US Energy Corp. (Nasdaq:USEG), has entered into a non-binding Letter of Intent with IronHorse Resources LLC pursuant to which the company expects to acquire a 40% interest in IronHorse Resource’s Farmout Agreement to participate in developing three core areas in the DJ Basin, Wattenberg Field in Weld County, Colorado.
Under the agreement, US Energy Corp. will obtain working interests averaging 11.6% in 21 horizontal wells to be drilled in the A, B, and C benches of the Niobrara formation and the Codell formation.
The development program is slated to begin later this year and drill into mid-2017. The company’s commitment will cost approximately $9.6 million for drilling and completing the wells and is expected to generate revenue of approximately $4.9 million in each of the first two years of the program net to the company, at a current price of $47.00/BO and $2.78/MCF and assuming future strip pricing and differentials. The company estimates that it could generate a 43% increase in reserves at a finding and development cost of $12.18/ BOE, a ROR of 38% and a ROI of 2.4.
US Energy Corp. is a natural resource exploration and development company with a primary focus on the exploration and development of its oil and gas assets. The company is headquartered in Denver, Colorado.