U.S. Energy to Drill Third Prospect with Houston Energy

U.S. Energy has entered into a third Participation Agreement with Houston, Texas-based Houston Energy L.P. ("HE") to acquire a 25% working interest in an oil prospect located in southeast Louisiana. Houston Energy has estimated that the prospect has a potential reserve of 2.1 million barrels of oil. Houston Energy is a privately held, independent oil and gas company with oil and gas interests in the Gulf of Mexico, South Louisiana, Texas Gulf Coast, West Texas and Southeastern New Mexico.

Under the terms of the agreement, U.S. Energy will pay sunk land costs and a prospect fee of approximately $200,000 and will be responsible for one third of the costs to drill an initial test well (ITW) to earn an after casing point (ACP) 25% working interest (17.625% net revenue interest). Spudding of the well is expected to take place in July 2009, with an initial planned drilling depth of approximately 9,300 feet, and should take approximately two weeks to drill.

"Our expanded relationship with Houston Energy allows us to access additional opportunities in a region where we have already experienced drilling success," stated Keith Larsen, CEO of U.S. Energy Corp. "This prospect is in a known oil producing field and it is a very attractive drilling target at a relatively shallow depth," he added.


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