Greetings. Welcome to U.S. Energy Corp. First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to Mason McGuire, Director of Corporate Development. Thank you. You may begin. Thank you, operator, and good morning, everyone. Welcome to U.S. Energy Corp.'s First Quarter 2023 Results Conference Call. Ryan Smith, our Chief Executive Officer, will provide an overview of our financial and operating results and discuss the company's strategic outlook. After the market closed yesterday, U.S. Energy issued a press release summarizing operating and financial results for the three months ended March 31, 2023. The press release, together with the 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 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. Thanks, Mason. Good morning, everyone, thank you for your interest in U.S. Energy and for joining us today for our Q1 2023 earnings call as the company has continued to carry forward into the Q1 the strong operational momentum realized throughout 2022. During the Q1, we sold approximately 91,300 barrels of oil and 384 million cubic feet of natural gas for a total of 155,000 barrels of oil equivalent, or approximately an average of 1,726 BOE per day, a 29% increase over the Q4 of last year when we averaged 1,341 BOE per day. Specific to our regional focus areas, our Rockies production grew approximately 4% during the quarter. Our MidCon and East Texas assets grew approximately 14%, and our West Texas and Gulf Coast assets grew approximately 8%. Unfortunately, our South Texas assets, specifically some of our highest margin properties in Karnes County, experienced some significant downtime related to, I would say, normal but unplanned well maintenance that was undertaken during the quarter, of which those wells have since come back online. Realized prices during the quarter before derivatives were approximately $77.70 per barrel of oil and $3.06 per Mcf of natural gas, or a blended cost of $53.25 per BOE, which was approximately 28% lower than our realized pricing in the prior period of $73.50 per BOE. This resulted in financial performance that was below that of the Q1 of last year, despite significantly higher production volumes. Moving on to revenue. We recorded $8.3 million in the Q1, down approximately 7% from the $8.9 million in the Q1 of last year, mostly driven by the previously mentioned pricing decline, and 86% of our net sales came from oil. Turning now to more significant expense line items on the income statement, our lease operating expense in the Q1 was approximately $4.5 million or $29.12 per BOE, compared to $2.7 million or $22.60 per BOE in the prior year period. Our absolute LOE increased due to the acquisition of the additional producing properties in 2022, and our per unit cost increased primarily because of the unplanned maintenance on our South Texas properties, which of course affected both production and the cost profile. Looking forward, we expect to recognize further operating cost efficiencies as we fully integrate all of the acquisitions that we made in 2022 into the portfolio, and we forecast LOE to average approximately $3.5 million per quarter or around the low $20 per BOE during 2023. Production taxes were about half a million dollars or $3.35 per BOE. Our tax rate as a percentage of revenue has held steady at approximately 6%. Our cash G&A, excluding share-based compensation, was approximately $2.0 million versus $1.4 million for the prior year period. The increased G&A expenses are due to the modest but necessary additions to personnel that came with our acquisitions that were made throughout 2022. We expect G&A to average approximately $2 million per quarter in 2023. Management maintains focus on continuing to optimize that number moving forward. Looking at our Adjusted EBITDA, U.S. Energy recorded $1.2 million in the Q1 compared to $4.1 million in the Q1 of 2022 as lower realized prices largely negated the 28% improvement in sales volumes. Quickly touching our hedge book, we are approximately 50% hedged on our expected oil volumes in 2023, with the majority being collars. All with a weighted average floor of right around $60 per barrel. We did have some gas hedges that rolled off in the Q1, so we are unhedged on gas moving forward. Where we sit now, we're comfortable with where our 2023 hedge program currently sits from a risk management perspective, and we will continue monitoring the forward oil strip as we evaluate 2024. Under the assumption that we're in a pricing environment similar to the one that we are in today, the level of hedging we may do around any potential future acquisitions will likely be commiserate with the amount of debt capital used in that transaction. Touching briefly on our balance sheet, at quarter end, we had $12 million outstanding on our revolving credit facility and about $2.4 million of cash on hand. With an additional $8 million available under the revolver, plus our cash, we had total liquidity of a little bit greater than $10 million. While we feel totally comfortable where our leverage profile stands today, we do continue to intend to continue paying down our outstanding balance with a portion of our free cash flow going forward. I would like to turn to our 2023 outlook, which is set against the backdrop of macroeconomic uncertainty and the recent volatility in commodity prices. Since the start of the year, there's been a pullback in commodity prices with the 2023 and 2024 oil strips declining by 11% and 9% respectively. All that to say that volatility is a fact of life in the energy business. We have avoided the temptation to lever up chasing growth in the good times because we have all seen the other side of that. We're very cautious with our balance sheet. That gives us a lot of assurance in the face of any potential recessionary environment that our capital-light, low decline business model is the right one. With our healthy liquidity profile that we have, our low leverage balance sheet, and our high-quality producing assets, we are positioned to capture significant value in an upcycle environment while remaining confident that we can successfully weather a downturn in commodity prices. While we do not put out official guidance, I would like to set some expectations as we head deeper into 2023. From an operations standpoint, we're very pleased with the performance of our producing assets. Given the conventional nature of these wells and their production history, our corporate decline rate is in the upper single-digit%. What does that mean? It means our maintenance capital required to hold production flat is minimal, and it can easily be funded from a portion of the company's free cash flow at current and significantly lesser commodity prices than we're experiencing today. Based on our current assets, we expect capital expenditures of approximately $5 million during 2023, which reflects investments in various highly economic return to production opportunities that we have throughout the portfolio, as well as infrastructure investments to optimize the daily, you know, operating cost structure of several existing assets. As I mentioned earlier, we do expect to see continued improvement in lease operating expenses, driving that line item continuously down to a steady run rate in the low $20 per BOE, generally flat production taxes and flat improving cash G&A throughout 2023. While running a bare bones business would definitely lower our G&A run rate, I do think it should be noted that the company is expected to realize true cost synergies around future acqui-asset acquisitions with the current professionals we have that make up our workforce right now. Finally, let me spend a couple of minutes on the strategic outlook for our business. Our priorities are threefold. First, we operate our assets and allocate our investors' capital responsibly. This means we take environmental stewardship seriously and are proud of where and how that we work, and we acknowledge that every $1 invested must have a positive return. Second, we smartly allocate that capital to primarily grow the company through acquisitions, understanding that increased scale brings both production and cost efficiencies and ultimately a more profitable business. We've already seen the rewards of this strategy in 2022, with significant increases to approved reserves value, cash flow, and the company's operating margins. Third, we're committed to returning capital to shareholders, both through a sustainable dividend and our recently announced $5 million share repurchase program. Two initiatives that I believe demonstrate the underlying strength in the business and the company's board's determination to create long-term value for our shareholders. We believe that our strategy has resulted in significant increase to the underlying value of the company. Thanks to strategic acquisitions and targeted development activities over the past 18 months on our existing acreage, we've increased proved developed producing reserves to 7.8 million BOE from just 1.4 million BOE, and have seen the value of those reserves increase 13 times to $173 million at year-end SEC pricing over the same time period, far above our current enterprise value. While the M&A market has been challenging and may continue to be, given the economic uncertainties, I have great confidence in our ability to drive value no matter the environment. U.S. Energy has a motivated and disciplined team of professionals, an extensive network in the oil and gas community, and a mandate to strategically grow the company. We offer our potential partners a strong balance sheet, the ability to evaluate and close quickly, and a proven track record of value creation, along with a post-deal history of quality asset stewardship. We fully believe that the continuous and efficient growth of the company is achievable, and we focus on that task every single day. I wanna thank you all again for your interest and your support of U.S. Energy. We believe we offer a unique value proposition to those looking for exposure to the current energy cycle, of which we believe we are in the early innings. There is no other public oil and gas producer of our size that offers the balance sheet strength and the downside risk protection with the growth trajectory that we do. Management, along with the rest of our team, are highly incentivized to create, maintain, and grow shareholder value. That mandate remains at the forefront of every decision that is made at the company. With that, operator, I'll turn it over to Q&A. Thank you. 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. Our first question is from Charles Meade with Johnson Rice. Please proceed. Good morning, Ryan, to you and the whole U.S. Energy team there. Hey, Charles. Good morning. Ryan, I wanna go back to what you said in your prepared comments about the downtime in Karnes County, and I think you, I think, I like the way you framed it. It was normal but not expected. Can you give a little bit more detail on what the nature of the work that was needed? Really what I'm aiming at is whether, you know, this is a kind of a one-time fix that we're not gonna have to handle again, or whether this is gonna, you know, this could be the kinda thing that crops up again. No, great question. I would say it's more of the former. you know, our Digressing just a little bit on the question, as you know, our asset base is highly conventional older wells that we've acquired and, you know, we clean up and lower costs. To that point, right, like, what is probably the number 1 thing that we focus on, right outside of cost, it's runtime. We've done a great job keeping runtime up. We're always going to have a percentage of wells go down. I would say this past quarter has been as good as any quarter that we've had. Unfortunately, the wells that went down were our highest producers in Karnes County and also Liberty County. it was nothing that was unexpected in terms of like, we have some, we have some tubing issues, or, we need to, we need to pull something out of the hole and check it out, as much as it was like standard work. I could probably dive into a likely LOE question on how we're seeing services in this comment as well. you know, the expected was they're expected to go down, you know, once every 18 months or so, hopefully. the unexpected is, you know, once you kind of cross that 12-month mark, you know it's coming, you just don't know exactly when it's coming. we don't expect these higher interest wells to, you know, need maintenance for quite a while now. If our run rate stays the same, in terms of runtime on these wells, I would expect, you know, our production to increase naturally. On a lookback basis, on an annual, probably come out in the wash on what, you know, we were kind of originally looking at pre-Q1. Got it. I think you kind of anticipated my second question there, which is, although, should we expect a sequential increase, in 2Q production? I mean, we think the... You know, I'm really interested- Yeah. No, I do. not so much in just what happens in 2Q, but the, you know, what it indicates for the trajectory overall. We should be looking for. Correct. for a small increment in Q2? I do. I do. I would... Another way to put it would be, the quarter-over-quarter decrease had nothing to do with, like, changing of type curves or underperformance. It was just, you know, well maintenance issues, on higher- Got it. -and high- Yeah. -high revenue properties. They're all back online now. I think that's a fair assumption. Got it. Maybe, one other, and then I'll see if there's anyone else in the queue. Some other companies who are on the acquisition hunt right now have said that their opportunity set is as good as it's been in years. I'm curious what it looks like, what the opportunity set looks like from your seat. No. I definitely see where people are coming from with that comment, and I kind of agree. I mean, there's kind of a caveat. I'll hit the positive points first. I would say, you know, a lot of the deals that went off, of course, not all the deals, but I would say, especially related to U.S. Energy, a lot of the deals that have gone off, call it, 2021 and 2022, were guys that needed to sell. Again, not all of them, but when you saw the 24-month, 30-month type of cash flow deals, those usually were people that in some form or fashion were kind of distressed and you could get stuff done. You know, what we're seeing now is, after a major slowdown over, you know, call it, you know, ballpark the last, six months, is a whole lot of deals that hit the market a year ago. I mean, literally, like, decks with April 2022 dates on them when, you know, we were first on the Russia-Ukraine spike and everybody ran to the market to try to monetize their assets, right? They weren't distressed. They were just opportunistically selling. There was so much volatility during that time that most of those deals did not make. You know, they pulled their assets back, just ran them- Right cash flowed them. A lot of those guys are they're back in the market, right? They're not distressed sellers, but they're opportunistic sellers. They're, we see it a lot with private companies, like true privates, not kind of portfolio companies. Then again, we also see a lot of, you know, portfolio companies and what I'll call unnatural equity holders, i.e., debt funds that, you know, through the cycle of ended up owning equity. These guys have a mandate to do something with these portfolio companies. I think the opportunity set, at least, you know, from U.S. Energy's perspective is definitely robust and we see a lot of deals. Capital is still scarce. There's no doubt. I would say that would be the hindrance to most of these transactions. Of course, everybody knows rates have gone up. You know, that's complicated everything. We've seen, you know, very big public hiccup in the banking markets. The really big banks are kind of very tough to have relationships and access with. You know, that leaves the vast majority of the small cap world in the regional and smaller commercial banking environment. While that's I would say very strong right now, and it's as strong at the beginning of this year as I've seen it in quite a while, there's a finite amount of that kind of, you know, debt, capital, keep your balance sheet sub 1x leverage type of groups out there. You know, the opportunity set is robust. The challenge, which I think we're very good at, is, you know, sourcing the capital in a smart, accretive way that doesn't blow up your balance sheet. That's helpful commentary. Thank you, Ryan. Our next question is from Noel Parks with EF Hutton. Please proceed. Good morning, Ryan, and thank you for your time today. You mentioned on the call more infrastructure investments in 2023. If you could just kind of give us some more color on how we should be thinking about the impact of that and CapEx spend overall, that'd be really helpful. Thank you very much. Yeah. Good morning. I'll answer the second part first. I think that we've kind of, told the market that, you know, we have about a $5 million expected CapEx spend this year. I believe we were a hair below that on our, run rate for the Q1, but very close to that. I think we're confident on that number. What does that $5 million get us? That $5 million gets us our production staying flat because of, the low decline nature of the asset base, which I know wasn't your question. Secondly, it does allocate some capital to, you know, what we're calling infrastructure investments. On some of our gassier assets, there was probably some more work that we could have done, and I'll get into that in a little bit, that, you know, the price drop, you know, really doesn't make sense right now. There's some stuff that makes sense no matter the price environment. You know, it kind of goes into, like, the cost inflation question and what are we seeing. In some costs, we're seeing flattening and even a pullback. You know, it's. A lot of it's geographic driven, but, you know, on certain pipe and certain just wellbore and other ancillary equipment, they don't really teach this in economics class, but the prices have stabilized. The availability is still a little bit rocky. We're in a much better situation there than we were, a while back. Where we see the biggest, I'll call it waste of money is in rental equipment. A good example would be, like, a compressor in East Texas. I'm gonna ballparks some numbers for you here, but they're close enough to accurate. Size and performance and price of compressors can range the full spectrum. If we buy an asset and we're renting a compressor, the legacy person's renting a compressor for $100,000 a month, and we can buy the compressor for $1 million, right? Like corporate finance will tell you you should do that deal. That's a big number, right? I don't wanna part with $1 million. There's other stuff that we can do, to with that money. Again, it still makes sense. It lowers our LOE very significantly because that original rental cost gets buried in the LOE. That CapEx number, kind of circling back, that I mentioned at the beginning, I think we're still comfortable with that number and, you know, that's a maintenance production to keep our production profile flat. About, you know, I would say, you know, 20% of that number, maybe a little bit less, is going to infrastructure investments that are really low-hanging fruit, simple type of projects from an engineering perspective, not pipeline, et cetera, type of things. You know, compressor, either acquiring it or acquiring a new one and installing it, is stuff that the folks here can do pretty easily, so. That was really helpful. Thank you, Ryan. There are no more questions at this time. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Thank you, everyone.