U.S. Energy (USEG) 27 Mar 242023 Q4 Earnings call transcript

Greetings. Welcome to U.S. Energy Corporation Fourth Quarter and Full Year 2023 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Mason McGuire, Director of Corporate Development. you. Thank

begin. may You

overview and Financial Quarter everyone. financial Conference and Chief a outlook; review provide Smith, operator, discuss detailed results Energy company's more Mark the Call. to Zajac Corp.'s results. our strategic an will Officer Fourth Year-End our Executive our our good you, operating Welcome and Chief morning, and U.S. Ryan of Officer, Thank of XXXX give Results will

results operating filed issued significantly the press results in differ and financial Today's and section future closed the business www.usnrg.com. accompanying statements. discussion at to including summarizing U.S. from available press to risks update After Relations Actual December release, This reports and the our our are in forward-looking about forward-looking Exchange today's Except the we risks financial required Energy and expectations. the XXXX. periodic with obligation a projected may the ended market our various by no with uncertainties, due year law, statements as presentation contain for materials undertake website statements of Securities Investor Commission. release yesterday, in those XX, together described forward-looking may

Ryan may measures that, I in will A non-GAAP disclosed measures and materials. With Further, our release Smith. con-call to that non-GAAP are latest of turn GAAP please note call financial during call. available reconciliation this be full to quarterly over earnings the

as and provide pleased from of update Mason, highlights well good and the you I'm some quarter outlook. our to year strategic an you, Thank you today. everyone, as and on this joining with thank for morning, share us strong

into greater annual consisting of production, production dedication entire effect of the our comparable our asset from of takes remainder quarter NGLs. approximately XXXX. and for accounted of per team. natural discuss consistency of our I of total We barrels increase net achieved will an divestitures, Our split X,XXX marking equivalent with which period gas XX% oil year-end fourth day, results reflect which the of daily later, the than production Oil even and

to proud particularly achievements cost management. I'm in our highlight substantial

came at per BOE significant quarter have the cost rates, continued remained impressive costs both quarter should of $XX.XX operating flows the as I some we through representing of elevated reduction everything, $X.X costs. while commitment in million as to well reduction prior mention high across lease which to to the compared elevated XXXX. certain to fourth including achieved Our was expense our have service That materials reduction use on see being underscores begun against that efficiency operational to This backdrop a and operations. levels, we that compared interest historical said, our or often

divestitures. majority us million of company All asset significant to Of went approximately the company The putting the fourth the of at divestitures during note, leverage $X.X properties closed attractive production. nonoperated represented proceeds our debt assets and of represented our the reduction, on quarter, profile. current roughly XX% from

I or results real X all with of Dakota is my divestitures, the our certain trading increase what buyer value. Board across As had the monetizing was borrowing through year made forward to process. ranging to were equity interest happy decision tangible less rates North the that valuation nonoperated being pull than We South the from and asset at to extremely to USEG in USEG properties packages throughout the realized good X offered, separate and we that explore continue belief, the Texas,

valuation of future value be company forward. to believe take any that diverse Looking pull asset in perceived I disconnect its have does base, do offers our up opportunities geographically which challenges able manage, advantage to ahead, to to the

XXXX. into Moving

company's the plan existing asset on organically will capital our and spent advantage the taking production maintaining Our debt, reducing maintaining profile repurchase of share driven be outstanding of base, opportunities.

equity projects portfolio the allocating oil-weighted capital valuations smaller-scale to made tough really recently, existing costs borrowing remained company's have highly in M&A and While economic.

they the we We out have about have first plan an plus what had year can are These these to and than now the been with accretive X able Since and asset a engineer we fruition more time, year. on and value that explore that figuring third-party come evaluating, sharing believe in we just capital have add much throughout them under control really we assets currently from that M&A. for optimization projects on years standpoint. really any opportunities always way more we as to are

We companies stands in oil this current gas other stable and macro relatively pricing a outlook. backdrop both of size out believe dynamics from U.S. oil producing and that Energy of our industry

Our maintain us current and effectively our steady predictable to profile, leading flow capital require on capital. minimal cash to a production to to dollars assets returns allocate allowing maximize

allows the always and positions well opportunities, landscape. us to and to prepared navigate approach energy Our evolving fluctuations capitalize us making weather market on

operational remains resource commitment Our sustainable and balance on sheet our efficiency, Energy responsible focus driving underscoring at discipline management, creation. to value U.S.

current As leveraging capitalizing dedicated shareholder market forward, on remain our we growth strengths returns. and we and to conditions to move deliver continued

December shares. of first during million quarter, shares we of our continued and limitations, We XXXX divestitures post company's since window and up the trading fourth our program. repurchased quarter we repurchase end, point previously the our normal X% outstanding repurchase restarted the million share nearly share that nonoperated have the until activity approximately or announced To $X that during closing X.X

control was flow. to and that help the initiatives high-margin of earlier These while for production, made this positioning a current currently stage quarter along results our to opportunity and in summary, as believe terms cost the marketplace. the the return the advantage of high at us strong capital decisions steady, set I repurchasing cash valuation allocations achievements in prudent of allocation of not oil fourth equity continue of, take year. in see generate levels We one growth In cash is if our and rate flow best, free of the prices XXXX that with of

core expanding selectively our greater to assets equity also continue both through while being our By increasing remains shareholder our complement shareholders. our initiatives operating all our of areas. we goal in value for scale we unlock our and initiatives, believe can M&A advantageous that the market returns Company's maintaining with scale growing

Mark Chief Now to introduce who Financial the I Zajac, will Officer, quarter. detailed financial like for our the results would provide on a update

Thank you, everyone. Ryan. Hello,

prices. volumes to This was for total is impacted note to quarter's this divestments continued and quarter. attributed a It important approximately, the contributed made Total nonoperated oil Let's quarter delve demonstrating and the in the the production quarter decrease significantly that from for was million quarter, to XX% a realized for details reflecting year. period Sales in revenue XXXX. from optimizing XX% a our $X.X assets. our the the XX% $XX.X gas financial decline focus reduction into on our the year-end of and production of oil amounted last by fourth million in oil sales same reduction during

$XX.XX totaled valorem assets workovers and last recent reflecting onetime taxes the same period XXXX a fewer fourth This $X.X approximately non-operated Severance expense reduction XXXX. impressive total from the Our equivalent quarter indicating expense quarter $X.X the fourth to attributed higher-cost of approximately million year. during reduction divestment for was million, BOE, a lease in XX% an quarter compared to operating the decline ad be $X.X operating million, and to of can the for in fourth of the lease quarter.

of to As for quarter. percentage $X.X approximately these total roughly in gas XXXX the finance positions. to primarily in $X.X of the expenses attributed period XXXX. million natural quarter a XXXX aggregate compared of oil This incurred for of revenue, a taxes professional highgrading prior accounting general to higher and decrease fees expenses fourth several was X% sales similar million and administrative and accounted during approximately Cash, reached

and largely the reported impairment fourth to fourth lower on attributed of loss pricing Company net of oil company's in $XX.X our by a loss million expense $XX.X Turning reserve an financial report. to quarter impact an driven The performance. quarter XXXX. of of SEC net gas million, the is

$X.X excluding million and same in most year, stood quarter to the adjusted impact last the prior of period. of the from period compared $X.X notably hedges, in prices commodity the in Our EBITDA, the XXXX fourth decline at production by million influenced

our upon touch sheet. briefly Let's balance

XXXX, XX, a credit million of facility. $X $XX revolving on the outstanding held December of As debt million company

to going forward. to company's maintain performance we us the initiatives this and excellence, to standard in charge ensure stood you position our million. integrity. a your allocating conditions the morning. $X.X maintains and to initiatives In flexibility flow for a high support support to financial reduction that are company's cash Our operating enable maintain plan portion in full growth I'm sheet results conclusion, processes of confident leading on ability balance entertain We a continue to market with the front. may the we of at our any the and debt react reported feel free to way participation cash that we Thank that pleased

are take questions. ready We now to your

[Operator question from Charles Meade with Instructions] Rice. Our Johnson is first

prepared and it correctly, sure way. I'm your interpreting right in to you want comments, back Ryan, heard go and I I make the

your you kind I able now, those higher or correctly? I initiatives extent returns seem that to growth that than have wonder are Was what portfolio say you I right you that think organic growth of opportunities. opportunities the saying outside -- if growth or to inside did that you interpret feel you and or hear I heard And initiatives M&A elaborate growth I you're opportunities are investment recall like that are. initiatives -- can any that better, to

kind that of Yes, there's Good of question. to course. layers of lot And question. a

if So me please I'll And all I of know. few of answer just pick them. don't out a them, let

type equity from smaller type base U.S. on this long-term as a aren't great. secret, -- M&A also risk/reward the catalyst costs the tough. acquisitions, running some well. like scale to So answer company on And both that relative basis -- borrowing we go are and makes value no a It's a into at creation then asset and is look And Energy, high, day-to-day of a could level of acquisitions basis. as a valuations of

you I a production going still take I'll day-to-day that the flow and flat, that maybe down portion and it, right a smaller think that can program assets, debt at out it to going. your keep cash you of on simplify but up existing reduction keep comes a into keep your little -- basis, flow still where of bit repurchase greatly cash fund

And thorough of so reward again, much likelihood even had diligence on perspective, areas gas a production from that existing about and in long higher it in to, we are oil risk rate feel cost spent on this a our acquiring it, it And perspective, getting opportunities environment, over extremely much time. we it than and that, return. portfolio capital bring an macro done when I a for those or barrels we I'll think from bringing asset of little now of a own have in comfortable a comes on obviously, We've from X since assets call it. a we years. doing these then more perspective And

border getting on our of have really be to where We almost everywhere arms Canadian capital and going where aisle. around assets And border between, not discoveries productive spent spent the and could from be made that capital both the seeing sides in should forward. southern we it,

a So from the spent, flowed our assets up XXXX, internal through to And an executing program. have borrowing through the We slowing increasing, rates second midyear and would already I mindset first pivoted divestiture down we've and then last starting divestiture M&A spent year, really of half, potential flowed to to the in setting of that costs which opportunities really we to with majority portfolio. acquisition the and our mindset increasing. half really engineer say,

or start basis, to is lot talk that, yet into next in And answer secret. see doing it's engineering think more that eyes, even place day-to-day can at lot what on because a on a I owners, quite market. back there's call going I go work whether big that and owners to a about we at the assets whether because or areas that. internally won't more good that in maybe going that the they that upside what exploited the quarter it geology reason, the liked April wasn't of on it's take areas whether was goes basically and we're that, it's previous before that working into new direct a just whatever the go just on the long technology, that May. was capital not is So we're I'll than new look on a I technology, past. But some for it have in previous new our and of

pretty production a basis. we returns a moderate have the that through feel in day-to-day go Again, portfolio our categories of get that confident to define those I we existing So where X can portfolio. reduction thorough and growth, have production us we of that we shareholder by hitting opportunities on that debt -- need assets

a Well, Got to lot equity -- just of will of the seat, big to deals, wondered, at at I seems down sellers have the right wanted my because to of slowed bit happening mostly look, A&D it cash of a the looks $XX-plus it. character a go lot -- haven't. the scale have I A&D equity that there's sellers that maybe little stuff of the comments deals to curious, about just that buyers work. of there's you elaborate they're pay no kind I'm is the oil, like you've Ryan, on the smaller And From it we to -- the and but market. moved can down seem kind set directly. still in -- -- the or made A&D are opportunity way more just now? the what willing

elaborate, hit know cap universe. really I spot deals the mid- are, you Like you're not it saying lower there, but on, exactly the small they and right, and which you're those to bigger Yes, right? but applicable aren't and out I'll

those, are deals, scale have same have that deals. right, hostile see all still -- get see people cut So always those bigger still And guys to you valuations guys and the that proposed done cost bigger. healthy that the up, for who stock-for-stock are reasons equity you stock-for-stock

now companies totally On side, larger big the the out their to addition take every And this And cap industry. think micro day. marking the a used of company, on it's a said, in significantly to the at valuations I book than in of equity single a public every discount private get surprise, to the situation things guys none, right are depressed related what private gate. transacts, smaller single at I've no forcing public bar smaller these to to the be that you whenever private, the multiple at public public which in marked seen number higher is you're the size

last on though properties, it. see where that Borrowing a to while forward. we a X% these the and years. the company a environment, costs, X% tougher a -- fourth seller say bit little kind for of it add again, of gas sense incremental optimistic to value on, I'll commodity doesn't And several a projections size appetite, gotten a significantly still lot really as in our And secret, perspective, or underwrite sellers, it's drives at make better. properties regulatory from for even greater risk/reward have basis lot price going it's a I no then than it they would underwrite things for like one some has X% from the oil the even of oil absolutely was gas gone or And And them. media

still people that and lot tricks serious. small they and was with do significant and companies down producing more very coming have. a company's can that much. activities P&A component of have top the stays there very that always on And historically than component, wells And company's to tough states are these that road. Energy It's a very still of had along U.S. and ever still kind them. smaller came of obligations some deals P&A shut-in It's very would kick always monitoring But way down

It's now. still game that when. you not that it's think see ending. if, people But I doing is

I items as of as calculus of the much it's transaction X the that a other really become mentioned. part So

Our Hutton. question with Tim from Moore EF is next

appreciate We going commentary, you oil-weighted any Ryan. we maybe there. geographically, the on that sneak assets. mostly But initiatives for would optimization why up us growth as be sense And take that makes color really effort they're alternatives review wrap asset other strategic long. can peek give you assume And it a the to comments so

Yes.

So question. good

out word you believe Board balance always when the and and we're I and sitting in valuations. a the it, and examples balance especially it management one is larger we and is announced small significant I business. But historically, delevered alternatives, nasty where carry equity at that. call was value that through in it gas the do where there. strategic I not know we're like I such what were sitting sheet not that oil a know, to the November, think I only sheet think, cap flowing gas as look company we're But oil of micro as right, represents we

I at I it equity I what that right tricky our transfers, balance at and project day, really the that good have especially a what sheet I day-to-day is transaction we here how through do, think a day years. oil I'll to accounting, expand last cetera. that this on that's company but look extremely the helps and team we flow right? et it's So finding field say, comment, have know But it's to something my thing obvious to or and the in very operations space in is think few valuation, gas and job focus value very handles our a the for or initiative that significant

think it take So forms. can I several

we're that, be very I for I shareholders table and M&A But sit us, board. lot more, do of think are as and it's we to at think as you we're make a gas. sounds. now shareholder company right? know always trend transactions. valuation is to towards going our a We now as now. the the to goal go I in the on and all As stock simplistic the mentioned we're volatile size to doesn't the price here easy understand thought say projects, at A your Tim, I And on up as it oil a oil have base. that looking where probably concentrated sitting to options of on seem

So I is table. think terms strategic in of on the odds, everything the

-- know into going transact and venture we're already oil gas course, well and to and that Of we an areas company. we're

is at you process, announce active comes X when of But And we that time. just November. still will was. the we So back I'll when at process. But as same as We together. ongoing it's that look did it there it out it that announced in still we put an as it let those it's no, something way

helpful. That's Good.

Now looking on that operating How nicely, more $XX it something like months Yes, that as much to in first we're that X decreased BOE, you out? forward think front. to more can the Is there? lease for of there you year. expenses, averaged lower do you mentioned, the potential $XX squeeze

I trend feels it's have like time again, associated on quite there's like but bit. prices here, like bit have costs a it historically to talking of in starting least to some in It still think to mean use feels a They're Labor like absolute and an down. availability like but the that. I basis, Houston, and little graph a come steel we pipe, started Texas, have that times down often, started the for cetera, trend employer's in at recent et favor very first high, little and down -- while, sway the I'm down. potential costs the in

the off, There's some healthy. that think more those to industry do tapers I as reduction inflation probably costs. and So incrementally becomes continued

a to LOE. single-digitish side corporate on rate on high higher flip having base, decline the said, asset a bit conventional our little being assets a That

we where I'm So happy were.

reduce we fourth in some But that's think assets a that quarter, jump our we big fourth room I initially that bought the there removed. going from still of made is the when some be stuff I lot really think saw to quarter. of onetime you to is the what to

improvement, we a still that been lot has improvement So but do have of some realized.

of Ryan should single Yes, above type of crude could for but know you oil what year digits if do organic you think at stayed XX% you progress. the let's rest to don't and year, be exclude XX% the high decline. theory, $XX that give you production production divestiture maybe I made of up And the just achieve prices for this mean, I you great in some growth guidance, volumes? on basis, production an looking Mark,

could not getting mean, to I are day-to-day be still we're some real, assumption, fair organic but that our a and the And to called think and Yes. be I like of scale kind starting Those Tim. smaller what arms projects. those. that of around coy, I begin

a the from now on a do color a incrementally projects more next on But CapEx it have production those we and then to again, production number shown a our single of and do or and we'll flat of kind expect think current in perspective CapEx model, think some what to or I call from our and with can think I has historically profile level always perspective. that on I between high -- million keep we assets. very just low close this, flat

Great. maybe. with year? color. in good I No, last mean, too stay not for the the of or expect the could rest down fairly done flattish for and you I in fourth $XX the million And quarter much, be $X.X did would prices If you the question know Mark quarter. million impairments you this that's really third impairment one

made last filing, our night. In we

first of is quarter SEC the rolling we're ultimately in the think one the issue 'XX, I projecting prices.

a a current for dealing And retrospective and impairment, with. in, prices with as that's dealing on quarters We're comparative prices. basis so if roll we're there's the relative potential what to decrease prices

just all March issue, get color and answers. I we but not Yes. the of maybe think an And No, figured be as I that. appreciate could much past the I

Great. Tim. Thanks,

in the today's will queue, further conclude no conference. we With questions

may You your this time, you thank your disconnect for at lines and participation.