U.S. ENERGY CORP. Introduction
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission onMarch 26, 2021 (the "Annual Report"). Certain abbreviations and oil and gas industry terms used throughout this Report are described and defined in greater detail under " Glossary of Oil and Natural Gas Terms " on page 4 of our Annual Report.
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under "Part I - Financial Information" - " Item 1. Financial Statements ".
In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.
See also " Cautionary Note About "Forward-Looking Statements " above.
Unless the context requires otherwise, references to the "Company," "we," "us," "our," "U.S. Energy", and "U.S. Energy Corp. " refer specifically toU.S. Energy Corp. and its consolidated subsidiaries
In addition, unless the context otherwise requires and for the purposes of this report only:
? "Bbl" refers to one stock tank barrel, or 42 U.S. gallons liquid volume, used
in this report in reference to crude oil or other liquid hydrocarbons;
? "BOE" refers to barrels of oil equivalent, determined using the ratio of one
Bbl of crude oil, condensate or natural gas liquids, to six Mcf of natural gas;
? "Bopd" refers to barrels of oil day;
? "Mcf" refers to a thousand cubic feet of natural gas;
? "Mcfe" means 1,000 cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids
? "NGL" refers to natural gas liquids;
? "Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
? "SEC" or the "Commission" refers to the
Commission;
? "Securities Act" refers to the Securities Act of 1933, as amended; and
? "WTI" means West Texas Intermediate.
Where You Can Find Other Information
We file annual, quarterly, and current reports, proxy statements and other information with theSEC . TheSEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with theSEC like us at https://www.sec.gov (our filings can be found at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000101594) and on the "Investors - SEC Filings" page of our website at https://usnrg.com. Copies of documents filed by us with theSEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report.
Summary of The Information Contained in Management's Discussion and Analysis of Financial Condition and Results of Operations
Our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
? General Overview. Discussion of our business and overall analysis of financial
and other highlights affecting us, to provide context for the remainder of
MD&A.
? Plan of Operations and Strategy. Discussion of our strategy moving forward and
how we plan to seek to increase stockholder value.
? Recent Developments. Discussion of recent developments affecting the Company
and our operations.
? Critical Accounting Policies and Estimates. Accounting estimates that we
believe are important to understanding the assumptions and judgments
incorporated in our reported financial results and forecasts.
? Results of Operations. An analysis of our financial results comparing the
three and six months ended
? Liquidity and Capital Resources. A discussion of our financial condition,
including descriptions of balance sheet information and cash flows.
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Table of Contents
General Overview
U.S. Energy Corp. - is a Wyoming corporation organized in 1966. We are an
independent energy company focused on the acquisition and development of oil and
natural gas producing properties in the continental United States . Our business
activities are currently focused in South Texas , the Williston Basin in North
Dakota , Lea County in New Mexico and Converse County in Wyoming .
We have historically explored for and produced oil and natural gas through a
non-operator business model. As a non-operator, we rely on our operating
partners to propose, permit, drill, complete and produce oil and natural gas
wells. Before a well is drilled, the operator provides all oil and natural gas
interest owners in the designated well the opportunity to participate in the
drilling and completion costs and revenues of the well on a pro-rata basis. Our
operating partners also produce, transport, market and account for all oil and
natural gas production. With recent acquisitions in 2020 of New Horizon
Resources, certain FieldPoint Petroleum wells and certain wells in Liberty
County, Texas we now operate a small portion of our production.
Plan of Operations and Strategy
During the remainder of 2021 and beyond, we intend to seek additional opportunities in the oil and natural gas sector, including but not limited to further acquisition of assets, participation with current and new industry partners in their exploration and development projects, acquisition of existing companies, and the purchase of oil producing assets. In addition, we plan to grow production by performing workovers on operated idle wells acquired in 2020 to return them back to production.
Key elements of our business strategy include:
? Deploy our Capital in a Conservative and Strategic Manner and Review
Opportunities to Bolster our Liquidity. In the current industry environment,
maintaining liquidity is critical. Therefore, we will be highly selective in
the projects we evaluate and will review opportunities to bolster our
liquidity and financial position through various means.
? Evaluate and Pursue Value-Enhancing Transactions. We plan to continuously
evaluate strategic alternative opportunities that we believe will enhance
shareholder value.
Recent Developments
Impacts of COVID-19 Pandemic and Effect on Economic Environment
In earlyMarch 2020 , there was an outbreak of a novel strain of coronavirus, which causes the infectious disease known as COVID-19, which resulted in a drastic decline in global demand of certain mineral and energy products including crude oil. As a result of the lower demand caused by the COVID-19 pandemic and the oversupply of crude oil, spot and future prices of crude oil fell to historic lows during the second quarter of 2020, which remained depressed for the majority of 2020. Operators inNorth Dakota's Williston Basin responded by significantly decreasing drilling and completion activity and shutting in or curtailing production from a significant number of producing wells, all of which have since come back online. Lower oil and natural gas prices not only decrease our revenues, but an extended decline in oil or gas prices may materially and adversely affect our future business, financial position, cash flows, results of operations, liquidity, ability to finance planned capital expenditures and the oil and natural gas reserves that we can economically produce. Additionally, the outbreak of COVID-19 and decreases in commodity prices resulting from oversupply, government-imposed travel restrictions, and other constraints on economic activity caused a significant decrease in the demand for oil and has created disruptions and volatility in the global marketplace for oil and gas during the first quarter of 2020, and continuing through most of 2020, which negatively affected our results of operations and cash flows during 2020. While demand and commodity prices have recently recovered and are back to pre-pandemic levels, our financial results may continue to be depressed in future quarters. The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; the availability and efficacy of vaccines and boosters, and the willingness of individuals to obtain such vaccines; future virus mutations; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact the supply and demand for oil and gas and our ability to produce and transport oil and gas and perform operations at and on our properties. This uncertainty also affects management's accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including investments, receivables, and forward-looking guidance. 22 Table of Contents
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles inthe United States ("GAAP") requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. A summary of our significant accounting policies is detailed in Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2020 Annual Report on Form 10-K filed with theSEC onMarch 26, 2021 (the "2020 Annual Report") and under "Note 1. Organization and Significant Accounting Policies" in the notes to consolidated financial statements included in our 2020 Annual Report. The Company's results of operations and operating cash flows are affected by changes in market prices for crude oil and natural gas. To manage a portion of our exposure to price volatility from producing crude oil, we entered into a crude oil derivative swap contract during the six months endedJune 30, 2021 , to protect against price declines in future periods. The Company does not designate commodity derivative contracts as a cash flow hedges and therefore the contract does not qualify for hedge accounting. Changes in fair value of the swap contract are recorded in the condensed consolidated statement of operations. The fair value of the swap contract is recorded as either an asset or a liability on the condensed consolidated balance sheet.
Recently Issued Accounting Standards
We do not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on our Condensed Consolidated Financial Statements or related disclosures.
Results of Operations
Comparison of our Statements of Operations for the Three Months Ended
2021 and 2020
For the three months ended
Revenue. Presented below is a comparison of our oil and gas sales, production quantities and average sales prices for the three months endedJune 30, 2021 and 2020: Three months ended June 30, Change 2021 2020 Amount Percent (in thousands except average prices and production quantities) Revenue: Oil$ 1,507 $ 201 $ 1,306 650 % Gas 149 (12 ) 161 Not meaningful Total$ 1,656 $ 189 $ 1,467 776 % Production quantities: Oil (Bbls) 24,077 11,710 12,367 106 % Gas (Mcf) 47,979 13,124 34,855 266 % BOE 32,073 13,897 18,176 131 % BOE per day 352 153 199 Average sales prices: Oil (Bbls)$ 62.59 $ 17.18 $ 45.41 264 % Gas (Mcf) 3.10 (0.95 )
4.05 Not meaningful
BOE $ 51.62 $ 13.58 $ 38.04 280 %
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Table of Contents
The increase in our oil and gas revenue of $1,467 thousand for the three months
ended June 30, 2021 , as compared to the three months ended June 30, 2020 , was
due to an increase in oil production of 106% and an increase in the realized
price received for our oil production of 264%. The increase in oil prices is
primarily due to stronger demand for crude oil on a global basis as the world
recovered from government mandated lockdowns which began in mid-March 2020 in
order to reduce the spread of the COVID-19 pandemic. The increase in oil
production volumes is primarily the result of the acquisitions of properties we
completed during 2020, and our efforts in the first six months of 2021 to return
idle wells to production. During the three months ended June 30, 2021 , we
produced 9,472 Bbls of oil from properties acquired in the second half of 2020.
In addition, during the three months ended June 30, 2021 , we experienced
production increases in our legacy non-operated properties, primarily in North
Dakota as the result of workovers in which we participated. In the comparable
period of the prior year, production declined due to operators, principally in
North Dakota , temporarily shutting in production as the result of low commodity
prices.
For the three months ended June 30, 2021 , we produced 32,073 BOE, or an average
of 356 BOE per day, as compared to 13,897 BOE or 153 BOE per day during the
comparable period in 2020. During the three months ended June 30, 2021 , our BOE
production mix was 75% oil and 25% natural gas compared to 84% oil and 16% gas
in the comparable period of 2020. The increase in gas as a percentage of total
production increased due to the acquisition of non-operated gas producing
properties in the second half of 2020.
Oil and Gas Production Costs. Presented below is a comparison of our oil and gas
production costs for the three months ended
Three months ended
June 30, Change
2021 2020 Amount Percent
(in thousands)
Production taxes $ 131 $ 13 $ 118 908 %
Lease operating expense 477 333 144 43 %
Total $ 608 $ 346 $ 262 76 %
For the three months ended June 30, 2021 , production taxes increased by $118
thousand , or 908%, compared to the comparable period in 2020. This increase was
attributable to the increase in oil revenues of 776% from the three months ended
June 30, 2020 . For the three months ended June 30, 2021 , lease operating
expenses increased by $144 thousand when compared to the three months ended June
30, 2020 , due to increased activity as the result of operated properties
acquired in the second half of 2020.
Depreciation, Depletion and Amortization. Our depreciation, depletion and
amortization ("DD&A") rate for the three months ended June 30, 2021 was $3.93
per BOE compared to $6.45 per BOE for the three months ended June 30, 2020 . Our
DD&A rate can fluctuate because of changes in drilling and completion costs,
impairments, divestitures, changes in the mix of our production, the underlying
proved reserve volumes and estimated costs to drill and complete proved
undeveloped reserves.
Impairment of Oil and Natural Gas Properties . During the three months ended June
30, 2020 , we recorded an impairment of $1.8 million due to the net capitalized
cost of our oil and natural gas properties exceeding the full cost ceiling
limitation. During the three months ended June 30, 2021 , there was no suchfull cost ceiling limitation. General and Administrative Expenses. Presented below is a comparison of our general and administrative expenses for the three months endedJune 30, 2021 and 2020: Three months ended June 30, Change 2021 2020 Amount Percent (in thousands) Compensation and benefits, including directors' fees$ 410 $ 296 $ 114 39 % Professional fees, insurance and other 402 71 331 466 % Total$ 812 $ 367 $ 445 121 % 24 Table of Contents General and administrative expenses increased by$445 thousand during the three-month period endedJune 30, 2021 , as compared to the prior year period. The increase was primarily attributable to an increase in professional fees of$331 thousand . Professional fees incurred during the three months endedJune 30, 2021 related to accounting and tax work, adding additional engineering and accounting contractors and legal fees related to the arbitration of an employment claim. See Note 9 Commitments, Contingencies andRelated Party Transactions-Arbitration of Employment Claim in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. Compensation and benefits, including director fees increased$39 thousand from the comparable period in 2020 due to the hiring inApril 2021 of a new Vice President of Operations. Non-Operating Income (Expense). Presented below is a comparison of our non-operating income (expense) for the three months endedJune 30, 2021 and 2020: Three months ended June 30, Change 2021 2020 Amount Percent (in thousands)
Loss on real estate held for sale $ -
100 %
Commodity derivative loss (317 ) - (317 ) (100 )%
Gain (loss) on marketable equity
securities 23 (46 ) 69 150 %
Warrant revaluation loss (4 ) (114 ) 110 96 %
Rental property gain (loss), net 6 (18 ) 24 133 % Other 1 - 1 100 % Interest, net (6 ) (2 ) (4 ) (200 )%
Total other income (expense)
937 76 %
During the three months endedJune 30, 2020 , we reclassified ourRiverton, Wyoming building and the related parcel of land to real estate held for sale. Concurrent with the reclassification we recognized a$1,054 thousand loss to record the value of the building at$725 thousand and land at$250 thousand , representing the amount we expect to realize for the sale of the property. See Note 3-Real Estate Held for Sale in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. For the three months endedJune 30, 2021 , we recognized a loss on our fixed-price swap commodity derivative contract of$317 thousand . InMarch 2021 , we entered into the swap contract to fix the price of 100 barrels of crude oil at$61.90 per barrel throughDecember 31, 2021 . The fixed-price swap contract represented approximately 28% of our oil production for the three months endedJune 30, 2021 . The loss is related to a change in the fair value of the fixed-price swap contract due to the increase in the price of crude oil during the period. See Note 8 Commodity Derivative in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. For the three months endedJune 30, 2021 , we recognized an unrealized gain on marketable equity securities of$23 thousand as compared to a loss of$46 thousand for the comparable period of 2020. The unrealized gain represents the increase in value of our investment in Anfield Energy Inc. See Note 15.Fair Value Measurements-Marketable Equity Securities in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. For the three months endedJune 30, 2021 , we recognized a warrant revaluation loss of$4 thousand as compared to a loss of$114 thousand during the three months endingJune 30, 2020 . The loss for the three months endedJune 30, 2021 was attributable to an increase in the value of our common stock during the period, which was partially offset by a decrease in the warrant liability due to the exercise of warrants to purchase 50,000 shares of common stock (leaving warrants to purchase 50,000 shares of common stock outstanding), which occurred in the third fiscal quarter of 2020. For the three months endingJune 30, 2021 , we recognized a gain on rental property. The gain represents rental income in excess of rental expenses related to ourRiverton, Wyoming office building, which is classified as held for sale atJune 30, 2021 .
Interest, net represents the interest expense on short-term financing of insurance premiums for certain policies.
Comparison of our Statements of Operations for the Six Months Ended
2021 and 2020
During the six months ended
25 Table of Contents Revenue. Presented below is a comparison of our oil and gas sales, production quantities and average sales prices for the six months endedJune 30, 2021 and 2020 (in thousands, except average sales prices and production quantities):
Six months ended
June 30, Change
2021 2020 Amount Percent
Revenue:
Oil $ 2,639 $ 1,056 $ 1,583 150 %
Gas 228 56 172 307 %
Total $ 2,867 $ 1,112 $ 1,755 158 %
Production quantities:
Oil (Bbls) 45,949 32,014 13,935 44 %
Gas (Mcfe) 72,173 53,437 18,736 35 %
BOE 57,978 40,920 17,058 42 %
BOE per day 320 225 95
Average sales prices:
Oil (Bbls) $ 57.43 $ 32.99 $ 24.44 74 %
Gas (Mcfe) 3.16 1.04 2.12 204 %
BOE $ 49.44 $ 27.17 $ 22.27 82 %
The increase in our oil and gas revenue of $1,755 thousand for the six months
ended June 30, 2021 as compared to the six months ended June 30, 2020 was due
primarily to an increase in oil production of 44% and an increase in the
realized price received for our oil production of 74%. The increase in oil
prices is primarily due to stronger demand for crude oil on a global basis as
the world recovered from government mandated lockdowns which began in mid-March
2020 , to reduce the spread of COVID-19. The increase in oil production volumes
is primarily the result of the acquisitions of properties we completed during
2020, and our efforts in the first six months of 2021 to return idle wells to
production. During the six months ended June 30, 2021 , we produced 16,875 Bbls
of oil from properties acquired in the second half of 2020.
For the six months ended June 30, 2021 , we produced 57,978 BOE, or an average of
320 BOE per day, as compared to 40,920 BOE or 225 BOE per day during the
comparable period in 2020. This increase was mainly attributable to the
acquisition of properties in the last half of 2020 and the return to production
of idle wells during the six months ended June 30, 2021 . In addition, during the
six months ended June 30, 2020 , certain North Dakota operators temporarily
shut-in production in response to low commodity prices.
Oil and Gas Production Costs. Presented below is a comparison of our oil and gas
production costs for the six months ended June 30, 2021 and 2020 (dollars in
thousands):
Six months ended
June 30, Change
2021 2020 Amount Percent
Production taxes $ 210 $ 80 $ 130 163 %Lease operating expense 1,045 742 303 41
% Total$ 1,255 $ 822 $ 433 53 % 26 Table of Contents
For the six months endedJune 30, 2021 , production taxes increased by$130 thousand , or 163%, as compared to the comparable period in 2020. This increase was primarily attributable to the increase in oil revenues, which increased by 150% compared to 2020. During the six months endedJune 30, 2021 , lease operating expenses increased by$303 thousand when compared to the six months endedJune 30, 2020 as a result of the acquisition of properties during the second half of 2020. Depreciation, Depletion and Amortization. Our DD&A rate for the six months endedJune 30, 2021 was$3.88 per BOE compared to$4.76 per BOE for the six months endedJune 30, 2020 . For the six months endedJune 30, 2020 , our depletion rate was impacted by a reclassification of$2.1 million of our unevaluated properties and the reduction in reserve quantities atJune 30, 2020 , primarily due to pricing revisions. Our DD&A rate can fluctuate as a result of changes in drilling and completion costs, impairments, divestitures, changes in the mix of our production, the underlying proved reserve volumes and estimated costs to drill and complete proved undeveloped reserves. Impairment ofOil and Natural Gas Properties . During the six months endedJune 30, 2020 we recorded an impairment of$1.8 million due to the net capitalized cost of our oil and natural gas properties exceeding the full cost ceiling limitation. During the six months endedJune 30, 2021 there was no such full cost ceiling limitation. General and Administrative Expenses. Presented below is a comparison of our general and administrative expenses for the six months endedJune 30, 2021 and 2020 (dollars in thousands): Six months ended June 30, Change 2021 2020 Amount Percent Compensation and benefits, including directors$ 749 $ 519 $ 230 44 % Professional fees, insurance and other 798 420 378 90 % Total$ 1,547 $ 939 $ 608 65 % General and administrative expenses increased by$608 thousand during six-month period endedJune 30, 2021 as compared to the six-month period endedJune 30, 2020 due to an increase in professional fees of$378 thousand . The increase was primarily attributable to an increase in legal fees. OnMarch 4, 2021 , we issued 90,846 shares of unregistered common stock valued at$406 thousand to APEG in reimbursement of legal costs they incurred in theTexas and Colorado Litigation, which was dismissed in 2020. See Note 9-Commitments, Contingencies and Related Party Transactions-APEG II Litigation in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. Compensation and benefits increased$230 thousand due to the hiring inApril 2021 of a new Vice President of Operations and an increase in the amortization of stock-based compensation due to awards granted to our officers and directors in January
andFebruary 2021 . 27 Table of Contents Non-Operating Income (Expense). Presented below is a comparison of our non-operating income (expense) for the six months endedJune 30, 2021 and 2020 (dollars in thousands): Six months ended June 30, Change 2021 2020 Amount Percent Loss on real estate held for sale - (1,054 ) 1,054 100 % Derivative loss (210 ) - (210 ) (100 )% Unrealized (loss) gain on marketable equity securities 73 (121 ) 194 160 %
Warrant revaluation (loss) gain (24 ) (120 )
96 80 % Rental property loss 23 (35 ) 58 166 % Other income 26 28 (2 ) (10 )% Interest, net (58 ) (2 ) (56 ) (2800 )% Total other income (expense)$ (170 ) $ (1,304 ) $ 1,134 87 % During the six months endedJune 30, 2020 we reclassified ourRiverton, Wyoming building and the related parcel of land to real estate held for sale. Concurrent with the reclassification we recognized a$1,054 thousand loss to adjust the carrying amount of the land and building to its estimated fair value of$975 thousand . See Note 3-Real Estate Held for Sale in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. For the six months endedJune 30, 2021 , we recognized a loss on our fixed-price swap commodity derivative contract of$210 thousand . InMarch 2021 , we entered into the swap contract to fix the price of 100 barrels of crude oil at$61.90 per barrel throughDecember 31, 2021 . The fixed-price swap contract represented approximately 32% of our oil production for the six months endedJune 30, 2021 . The loss is related to a change in the fair value of the fixed-price swap contract due to the increase in the price of crude oil during the period. See Note 8 Commodity Derivative in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. During the six months endedJune 30, 2021 we recognized an unrealized gain on marketable equity securities of$73 thousand as compared to an unrealized loss of$121 thousand for the comparable period of 2020. The unrealized gain represents the increase in value of our investment in Anfield Energy Inc. See Note 15.Fair Value Measurements-Marketable Equity Securities in the Notes to the condensed consolidated financial statements included in Part I, Item 1
of this report. During the six months endedJune 30, 2021 , we recognized a warrant revaluation loss of$24 thousand as compared to a loss of$120 thousand during the six months endedJune 30, 2020 . The loss during the three months endedJune 30, 2021 was attributable to an increase in the warrant liability, primarily as a result of the increase in the value of our common stock. During the six months endedJune 30, 2021 , we recognized a gain of$25 thousand from the partial recovery of a deposit written off in 2018. For the six months endedJune 30, 2020 we recognized a$25 thousand gain related to the recovery of the same deposit. Interest, net increased by$56 thousand during the six months endedJune 30, 2021 compared to the comparable period in 2020. OnMarch 4, 2021 , we entered into a Debt Conversion Agreement with APEG II. Pursuant to the agreement we repaid the note and accrued interest to the maturity date by issuing 97,962 shares. See Note 7-Debt in the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this report. 28 Table of Contents
Liquidity and Capital Resources
The following table sets forth certain measures of our liquidity as ofJune 30, 2021 andDecember 31, 2020 : June 30, December 31, 2021 2020 Change (in thousands) Cash and equivalents$ 6,582 $ 2,854 $ 3,728 Working capital (1) 7,416 2,499 4,917 Total assets 17,627 12,363 5,264 Total shareholders' equity 14,482 8,567 5,915 Select Ratios: Current ratio (2) 5.7 to 1.0 2 .2 to 1.0
(1) Working capital is computed by subtracting total current liabilities from
total current assets.
(2) The current ratio is computed by dividing total current assets by total
current liabilities.
As of June 30, 2021 , we had working capital of $7.4 million compared to working
capital of $2.5 million as of December 31, 2020 , an increase of $4.9 million .
This increase was primarily attributable to proceeds of $5.3 million from the
sale of 1.1 million shares of common stock, net of issuance costs, sold pursuant
to an underwritten offering in February 2021 , as discussed below.
As of
We own a 14-acre tract inRiverton, Wyoming with a two-story, 30,400 square foot office building and an additional 13-acre parcel of land adjacent to the building. The building served as our corporate headquarters until 2015 and is currently being leased to government agencies and other non-affiliated companies. During 2020, we made the decision to sell the land and building and began a process to determine the price at which we would list the property for sale. The process included obtaining an appraisal, analyzing operating statements for the building, reviewing capitalization rates and consulting a large national commercial real estate company. We determined the realizable value of the real estate assets was in the range of$950 thousand to$1.2 million . A special committee of the board of directors was formed to evaluate the sales process and during 2020, we entered into an agreement with a large national commercial broker and a local broker inRiverton, Wyoming to sell
our real estate assets.
On
If we have needs for additional capital in the second half of 2021, alternatives that we will consider would potentially include entering into a reserve-based credit facility, selling all or a partial interest in certain of our non-operated oil and natural gas assets, selling our marketable equity securities, issuing additional shares of our common stock for cash or as consideration for acquisitions, and other alternatives, as we determine how to best fund our capital programs and meet our financial obligations. Cash Flows The following table summarizes our cash flows for the six months endedJune 30, 2021 and 2020: Six months ended June 30, 2021 2020 Change (in thousands) Net cash provided by (used in): Operating activities$ (591 ) $ (470 ) $ (121 ) Investing activities (877 ) (133 ) (744 ) Financing activities 5,196 (152 ) 5,348
Operating Activities. Cash used in operating activities for the six months endedJune 30, 2021 was$591 thousand as compared to cash used in operating activities$470 thousand for the comparable period in 2020. The increase in cash used in operating activities is mainly attributable to the increases in payments for operating and general and administrative expenses, which were partially offset by an increase in cash receipts for revenues. 29 Table of Contents
Investing Activities. Cash used in investing activities for the six months endedJune 30, 2021 was$877 thousand as compared to$133 thousand for the comparable period in 2020. The primary use of cash in our investing activities for the six months endedJune 30, 2021 was the capital expenditures of oil and gas properties related to returning idle wells to production in ourLiberty County, Texas field. The comparable number in 2020 mainly represents the cash paid for the acquisition ofNew Horizon for net cash of$122 thousand . Financing Activities. Cash provided by financing activities for the six months endedJune 30, 2021 was$5.2 million as compared to cash used in financing activities of$152 thousand for the comparable period in 2020. The cash provided by financing activities during the six months endedJune 30, 2021 was primarily attributable to cash received from the sale of 1.1 million shares of common stock of$5.3 million . The comparable number in 2020 represents repayment of the credit facility and payments on the premium finance note payable.
Off-Balance Sheet Arrangements
As part of our ongoing business, we have not participated in transactions that
generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities ("SPEs"), which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
We evaluate our transactions to determine if any variable interest entities exist. If it is determined that we are the primary beneficiary of a variable interest entity, that entity will be consolidated in our consolidated financial statements. We have not been involved in any unconsolidated SPE transactions during the periods covered by this report.
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