An assortment of updates

First, a request: if any of you know of a finance professor who is an acknowledged options expert and might be willing to consider a quick consulting project (shouldn't require more than an hour of his time), please e-mail me at contact[at]shortscreen.com. Thanks.

Now, on to some assorted updates and musings.

Sorry for the lack of posts over the last few days. I meant to post something last night, but after a late, gluttonous, feast at George's favorite New York restaurant (Balthazar) last night I was too beat to post or check e-mails when I got home. Before dinner, I had taken George to meet my developers at Simande. George is considering making some modest updates to his business's computer system (he's currently running it on DOS). I mentioned to the Simande guys that George first set up his system when Tronwas playing in the movie theaters. After a beat, Matt asked, "When did that come out, early 80's?". "Yeah," I replied. "That's when we were born," said Matt. For Matt, here is the trailer for Tron:



I believe a remake of Tron is in the works.

After leaving Simande HQ, we met George's old friend Frank at Balthazar. Balthazar is sort of an upscale version of the French Roast, but Balthazar has its own excellent bakery (located, conveniently enough for us, in nearby Englewood, NJ.). After a few bottles of Bollinger for the table, Frank, an actor/playwright, was in a feisty mood. He launched into some of the political arguments you might expect from a New Yorker, with gusto.

I remembered from meeting him on previous occasions that Frank had mentioned he was friends with Al Pacino, so in an effort to deflect him from politics, I asked him questions about Pacino's performance in Heat (e.g., Why was his character chewing what appeared to be a half-piece of gum throughout the whole movie? Why did he always hang up on everyone without saying "goodbye"?). We probably would have gone through less of the champagne (which was wasted on my palate; I can get heartburn just as easily from a $10 bottle of cava) if George hadn't ordered one of those multi-tiered shellfish appetizers for the table, which the waiters consolidated to lower tiers Tetris-style as we ate). In any case, it was a good dinner with good company, but I ate way too much. Balancing that out today by just having a piece of toast and some ginger ale for lunch. Onto some updates:

Investment stuff:

- AYSI.OB: Got a belated response today from the CEO re the e-mail I sent him when they filed the 10-K on 12/23. I'll post on that separately in a little bit.

- USEG: Up today on this news from yesterday about the latest positive well result from its Bakken deal with BEXP, and this news from today that it received its $1 million option payment from Thompson Creek related to the molybdenum project, and that Thompson creek has budgeted several million more dollars for preliminary work on the project this year.

- The United Airlines puts: These went against me a little this week, a day before Continental announced its positive results. Steady as she goes though.

New blogs:

After e-mailing my logo designer's gal Friday asking her, essentially, "WTF?", she wrote back pleading technical difficulties and saying that if she could crawl into the computer and push the process along she would. The thought of her and him being sucked into a computer Tron-style and forced to play in one of the movie's Jai Alai death matches brings me a small measure of comfort at this point.

The Sea Artist

I read the new, posthumously-released Crichton novel last week, Pirate Latitudes. One character in the novel, which is set in the Caribbean in the 17th century, is a helmsman, who is so intuitively skilled at reading the sea and driving ships that the other characters call him "The Sea Artist". I don't know if Crichton came up with that term himself, or he came across it during his research, but it struck me as a fine turn of phrase. It would be great to be a stock artist, and have a similarly intuitive skill at investing. Maybe that's something that comes with looking at things long enough, until the patterns finally emerge.

On occasion, I think I've seen a pattern here and there, among two or three obscure stocks I follow. I still have DSNY on my Yahoo portfolio page for some reason, and when I saw it hit .52 today my immediate thought was, "If I still owned that I'd sell it right there". Of course, I sold a couple weeks back at .45, so I didn't have any intuition then that it would soon hit .52. A few weeks before that though, buying DSNY at .305 looked like a slammed dunk, so I bought it.

When I saw USEG dip below $5 earlier this week, I had half a mind to buy more there. I didn't though, and now it has traded higher on yesterday's news of the high initial production of its latest Bakken well. That one's a little trickier though. I've owned and have been following this stock for about a year and a half, but since the BEXP deal a few months ago, it's almost a new stock: new shareholders, much bigger volume, an imminent secondary offering, etc. My average price on it now is about $2.80, I think. I don't think I'll be able to buy more for less than that anytime soon. So at what price should I buy more?

The textbook value investing approach would be to come up with an intrinsic value for the company, and figure out where the current stock price is relative to your intrinsic value figure. That approach has some merit, but it also has a couple of drawbacks to it. The first is that it would be a pain in the ass, as it was to do my initial write-up of the company back in the summer of 2008. Back then, I did that with the prospect of getting paid in mind: I submitted that write-up to the Value Investor's Club when they were offering $5k for the best idea of the week. That was also my application to membership in the VIC. It was rejected, so of course my USEG write-up didn't win best idea. In any case, a similar write-up today would be a little more involved because it would have to account for the dilution of the secondary offering(s) and the inclusion of new ventures.

The second drawback of that approach is the false sense of precision inherent in any intrinsic value calculation (I didn't see the need for even attempting one with my initial write-up, as the company was trading at a ~50% discount to its book value then). To do one with USEG, you'd have to speculate on the success, or lack thereof, of additional wells drilled in its Bakken deal; you'd have to estimate production rates and oil prices going forward; you'd have to ballpark the value of its Standard Steam Trust holdings by looking at comps with publicly-traded geothermal companies; you'd have to speculate about molybdenum and uranium prices for its properties in those areas, etc. In short, you'd be stringing together a lot of subjective assumptions to come up with an objective-sounding number.

USEG news

Last week, U.S. Energy Corp. (Nasdaq Capital Market: USEG) announced that it had priced a secondary offering of 5 million shares at $5.25, and its stock dropped on the news, as it had on the company's initial announcement of its (larger) shelf registration in October, on fears of dilution¹. The main reason USEG is raising additional capital is to fund its participation in additional Bakken wells with BEXP. After the close Monday, USEG announced the latest results from that drilling program:

U.S. Energy Corp. Announces Initial Production Rate of Approximately 3,394 BOE/D From the Williston 25-36 #1H Well

Those are the highest initial production rates so far on this drilling program.

¹When I spoke to him on the day USEG announced its shelf registration, CEO Keith Larsen said he'd been getting a number of angry calls about it. I reminded him of the old Michael Milken quote, that the best time to raise capital is when you can.

Bakken Black

U.S. Energy Corp. Announces Initial Production Rate of Approximately 1,544 BOE/D From the Lee 16-21 #1H Bakken Well.

I believe that's three-for-three so far on USEG's Bakken deal.

Incidentally, one thing you notice using ShortScreen is that a number of natural resources companies appear on its screener, including BEXP, USEG's Bakken partner. Indeed, when you consider the generous terms USEG got on this deal, it's not too surprising when you consider both companies' respective Altman Z"-Scores: USEG's score was in the financial strength zone and BEXP's was in the distress zone. Not surprising that USEG would get good terms on its deal given that it was negotiating from a position of financial strength.

USEG News

Would have blogged about this earlier, but I got a late start today and was on the go. Shares of U.S. Energy Corp. (Nasdaq: USEG) were up 21.68% today, mainly on the announcement of positive results at the second of its Bakken wells:

U.S. Energy Corp. Announces Initial Production Rate of Approximately 1,776 BOE/D From the BCD Farms 16-21 #1H Bakken Well.

Also, the Wall Street Journal reported Monday that "market talk" suggested that Standard Steam Trust planned to raise a minimum of C$50 million in an IPO. Recall that USEG purchased 25% of the privately-held geothermal company for about $3.5 million at the end of last year. Recall also USEG CEO Keith Larsen's comments to us about Standard Steam back in August:

Keith Larsen predicted that USEG's investment in Standard Steam Trust would be a ten-bagger within two years. He noted the advantages of Geothermal versus other alternatives such as solar and wind (Geothermal's always on, so it doesn't need a back up power source), and mentioned that a Canadian geothermal company, Magma Energy recently raised over $100 million in an IPO.

First Results in from USEG's Bakken Deal

U.S. Energy Corp.'s partner Brigham Exploration reports:

AUSTIN, TX--(Marketwire - 10/16/09) - Brigham Exploration Company (NASDAQ:BEXP - News) announced that its operated Brad Olson 9-16 #1H produced approximately 2,112 barrels of oil equivalent per day from the Bakken formation during an early 24 hour flow back period.

[...]

Brigham maintains an approximate 33% working interest and 26% net revenue interest in the Brad Olson 9-16 #1H. Also participating in a non-operated role in the Brad Olson 9-16 #1H is U.S. Energy Corp. (NASDAQ:USEG) with an approximate 61% working interest and 48% net revenue interest. Brigham will back in after combined payout of the six initial wells drilled under the participation agreement with U.S. Energy for 35% of their interest in the Brad Olson 9-16 #1H well.

I was waiting for a pullback to add more USEG. If Brigham keeps drilling holes in Bakken and finding oil, that may prove difficult.

Rumors of the dollar's death: greatly exaggerated

So says Martin Wolf of the Financial Times in his most recent column. Excerpt:

It is the season of dollar panic. These panic-mongers are varied: gold bugs, fiscal hawks and many others agree that the dollar, the dominant currency since the first world war, is on its death bed. Hyperinflationary collapse is in store. Does this make sense? No. All the same, the dollar-based global monetary system is defective. It would be good to start building alternative arrangements.

It's worth reading Wolf's column in full, but he makes a point there similar to one David Merkel made on his Aleph blog¹ recently [Merkel]:

Whatever country of our world has the status of reserve currency must issue debt, and a lot of it, that other countries can invest in to park their idle cash balances.

Wolf sketches out the "Triffin dilemma" this leads to: an overhang of debt that eventually undermines confidence in the reserve currency. Wolf's proposed solution is to look for an alternative to the dollar as a reserve currency, but I wonder if a simpler alternative would make sense in the near-term: instead of having surplus countries buy up U.S. debt to satiate their demand for dollar-based assets, why doesn't the U.S. government offer them an equity-like investment instead? Specifically, why not offer shares in a sort of massive master limited partnership that would invest its assets in nuclear power plants and other infrastructure, and pay dividends out of the revenues generated from those infrastructure assets?

Unlike the proceeds from the sale of Treasuries, which can go to fund transfer payments and health care for retirees, or extended military expeditions, proceeds from the sale of shares in this master limited partnership would go toward increasing productive capacity, which would fuel future economic growth in the U.S. This idea is a similar to (but simpler than) one proposed by Professor Yu Qiao of the School of Public Policy and Management, Tsinghua University, Beijing, in the Financial Times last spring.

¹Speaking of Merkel's blog, last month he asked if any readers had any stock ideas to share. I mentioned three: USEG, AYSI.OB, and DSNY.OB. As of yesterday's close, they were up 26%, 390%, and 60%, respectively.

USEG on the Move

For those who missed it, this post, contains some notes on my recent conversation with USEG management, where the management team described several of the irons the company currently has in the fire.

Incidentally, I mentioned USEG, along with AYSI.OB, and DSNY.OB on David Merkel's Aleph Blog last week when he solicited stock ideas. I noted that these companies are probably all too small for his purposes, but perhaps they might be of interest to some of his readers. Judging from the lack of comments there, apparently not. I'm guessing his readers tend toward investing in larger cap companies.

A Conversation with USEG Management

Today I spoke with U.S. Energy Corp. (NASDAQ: USEG) CEO Keith Larsen, CFO Scott Lorimer, and Director of Investor Relations Reggie Larsen, who initiated the call. Some notes from the conversation follow.

- The Brigham Exploration (NASDAQ: BEXP) is intended to make USEG profitable as an oil company alone. CEO Keith Larsen said the company looked at about a hundred oil deals, and looked closely at ten, before picking this one.

- Estimated cumulative revenue from the first six wells (assuming oil prices stay at about ~$70 per barrel) is $1.7 million to $2 million per month, dropping off to about $1 million per month after a year of production.


- USEG is close to a financing deal that will let it borrow $15 million against its Remington Village development at about 5.5% interest. This money may be used for follow up investments in the Bakken field with BEXP. Occupancy there has drifted below 90%, but the management is working to get it back up (by allowing pets, etc.).

- Keith Larsen predicted that USEG's investment in Standard Steam Trust would be a ten-bagger within two years. He noted the advantages of Geothermal versus other alternatives such as solar and wind (Geothermal's always on, so it doesn't need a back up power source), and mentioned that a Canadian geothermal company, Magma Energy recently raised over $100 million in an IPO.

- Re the molybdenum project, Keith and Reggie said that they've been moving forward with preliminary steps on it, but have eschewed publicizing most of them to avoid stirring up the vocal radical environmental opposition. They noted that local blue collar workers have stopped by their offices looking for work, expressing support in the mine project, and asking what they could do to help make it happen. With a weak economy, opposition to the creation of numerous high-paying jobs may lose some political valence.

USEG News

Shares of U.S. Energy Corp. (NASDAQ: USEG) rose about 32% today on about 13x average volume on the news that the company had entered into a drilling participation agreement with Brigham Exploration (NASDAQ: BEXP) in the Bakken oil field. From the release:

"We are delighted to be teaming up with one of the best and most technologically advanced operators in the Bakken oil field," stated Mark Larsen, President of U.S. Energy. "Brigham has proven itself to be one of the premier companies in the Williston Basin through the advancement of their multi-stage frac completions and their consistent improvement of production rates. We look forward to a long term relationship with Brigham and developing low cost reserves well into the future," he added.

"Our patient search for a sound investment in oil and gas has now come to light with today's announcement," stated Keith Larsen, CEO of U.S. Energy Corp. "At a time when natural gas appears to be poised for an extended period of low prices our main focus has been to expand our oil production and reserves. This agreement does just that by providing us with the potential to rapidly expand our oil production and increase our reserves by participating with an experienced operator that has a track record of lowering its finding and development costs. Furthermore, I am confident that our drilling schedule for the balance of 2009 will allow us to reach our corporate production goal of 7,000 MCFED or approximately 1,200 BOED by year end," he added.

This is a pretty large commitment by USEG -- according to the press release, USEG's "expenditures are anticipated to approximate $17.6 million for the first six initial well program." That's a little less than half of USEG's remaining cash and Treasuries, going by the company's most recent balance sheet. Judging by the relative performance of USEG and BEXP today though, without drilling down further, I'd assume this deal is on pretty favorable terms to USEG. Which would make sense, since it appears that BEXP had a more acute need for the cash than USEG had for the participation deal. I'd venture that some BEXP shareholders bought into USEG today.

I got a voice mail about this today from Reggie Larsen at USEG, but we didn't get a chacne to speak. If he and I connect tomorrow, I'll update this post accordingly. Investor relations via social media: just like in those trendy marketing books.

An Undiscovered Gem from Barron's?

Visiting Yahoo! Finance, I saw an article headline from Barron's that intrigued me, "The Best Bank You've Never Heard Of". I was hoping the article might be about some great micro cap bank I'd never heard of, but guessed it would be about a mid cap bank I already knew about, e.g., maybe Hudson City. I guessed wrong though: the bank was the mega cap multinational Santander. Is this is the sort of 'undiscovered gem' readers can expect from Barron's?

This article is my most recent reminder of why I don't read Barron's regularly. The second most recent reminder was this article back in May, which was listed under the "headlines" tab at the time for a stock I own, U.S. Energy Corp (USEG). At the time, this article wasn't available online, so I went to Barnes & Noble and looked for it in the dead tree edition of Barron's. Here was the one sentence that mentioned USEG,

Companies like Cameco (ticker: CCJ), BHP Billiton (BHP), Rio Tinto (RTP) and U.S. Energy (USEG) mine and/or trade uranium, although its value contribution to their shares is overshadowed by the many more popular metals these firms also trade.

Reading that, I thought: Is it too much to expect a Barron's writer to know at least as much about this company as me? U.S. Energy Corp. neither mines nor trades uranium, and, in fact, sold most of its uranium assets to Uranium One two years ago, as I have noted on this blog.

Barron's benefits from the inertia of its brand and of its readership. When I got out of college, I worked for a few months at a tiny, over-the-counter investment bank/brokerage in Manhattan where I was supposed to read Barron's every weekend. So I did. I'd read Alan Ableson's column, which was a little like Louis Rukeyser in print, and then I'd slog through the rest of it. I soon figured out that we weren't actually expected to learn anything useful from Barron's; we were supposed to read it because the affluent investors we were calling on read it, and they might mention something from the most recent issue and expect us to be familiar with it.

When journalists lament the decline of the print business, they ought to consider that the Google- and Craig's List-powered disruption of the advertising model isn't the only reason for print's decline; so is the decline of journalism itself. A lot of what passes for journalism today simply isn't worth paying for in any medium.

A Note about the Light Posting Here Recently

Mainly, it's been due to my attention being focused on a few new projects, and partly it's due to my being a little more selective in updating certain topics here. For example, I considered writing a post about U.S. Energy Corp's (Nasdaq: USEG) recent quarterly report and conference call, but since there wasn't enough material new information to spark my interest (the company remains on the same general trajectory since I last commented on it), I figured a post on it wouldn't be of much interest to anyone else. Similarly, there have been several press releases and filings by the management of Asure Software (Nasdaq Capital Market: ASUR) in support of its go-private plan, and several press releases and filings by institutional investors who oppose the plan since my last post on it. Again, not enough material new information to inspire me to write another follow-up post on it at this point (though after reading over my comments on my last post on the subject, I just added a correction in that post's comment thread).

As always, feel free to suggest topics for future posts. If I'm interested in the topic, and I think I might have something useful to add to the discussion, I'll post on it as time permits.

U.S. Energy Corp. Update

On Monday, U.S. Energy Corp. (Nasdaq: USEG) filed its 10-K and released its highlights for 2008, most of which we noted here when they were announced individually. Today the company held its conference call. CEO Keith Larsen mentioned that the company's Gillette, WY real estate development was currently 95% occupied, and is generating $225k in rental revenue per month. He also noted that the local economy in Gillette remained strong¹, despite the national downturn. Larsen also noted that the current low oil and natural gas prices offered promising opportunities to sign new exploration and production deals.

If the conference call was any indication, investor interest in USEG, such as it was, appears to have declined significantly. This may have been the shortest quarterly conference call I have listed to, by any company. There was exactly one question (I would have asked a question², but I was listening via streaming audio on the Internet). Other signs of a decline in investor interest:

- The company's Investor Hub message board has four posts in the last four months, all by the moderator.

- The company's Yahoo! message board hasn't had a post since January 27th.

Based on its year-end balance sheet data, USEG is currently trading for less than its net cash.

The photo above comes for U.S. Energy Corp's website. You can read more details on the company's interests in Molybdenum, Oil & Natural Gas, Uranium, Geothermal, and its Gillette, WY real estate project on the projects section of the company's website.

¹As of January, according to the Bureau of Labor Statistics, Wyoming's unemployment rate was 3.7%, the lowest in the nation.

²My question would have been about what cost-cutting plans (if any) the company had in mind to get closer toward profitability from the cost side.

U.S. Energy Corp. Update

A few quick updates:

- U.S. Energy Corp. (Nasdaq: USEG) filed an 8-k and issued a press release today announcing that it had retired its $16.8 million construction loan on its Remington Village real estate project. Since it was unable to get longer-term financing in the current credit environment without paying onerous fees, since it had close to $70 million in low-yielding Treasuries, USEG management figured it was better off using some of that cash to payoff the loan. The press release also added some details about the status of the Remington Village project:

``Remington Village is an excellent asset in an economically sound area that is currently generating in excess of $200,000 per month in revenue and is expected to generate $248,000 in monthly revenues upon stabilization at 95% occupancy,'' [said USEG CEO Keith Larsen]

The project was completed ahead of schedule in early December, 2008 approximately $1.1 million under budget, and is currently 88% occupied. The Remington Village complex consists of nine 24-plexes with a mix of one, two, and three bedroom units, as well as a clubhouse and leasing office.

The Gillette, Wyoming region continues to experience solid growth following record state coal production in 2008, and attracting new residents through a number of infrastructure projects currently under development including a $40 million recreation center, an $80 million hospital renovation, a $1.4 billion mine mouth-feed coal-fired power plant and a soon to be constructed $120 million coal dewatering facility north of Gillette.

- Last week, USEG announced that it had received a scheduled $1 million milestone payment from Thomson Creek as part of the option agreement Thomson Creek signed with USEG in August to pursue development of the Lucky Jack Molybdenum project.

- Earlier this month, USEG announced that it had signed an oil & gas participation agreement with a private company to acquire a 50% working interest in a prospect in Northeastern Wyoming. In this release, USEG's CEO stated that his company's goal was to increase its production from its current level of 1,700 million cubic feet equivalent per day (MCFE/D) to 7,000 MCFE/D by the end of 2009.

The photo above, of the company's Remington Village real estate development, is from the company's website

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.

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.

USEG Update on Drilling Program with PetroQuest

U.S. Energy Corp. (Nasdaq: USEG) released an update on its drilling program with PetroQuest Energy (NYSE: PQ) today. So far they are 1-for-2: the first drilling prospect went into production yesterday, and the second prospect was determined to be non-productive. These were the first two of a scheduled three well drilling program with PetroQuest Energy.

The image above is from U.S. Energy Corp.'s website.

U.S. Energy Corp. and Wyoming

In previous posts on U.S. Energy Corp. (Nasdaq: USEG), e.g., "A Conversation with the CEO of U.S. Energy Corp.", we mentioned the multi-family housing project the company was developing in Gillette, Wyoming, where, as the company notes on its website, "there is a critical housing shortage due to high employment in the energy and mining industries." The graphic above, borrowed from the Economist article we referred to in the previous post (A Tale of Two States: Utah versus Rhode Island") shows that the current unemployment rate in Wyoming is even lower than Utah's, at 3.3%.

Conversation with the CEO of USEG

U.S. Energy Corp. (Nasdaq: USEG) put out a press release on Monday announcing a deal with a private, Texas-based oil company -- U.S. Energy's third working interest partner in the oil & gas space: "U.S. Energy Corp. Signs Lease Purchase and Drilling Agreement With Private Texas-Based Company".

I spoke to U.S. Energy's CEO Keith Larsen today, and asked him if he was seeing better terms offered on these sorts of working interest deals, with the current correction in oil and natural gas prices. He said he was, and that he was also starting to look at buying proven reserves from other companies, particularly those that overextended themselves with leverage and may now be forced to sell some of their assets.

At its closing price today of $2.29 per share, USEG is trading for about $2.5 million less than its net cash.

USEG Update

U.S. Energy Corp. (Nasdaq: USEG) announced the spudding of the second of the three planned wells with PetroQuest Energy (NYSE: PQ). Excerpt from the press release:

``With drilling completed at the Bluffs prospect, our oil and gas program continues to expand as our partner, PetroQuest, has redeployed the rig to begin drilling at the second of three projects where we have an interest,'' stated Keith Larsen, CEO of U.S. Energy Corp. ``As we advance our oil and gas program through the balance of 2008, we expect to report initial production rates at the Bluffs and additional drilling at our other prospects. With approximately $70 million held in U.S. Treasuries and cash, we are well positioned to take advantage of any additional opportunities identified in the year ahead,'' he added.

According to Yahoo! Finance, USEG currently has a market cap of about $60 million and, after adding in its debt and subtracting its cash, an enterprise value of about $1.5 million.