Reggie Larsen - Director of Investor Relations Keith Larsen - Chief Executive Officer and Chairman David Veltri - President and Chief Operating Officer Steven Richmond - Chief Financial Officer

Patrick Rigamer - Global Hunter Securities

Good morning. My name is Jonathan and I will be your conference operator today. At this time, I would like to welcome everyone to the U.S. Energy Corp. Fourth Quarter and Year End 2014 Selected Highlights Financial Results and Operations Update Conference Call. All lines have been placed on mute to prevent any background noise. I would now like to turn the conference over to Mr. Reg Larsen, Director of Investor Relations of U.S. Energy Corp. Sir, you may begin your conference.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us today. With me this morning is Keith Larsen, Chief Executive Officer; David Veltri, President and COO; and Steve Richmond, Chief Financial Officer of the Company, as well as members of the management team. In terms of agenda for the call, Steve will provide you with an overview of our highlights, financial results, operating initiatives for the fourth quarter and year ended December 31, 2014 and we’ll finish the call with the question-and-answer session. As a preliminary matter, I would like to note that during this call, we may make forward-looking statements which may be identified by the words will, anticipate, expect, and similar words that are based on the beliefs and assumptions of U.S. Energy's management. These and all statements other than statements of historical fact are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The forward-looking statements are subject to numerous risks and uncertainties, including those described in the Form 10-K for the year ended December 31, 2014, which was filed premarket this morning and our other filings with the SEC, all of which are incorporated herein by reference. Relevant non-GAAP reconciliations are available on the Company’s web site which is located at www.usnrg.com. I'd now like to turn the call over to Steve.

Thank you, Reg, and good morning ladies and gentlemen. To begin I would like to thank the audience for attending today’s call and for following the Company’s progress throughout 2014. At year-end, the Company have participation interest in 136 gross, 20.02 net producing wells primarily located in South Texas and in the Williston Basin of North Dakota. During the three months ended December 31, 2014, the Company produced 101,265 net BOE. Average net daily production during the quarter was 1,101 BOE per day. During the 12 months ended December 31, 2014, the Company produced 465,342 BOE or 1,275 BOE per day. In South Texas, 2014 production increased 148% when compared to the prior year, from 76,773 BOE to 190,760 BOE as a result of our Buda limestone drilling program. We do not anticipate this growth to continue due to lower oil prices and a decreased pace of drilling in the region. However, we are continuing to test the potential of this region through additional drilling in order to continue to prove inventory on a going forward basis. The decrease in both the net daily average production and overall total production when compared to the previous quarter of 2014 until the same period of the prior year comes from the curtailment of drilling in both South Texas and in North Dakota due to the dramatic downturn in the price of oil beginning in the fourth quarter of 2014. The pricing situation affected all aspects of our business including lower sales volumes and lower realized oil prices which are reflected in the following quarterly and annual results. During the three months ended December 31, 2014, the Company recognized $5.1 million in revenue. For the 12 months ended December 31, 2014, the Company recognized $32.4 million in revenue which is a slight decrease in revenue as compared to $33.6 million during 2013. At December 31, 2014, we had $4 million in cash and cash equivalents and an additional $18.5 million in borrowing capacity under our $24.5 million line of credit with Wells Fargo. During the 12 months ended December 31, 2014, we received an average of $2.7 million per month from our producing wells with an average operating cost of $657,000 per month, including work over costs and production taxes of $230,000 for average net cash flows of $1.8 million per month from oil and gas production before non-cash depletion expense. In the financial and operational release that was published this morning which is available on our web site, we presented an EBITDAX table showing earnings before interest, income taxes, depreciation, depletion and amortization, accretion of discount on asset retirement obligation, non-cash impairments, unrealized derivative gains and losses, and non-cash stock compensation expense which we refer to as modified EBITDAX. Modified EBITDAX was 1.2 million for the three months ended December 31, 2014 and 14.1 million for the 12 months ended December 31, 2014. As a result of the Company’s 2014 drilling testing and development activities, at year-end the Company had estimated proved reserves of 4.65 million BOE, which is a 20.7% increase over prior year’s reserves. These reserves consist of 89% oil and 11% natural gas, 43% of the reserves are producing, 1% is proved developed nonproducing and 56% are proved undeveloped. The estimated proved reserves at year-end had a standardized measure value of $81.9 million and a PV10 value of $85.2 million. The production and financial metrics that I have just stated have resulted in a net loss after taxes of $2.1 million or $0.08 per share during the 12 months ended December 31, 2014. Now, moving on to our oil and gas operations during the year, our focus continued to be on our active drilling programs in both South Texas and in the Williston Basin of North Dakota. In South Texas the Company currently participates in approximately 31,500 gross, 7,700 net acres in Zavala and Dimmit Counties. At year-end, we had 34 gross, 9.19 net producing wells and 1 gross well, 0.33 net was being drilled and awaiting completion. I will begin with our Booth Tortuga acreage block that is located in Zavala and Dimmit Counties, Texas. This block is operated by Contango Oil and Gas Company. Acreage currently has production from the Buda limestone, Eagle Ford and Austin Chalk formations. The Company has an approximate 30% working interest and an approximate 22.5% of net revenue interest in the acreage. The Beeler 26H well was spud September 12, 2014. The well began production in late December 2014. In addition, the Beeler 24H well was spud on October 24, 2014. This well was drilled as a vertical pilot well to evaluate the Eagle Ford and other formations in Zavala and Dimmit Counties. As a result of this activity the operator has scheduled to drill an Eagle Ford test well in the second half of 2015. In addition, in the Booth Tortuga acreage block the Richard 1 well, which is operated by CML exploration is scheduled to spud next week. This well is a Buda limestone formation target. The Company has a 12.9% working interest and 9.87% net revenue interest in the well. I’ll now move on to our Q2 2014 Dimmit County acquisition. On May 7, 2014, the Company entered into a Participation Agreement with U.S. Enercorp., a private South Texas-based oil and gas company to acquire a 33% interest and approximately 12,100 gross, 3,400 net acres in Dimmit County, Texas. Under this program the South McKnight 1317 HB well targeting the Eagle Ford formation was spud on September 28, 2014. The well was drilled to a measured depth of approximately 11,000 feet including an approximate 6,000 foot lateral and was fracture stimulated. The well began producing in December 2014 and we are currently monitoring the performance of the well in order to determine further development potential. Now I’ll move on to the Williston Basin of North Dakota. The Company participates in 58 gross drilling units, which equates to approximately 71,000 gross, 2,500 net acres in Williams, McKenzie and Mountrail Counties, North Dakota with numerous operators. At year end, we participated in 99 gross 10.27 net producing wells with an addition of 6 gross 0.02 net wells being drilled or waiting completion. During 2015, we have budgeted a reduced amount of development capital to this region due to the suppressed commodity price coupled with the pricing differentials due to takeaway capacity constraints in the basin. Currently, 5 gross 0.02 net wells have been drilled and are awaiting completion. That concludes the oil and gas operation portions of the call. Before moving on to the question and answer portion, I will touch briefly on Mount Emmons and the hiring off our new President and COO, Mr. David Veltri. At the Mount Emmons molybdenum project located in Gunnison County, Colorado, during the course of 2015, we plan to continue working with the U.S. Forest Service in the review of the mine plan of operations and environmental analysis in order to further evaluate the predicted environmental and socio economic impacts of the proposed mine plan. At the same time, we are continuing to pursue various developmental alternatives for the project, including an industry joint venture or outright sale, as well as continued dialogue with local interested parties. It is our intention that one of these initiatives lead to monetization of the project. We will also continue to investigate various reclamation and cost-reduction strategies in order to minimize our ongoing holding costs of the project. During 2015, we have budgeted a reduced – sorry about that. Lastly, on December 15, 2014, the Company announced the appointment of Mr. David Veltri as President and Chief Operating Officer of the Company effective January 1, 2015. Prior to joining the Company, David was the Chief Operating Officer of Denver, Colorado based Emerald Oil, Inc. While at Emerald, David managed all aspects of oil and gas operations and supporting activities, including oversight of a three rig drilling program and field operations from well spud to sales, evaluation of acquisition targets including both producing properties and undeveloped leases, and was integral in converting Emerald from a non-operated position into an operator in North Dakota during his tenure. David brings with him over 33 years of oil and gas industry experience. I am pleased to have David on board with the team here at U.S. Energy. He brings a wide knowledge of the oil and gas industry, 33 years of industry contacts, and I believe that with his guidance, 2015 will be a transformative year for the Company with an emphasis on operating projects in order to better control our destiny. In closing, we have been very active in South Texas during last year which has provided us with better understanding of our development potential in the region. Looking forward, we will continue to monitor our drilling commitments and well economics in the current oil price environment as we proceed through the balance of 2015. We will prudently manage the balance sheet and intend to fund our reduced drilling and testing commitments during the year on a well-by-well basis to ensure prudent investment of our development capital. Our upcoming drilling schedule includes key testing in our South Texas region which may lead to an increased inventory of drilling in multiple targeted formations in that region. We are focused on finding accretive acquisitions and believe that we will see favorable opportunities if the current commodity price environment persists through the upcoming redetermination cycle. It is our intent to consolidate our acreage position to where appropriate and transition the Company and operations during the course of 2015. That concludes our prepared remarks for today. Operator, would you please begin the Q&A session.

Yes, sir. [Operator Instructions] Our first question comes from the line of Patrick Rigamer from Global Hunter Securities. Your question please.

Hi, good morning guys.

Good morning.

Talking about I guess this Eagle Ford vertical pilot well in South Texas, you mentioned that the operator has planned another well in the second half of the year. Do you have enough information at this point to narrow? I mean do you plan to participate in that well or is that still to be determined?

At this time, we do plan, Pat, on participating in that well.

Okay. And if successful, do you have an idea of I guess how many potential future locations that could open up.

Not at this time. You can do the math and multiply by three to one is or whatever the spacing is but I think that would be a bit optimistic at this time.

Okay. And then I guess as kind of scale back operations here, are there any acreage expiration issues that you need to deal with?

We do have a continuous drilling obligation on one of our leases with U.S. Enercorp and I believe it’s every 150 days but that isn’t an issue.

Okay. And then…

Fortunately most of our, I am sorry Pat, fortunately all of our Williston Basin acreage is held by production and a majority of our South Texas business as well.

Okay. That’s helpful. And then I guess as you look to transition from non-op to becoming an operator, are you looking at that transition in the Williston or South Texas or both or where I guess where would you see that happening initially?

Pat, this is David Veltri. I think we are concentrating on both of those areas as both of them have been successful in the past and we have a good working knowledge of both South Texas and North Dakota, but we are not going to limit ourselves to those. We feel like we can look in some other conventional and traditional basins that are easy to understand or we’ve got experience as well.

Okay. So there would be potentially new acquisitions or new acreage or...?

Yeah. We are going to focus on conventional and acquiring possibly producing property and even outside of the two basins.

Okay. That’s it from me. Thank you very much.

Thanks, Pat.

Thanks, Pat.

Thank you. [Operator Instructions] And there are no further questions at this time. This does conclude today’s conference call. You may now disconnect. Good day.