U.S. Energy Corp. (USEG)

[LouisDesyjr]

2015 Q3 10Q report - looks worse

2015 Q3 period ending September 30, 2015:
http://ih.advfn.com/p.php?pid=nmona&article=69227037

USEG continued to do worse in Q3 of 2015. There was an impairment of $21 million, but even taking that out of the quarter and taking out the depreciation, the company still lost $1.5 million.

Even more troubling, is that apparently the company is in danger of defaulting on a line of credit of $7 million due to not maintaining the required current ratio called for in the loan agreement:

Because we project that it is unlikely that we will regain compliance with the Current Ratio covenant within the next 12 months, we have reflected the $6.0 million in debt under the credit facility as a current liability as of September 30, 2015 in the applicable balance sheets included in this report. In the event that we are unable to obtain an amendment or waiver of the Senior Credit Agreement to address the anticipated future breaches of the Current Ratio covenant, and other actual or potential future breaches that may occur, the lender under the facility could elect to declare some or all of our debt to be immediately due and payable and could elect to terminate their commitments and cease making further loans.

It would be a disaster for USEG if Wells Fargo called the loan, since total current assets are only $6.4 million. While they could sell some land or the mine, to try to make a loan call repayment, they would probably take a large loss on any such sales since none of the property seems to be doing that well. The oil is only producing a few million in revenue per quarter, and the mine is still not approved.

Louis J. Desy Jr.