U.S. Energy's Q2 2025: Key Contradictions on Processing Plant Costs, Helium Market Stability, and Resource Confidence

Industrial Gas Project Development:
- U.S. Energy Corp drilled its second and third industrial gas wells in Montana, targeting helium and CO2-rich formations, with drill costs within budget.
- Peak production rates reached 12.2 million cubic feet per day with a premium gas composition, leading to significant helium and CO2 reserves.
- The project is progressing towards bringing operations online, supported by a positive resource assessment and strategic infrastructure plans.

Financial Results and Divestitures:
- Revenue for Q2 2025 was approximately $2 million, a decline from the previous year, attributed to divestitures since Q4 2023.
- Lease operating expenses (LOE) were $1.6 million, or $32.14 per BOE, reflecting the impact of divestitures and the company's focus on optimizing its remaining oil assets.
- The company maintains a strong cash position of over $6.7 million, supporting its strategic growth initiatives.

Carbon Management and Environmental Opportunities:
- U.S. Energy controls one of the largest CO2 deposits in the U.S., with geology suited for permanent storage and enhanced oil recovery.
- The company aims to access federal carbon credits under Section 45Q, with injection testing supporting a sequestration capacity of 240,000 metric tons of CO2 annually.
- This strategic positioning allows U.S. Energy to integrate its CO2 supply with hydrocarbon recovery, offering potential long-term carbon management solutions.

Legacy Oil and Gas Portfolio:
- Lower commodity prices have impacted earnings across the sector, including U.S. Energy's legacy assets, which are no longer the primary focus.
- The company remains opportunistic in pursuing value-maximizing divestitures of non-core legacy assets to strengthen its financial position.
- The proceeds of these divestitures are used to invest in the core Montana industrial gas project, aiming for a breakout year in 2026.