----

| x      | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934  |
|--------|------------------------------------------------------------------------------------------|
|   | For the quarter ended September 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 Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009 (unaudited)                | 4-5          |
|     |                                                                                                                        |         |
|     | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 (unaudited) | 6            |
|     |                                                                                                                        |         |
|     | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (unaudited)           | 7-8          |
|     |                                                                                                                        |         |
|     | Notes to Condensed Consolidated Financial Statements (unaudited)                                                            | 9-21         |
|     |                                                                                                                        |         |
| Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                 | 22-39        |
|     |                                                                                                                        |         |
| Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                                                                  | 39           |
|     |                                                                                                                        |         |
| Item 4.  | Controls and Procedures                                                                                                     | 40           |
|     |                                                                                                                        |         |
| PART II. | OTHER INFORMATION                                                                                                           |         |
|     |                                                                                                                        |         |
| Item 1.  | Legal Proceedings                                                                                                           | 41-42        |
|     |                                                                                                                        |         |
| Item 1A. | Risk Factors                                                                                                                | 42           |
|     |                                                                                                                        |         |
| 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                                                                                            | 43           |
|     |                                                                                                                        |         |
|     | Signatures                                                                                                                  | 44           |
|     |                                                                                                                        |         |
|     | Certifications                                                                                                              | See Exhibits |

----

INDEX

 Financial Statements

| U.S. ENERGY CORP.                                    |   |
|------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED BALANCE SHEETS                |   |
| ASSETS                                               |   |
| (Unaudited)                                          |   |
| (In thousands)                                       |   |
|                                                 |   |   |   |   |   |   |
|                                                 |   | September 30, |   |   | December 31, |   |
|                                                 |   | 2010 |   |   | 2009 |   |
| CURRENT ASSETS:                                      |   |   |   |   |   |   |
| Cash and cash equivalents                            |   | $ | 10,414 |   |   | $ | 33,403 |   |
| Marketable securities                                |   |   |   |   |   |   |   |   |
| Held to maturity - treasuries                        |   |   | 29,242 |   |   |   | 22,059 |   |
| Available for sale securities                        |   |   | 1,110 |   |   |   | 1,178 |   |
| Accounts receivable                                  |   |   |   |   |   |   |   |   |
| Trade                                                |   |   | 3,942 |   |   |   | 3,882 |   |
| Reimbursable project costs                           |   |   | 2 |   |   |   | 2 |   |
| Income taxes                                         |   |   | 353 |   |   |   | 353 |   |
| Other current assets                                 |   |   | 1,203 |   |   |   | 1,223 |   |
| Total current assets                                 |   |   | 46,266 |   |   |   | 62,100 |   |
|                                                 |   |   |   |   |   |   |   |   |
| INVESTMENT                                           |   |   | 2,910 |   |   |   | 2,958 |   |
|                                                 |   |   |   |   |   |   |   |   |
| PROPERTIES AND EQUIPMENT:                            |   |   |   |   |   |   |   |   |
| Oil & gas properties under full cost method, net |   |   | 43,831 |   |   |   | 26,002 |   |
| Undeveloped mining claims                            |   |   | 22,003 |   |   |   | 21,969 |   |
| Commercial real estate, net                          |   |   | 22,512 |   |   |   | 23,200 |   |
| Property, plant and equipment, net                   |   |   | 9,540 |   |   |   | 9,301 |   |
| Net properties and equipment                         |   |   | 97,886 |   |   |   | 80,472 |   |
|                                                 |   |   |   |   |   |   |   |   |
| OTHER ASSETS                                         |   |   | 1,740 |   |   |   | 1,193 |   |
| Total assets                                         |   | $ | 148,802 |   |   | $ | 146,723 |   |
|                                                 |   |   |   |   |   |   |   |   |

----

INDEX

| U.S. ENERGY CORP.                              |   |
|------------------------------------------------|--------|
| CONDENSED CONSOLIDATED BALANCE SHEETS          |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY           |   |
| (Unaudited)                                    |   |
| (In thousands, except shares)                  |   |
|                                           |   |   |   |   |   |   |
|                                           |   | September 30, |   |   | December 31, |   |
|                                           |   | 2010 |   |   | 2009 |   |
| CURRENT LIABILITIES:                           |   |   |   |   |   |   |
| Accounts payable                               |   | $ | 4,442 |   |   | $ | 6,500 |   |
| Accrued compensation                           |   |   | 1,515 |   |   |   | 1,748 |   |
| Commodity risk management liability            |   |   | 586 |   |   |   | -- |   |
| Current portion of long-term debt              |   |   | 200 |   |   |   | 200 |   |
| Other current liabilities                      |   |   | 711 |   |   |   | 224 |   |
| Total current liabilities                      |   |   | 7,454 |   |   |   | 8,672 |   |
|                                           |   |   |   |   |   |   |   |   |
| LONG-TERM DEBT, net of current portion         |   |   | 600 |   |   |   | 600 |   |
|                                           |   |   |   |   |   |   |   |   |
| DEFERRED TAX LIABILITY                         |   |   | 7,685 |   |   |   | 7,345 |   |
|                                           |   |   |   |   |   |   |   |   |
| ASSET RETIREMENT OBLIGATIONS                   |   |   | 293 |   |   |   | 211 |   |
|                                           |   |   |   |   |   |   |   |   |
| OTHER ACCRUED LIABILITIES                      |   |   | 838 |   |   |   | 762 |   |
|                                           |   |   |   |   |   |   |   |   |
| SHAREHOLDERS' EQUITY:                          |   |   |   |   |   |   |   |   |
| Common stock, $.01 par value; unlimited shares |   |   |   |   |   |   |   |   |
| authorized; 26,856,290 and 26,418,713          |   |   |   |   |   |   |   |   |
| shares issued, respectively                    |   |   | 269 |   |   |   | 264 |   |
| Additional paid-in capital                     |   |   | 120,646 |   |   |   | 118,998 |   |
| Accumulated surplus                            |   |   | 10,647 |   |   |   | 9,485 |   |
| Unrealized gain on marketable securities       |   |   | 370 |   |   |   | 386 |   |
| Total shareholders' equity                     |   |   | 131,932 |   |   |   | 129,133 |   |
| Total liabilities and shareholders' equity     |   | $ | 148,802 |   |   | $ | 146,723 |   |
|                                           |   |   |   |   |   |   |   |   |

----

INDEX

| U.S. ENERGY CORP.                               |   |
|-------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |   |
| (Unaudited)                                     |   |
| (In thousands except per share data)            |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|                                            |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| REVENUES:                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                                     |   | $ | 6,303 |   |   | $ | 691 |   |   | $ | 20,230 |   |   | $ | 2,119 |   |
| Unrealized (loss) on                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| risk management activities                      |   |   | (586 | ) |   |   | -- |   |   |   | (586 | ) |   |   | -- |   |
| Real estate                                     |   |   | 646 |   |   |   | 686 |   |   |   | 1,893 |   |   |   | 2,165 |   |
|                                            |   |   | 6,363 |   |   |   | 1,377 |   |   |   | 21,537 |   |   |   | 4,284 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                                     |   |   | 4,399 |   |   |   | 544 |   |   |   | 11,678 |   |   |   | 2,143 |   |
| Impairment of oil and gas properties            |   |   | -- |   |   |   | 405 |   |   |   | -- |   |   |   | 1,468 |   |
| Real estate                                     |   |   | 562 |   |   |   | 507 |   |   |   | 1,717 |   |   |   | 1,517 |   |
| Water treatment plant                           |   |   | 347 |   |   |   | 379 |   |   |   | 1,155 |   |   |   | 1,398 |   |
| Mineral holding costs                           |   |   | 9 |   |   |   | -- |   |   |   | 61 |   |   |   | -- |   |
| General and administrative                      |   |   | 1,920 |   |   |   | 1,838 |   |   |   | 6,755 |   |   |   | 5,675 |   |
|                                            |   |   | 7,237 |   |   |   | 3,673 |   |   |   | 21,366 |   |   |   | 12,201 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME (LOSS):                        |   |   | (874 | ) |   |   | (2,296 | ) |   |   | 171 |   |   |   | (7,917 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income and (expenses)                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain/(loss) on sale of assets                   |   |   | -- |   |   |   | (46 | ) |   |   | 115 |   |   |   | (41 | ) |
| Equity gain/(loss) in                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| unconsolidated investment                       |   |   | (52 | ) |   |   | (339 | ) |   |   | 1,090 |   |   |   | (505 | ) |
| Gain on sale of marketable securities           |   |   | 26 |   |   |   | -- |   |   |   | 34 |   |   |   | -- |   |
| Miscellaneous income                            |   |   | 60 |   |   |   | 5 |   |   |   | 61 |   |   |   | 14 |   |
| Interest income                                 |   |   | 30 |   |   |   | 88 |   |   |   | 91 |   |   |   | 264 |   |
| Interest expense                                |   |   | (16 | ) |   |   | (20 | ) |   |   | (51 | ) |   |   | (78 | ) |
|                                            |   |   | 48 |   |   |   | (312 | ) |   |   | 1,340 |   |   |   | (346 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE INCOME TAX:                |   |   | (826 | ) |   |   | (2,608 | ) |   |   | 1,511 |   |   |   | (8,263 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes:                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Current (provision for) benefit from      |   |   | -- |   |   |   | (3 | ) |   |   | -- |   |   |   | 210 |   |
|  Deferred (provision for) benefit from     |   |   | 591 |   |   |   | 867 |   |   |   | (349 | ) |   |   | 1,077 |   |
|                                            |   |   | 591 |   |   |   | 864 |   |   |   | (349 | ) |   |   | 1,287 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                               |   | $ | (235 | ) |   | $ | (1,744 | ) |   | $ | 1,162 |   |   | $ | (6,976 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER SHARE                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   | $ | (0.01 | ) |   | $ | (0.09 | ) |   | $ | 0.04 |   |   | $ | (0.33 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                         |   | $ | (0.01 | ) |   | $ | (0.09 | ) |   | $ | 0.04 |   |   | $ | (0.33 | ) |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   |   | 26,855,513 |   |   |   | 21,288,841 |   |   |   | 26,693,710 |   |   |   | 21,416,869 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                         |   |   | 26,855,513 |   |   |   | 21,288,841 |   |   |   | 27,743,396 |   |   |   | 21,416,869 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

INDEX

| U.S. ENERGY CORP.                                      |   |
|--------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        |   |
| (Unaudited)                                            |   |
| (In thousands)                                         |   |
|                                                   |   |   |   |   |   |   |
|                                                   |   | Nine months ended September 30, |   |
|                                                   |   | 2010 |   |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                  |   |   |   |   |   |   |
| Net income (loss)                                      |   | $ | 1,162 |   |   | $ | (6,976 | ) |
| Adjustments to reconcile net income (loss) to net cash |   |   |   |   |   |   |   |   |
| provided by operations                                 |   |   |   |   |   |   |   |   |
| Depreciation, depletion and amortization               |   |   | 8,763 |   |   |   | 2,918 |   |
| Change in fair value of commodity price                |   |   |   |   |   |   |   |   |
| risk management activities, net                        |   |   | 586 |   |   |   | -- |   |
| Accretion of discount on treasury investment           |   |   | (61 | ) |   |   | (160 | ) |
| Impairment of oil and gas properties                   |   |   | -- |   |   |   | 1,468 |   |
| Gain on sale of marketable securities                  |   |   | (34 | ) |   |   | -- |   |
| Equity (gain)/loss from Standard Steam                 |   |   | (1,090 | ) |   |   | 505 |   |
| Change in deferred income taxes                        |   |   | 349 |   |   |   | (1,077 | ) |
| (Gain)/loss on sale of assets                          |   |   | (115 | ) |   |   | 41 |   |
| Noncash compensation                                   |   |   | 1,101 |   |   |   | 1,283 |   |
| Noncash services                                       |   |   | 48 |   |   |   | 50 |   |
| Net changes in assets and liabilities                  |   |   | 1,546 |   |   |   | 4,802 |   |
| NET CASH PROVIDED BY                                   |   |   |   |   |   |   |   |   |
| OPERATING ACTIVITIES                                   |   |   | 12,255 |   |   |   | 2,854 |   |
|                                                   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                  |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas properties  |   | $ | (29,013 | ) |   | $ | (9,078 | ) |
| Net (investment in) redemption of treasury investments |   |   | (7,122 | ) |   |   | 24,088 |   |
| Net distribution from (investment in) Standard Steam   |   |   | 1,138 |   |   |   | (877 | ) |
| Acquisition and development of mining properties       |   |   | (34 | ) |   |   | (10 | ) |
| Mining property option payment                         |   |   | -- |   |   |   | 1,000 |   |
| Development of real estate                             |   |   | -- |   |   |   | (91 | ) |
| Acquisition of property and equipment                  |   |   | (704 | ) |   |   | (249 | ) |
| Proceeds from sale of property and equipment           |   |   | 118 |   |   |   | 5 |   |
| Proceeds from sale of marketable securities            |   |   | 77 |   |   |   | -- |   |
| Net change in restricted investments                   |   |   | (207 | ) |   |   | 4,682 |   |
| NET CASH (USED IN) PROVIDED                            |   |   |   |   |   |   |   |   |
| BY INVESTING ACTIVITIES                                |   |   | (35,747 | ) |   |   | 19,470 |   |
|                                                   |   |   |   |   |   |   |   |   |

----

INDEX

| U.S. ENERGY CORP.                               |   |
|-------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |   |
| (Unaudited)                                     |   |
| (In thousands)                                  |   |
|                                            |   |   |   |   |   |   |
|                                            |   | Nine months ended September 30, |   |
|                                            |   | 2010 |   |   | 2009 |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:           |   |   |   |   |   |   |
| Issuance of common stock, net                   |   | $ | 503 |   |   | $ | -- |   |
| Repayments of debt                              |   |   | -- |   |   |   | (17,688 | ) |
| Stock buyback program                           |   |   | -- |   |   |   | (1,399 | ) |
| NET CASH PROVIDED BY (USED IN)                  |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                            |   |   | 503 |   |   |   | (19,087 | ) |
|                                            |   |   |   |   |   |   |   |   |
| NET (DECREASE) INCREASE IN                      |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                       |   |   | (22,989 | ) |   |   | 3,237 |   |
|                                            |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                       |   |   |   |   |   |   |   |   |
|  AT BEGINNING OF PERIOD                    |   |   | 33,403 |   |   |   | 8,434 |   |
|                                            |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                       |   |   |   |   |   |   |   |   |
| AT END OF PERIOD                                |   | $ | 10,414 |   |   | $ | 11,671 |   |
|                                            |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                       |   |   |   |   |   |   |   |   |
| Income tax received                             |   | $ | -- |   |   | $ | (5,753 | ) |
|                                            |   |   |   |   |   |   |   |   |
| Interest paid                                   |   | $ | 15 |   |   | $ | 34 |   |
|                                            |   |   |   |   |   |   |   |   |
| NON-CASH INVESTING AND FINANCING ACTIVITIES:    |   |   |   |   |   |   |   |   |
|                                            |   |   |   |   |   |   |   |   |
| Unrealized gain                                 |   | $ | 370 |   |   | $ | 143 |   |
|                                            |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas      |   |   |   |   |   |   |   |   |
| properties through accounts payable             |   | $ | 1,894 |   |   | $ | -- |   |
|                                            |   |   |   |   |   |   |   |   |
| Acquisition and development of oil and gas      |   |   |   |   |   |   |   |   |
| through asset retirement obligation             |   | $ | 70 |   |   | $ | -- |   |
|                                            |   |   |   |   |   |   |   |   |

----

INDEX

Basis of Presentation

----

INDEX

----

INDEX

| U.S. Energy Corp.                        |   |
|------------------------------------------|--------|
| Components of Properties & Equipment |   |
|                                     |   |   |   |   |   |   |
|                                     |   | (In thousands) |   |
|                                     |   | September 30, |   |   | December 31, |   |
|                                     |   | 2010 |   |   | 2009 |   |
|  Oil & Gas properties           |   |   |   |   |   |   |
|  Unproved                           |   | $ | 2,795 |   |   | $ | 3,993 |   |
|  Wells in progress                  |   |   | 2,534 |   |   |   | 1,367 |   |
|  Proved                             |   |   | 50,083 |   |   |   | 24,595 |   |
|                                     |   |   | 55,412 |   |   |   | 29,955 |   |
|  Less accumulated depreciation      |   |   |   |   |   |   |   |   |
|  depletion and amortization         |   |   | (11,581 | ) |   |   | (3,953 | ) |
|  Net book value                     |   |   | 43,831 |   |   |   | 26,002 |   |
|                                     |   |   |   |   |   |   |   |   |
|  Mining properties                  |   |   | 22,003 |   |   |   | 21,969 |   |
|                                     |   |   |   |   |   |   |   |   |
|  Commercial real estate             |   |   | 24,622 |   |   |   | 24,600 |   |
|  Less Accumulated depreciation      |   |   | (2,110 | ) |   |   | (1,400 | ) |
|  Net book value                     |   |   | 22,512 |   |   |   | 23,200 |   |
|                                     |   |   |   |   |   |   |   |   |
|  Building, land and equipment       |   |   | 14,621 |   |   |   | 14,196 |   |
|  Less accumulated depreciation      |   |   | (5,081 | ) |   |   | (4,895 | ) |
|  Net book value                     |   |   | 9,540 |   |   |   | 9,301 |   |
|  Totals                             |   | $ | 97,886 |   |   | $ | 80,472 |   |
|                                     |   |   |   |   |   |   |   |   |

----

INDEX

----

INDEX

|                                           |   |           |   |
|------------------------------------------------|--------|----------------|--------|
|                                           |   | (In thousands) |   |
|  Costs associated with Mount Emmons       |   |           |   |
|  at December 31, 2009                     |   | $              | 21,969 |   |
|  Development costs during the nine months |   |           |   |   |
|  ended September 30, 2010                 |   |           | 34     |   |
|                                           |   | $              | 22,003 |   |
|                                           |   |           |   |   |

----

INDEX

|                                  |   |           |   |   |         |   |
|---------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                  |   | (In thousands) |   |
|                                  |   | September 30,  |   |   | December 31, |   |
|                                  |   | 2010           |   |   | 2009         |   |
| Beginning asset retirement obligation |   | $              | 211    |   |         | $      | 144 |   |
| Accretion of discount                 |   |           | 12     |   |         |   | 12 |   |
| Liabilities incurred                  |   |           | 70     |   |         |   | 55 |   |
| Ending asset retirement obligation    |   | $              | 293    |   |         | $      | 211 |   |
|                                  |   |           |   |   |         |   |   |   |
| Mining properties                     |   | $              | 136    |   |         | $      | 128 |   |
| Oil & Gas Wells                   |   |           | 157    |   |         |   | 83 |   |
| Ending asset retirement obligation    |   | $              | 293    |   |         | $      | 211 |   |
|                                  |   |           |   |   |         |   |   |   |

----

INDEX

|                       |   |              |   |      |   |                                          |   |                           |
|----------------------------|--------|-------------------|--------|-----------|--------|-----------------------------------------------|--------|--------------------------------|
|                       |   |              |   |      |   | Quantity                                      |   |                           |
| Settlement Period          |   | Counterparty      |   | Basis     |   | (Bbl/d)                                       |   | Strike Price                   |
| Crude Oil Costless Collars |   |              |   |      |   |                                          |   |                           |
| 10/1/10 - 9/30/11          |   |  BNP Parabis |   |  WTI |   |        200 |   |  Put:  $75.00   |
|                       |   |              |   |      |   |                                          |   |  Call:  $83.25  |
|                       |   |              |   |      |   |                                          |   |                           |
| Crude Oil Swap             |   |              |   |      |   |                                          |   |                           |
| 10/1/10 - 9/30/11          |   |  BNP Parabis |   |  WTI |   |        200 |   |  Fixed:  $79.05 |

|                          |              |   | Fair Value at |    |
|-------------------------------|-------------------|--------|---------------|---------|
| Underlying                    | Location on       |   | September 30, |    |
| Commodity                     | Balance Sheet     |   | 2010          |    |
| Crude oil derivative contract | Current liability |   | $             | 256,000 |   |
|                          |              |   |          |    |   |
| Crude oil derivative contract | Current liability |   |          | 330,000 |   |
|                          |              |   | $             | 586,000 |   |

----

INDEX

| ·   | Level 1 — Unadjusted quoted prices are 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 September 30, 2010 Using |   |
|                                |   | September 30,  |   |   | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Other Observable Inputs |   |   | Significant Unobservable Inputs |   |
| Description                         |   | 2010           |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                                |   |           |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities       |   | $              | 1,110  |   |   | $ | 1,110 |   |   | $ | -- |   |   | $ | -- |   |
|                                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                        |   | $              | 1,110  |   |   | $ | 1,110 |   |   | $ | -- |   |   | $ | -- |   |
|                                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commodity risk management liability |   | $              | 586    |   |   | $ | -- |   |   | $ | 586 |   |   | $ | -- |   |
| Other accrued liabilities           |   |           | 838    |   |   |   | -- |   |   |   | -- |   |   |   | 838 |   |
|                                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilitities                 |   | $              | 1,424  |   |   | $ | -- |   |   | $ | 586 |   |   | $ | 838 |   |
|                                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

INDEX

|                          |   | (In thousands)      |   |
|-------------------------------|--------|---------------------|--------|
| September 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 |   |
|                          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   | $                   | 1,110  |   |   | $ | 206 |   |   | $ | -- |   |   | $ | -- |   |   | $ | 1,110 |   |   | $ | 206 |   |
|                          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |   | $                   | 1,110  |   |   | $ | 206 |   |   | $ | -- |   |   | $ | -- |   |   | $ | 1,110 |   |   | $ | 206 |   |
|                          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|           |   | (In thousands)     |   |
|----------------|--------|--------------------|--------|
|           |   | September 30, 2010 |   |   |   |   |
| Description    |   | Carry Amount       |   |   | Fair Value |   |
|           |   |               |   |   |   |   |
| Long-term debt |   | $                  | 800    |   |   | $ | 800 |   |
|           |   |               |   |   |   |   |   |   |

----

INDEX

|                                             |   |         |       |   |    |   |   |       |   |
|--------------------------------------------------|--------|--------------|------------|--------|---------|--------|--------|------------|--------|
| (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               |   |         | 60,000     |   |    |   | 1      |       |   |   | 337 |   |
|  Exercise of employee stock options         |   |         | 141,210    |   |    |   | 1      |       |   |   | (201 | ) |
|  Exercise of stock warrants                 |   |         | 236,367    |   |    |   | 3      |       |   |   | 700 |   |
|  Expense of employee options vesting        |   |         | --         |   |    |   | --     |       |   |   | 764 |   |
|  Stock options issued to outside directors  |   |         | --         |   |    |   | --     |       |   |   | 45 |   |
|  Expense of company warrants issued         |   |         | --         |   |    |   | --     |       |   |   | 3 |   |
|  Balance September 30, 2010                 |   |         | 26,856,290 |   |    | $      | 269    |       |   | $ | 120,646 |   |
|                                             |   |         |       |   |    |   |   |       |   |   |   |   |

----

INDEX

|                                                        |   | September 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                                                   |   |                   | (360,984  | ) |   | $ | 2.84 |   |   |   | (236,367 | ) |   | $ | 2.97 |   |
| Outstanding at September 30, 2010                           |   |                   | 3,350,130 |   |   | $ | 3.72 |   |   |   | 335,000 |   |   | $ | 2.95 |   |
| Exercisable at September 30, 2010                           |   |                   | 2,742,631 |   |   | $ | 3.61 |   |   |   | 291,667 |   |   | $ | 2.93 |   |
|                                                        |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Remaining Contractual Life - Years         |   |                   |      | 5.13 |   |   |   |   |   |   |   | 4.29 |   |
|                                                        |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate intrinsic value of options / warrants outstanding |   |                   | $         | 3,286,000 |   |   |   |   |   |   | $ | 538,000 |   |
|                                                        |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

INDEX

|                         |   | (Unaudited)          |   |
|------------------------------|--------|----------------------|--------|
|                         |   | (In thousands)       |   |
|                         |   | For the three months |   |   | For the nine months |   |
|                         |   | ended September 30,  |   |   | ended September 30, |   |
|                         |   | 2010                 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Revenues:                    |   |                 |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                  |   | $                    | 5,717  |   |   | $ | 691 |   |   | $ | 19,644 |   |   | $ | 2,119 |   |
| Real estate                  |   |                 | 646    |   |   |   | 686 |   |   |   | 1,893 |   |   |   | 2,165 |   |
| Total revenues:              |   |                 | 6,363  |   |   |   | 1,377 |   |   |   | 21,537 |   |   |   | 4,284 |   |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:          |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                  |   | $                    | 4,399  |   |   | $ | 949 |   |   | $ | 11,678 |   |   | $ | 3,611 |   |
| Real estate                  |   |                 | 562    |   |   |   | 507 |   |   |   | 1,717 |   |   |   | 1,517 |   |
| Mineral properties           |   |                 | 356    |   |   |   | 379 |   |   |   | 1,216 |   |   |   | 1,398 |   |
| Total operating expenses:    |   |                 | 5,317  |   |   |   | 1,835 |   |   |   | 14,611 |   |   |   | 6,526 |   |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense             |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                  |   | $                    | --     |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Real estate                  |   |                 | --     |   |   |   | -- |   |   |   | -- |   |   |   | 19 |   |
| Mineral properties           |   |                 | 12     |   |   |   | 15 |   |   |   | 36 |   |   |   | 45 |   |
| Total interest expense:      |   |                 | 12     |   |   |   | 15 |   |   |   | 36 |   |   |   | 64 |   |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income/(loss)      |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                  |   | $                    | 1,318  |   |   | $ | (258 | ) |   | $ | 7,966 |   |   | $ | (1,492 | ) |
| Real estate                  |   |                 | 84     |   |   |   | 179 |   |   |   | 176 |   |   |   | 629 |   |
| Mineral properties           |   |                 | (368   | ) |   |   | (394 | ) |   |   | (1,252 | ) |   |   | (1,443 | ) |
| Operating income/(loss)      |   |                 | 1,034  |   |   |   | (473 | ) |   |   | 6,890 |   |   |   | (2,306 | ) |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other revenues and expenses: |   |                 | (1,860 | ) |   |   | (2,135 | ) |   |   | (5,379 | ) |   |   | (5,957 | ) |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income/(loss) before         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income taxes                 |   | $                    | (826   | ) |   | $ | (2,608 | ) |   | $ | 1,511 |   |   | $ | (8,263 | ) |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation expense:        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and gas                  |   | $                    | 2,976  |   |   | $ | 475 |   |   | $ | 7,627 |   |   | $ | 1,795 |   |
| Real estate                  |   |                 | 266    |   |   |   | 262 |   |   |   | 797 |   |   |   | 783 |   |
| Mineral properties           |   |                 | 18     |   |   |   | 13 |   |   |   | 54 |   |   |   | 41 |   |
| Corporate                    |   |                 | 95     |   |   |   | 98 |   |   |   | 285 |   |   |   | 299 |   |
| Total depreciation expense   |   |                 | 3,355  |   |   |   | 848 |   |   |   | 8,763 |   |   |   | 2,918 |   |
|                         |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

INDEX

|                   |   |           |    |   |         |   |
|------------------------|--------|----------------|---------|--------|--------------|--------|
|                   |   | (In thousands) |    |
|                   |   | September 30,  |    |   | December 31, |   |
|                   |   | 2010           |    |   | 2009         |   |
| Assets by segment      |   |           |    |   |         |   |
| Oil and Gas properties |   | $              | 53,965  |   |         | $      | 30,016 |   |
| Real estate            |   |           | 22,760  |   |         |   | 23,450 |   |
| Mineral properties     |   |           | 22,021  |   |         |   | 21,998 |   |
| Corporate assets       |   |           | 50,056  |   |         |   | 71,259 |   |
| Total assets           |   | $              | 148,802 |   |         | $      | 146,723 |   |
|                   |   |           |    |   |         |   |   |   |

----

INDEX

ITEM 2. 

----

INDEX

| ·   | Lower working interests |
|--------------------|-------------------------|

| ·   | Lower market prices for oil and gas |
|--------------------|-------------------------------------|

| ·   | Higher drilling costs |
|--------------------|-----------------------|

| ·   | Higher lease operating expenses |
|--------------------|---------------------------------|

| ·   | Steeper decline rates than currently anticipated |
|--------------------|--------------------------------------------------|

| ·   | Mechanical and geological problems with the wells |
|--------------------|---------------------------------------------------|

----

INDEX

| ·   | Cash provided by operations for the period ended September 30, 2010 improved to $12.2 million as compared to cash provided in operations of $2.8 million for the same period of the prior year.  This $9.4 million improvement year over year in cash from operating activities is predominantly a result of a $8.1 million increase in net income during the respective periods. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | For a complete discussion of 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, $29.0 million; treasury investments, $7.1 million; acquisition of property and equipment, $704,000; in restricted investments, $207,000; the development of mineral claims, $34,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cash was provided by investing activities as a result of a capital distribution from Standard Steam Trust, LLC, (“SST”), $1.1 million, the sale of a commercial office property, $118,000, and $77,000 in proceeds from the sale of marketable securities. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

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

----

INDEX

----

INDEX

----

INDEX

----

INDEX

|                                     |   |                        |   |   |               |   |   |       |   |
|------------------------------------------|--------|-----------------------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                     |   | (In thousands)              |   |
|                                     |   | For the three months ending |   |   | Increase           |   |
|                                     |   | September 30, 2010          |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Revenues                                 |   | $                           | 6,949  |   |               | $      | 1,377  |       |   | $ | 5,572 |   |
| Unrealized (loss) from                   |   |                        |   |   |               |   |   |       |   |   |   |   |
| risk management activities               |   |                        | (586   | )      |               |   | --     |       |   |   | (586 | ) |
|                                     |   |                        | 6,363  |   |               |   | 1,377  |       |   |   | 4,986 |   |
| Operating expenses                       |   |                        | 3,882  |   |               |   | 2,950  |       |   |   | 932 |   |
| Depreciation, depletion and amortization |   |                        | 3,355  |   |               |   | 318    |       |   |   | 3,037 |   |
| Impairment                               |   |                        | --     |   |               |   | 405    |       |   |   | (405 | ) |
|                                     |   |                        | 7,237  |   |               |   | 3,673  |       |   |   | 3,564 |   |
| Operating income (loss)                  |   | $                           | (874   | )      |               | $      | (2,296 | )          |   | $ | 1,422 |   |
|                                     |   |                        |   |   |               |   |   |       |   |   |   |   |

|                                     |   |                        |   |   |               |   |   |       |   |
|------------------------------------------|--------|-----------------------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                     |   | (In thousands)              |   |
|                                     |   | For the three months ending |   |   | Increase           |   |
|                                     |   | September 30, 2010          |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Oil and gas revenues                     |   | $                           | 6,303  |   |               | $      | 691    |       |   | $ | 5,612 |   |
| Unrealized (loss) from                   |   |                        |   |   |               |   |   |       |   |   |   |   |
| risk management activities               |   |                        | (586   | )      |               |   | --     |       |   |   | (586 | ) |
|                                     |   |                        | 5,717  |   |               |   | 691    |       |   |   | 5,026 |   |
| Operating expenses                       |   |                        | 1,423  |   |               |   | 69     |       |   |   | 1,354 |   |
| Depreciation, depletion and amortization |   |                        | 2,976  |   |               |   | 475    |       |   |   | 2,501 |   |
| Impairment                               |   |                        | --     |   |               |   | 405    |       |   |   | (405 | ) |
|                                     |   |                        | 4,399  |   |               |   | 949    |       |   |   | 3,450 |   |
| Operating income (loss)                  |   | $                           | 1,318  |   |               | $      | (258   | )          |   | $ | 1,576 |   |
|                                     |   |                        |   |   |               |   |   |       |   |   |   |   |

----

INDEX

|                              |   |               |    |   |     |   |    |       |   |
|-----------------------------------|--------|--------------------|---------|--------|----------|--------|---------|------------|--------|
|                              |   | Three Months Ended |    |   |     |   |
|                              |   | September 30,      |    |   | Increase |   |
|                              |   | 2010               |    |   | 2009     |   |    | (Decrease) |   |
| Production volumes                |   |               |    |   |     |   |    |       |   |
| Oil and condensate (Bbls)         |   |               | 76,397  |   |     |   | 3,351   |       |   |   | 73,046 |   |
| Natural gas (Mcf)                 |   |               | 197,731 |   |     |   | 120,314 |       |   |   | 77,417 |   |
| Natural gas liquids (Bbls)        |   |               | 5,317   |   |     |   | 3,504   |       |   |   | 1,813 |   |
| Average sales prices              |   |               |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate (per Bbl)      |   | $                  | 67.14   |   |     | $      | 72.81   |       |   | $ | (5.67 | ) |
| Natural gas (per Mcf)             |   |               | 4.82    |   |     |   | 2.95    |       |   |   | 1.87 |   |
| Natural gas liquids (per Bbl)     |   |               | 41.56   |   |     |   | 26.26   |       |   |   | 15.30 |   |
| Operating revenues (in thousands) |   |               |    |   |     |   |    |       |   |   |   |   |
| Oil and condensate                |   | $                  | 5,129   |   |     | $      | 244     |       |   | $ | 4,885 |   |
| Natural gas                       |   |               | 953     |   |     |   | 355     |       |   |   | 598 |   |
| Natural gas liquids               |   |               | 221     |   |     |   | 92      |       |   |   | 129 |   |
| Total operating revenue           |   |               | 6,303   |   |     |   | 691     |       |   |   | 5,612 |   |
| Lease operating expense           |   |               | (979    | )      |     |   | 7       |       |   |   | (986 | ) |
| Production taxes                  |   |               | (444    | )      |     |   | (76     | )          |   |   | (368 | ) |
| Impairment                        |   |               | -       |   |     |   | (405    | )          |   |   | 405 |   |
| Gain before DD&A              |   |               | 4,880   |   |     |   | 217     |       |   |   | 4,663 |   |
| DD&A                          |   |               | (2,976  | )      |     |   | (475    | )          |   |   | (2,501 | ) |
| Gain (Loss)                       |   | $                  | 1,904   |   |     | $      | (258    | )          |   | $ | 2,162 |   |
|                              |   |               |    |   |     |   |    |       |   |   |   |   |

|                                     |   | (In thousands)              |   |
|------------------------------------------|--------|-----------------------------|--------|
|                                     |   | For the three months ending |   |   | Increase |   |
|                                     |   | September 30, 2010          |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Real estate revenues                     |   | $                           | 646    |   |   | $ | 686 |   |   | $ | (40 | ) |
| Operating expenses                       |   |                        | 296    |   |   |   | 245 |   |   |   | 51 |   |
| Interest expense                         |   |                        | --     |   |   |   | -- |   |   |   | -- |   |
| Depreciation, depletion and amortization |   |                        | 266    |   |   |   | 262 |   |   |   | 4 |   |
|                                     |   |                        | 562    |   |   |   | 507 |   |   |   | 55 |   |
| Operating income                         |   | $                           | 84     |   |   | $ | 179 |   |   | $ | (95 | ) |
|                                     |   |                        |   |   |   |   |   |   |   |   |   |   |

----

INDEX

| ·   | $337,000 accrual of a 2010 year-end bonus to all employees 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.  Any bonus earned for 2010 performance will be paid during the second 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 September 30, 2009 no accrual had been made as the controlling factor of positive cash flows from operations had not been met. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $82,000 increased payroll costs and $22,000 increase in other general and administrative costs |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | $389,000 decrease in professional services. During the quarter ended September 30, 2009 we incurred large professional services fees in connection with the closing of our drilling agreement with Brigham Exploration. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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INDEX

|                                     |   |                       |   |   |               |   |   |       |   |
|------------------------------------------|--------|----------------------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                     |   | (In thousands)             |   |
|                                     |   | For the nine months ending |   |   | Increase           |   |
|                                     |   | September 30, 2010         |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Revenues                                 |   | $                          | 22,123 |   |               | $      | 4,284  |       |   | $ | 17,839 |   |
| Unrealized (loss) from                   |   |                       |   |   |               |   |   |       |   |   |   |   |
| risk management activities               |   |                       | (586   | )      |               |   | --     |       |   |   | (586 | ) |
|                                     |   |                       | 21,537 |   |               |   | 4,284  |       |   |   | 17,253 |   |
| Operating expenses                       |   |                       | 12,603 |   |               |   | 8,345  |       |   |   | 4,258 |   |
| Depreciation, depletion and amortization |   |                       | 8,763  |   |               |   | 2,388  |       |   |   | 6,375 |   |
| Impairment                               |   |                       | --     |   |               |   | 1,468  |       |   |   | (1,468 | ) |
|                                     |   |                       | 21,366 |   |               |   | 12,201 |       |   |   | 9,165 |   |
| Operating income (loss)                  |   | $                          | 171    |   |               | $      | (7,917 | )          |   | $ | 8,088 |   |
|                                     |   |                       |   |   |               |   |   |       |   |   |   |   |

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INDEX

|                                     |   |                       |   |   |               |   |   |       |   |
|------------------------------------------|--------|----------------------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                     |   | (In thousands)             |   |
|                                     |   | For the nine months ending |   |   | Increase           |   |
|                                     |   | September 30, 2010         |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Oil and gas revenues                     |   | $                          | 20,230 |   |               | $      | 2,119  |       |   | $ | 18,111 |   |
| Unrealized (loss) from                   |   |                       |   |   |               |   |   |       |   |   |   |   |
| risk management activities               |   |                       | (586   | )      |               |   | --     |       |   |   | (586 | ) |
|                                     |   |                       | 19,644 |   |               |   | 2,119  |       |   |   | 17,525 |   |
| Operating expenses                       |   |                       | 4,051  |   |               |   | 348    |       |   |   | 3,703 |   |
| Depreciation, depletion and amortization |   |                       | 7,627  |   |               |   | 1,795  |       |   |   | 5,832 |   |
| Impairment                               |   |                       | --     |   |               |   | 1,468  |       |   |   | (1,468 | ) |
|                                     |   |                       | 11,678 |   |               |   | 3,611  |       |   |   | 8,067 |   |
| Operating income (loss)                  |   | $                          | 7,966  |   |               | $      | (1,492 | )          |   | $ | 9,458 |   |
|                                     |   |                       |   |   |               |   |   |       |   |   |   |   |

|                              |   | Nine Months Ended |    |   |     |   |
|-----------------------------------|--------|-------------------|---------|--------|----------|--------|
|                              |   | September 30,     |    |   | Increase |   |
|                              |   | 2010              |    |   | 2009     |   |   | (Decrease) |   |
| Production volumes                |   |              |    |   |     |   |   |   |   |
| Oil and condensate (Bbls)         |   |              | 237,324 |   |     |   | 10,451 |   |   |   | 226,873 |   |
| Natural gas (Mcf)                 |   |              | 515,365 |   |     |   | 351,191 |   |   |   | 164,174 |   |
| Natural gas liquids (Bbls)        |   |              | 11,451  |   |     |   | 4,507 |   |   |   | 6,944 |   |
| Average sales prices              |   |              |    |   |     |   |   |   |   |   |   |   |
| Oil and condensate (per Bbl)      |   | $                 | 71.32   |   |     | $      | 58.85 |   |   | $ | 12.47 |   |
| Natural gas (per Mcf)             |   |              | 5.32    |   |     |   | 3.90 |   |   |   | 1.42 |   |
| Natural gas liquids (per Bbl)     |   |              | 49.17   |   |     |   | 30.18 |   |   |   | 18.99 |   |
| Operating revenues (in thousands) |   |              |    |   |     |   |   |   |   |   |   |   |
| Oil and condensate                |   | $                 | 16,925  |   |     | $      | 615 |   |   | $ | 16,310 |   |
| Natural gas                       |   |              | 2,742   |   |     |   | 1,368 |   |   |   | 1,374 |   |
| Natural gas liquids               |   |              | 563     |   |     |   | 136 |   |   |   | 427 |   |
| Total operating revenue           |   |              | 20,230  |   |     |   | 2,119 |   |   |   | 18,111 |   |
| Lease operating expense           |   |              | (1,847  | )      |     |   | (163 | ) |   |   | (1,684 | ) |
| Production taxes                  |   |              | (2,204  | )      |     |   | (185 | ) |   |   | (2,019 | ) |
| Impairment                        |   |              | -       |   |     |   | (1,468 | ) |   |   | 1,468 |   |
| Gain before DD&A              |   |              | 16,179  |   |     |   | 303 |   |   |   | 15,876 |   |
| DD&A                          |   |              | (7,627  | )      |     |   | (1,795 | ) |   |   | (5,832 | ) |
| Gain (Loss)                       |   | $                 | 8,552   |   |     | $      | (1,492 | ) |   | $ | 10,044 |   |
|                              |   |              |    |   |     |   |   |   |   |   |   |   |

----

INDEX

|                                     |   |                       |   |   |               |   |   |       |   |
|------------------------------------------|--------|----------------------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                     |   | (In thousands)             |   |
|                                     |   | For the nine months ending |   |   | Increase           |   |
|                                     |   | September 30, 2010         |   |   | September 30, 2009 |   |   | (Decrease) |   |
| Real estate revenues                     |   | $                          | 1,893  |   |               | $      | 2,165  |       |   | $ | (272 | ) |
| Operating expenses                       |   |                       | 920    |   |               |   | 734    |       |   |   | 186 |   |
| Interest expense                         |   |                       | --     |   |               |   | 19     |       |   |   | (19 | ) |
| Depreciation, depletion and amortization |   |                       | 797    |   |               |   | 783    |       |   |   | 14 |   |
|                                     |   |                       | 1,717  |   |               |   | 1,536  |       |   |   | 181 |   |
| Operating income                         |   | $                          | 176    |   |               | $      | 629    |       |   | $ | (453 | ) |
|                                     |   |                       |   |   |               |   |   |       |   |   |   |   |

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INDEX

| ·   | $980,000 - Accrual of a 2010 year-end bonus to all employees 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.  Any bonus earned for 2010 performance will be paid during the second 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 September 30, 2009 no accrual had been made under the PCP as the controlling factor of positive cash flow from operations had not been met; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $189,000 - Noncash increase in stock compensation expense.  The increase is primarily due to shares issued to officers pursuant to the 2001 Stock Compensation Plan being issued at a higher price than those issued in 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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INDEX

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INDEX

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INDEX

----

INDEX

|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |
|-----------------------------------|--------|------------------------|--------|--------|----------|--------|--------|--------|--------|--------|----------|--------|--------|-----------|--------|
|                              |   | (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        |   | $                      | 991    |   |     |   | 153    |   |   |   | 480      |   |   |      | 251    |   |   |   | 108 |   |
|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |   |   |   |   |   |
|  Asset retirement obligation |   | $                      | 293    |   |     |   | --     |   |   |   | --       |   |   |      | 26     |   |   |   | 266 |   |
|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |   |   |   |   |   |
|  Totals                      |   | $                      | 2,084  |   |     | $      | 353    |   |   | $      | 1,080    |   |   | $         | 277    |   |   | $ | 374 |   |
|                              |   |                   |   |   |     |   |   |   |   |   |     |   |   |      |   |   |   |   |   |   |

ITEM 3.

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INDEX

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. |
|-----------------|----------------------------------------------------------------------------|

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INDEX

ITEM 1.  

----

INDEX

ITEM 1A

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INDEX

ITEM 2. 

ITEM 3.

ITEM 4.

ITEM 5. 

ITEM 6

|   | (a)    | Exhibits                                                                                                                                                             |                                                                                                                                                                                        |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | 31.1                                                                                                                                                                 | 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 five reports on Form 8-K for the quarter ended September 30, 2010.  The events reported were as follows: |
|   |   | 1.                                                                                                                                                                   | The report filed on August 2, 2010, under Item 1.01 referenced the company establishing a Senior Secured Revolving Credit Facility to borrow up to $75 million.                             |
|   |   | 2.                                                                                                                                                                   | The report filed on August 4, 2010, under Item 7.01 referenced an update on recent and planned drilling and completion activities in North Dakota.                                          |
|   |   | 3.                                                                                                                                                                   | The report filed on August 5, 2010, under Item 7.01 referenced results from a drilling prospects with PetroQuest Energy, L.L.C.; and update on drilling initiatives in Louisiana and Texas. |
|   |   | 4.                                                                                                                                                                   | The report filed on August 9, 2010, under Item 7.01 referenced highlights and financial results for the second quarter 2010.                                                                |
|   |   | 5.                                                                                                                                                                   | The report filed on August 10, 2010, under Item 7.01 referenced the announcement of initial production rate form its Sukut 28-33 #1H well.                                                  |

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INDEX

SIGNATURES

|                   |   | U.S. ENERGY CORP. |
|------------------------|--------|-------------------|
|                   |   | (Registrant)      |
|                   |   |              |
|                   |   |              |
|                   |   |              |
| Date: November 5, 2010 |   | By:               | /s/ Keith G. Larsen |
|                   |   |              | KEITH G. LARSEN |
|                   |   |              | Chairman and CEO |
|                   |   |              |   |
|                   |   |              |   |
|                   |   |              |   |
|                   |   |              |   |
| Date: November 5, 2010 |   | By:               | /s/ Robert Scott Lorimer |
|                   |   |              | ROBERT SCOTT LORIMER |
|                   |   |              | Principal Financial Officer and |
|                   |   |              | Chief Accounting Officer |

----