U.S. Energy Corp. to Spud 2nd Well with Houston Energy Within 7 Days

U.S. Energy Corp.

U.S. Energy Corp. announced that its partner Houston Energy, L.P. (HE), has reached contract depth of 11,100 ft on the first well drilled with HE. Two productive zones have been identified with approximately 35 ft. of net pay and preliminary analysis indicates the well is commercially productive and completion operations are under way.

Production from the well is expected to commence within the next 60 to 90 days. Actual production rates from the well will be announced at that time. There are two additional prospective drill sites in this area of mutual interest with HE. Further data collected from this well will be evaluated to determine future drilling activity.

Under the terms of the participation agreement previously announced, USE is responsible for 10% of the costs to drill this initial well to earn an 8.5% after casing point working interest (6.2% net revenue interest). There is also a 10% after prospect payout (APO) back-in working interest due to the operator, which will reduce USE's working interest to 7.65% (5.6% net revenue interest) APO.

After setting the production casing on this well, the same drilling rig will be mobilized to spud a well at a second prospect area within 7 business days. Under the terms of this second agreement, USE will be responsible for 11.11% of the costs of this initial test well to earn an 8.33% after casing point working interest (6.1% net revenue interest). USE's initial commitment under the agreement is approximately $96,000 to the casing point. There is an initial planned drilling depth of approximately 8,000 feet, and HE believes this well has a resource potential of 4BCF and 280 MBO. Drilling is expected to take approximately 15 days, with results to follow.

"We are pleased with the results of our first well with Houston Energy," stated Keith G. Larsen, CEO of U.S. Energy Corp. "With better rig rates, U.S. Energy Corp. and its partners plan to continue drilling throughout the remainder of 2009. This is another step forward for the company in achieving its stated goals of adding production and reserves to the company's balance sheet along with recurring revenues," he added.