U.S. Energy Spuds 3rd Well with Houston Energy L.P.

U.S. Energy Corp. announced the spudding of its third well under a previously announced Participation Agreement with Houston, Texas-based Houston Energy L.P. ("HE"). USE has agreed to purchase a 25% working interest in this prospect which is located in Southeast Louisiana. 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. The well will be operated by Texas Petroleum Investment Company.

The prospect is located in Lafourche Parish, LA and is a one well six zone primary oil target. HE believes the prospect has a resource potential of 2.1 million barrels of oil. The well will be drilled to an initial depth of approximately 9,300 feet. Under the terms of this agreement, USE has paid a sunk land cost and prospect fee of approximately $200,000 and is responsible for an additional one third (approximately $320,000) 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). Drilling is expected to be completed in approximately two weeks.

Production from the first well drilled with HE in early June of 2009 is expected to commence by mid-September 2009. Two productive zones were identified at the completion of the well, with approximately 35 feet of net pay. Initial production rates from the well will be announced upon commencement of production.

"We are pleased to continue our relationship with Houston Energy in drilling this third well. We are also pleased that the target is oil and that we were able to participate in a larger working interest in this well," stated Keith Larsen, CEO of U.S. Energy Corp.