U.S. Energy Updates on Gulf Coast Drilling Program

U.S. Energy has elected to participate in two Gulf Coast prospects with PetroQuest Energy, L.L.C., and an initial test well, with Houston, Texas-based, Yuma Exploration and Production Company.

In August 2009, USE entered into a participation agreement with PetroQuest Energy to acquire a 3.6% working interest (~2.5% net revenue interest) in a gas prospect located in south central Louisiana. The well has an initial planned drilling depth of approximately 14,700 feet, and is targeting the middle Miocene Tex W 7 Sand. The prospect has gross unrisked reserve potential of approximately 13.7 BCFE. Spudding of the well is expected to take place in early February and the well is expected to take approximately 45-60 days to drill. This well is subject to a back-in after payout.

On January 7, 2010, USE entered into an additional participation agreement with PetroQuest Energy to acquire a 10% working interest (~8% net revenue interest) in an oil and gas prospect located 15 miles offshore of south east Louisiana. The well has an initial planned drilling depth of approximately 12,500 feet, and is targeting the middle Miocene "Listerella" sand. The prospect has gross unrisked reserve potential of approximately 1.8 MMBO / 4.0 BCFG. A large independent oil and gas company will operate the well. Spudding of the well is expected to take place in early February and the well is expected to take approximately 45-60 days to drill. This well is not subject to a back-in after payout.

In addition, the Company's partner, Yuma Exploration and Production Company, has identified multiple prospects as a result of a 2009 3-D seismic shoot that USE participated in. Early indications are that Yuma may drill up to six prospects in 2010. Drilling of the first prospect is expected to commence in the first quarter of 2010, and the program will be evaluated on a going forward basis, based on the early drill results.


 

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