By Thomas Kerr, CFA
NASDAQ: USEG
READ THE FULL USEG RESEARCH REPORT
Update on Integrated Platform and new Investor Presentation
On February 26, 2026, U.S. Energy (NASDAQ: USEG) provided a new investor presentation that provided additional information and clarified the company’s vertically integrated long-term business strategy.
The new investor presentation describes a differentiated public-market opportunity built around a fully integrated helium and carbon management platform supported by three independent revenue streams, federal policy incentives, and a path to meaningful revenue generation and cash flow beginning in 2027. $22.0 million has already been invested, wells have been drilled, and key milestones are underway. This includes progress on the CO₂ enhanced oil recovery program at the Cut Bank oil field.
Some highlights of the new investor deck include:
One Asset with Three Revenue Streams: The Big Sky Carbon Hub controls 1.3 BCF of certified helium and 444 BCF of CO₂ resources and is integrated with the owned Cut Bank oil field. This creates three monetization pathways: helium sales, Section 45Q-backed carbon management, and CO₂-enhanced oil recovery. The asset base is 100% owned and operated with a 50+ year reserve life and minimal third-party dependencies.
$130 million of projected Phase 1 Section 45Q tax credits:As an early mover in U.S. Carbon Capture, Utilization, and Storage (CCUS) technologies, the company expects to qualify for $85 per metric ton of CO₂ captured, utilized, and sequestered under Section 45Q, providing a policy-supported, commodity-independent revenue stream. This $85 price per ton has annual escalators of approximately 3.0%.
Attractive Valuation Relative to Forward Cash Flow. At an enterprise value of approximately $53.6 million currently, the company trades at approximately 2.8x estimated 2027 EBITDA based on management forecasts (Zacks SCR forecasts may differ). This is a substantial discount to internally estimated Phase 1 net asset value and to trading multiples typically observed in similar industrial gas and carbon infrastructure companies.
Execution Momentum: $22 million has been invested to date with development wells already drilled, MRV applications filed with the EPA, plant Final Investment Decision (FID) targeted for Q2 2026, and initial helium sales, carbon management operations, and CO₂-EOR activity expected to begin in the 1st quarter of 2027.
Multiple Near-Term Catalysts in 2026: Catalysts expected this year include execution of a long-term helium offtake agreement, the expected EPA MRV approvals, and the continued advancement of CO₂-EOR development (the helium offtake agreement is now expected in Q2 2026).
Aligned Leadership: Management and insiders own approximately 36% of outstanding shares, directly aligning leadership with investors.
Additional slides from the new presentation will be highlighted in the full report.
2025 Full Year Results
On March 13, 2026, the company released 4th quarter and full year 2025 financial and operating results.
Over the past 18 months, U.S. Energy has executed a disciplined strategy to transform into a scalable, vertically integrated industrial gas, energy, and carbon management hub, with helium production, CO2 recovery and sequestration, and enhanced oil recovery (“EOR”) as three distinct revenue streams going forward.
For the full year 2025, production totaled 164,752 barrels of oil equivalent (BOE), consisting of 68% oil, versus 415,887 BOE in 2024. The year-over-year decline reflects previously announced and deliberate monetization of legacy oil and gas assets along with strategic initiative intended to redeploy capital to the development of its industrial gas and carbon management platforms. Revenue for 2025 was $7.4 million, with oil representing 87% of total revenue, compared to $20.6 million in the prior year period. Realized pricing averaged $56.54 per barrel of oil and $3.13 per Mcf of natural gas, resulting in an average realized price of $44.63 per BOE. This compares to $70.91 per barrel and $2.56 per Mcf in 2024, which translates to $49.58 per BOE.
Lease operating expense declined to $5.2 million in 2025 from $11.2 million in 2024, reflecting the lowered asset base following recent divestitures. Cash G&A totaled $6.2 million, compared to $6.9 million in 2024, primarily due to lower compensation and benefits. Stock compensation expense was $1.9 million in 2025 compared to $1.3 million in the prior year.
Adjusted EBITDA for 2025 was ($4.5) million, and the net loss was ($14.4) million, or ($0.43) per diluted share. The net loss included non-cash items associated with the Company’s strategic repositioning, including a $3.6 million impairment of oil & gas properties and a $0.4 million loss on the sale of East Texas assets. These items are non-recurring and reflect the continued transition away from legacy oil and gas operations toward the industrial gas, EOR, and CCUS platforms.
The present value of the company's reported SEC proved reserves, discounted at 10% (PV-10), at the end of 2025 was $18.4 million based on pricing of $65.34/bbl oil and $3.39/mcf natural gas.
Balance Sheet & Liquidity
In early March 2026, the company completed an equity offering of 8.8 million shares at $1.00 per share. Also, this year the company was able to raise approximately $5.7 million by utilizing its equity line of credit. U.S. Energy currently has a $15.4 million cash balance with $22.9 million of available liquidity.
Valuation & Estimates
We increase our price target to $3.50 per share as we believe the beginning of strong revenues and EBITDA growth will occur within 12 months from now and the new price target is also supported by reaching the FID stage of development.
We utilize multiple valuation methodologies to arrive at our target price of $3.50 for USEG stock. These include Discounted Cash Flow (DCF) calculations, peer multiples, price to book value, price to asset value and others.
Our DCF calculation assumes monetization of the 3 revenue streams beginning in early 2027. For 2027, we expect oil revenues of $11.0 million, helium revenues of $2.0 million, and CO2 tax credit revenues of $7.5 million which could provide EBITDA of approximately $12.0 million. In 2028, we expect total revenues of $29.0 million and EBITDA of $17.0 million.
Under this scenario, our DCF calculation is approximately $3.50 per share. This may prove to be conservative as we utilize a high discount rate of 12.5%.
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