----

| x      | Quarterly                  report pursuant to section 13 or 15(d) of the Securities Exchange                  Act of                  1934  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   | For                  the quarter ended June 30, 2007 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 Company 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)**      |
|                                                                   |   |                                 |
| Company's                  telephone number, including area code:      |   | **(307)                  856-9271**  |

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

----

| Class                                         |   | Outstanding                  Shares at August 14, 2007 |
|-----------------------------------------------|--------|--------------------------------------------------------|
| Common                  stock, $.01 par value |   | 20,911,619                                             |

----

**U.S.          ENERGY CORP. and SUBSIDIARIES**

**INDEX**

|                            |                                                                                                                                                                           | Page                    No.     |
|---------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|
| **PART                    I.**  | **FINANCIAL                    INFORMATION**                                                                                                                                   |                            |
|                            |                                                                                                                                                                           |                            |
| ITEM                    1.      | Financial                    Statements.                                                                                                                                       |                            |
|                            |                                                                                                                                                                           |                            |
|                            | Condensed                    Consolidated Balance Sheets as of June 30, 2007 and December                    31, 2006                    (unaudited)                           | 4-5                             |
|                            |                                                                                                                                                                           |                            |
|                            | Condensed                    Consolidated Statements of Operations for the Three and Six months                    Ended                    June 30, 2007 and 2006 (unaudited) | 6-7                             |
|                            |                                                                                                                                                                           |                            |
|                            | Condensed                    Consolidated Statements of Cash Flows for the Six Months Ended                    June 30,                    2007 and 2006 (unaudited)           | 8-9                             |
|                            |                                                                                                                                                                           |                            |
|                            | Notes                    to Condensed Consolidated Financial Statements (unaudited)                                                                                            | 10-22                           |
|                            |                                                                                                                                                                           |                            |
| ITEM                    2.      | Management’s                    Discussion and Analysis of Financial Condition and Results of                    Operations                                              | 23-33                           |
|                            |                                                                                                                                                                           |                            |
| ITEM                    3.      | Quantitative                    and Qualitative Disclosures about Market Risk                                                                                                  | 33-34                           |
|                            |                                                                                                                                                                           |                            |
| ITEM                    4.      | Controls                    and Procedures                                                                                                                                     | 34                              |
|                            |                                                                                                                                                                           |                            |
| **PART                    II.** | **OTHER                    INFORMATION**                                                                                                                                       |                            |
|                            |                                                                                                                                                                           |                            |
| ITEM                    1.      | Legal                    Proceedings                                                                                                                                           | 34-36                           |
|                            |                                                                                                                                                                           |                            |
| ITEM                    1A.     | Rick                    Factors                                                                                                                                                | 36-37                           |
|                            |                                                                                                                                                                           |                            |
| ITEM                    2.      | Changes                    in Securities and Use of Proceeds                                                                                                                   | 37                              |
|                            |                                                                                                                                                                           |                            |
| ITEM                    3.      | Defaults                    Upon Senior Securities                                                                                                                             | 37                              |
|                            |                                                                                                                                                                           |                            |
| ITEM                    4.      | Submission                    of Matters to a Vote of Shareholders                                                                                                             | 38                              |
|                            |                                                                                                                                                                           |                            |
| ITEM                    5.      | Other                    Information                                                                                                                                           | 38                              |
|                            |                                                                                                                                                                           |                            |
| ITEM                    6.      | Exhibits                    and Reports on Form 8-K                                                                                                                            | 39                              |
|                            |                                                                                                                                                                           |                            |
|                            | Signatures                                                                                                                                                                     | 40                              |
|                            |                                                                                                                                                                           |                            |
|                            | Certifications                                                                                                                                                                 | See                    Exhibits |

----

**PART        I.  FINANCIAL INFORMATION**

**ITEM        1.  Financial Statements**

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**    |   |
|------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED BALANCE SHEETS** |   |
| **(Unaudited)**                                            |   |
| **ASSETS**                                                 |   |
|                                                       |   |   |   |   |   |   |
|                                                       |   | June                  30, |   |   | December                  31, |   |
|                                                       |   | 2007 |   |   | 2006 |   |
| CURRENT                  ASSETS:                           |   |   |   |   |   |   |
| Cash                  and cash equivalents                 |   | $ | 8,948,400 |   |   | $ | 16,973,500 |   |
| Marketable                  securities                     |   |   |   |   |   |   |   |   |
| Held                  to maturity - treasury bills         |   |   | 70,330,100 |   |   |   | -- |   |
| Available                  for sale securities             |   |   | 22,464,800 |   |   |   | 1,148,500 |   |
| Trading                  securities                        |   |   | 94,300 |   |   |   | 123,400 |   |
| Accounts                  receivable                       |   |   |   |   |   |   |   |   |
| Trade                                                      |   |   | 27,800 |   |   |   | 156,500 |   |
| Reimbursable                  project costs                |   |   | 631,200 |   |   |   | 188,400 |   |
| Sale                  of marketable securities             |   |   | 6,223,300 |   |   |   | -- |   |
| Note                  receivable                           |   |   | -- |   |   |   | 560,500 |   |
| Assets                  held for sale                      |   |   | -- |   |   |   | 9,686,300 |   |
| Deferred                  tax assets                       |   |   | 1,413,500 |   |   |   | 14,321,600 |   |
| Prepaid                  expenses and other current assets |   |   | 184,000 |   |   |   | 166,500 |   |
| Total                  current assets                      |   |   | 110,317,400 |   |   |   | 43,325,200 |   |
|                                                       |   |   |   |   |   |   |   |   |
| INVESTMENTS:                                               |   |   | 27,000 |   |   |   | 27,000 |   |
|                                                       |   |   |   |   |   |   |   |   |
| PROPERTIES                  AND EQUIPMENT:                 |   |   | 14,429,400 |   |   |   | 11,563,500 |   |
| Less                  accumulated depreciation,            |   |   |   |   |   |   |   |   |
| depletion                  and amortization                |   |   | (5,635,900 | ) |   |   | (5,454,200 | ) |
| Net                  properties and equipment              |   |   | 8,793,500 |   |   |   | 6,109,300 |   |
|                                                       |   |   |   |   |   |   |   |   |
| OTHER                  ASSETS:                             |   |   |   |   |   |   |   |   |
| Deferred                  tax assets                       |   |   | 54,500 |   |   |   | 610,200 |   |
| Real                  estate held for development          |   |   | 1,549,700 |   |   |   | -- |   |
| Real                  estate held for resale               |   |   | 1,819,700 |   |   |   | 1,819,700 |   |
| Deposits                  and other                        |   |   | 653,700 |   |   |   | 10,000 |   |
| Total                  other assets                        |   |   | 4,077,600 |   |   |   | 2,439,900 |   |
| Total                  assets                              |   | $ | 123,215,500 |   |   | $ | 51,901,400 |   |
|                                                       |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**           |   |
| **(Unaudited)**                                                      |   |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**            |   |
|                                                                 |   |   |   |   |   |   |
|                                                                 |   | June                  30, |   |   | December                  31, |   |
|                                                                 |   | 2007 |   |   | 2006 |   |
| CURRENT                  LIABILITIES:                                |   |   |   |   |   |   |
| Accounts                  payable                                    |   | $ | 298,200 |   |   | $ | 1,115,000 |   |
| Accrued                  compensation expense                        |   |   | 955,500 |   |   |   | 1,190,200 |   |
| Dividends                  payable                                   |   |   | 2,131,900 |   |   |   | -- |   |
| Income                  taxes payable                                |   |   | 19,906,200 |   |   |   | -- |   |
| Current                  portion of long-term debt                   |   |   | 129,600 |   |   |   | 937,200 |   |
| Liabilities                  held for sale                           |   |   | -- |   |   |   | 7,375,800 |   |
| Refundable                  deposits                                 |   |   | -- |   |   |   | 800,000 |   |
| Other                  current liabilities                           |   |   | 231,900 |   |   |   | 177,000 |   |
| Total                  current liabilities                           |   |   | 23,653,300 |   |   |   | 11,595,200 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| LONG-TERM                  DEBT, net of current portion              |   |   | 247,500 |   |   |   | 294,900 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| ASSET                  RETIREMENT OBLIGATIONS                        |   |   | 129,300 |   |   |   | 124,400 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| OTHER                  ACCRUED LIABILITIES                           |   |   | 401,400 |   |   |   | 462,700 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| MINORITY                  INTERESTS                                  |   |   | 8,361,900 |   |   |   | 4,700,200 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES                       |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |
| FORFEITABLE                  COMMON STOCK,  $.01 par value |   |   |   |   |   |   |   |   |
| -0-                  and 297,540 shares issued, respectively         |   |   |   |   |   |   |   |   |
| forfeitable                  until earned                            |   |   | -- |   |   |   | 1,746,600 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| PREFERRED                  STOCK,                                    |   |   |   |   |   |   |   |   |
| $.01                  par value; 100,000 shares authorized           |   |   |   |   |   |   |   |   |
| No                  shares issued or outstanding                     |   |   | -- |   |   |   | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |
| SHAREHOLDERS'                  EQUITY:                               |   |   |   |   |   |   |   |   |
| Common                  stock, $.01 par value;                       |   |   |   |   |   |   |   |   |
| unlimited                  shares authorized; 20,829,628             |   |   |   |   |   |   |   |   |
| and                  19,659,591 shares issued net of                 |   |   |   |   |   |   |   |   |
| treasury                  stock, respectively                        |   |   | 208,300 |   |   |   | 196,600 |   |
| Additional                  paid-in capital                          |   |   | 77,503,800 |   |   |   | 72,990,700 |   |
| Retained                  earnings (accumulated deficit)             |   |   | 16,743,400 |   |   |   | (39,101,900 | ) |
| Treasury                  stock at cost, 497,845 shares              |   |   | (923,500 | ) |   |   | (923,500 | ) |
| Unrealized                  (loss) gain on marketable securities     |   |   | (2,619,400 | ) |   |   | 306,000 |   |
| Unallocated                  ESOP contribution                       |   |   | (490,500 | ) |   |   | (490,500 | ) |
| Total                  shareholders' equity                          |   |   | 90,422,100 |   |   |   | 32,977,400 |   |
| Total                  liabilities and shareholders' equity          |   | $ | 123,215,500 |   |   | $ | 51,901,400 |   |
|                                                                 |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS** |   |
| (Unaudited)                                                          |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Three                  months ended June 30, |   |   | Six                  months ended June 30, |   |
|                                                                 |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| OPERATING                  REVENUES:                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate operations                              |   | $ | 151,100 |   |   | $ | 48,000 |   |   | $ | 184,100 |   |   | $ | 102,800 |   |
| Management                  fees and other                           |   |   | 102,000 |   |   |   | 100,300 |   |   |   | 141,000 |   |   |   | 222,100 |   |
|                                                                 |   |   | 253,100 |   |   |   | 148,300 |   |   |   | 325,100 |   |   |   | 324,900 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                  COSTS AND EXPENSES:                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate operations                              |   |   | 3,100 |   |   |   | 66,100 |   |   |   | 169,000 |   |   |   | 136,300 |   |
| Mineral                  holding costs                               |   |   | 998,900 |   |   |   | 682,300 |   |   |   | 1,795,600 |   |   |   | 1,183,400 |   |
| General                  and administrative                          |   |   | 8,118,400 |   |   |   | 2,367,300 |   |   |   | 9,824,000 |   |   |   | 4,916,000 |   |
|                                                                 |   |   | 9,120,400 |   |   |   | 3,115,700 |   |   |   | 11,788,600 |   |   |   | 6,235,700 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                  BEFORE INVESTMENT AND                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROPERTY                  TRANSACTIONS                               |   |   | (8,867,300 | ) |   |   | (2,967,400 | ) |   |   | (11,463,500 | ) |   |   | (5,910,800 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME & (EXPENSES):                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                  on sales of assets                             |   |   | 1,821,200 |   |   |   | 408,600 |   |   |   | 1,822,200 |   |   |   | 2,823,500 |   |
| Loss                  on sale of marketable securities               |   |   | (6,828,800 | ) |   |   | -- |   |   |   | (6,091,400 | ) |   |   | -- |   |
| Gain                  on foreign exchange                            |   |   | 516,600 |   |   |   | -- |   |   |   | 516,600 |   |   |   | -- |   |
| Gain                  on sale of uranium assets                      |   |   | 111,728,200 |   |   |   | -- |   |   |   | 111,728,200 |   |   |   | -- |   |
| Loss                  from valuation of derivatives                  |   |   | -- |   |   |   | (45,500 | ) |   |   | -- |   |   |   | (630,900 | ) |
| Loss                  from Enterra share exchange                    |   |   | -- |   |   |   | (3,848,600 | ) |   |   | -- |   |   |   | (3,845,800 | ) |
| Loss                  on sale of investment                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (27,500 | ) |
| Dividends                                                            |   |   | 2,700 |   |   |   | 2,200 |   |   |   | 5,600 |   |   |   | 5,000 |   |
| Interest                  income                                     |   |   | 641,100 |   |   |   | 198,700 |   |   |   | 867,100 |   |   |   | 250,000 |   |
| Interest                  expense                                    |   |   | 6,100 |   |   |   | (27,600 | ) |   |   | (49,700 | ) |   |   | (57,100 | ) |
|                                                                 |   |   | 107,887,100 |   |   |   | (3,312,200 | ) |   |   | 108,798,600 |   |   |   | (1,482,800 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                  (LOSS) BEFORE MINORITY INTEREST,             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION                  FOR INCOME TAXES                          |   |   | 99,019,800 |   |   |   | (6,279,600 | ) |   |   | 97,335,100 |   |   |   | (7,393,600 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| MINORITY                  INTEREST IN (GAIN) LOSS OF                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CONSOLIDATED                  SUBSIDIARIES:                          |   |   | (3,716,800 | ) |   |   | 43,400 |   |   |   | (3,698,600 | ) |   |   | 47,600 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                  (LOSS) BEFORE PROVISION                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FOR                  INCOME TAXES                                    |   |   | 95,303,000 |   |   |   | (6,236,200 | ) |   |   | 93,636,500 |   |   |   | (7,346,000 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                  TAXES:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Current                  provision for                         |   |   | (20,620,300 | ) |   |   | -- |   |   |   | (20,620,300 | ) |   |   | -- |   |
|  Deferred                  provision for                        |   |   | (15,387,300 | ) |   |   | -- |   |   |   | (15,039,000 | ) |   |   | -- |   |
|                                                                 |   |   | (36,007,600 | ) |   |   | -- |   |   |   | (35,659,300 | ) |   |   | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                  INCOME (LOSS)                                   |   | $ | 59,295,400 |   |   | $ | (6,236,200 | ) |   | $ | 57,977,200 |   |   | $ | (7,346,000 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Three                  months ended June 30, |   |   | Six                  months ended June 30, |   |
|                                                                 |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| PER                  SHARE DATA                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings (loss) per share                     |   | $ | 2.95 |   |   | $ | (0.34 | ) |   | $ | 2.94 |   |   | $ | (0.40 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  earnings (loss) per share                   |   | $ | 2.65 |   |   | $ | (0.34 | ) |   | $ | 2.63 |   |   | $ | (0.40 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED                  AVERAGE SHARES OUTSTANDING:                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   |   | 20,087,999 |   |   |   | 18,300,530 |   |   |   | 19,752,827 |   |   |   | 18,213,107 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                              |   |   | 22,378,861 |   |   |   | 18,300,530 |   |   |   | 22,036,586 |   |   |   | 18,213,107 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |   |
|                                                                 |   | Six                  months ended June 30, |   |
|                                                                 |   | 2007 |   |   | 2006 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:               |   |   |   |   |   |   |
| Net                  income (loss)                                   |   | $ | 57,977,200 |   |   | $ | (7,346,000 | ) |
| Adjustments                  to reconcile net income (loss)          |   |   |   |   |   |   |   |   |
| to                  net cash used in operating activities:           |   |   |   |   |   |   |   |   |
| Minority                  interest in gain (loss) of                 |   |   |   |   |   |   |   |   |
| consolidated                  subsidiaries                           |   |   | 3,698,600 |   |   |   | (47,600 | ) |
| Depreciation                                                         |   |   | 229,200 |   |   |   | 269,300 |   |
| Accretion                  of asset retirement obligations           |   |   | 4,900 |   |   |   | 385,600 |   |
| Initial                  valuation of asset                          |   |   |   |   |   |   |   |   |
| retirement                  obligation                               |   |   | -- |   |   |   | 83,400 |   |
| Income                  tax payable                                  |   |   | 19,906,200 |   |   |   | -- |   |
| Deferred                  income taxes                               |   |   | 15,039,000 |   |   |   | -- |   |
| Gain                  on sale of assets to sxr                       |   |   | (111,728,200 | ) |   |   | -- |   |
| Gain                  on sale of assets                              |   |   | (1,822,200 | ) |   |   | (2,823,500 | ) |
| Gain                  on foreign exchange                            |   |   | (516,400 | ) |   |   | -- |   |
| Loss                  on valuation of Enterra units                  |   |   | -- |   |   |   | 3,845,800 |   |
| Loss                  on valuation of derivatives                    |   |   | -- |   |   |   | 630,900 |   |
| Loss                  on sale of marketable securities               |   |   | 6,091,500 |   |   |   | 27,500 |   |
| Proceeds                  from the sale of trading securities        |   |   | -- |   |   |   | 1,295,500 |   |
| Warrant                  extension and repricing                     |   |   | 116,300 |   |   |   | 484,700 |   |
| Noncash                  compensation                                |   |   | 207,500 |   |   |   | 600,700 |   |
| Noncash                  services                                    |   |   | -- |   |   |   | 18,900 |   |
| Net                  changes in assets and liabilities:              |   |   | (2,076,200 | ) |   |   | (37,800 | ) |
| NET                  CASH USED IN                                    |   |   |   |   |   |   |   |   |
| OPERATING                  ACTIVITIES                                |   |   | (12,872,600 | ) |   |   | (2,612,600 | ) |
|                                                                 |   |   |   |   |   |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:               |   |   |   |   |   |   |   |   |
| Proceeds                  from sale of marketable securities         |   |   | 62,497,000 |   |   |   | 94,700 |   |
| Acquisition                  of unproved oil & gas properties    |   |   | (2,747,400 | ) |   |   | -- |   |
| Proceeds                  from sale of uranium assets                |   |   | 14,022,700 |   |   |   | -- |   |
| Acquisition                  of unproved mining claims               |   |   | (257,200 | ) |   |   | (21,100 | ) |
| Proceeds                  on sale of property and equipment          |   |   | 1,027,000 |   |   |   | 2,263,100 |   |
| Purchase                  of real estate for development             |   |   | (1,549,700 | ) |   |   | -- |   |
| Purchase                  of equipment                               |   |   | (103,000 | ) |   |   | (306,600 | ) |
| Purchase                  of treasury bills                          |   |   | (70,330,100 | ) |   |   | -- |   |
| Net                  change in restricted investments                |   |   | -- |   |   |   | (49,000 | ) |
| Net                  change in notes receivable                      |   |   | 560,500 |   |   |   | (20,700 | ) |
| Net                  change in investments in affiliates             |   |   | 85,300 |   |   |   | 65,400 |   |
| NET                  CASH PROVIDED BY                                |   |   |   |   |   |   |   |   |
| BY                  INVESTING ACTIVITIES                             |   |   | 3,205,100 |   |   |   | 2,025,800 |   |
|                                                                 |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |   |
|                                                                 |   | Six                  months ended June 30, |   |
|                                                                 |   | 2007 |   |   | 2006 |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:               |   |   |   |   |   |   |
| Issuance                  of common stock                            |   | $ | 1,783,300 |   |   | $ | 915,900 |   |
| Issuance                  of subsidiary stock                        |   |   | -- |   |   |   | 3,173,700 |   |
| Deferred                  taxes from stock options                   |   |   | 714,100 |   |   |   | -- |   |
| Proceeds                  from long term debt                        |   |   | 164,100 |   |   |   | 184,400 |   |
| Repayments                  of long term debt                        |   |   | (1,019,100 | ) |   |   | (177,900 | ) |
| NET                  CASH PROVIDED BY                                |   |   |   |   |   |   |   |   |
| FINANCING                  ACTIVITIES                                |   |   | 1,642,400 |   |   |   | 4,096,100 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| NET                  INCREASE IN                                     |   |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   | (8,025,100 | ) |   |   | 3,509,300 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   |   |   |   |   |   |   |
|  AT                  BEGINNING OF PERIOD                        |   |   | 16,973,500 |   |   |   | 6,998,700 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   |   |   |   |   |   |   |
|                    AT END OF PERIOD                             |   | $ | 8,948,400 |   |   | $ | 10,508,000 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL                  DISCLOSURES:                           |   |   |   |   |   |   |   |   |
|                    Income tax paid                              |   | $ | -- |   |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |
|                    Interest paid                                |   | $ | 49,700 |   |   | $ | 57,100 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| NON-CASH                  INVESTING AND FINANCING ACTIVITIES:        |   |   |   |   |   |   |   |   |
|  Acquisition                  of assets                         |   |   |   |   |   |   |   |   |
| through                  issuance of debt                            |   | $ | -- |   |   | $ | 355,800 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Satisfaction                  of receivable - employee               |   |   |   |   |   |   |   |   |
| with                  stock in company                               |   | $ | -- |   |   | $ | 30,600 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Issuance                  of subsidiary stock to acquire             |   |   |   |   |   |   |   |   |
|                     mining claims                          |   | $ | 33,700 |   |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Receipt                  of marketable securities from               |   |   |   |   |   |   |   |   |
|                    the sale of assets                           |   | $ | 99,400,600 |   |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Conversion                  of Enterra shares                        |   |   |   |   |   |   |   |   |
|                    to tradable units                            |   | $ | -- |   |   | $ | 13,880,100 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Issuance                  of stock warrants in                       |   |   |   |   |   |   |   |   |
|                    conjunction with agreements                  |   | $ | -- |   |   | $ | 727,300 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| Unrealized                  loss/gain                                |   | $ | 2,619,400 |   |   | $ | 42,200 |   |
|                                                                 |   |   |   |   |   |   |   |   |

----

**U.S.            ENERGY CORP. & SUBSIDIARIES**

**Notes            to Condensed Consolidated Financial Statements            (Unaudited)**

**Basis of Presentation**

**Principles of Consolidation**

----

**U.S.                ENERGY CORP. & SUBSIDIARIES**

**Notes                to Condensed Consolidated Financial Statements                (Unaudited)**

**Recent Accounting Pronouncements**

**FIN        48  **

**FAS        157  **

**FAS        159**
*The Fair        Value Option for Financial Assets and Financial Liabilities *

**Stock Based Compensation**

**Stock        Options -**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Forfeitable        Shares **

**Properties and Equipment**

|                                                   |   |   |       |   | Accumulated                      |   |       |                          |   |
|--------------------------------------------------------|--------|--------|------------|--------|----------------------------------|--------|------------|-------------------------------|--------|
|                                                   |   |   |       |   | Amortization                     |   |       |                          |   |
|                                                   |   |   |       |   | Depletion                    and |   |       | Net                           |   |
|                                                   |   | Cost   |       |   | Depreciation                     |   |       | Book                    Value |   |
|  Oil                    & Gas properties      |   | $      | 2,747,400  |   |                             | $      | -          |                          |   | $ | 2,747,400 |   |
|  Mining                    properties             |   |   | 821,600    |   |                             |   | -          |                          |   |   | 821,600 |   |
|  Buildings,                    land and equipment |   |   | 10,860,400 |   |                             |   | (5,635,900 | )                             |   |   | 5,224,500 |   |
|  Totals                                           |   | $      | 14,429,400 |   |                             | $      | (5,635,900 | )                             |   | $ | 8,793,500 |   |
|                                                   |   |   |       |   |                             |   |       |                          |   |   |   |   |

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Marketable Securities**

|                                                 |   |   |       |   | Market |       |       | Unrealized |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|------------|------------|------------|--------|
|                                                 |   | Cost   |       |   | Value  |       |       | Loss       |   |
|                                                 |   |   |       |   |   |       |       |       |   |
| Held                    to maturity - treasury bills |   |   |       |   | $      | 70,330,100 |       |       |   |   |
|                                                 |   |   |       |   |   |       |       |       |   |   |
| Available                    for sale securities     |   |   |       |   |   |       |       |       |   |   |
|  sxr                    shares                  |   | $      | 25,689,800 |   |   | $          | 21,768,900 |       |   | $ | 3,920,900 |   |
|  Kobex                    shares                |   |   | 750,000    |   |   |       | 641,100    |       |   |   | 108,900 |   |
|  Premier                    shares              |   |   | 54,800     |   |   |       | 54,800     |       |   |   | -- |   |
|                                                 |   | $      | 26,494,600 |   |   | $          | 22,464,800 |       |   | $ | 4,029,800 |   |
|                                                 |   |   |       |   |   |       |       |       |   |   |   |   |
| Trading                    securities                |   |   |       |   |   |       |       |       |   |   |   |   |
|  Enterra                    Units               |   |   |       |   |   | $          | 94,300     |       |   |   |   |   |
|                                                 |   |   |       |   |   |       |       |       |   |   |   |   |

**Other          Comprehensive Income (Loss)**

|                                                        |                             |   | Six                    months ending June 30, |      |
|-------------------------------------------------------------|----------------------------------|--------|-----------------------------------------------|-----------|
|                                                        |                             |   | 2007                                          |      |   | 2006 |   |
| Net                    income/(loss)                        |                             | $      | 57,977,200                                    |      |   | $ | (7,346,000 | ) |
|                                                        |                             |   |                                          |      |   |   |   |   |   |
| Comprehensive                    loss from the              |                             |   |                                          |      |   |   |   |   |
| unrealized                    loss on marketable securities |                             |   | (4,335,800                                    | )         |   |   | (55,900 | ) |
|                                                        |                             |   |                                          |      |   |   |   |   |   |
| Deferred                    income taxes on                 |                             |   |                                          |      |   |   |   |   |
|                                                        | stock                    options |   |                                          | 1,410,400 |   |   |   | -- |   |
|                                                        |                             |   |                                          |      |   |   |   |   |   |
| Comprehensive                    income/(loss)              |                             | $      | 55,051,800                                    |      |   | $ | (7,401,900 | ) |
|                                                        |                             |   |                                          |      |   |   |   |   |   |

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Income Taxes**

|                                                                                               |   | Three                    Months  |       |   | Six                    Months    |   |
|----------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------|----------------------------------|--------|
|                                                                                               |   | Ended                            |       |   | Ended                            |   |
|                                                                                               |   | June                    30, 2007 |       |   | June                    30, 2007 |   |
| Consolidated                    book income before income tax                                      |   | $                                | 95,303,000 |   |                             | $      | 93,636,500 |   |
| Add                    back equity loss from non consolidated tax sub                              |   | $                                | 3,729,700  |   |                             |   | 3,711,500 |   |
| Add                    back losses from non consolidated tax subs                                  |   | $                                | 1,154,100  |   |                             |   | 1,154,100 |   |
| Permanent                    differences                                                           |   | $                                | (451,200   | )      |                             |   | 238,300 |   |
| Taxable                    income before temporary differrences                                    |   | $                                | 99,735,600 |   |                             | $      | 98,740,400 |   |
|                                                                                               |   |                             |       |   |                             |   |   |   |
| Expected                    federal income tax expense (benefit)35%                                |   | $                                | 34,907,600 |   |                             | $      | 34,559,300 |   |
|                                                                                               |   |                             |       |   |                             |   |   |   |
| Deferred                    income tax expense (benefit)                                           |   | $                                | 15,039,000 |   |                             | $      | 15,039,000 |   |
|       Current                    expense (benefit)                   |   |                             | 19,868,600 |   |                             |   | 19,520,300 |   |
| Total                    federal income tax expense (benefit)                                      |   |                             | 34,907,600 |   |                             |   | 34,559,300 |   |
|       Current                    state income tax expense net of     |   |                             |       |   |                             |   |   |   |
|           federal                    tax benefit |   |                             | 1,100,000  |   |                             |   | 1,100,000 |   |
|        Total                    provision (benefit)             |   | $                                | 36,007,600 |   |                             | $      | 35,659,300 |   |
|                                                                                               |   |                             |       |   |                             |   |   |   |

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

|                                                  |   | June                    30, |      |   | December                    31, |   |
|-------------------------------------------------------|--------|-----------------------------|-----------|--------|---------------------------------|--------|
|                                                  |   | 2007                        |      |   | 2006                            |   |
| Deferred                    tax assets:               |   |                        |      |   |                            |   |
| Deferred                    compensation              |   | $                           | 260,700   |   |                            | $      | 589,000 |   |
| Accrued                    reclamation                |   |                        | 37,100    |   |                            |   | 879,100 |   |
| Allowances                    for bad debts           |   |                        |      |   |                            |   | - |   |
| Tax                    basis in excess of book        |   |                        | 1,410,400 |   |                            |   | - |   |
| Net                    operating loss carry forwards  |   |                        |      |   |                            |   | 14,525,100 |   |
| Tax                    credits (AMT credit carryover) |   |                        |      |   |                            |   | 44,200 |   |
| Non-deductible                    reserves and other  |   |                        | 3,100     |   |                            |   | 2,900 |   |
| Total                    deferred tax assets          |   |                        | 1,711,300 |   |                            |   | 16,040,300 |   |
|                                                  |   |                        |      |   |                            |   |   |   |
| Deferred                    tax liabilities:          |   |                        |      |   |                            |   |   |   |
|                                                  |   |                        |      |   |                            |   |   |   |
| Book                    basis in excess of tax basis  |   |                        | (243,300  | )      |                            |   | (179,900 | ) |
| Accrued                    reclamation                |   |                        |      |   |                            |   | (926,400 | ) |
| Non-deductible                    reserves and other  |   |                        |      |   |                            |   | (2,200 | ) |
| Total                    deferred tax liabilities     |   |                        | (243,300  | )      |                            |   | (1,108,500 | ) |
|                                                  |   |                        |      |   |                            |   |   |   |
| Net                    deferred tax assets            |   |                        | 1,954,600 |   |                            |   | 14,931,800 |   |
| Valuation                    allowance                |   |                        |      |   |                            |   |   |   |
| Net                    deferred tax assets            |   | $                           | 1,954,600 |   |                            |   | 14,931,800 |   |
|                                                  |   |                        |      |   |                            |   |   |   |

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Sale of Marketable Securities**

**Earnings        Per Share**

**Long term debt**

|  Current                    Portion of Long Term Debt |   | $      | 129,600 |   |
|------------------------------------------------------------|--------|--------|---------|--------|
|                                                       |   |   |    |   |
|  Long                    Term Portion of Debt         |   |   | 247,500 |   |
|                                                       |   | $      | 377,100 |   |
|                                                       |   |   |    |   |

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Asset        Retirement Obligations**

| Balance                    December 31, 2006 and 2005 Respectively |   | $      | 124,400 |   |   | $      | 5,902,200 |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|-----------|--------|
| Addition                    to Liability                           |   |   | --      |   |   |   | 83,400    |   |
| Accretion                    Expense                               |   |   | 4,900   |   |   |   | 385,600   |   |
| Balance                    June 30, 2007 and 2006 Respectively     |   | $      | 129,300 |   |   | $      | 6,371,200 |   |
|                                                               |   |   |    |   |   |   |      |   |

**Shareholders’        Equity**

**Stock        Option Plans**

**Warrants        to Others**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

|                                                                           |   | June                    30, 2007          |      |
|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|-----------|
|                                                                           |   | Employee                    Stock Options                               |      |   | Stock                    Purchase Warrants |   |
|                                                                           |   |                                                                                   |      |   | Weighted |   |   |   |   |   | Weighted |   |
|                                                                           |   |                                                                                   |      |   | Average |   |   |   |   |   | Average |   |
|                                                                           |   |                                                                                   |      |   | Exercise |   |   |   |   |   | Exercise |   |
|                                                                           |   | Options                                                                                |      |   | Price |   |   | Warrants |   |   | Price |   |
| Outstanding                    at beginning                                    |   |                                                                                   |      |   |   |   |   |   |   |   |   |   |
| Outstanding                    balance at December 31, 2006                    |   |                                                                                   | 3,927,880 |   |   | $ | 2.92 |   |   |   | 1,821,323 |   |   | $ | 3.57 |   |
| Granted                                                                        |   |                                                                                   | -         |   |   | $ | - |   |   |   | 31,215 |   |   | $ | 3.29 |   |
| Forfeited                                                                      |   |                                                                                   | -         |   |   | $ | - |   |   |   | - |   |   | $ | - |   |
| Expired                                                                        |   |                                                                                   | -         |   |   | $ | - |   |   |   | - |   |   | $ | - |   |
| Exercised                                                                      |   |                                                                                   | (962,302  | ) |   | $ | 2.68 |   |   |   | (84,385 | ) |   | $ | 3.41 |   |
| Outstanding                    at June 30, 2007                                |   |                                                                                   | 2,965,578 |   |   | $ | 2.99 |   |   |   | 1,768,153 |   |   | $ | 3.57 |   |
| Exercisable                    at June 30, 2007                                |   |                                                                                   | 2,940,578 |   |   | $ | 2.99 |   |   |   | 1,768,153 |   |   | $ | 3.57 |   |
|                                                                           |   |                                                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                    Average Remaining Contractual Life - Years         |   |                                                                                   |      |   |   |   | 5.45 |   |   |   |   |   |   |   | 3.61 |   |
|                                                                           |   |                                                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate                    intrinsic value of options / warrants outstanding |   |                                                                                   |      |   |   | $ | 7,074,300 |   |   |   |   |   |   | $ | 5,922,500 |   |
|                                                                           |   |                                                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Common        Stock**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

|                                                                     |   |                                              |       |   |    |   |    | Additional |   |
|--------------------------------------------------------------------------|--------|---------------------------------------------------|------------|--------|---------|--------|---------|------------|--------|
|                                                                     |   | Common                    Stock    |       |   | Paid-In |   |
|                                                                     |   | Shares                                            |       |   | Amount  |   |    | Capital    |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |
|  Balance                    December 31, 2006                       |   |                                              | 19,659,591 |   |    | $      | 196,600 |       |   | $ | 72,990,700 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Stock                    issued to outside directors               |   |                                              | 3,812      |   |    |   | -       |       |   |   | 18,000 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  2001                    stock compensation plan                    |   |                                              | 22,500     |   |    |   | 200     |       |   |   | 115,200 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Exercise                    of options                             |   |                                              | 766,600    |   |    |   | 7,700   |       |   |   | 1,487,700 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Exercise                    of warrants                            |   |                                              | 84,385     |   |    |   | 800     |       |   |   | 287,100 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Value                    of company warrants issued and extended   |   |                                              | -          |   |    |   | -       |       |   |   | 116,300 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Expense                    of employee options vesting             |   |                                              | -          |   |    |   | -       |       |   |   | 8,900 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Forfeitable                    stock release to a former employee  |   |                                              | 112,680    |   |    |   | 1,200   |       |   |   | 660,200 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Forfeitable                    stock released to current employees |   |                                              | 180,060    |   |    |   | 1,800   |       |   |   | 1,105,600 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|  Deferred                    taxes on FAS 123R compensation         |   |                                              | -          |   |    |   | -       |       |   |   | 714,100 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |
|                                                                     |   |                                              | 20,829,628 |   |    | $      | 208,300 |       |   | $ | 77,503,800 |   |
|                                                                     |   |                                              |       |   |    |   |    |       |   |   |   |   |

**Real        Estate Investment**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**Crested        Acquisition**

**Sutter        Gold Mining, Inc.**

**Uranium One Asset Purchase Agreement Closing**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

| **Proceeds                    from sale of assets to sxr Uranium One**  |   |   |        |
|-------------------------------------------------------------------------|--------|--------|-------------|
| Release                    of refundable deposit                        |   | $      | 750,000     |   |
| Relief                    from Asset Retirement Obligations             |   |   | 6,527,200   |   |
| Relief                    from accrued holding costs on uranium mill    |   |   | 848,600     |   |
| sxr                    Uranium One purchase of UPC position             |   |   | 5,020,900   |   |
| Reimbursable                    Costs                                   |   |   | 1,585,100   |   |
| Receipt                    of sxr Uranium One common stock              |   |   | 99,400,600  |   |
|                                                                    |   |   | 114,132,400 |   |
| **Cost                    of sale of assets to sxr Uranium One**        |   |   |        |   |
| Mining                    Claims                                        |   |   | 1,535,500   |   |
| Property                    Plant and Equipment - net                   |   |   | 692,500     |   |
| Pro-ration                    of property taxes                         |   |   | 3,300       |   |
| Accrued                    costs from January 1, 2007 to April 30, 2007 |   |   | 172,900     |   |
|                                                                    |   |   | 2,404,200   |   |
|                                                                    |   |   |        |   |
| Net                    gain before income taxes                         |   |   | 111,728,200 |   |
|                                                                    |   |   |        |   |
| Provision                    for income taxes                           |   |   | 41,771,700  |   |
|                                                                    |   |   |        |   |
| Net                    gain on sale of assets to sxr Uranium One        |   | $      | 69,956,500  |   |
|                                                                    |   |   |        |   |

**Payment        of Cash Bonus, and Related Matters**

----

**U.S.              ENERGY CORP. & SUBSIDIARIES**

**Notes              to Condensed Consolidated Financial Statements              (Unaudited)**

**            Lucky Jack Molybdenum Property - Kobex Resources, Ltd.**

**Cash        Dividend on Common Stock**

**Common        Stock Buy Back Program**

**Oil        and Gas Exploration Activities**

**Subsequent Event**

----

**ITEM        2.  Management's Discussion and Analysis of Financial Condition and        Results of Operations.**

**Forward        Looking Statements**

**Overview        of Business**

**Recent        Developments**

**Sale        of Uranium Assets**

----

**Lucky        Jack Molybdenum Property – Kobex Resources, Ltd.**

----

**Oil        and Gas Development**

**Acquisition        of Crested**

**Stock        Buy Back Plan**

**Dividend**

**Mineral        Prices**

----

**Results        of Operations**

**Three        and Six Months Ended June 30, 2007 compared with the Three and Six Months        Ended        June 30, 2006**

----

**Liquidity        and Capital Resources**

----

**Capital        Resources**

----

**Capital        Requirements                                                      **

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**Stock        Buy Back Program**

**Dividend**

**Contractual        Obligations**

|                                                 |   | 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  |   | $                                         | 377,100 |   |   | $ | 129,600 |   |   | $ | 245,800 |   |   | $ | 1,700 |   |   | $ | -- |   |
|                                                 |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Other                    long-term liabilities |   |                                      | 129,300 |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 129,300 |   |
|  Totals                                         |   | $                                         | 506,400 |   |   | $ | 129,600 |   |   | $ | 245,800 |   |   | $ | 1,700 |   |   | $ | 129,300 |   |
|                                                 |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Critical        Accounting Policies**

*Principles        of Consolidation*

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*Cash        Equivalents *
**- **

*Accounts        and Notes Receivable*

*Marketable        Securities *

*Mineral        Claims*
*and Oil and Gas Properties*

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*Asset        Retirement Obligations*

*Real        Estate Held for Sale*

*Revenue        Recognition*

*Income        Taxes*

*Use        of Accounting Estimates*

**ITEM        3.  Quantitative and Qualitative Disclosures About Market        Risk**

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**ITEM        4.  Controls and Procedures**

**PART        II.  OTHER INFORMATION**

**ITEM        1.  Legal Proceedings**

***Water        Rights Litigation –Lucky Jack Molybdenum Property***

| 1.   | Concerning                  the Application for Water Rights of Virgil and Lee Spann Ranches,                  Inc., *Case No. 03CW033, 03CW034, 03CW035, 03CW036 and                  03CW037.*  These related cases involve the Spann Ranches,                  Inc.’s Water Court applications to change the point of diversion through                  alternative points for the purpose of rotating a portion of their                  senior                  water rights between ditches to maximize beneficial use in the                  event of a                  major downstream senior call.  MEMCO filed Statements of                  Opposition to ensure that the final decrees to be issued by the Water                  Court contain terms and conditions sufficient to protect MEMCO’s water                  rights from material injury.  These cases are pending, the                  Company awaiting proposed decrees from Applicant Spann Ranches,                  Inc. for                  consideration. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 2.   | Concerning                  the Application for Water Rights of the Town of Crested Butte,                  *Case No. 02CW63.*  This case involves an application                  filed by the Town of Crested Butte to provide for an alternative                  point of                  diversion.  MEMCO filed a Statement of Opposition to ensure that                  the final decree to be issued by the Water Court contains terms                  and                  conditions sufficient to protect MEMCO’s water rights from material                  injury.  The Town of Crested Butte and USECC have reached a                  settlement and signed a Stipulation to protect USECC’s water rights                  pursuant to a proposed final decree.  This Stipulation has been                  signed by the Water Referee and has been submitted to the Water                  Court for                  its approval. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Concerning                  the Application of the United States of America in the                  Gunnison River,                  Gunnison County, *Case No.                  99CW267*.  This case involves an application filed by the                  United States of America to appropriate 0.033 cubic feet per second                  of                  water for wildlife use and for incidental irrigation of riparian                  vegetation at the Mt. Emmons Iron Bog Spring, located in the vicinity                  of                  the Lucky Jack property.  MEMCO filed a Statement of Opposition                  to protect proposed mining operations against any adverse impacts                  by the                  water requirements of the Iron Bog on such operations.  This                  case is pending while the parties attempt to reach a settlement                  on the                  proposed decree terms and                  conditions. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Concerning                  the Application for Water Rights of the United States of America                  for                  Quantification of Reserved Right for Black Canyon of Gunnison National                  Park, *Case No. 01CW05.*  This case involves an                  application filed by the United States of America to make absolute                  conditional water rights claimed in the Gunnison River in relation                  to the                  Black Canyon of the Gunnison National Park for, and to quantify                  in-stream                  flows for the protection and reproduction of fish and to preserve                  the                  recreational, scenic and aesthetic conditions.  MEMCO and over                  350 other parties filed Statements of Opposition to protect their                  existing                  water rights.  On August 3, 2007, the Parties signed a                  Stipulation recognizing USECC and most other Opposers position                  is that the                  flows claimed by the United States should be subordinated to the                  historical operations of the federally owned and operated Aspinall                  Unit,                  and are subject to the provisions contained in the Aspinall Unit                  Subordination Agreement between the federal government and water                  districts                  which protect junior water users in the Upper Gunnison River                  Basin.  This Stipulation has been submitted to the Water Court                  for approval.  Although future Water Court proceedings in this                  case will involve quantification of the in-stream flows claimed                  the United                  States of America for the Black Canyon Park, USECC’s water rights will be                  protected. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Quiet        Title Litigation – Sutter Gold Mining Inc.***

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**ITEM        1A. Risk Factors**

**The        following risk factors should be considered in evaluating the information        in        this Form 10-Q.  The reader should also consider risk factors        discussed in our annual report for the year ended December 31, 2006 filed        on        Form 10-K.**

***We        may be classified as an inadvertent investment        company***

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**ITEM        2.  Changes in Securities and Use of        Proceeds**

**ITEM        3.  Defaults Upon Senior Securities**

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**ITEM        4.  Submission of Matter to a Vote of        Shareholders**

| Name                  of Director    |   | Votes                  For |   | Abstain |
|--------------------------------------|--------|----------------------------|--------|---------|
| Mark                  J. Larsen      |   | 16,245,419                 |   | 461,782 |
| Harold                  F. Herron    |   | 16,245,282                 |   | 461,919 |
| Allen                  S. Winters    |   | 16,245,392                 |   | 461,809 |
| Michael                  T. Anderson |   | 16,244,842                 |   | 462,359 |

|                                                                                                                                                                                                                                              |   | Votes                  For |   | Votes                  Against |   | Abstain |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------------------------------|--------|---------|
| Amendment                  of the 2001 Stock Compensation Plan to Extend its Term to 2018,                  and                  Increase the Number of Shares Issuable each Year to a Total of                  100,000                  Shares. |   | 6,252,152                  |   | 1,170,157                      |   | 163,317 |

|                                                                                                                                                                                                                                                                                                                               |   | Votes                  For |   | Votes                  Against |   | Abstain |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------------------------------|--------|---------|
| Amendment                  of the 2001 Incentive Stock Option Plan to Increase the Number                  of Shares                  of Common Stock Issuable on Exercise of Options, to Always Be a                  Number                  Equal to 25% of the Issued and Outstanding Shares of Common                  Stock. |   | 6,353,405                  |   | 1,089,542                      |   | 142,679 |
|                                                                                                                                                                                                                                                                                                                               |   |                       |   |                           |   |    |

|                                                                                                                                                                               |   | Votes                  For |   | Votes                  Against |   | Abstain |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------------------------------|--------|---------|
| Amendment                  of the Forfeitable Stock Compensation Plan to Permit Early Release                  of                  Forfeitable Shares and Payment of Income Taxes. |   | 6,174,604                  |   | 1,267,798                      |   | 143,224 |

|                                                                                                                   |   | Votes                  For |   | Votes                  Against |   | Abstain |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------------------------------|--------|---------|
| Amendment                  of the 1998 Incentive Stock Option Plan to Permit Payment of Income                  Taxes. |   | 5,591,645                  |   | 1,903,951                      |   | 90,030  |

|                                                                                                                                                        |   | Votes                    For |   | Votes                    Against |   | Abstain |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|----------------------------------|--------|---------|
| Ratification                    of appointment of Moss Adams LLP as independent auditors for                    the current                    fiscal year. |   | 16,364,836                   |   | 303,246                          |   | 39,091  |

**ITEM        5.  Other Information**

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**ITEM        6.  Exhibits and Reports on Form 8-K**

| (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 June 30, 2007.  The events reported                  were as follows: |
|   |                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                           |
|   | 1.                                                                                                                                                                                                                     | The                  report filed on April 9, 2007, under Item 1.01 referenced the formal                  Exploration, Development and Mine Operating Agreement with Kobex                  Resources                  Ltd.                                                                                                   |
|   |                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                           |
|   | 2.                                                                                                                                                                                                                     | The                  report filed on May 4, 2007, under Items 2.01, 9.01, 5.01 and 8.01                  referenced the sale of uranium assets to sxr Uranium One Inc. including                  Pro Forma Financial Information, the approval of Compensation Committee                  recommendations and tax obligation. |
|   |                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                           |
|   | 3.                                                                                                                                                                                                                     | The                  report filed on May 7, 2007, amending the 8-K filed May 4,                  2007.                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                           |
|   | 4.                                                                                                                                                                                                                     | The                  report filed on June 4, 2007, under Item 8.01 referenced the TSX-V                  approval of the Exploration, Development and Mine Operating Agreement                  with                  Kobex Resources Ltd.                                                                                     |
|   |                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                           |
|   | 5.                                                                                                                                                                                                                     | The                  report filed on June 27, 2007 under Items 1.01 and 8.01 referenced                  the                  result of the Annual Meeting held June 22, 2007, Credit Facility                  for                  Sutter Gold Mining Inc. and changes to Company                  Bylaws.                   |

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**SIGNATURES**

|                                   |   | U.S.                  ENERGY CORP. |
|----------------------------------------|--------|------------------------------------|
|                                   |   | (Company)                          |
|                                   |   |                               |   |   |
|                                   |   |                               |   |   |
|                                   |   |                               |   |   |
| Date:                  August 14, 2007 |   | By:                                | /s/                  Keith G. Larsen |   |
|                                   |   |                               | KEITH                  G. LARSEN, |   |
|                                   |   |                               | Chairman                  and CEO |   |
|                                   |   |                               |   |   |
|                                   |   |                               |   |   |
|                                   |   |                               |   |   |
|                                   |   |                               |   |   |
| Date:                  August 14, 2007 |   | By:                                | /s/                  Robert Scott Lorimer |   |
|                                   |   |                               | ROBERT                  SCOTT LORIMER |   |
|                                   |   |                               | Principal                  Financial Officer and |   |
|                                   |   |                               | Chief                  Accounting Officer |   |

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