Greetings, and welcome to the U.S. Energy Corporation Second Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mason McGuire, VP of Finance and Strategy. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to U.S. Energy Corp.'s Second Quarter 2025 Results Conference Call. Ryan Smith, our Chief Executive Officer, will provide an overview of our operating results and discuss the company's strategic outlook; and our Chief Financial Officer, Mark Zajac, will give more detailed overview of our financial results. Before this morning's market opening, U.S. Energy issued a press release summarizing operating and financial results for the quarter ended June 30, 2025. This press release, together with accompanying presentation materials, are available in our Investor Relations section of our website at www.usnrg.com. Today's discussion may contain forward-looking statements about the future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to the 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 like to turn the call over to Ryan Smith.

Good morning, everyone, and thank you for joining us today. I'm pleased to walk you through our second quarter results, highlight key milestones and share a strategic update as we continue advancing U.S. Energy's transformation and growth. As we've discussed in prior quarters, our primary focus is the development of our Montana-based industrial gas project, an asset we believe is uniquely positioned to meet growing demand, deliver strong economics and achieve meaningful scale in the public markets. This summer, we completed the initial phase of our development program and remain firmly on track to bring operations online. This first phase included drilling 2 new development wells, advancing engineering on an acquired already productive well, flow testing all existing producing wells, reaching a final investment decision on infrastructure and making significant progress on our carbon management strategy. I will walk you through these in more detail now. Starting with upstream development. In the second quarter, we drilled our second and third industrial gas wells targeting the helium and CO2-rich Duperow Formation, both within budget. Including the productive well we acquired earlier this year, peak rates reached approximately 12.2 million cubic feet per day with a premium gas composition of approximately 85% CO2, 5% natural gas and 0.4% helium. To optimize reservoir performance and maximize value, we subsequently managed production in the 8 million cubic feet a day range with similar compositions. With 3 producing industrial gas wells and 2 injection wells, we are well positioned for near-term cash flow generation. These results validate the quality and scale of our resource, further reinforced by our independent resource report. Following drilling, we engaged Ryder Scott to prepare a volumetric resource assessment of our Montana asset. The report confirmed net contingent resources of 444 billion cubic feet of CO2 and 1.3 billion cubic feet…

Thank you, Ryan. Hello, everyone. Let's delve into the financial details for the second quarter of 2025. Our operating results reflect the cumulative impact of our divestitures since the fourth quarter of 2023. Revenue was approximately $2 million, down from $6 million same quarter last year, reflecting the impact of divestitures in the second half of 2024. Oil comprised over 90% of the revenue this quarter, reflecting our focus on optimizing our remaining oil assets. Lease operating expense for this quarter was $1.6 million or $32.14 a BOE, compared to $3.1 million or $27.69 per BOE in the same quarter last year. The overall decrease reflects our divestitures since first quarter last year and on a BOE basis, the increase is a function of the assets remaining in our portfolio. Cash, general and administrative expense was $1.7 million for the second quarter of 2025, which is in line with our run rate expectations quarterly. We have made significant improvements to our organization and structured the team around our industrial gas development. As for our balance sheet, as of June 30, 2025, there was no debt outstanding on our $20 million revolving credit facility, and our cash position stood at over $6.7 million, reflecting the net proceeds of $10.3 million generated from our successful equity offering during the first quarter. This was offset by $4.6 million of industrial gas acquisition and capital expenditures. We have agreed on terms on the renewal of our credit agreement, extending it to May 31, 2029. We are completing customary closing activities now and expect to execute the amendment in the coming days. The renewed agreement includes covenant waivers for the first quarter of 2026 as we achieve profitability on our industrial gas operations. Overall, our operating performance and financial results reflect our recent divestitures as well as the company's new initiatives. We continue to maintain balance sheet discipline and integrity. My objectives continue to ensure that the company's reporting processes maintain a high standard of excellence, and we feel confident in our ability to support the growth initiatives we currently have underway. Thank you for your participation this morning. We are now ready to take your questions.

[Operator Instructions] The first question comes from Charles Meade with Johnson Rice.

Ryan, I wanted to -- you used the word in your press release about the resource report, I guess, you used the word pleased. I wanted to ask a little more detail there. Was there anything in that? So you used the word pleased, it's good. But was there anything in there that surprised you either to the upside or downside, whether it be the total resource that they came up with or the concentrations? Or -- if you could just give us the kind of inside baseball on how that process rolled out to get to that final numbers that you gave us.

Yes. No, good question. So I am pleased with it. I would say not surprised because those numbers, again, when you're dealing with the quantum of billions of cubic feet, rounding errors can be pretty big numbers. But since we started this process, I don't know, 18 months ago or so and progressed it, we believe that the resource, both helium, both CO2, there's a 5% or so nat gas cut in that stream, which we didn't have in the resource report. But we believe from the very beginning that the numbers here were very large, and that's why we went after the project. So having Ryder Scott, which for my money is as good and reputable as any reserve firm in the world, verify that and get a formal big company third-party stamp of approval for what we already believed internally, it was very -- I'll use the word again, very pleasing. It wasn't surprising because we thought it was there. And as we start our core development across the structure, and again, just looking at our maps, which we have on our website, et cetera, we think there's more upside to go. This is kind of our initial core development area. So I think there's upside to those numbers as we continue to move outward off that structure. But no, we were -- I'm pleased with it. I'm very happy with it. It shows the immense running room of what we have as we continue to develop this going forward across multiple streams of that gas stream.

Got it. And that's a good segue to my follow-up question. I recognize it's early, but the question is on the commercial offtake agreements. And you talked a little bit about some CO2 going to the Cut Bank field for EOR and 45Q. But can you give us a sense of -- what are your goals for different offtake streams, whether it's the CO2 or the helium or I guess, natural gas is really a rounding error, so that's not important. But what are your goals for those different streams? And what's a time frame to -- that we should be thinking about to -- for some kind of a resolution or sometime additional information on your commercial offtake arrangements?

Yes. No, good question. So there's a few ways -- there's a few parts to that question. I think from a high level, you have your gaseous helium, you have your CO2, which can really be kind of a 3-pronged monetization via permanent sequestration via EOR use and via merchant retail market sales. Probably an obvious comment, but I would like to control the offtakes as much as possible. And what I mean by that is with the recent Big Beautiful Bill passage and the value for CO2 EOR use equaling permanent sequestration use, the fact that our Montana assets going back literally 100 years ago to Chevron, Unicol owning them was always targeted for CO2 tertiary flood. And economics are always a little bit stretched based on oil prices and the expense of CO2. And now that, that expense has turned into an extremely significant revenue stream, we started looking at the EOR uses for the CO2 a whole lot more, one, because of the economics; two, because we're on both sides of the table in negotiating that use. So that gives us a very doable economic use for that CO2. I think on the -- and as well as the permanent sequestration side, right? Like we don't need to get third-party approvals for that because we're agreeing to both sides of that because we own all the assets. I think on the helium side, I'll say, I think we enter into something by the end of the year. I'll caveat that by saying we're probably in a position to be able to do it now. We have some stuff in front of us. The offtake helium agreement market is pretty opaque. And when you go to market with something and you're not a massive company, the counterparties know that, and we'll reflect that in price. So I think between now and the end of the year, we'll kind of pick our spot, but you'll see something on that front as well. And then kind of sprinkles on the ice cream would be us being able to sell merchant retail CO2 into the West Coast markets. I can't give a time frame on that just because it's -- you deal with very specific parties, but that's something that we're working on actively as well. So I think in summary, you'll see intercompany agreements on sequestration and EOR use for the CO2 in the relatively near term, helium offtake, which would basically be offtake agreements with the owner of helium liquefaction equipment by the end of the year and proactively merchant CO2 sales into the retail market. TBD, but something we're working on actively.

The next question comes from Tom Kerr with Zacks.

The helium concentration on the drilled wells, I think in the Texas at 0.47, but we had always talked about 0.6 in the last several quarters. Was there anything there or what happened there?

Yes. I mean it's less than our initial well that we acquired and did more work on. And I would love to have like a very dignified reason answer for you. I think the honest answer is when you're dealing with basis points on a gas stream, sometimes it comes in more, sometimes it comes in less. And the numbers were what kind of what they were, right? We think that if we drill another well to get the overall volumes up a little bit more, we have some ideas and some locations to where we think that, that composition is a little bit higher than what some of our subsequent wells produced in. But again, we go after the areas we think are prolific enough to defend processing economics, et cetera. We always expected some variation potentially to the upside potentially to the downside. Unfortunately, it was a little bit to the downside. I would say that those numbers are still highly economic for us as part of our full cycle program. But they kind of are what they are. So I don't know if that's what the answer you're looking for, but I think that's what I got.

Yes, you just answered my second question, which is still economically viable level in terms of economics and cash flow and that sort of stuff.

Yes, absolutely, right? Like we look at it starting off each economic driver kind of in its own silo and standing on its own 2 feet, right? Like we don't want to have an uneconomic process in one pocket and then depend on the other pocket to defend activity. So the helium concentrations on our current flows, and so much of it depends on processing and infrastructure, and that goes into the planning as well, right? Like the size and et cetera. What works for us and then layering on, I'll call it, revenues and incentives from CO2 sequestration, EOR usage really juices those economics very extensively on top of what we already have on the helium side.

Got it. All right. That makes sense. And then just on the processing plant, any sort of changes in the complications of developing that or cost levels or changes since we last talked?

I think there's a few changes. I won't -- we're still going through I'll say, a few design options right now. And the reason for that isn't for difficulty. It's really the incentives on the recent bill evening out EOR and sequestration dollars really kind of change the proverbial calculus for us. I mean, we have an extensive EOR asset in Montana. It's very large. It's very close. The geography couldn't be any better. And some of the equipment and processes to, call it, strip out helium, sell helium, strip out nat gas, sell nat gas, get the CO2 to a level where it's getting used for EOR purposes is actually a little more simple and a little bit cheaper than what we were originally planning for. So obvious comment, if there's something that we can do that results in the same economics and do it at a cheaper cost, we're going to pursue that route. So, that's probably the main reason why we haven't started on the plant. We're just -- we're fine-tuning our economic model, our strategy, construction planning and exactly the lowest cost within reason that we can spend on the processing infrastructure side to access these multiple value chains as soon as possible.

Got it. All right. Last question, a financial one on the cash SG&A slightly elevated because of some business development in Montana. I think you said it will stabilize. Does that mean we're going to see that level probably in the next 2 quarters of $1.7 million? Or does that drift down because you don't have some of those Montana costs in there?

I think it's the latter. It should drift down. We've spent, I'd say, a fair amount of capital getting the project off the ground. And again, we're not a huge company. So onetime hits show up a lot more than they would with other larger entities. Consultants, both internal and third party, a fair amount of legal work just on the landowner right away, other ancillary charges, getting permits, getting disposal permits, all of that stuff. It's added up over the last couple of quarters. And it will continue to some extent just as we keep pushing stuff forward, but it definitely should lessen here in the very, very near term. It's probably already started to lessen a little bit as we go forward.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Great. I appreciate everybody for joining this morning and listening to what we have going on. We're excited about our project. We continue to move it forward. We're set up for 2026 to be a stellar year for U.S. Energy as we get this project off the ground and online. I appreciate your time. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.