grandriver U.S. Energy Corp (NASDAQ: USEG ) is an oil explorer and producer with unconventional assets in Texas, North Dakota, and the Mid Continent. The company was revamped in 2022 after three private companies contributed their already productive O&G assets to USEG in exchange for an 82% stake in the company. Eighteen months ago, a stagnant exploration company, today USEG is drilling approximately 1.7 thousand BOE daily and has multiplied its proven developed reserves by 14x. Unfortunately, the company’s extraction costs per BOE are too high, given its oil and natural gas production mix. This makes it difficult for the company to profit even with relatively elevated commodity prices. The recent collapse of natural gas prices puts more pressure on the company. Also, USEG engaged in much more expensive acquisitions in 2022 after oil prices spiked, indicating pro-cyclical capital allocation practices. I disagree with other capital allocation policies, like paying dividends and taking debt simultaneously. Further, the company has not yet shown that it can drill efficiently, a requirement for an unconventional producer, given the fast decay of unconventional wells. In this context, I believe USEG is not an opportunity. Note: Unless otherwise stated, all information has been obtained […]
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
