Ladies and gentlemen, greetings and welcome to the U.S. Energy Corp. Third Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Masters. Please go ahead. Thank you, operator and welcome to U.S. Energy Corp.'s third quarter 2022 results conference call. After the market closed yesterday, U.S. Energy Corp. issued a press release summarizing operating and financial results for the three and nine months ended 30 September 2022. This press release, together with accompanying presentation materials, are available in the investor relations section of our website at www.usnrg.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements are available in our latest quarterly earnings release and conference call presentation. With that, I would now like to turn the conference call over to Ryan Smith, CEO of U.S. Energy Corp. for his prepared remarks. Thank you, James. Good morning and thank you for joining U.S. Energy's first quarterly results conference call. With this being our first call together, I wanted to spend a few minutes providing an overview of our business along with our strategy for profitable growth going forward. U.S. Energy is one of the fastest-growing independent oil and gas producers in the United States, having completed eight highly accretive acquisitions of increasing size in the last 24 months. Since late 2019, we've increased our proved producing PV-10 by more than 14 times with current PDP reserves well in excess of our current enterprise value. Today, we operate in four prolific U.S. onshore oil regions, the Rockies in North Dakota, the Mid-Continent, the South Texas Gulf Coast and West Texas. These assets representing a diversified portfolio that protects the company from being tied to regional pricing or operational disruptions. Our assets contain 8 million barrels of oil equivalent of long life, oil weighted proved producing reserves that have a low decline profile. Our current annual PDP decline is just around 11%, which affords us the flexibility of investing minimal incremental capital into the existing business to maintain healthy cash flows. Even though we have grown quickly, we've maintained our capital discipline, allocating free cash flow towards debt reduction, a stable quarterly cash dividend and organic and inorganic investments. As of 30 September 2022, our debt balance stood at $12.5 million with a year-to-date annualized EBITDA of nearly $17 million, putting our leverage ratio at approximately 0.6x net debt to EBITDA. A very healthy and manageable level for an E&P company of our size. Given the general volatility of the broader commodity markets, we regularly hedge our production, targeting greater than 50% of our expected oil volumes in the current year, thereby ensuring relative stability in our cash flow generation. From an M&A perspective, we've stayed very active and opportunistic, pursuing mature assets with consistent production growth, high margin cash flows and measurable operating efficiencies. In summary, we believe that U.S. Energy provides investors commodity exposure through a microcap E&P story that provides the growth potential, return of capital elements and balance sheet stability that is demanded in today's environment. Next, I'd like to spend a few minutes discussing our roadmap for growth going forward. U.S. Energy today operates a portfolio of mature producing assets that provide high margin free cash flow that is critical to maintaining a strong balance sheet and supporting a stable quarterly cash dividend. Despite having completed eight transactions in 24 months in which we'd have acquired assets at significant discounts to PDP PV-10 and have increased the value of our proved reserves by over 10 times, we do remain in the early innings of a multi-step expansionary phase at the company. In the energy business, scale is critical to sustained profitability, so our strategy is to continue rolling up high-quality assets and rapidly growing our platform, which will achieve the operating leverage required to drive continuous profitable growth going forward. To that end, as our cash flows scale with new asset additions, we do see the potential to develop a more robust return of capital program over time. Finally, while economic returns are always top of mind, we do balance these priorities while maintaining a high level of regulatory discipline and environmental compliance across our entire organization. Before turning to our third quarter results, allow me to summarize why we do believe that U.S. Energy remains the most compelling E&P microcap story. First, our asset profile. We have a low decline, oil-weighted producing assets across four of the most important and prolific oil basins in the United States. Secondly, our free cash flow generation. Given the maturity of the production in our asset base, our reinvestment needs are relatively low, which allows us to harvest greater amounts of cash flow from the assets and be strategic about how we want to allocate that capital to create and return shareholder value. value. This leads us to the third point, which is our focus on profitable growth. Growth has become somewhat of a dirty word in our sector because some operators drew themselves right into the ground during the last several cycles and years, ultimately losing their capital discipline. However, we do think growth done right leads to high free cash flow conversion and superior shareholder returns. We intend to grow the scale of our business, focusing on high margin cash flow while maintaining a base level of profitability. Turning now to our third quarter results. Production for the third quarter averaged approximately 1,752 BOE per day, of which approximately 59% was oil. This compares to the second quarter, which averaged 1,783 BOE per day, of which 66% of the production was oil. Oil volumes declined during the quarter because we shut in wells on recently acquired West Texas properties to perform planned and necessary maintenance. When we did close our January 2022 acquisition, we knew we would have to spend some workover capital in the future in order to maximize the production efficiency of the assets going forward. Much of the work was completed during the third quarter and the wells returned to production, which we expect good contribution from these wells, going forward in the fourth quarter. Gas volumes increased during the quarter due to the integration of our most recent East Texas acquisition that we closed in the third quarter in July. Total oil and natural gas revenues in the third quarter were approximately $11.8 million compared to $13.5 million in the second quarter. Realized prices for the quarter were as follows: Oil received $94.81 per barrel and natural gas received $7.10 per Mcf for a total realized price of $73.36 per barrel of oil equivalent. This compares to the second quarter, where we received $105.74 per barrel of oil, $6.55 per Mcf of natural gas and $83.09 per barrel of oil equivalent. In total, realized prices declined by 12% in the third quarter. Lease operating expense for the third quarter was approximately $5.4 million, compared to $4.6 million in the second quarter. The increase in LOE is primarily due to the increased workover expense incurred in West Texas that I previously discussed. Production taxes of $900,000 during the quarter were approximately 6.9% of total sales revenue, which is essentially flat quarter-over-quarter. Cash G&A for the third quarter totaled $2.2 million, which is slightly higher than the second quarter of $2.0 million. The increase in cash G&A expense is primarily due to an increase in non-recurring professional and advisory fees related to the company's January 2022 acquisitions and the associated share registration statements filed throughout the third quarter. Adjusted EBITDA in the third quarter was approximately $3.1 million, compared to $5.1 million for the second quarter. As just mentioned, the decrease in third quarter was attributable to the lower oil volumes, increased workover expenses and lower realized oil prices. Now to touch on hedging. We are approximately 73% hedged for the balance of 2022 and approximately 54% hedged in 2023 when it comes to our anticipated oil volumes. Given the gas revenue makes up a lesser percentage of our overall revenues, we have taken a more patient approach to hedging that commodity. For the balance of 2022, we are hedged in gas approximately 17% and carry no gas hedges after the first quarter of 2023. Finally, I'd like to give a quick update on the balance sheet before we turn the call over to Q&A. In connection with closing our East Texas acquisition in July, the borrowing base on our revolving credit facility was increased from $15 million-$20 million. Post-transaction, we have $12.5 million outstanding on the revolver, which represents the only debt that we carry. As of 30 September, U.S. Energy had approximately $3.1 million of cash on hand for a resulting net debt balance of $9.4 million. As we have previously discussed, we plan to continue using excess cash flow to work the balance down over the next few quarters, as well to fund our quarterly dividend payment. Since current management took over in late 2019, the goal here has been to build a company of scale and I'm very proud of the progress that we have made thus far. During our tenure, U.S. Energy has grown proved reserves from 1 million BOE to 8 million BOE, production from 300 BOE per day to over 1,800 BOE per day currently. Over that same period, the value of our proved producing reserves has increased 14 times to more than $175 million or approximately $6.60 per share, more than double where the shares are trading today. On behalf of the entire team, I wanna thank you all again for joining us this morning and for your continued interest in U.S. Energy Corp. We consider the initiation of a quarterly conference call with investors a strong step in providing more access to the company and disclosure to our investors. It's a compelling story and one that we are all very excited to be a part of. As one of the few high-quality micro-cap stories that combines low risk income yield with meaningful upside through M&A, we believe this is an opportunity worth sharing. With that, I'll turn the call back to the operator for questions. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from the line of Charles Meade from Johnson Rice & Company. Please go ahead. Morning, Ryan to you and your whole team there. Hey, Charles. Good morning. Ryan, I want to ask two questions about your volume trajectory and the underlying dynamics in 3Q going into 4Q. First, on natural gas, obviously you have the big uptick in 3Q and a big piece of that is the East Texas acquisition. Can you give us a sense or you know what it looks like from your point of view on how that asset package is performing versus your acquisition case on the natural gas side. How much that may be played into you know how 3Q worked out and what 4Q is gonna look like. Yeah. No problem. We closed the acquisition we made in East Texas in late July of the third quarter. For accounting purposes, it only showed up for August and September. The July portion of it was a closing statement adjustment. So far it has been wonderful for us. You know, we went into it evaluating. We had some wells in the area already from the January 2022 this year acquisition that we made. We already had a lot of familiarity within the area with the gas prices, where they've been. You know, this year, obviously it makes these gas projects much more compelling. It was already an area that we were looking at. You know, we thought we bought the asset right on, you know, a very attractive cash flow multiple, I believe 1.7 times. So far we've had no hiccups. I would say, it's performed better within, you know, a range of probably 5% than what we were forecasting. It's definitely been in line. It's produced, you know, the net cash flow, if you will, off of the asset as we forecasted for us to amortize down our credit facility, which we drew on to make the acquisition. It's been strong so far. It's been very low maintenance. I think going into 2023, you know, our plan on it is, you know, on one hand, if it's not broke, don't try and fix it and let it keep, you know, producing 400-450 BOE per day, which, you know, 60% gas. Y ou know, as we continue to learn more about it, get our arms around it, I do think down the road and when I say down the road, I call down the road 2023, there are some potential recompletion opportunities in a number, I'd say the majority of the wellbores that we acquired in the deal. That early stage, we see some upside. More engineering needs to be done on it but it is part of our evaluation in 2023 planning and budgeting process that we're going through right now. Got it. That's helpful, Ryan. On the oil side, I think you addressed this a bit or you maybe hinted at it in your prepared remarks. The workover program you guys were doing on your those, I believe they're conventional Permian assets in West Texas. What kind of production response do you expect to see or should we expect to see? Was this workover more just kind of you know, cleaning things up as opposed to improving rate? You know, unfortunately, I would say the latter. It's definitely a mix but I think, you know, it's kind of a two-part answer. The first half of the year, the capital that we spent on our West Texas assets were, call it, you know, return to production type of capital. We had fairly decent results there. We didn't have a chance to fulfill the whole program. I would say the most recent capital that we've spent, especially the stuff that showed up in the third quarter, was the vast majority of that capital was maintenance capital that took some of that return to production production off of line right now. I think, you know, I don't think I know a lot of that production has come back in the fourth quarter. We're still spending some money on the same project to finish it up. We're almost done now. I expect that production to come back online, what hasn't already, throughout the fourth quarter. You know, naturally spending workover capital on maintenance, you know, hurts your field level economics for the year. We do believe here that, you know, once kind of it shakes out on an annual look back basis, the capital that's being spent in West Texas to bring wells back online will ultimately be economic with, you know, a much higher runtime going forward with this maintenance work that we're doing right now. Ryan, if I understand correctly, volumes will go up because basically wells are coming back online but it's not the case that wells are coming back online at higher rate. It's more just there'll be an uptick because of uptime as opposed to improved rate. Is that the right read? I think it's both. I mean, taking like flush production out of the equation, a lot of the return to production wells we were doing, work that we're doing were wells that were shut in when we acquired them. I think it's a mix of both. Got it. Okay. Got it. I have another question but if there's anyone else in the queue, you can go to them. You can go ahead. You can go ahead and ask now if you want. Okay. All right. I don't, I'm not in charge. I'm not in charge of the queue here. I'm not in charge of the queue here. I wanted to ask about how the A&D opportunity set looks like for you right now. I wonder if you could address it from kind of two perspectives. Number one, what do you see? Like, you know, how has the opportunity set changed either for the better or for worse or what's new and different? On the other side of it, what are you seeing in the way of, you know, competition from other possible buyers on the opportunity set you're after? Yeah. No, it's a great question. Complicated and very fluid as you well know, in the M&A markets right now. I think, at least what I see and what we see here is like a very clear line. I can't give you an exact dollar amount or value amount where that line is. Over the last couple of months, I think the larger type of deals and I mean larger, too, relative to U.S. Energy, not, you know, relative to Exxon. I think we have seen kind of a recalibration of seller and especially buyer and what they'll attribute value to. I've seen when, you know, over the last several months, if you will or maybe last several months, beginning in maybe June or July, people talking about paying for upside or giving any credit to upside would get you thrown out of a room. I think we've seen a few transactions that if there's real near-term drilling, real being, you know, you have permits in hand, you have rig in hand, you have crew in hand, you have the million things right now that are tough to get and you have your arms around and this is really development drilling and not, you know, kind of step out exploration drilling, you're seeing credit assigned to that near-term drilling. Is it dollar for dollar reserve report credit? Of course not. I think we are seeing a PDP plus with that plus representing some upside drilling locations. Flipping a full 180 on you, what we see on the kind of, call it asset level, truer asset level deals, just, you know, asset bolt-ons ranging, you know, from very small to call it, you know, I'll say $20 million or $30 million but again, that number is very rangy a re still straight cash flow multiples, whether it's 24-27 month deals. We haven't seen as much seller and buyer recalibration in that market because at these commodity prices, right, a private seller that doesn't have a lot of hedges is probably cash flowing their asset, you know, pretty strong. Definitely stronger than it's been in a long time. A lot of those folks don't wanna sell at 24-27 months cash flow, right? They would just rather keep it. We've seen a slowdown in that market and kind of a head butting in that market. It hasn't really changed. But again, that's just a challenge that we overcome. That's kind of where we see the deals shaking out and the values being attributed. In terms of competition, I mean, no doubt that there's a lot of competition out there. I would say on the asset level deals, you know, we don't run into as much public company competition just because of, you know, there's not that many smaller scale entities out there that are outbidding. If they do, I'd say some of the existing smaller scale entities are probably focused on singular areas. The larger guys, right, they need to do stuff that moves the needle. On the private side, on the asset level type of deals, we see a lot of competition from private, true privates. I call true privates, not, you know, private equity portfolio companies. The true privates and family office type of funded capital, especially in that, you know, in that world, there's a lot of that money chasing assets. It is competitive. Again, you know, the bid-ask right now on the smaller asset side, at least from what we see hasn't budged much over the last few months. Got it. That's all good color. Thank you, Ryan. Thanks, all. Thank you. Our next question comes from the line of Ignacio Bernal from EF Hutton. Please go ahead. Hey, good morning. Congratulations on the quarter and thanks for the time today. I'm calling on behalf of Ben Piggott with two questions here. Just to start, I guess, just an update on recompletion opportunities in Montana and how that's going. Yeah, for sure. I'll expand it a little bit because I think it's kind of more of an asset-based question. On Montana specifically, we have not done a ton of recompletion work on the Montana asset that we acquired in January of 2022, just because it's been a really good asset for us. It's been a high runtime. We have a really great team up there in Cut Bank, Montana, that is running it. You know, it's really been just like a cash flow generation machine for us right now. I think on the true recompletion side, we have participated in some on a non-op basis in North Dakota to you know I would say mixed but fairly decent results. Small working interest type of stuff. As I mentioned earlier, on the earlier question, I think that probably our most near-term recompletion opportunities, at least where we're spending a lot of time on, is on our newly acquired East Texas assets, going back into the Rodessa Formation. Then on our South Texas assets, which are non-op but we have a very high working interest, some as high as 50%. We're working with our partner and we think there is some Austin Chalk recomplete activity on a fair amount of our holdings down there. I think that you see activity in these areas for us in 2023. Like I mentioned, we're still kind of, like, going through and formulating our 2023 budget. We do think that there is upside over a significant portion of our asset base on recomplete opportunities. I think we start in Texas, both in East Texas and kind of our South Texas acreage. That's really helpful. Thank you. I know it was mentioned before and it's been talked about but just any other color on the M&A funnel, maybe some broader trends you're seeing. Anything would be helpful there. Thank you. Yeah. I mean, I think I'll kind of reiterate what I already mentioned and maybe add a little more color to how we do it. You know, we have a very strong business development team here and, you know, evaluation process. We're very, I would say, in the market on all sides of the deals, small and large. I do think that we have a good pulse on the market. I see a bigger gap, like I mentioned, between the larger scale of deals and the smaller scale of deals and the way that they're valued. I know they're always valued a little bit different when the scale is that wide. The way that they're being valued, the way that companies and entities are looking at them just seem to be very far apart from, you know, a PDP paying for some upside as well and then a cash flow deal. You know, I think that's why we've seen outside of the really big guys M&A slow down unless their respective transactions gave some upside to the sellers. I think you've seen two or three transactions over the last, you know, call it six weeks or so, reflect that. I do think it's something that, you know, the investing community is going to eventually recognize, that inventory is going to come to the forefront of the conversation for companies now, when it hasn't been at the forefront of the conversation for a little while. I think that this trend of giving attributing value to real locations and real near-term drilling that, you know, in this business you can put as much certainty around results as you possibly can. I think you're gonna see deals start going off more and more with value attributed to those locations. That's perfect. Thank you guys and congrats on the quarter. Thanks. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. Now I would like to turn the conference to Ryan Smith, CEO, for closing comments. Thank you, everybody. I appreciate your time this morning and for your continued interest in U.S. Energy. I look forward to speaking again next quarter. Thank you. Thank you. The conference of U.S. Energy Corp. has now concluded. Thank you for your participation. You may disconnect your line.