Monday, November 10, 2008

USEG Reports

U.S. Energy Corp. (Nasdaq: USEG) released its 10-Q today for the quarter ending in September. A few notes on this:

- Net cash and Treasuries totaled $58.2 million1, so given the company's current market cap of $53 million, its shares are still trading for less than its net cash and Treasuries.

- Rental revenues from the company's Gillette, WY real estate development increased $497,100 from $288,600 in the previous quarter.

- No revenues appear from the oil and gas projects yet, as the well with PetroQuest hadn't gone into production by the end of the quarter.

1The company had a total of $74.6 million in cash and Treasuries including $4.9 million in restricted Treasuries pledged as collateral on a construction loan for the Gillette project of about $16.4 million.


Anonymous said...

what is the bear case for this investment?

DaveinHackensack said...

The bear case:

- The company doesn't have earnings yet.

- The company's big long-term prospect, the molybdenum mine, may never get built.

- The company's medium term prospects, tens of millions of dollars in additional proceeds from its uranium properties, may not come through, if uranium prices drop further and demand for uranium is depressed.

- The company's short-term prospects, it's oil & gas exploration joint ventures may all be unsuccessful, or oil and gas prices may drop so much further as to make them uneconomic.

- The company's other short-term source of revenue, its Gillette, WY real estate development may lose renters and become a liability.

- Although the company has a lot of cash, it may deplete it eventually through unsuccessful investments and overhead.

Anonymous said...

Ok, thanks. It's got a family thing going, too. I read the comments on yahoo about the private jet. I guess the brothers aren't interested in monetizing their shares.

DaveinHackensack said...

Yeah, it is essentially a family business. And they do pay themselves fairly well. I don't have a problem with the plane though. They do seem to fly around the U.S. and Canada quite a bit, looking at natural resource prospects, and being headquartered in WY, it's probably more efficient to fly from one secondary or tertiary airport directly to another, versus flying to hubs commercially.

DaveinHackensack said...

Incidentally, the company is holding its 3Q conference call tomorrow. Unlike some small companies, USEG management takes questions from retail investors.