(Editor’s note: With this announcement from U.S. Energy, major movement with the Mt. Emmons molybdenum mine started today with a transfer of the mine assets and liabilities. We will have more details in the next issue of the Crested Butte News…)
U.S. Energy Corp. Continues to Execute on Its Previously Stated Business Plan to Transform the Company and Focus on Oil and Gas as the Primary Business
DENVER, Feb. 12, 2016 (GLOBE NEWSWIRE) — U.S. Energy Corp. (NASDAQ:USEG) a Wyoming corporation, entered into an Acquisition Agreement with Mt. Emmons Mining Company (MEM), a subsidiary of Freeport-McMoRan Inc., whereby MEM acquired the Company’s Mt. Emmons mine site located in Gunnison County, Colorado, including the Keystone Mine, a related water treatment plant and other related properties. Under the Acquisition Agreement, MEM will replace the Company as the owner and permittee of the water treatment plant, the associated mining assets and will discharge the obligation of the Company to operate the water treatment plant upon closing. Concurrent with entry into the Acquisition Agreement, and as additional consideration for MEM to accept transfer of the properties, including the water treatment plant, the Company entered into a Series A Convertible Preferred Stock Purchase Agreement, pursuant to which the Company issued 50,000 shares of newly designated convertible preferred stock with a cumulative noncash dividend to MEM.
The transaction is a continuation of the transformation of U.S. Energy Corp. to solely focus on its ongoing oil and gas business. Previously, U.S. Energy Corp. announced a restructuring of the company by reducing its overhead costs significantly, moving the corporate headquarters to Denver for better access to financial services and to improve access to oil and gas deal flow. U.S. Energy Corp. intends to migrate from a traditionally non-operator of oil and gas assets to an oil and gas operating company going forward.
With the divestiture of the Mount Emmons Mining operations, U.S. Energy Corp. will have eliminated its mining related operating costs of approximately $3 million per year, a portion of which relates to operation of the water treatment plant. Coupled with the overhead reduction of $4 million at year end 2015, approximately $7 million savings can be realized on an annualized basis. The reductions have been implemented to support the ongoing business plan of U.S. Energy Corp. during this industry downturn and low commodity price environment.
The company intends to focus on securing appropriate financial funding to replace its current Reserve Based Lender along with adding growth capital for potential oil and gas asset acquisitions. U.S. Energy Corp. primarily owns interests in oil and gas assets in the Williston Basin of North Dakota and South Texas Eagle Ford Trend. The Company intends to evaluate properties in a variety of basins where it has operating expertise.
Further, to address the stock listing compliance issue the Company has entered into a continued listing agreement with NASDAQ through June 2016.
Mr. David Veltri, Chief Executive Officer, stated, “This transaction will end our mining activities and together with the earlier reductions and savings will position U.S. Energy to execute our strategy to transform the company to profitability and to grow our oil and gas assets during 2016 and beyond.”