US ENERGY CORP Entering into a material definitive agreement, completing the acquisition or disposition of assets, creating a direct financial obligation or an obligation under an off-balance sheet arrangement of a registrant, Disclosure of FD Regulations, Financial Statements and Exhibits (Form 8-K/A)

Section 1.01 Entering into a Material Definitive Agreement.

The disclosures and information set forth in Section 2.01 below in connection with increasing the borrowing base are incorporated by reference into this Section 1.01 in their entirety.

Item 2.01 Completion of Acquisition or Disposal of Assets.

As previously noted in the current Form 8-K report filed by US Energy Corp. (“WE Energy”, “we”, “our” or the “Company”) with the Security and Exchange Commission on June 30, 2022on June 29, 2022the Company has entered into a purchase and sale agreement (the “PSA”) with ETXENERGY, LLC (seller”).

Pursuant to the EPS, we have agreed to acquire all of the Vendor’s rights and interests in certain operating producing properties aggregating approximately 16,600 net acres, located in Henderson and anderson Counties, Texas, adjacent to the Company’s existing assets in the region. The Acquisition will also include certain wells, pipelines, contracts, technical data, records, personal property and hydrocarbons associated with the Properties, including two pipeline gathering systems and related infrastructure (collectively with the Oil and Gas Properties to be Acquired, the “Acquired Assets”).

The PSA closed the July 27, 2022the date we acquired the acquired assets for the original base purchase price of $11.875 million in liquid. The initial cost base purchase price is also subject to customary working capital and other adjustments as set forth in the EPS. A total of $590,000 (five percent (5%) of the purchase price) was paid by the Company as a deposit on the purchase price at the time of entry into the PSA and credited to the closing payment.

The effective date of acquisition was June 1, 2022.

The PSA contains representations and warranties of Company and Seller as of specific dates and customary indemnification obligations of the parties, subject to certain limitations and deductibles.

The above summary description of the EPS does not purport to be complete and is qualified in its entirety by reference to the full text of the EPS, which is incorporated by reference as Exhibit 10.1 to this Current Report on Form 8-K. and is incorporated by reference into this Section 1.01.

The Company financed the transaction with cash ($1,175,000) and borrowings under its existing credit facility (“Credit Agreement”) with
First Southwest Bank (“Firstbank”) as administrative agent for one or more lenders (the “Lenders”) ($10,700,000) (the “Acquisition Loan”). As a result of the acquisition loan, the principal balance owed by the company under the credit agreement is now 14,700,000.

On July 26, 2022in anticipation of the closure of the PSA, we entered into a letter of agreement with First bank whereby we increased our borrowing base under the credit agreement of $15 million at $20 millionand paid the administrative agent an initial commission of $32,500 as part of this increase (the “Borrowing Base Increase”).

The credit agreement provides for a maximum credit amount of $100,000,000subject to semi-annual redeterminations of the borrowing base (currently $20 million following the increase in the borrowing base) in April and October of each year until maturity, based on the value of the Company’s proven oil and natural gas reserves in accordance with the procedures and customary practices of lenders.

Under the credit agreement, the revolving loans can be borrowed, repaid and reborrowed up to January 5, 2026when all amounts due must be repaid.

Interest on amounts unpaid under the Credit Agreement (including the Acquisition Loan) will accrue at a rate of interest equal to (a) the greater of (i) the prime rate in effect on such day there, and (b) the federal funds rate in effect to date (as determined in the Credit Agreement) plus 0.50%, and an applicable margin of between 0.25% and 1.25% in depending on the use of the amount of the borrowing base (the “Applicable Margin”). If the Company fails to provide a report indicating its proven oil and natural gas reserves as required under the credit agreement, the applicable margin will be 1.25%, regardless of use.

Upon the occurrence of certain Events of Default (as described in the Credit Agreement), unpaid amounts will bear an additional interest of 2.00% per annum. Interest accrued on each revolving loan is payable in arrears on the last day of each month of March, June, September and December.

The Company generally has the right to make prepayments of the borrowings at any time without penalty or premium under the credit agreement. A commitment fee of 0.50% accrued on the average daily amount of the unused portion of the borrowing base is payable in arrears on the last business day of March, June, September and December of each year and the due date.

We are also required to make certain mandatory repayments under the Credit Agreement, in the event that the Borrowing Base decreases below the total amount of loans made by the lenders and/or if, on the last business day of any calendar month, certain required debt ratios required under the credit agreement are not met, there are outstanding amounts due to lenders and the company has consolidated liquid assets greater than $5 millionand in some cases we are also required to pay money to the agent to be held as collateral.

The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Loan Parties and their Subsidiaries, including, without limitation, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other debts, transactions with affiliated companies, as well as dividends and other distributions. In addition, the credit agreement contains financial covenants, tested quarterly, which limit the Company’s total debt/EBITDAX ratio (as defined in the credit agreement) to 3:1 and require that its consolidated current assets/ consolidated current liabilities (as each is described in the credit agreement) to remain at 1:1 or greater.

The terms of the Company’s existing credit agreement are further described in the current report on Form 8-K filed by the Company with the
Security and Exchange Commission on January 10, 2022.

The above summary description of the Credit Agreement and Increase in Borrowing Base does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement and Letter of Disclosure. Increase in Borrowing Base, which are incorporated by reference herein as Schedules 10.2 and 10.3 to this Current Report on Form 8-K and are incorporated by reference into this Section 1.01.

Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The disclosures and information set forth in Section 2.01 above in connection with the Increase in Borrowing Base and the Acquisition Loan are incorporated by reference into this Section 2.03 in their entirety.

Section 7.01 Disclosure of FD Rules.

On July 28, 2022, the Company issued a press release announcing the closing of the PSA. A copy of the press release is attached hereto as Exhibit 99.1 and the information contained in the press release is incorporated by reference into this Section 7.01.

Information in response to Section 7.01 of this Form 8-K and Exhibit 99.1 hereto shall not be deemed “filed” for the purposes of Section 18 of the Stock Exchange Act of 1934, as as amended (the “Stock Exchange Act”) or otherwise subject to the responsibilities of this Section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or Exchange Act, except as expressly provided by specific reference in such filing. The provision of this report is not intended to constitute a determination by the Company that the information is material or that release of the information is required by FD Regulation.

Item 9.01 Financial statements and supporting documents.

(a) Financial statements of acquired businesses

Financial statements for the acquired assets will be filed no later than 71 calendar days after the date the original Form 8-K was required to be filed.

(b) Pro forma financial information

Pro forma financial information relating to the acquisition of the Acquired Assets will be filed no later than 71 calendar days after the date the original Form 8-K was required to be filed.

Part # Description

10.1#           Purchase and Sale Agreement dated June 29, 2020, by and among U.S.
              Energy Corp, as Buyer, and ETXENERGY, LLC, as Seller (Filed as
              Exhibit 10.1 to the Current Report on Form 8-K filed by the Company
              with the Securities and Exchange Commission on June 30, 2022 (File
              No. 000-06814) and incorporated by reference herein)
10.2            Credit Agreement dated as of January 5, 2022, among U.S. Energy
              Corp., as borrower, Firstbank Southwest, as Administrative Agent and
              the Lenders party thereto (Filed as Exhibit 10.6 to the Current
              Report on Form 8-K filed by the Company with the Securities and
              Exchange Commission on January 10, 2022 (File No. 000-06814) and
              incorporated by reference herein)
10.3£           Borrowing Base Increase Letter Agreement dated July 26, 2022,
              between U.S. Energy Corp. and Firstbank Southwest, as Administrative
              Agent
99.1¥           Press Release dated July 28, 2022
104           Cover Page Interactive Data File (the cover page XBRL tags are
              embedded within the Inline XBRL document)



£ Filed as an attachment to the original Form 8-K and incorporated herein by reference.

¥ Provided as an attachment to the original Form 8-K and incorporated herein by reference.

# Certain schedules, exhibits, schedules, and similar attachments have been omitted pursuant to SK Rule 601(a)(5). A copy of any appendix or omitted exhibit will be provided in addition to the Security and Exchange Commission on demand; provided, however, that US Energy Corp. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

© Edgar Online, source Previews

Comments are closed.