----

----

| x      | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934  |
|--------|------------------------------------------------------------------------------------------|
|   | For the quarter ended June 30, 2010 or                                                   |
|   |                                                                                     |
| o      | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
|   | For the transition period from ___________ to ____________                               |

| U.S. ENERGY CORP.                                      |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| Wyoming                                             |   | 83-0205516          |
|-----------------------------------------------------|--------|---------------------|
| (State or other jurisdiction of                     |   | (I.R.S. Employer    |
| incorporation or organization)                      |   | Identification No.) |
|                                                |   |                |
| 877 North 8th West, Riverton, WY                    |   | 82501               |
| (Address of principal executive offices)            |   | (Zip Code)          |
|                                                |   |                |
| Registrant's telephone number, including area code: |   | (307) 856-9271      |

| Not Applicable                                                       |
|----------------------------------------------------------------------|
| (Former name, address and fiscal year, if changed since last report) |

----

----

INDEX

|     |                                                                                                     | Page No.     |
|----------|----------------------------------------------------------------------------------------------------------|--------------|
| PART I.  | FINANCIAL INFORMATION                                                                                    |         |
|     |                                                                                                     |         |
| Item 1.  | Financial Statements.                                                                                    |         |
|     |                                                                                                     |         |
|     | Condensed Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009 (unaudited)               | 4-5          |
|     |                                                                                                     |         |
|     | Condensed Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 (unaudited) | 6            |
|     |                                                                                                     |         |
|     | Condensed Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited)           | 7-8          |
|     |                                                                                                     |         |
|     | Notes to Condensed Financial Statements (unaudited)                                                      | 9-23         |
|     |                                                                                                     |         |
| Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations              | 24-40        |
|     |                                                                                                     |         |
| Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                                               | 40           |
|     |                                                                                                     |         |
| Item 4.  | Controls and Procedures                                                                                  | 40           |
|     |                                                                                                     |         |
| PART II. | OTHER INFORMATION                                                                                        |         |
|     |                                                                                                     |         |
| Item 1.  | Legal Proceedings                                                                                        | 41-43        |
|     |                                                                                                     |         |
| Item 1A. | Risk Factors                                                                                             | 43           |
|     |                                                                                                     |         |
| Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                              | 43           |
|     |                                                                                                     |         |
| Item 3.  | Defaults Upon Senior Securities                                                                          | 43           |
|     |                                                                                                     |         |
| Item 4.  | Submission of Matters to a Vote of Security Holders                                                      | 43           |
|     |                                                                                                     |         |
| Item 5.  | Other Information                                                                                        | 43           |
|     |                                                                                                     |         |
| Item 6.  | Exhibits and Reports on Form 8-K                                                                         | 44           |
|     |                                                                                                     |         |
|     | Signatures                                                                                               | 45           |
|     |                                                                                                     |         |
|     | Certifications                                                                                           | See Exhibits |

----

| U.S. ENERGY CORP.                                    |   |
|------------------------------------------------------|--------|
| CONDENSED BALANCE SHEETS                             |   |
| ASSETS                                               |   |
| (Unaudited)                                          |   |
| (In thousands)                                       |   |
|                                                 |   |   |   |   |   |   |
|                                                 |   | June 30, |   |   | December 31, |   |
|                                                 |   | 2010 |   |   | 2009 |   |
| CURRENT ASSETS:                                      |   |   |   |   |   |   |
| Cash and cash equivalents                            |   | $ | 6,112 |   |   | $ | 33,403 |   |
| Marketable securities                                |   |   |   |   |   |   |   |   |
| Held to maturity - treasuries                        |   |   | 34,426 |   |   |   | 22,059 |   |
| Available for sale securities                        |   |   | 873 |   |   |   | 1,178 |   |
| Accounts receivable                                  |   |   |   |   |   |   |   |   |
| Trade                                                |   |   | 3,022 |   |   |   | 3,882 |   |
| Reimbursable project costs                           |   |   | 33 |   |   |   | 2 |   |
| Income taxes                                         |   |   | 353 |   |   |   | 353 |   |
| Other current assets                                 |   |   | 1,068 |   |   |   | 1,223 |   |
| Total current assets                                 |   |   | 45,887 |   |   |   | 62,100 |   |
|                                                 |   |   |   |   |   |   |   |   |
| INVESTMENT                                           |   |   | 2,962 |   |   |   | 2,958 |   |
|                                                 |   |   |   |   |   |   |   |   |
| PROPERTIES AND EQUIPMENT:                            |   |   |   |   |   |   |   |   |
| Oil & gas properties under full cost method, net |   |   | 40,035 |   |   |   | 26,002 |   |
| Undeveloped mining claims                            |   |   | 22,001 |   |   |   | 21,969 |   |
| Commercial real estate, net                          |   |   | 22,749 |   |   |   | 23,200 |   |
| Property, plant and equipment, net                   |   |   | 9,445 |   |   |   | 9,301 |   |
| Net properties and equipment                         |   |   | 94,230 |   |   |   | 80,472 |   |
|                                                 |   |   |   |   |   |   |   |   |
| OTHER ASSETS                                         |   |   | 1,214 |   |   |   | 1,193 |   |
| Total assets                                         |   | $ | 144,293 |   |   | $ | 146,723 |   |
|                                                 |   |   |   |   |   |   |   |   |

Index

----

| U.S. ENERGY CORP.                              |   |
|------------------------------------------------|--------|
| CONDENSED BALANCE SHEETS                       |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY           |   |
| (Unaudited)                                    |   |
| (In thousands, except shares)                  |   |
|                                           |   |   |   |   |   |   |
|                                           |   | June 30, |   |   | December 31, |   |
|                                           |   | 2010 |   |   | 2009 |   |
| CURRENT LIABILITIES:                           |   |   |   |   |   |   |
| Accounts payable                               |   | $ | 1,242 |   |   | $ | 6,500 |   |
| Accrued compensation                           |   |   | 1,150 |   |   |   | 1,748 |   |
| Current portion of long-term debt              |   |   | 200 |   |   |   | 200 |   |
| Other current liabilities                      |   |   | 232 |   |   |   | 224 |   |
| Total current liabilities                      |   |   | 2,824 |   |   |   | 8,672 |   |
|                                           |   |   |   |   |   |   |   |   |
| LONG-TERM DEBT, net of current portion         |   |   | 600 |   |   |   | 600 |   |
|                                           |   |   |   |   |   |   |   |   |
| DEFERRED TAX LIABILITY                         |   |   | 8,179 |   |   |   | 7,345 |   |
|                                           |   |   |   |   |   |   |   |   |
| ASSET RETIREMENT OBLIGATIONS                   |   |   | 234 |   |   |   | 211 |   |
|                                           |   |   |   |   |   |   |   |   |
| OTHER ACCRUED LIABILITIES                      |   |   | 831 |   |   |   | 762 |   |
|                                           |   |   |   |   |   |   |   |   |
| SHAREHOLDERS' EQUITY:                          |   |   |   |   |   |   |   |   |
| Common stock, $.01 par value; unlimited shares |   |   |   |   |   |   |   |   |
| authorized; 26,834,706 and 26,418,713          |   |   |   |   |   |   |   |   |
| shares issued, respectively                    |   |   | 268 |   |   |   | 264 |   |
| Additional paid-in capital                     |   |   | 120,279 |   |   |   | 118,998 |   |
| Accumulated surplus                            |   |   | 10,882 |   |   |   | 9,485 |   |
| Unrealized gain on marketable securities       |   |   | 196 |   |   |   | 386 |   |
| Total shareholders' equity                     |   |   | 131,625 |   |   |   | 129,133 |   |
| Total liabilities and shareholders' equity     |   | $ | 144,293 |   |   | $ | 146,723 |   |
|                                           |   |   |   |   |   |   |   |   |

Index

----

| U.S. ENERGY CORP.                           |   |
|---------------------------------------------|--------|
| CONDENSED STATEMENTS OF OPERATIONS          |   |
| (Unaudited)                                 |   |
| (In thousands except per share data)        |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|                                        |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| OPERATING REVENUES:                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                                 |   | $ | 6,218 |   |   | $ | 754 |   |   | $ | 13,927 |   |   | $ | 1,428 |   |
| Real estate                                 |   |   | 608 |   |   |   | 745 |   |   |   | 1,247 |   |   |   | 1,479 |   |
|                                        |   |   | 6,826 |   |   |   | 1,499 |   |   |   | 15,174 |   |   |   | 2,907 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING COSTS AND EXPENSES:               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                                 |   |   | 3,894 |   |   |   | 787 |   |   |   | 7,279 |   |   |   | 1,599 |   |
| Impairment of oil and gas properties        |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 1,063 |   |
| Real estate                                 |   |   | 602 |   |   |   | 498 |   |   |   | 1,155 |   |   |   | 1,010 |   |
| Water treatment plant                       |   |   | 459 |   |   |   | 576 |   |   |   | 808 |   |   |   | 1,019 |   |
| Mineral holding costs                       |   |   | (5 | ) |   |   | -- |   |   |   | 52 |   |   |   | -- |   |
| General and administrative                  |   |   | 2,167 |   |   |   | 1,832 |   |   |   | 4,835 |   |   |   | 3,837 |   |
|                                        |   |   | 7,117 |   |   |   | 3,693 |   |   |   | 14,129 |   |   |   | 8,528 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME (LOSS)                     |   |   | (291 | ) |   |   | (2,194 | ) |   |   | 1,045 |   |   |   | (5,621 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME AND (EXPENSES):                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain on sale of assets                      |   |   | -- |   |   |   | -- |   |   |   | 115 |   |   |   | 5 |   |
| Equity gain/(loss) in                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| unconsolidated investment                   |   |   | 179 |   |   |   | (75 | ) |   |   | 1,142 |   |   |   | (166 | ) |
| Gain on sale of marketable securities       |   |   | 8 |   |   |   | -- |   |   |   | 8 |   |   |   | -- |   |
| Miscellaneous income and (expenses)         |   |   | (20 | ) |   |   | 49 |   |   |   | 1 |   |   |   | 44 |   |
| Interest income                             |   |   | 22 |   |   |   | 44 |   |   |   | 61 |   |   |   | 141 |   |
| Interest expense                            |   |   | (18 | ) |   |   | (20 | ) |   |   | (35 | ) |   |   | (58 | ) |
|                                        |   |   | 171 |   |   |   | (2 | ) |   |   | 1,292 |   |   |   | (34 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FOR INCOME TAXES                            |   |   | (120 | ) |   |   | (2,196 | ) |   |   | 2,337 |   |   |   | (5,655 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME TAXES:                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Current (provision for) benefit from  |   |   | -- |   |   |   | (467 | ) |   |   | -- |   |   |   | 210 |   |
|  Deferred (provision for) benefit from |   |   | (10 | ) |   |   | (222 | ) |   |   | (940 | ) |   |   | 213 |   |
|                                        |   |   | (10 | ) |   |   | (689 | ) |   |   | (940 | ) |   |   | 423 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) FROM                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CONTINUING OPERATIONS                       |   |   | (130 | ) |   |   | (2,885 | ) |   |   | 1,397 |   |   |   | (5,232 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                           |   | $ | (130 | ) |   | $ | (2,885 | ) |   | $ | 1,397 |   |   | $ | (5,232 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER SHARE                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                       |   | $ | -- |   |   | $ | (0.13 | ) |   | $ | 0.05 |   |   | $ | (0.24 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                     |   | $ | -- |   |   | $ | (0.13 | ) |   | $ | 0.05 |   |   | $ | (0.24 | ) |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                       |   |   | 26,734,636 |   |   |   | 21,311,266 |   |   |   | 26,611,583 |   |   |   | 21,481,944 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                     |   |   | 26,734,636 |   |   |   | 21,311,266 |   |   |   | 27,813,215 |   |   |   | 21,481,944 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

Index

----

| U.S. ENERGY CORP.                                      |   |
|--------------------------------------------------------|--------|
| CONDENSED STATEMENTS OF CASH FLOWS                     |   |
| (Unaudited)                                            |   |
| (In thousands)                                         |   |
|                                                   |   |   |   |   |   |   |
|                                                   |   | Six months ended June 30, |   |
|                                                   |   | 2010 |   |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                  |   |   |   |   |   |   |
| Net income (loss)                                      |   | $ | 1,397 |   |   | $ | (5,232 | ) |
| Adjustments to reconcile net income (loss) to net cash |   |   |   |   |   |   |   |   |
| provided by (used in) operations                       |   |   |   |   |   |   |   |   |
| Depreciation, depletion and amortization               |   |   | 5,408 |   |   |   | 2,070 |   |
| Accretion of discount on treasury investment           |   |   | (34 | ) |   |   | (94 | ) |
| Impairment of oil and gas properties                   |   |   | -- |   |   |   | 1,063 |   |
| Gain on sale of marketable securities                  |   |   | (8 | ) |   |   | -- |   |
| Equity (gain)/loss from Standard Steam                 |   |   | (1,142 | ) |   |   | 166 |   |
| Deferred income taxes                                  |   |   | 944 |   |   |   | (213 | ) |
| Gain on sale of assets                                 |   |   | (115 | ) |   |   | (5 | ) |
| Noncash compensation                                   |   |   | 752 |   |   |   | 837 |   |
| Noncash services                                       |   |   | 30 |   |   |   | 35 |   |
| Net changes in assets and liabilities                  |   |   | 291 |   |   |   | (600 | ) |
| NET CASH PROVIDED BY                                   |   |   |   |   |   |   |   |   |
| (USED IN) OPERATING ACTIVITIES                         |   |   | 7,523 |   |   |   | (1,973 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                  |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas properties  |   | $ | (23,734 | ) |   | $ | (1,283 | ) |
| Net (investment in) redemption of treasury investments |   |   | (12,332 | ) |   |   | 10,369 |   |
| Distribution from Standard Steam                       |   |   | 1,138 |   |   |   | -- |   |
| Acquisition and development of mining properties       |   |   | (32 | ) |   |   | (10 | ) |
| Mining property option payment                         |   |   | -- |   |   |   | 1,000 |   |
| Development of real estate                             |   |   | -- |   |   |   | (90 | ) |
| Acquisition of property and equipment                  |   |   | (466 | ) |   |   | (168 | ) |
| Proceeds from sale of property and equipment           |   |   | 118 |   |   |   | 5 |   |
| Proceeds from sale of marketable securities            |   |   | 13 |   |   |   | -- |   |
| Net change in restricted investments                   |   |   | (22 | ) |   |   | 4,782 |   |
| NET CASH (USED IN) PROVIDED                            |   |   |   |   |   |   |   |   |
| BY INVESTING ACTIVITIES                                |   |   | (35,317 | ) |   |   | 14,605 |   |
|                                                   |   |   |   |   |   |   |   |   |

Index

----

| U.S. ENERGY CORP.                            |   |
|----------------------------------------------|--------|
| CONDENSED STATEMENTS OF CASH FLOWS           |   |
| (Unaudited)                                  |   |
| (In thousands)                               |   |
|                                         |   |   |   |   |   |   |
|                                         |   | Six months ended June 30, |   |
|                                         |   | 2010 |   |   | 2009 |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:        |   |   |   |   |   |   |
| Issuance of common stock                     |   | $ | 503 |   |   | $ | -- |   |
| Repayments of debt                           |   |   | -- |   |   |   | (17,688 | ) |
| Stock buyback program                        |   |   | -- |   |   |   | (1,399 | ) |
| NET CASH PROVIDED BY (USED IN)               |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                         |   |   | 503 |   |   |   | (19,087 | ) |
|                                         |   |   |   |   |   |   |   |   |
| NET DECREASE IN                              |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                    |   |   | (27,291 | ) |   |   | (6,455 | ) |
|                                         |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                    |   |   |   |   |   |   |   |   |
|  AT BEGINNING OF PERIOD                 |   |   | 33,403 |   |   |   | 8,434 |   |
|                                         |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                    |   |   |   |   |   |   |   |   |
| AT END OF PERIOD                             |   | $ | 6,112 |   |   | $ | 1,979 |   |
|                                         |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                    |   |   |   |   |   |   |   |   |
| Income tax (received)                        |   | $ | -- |   |   | $ | (144 | ) |
|                                         |   |   |   |   |   |   |   |   |
| Interest paid                                |   | $ | 11 |   |   | $ | 29 |   |
|                                         |   |   |   |   |   |   |   |   |
| NON-CASH INVESTING AND FINANCING ACTIVITIES: |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |
| Unrealized gain                              |   | $ | 196 |   |   | $ | 143 |   |
|                                         |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas   |   |   |   |   |   |   |   |   |
| properties through accounts payable          |   | $ | 458 |   |   | $ | -- |   |
|                                         |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas   |   |   |   |   |   |   |   |   |
| through asset retirement obligation          |   | $ | 14 |   |   | $ | -- |   |
|                                         |   |   |   |   |   |   |   |   |
| Development of mining properties             |   |   |   |   |   |   |   |   |
| through asset retirement obligation          |   | $ | -- |   |   | $ | -- |   |
|                                         |   |   |   |   |   |   |   |   |

Index

----

1)  

----

----

|                                |   | (In thousands) |   |
|-------------------------------------|--------|----------------|--------|
|                                |   | June 30,       |   |   | December 31, |   |
|                                |   | 2010           |   |   | 2009 |   |
|  Oil & Gas properties      |   |           |   |   |   |   |
|  Unproved                      |   | $              | 4,456  |   |   | $ | 3,993 |   |
|  Well in progress              |   |           | 8,753  |   |   |   | 1,367 |   |
|  Proved                        |   |           | 35,431 |   |   |   | 24,595 |   |
|                                |   |           | 48,640 |   |   |   | 29,955 |   |
|  Less accumulated depreciation |   |           |   |   |   |   |   |   |
|  depletion and amortization    |   |           | (8,605 | ) |   |   | (3,953 | ) |
|  Net book value                |   |           | 40,035 |   |   |   | 26,002 |   |
|                                |   |           |   |   |   |   |   |   |
|  Mining properties             |   |           | 22,001 |   |   |   | 21,969 |   |
|                                |   |           |   |   |   |   |   |   |
|  Commercial real estate        |   |           | 24,622 |   |   |   | 24,600 |   |
|  Less Accumulated depreciation |   |           | (1,873 | ) |   |   | (1,400 | ) |
|  Net book value                |   |           | 22,749 |   |   |   | 23,200 |   |
|                                |   |           |   |   |   |   |   |   |
|  Building, land and equipment  |   |           | 14,386 |   |   |   | 14,196 |   |
|  Less accumulated depreciation |   |           | (4,941 | ) |   |   | (4,895 | ) |
|  Net book value                |   |           | 9,445  |   |   |   | 9,301 |   |
|  Totals                        |   | $              | 94,230 |   |   | $ | 80,472 |   |
|                                |   |           |   |   |   |   |   |   |

----

----

----

|                                          |   |           |   |
|-----------------------------------------------|--------|----------------|--------|
|                                          |   | (In thousands) |   |
|  Costs associated with Mount Emmons      |   |           |   |
|  at December 31, 2009                    |   | $              | 21,969 |   |
|  Development costs during the six months |   |           |   |   |
|  ended June 30, 2010                     |   |           | 32     |   |
|                                          |   | $              | 22,001 |   |
|                                          |   |           |   |   |

|                                  |   |           |   |   |         |   |
|---------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                  |   | (In thousands) |   |
|                                  |   | June 30,       |   |   | December 31, |   |
|                                  |   | 2010           |   |   | 2009         |   |
| Beginning asset retirement obligation |   | $              | 211    |   |         | $      | 144 |   |
| Accretion of discount                 |   |           | 8      |   |         |   | 12 |   |
| Liabilities incurred                  |   |           | 15     |   |         |   | 55 |   |
| Ending asset retirement obligation    |   | $              | 234    |   |         | $      | 211 |   |
|                                  |   |           |   |   |         |   |   |   |
| Mining properties                     |   | $              | 134    |   |         | $      | 128 |   |
| Oil & Gas Wells                   |   |           | 100    |   |         |   | 83 |   |
| Ending asset retirement obligation    |   | $              | 234    |   |         | $      | 211 |   |
|                                  |   |           |   |   |         |   |   |   |

----

| ·   | Level 1 — Unadjusted quoted prices is available in active markets for identical assets or liabilities. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 — Pricing inputs, other than quoted prices within Level 1, which are either directly or indirectly observable. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 — Pricing inputs that are unobservable requiring the Company to use valuation methodologies that result in management’s best estimate of fair value. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                      |   | (In thousands) |   |
|---------------------------|--------|----------------|--------|
|                      |   |           |   |   | Fair Value Measurements at June 30, 2010 Using |   |
|                      |   | June 30,       |   |   | Quoted Prices in Active Markets for Identical Assets |   | Significant Other Observable Inputs |   | Significant Unobservable Inputs |   |
| Description               |   | 2010           |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |
| Other accrued liabilities |   | $              | 831    |   |   |   | -- |   |   |   | -- |   |   | $ | 831 |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                     |   | $              | 831    |   |   | $ | -- |   |   | $ | -- |   |   | $ | 831 |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   |           |   |   |   | Fair Value Measurements at December 31, 2009 Using |   |
|                      |   | December 31,   |   |   | Quoted Prices in Active Markets for Identical Assets |   | Significant Other Observable Inputs |   | Significant Unobservable Inputs |   |
| Description               |   |           | 2009   |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other accrued liabilities |   | $              | 762    |   |   |   | -- |   |   |   | -- |   |   | $ | 762 |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                     |   | $              | 762    |   |   | $ | -- |   |   | $ | -- |   |   | $ | 762 |   |
|                      |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |
|-------------------------------|--------|----------------|--------|--------|------------------------------------------------------|----------------------------------------------------|-------------------------------------|-----------|---------------------------------|--------|-----------|-----------|
|                          |   | (In thousands) |   |
|                          |   |           |   |   | Fair Value Measurements at June 30, 2010 Using       |                                               |
|                          |   | June 30,       |   |   | Quoted Prices in Active Markets for Identical Assets |                                               | Significant Other Observable Inputs |      | Significant Unobservable Inputs |   |
| Description                   |   | 2010           |   |   | (Level 1)                                            |                                               |                                | (Level 2) |                            |   | (Level 3) |      |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |
| Held to maturity - treasuries |   | $              | 34,426 |   |                                                 | $                                                  | 34,426                              |      |                            | $      | --        |      |   | $ | -- |   |
| Available for sale securities |   |           | 873    |   |                                                 |                                               | 873                                 |      |                            |   | --        |      |   |   | -- |   |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |   |   |   |   |
| Total                         |   | $              | 35,299 |   |                                                 | $                                                  | 35,299                              |      |                            | $      | --        |      |   | $ | -- |   |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |   |   |   |   |
|                          |   |           |   |   |                                                 | Fair Value Measurements at December 31, 2009 Using |                                |
|                          |   | December 31,   |   |   | Quoted Prices in Active Markets for Identical Assets |                                               | Significant Other Observable Inputs |      | Significant Unobservable Inputs |   |
| Description                   |   |           | 2009   |   |                                                 | (Level 1)                                          |                                |      | (Level 2)                       |   |      | (Level 3) |   |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |   |   |   |   |
| Held to maturity - treasuries |   | $              | 22,059 |   |                                                 | $                                                  | 22,059                              |      |                            | $      | --        |      |   | $ | -- |   |
| Available for sale securities |   |           | 1,178  |   |                                                 |                                               | 1,178                               |      |                            |   | --        |      |   |   | -- |   |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |   |   |   |   |
| Total                         |   | $              | 23,237 |   |                                                 | $                                                  | 23,237                              |      |                            | $      | --        |      |   | $ | -- |   |
|                          |   |           |   |   |                                                 |                                               |                                |      |                            |   |      |      |   |   |   |   |

----

|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |
|-------------------------------|--------|---------------------|--------|--------|----------------------|------------|--------|------------|--------|--------|------------|--------|------------|------------|--------|--------|------------|--------|
|                          |   | (In thousands)      |   |
| June 30, 2010                 |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |
|                          |   | Less Than 12 Months |   |   | 12 Months or Greater |       |   | Total      |   |
|                          |   |                |   |   | Unrealized           |       |   |       |   |   | Unrealized |   |       |       |   |   | Unrealized |   |
| Description of Securities     |   | Fair Value          |   |   | Gain                 |       |   | Fair Value |   |   | Gain       |   |       | Fair Value |   |   | Gain       |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |
| Held to maturity - treasuries |   | $                   | 34,426 |   |                 | $          | --     |       |   | $      | --         |   |       | $          | --     |   |       | $      | 34,426 |   |   | $ | -- |   |
| Available for sale securities |   |                | 873    |   |                 |       | 206    |       |   |   | --         |   |       |       | --     |   |       |   | 873 |   |   |   | 206 |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |
| Total                         |   | $                   | 35,299 |   |                 | $          | 206    |       |   | $      | --         |   |       | $          | --     |   |       | $      | 35,299 |   |   | $ | 206 |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |
| December 31, 2009             |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |
|                          |   | Less Than 12 Months |   |   | 12 Months or Greater |       |   | Total      |   |
|                          |   |                |   |   |                 | Unrealized |   |       |   |   |       |   | Unrealized |       |   |   |       |   |   | Unrealized |   |
| Description of Securities     |   | Fair Value          |   |   | Gain                 |       |   | Fair Value |   |   | Gain       |   |       | Fair Value |   |   | Gain       |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |
| Held to maturity - treasuries |   | $                   | 22,059 |   |                 | $          | --     |       |   | $      | --         |   |       | $          | --     |   |       | $      | 22,059 |   |   | $ | -- |   |
| Available for sale securities |   |                | 1,178  |   |                 |       | 602    |       |   |   | --         |   |       |       | --     |   |       |   | 1,178 |   |   |   | 602 |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |
| Total                         |   | $                   | 23,237 |   |                 | $          | 602    |       |   | $      | --         |   |       | $          | --     |   |       | $      | 23,237 |   |   | $ | 602 |   |
|                          |   |                |   |   |                 |       |   |       |   |   |       |   |       |       |   |   |       |   |   |   |   |   |   |   |

|           |   | (In thousands) |   |
|----------------|--------|----------------|--------|
|           |   | June 30, 2010  |   |   | December 31, 2009 |   |
| Description    |   | Carry Amount   |   |   | Fair Value |   |   | Carry Amount |   |   | Fair Value |   |
|           |   |           |   |   |   |   |   |   |   |   |   |   |
| Long-term debt |   | $              | 800    |   |   | $ | 800 |   |   | $ | 800 |   |   | $ | 800 |   |

----

|                                             |   |         |       |   |    |   |   |       |   |
|--------------------------------------------------|--------|--------------|------------|--------|---------|--------|--------|------------|--------|
| (Amounts in thousands, except for share amounts) |   |
|                                             |   |         |       |   |    |   |   | Additional |   |
|                                             |   | Common Stock |       |   | Paid-In |   |
|                                             |   | Shares       |       |   | Amount  |   |   | Capital    |   |
|                                             |   |         |       |   |    |   |   |       |   |
|  Balance December 31, 2009                  |   |         | 26,418,713 |   |    | $      | 264    |       |   | $ | 118,998 |   |
|  2001 stock compensation plan               |   |         | 40,000     |   |    |   | --     |       |   |   | 245 |   |
|  Exercise of employee stock options         |   |         | 139,626    |   |    |   | 1      |       |   |   | (201 | ) |
|  Exercise of stock warrants                 |   |         | 236,367    |   |    |   | 3      |       |   |   | 700 |   |
|  Expense of employee options vesting        |   |         | --         |   |    |   | --     |       |   |   | 507 |   |
|  Stock options issued to outside directors  |   |         | --         |   |    |   | --     |       |   |   | 28 |   |
|  Expense of company warrants issued         |   |         | --         |   |    |   | --     |       |   |   | 2 |   |
|  Balance June 30, 2010                      |   |         | 26,834,706 |   |    | $      | 268    |       |   | $ | 120,279 |   |
|                                             |   |         |       |   |    |   |   |       |   |   |   |   |

----

|                                                        |   |                   |      |   |                    |   |      |     |   |   |     |   |
|-------------------------------------------------------------|--------|------------------------|-----------|--------|-------------------------|--------|-----------|----------|--------|--------|----------|--------|
|                                                        |   | June 30, 2010          |      |
|                                                        |   | Employee Stock Options |      |   | Stock Purchase Warrants |   |
|                                                        |   |                   |      |   | Weighted                |   |      |     |   |   | Weighted |   |
|                                                        |   |                   |      |   | Average                 |   |      |     |   |   | Average  |   |
|                                                        |   |                   |      |   | Exercise                |   |      |     |   |   | Exercise |   |
|                                                        |   | Options                |      |   | Price                   |   |      | Warrants |   |   | Price    |   |
|                                                        |   |                   |      |   |                    |   |      |     |   |   |     |   |
| Outstanding balance at December 31, 2009                    |   |                   | 3,711,114 |   |                    | $      | 3.64      |     |   |   | 581,367  |   |   | $ | 2.91 |   |
| Granted                                                     |   |                   | -         |   |                    | $      | -         |     |   |   | 10,000   |   |   | $ | 5.04 |   |
| Forfeited                                                   |   |                   | -         |   |                    | $      | -         |     |   |   | (20,000  | )      |   | $ | 2.52 |   |
| Expired                                                     |   |                   | -         |   |                    | $      | -         |     |   |   | -        |   |   | $ | - |   |
| Exercised                                                   |   |                   | (357,650  | )      |                    | $      | 2.84      |     |   |   | (236,367 | )      |   | $ | 2.97 |   |
| Outstanding at June 30, 2010                                |   |                   | 3,353,464 |   |                    | $      | 3.72      |     |   |   | 335,000  |   |   | $ | 2.95 |   |
| Exercisable at June 30, 2010                                |   |                   | 2,558,469 |   |                    | $      | 3.69      |     |   |   | 258,334  |   |   | $ | 2.98 |   |
|                                                        |   |                   |      |   |                    |   |      |     |   |   |     |   |   |   |   |   |
| Weighted Average Remaining Contractual Life - Years         |   |                   |      |   |                    |   | 5.38      |     |   |   |     |   |   |   | 4.54 |   |
|                                                        |   |                   |      |   |                    |   |      |     |   |   |     |   |   |   |   |   |
| Aggregate intrinsic value of options / warrants outstanding |   |                   |      |   |                    | $      | 3,731,000 |     |   |   |     |   |   | $ | 607,000 |   |
|                                                        |   |                   |      |   |                    |   |      |     |   |   |     |   |   |   |   |   |

----

----

|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |
|--------------------------------------|--------|----------------------|--------|--------|--------------------|--------|--------|--------|--------|--------|--------|--------|
|                                 |   | (Unaudited)          |   |
|                                 |   | (In thousands)       |   |
|                                 |   | For the three months |   |   | For the six months |   |
|                                 |   | ended June 30,       |   |   | ended June 30,     |   |
|                                 |   | 2010                 |   |   | 2009               |   |   | 2010   |   |   | 2009   |   |
| Revenues:                            |   |                 |   |   |               |   |   |   |   |   |   |   |
| Oil and gas                          |   | $                    | 6,218  |   |               | $      | 645    |   |   | $      | 13,927 |   |   | $ | 1,428 |   |
| Real estate                          |   |                 | 608    |   |               |   | 745    |   |   |   | 1,247  |   |   |   | 1,479 |   |
| Total revenues:                      |   |                 | 6,826  |   |               |   | 1,390  |   |   |   | 15,174 |   |   |   | 2,907 |   |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                  |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                          |   | $                    | 3,894  |   |               | $      | 678    |   |   | $      | 7,279  |   |   | $ | 1,599 |   |
| Impairment of oil and gas properties |   |                 | --     |   |               |   | --     |   |   |   | --     |   |   |   | 1,063 |   |
| Real estate                          |   |                 | 602    |   |               |   | 498    |   |   |   | 1,155  |   |   |   | 1,010 |   |
| Mineral properties                   |   |                 | 454    |   |               |   | 576    |   |   |   | 860    |   |   |   | 1,019 |   |
| Total operating expenses:            |   |                 | 4,950  |   |               |   | 1,752  |   |   |   | 9,294  |   |   |   | 4,691 |   |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                     |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                          |   | $                    | --     |   |               | $      | --     |   |   | $      | --     |   |   | $ | -- |   |
| Real estate                          |   |                 | --     |   |               |   | --     |   |   |   | --     |   |   |   | 19 |   |
| Mineral properties                   |   |                 | 12     |   |               |   | 30     |   |   |   | 24     |   |   |   | 30 |   |
| Total interest expense:              |   |                 | 12     |   |               |   | 30     |   |   |   | 24     |   |   |   | 49 |   |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Operating income/(loss)              |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                          |   | $                    | 2,324  |   |               | $      | (33    | )      |   | $      | 6,648  |   |   | $ | (1,234 | ) |
| Real estate                          |   |                 | 6      |   |               |   | 247    |   |   |   | 92     |   |   |   | 450 |   |
| Mineral properties                   |   |                 | (466   | )      |               |   | (606   | )      |   |   | (884   | )      |   |   | (1,049 | ) |
| Operating income/(loss)              |   |                 | 1,864  |   |               |   | (392   | )      |   |   | 5,856  |   |   |   | (1,833 | ) |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Other revenues and expenses:         |   |                 | (1,984 | )      |               |   | (1,804 | )      |   |   | (3,519 | )      |   |   | (3,822 | ) |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Income/(loss) before                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| income taxes                         |   | $                    | (120   | )      |               | $      | (2,196 | )      |   | $      | 2,337  |   |   | $ | (5,655 | ) |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation expense:                |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                          |   | $                    | 2,396  |   |               | $      | 261    |   |   | $      | 4,651  |   |   | $ | 1,320 |   |
| Real estate                          |   |                 | 266    |   |               |   | 607    |   |   |   | 531    |   |   |   | 521 |   |
| Mineral properties                   |   |                 | 18     |   |               |   | 13     |   |   |   | 36     |   |   |   | 28 |   |
| Corporate                            |   |                 | 94     |   |               |   | 100    |   |   |   | 190    |   |   |   | 201 |   |
| Total depreciation expense           |   |                 | 2,774  |   |               |   | 981    |   |   |   | 5,408  |   |   |   | 2,070 |   |
|                                 |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |

----

|                   |   |           |    |   |         |   |
|------------------------|--------|----------------|---------|--------|--------------|--------|
|                   |   | (In thousands) |    |
|                   |   | June 30,       |    |   | December 31, |   |
|                   |   | 2010           |    |   | 2009         |   |
| Assets by segment      |   |           |    |   |         |   |
| Oil and Gas properties |   | $              | 43,022  |   |         | $      | 30,016 |   |
| Real estate            |   |           | 23,002  |   |         |   | 23,450 |   |
| Mineral properties     |   |           | 22,056  |   |         |   | 21,998 |   |
| Corporate assets       |   |           | 56,213  |   |         |   | 71,259 |   |
| Total assets           |   | $              | 144,293 |   |         | $      | 146,723 |   |
|                   |   |           |    |   |         |   |   |   |

----

----

ITEM 2.

----

| ·   | Operations provided $7.5 million, Investing Activities consumed $35.3 million and Financing Activities provided $503,000 for a net decrease in cash of $27.3 million during the six months ended June 30, 2010.  During the six months ended June 30, 2009, Operations consumed $2.0 million, Investing Activities provided $14.6 million and Financing activities consumed $19.1 million for a net decrease of $6.5 million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | For a discussion on cash provided by Operations please refer to Results of Operations below. |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Investing activities consumed cash through the acquisition and development of oil and gas properties, $23.7 million, investment in treasury investments, $12.3 million, acquisition of property and equipment, $466,000, development of mineral claims, $32,000, and $22,000 in restricted investments |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cash was provided by investing activities as a result of the Company’s receipt of a capital distribution from Standard Steam Trust, LLC, (“SST”), $1.1 million, sale of a commercial office property, $118,000, and sale of marketable securities, $13,000. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company received $503,000 for the issuance of shares related to the exercise of employee options and warrants to third party consultants. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

| ·   | Dry hole costs of $3.4 million during the quarter ended June 30, 2010.  As a result of the dry hole costs during the quarter, the Company added approximately $3.4 million to the full cost pool which is being amortized over production.  The addition of these dry hole costs raised the DD&A amount from $19.43 per barrel during the quarter ended March 31, 2010 to $23.98 per barrel during the quarter ended June 30, 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower proven reserves on wells drilled during the quarter ended June 30, 2010. |
|--------------------|--------------------------------------------------------------------------------|

| ·   | Higher drilling and completion costs due to increased drilling activity in the Williston Basin which has impacted rig availability. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Operating costs for the Bakken wells were higher during the quarter due to work over costs.  During the workovers of the wells, they did not produce oil or gas. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   |                        |   |   |          |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)              |   |
|                                     |   | For the three months ending |   |
|                                     |   | June 30, 2010               |   |   | June 30, 2009 |   |
| Revenues                                 |   | $                           | 6,826  |   |          | $      | 1,499 |   |
|                                     |   |                        |   |   |          |   |   |   |
| Operating expenses                       |   |                        | 4,343  |   |          |   | 2,712 |   |
| Depreciation, depletion and amortization |   |                        | 2,774  |   |          |   | 981 |   |
| Impairment                               |   |                        | --     |   |          |   | -- |   |
|                                     |   |                        | 7,117  |   |          |   | 3,693 |   |
| Operating income (loss)                  |   | $                           | (291   | )      |          | $      | (2,194 | ) |
|                                     |   |                        |   |   |          |   |   |   |

----

|                                     |   |                        |   |   |          |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)              |   |
|                                     |   | For the three months ending |   |
|                                     |   | June 30, 2010               |   |   | June 30, 2009 |   |
| Oil and gas revenues                     |   | $                           | 6,218  |   |          | $      | 754 |   |
|                                     |   |                        |   |   |          |   |   |   |
| Operating expenses                       |   |                        | 1,498  |   |          |   | 180 |   |
| Depreciation, depletion and amortization |   |                        | 2,396  |   |          |   | 607 |   |
| Impairment                               |   |                        | --     |   |          |   | -- |   |
|                                     |   |                        | 3,894  |   |          |   | 787 |   |
| Operating income (loss)                  |   | $                           | 2,324  |   |          | $      | (33 | ) |
|                                     |   |                        |   |   |          |   |   |   |

|                              |   |               |    |   |     |   |    |       |   |
|-----------------------------------|--------|--------------------|---------|--------|----------|--------|---------|------------|--------|
|                              |   | Three Months Ended |    |   |     |   |
|                              |   | June 30,           |    |   | Increase |   |
|                              |   | 2010               |    |   | 2009     |   |    | (Decrease) |   |
| Production volumes                |   |               |    |   |     |   |    |       |   |
| Oil and condensate (Bbls)         |   |               | 72,601  |   |     |   | 3,484   |       |   |   | 69,117 |   |
| Natural gas (Mcf)                 |   |               | 163,996 |   |     |   | 114,499 |       |   |   | 49,497 |   |
| Average sales prices              |   |               |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate (per Bbl)      |   | $                  | 71.98   |   |     | $      | 59.13   |       |   | $ | 12.85 |   |
| Natural gas (per Mcf)             |   |               | 6.05    |   |     |   | 4.13    |       |   |   | 1.92 |   |
| Operating revenues (in thousands) |   |               |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate                |   | $                  | 5,226   |   |     | $      | 229     |       |   | $ | 4,997 |   |
| Natural gas                       |   |               | 992     |   |     |   | 473     |       |   |   | 519 |   |
| Total operating revenue           |   |               | 6,218   |   |     |   | 702     |       |   |   | 5,516 |   |
| Lease operating expense           |   |               | (664    | )      |     |   | (71     | )          |   |   | (593 | ) |
| Production taxes                  |   |               | (834    | )      |     |   | (57     | )          |   |   | (777 | ) |
| Gain before DD&A              |   |               | 4,720   |   |     |   | 574     |       |   |   | 4,146 |   |
| DD&A                          |   |               | (2,396  | )      |     |   | (607    | )          |   |   | (1,789 | ) |
| Gain (Loss)                       |   | $                  | 2,324   |   |     | $      | (33     | )          |   | $ | 2,357 |   |
|                              |   |               |    |   |     |   |    |       |   |   |   |   |

----

|                                     |   |                        |   |   |          |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)              |   |
|                                     |   | For the three months ending |   |
|                                     |   | June 30, 2010               |   |   | June 30, 2009 |   |
| Real estate revenues                     |   | $                           | 608    |   |          | $      | 745 |   |
|                                     |   |                        |   |   |          |   |   |   |
| Operating expenses                       |   |                        | 336    |   |          |   | 209 |   |
| Depreciation, depletion and amortization |   |                        | 266    |   |          |   | 289 |   |
|                                     |   |                        | 602    |   |          |   | 498 |   |
| Operating income                         |   | $                           | 6      |   |          | $      | 247 |   |
|                                     |   |                        |   |   |          |   |   |   |

----

| ·   | $329,000 accrual of a 2010 year-end bonus to all employees of the Company which is subject to meeting corporate and personal goals, meeting annual budget goals, increased share price and cash flow from operations.  Under the Performance Compensation Plan (“PCP”) adopted by the board of directors, employees can earn from 33% to 100% of their base compensation as bonuses if the terms of the PCP are met.  The PCP was proposed by the Company’s Compensation Committee and adopted by the full Board in April 2009.  Details of the PCP are disclosed in the Company’s annual proxy statement for the annual meeting that was held in June of 2010.  Any bonus earned for 2010 performance will be paid during the first quarter of 2011.  The PCP is being reevaluated by the Board of Directors and is subject to change.  Any change to the PCP may affect the accrued amounts.  As of June 30, 2009 no accrual had been made as the terms of the PCP had not been met. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                     |   |                      |   |   |          |   |
|------------------------------------------|--------|---------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)            |   |
|                                     |   | For the six months ending |   |
|                                     |   | June 30, 2010             |   |   | June 30, 2009 |   |
| Revenues                                 |   | $                         | 15,174 |   |          | $      | 2,907 |   |
|                                     |   |                      |   |   |          |   |   |   |
| Operating expenses                       |   |                      | 8,721  |   |          |   | 5,395 |   |
| Depreciation, depletion and amortization |   |                      | 5,408  |   |          |   | 2,070 |   |
| Impairment                               |   |                      | --     |   |          |   | 1,063 |   |
|                                     |   |                      | 14,129 |   |          |   | 8,528 |   |
| Operating income (loss)                  |   | $                         | 1,045  |   |          | $      | (5,621 | ) |
|                                     |   |                      |   |   |          |   |   |   |

|                                     |   |                      |   |   |          |   |
|------------------------------------------|--------|---------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)            |   |
|                                     |   | For the six months ending |   |
|                                     |   | June 30, 2010             |   |   | June 30, 2009 |   |
| Oil and gas revenues                     |   | $                         | 13,927 |   |          | $      | 1,428 |   |
|                                     |   |                      |   |   |          |   |   |   |
| Operating expenses                       |   |                      | 2,628  |   |          |   | 279 |   |
| Depreciation, depletion and amortization |   |                      | 4,651  |   |          |   | 1,320 |   |
| Impairment                               |   |                      | --     |   |          |   | 1,063 |   |
|                                     |   |                      | 7,279  |   |          |   | 2,662 |   |
| Operating income (loss)                  |   | $                         | 6,648  |   |          | $      | (1,234 | ) |
|                                     |   |                      |   |   |          |   |   |   |

----

|                              |   |             |    |   |     |   |    |       |   |
|-----------------------------------|--------|------------------|---------|--------|----------|--------|---------|------------|--------|
|                              |   | Six Months Ended |    |   |     |   |
|                              |   | June 30,         |    |   | Increase |   |
|                              |   | 2010             |    |   | 2009     |   |    | (Decrease) |   |
| Production volumes                |   |             |    |   |     |   |    |       |   |
| Oil and condensate (Bbls)         |   |             | 160,927 |   |     |   | 7,100   |       |   |   | 153,827 |   |
| Natural gas (Mcf)                 |   |             | 330,398 |   |     |   | 230,877 |       |   |   | 99,521 |   |
| Average sales prices              |   |             |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate (per Bbl)      |   | $                | 73.30   |   |     | $      | 38.15   |       |   | $ | 35.15 |   |
| Natural gas (per Mcf)             |   |             | 6.45    |   |     |   | 4.94    |       |   |   | 1.51 |   |
| Operating revenues (in thousands) |   |             |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate                |   | $                | 11,796  |   |     | $      | 371     |       |   | $ | 11,425 |   |
| Natural gas                       |   |             | 2,131   |   |     |   | 1,057   |       |   |   | 1,074 |   |
| Total operating revenue           |   |             | 13,927  |   |     |   | 1,428   |       |   |   | 12,499 |   |
| Lease operating expense           |   |             | (868    | )      |     |   | (170    | )          |   |   | (698 | ) |
| Production taxes                  |   |             | (1,760  | )      |     |   | (109    | )          |   |   | (1,651 | ) |
| Impairment                        |   |             | -       |   |     |   | (1,063  | )          |   |   | 1,063 |   |
| Gain before DD&A              |   |             | 11,299  |   |     |   | 86      |       |   |   | 11,213 |   |
| DD&A                          |   |             | (4,651  | )      |     |   | (1,320  | )          |   |   | (3,331 | ) |
| Gain (Loss)                       |   | $                | 6,648   |   |     | $      | (1,234  | )          |   | $ | 7,882 |   |
|                              |   |             |    |   |     |   |    |       |   |   |   |   |

----

|                                     |   |                      |   |   |          |   |
|------------------------------------------|--------|---------------------------|--------|--------|---------------|--------|
|                                     |   | (In thousands)            |   |
|                                     |   | For the six months ending |   |
|                                     |   | June 30, 2010             |   |   | June 30, 2009 |   |
| Real estate revenues                     |   | $                         | 1,247  |   |          | $      | 1,479 |   |
|                                     |   |                      |   |   |          |   |   |   |
| Operating expenses                       |   |                      | 624    |   |          |   | 489 |   |
| Interest expense                         |   |                      | --     |   |          |   | 19 |   |
| Depreciation, depletion and amortization |   |                      | 531    |   |          |   | 521 |   |
|                                     |   |                      | 1,155  |   |          |   | 1,029 |   |
| Operating income                         |   | $                         | 92     |   |          | $      | 450 |   |
|                                     |   |                      |   |   |          |   |   |   |

| ·   | $676,000 - Accrual of a 2010 year-end bonus to all employees of the Company which is subject to meeting corporate and personal goals, meeting annual budget goals, increased share price and cash flow from operations.  Under the Performance Compensation Plan (“PCP”) adopted by the board of directors, employees can earn from 33% to 100% of their base compensation as bonuses if the terms of the PCP are met.  The PCP was proposed by the Company’s Compensation Committee and adopted by the full Board in April, 2009.  Details of the PCP are disclosed in the Company’s annual proxy statement for the annual meeting that was held in June of 2010.  Any bonus earned for 2010 performance will be paid during the first quarter of 2011.  The PCP is being reevaluated by the Board of Directors and is subject to change.  Any change to the PCP may affect the accrued amounts.  As of June 30, 2009 no accrual had been made as the terms of the PCP had not been met; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $198,000 - Noncash increase in stock compensation expense.  The increase is primarily due to shares issued to officers of the Company pursuant to the 2001 Stock Compensation Plan being issued at a higher price than those issued in 2009; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | $139,000 - Increase in professional services.  This increase is primarily due to professional services fees related to our participation in the Williston Basin wells with Brigham and with services related to our listing on NASDAQ. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |
|-----------------------------------|--------|------------------------|--------|--------|----------|--------|--------|--------|--------|--------|----------|--------|--------|-----------|--------|
|                              |   | (In thousands)         |   |
|                              |   | Payments due by period |   |
|                              |   |                   |   |   | Less     |   |   | One to |   |   | Three to |   |   | More than |   |
|                              |   |                   |   |   | than one |   |   | Three  |   |   | Five     |   |   | Five      |   |
|                              |   | Total                  |   |   | Year     |   |   | Years  |   |   | Years    |   |   | Years     |   |
|  Long-term debt obligations  |   | $                      | 800    |   |     | $      | 200    |   |   | $      | 600      |   |   | $         | --     |   |   | $ | -- |   |
|  Executive retirement        |   | $                      | 983    |   |     |   | 153    |   |   |   | 129      |   |   |      | --     |   |   |   | 701 |   |
|  Asset retirement obligation |   | $                      | 234    |   |     |   | --     |   |   |   | --       |   |   |      | 26     |   |   |   | 208 |   |
|  Totals                      |   | $                      | 2,017  |   |     | $      | 353    |   |   | $      | 729      |   |   | $         | 26     |   |   | $ | 909 |   |
|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |   |   |   |   |   |

ITEM 3

ITEM 4

| i.   | That the Company’s disclosure controls and procedures are designed to ensure (a) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (b) that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure; and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii.   | That the Company’s disclosure controls and procedures are effective. |
|-----------------|----------------------------------------------------------------------------|

----

ITEM 1.

----

ITEM 1A.

----

ITEM 2

ITEM 3.

ITEM 4

| Name of Director  |   | Votes For |   | Withheld |   | Broker Non-Votes |
|-------------------|--------|-----------|--------|----------|--------|------------------|
| Stephen V. Conrad |   | 7,322,244 |   | 581,286  |   | 12,019,005       |
| Mark J. Larsen    |   | 7,268,168 |   | 635,362  |   | 12,019,005       |

| Votes For  |   | Votes Against |   | Abstain |   | Broker Non-Votes |
|------------|--------|---------------|--------|---------|--------|------------------|
| 19,291,602 |   | 551,196       |   | 79,737  |   | 0                |

ITEM 5

----

ITEM 6.

|   | (a)    | Exhibits                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                      |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                      |
|   |   | 10.131.1                                                                                                                                                         | Consent of Cawley, Gillespie & Associates, Inc.Certification of Chief Executive Officer Pursuant to Rule 13a-15(e) / Rule 15d-15(e)                                                                                                                                                                                   |
|   |   | 31.2                                                                                                                                                             | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / Rule 15(e)/15d-15(e)                                                                                                                                                                                                                                |
|   |   | 32.1                                                                                                                                                             | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  |
|   |   | 32.2                                                                                                                                                             | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  |
|   |   |                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                      |
|   | (b)    | Reports on Form 8-K.  The Company filed seven reports on Form 8-K for the quarter ended June 30, 2010.  The events reported were as follows: |
|   |   | 1.                                                                                                                                                               | The report filed on April 5, 2010, under Item 7.01 referenced the initial production rate of the Jack Erickson 6-31 #1H well.                                                                                                                                                                                             |
|   |   | 2.                                                                                                                                                               | The report filed on April 12, 2010, under Item 7.01 referenced the company presenting at the IPAA Oil & Gas Investment Symposium in New York.                                                                                                                                                                         |
|   |   | 3.                                                                                                                                                               | The report filed on April 27, 2010, under Item 7.01 referenced results from two drilled prospects with PetroQuest Energy, L.L.C.; well results from initial test well with Yuma Exploration and Production Company; expansion of drilling program with PetroQuest and Houston Energy, L.P. and update on Williston Basin. |
|   |   | 4.                                                                                                                                                               | The report filed on April 28, 2010, under Item 7.01 referenced a cash distribution of $1.1 million from Standard Steam Trust.                                                                                                                                                                                             |
|   |   | 5.                                                                                                                                                               | The report filed on May 10, 2010, under Item 7.01 referenced a conference call on May 10, 2010 to review and discuss first quarter 2010 highlights and financial results.                                                                                                                                                 |
|   |   | 6.                                                                                                                                                               | The report filed on June 24, 2010, under Item 7.01 referenced an update on oil and gas drilling initiatives.                                                                                                                                                                                                              |
|   |   | 7.                                                                                                                                                               | The report filed on June 29, 2010, under Item 5.07 referenced the voting results from the annual meeting of shareholders.                                                                                                                                                                                                 |

----

SIGNATURES

|                 |   | U.S. ENERGY CORP. |
|----------------------|--------|-------------------|
|                 |   | (Registrant)      |
|                 |   |              |
|                 |   |              |
|                 |   |              |
| Date: August 9, 2010 |   | By:               | /s/ Keith G. Larsen |
|                 |   |              | KEITH G. LARSEN |
|                 |   |              | Chairman and CEO |
|                 |   |              |   |
|                 |   |              |   |
|                 |   |              |   |
|                 |   |              |   |
| Date: August 9, 2010 |   | By:               | /s/ Robert Scott Lorimer |
|                 |   |              | ROBERT SCOTT LORIMER |
|                 |   |              | Principal Financial Officer and |
|                 |   |              | Chief Accounting Officer |

----