SEC Company Response from US ENERGY CORP (USEG) (CIK 0000101594) (BSIN) — Mar 31, 2006
US ENERGY CORP (USEG) (CIK 0000101594)
Date: March 31, 2006 · CIK: 0000101594 · Accession: 0000101594-06-000060
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-115477
Referenced dates: January 26, 2006, November 18, 2005
Letter
United States Securities and Exchange Commission Division of Corporate Finance File No. 333-115477 Form 10-Q for the Period Ended September 30, 2005 Filed November 14, 2005 Supplemental Information
Dear Ms. Gallagher;
We have reviewed your comment letter dated January 26, 2006 and herby submit our response for your review and consideration. We submit to you that while the subject disclosures in the periodic report may need some clarification, those disclosures, taken alone, are not of sufficient gravity to warrant amending prior reports.
In addition, the 2004 audited financial statements in the S-1 have gone stale as of today. We will therefore be withdrawing the Form S-1 and we will be filing a Form S-3 for the selling shareholders now identified in the Form S-1.
If needed, we would be pleased to arrange a conference call with the staff to further explain our proposed response.
Securities and Exchange Commission
Division of Corporation Finance
Supplemental Information
February 16, 2006
Page 2 of 3
Form 10-Q for the Periods Ended September 30, 2005
Note 6, page 11
2.
We note your response to our prior comment three in our letter dated November 18, 2005 where you discuss the gain you have deferred on the sale of Rocky Mountain Gas, Inc. The manner by which you are accounting for your investment in Enterra US Acquisitions, Inc. shares in the interim remains unclear, as do the circumstances under which you will recognize the gain into income. Please tell us how you account for your investment in Enterra US Acquisitions Inc. shares presently, and your plans once the one year holding period has passed. Also clarify whether you intend to recognize the deferred gain at that time, or only upon subsequent sale of those shares. In addition, please clarify what you mean when you state that you “…will recognize the additional gain or loss when the shares are ultimately sold.” Please cite the specific authoritative accounting literature that you have relied upon in evaluating the deferral and recognition of this gain; and in formulating a view on any accounting that may be necessary for the conversion feature.
Response:
Our response dated January 16, 2005 recorded the details of the transaction. We will therefore refer to the details in that earlier response and not repeat them.
The investment in Enterra US Acquisitions Inc. Class D shares is being accounted for as a long term investment in a non affiliated company. A fair market value or readily determinable fair value for the shares of Enterra Acquisitions is not available. In accordance with FAS 107 management made its, “best estimate of fair value ... based on the quoted market price of a financial instrument with similar characteristics or on valuation techniques (…using the present value of estimated future cash flows using a discount rate commensurate with the risks involved, … pricing models or matrix pricing models.)” Management of the Company therefore estimated the risk and volatility of the Enterra shares at 10%. The discount of 10% was recorded as deferred income as detailed in our previous response, as an offset to the estimated value of the shares at the time of closing. The carrying value for these shares as of September 30, 2005 was $13,172,300; please note that this value includes the 10,931 shares which belong to Yellowstone Fuels as a consolidated entity.
Securities and Exchange Commission
Division of Corporation Finance
Supplemental Information
February 16, 2006
Page 3 of 3
(b) At June 1, 2006, the Class D shares of Enterra Acquisitions automatically convert on a one for one basis into Units of Enterra. At that time the Units will have a quoted market value and will be readily available for sale. The previously booked deferred gain will be netted against the carrying value of the Enterra Units and any additional gain or loss based on the fair market value at the time of conversion will also be recognized. Management currently intends to sell the Units after June 1, 2006. The gain or loss from the sale of those Units will be recognized at the time of sale for each reporting period. In the event that the Units are not sold comprehensive income will be recognized on those Units during each reporting period as per FAS 115.
We submit that this is the proper treatment of the transaction. We believe that an amendment to the subject Form 10-Q is not necessary, and propose to make more detailed disclosure in future 1934 Act filings.
We look forward to hearing from you at your earliest convenience. In the event that you would like us to arrange a conference call please call either myself or Steve Rounds, SEC Counsel at (303) 377-6997. We will have Mr. Rounds and Mark Weber, our Independent Accountant from Epstein Weber & Conover, PLC on the phone. Thank you.
Sincerely,
/s/
Robert Scott Lorimer
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USE Letter to SEC 2-21-06
February
21, 2006
Sent
Via
FAX (202) 845-1281
United
States Securities and Exchange Commission
Division
of Corporate Finance
100
F
Street, N.E.
Washington,
D.C. 20549-7010
Attn:
Jennifer Gallagher
Re:
U.S.
Energy Corp.
Post-Effective
Amendment No. 1 to Form S-1
Filed
October 25, 2005
File
No.
333-115477
Form
10-Q
for the Period Ended September 30, 2005
Filed
November 14, 2005
Supplemental
Information
Dear
Ms.
Gallagher;
We
have
reviewed your comment letter dated January 26, 2006 and herby submit our
response for your review and consideration. We submit to you that while the
subject disclosures in the periodic report may need some clarification, those
disclosures, taken alone, are not of sufficient gravity to warrant amending
prior reports.
In
addition, the 2004 audited financial statements in the S-1 have gone stale
as of
today. We will therefore be withdrawing the Form S-1 and we will be filing
a
Form S-3 for the selling shareholders now identified in the Form S-1.
If
needed, we would be pleased to arrange a conference call with the staff to
further explain our proposed response.
Securities and Exchange Commission
Division of Corporation Finance
Supplemental Information
February 16, 2006
Page 2 of 3
Form
10-Q for the Periods Ended September 30, 2005
Note
6, page 11
2.
We
note your response to our prior comment three in our letter dated
November
18, 2005 where you discuss the gain you have deferred on the sale
of Rocky
Mountain Gas, Inc. The manner by which you are accounting for your
investment in Enterra US Acquisitions, Inc. shares in the interim
remains
unclear, as do the circumstances under which you will recognize the
gain
into income. Please tell us how you account for your investment in
Enterra
US Acquisitions Inc. shares presently, and your plans once the one
year
holding period has passed. Also clarify whether you intend to recognize
the deferred gain at that time, or only upon subsequent sale of those
shares. In addition, please clarify what you mean when you state
that you
“…will recognize the additional gain or loss when the shares are
ultimately sold.” Please cite the specific authoritative accounting
literature that you have relied upon in evaluating the deferral and
recognition of this gain; and in formulating a view on any accounting
that
may be necessary for the conversion
feature.
Response:
Our
response dated January 16, 2005 recorded the details of the transaction. We
will
therefore refer to the details in that earlier response and not repeat
them.
The
investment in Enterra US Acquisitions Inc. Class D shares is being accounted
for
as a long term investment in a non affiliated company. A fair market value
or
readily determinable fair value for the shares of Enterra Acquisitions is not
available. In accordance with FAS 107 management made its, “best estimate of
fair value ... based on the quoted market price of a financial instrument with
similar characteristics or on valuation techniques (…using the present value of
estimated future cash flows using a discount rate commensurate with the risks
involved, … pricing models or matrix pricing models.)” Management of the Company
therefore estimated the risk and volatility of the Enterra shares at 10%. The
discount of 10% was recorded as deferred income as detailed in our previous
response, as an offset to the estimated value of the shares at the time of
closing. The carrying value for these shares as of September 30, 2005 was
$13,172,300; please note that this value includes the 10,931 shares which belong
to Yellowstone Fuels as a consolidated entity.
Securities and Exchange Commission
Division of Corporation Finance
Supplemental Information
February 16, 2006
Page 3 of 3
(b)
At
June 1, 2006, the Class D shares of Enterra Acquisitions automatically convert
on a one for one basis into Units of Enterra. At that time the Units will have
a
quoted market value and will be readily available for sale. The previously
booked deferred gain will be netted against the carrying value of the Enterra
Units and any additional gain or loss based on the fair market value at the
time
of conversion will also be recognized. Management currently intends to sell
the
Units after June 1, 2006. The gain or loss from the sale of those Units will
be
recognized at the time of sale for each reporting period. In the event that
the
Units are not sold comprehensive income will be recognized on those Units during
each reporting period as per FAS 115.
We
submit
that this is the proper treatment of the transaction. We believe that an
amendment to the subject Form 10-Q is not necessary, and propose to make more
detailed disclosure in future 1934 Act filings.
We
look
forward to hearing from you at your earliest convenience. In the event that
you
would like us to arrange a conference call please call either myself or Steve
Rounds, SEC Counsel at (303) 377-6997. We will have Mr. Rounds and Mark Weber,
our Independent Accountant from Epstein Weber & Conover, PLC on the phone.
Thank you.
Sincerely,
/s/
Robert Scott Lorimer
___________________________
U.S.
Energy Corp.
Robert
Scott Lorimer
CFO/V.P.
Finance
cc:
Steve Rounds
Mark
Weber
Daniel
P.
Svilar - General Counsel
Keith
G.
Larsen - CEO and Chairman
Mark
J.
Larsen - President and COO