Monday, December 22, 2008

USEG Management Agrees with Commenter J.K.

In a comment on a recent post ("Why We Will Be Using Fossil Fuels for Decades to Come"), commenter J.K. wrote,

Forget wind and solar(-except maybe satellite based), the real next gen energy is geothermal. You don't have to rely on conducive weather conditions or harming the environment. We probably will be using predominantly fossil fuels for the forseable future though. Hopefully not.

U.S. Energy Corp. (Nasdaq: USEG) executives had mentioned on previous occasions that they were considering investments in alternative energy, and today USEG issued a press release announcing that it had invested $3.445 million for a 25% stake in Standard Steam Trust LLC, a privately-held geothermal energy company based in Denver, CO. From the press release,

``After spending considerable time reviewing the renewable energy sector, we firmly believe that our entry into geothermal provides our company with a strong position in a market that has tremendous growth potential,'' said Mark Larsen, President of U.S. Energy Corp. ``Geothermal is a renewable subsurface fuel, and our partners are applying their extensive experience in modern oil and gas plays to geothermal exploration. This sector shows significant promise at a time when carbon management is playing an increasing role in the generation of clean energy in our nation,'' he added.

Since Standard Steam Trust is privately-held, it's hard to speculate on whether USEG paid a fair price for its stake, but it is probably prudent, for political reasons if nothing else, for a diversified natural resources company to position itself as a player in "clean" or "renewable" energy as well. Perhaps this will give USEG some environmental bona fides that will help it somewhat in getting the necessary approvals for its molybdenum mine.

The graphic above, on harnessing geothermal energy, comes from the Seattle Post-Intelligencer.


JK said...

Might have to jump into USEG after all! haha. The case for USEG just became stronger in my book.

But yes, from what I've read regarding alt energy sources, I like geothermal the best. The heat of the earth's mantle will always produce intense heat for harvesting, and no matter how much we harvest, it won't be depleted. It's always been just a matter of having the technology to be cost effective drilling to that depth. Many think we're finally there now tech-wise.

Tilly Bickets said...

USEG spent $1.047 MM to buy back shares at an average price of $4.59/share in 2007.

They spent $2.831 MM buying back shares at an average price of $3.04/share in 2008.

Why is there only one open market insider purchase over the past months with the shares now @ $1.50?

That one buy was for a measly $5,000.

If this company sees such great investment opportunities it should be expanding the business rather than trying to prop up the share price.

Stockdoc said...

Billy is back, how is the fake id business on your website?

Regarding USEG, one point I want to make clear is that I absolutely hate these small caps, primarily because you can't estimate their earnings. Large caps have tons of analysts following them, its easy to plug in their estimates and those from valueline to arrive at a fair value. Those analyst estimates prove to be correct in most cases.

Paul Price said...

The conmment above showing as from 'Stockdoc' is not from me.

Paul Price

Dr Paul Price said...

Whoever is using my names Stockdoc and Paul Price to write random comments will be dealt with seriously (including a police complaint). I worked hard to earn respect for those names, now I won't let some nincompoop spoil them at the end of the day.

Paul Price said...

Another bogus entry pretending to be me.

Paul Price said...

That's another bogus one. Whoever is doing this please stop, its a kind request.

DaveinHackensack said...

My view on share buybacks is that they they shouldn't be considered unless the company's shares are trading for less than book value (and preferably, less than net cash). At current share prices, limited buybacks by USEG make sense, but not so much for the earlier ones.