also provide a platform to support undercapitalized producers in the region. With control over the majority of the basin's helium supply, we see multiple opportunities to expand our value capture. Lastly, I would like to touch on US Energy Corp.'s carbon management front. US Energy Corp. controls one of the largest CO2 deposits in the U.S., with geology ideally suited for both permanent storage and enhanced oil recovery. Our proximity to the Cut Bank oil field, just 15 miles away, offers a unique and lucrative integration opportunity between CO2 supply and hydrocarbon recovery. We already hold multiple Class II injection permits, with additional approvals expected in August.
Speaker #4: With control over the majority of the basin's helium supply, we see multiple opportunities to expand our value capture. Lastly, I would like to touch on US Energy's carbon management front.
Speaker #4: US Energy controls one of the largest CO2 deposits in the US, with geology ideally suited for both permanent storage and enhanced oil recovery. Our proximity to the Cut Bank oil field, just 15 miles away, offers a unique and lucrative integration opportunity, between CO2 supply and hydrocarbon recovery.
Speaker #4: We already hold multiple Class 2 injection permits, with additional approvals expected in August. Recent injection testing at two disposal wells achieved sustained rates of over 17 million cubic feet a day, supporting a sequestration capacity of approximately 240,000 metric tons of CO2 annually.
Ryan Smith: Recent injection testing at two disposal wells achieves sustained rates of over 17 million cubic feet a day, supporting a sequestration capacity of approximately 240,000 metric tons of CO2 annually. We have also initiated our EPA monitoring, reporting, and verification plan, targeting submission this September and approval by spring 2026, positioning us to potentially access federal carbon credits under Section 45Q. We are highly optimistic about the road ahead. The Kivan Dome represents a first-mover opportunity in the industrial gas sector and one that cannot be replicated. Our vision is to build a full-cycle platform that spans upstream production, midstream processing, and long-term carbon management while maintaining strict capital discipline. The data collected to date supports a highly economic development path, both at the wellhead and infrastructure levels. Initial phases have modest funding requirements, with a clear and measured capital plan designed to scale returns over time.
Speaker #4: We've also initiated our EPA monitoring reporting and verification plan, targeting submission this September and approval by spring 2026. Positioning us to potentially access federal carbon credits under Section 45Q.
Speaker #4: We are highly optimistic about the road ahead. The Kievan Dome represents a first-mover opportunity in the industrial gas sector, and one that cannot be replicated.
Speaker #4: Our vision is to build a full-cycle platform that spans upstream production, midstream processing, and long-term carbon management, while maintaining strict capital discipline. The data collected to date supports a highly economic development path, both at the wellhead and infrastructure levels.
Speaker #4: Initial phases have modest funding requirements, with a clear and measured capital plan designed to scale returns over time. Turning briefly to our legacy oil and gas portfolio, lower commodity prices have weighed on earnings across the sector, including ours.
Ryan Smith: Turning briefly to our legacy oil and gas portfolio, lower commodity prices have weighed on earnings across the sector, including ours. While these assets are no longer our primary focus, they do remain valuable. Our 2024 monetization program eliminated debt and strengthened liquidity, and we remain opportunistic in pursuing value-maximizing divestitures. As we progress through 2025, our strategy remains clear: invest in our core Montana industrial gas project, monetize non-core legacy assets where appropriate, and maintain capital discipline to position 2026 as a breakout year in our transformation. We believe US Energy Corp. stands apart with a scalable, high-margin development platform supported by legacy assets that require minimal reinvestment. This structure allows us to pursue high-return growth in industrial gases while reducing exposure to commodity volatility. In short, US Energy Corp. is emerging as a differentiated and growth-oriented industrial gas company, with exposure across upstream, midstream, and carbon management.
Speaker #4: While these assets are no longer our primary focus, they do remain valuable. Our 2024 monetization program eliminated debt and strengthened liquidity, and we remain opportunistic in pursuing value-maximizing divestitures.
Speaker #4: As we progress through 2025, our strategy remains clear: invest in our core Montana industrial gas project, monetize non-core legacy assets where appropriate, and maintain capital discipline to position 2026 as a breakout year in our transformation.
Speaker #4: We believe US Energy stands apart with a scalable, high-margin development platform, supported by legacy assets that require minimal reinvestment. This structure allows us to pursue high-return growth in industrial gases while reducing exposure to commodity volatility.
Speaker #4: In short, US Energy is emerging as a differentiated and growth-oriented industrial gas company, with exposure across upstream, midstream, and carbon management. Our strong financial position and clean capital structure give us a competitive advantage, and we believe the strategy we're executing today will deliver sustainable long-term shareholder value.
Ryan Smith: Our strong financial position and clean capital structure give us a competitive advantage, and we believe the strategy we are executing today will deliver sustainable long-term shareholder value. With that, I will now turn the call over to our Chief Financial Officer, Mark Zajac, who will provide an update on our financial results for the quarter.
Speaker #4: With that, I'll now turn the call over to our Chief Financial Officer, Mark Zajac, who will provide an update on our financial results for the quarter.
Speaker #5: Thank you, Ryan. Hello, everyone. Let's delve into the financial details for the second quarter of 2025. Our operating results reflect the cumulative impact of our divestitures, since the fourth quarter of 2023.
Mark Zajac: Thank you, Ryan. Hello, everyone. Let's delve into the financial details for the second quarter of 2025. Our operating results reflect the cumulative impact of our divestitures since the fourth quarter of 2023. Revenue was approximately $2 million, down from $6 million same quarter last year, reflecting the impact of divestitures in the second half of 2024. Oil comprised over 90% of the revenue this quarter, reflecting our focus on optimizing our remaining oil assets. Lease operating expense for this quarter was $1.6 million, or $32.14 at BOE, compared to $3.1 million, or $27.69 per BOE in the same quarter last year. The overall decrease reflects our divestitures since first quarter last year, and on a BOE basis, the increase is a function of the assets remaining in our portfolio.
Speaker #5: Revenue was approximately $2 million, down from $6 million in the same quarter last year, reflecting the impact of divestitures in the second half of 2024. Oil comprised over 90% of the revenue this quarter, reflecting our focus on optimizing our remaining oil assets.
Speaker #5: Lease operating expense for this quarter was 1.6 million, or $32.14 of BOE, compared to $3.1 million, or $27.69 per BOE. In the same quarter last year, the overall decrease reflects our divestitures since first quarter last year, and on a BOE basis, the increase is a function of the assets remaining in our portfolio.
Speaker #5: Cash-generated administrative expense was 1.7 million for the second quarter of 2025, which is in line with our run rate expectations quarterly. We have made significant improvements to our organization and structured the team around our industrial gas development.
Mark Zajac: Cash general administrative expense was $1.7 million for the second quarter of 2025, which is in line with our run rate expectations quarterly. We have made significant improvements to our organization and structured the team around our industrial gas development. As for our balance sheet, as of June 30, 2025, there was no debt outstanding on our $20 million revolving credit facility, and our cash position stood at over $6.7 million, reflecting the net proceeds of $10.3 million generated from our successful equity offering during the first quarter. This was offset by $4.6 million of industrial gas acquisition and capital expenditures. We have agreed on terms on the renewal of our credit agreement, extending it to May 31, 2029. We are completing customary closing activities now and expect to execute the amendment in the coming days.
Speaker #5: As for our balance sheet, as of June 30, 2025, there was no debt outstanding on our $20 million revolving credit facility, and our cash position stood at over 6.7 million, reflecting the net proceeds of 10.3 million generated from our successful equity offering during the first quarter.
Speaker #5: This was offset by 4.6 million of industrial gas acquisition and capital expenditures. We have agreed on terms on the renewal of our credit agreement, extending it to May 31, 2029.
Speaker #5: We are completing customary closing activities now and expect to execute the amendment in the coming days. The renewed agreement includes covenant waivers to the first quarter of 2026, as we achieved profitability on our industrial gas operations.
Mark Zajac: The renewed agreement includes covenant waivers for the first quarter of 2026 as we achieve profitability on our industrial gas operations. Overall, our operating performance and financial results reflect our recent divestitures as well as the company's new initiatives. We continue to maintain balance sheet discipline and integrity. My objectives continue to ensure that the company's reporting processes maintain a high standard of excellence, and we feel confident in our ability to support the growth of the initiatives we currently have underway. Thank you for your participation this morning. We are now ready to take your questions.
Speaker #5: Overall, our operating performance and financial results reflect our recent divestitures, as well as the company's new initiatives. We continue to maintain balance sheet discipline and integrity.
Speaker #5: My objectives continue to ensure that the company's reporting processes maintain a high standard of excellence, and we feel confident in our ability to support the growth of initiatives we currently have underway.
Speaker #5: Thank you for your participation this morning. We are now ready to take your questions.
Speaker #1: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Operator: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Once again, that is star one to ask a question at this time. One moment while we pull for the first question. The first question comes from Charles Meade with Johnson Rice. Please proceed.
Speaker #1: You may press *2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys.
Speaker #1: Once again, that's *1 to ask a question at this time. One moment while we hold for the first question. The first question comes from Charles Mead with Johnson Rice.
Speaker #1: Please proceed.
Speaker #6: Yes, good morning, Ryan, and Mark.
Charles Meade: Yes, good morning, Ryan and Mark.
Speaker #7: Hi, good morning, Charles.
Ryan Smith: Hey, good morning, Charles.
Speaker #6: Hey, Ryan, I want to you used the word in your press release, about the resource report, I guess. You used the word pleased. I wanted to ask a little more detail there.
Charles Meade: Hey, Ryan Smith, I wanted to ask you about the word you used in your press release regarding the resource report. You used the word "pleased." I wanted to ask a little more detail there. Was there anything in that, you know, so you used the word "pleased," it is good, but was there anything in there that surprised you, either to the upside or downside, whether it be, you know, the total resource that they came up with or the concentrations? If you could just give us the kind of inside baseball on how that process rolled out to get to that final numbers that you gave us.
Speaker #6: Was there anything in there that you know, so you used the word "pleased"—it's good—but was there anything in there that surprised you, either to the upside or downside? Whether it be, you know, the total resource that they came up with or the concentrations or, you know, if you just give us the kind of inside baseball on how that process rolled out to get to that final numbers that you gave us.
Speaker #7: Yeah, no, good question. So, I am pleased with it. I would say, you know, not surprised, because those numbers, again, when you're dealing with the quantum of billions of cubic feet, you know, rounding errors can be pretty big numbers.
Ryan Smith: Yeah, no, good question. I am pleased with it. I would say, not surprised because those numbers, again, when you're dealing with the quantum of billions of cubic feet, rounding errors can be pretty big numbers. Since we started this process, I don't know, 18 months ago or so and progressed it, we believe that the resource, both helium, both CO2, there's a 5% or so natural gas cut in that stream, which we didn't have in the resource report. We believe from the very beginning that the numbers here were very large. That's why we went after the project. Having Ryder Scott, which, for my money, is good and reputable as any reserve firm in the world, verify that and get a formal big company third-party stamp of approval for what we already believed internally. It was very, I'll use the word again, very pleasing.
Speaker #7: But since we've started this process, I don't know, 18 months ago or so, and progressed it, we believe that the resource both helium, both CO2, you know, there's a 5% or so net gas cut in that stream, which we didn't have in the resource report.
Speaker #7: But we believe, from the very beginning, that the numbers here were very large. And, you know, that's why we went after the project. So, having Ryder Scott, which, you know, for my money, is as good and reputable as any reserve firm in the world, verify that and get, you know, a formal big company third-party stamp of approval for, you know, what we already believed internally, it was very—I'll use the word again—very pleasing.
Speaker #7: It wasn't surprising, because we thought it was there. And, you know, as we start our core development across the structure, and again, just looking at our maps, which we've had on our website etc., we think there's more upside to go.
Ryan Smith: It wasn't surprising because we thought it was there. As we start our core development across the structure, and again, just looking at our maps, which we have on our website, etc., we think there's more upside to go. This is kind of our initial core development area. So I think there's upside to those numbers as we continue to move outward off that structure. No, we were, I'm pleased with it. I'm very happy with it. It shows the immense running room of what we have as we continue to develop this going forward across multiple streams of that gas stream.
Speaker #7: This is kind of our initial core development area. So I think there's upside to those numbers, as we continue to move outward. Off that structure, but no, we were I'm pleased with it.
Speaker #7: I'm very happy with it. It shows the immense running room of what we have as we continue to develop this going forward across multiple streams of that gas stream.
Speaker #6: Got it. And that's a good segue to my follow-up question. I recognize it's early, but the questions on the, you know, commercial off-take agreements, and you talked a little bit about, you know, some CO2 going to the Cut Bank field for EOR and 45Q.
Charles Meade: Got it. That is a good segue to my follow-up question. I recognize it is early, but the question is on the commercial offtake agreements. You talked a little bit about some CO2 going to the Cut Bank oil field for EOR and Section 45Q federal carbon credits. Can you give us a sense of what your goals are for different offtake streams, whether it is the CO2 or the helium? I guess natural gas is really a rounding error, so that is not important. What are your goals for those different streams? What is a timeframe that we should be thinking about for some kind of a resolution or some kind of additional information on your commercial offtake arrangements?
Speaker #6: But can you give us a sense of, you know, what are your goals for different off-take streams, whether it's, you know, the CO2 or the helium or, you know, I guess natural gas is really a rounding error, so that's not important.
Speaker #6: But what are your goals for those different streams, and what's a timeframe to, you know, that we should be thinking about to for some kind of a, you know, resolution or some kind of additional information on your commercial off-take arrangements?
Speaker #7: Yeah, no, good question. So there's a few ways, there's a few parts to that question. I think from a high level, you know, you have your gaseous helium, you have your CO2, which can really be kind of a three-pronged monetization via permanent sequestration via EOR, use and via merchant retail market sales.
Ryan Smith: Yeah, no, good question. There are a few ways, there are a few parts to that question. I think from a high level, you know, you have your gaseous helium, you have your CO2, which can really be kind of a three-pronged monetization via permanent sequestration, via EOR use, and via, you know, merchant retail market sales. Probably an obvious comment, but, you know, I would like to control the offtakes as much as possible. What I mean by that is, you know, with the recent big, beautiful bill passage and the value for CO2 EOR use equaling permanent sequestration use, the fact that, you know, our Montana assets going back literally 100 years ago to Chevron Unocal owning them was always targeted for CO2 tertiary flood. You know, economics are always a little bit stretched based on oil prices and the expense of CO2.
Speaker #7: Probably an obvious comment, but, you know, I would like to control the off-takes as much as possible. And what I mean by that is, you know, with the recent big, beautiful build passage and the value for CO2 EOR use equaling permanent sequestration use, the fact that, you know, our Montana assets going back literally 100 years ago to Chevron Unical owning them, was always targeted for CO2 tertiary flood.
Speaker #7: And, you know, economics are always a little bit stretched. Based on oil prices and the expense of CO2, and now that that expense has turned into an extremely significant revenue stream, we've started looking at the EOR uses for the CO2 a whole lot more.
Ryan Smith: Now that that expense has turned into an extremely significant revenue stream, we've started looking at the EOR uses for the CO2 a whole lot more. One, because of the economics, two, because we're on both sides of the table in negotiating that use. That gives us a very doable economic use for that CO2. I think on the, and as well as the permanent sequestration side, right? We don't need to get third-party approvals for that because we're agreeing to both sides of that because we own all the assets. I think on the helium side, I'll say I think we enter into something by the end of the year. I'll caveat that by saying we're probably in a position to be able to do it now. We have some stuff in front of us. You know, the offtake helium agreement market is pretty opaque.
Speaker #7: One, because of the economics. Two, because we're on both sides of the table in negotiating that use. So that gives us a very doable economic use for that CO2.
Speaker #7: I think on the and as well as the permanent sequestration side, right? Like, we don't need to get third-party approvals for that, because we're agreeing to both sides of that, because we own all the assets.
Speaker #7: I think on the helium side, I'll say I think we enter into something by the end of the year. I'll caveat that by saying we're probably in a position to be able to do it now.
Speaker #7: We have some stuff in front of us. You know, the off-take helium agreement market is pretty opaque, and when you go to market with something, and you're not a massive company, the counterparties know that.
Ryan Smith: When you go to market with something and you're not a massive company, the counterparties know that and, you know, will reflect that in price. So I think between now and the end of the year, you know, we'll kind of pick our spot, but you'll see something on that front as well. Then kind of, you know, sprinkles on the ice cream would be us being able to sell a merchant retail CO2 into the West Coast markets. I can't give a timeframe on that just because you deal with very specific parties, but that's something that we're working on actively as well.
Speaker #7: And, you know, we'll reflect that in price. So I think between now and the end of the year, you know, we'll kind of pick our spot.
Speaker #7: But you'll see something on that front as well. And then kind of, you know, sprinkles on the ice cream would be us being able to sell merchant retail CO2 into the West Coast markets.
Speaker #7: I can't give a timeframe on that, just because you deal with very specific parties. But that's something that we're working on actively as well.
Speaker #7: So I think, like, in summary, you'll see intercompany agreements on sequestration and EOR use for the CO2. In the relatively near term, helium off-take, which would basically be off-take agreements with the owner of helium liquefaction equipment by the end of the year.
Ryan Smith: So I think, in summary, you'll see intercompany agreements on sequestration and EOR use for the CO2 in the relatively near term, helium offtake, which would basically be offtake agreements with the owner of helium liquefaction equipment by the end of the year, and, you know, proactively merchant CO2 sales into the retail market. TBD, but something we're working on actively.
Speaker #7: And, you know, proactively merchant CO2 sales into the retail market. TBD, but something we're working on actively.
Speaker #6: Got it. That is great detail and a good summary. Thank you, Ryan.
Charles Meade: Got it. That is a great detail and a good summary. Thank you, Ryan Smith.
Speaker #7: Yes.
Ryan Smith: Yes.
Speaker #1: The next question comes from Tom Kerr with Zax. Please proceed.
Operator: The next question comes from Tom Kerr with ZAX. Please proceed.
Speaker #8: Good morning, guys.
Ryan Smith: Good morning, guys.
Speaker #7: Hey, Tom.
Mark Zajac: Hey, Tom. Good morning.
Speaker #8: Good Good morning. The helium concentration on the drilled wells, I think in the text it said 0.47, but we had always talked about 0.6.
Ryan Smith: The helium concentration on the drilled wells, I think in the text it said 0.47, but we had always talked about 0.6 in the last several quarters. Was there anything there or what happened there?
Speaker #8: In the last several quarters, was there anything there, or what happened there?
Speaker #7: Yeah, I mean, it's less than our initial well that we acquired, and did more work on. And I would love to have like a very dignified reason answer for you.
Mark Zajac: Yeah, I mean, it is less than our initial well that we acquired and did more work on. I would love to have a very dignified, reasoned answer for you. I think that the honest answer is when you are dealing with basis points on a gas stream, sometimes it comes in more, sometimes it comes in less. The numbers were what kind of what they were, right? We think that if we drill another well to get the overall volumes up a little bit more, we have some ideas and some locations to where we think that that composition is a little bit higher than what some of our subsequent wells produced in. Again, we go after the areas we think are prolific enough to defend processing, economics, etc. We always expected some variation, potentially to the upside, potentially to the downside.
Speaker #7: I think that the honest answer is, when you're dealing with basis points on a gas stream, you know, sometimes it comes in more; sometimes it comes in less.
Speaker #7: And the numbers were kind of what they were, right? We think that if we drill another well to get the overall volumes up a little bit more, we have some ideas.
Speaker #7: And some locations, to where we think that that composition is a little bit higher than what some of our subsequent wells produced in. But again, you know, we go after the areas we think are prolific enough to defend processing economics, etc.
Speaker #7: We always expected some variation potentially to the upside, potentially to the downside. Unfortunately, it was a little bit to the downside. I would say that those numbers are still highly economic for us, as far as part of our full cycle program.
Mark Zajac: Unfortunately, it was a little bit to the downside. I would say that those numbers are still highly economic for us as part of our full cycle program. They kind of are what they are. I do not know if that is what the answer you are looking for, but I think that is what I got.
Speaker #7: But they kind of are what they are. So I don't know if that's what the answer you're looking for, but I think that's what I got.
Speaker #8: Yeah, you just answered my second question, which is still an economically viable level. You know, in terms of economics and cash flow, that sort of stuff, so.
Ryan Smith: You just answered my second question. It is still an economically viable level, in terms of economics and cash flow, that sort of stuff.
Speaker #7: Yeah, absolutely, right? Like, we look at it starting off each economic driver kind of in its own silo and standing, you know, on its own two feet, right?
Mark Zajac: Yeah, absolutely, right? We look at it starting off each economic driver kind of in its own silo and standing on its own two feet, right? We do not want to have an uneconomic process in one pocket and then depend on the other pocket to defend activity. So the helium concentrations on our current flows, and so much of it depends on processing and infrastructure, and that goes into the planning as well, right? The size and etc., right? And what works for US Energy Corp., and then layering on, I will call it revenues and incentives from CO2 sequestration, EOR usage, really juices those economics very extensively on top of what we already have on the helium side.
Speaker #7: Like, we don't want to have an uneconomic process in one pocket, and then depend on the other pocket to, you know, defend activity. So the helium concentrations on our current flows and so much of it depends on processing and infrastructure.
Speaker #7: And that goes into the planning as well, right? Like, the size and etc. What works for us, and then, you know, layering on—I'll call it revenues and, you know, incentives from CO2 sequestration EOR usage, you know, really juices those economics.
Speaker #7: Very extensively. On top of what we already have on the helium side.
Speaker #8: Got Got it. All right, that makes sense. Thanks. And then just on the processing plant. Any sort of changes in the complications of developing that, or cost levels, or since changes since we last last talked?
Ryan Smith: Got it. All right. That makes sense. Thanks. Then, just on the processing plant, any sort of changes in the complications of developing that or cost levels or changes since we last talked?
Speaker #7: I think there's a few changes. I won't we're still going through I'll say a few. Design options, right now, and the reason for that isn't for difficulty, it's really the incentives on the recent bill evening out EOR and sequestration dollars.
Mark Zajac: I think there are a few changes. I won't, we are still going through, I will say, a few design options right now. The reason for that isn't for difficulty. It is really the incentives on the recent bill evening out EOR and sequestration dollars really kind of, you know, changed the proverbial calculus for US Energy Corp. I mean, we have an extensive EOR asset in Montana. It is very large. It is very close. The geography couldn't be any better. Some of the equipment and processes to call it strip out helium, sell helium, strip out natural gas, sell natural gas, get the CO2 to a level where it is getting used for EOR purposes is actually a little more simple and a little bit cheaper than what we were originally planning for.
Speaker #7: Really kind of, you know, change the proverbial calculus for us. I mean, we have an extensive EOR asset in Montana. It's very large, and it's very close.
Speaker #7: The geography couldn't be any better. And some of the equipment and processes to call it strip out helium, sell helium, strip out net gas, sell net gas, get the CO2 to a level where it's getting used for EOR purposes, is actually a little more simple and a little bit cheaper than what we were originally planning for.
Speaker #7: So, you know, obvious comment: if there's something that we can do that results in the same economics and do it at a cheaper cost, we're going to pursue that route.
Mark Zajac: You know, obvious comment, if there is something that we can do that results in the same economics and do it at a cheaper cost, we are going to pursue that route. That is probably the main reason why we haven't started on the plant. We are just fine-tuning our economic model, you know, our strategy, construction planning, and exactly the lowest cost within reason that we can spend on the processing infrastructure side to access these multiple value chains as soon as possible.
Speaker #7: So that's probably the main reason why we haven't started on the plant, we're just we're fine-tuning our economic model our strategy construction planning and exactly the lowest cost within reason that we can spend on the processing infrastructure side to access these multiple value chains as soon as possible.
Speaker #8: Got it. All right. Thanks for the color on that. Now, last question, the financial one on the cash SG&A slightly elevated because there's some business development in Montana.
Ryan Smith: Got it. All right. Thanks for the color on that. Our last question, the financial one on the cash SG&A, was slightly elevated because of some business development in Montana. I think you said it will stabilize. Does that mean we are going to see that level probably in the next two quarters of $1.7 million, or does that drift down because you do not have some of those Montana costs in there?
Speaker #8: Did you feel stabilized? Does that mean we're going to see that level, probably in the next two quarters, of 1.7 million? Or does that drift down because you don't have some of those Montana costs in there?
Speaker #7: I think it's the latter. It should drift down. You know, we've spent, I'd say, a fair amount of capital getting the project off the ground, and again, we're not a huge company. So, you know, one-time hits show up a lot more than they would with other larger entities.
Mark Zajac: I think it's the latter. It should drift down. You know, we've spent, I'd say, a fair amount of capital getting the project off the ground. Again, we're not a huge company, so one-time hits show up a lot more than they would with other larger entities. Consultants, both internal and third-party, a fair amount of legal work just on the landowner right-of-way, other ancillary charges, getting permits, getting disposal permits, all of that stuff. It's added up over the last couple of quarters. It'll continue to some extent just as we keep pushing stuff forward, but it definitely should lessen here in the very, very near term. It's probably already started to lessen a little bit as we go forward.
Speaker #7: Consultants, both internal and third-party, a fair amount of legal work, just on the landowner right-of-way other ancillary charges getting permits, getting disposal permits, all of that stuff.
Speaker #7: It's added up over the last couple of quarters. And it'll continue to some extent, just as we keep pushing stuff forward. But it definitely should lessen here in the very, very near term.
Speaker #7: It's probably already started to lessen a little bit as we go forward.
Speaker #8: Got it. Thanks. That's all I have for today. Thank you.
Ryan Smith: Got it. Thanks. That's all I have for today. Thank you.
Speaker #7: Thanks, Tom.
Mark Zajac: Thanks, Tom.
Speaker #1: Thank you. At this time, I would like to turn the call back over to management for closing comments.
Operator: Thank you. At this time, I would like to turn the call back over to management for closing comments.
Speaker #7: Great. I appreciate everybody for joining this morning, and listening to what we have going on. We're excited about our project. We continue to move it forward.
Ryan Smith: Great. I appreciate everybody for joining this morning and listening to what we have going on. We are excited about our project. We continue to move it forward. We are set up for 2026 to be a stellar year for US Energy Corp. as we get this project off the ground and online. I appreciate your time. Thank you.
Speaker #7: We're set up for 2026 to be a stellar year for U.S. Energy as we get this project off the ground and online. I appreciate your time.
Speaker #7: Thank you.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.