Crimson Exploration - U.S. Energy Eagle Ford Drilling Successes

Crimson Exploration announced drilling success in both Karnes and Zavala Counties. The company's Karnes County well came online at more than 1,000 barrels of oil equivalent per day and was completed through a 4,200 ft horizontal lateral with 15 frac stages. Future well test that are planned will have longer laterals and additional frack stages. The company also completed a well in Zavala County where U.S. Energy Corporation is a partner. The well initially had issues with too much water production, but the companies were able to plug the water producing portion of the well and bring it back to production at more than 400 barrels of oil equivalent per day. That's a win for a well that could have been written off for too much water production.

Crimson Exploration

In Karnes County, TX, the Littlepage McBride #2H (53.0% WI), targeting the Eagle Ford Shale formation, commenced production at a gross rate of 1,030 Boepd (952 Bopd and 465 Mcfpd) on a 15/64th choke and 2,700 psi of flowing tubing pressure. The well was drilled to a total measured depth of 16,174 feet, including a 4,200 foot lateral, with 15 stages of frac. The Littlepage McBride #2H is located approximately 0.6 miles east of the Littlepage McBride #1H (53.0% WI) which is currently producing 415 Boepd and has produced a cumulative 78,000 Boe since the commencement of production in early April. The Littlepage McBride #4H (53.0% WI) well recently reached a total measured depth of 16,572 feet, including a 5,600 foot lateral. Also, drilling operations are currently underway on the Littlepage McBride #3H (53.0% WI) which is expected to reach a total measured depth of 16,610 feet, including a 5,800 foot lateral, by early October. Crimson anticipates completion operations to begin on both wells by the middle of the third quarter, and will have a continuous drilling program in this area through at least the first quarter of 2012.

Crimson recently completed the KM Ranch #1H well (50% WI), the first well in its Zavala County Eagle Ford project area. The well was drilled to a total measured depth of 12,627 feet, including a 5,800 foot lateral. The well was completed with 20 stages of frac in late June and flow back operations commenced. Initial flow back data indicated that the well was in communication with an extraneous source of water not coming from the Eagle Ford formation. Diagnostic production logs identified the source of the water entering the wellbore near the toe of the well and in late August the water source was mechanically isolated with the setting of a plug in the casing between frac stages 9 and 10. The well was then placed back on production at a gross rate of 418 Boepd (331 Bopd and 524 Mcfpd) on a 20/64" choke and 397 psi of flowing casing pressure. The extraneous source of water was effectively shut off and for the first seven days of production following the remedial work, the well has averaged 380 Boepd. The initial production rates from the eleven contributing frac stages are the equivalent of a 3,200 foot lateral.

US Energy Corporation

In February and June of 2011, we entered into two separate participation agreements with Crimson Exploration Inc. to acquire a 30% working interest in two oil prospects and associated leases located in Zavala and Dimmit Counties in Southern Texas. Both leaseholds are Eagle Ford Shale oil window prospects.

The first well on the Leona River prospect, the KM Ranch#1H (30% WI), was completed with 20 frac stages in late June and flow back operations have commenced. Results are reported above in Crimson's quote. Crimson and the Company are very encouraged by the latest results showing excellent oil flow potential from essentially half the lateral, which is indicative of good reservoir parameters along with the relatively high gas rates seen in the flow back period.

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