U.S. Energy Corp. (NASDAQ: USEG) is having an incredibly strong day in the market today after the company announced its participation in an upcoming drilling program. This led to excitement among the investing public, sending the stock on an explosive run for the top. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (10:54), USEG is trading at $1.26 per share after a gain of $0.25 per share or 24.75% thus far today.
USEG Gains On Upcoming Drilling Program
As mentioned above, U.S. Energy Corp. is making a run for the top in the market today after announcing that it will be participating in an upcoming horizontal drilling program on its existing acreage position. The program will take place in the Georgetown formation in Zavala and Dimmit Counties in Texas. The positions of the development program have all been previously developed for shallower horizons. USEG said in the press release that it expects to begin drilling in late October 2017. The company also said that the initial well will be a dual lateral.
The company said that it plans on participating in the drilling of up to 6 horizontal wells, all of which are on its existing acreage position. It has interest that ranges from 6% yo 15% across the entire project. USEG said that based on current commodity prices, single wells are expected to generate approximately 60% internal rate of return as well as 2.5X cash on cash return payback over the course of approximately one year. The company is expecting that gross drilling and completion costs for each horizontal well will be about $3.4 million; which will be funded from cash flow from operations and existing cash on hand. In a statement, avid Veltri, Chairman and CEO at USEG, had the following to offer:
“We are pleased to announce our participation in the upcoming drilling program and excited for the future prospects of U.S. Energy as we continue our transition from being focused on restructuring the Company’s balance sheet to becoming a growth-oriented E&P company. Our recently announced restructuring initiatives along with the completion of recent asset sales will allow us to re-deploy capital to focus on significant growth opportunities and position U.S. Energy to maximize returns for shareholders. This is the first newly drilled well that U.S. Energy has participated in since early 2015, and we look forward to evaluating and participating in other highly accretive development projects that are focused on capital returns and cash generation.”
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on USEG. In particular, we’re interested in following the new drilling project and excited to see the fruits of the labor as the company regains its footing on a strong financial foundation. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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