----

| x      | Quarterly                report pursuant to section 13 or 15(d) of the Securities Exchange                Act of                1934  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|
|   | For                the quarter ended June 30, 2006 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 8****th****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 11, 2006 |
|---------------------------------------------|--------|------------------------------------------------------|
| Common                stock, $.01 par value |   | 19,647,540                                           |

----

**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, 2006 (unaudited) and December                31, 2005                                          | 4-5                         |
|                        |                                                                                                                                                               |                        |
|                        | Condensed                Consolidated Statements of Operations for the Three and six months                Ended                June 30, 2006 and 2005 (unaudited) | 6-7                         |
|                        |                                                                                                                                                               |                        |
|                        | Condensed                Consolidated Statements of Cash Flows for the Three and Six Months                Ended                June 30, 2006 and 2005 (unaudited) | 8-10                        |
|                        |                                                                                                                                                               |                        |
|                        | Notes                to Condensed Consolidated Financial Statements (unaudited)                                                                                    | 11-17                       |
|                        |                                                                                                                                                               |                        |
| ITEM                2.      | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                          | 18-34                       |
|                        |                                                                                                                                                               |                        |
| ITEM                3.      | Quantitative                and Qualitative Disclosures about Market Risk                                                                                          | 34-36                       |
|                        |                                                                                                                                                               |                        |
| ITEM                4.      | Controls                and Procedures                                                                                                                             | 37                          |
|                        |                                                                                                                                                               |                        |
| **PART                II.** | **OTHER                INFORMATION**                                                                                                                               | 38                          |
|                        |                                                                                                                                                               |                        |
| ITEM                1.      | Legal                Proceedings                                                                                                                                   | 38-39                       |
|                        |                                                                                                                                                               |                        |
| ITEM                2.      | Changes                in Securities and Use of Proceeds                                                                                                           | 40                          |
|                        |                                                                                                                                                               |                        |
| ITEM                3.      | Defaults                Upon Senior Securities                                                                                                                     | 40                          |
|                        |                                                                                                                                                               |                        |
| ITEM                4.      | Submission                of Matters to a Vote of Shareholders                                                                                                     | 40                          |
|                        |                                                                                                                                                               |                        |
| ITEM                5.      | Other                Information                                                                                                                                   | 41                          |
|                        |                                                                                                                                                               |                        |
| ITEM                6.      | Exhibits                and Reports on Form 8-K                                                                                                                    | 41                          |
|                        |                                                                                                                                                               |                        |
|                        | Signatures                                                                                                                                                         | 42                          |
|                        |                                                                                                                                                               |                        |
|                        | Certifications                                                                                                                                                     | See                Exhibits |

----

**PART      I. FINANCIAL INFORMATION**

**ITEM      1. Financial Statements**

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**          |   |
|------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**       |   |
| **ASSETS**                                                       |   |
|                                                             |   |   |   |   |   |
|                                                             |   | June                  30, |   | December                  31, |   |
|                                                             |   | 2006 |   | 2005 |   |
|                                                             |   | (Unaudited) |   |   |   |
| CURRENT                  ASSETS:                                 |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                       |   | $ | 10,508,000 |   | $ | 6,998,700 |   |
| Marketable                  securities                           |   |   |   |   |   |   |   |
| Trading                  securities                         |   |   | 8,066,500 |   |   | -- |   |
| Available                  for Sale                         |   |   | 890,800 |   |   | 328,700 |   |
| Accounts                  receivable                             |   |   |   |   |   |   |   |
| Trade,                  net of allowance of $0 and $32,300  |   |   | 73,300 |   |   | 251,400 |   |
| Affiliates                                                  |   |   | -- |   |   | 14,100 |   |
| Prepaid                  expenses and other current assets       |   |   | 292,100 |   |   | 215,000 |   |
| Inventories                                                      |   |   | 35,500 |   |   | 32,700 |   |
| Total                  current assets                       |   |   | 19,866,200 |   |   | 7,840,600 |   |
|                                                             |   |   |   |   |   |   |   |
| INVESTMENTS:                                                     |   |   |   |   |   |   |   |
| Non-affiliated                  companies                        |   |   | 957,700 |   |   | 14,760,800 |   |
| Marketable                  securities, held-to-maturity         |   |   | 6,810,200 |   |   | 6,761,200 |   |
| Other                                                            |   |   | 54,900 |   |   | 54,900 |   |
| Total                  investments                          |   |   | 7,822,800 |   |   | 21,576,900 |   |
|                                                             |   |   |   |   |   |   |   |
| PROPERTIES                  AND EQUIPMENT:                       |   |   | 13,884,300 |   |   | 13,847,600 |   |
| Less                  accumulated depreciation,                  |   |   |   |   |   |   |   |
| depletion                  and amortization                 |   |   | (7,221,600 | ) |   | (7,481,800 | ) |
| Net                  properties and equipment               |   |   | 6,662,700 |   |   | 6,365,800 |   |
|                                                             |   |   |   |   |   |   |   |
| OTHER                  ASSETS:                                   |   |   |   |   |   |   |   |
| Note                  receivable trade                           |   |   | 10,900 |   |   | 20,800 |   |
| Real                  estate held for resale                     |   |   | 1,819,700 |   |   | 1,819,700 |   |
| Deposits                  and other                              |   |   | 1,135,800 |   |   | 482,900 |   |
| Total                  other assets                         |   |   | 2,966,400 |   |   | 2,323,400 |   |
| Total                  assets                                    |   | $ | 37,318,100 |   | $ | 38,106,700 |   |
|                                                             |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**          |   |
|------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**       |   |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**        |   |
|                                                             |   |   |   |   |   |
|                                                             |   | June                  30, |   | December                  31, |   |
|                                                             |   | 2006 |   | 2005 |   |
|                                                             |   | (Unaudited) |   |   |   |
| CURRENT                  LIABILITIES:                            |   |   |   |   |   |   |   |
| Accounts                  payable                                |   | $ | 174,100 |   | $ | 433,000 |   |
| Accrued                  compensation expense                    |   |   | 283,600 |   |   | 177,100 |   |
| Asset                  retirement obligation                     |   |   | 233,200 |   |   | 233,200 |   |
| Current                  portion of long-term debt               |   |   | 294,200 |   |   | 156,500 |   |
| Other                  current liabilities                       |   |   | 354,000 |   |   | 232,400 |   |
| Total                  current liabilities                  |   |   | 1,339,100 |   |   | 1,232,200 |   |
|                                                             |   |   |   |   |   |   |   |
| LONG-TERM                  DEBT, net of current portion          |   |   | 1,104,900 |   |   | 880,300 |   |
|                                                             |   |   |   |   |   |   |   |
| ASSET                  RETIREMENT OBLIGATIONS,                   |   |   |   |   |   |   |   |
| net                  of current portion                          |   |   | 6,138,000 |   |   | 5,669,000 |   |
|                                                             |   |   |   |   |   |   |   |
| OTHER                  ACCRUED LIABILITIES                       |   |   | 1,359,500 |   |   | 1,400,500 |   |
|                                                             |   |   |   |   |   |   |   |
| MINORITY                  INTERESTS                              |   |   | 4,959,000 |   |   | 1,767,500 |   |
|                                                             |   |   |   |   |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES                   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |
| FORFEITABLE                  COMMON STOCK, $.01 par value        |   |   |   |   |   |   |   |
| 442,740                  shares issued, forfeitable until earned |   |   | 2,599,000 |   |   | 2,599,000 |   |
|                                                             |   |   |   |   |   |   |   |
| PREFERRED                  STOCK,                                |   |   |   |   |   |   |   |
| $.01                  par value; 100,000 shares authorized       |   |   |   |   |   |   |   |
| No                  shares issued or outstanding                 |   |   | -- |   |   | -- |   |
|                                                             |   |   |   |   |   |   |   |
| SHAREHOLDERS'                  EQUITY:                           |   |   |   |   |   |   |   |
| Common                  stock, $.01 par value;                   |   |   |   |   |   |   |   |
| unlimited                  shares authorized; 19,309,080    |   |   |   |   |   |   |   |
| and                  18,825,134 shares issued net of        |   |   |   |   |   |   |   |
| treasury                  stock, respectively               |   |   | 193,100 |   |   | 188,200 |   |
| Additional                  paid-in capital                      |   |   | 70,595,500 |   |   | 68,005,600 |   |
| Accumulated                  deficit                             |   |   | (47,500,100 | ) |   | (40,154,100 | ) |
| Treasury                  stock at cost,                         |   |   |   |   |   |   |   |
| 1,004,174                  and 999,174 shares respectively  |   |   | (2,923,500 | ) |   | (2,892,900 | ) |
| Unrealized                  (loss) on marketable securities      |   |   | (55,900 | ) |   | (98,100 | ) |
| Unallocated                  ESOP contribution                   |   |   | (490,500 | ) |   | (490,500 | ) |
| Total                  shareholders' equity                 |   |   | 19,818,600 |   |   | 24,558,200 |   |
| Total                  liabilities and shareholders' equity      |   | $ | 37,318,100 |   | $ | 38,106,700 |   |
|                                                             |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Three                  months ended June 30, |   | Six                  months ended June 30, |   |
|                                                                 |   | 2006 |   | 2005 |   | 2006 |   | 2005 |   |
| OPERATING                  REVENUES:                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate operations                         |   | $ | 48,000 |   | $ | 72,100 |   | $ | 102,800 |   | $ | 157,200 |   |
| Management                  fees and other                      |   |   | 100,300 |   |   | 111,400 |   |   | 222,100 |   |   | 367,700 |   |
|                                                                 |   |   | 148,300 |   |   | 183,500 |   |   | 324,900 |   |   | 524,900 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                  COSTS AND EXPENSES:                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate operations                         |   |   | 66,100 |   |   | 67,300 |   |   | 136,300 |   |   | 135,400 |   |
| Mineral                  holding costs                          |   |   | 682,300 |   |   | 377,000 |   |   | 1,183,400 |   |   | 669,900 |   |
| General                  and administrative                     |   |   | 2,367,300 |   |   | 2,160,100 |   |   | 4,916,000 |   |   | 3,324,500 |   |
|                                                                 |   |   | 3,115,700 |   |   | 2,604,400 |   |   | 6,235,700 |   |   | 4,129,800 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                  LOSS                                      |   |   | (2,967,400 | ) |   | (2,420,900 | ) |   | (5,910,800 | ) |   | (3,604,900 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME & (EXPENSES):                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                  on sales of assets                        |   |   | 408,600 |   |   | -- |   |   | 2,823,500 |   |   | 9,500 |   |
| Gain                  (loss) on sale of investment              |   |   | -- |   |   | 51,200 |   |   | (27,500 | ) |   | 117,700 |   |
| Gain                  (loss) from valuation of derivatives      |   |   | (45,500 | ) |   | 3,466,400 |   |   | (630,900 | ) |   | 3,466,400 |   |
| Loss                  from Enterra share exchange               |   |   | (3,848,600 | ) |   | -- |   |   | (3,845,800 | ) |   | -- |   |
| Dividends                                                       |   |   | 2,200 |   |   | -- |   |   | 5,000 |   |   | -- |   |
| Interest                  income                                |   |   | 198,700 |   |   | 135,500 |   |   | 250,000 |   |   | 190,400 |   |
| Interest                  expense                               |   |   | (27,600 | ) |   | (3,358,900 | ) |   | (57,100 | ) |   | (3,632,000 | ) |
|                                                                 |   |   | (3,312,200 | ) |   | 294,200 |   |   | (1,482,800 | ) |   | 152,000 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                  BEFORE MINORITY INTEREST,                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED                  OPERATIONS AND                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION                  FOR INCOME TAXES                     |   |   | (6,279,600 | ) |   | (2,126,700 | ) |   | (7,393,600 | ) |   | (3,452,900 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| MINORITY                  INTEREST IN LOSS OF                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CONSOLIDATED                  SUBSIDIARIES                      |   |   | 43,400 |   |   | 307,600 |   |   | 47,600 |   |   | 361,400 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                  BEFORE DISCONTINUED                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATIONS                  AND PROVISION                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FOR                  INCOME TAXES                               |   |   | (6,236,200 | ) |   | (1,819,100 | ) |   | (7,346,000 | ) |   | (3,091,500 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED                  OPERATIONS, net of taxes               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                  on sale of discontinued segment           |   |   | -- |   |   | 15,721,600 |   |   | -- |   |   | 15,721,600 |   |
| Loss                  from discontinued operations              |   |   | -- |   |   | -- |   |   | -- |   |   | (326,100 | ) |
|                                                                 |   |   | -- |   |   | 15,721,600 |   |   | -- |   |   | 15,395,500 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (LOSS)                  GAIN BEFORE PROVISION FOR                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                  TAXES                                   |   |   | (6,236,200 | ) |   | 13,902,500 |   |   | (7,346,000 | ) |   | 12,304,000 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION                  FOR INCOME TAXES                          |   |   | -- |   |   | -- |   |   | -- |   |   | -- |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Three                  months ended June 30, |   | Six                  months ended June 30, |   |
|                                                                 |   | 2006 |   | 2005 |   | 2006 |   | 2005 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
| NET                  (LOSS) GAIN                                     |   | $ | (6,236,200 | ) | $ | 13,902,500 |   | $ | (7,346,000 | ) | $ | 12,304,000 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PER                  SHARE DATA                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Loss                  from continuing operations               |   | $ | (0.34 | ) | $ | (0.12 | ) | $ | (0.40 | ) | $ | (0.20 | ) |
|  Gain                  from discontinued                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  operations                                                     |   |   | -- |   | $ | 1.00 |   |   | -- |   | $ | 1.03 |   |
|                                                                 |   | $ | (0.34 | ) | $ | 0.88 |   | $ | (0.40 | ) | $ | 0.83 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                  WEIGHTED AVERAGE                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHARES                  OUTSTANDING                             |   |   | 18,300,530 |   |   | 15,795,706 |   |   | 18,213,107 |   |   | 14,896,431 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                  WEIGHTED AVERAGE                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHARES                  OUTSTANDING                             |   |   | 18,300,530 |   |   | 15,352,966 |   |   | 18,213,107 |   |   | 15,339,171 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |
|                                                                 |   | Six                  months ended June 30, |   |
|                                                                 |   | 2006 |   | 2005 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:               |   |   |   |   |   |   |   |
| Net                  (loss) gain                                     |   | $ | (7,346,000 | ) | $ | 12,304,000 |   |
| Adjustments                  to reconcile net (loss) gain            |   |   |   |   |   |   |   |
| to                  net cash used in operating activities:           |   |   |   |   |   |   |   |
| Minority                  interest in loss of                        |   |   |   |   |   |   |   |
| consolidated                  subsidiaries                      |   |   | (47,600 | ) |   | (361,400 | ) |
| Amortization                  of deferred charge                     |   |   | -- |   |   | 441,300 |   |
| Depreciation                                                         |   |   | 269,300 |   |   | 189,000 |   |
| Accretion                  of asset                                  |   |   |   |   |   |   |   |
| retirement                  obligations                         |   |   | 385,600 |   |   | 183,400 |   |
| Initial                  valuation of asset                          |   |   |   |   |   |   |   |
| retirement                  obligation                          |   |   | 83,400 |   |   | -- |   |
| Amortization                  of debt discount                       |   |   | -- |   |   | 2,767,000 |   |
| Noncash                  interest expense                            |   |   | -- |   |   | 671,700 |   |
| (Gain)                  on sale of assets                            |   |   | (2,823,500 | ) |   | (9,500 | ) |
| Loss                  on valuation of Enterra units                  |   |   | 3,845,800 |   |   | -- |   |
| Loss                  (gain) on valuation of derivatives             |   |   | 630,900 |   |   | (3,466,400 | ) |
| Gain                  on sale of discontinued segment                |   |   | -- |   |   | (15,721,600 | ) |
| Loss                  on sale of marketable securities               |   |   | 27,500 |   |   | -- |   |
| Proceeds                  on sale of trading securities              |   |   | 1,295,500 |   |   | -- |   |
| Gain                  on sale of investments                         |   |   | -- |   |   | (117,700 | ) |
| Noncash                  compensation                                |   |   | 600,700 |   |   | 216,900 |   |
| Noncash                  services                                    |   |   | 18,900 |   |   | 35,600 |   |
| Warrant                  extension and repricing                     |   |   | 484,700 |   |   | -- |   |
| Net                  changes in assets and liabilities:              |   |   | (37,800 | ) |   | 655,700 |   |
| NET                  CASH USED IN                                    |   |   |   |   |   |   |   |
| OPERATING                  ACTIVITIES                                |   |   | (2,612,600 | ) |   | (2,212,000 | ) |
|                                                                 |   |   |   |   |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:               |   |   |   |   |   |   |   |
| Proceeds                  from sale of marketable securities         |   |   | 94,700 |   |   | -- |   |
| Sale                  of RMG                                         |   |   | -- |   |   | (270,000 | ) |
| Proceeds                  from sale investments                      |   |   | -- |   |   | 117,700 |   |
| Acquisition                  of unproved mining claims               |   |   | (21,100 | ) |   | (166,100 | ) |
| Proceeds                  on sale of property and equipment          |   |   | 2,263,100 |   |   | 9,500 |   |
| Purchase                  of property and equipment                  |   |   | (306,600 | ) |   | (240,300 | ) |
| Escrow                  proceeds                                     |   |   | -- |   |   | -- |   |
| Net                  change in restricted investments                |   |   | (49,000 | ) |   | (8,300 | ) |
| Net                  change in notes receivable                      |   |   | (20,700 | ) |   | (14,000 | ) |
| Net                  change in investments in affiliates             |   |   | 65,400 |   |   | -- |   |
| NET                  CASH PROVIDED BY (USED IN)                      |   |   |   |   |   |   |   |
| INVESTING                  ACTIVITIES                                |   |   | 2,025,800 |   |   | (571,500 | ) |
|                                                                 |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |
|                                                                 |   | Six                  months ended June 30, |   |
|                                                                 |   | 2006 |   | 2005 |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:               |   |   |   |   |   |   |   |
| Issuance                  of common stock                            |   | $ | 915,900 |   | $ | 1,579,600 |   |
| Issuance                  of subsidiary stock                        |   |   | 3,173,700 |   |   | -- |   |
| Proceeds                  from long term debt                        |   |   | 184,400 |   |   | 3,700,000 |   |
| Repayments                  of long term debt                        |   |   | (177,900 | ) |   | (958,600 | ) |
| NET                  CASH PROVIDED BY                                |   |   |   |   |   |   |   |
| FINANCING                  ACTIVITIES                                |   |   | 4,096,100 |   |   | 4,321,000 |   |
|                                                                 |   |   |   |   |   |   |   |
| Net                  cash used in operating activities of            |   |   |   |   |   |   |   |
| discontinued                  operations                             |   |   | -- |   |   | (453,500 | ) |
| Net                  cash used in investing activities of            |   |   |   |   |   |   |   |
| discontinued                  operations                             |   |   | -- |   |   | (215,000 | ) |
| Net                  cash used in financing activities of            |   |   |   |   |   |   |   |
| discontinued                  operations                             |   |   | -- |   |   | (8,500 | ) |
|                                                                 |   |   |   |   |   |   |   |
| NET                  INCREASE IN                                     |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   | 3,509,300 |   |   | 860,500 |   |
|                                                                 |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   |   |   |   |   |   |
| AT                  BEGINNING OF PERIOD                              |   |   | 6,998,700 |   |   | 3,842,500 |   |
|                                                                 |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS                           |   |   |   |   |   |   |   |
| AT                  END OF PERIOD                                    |   | $ | 10,508,000 |   | $ | 4,703,000 |   |
|                                                                 |   |   |   |   |   |   |   |
| SUPPLEMENTAL                  DISCLOSURES:                           |   |   |   |   |   |   |   |
| Income                  tax paid                                     |   | $ | -- |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |
| Interest                  paid                                       |   | $ | 57,100 |   | $ | 193,300 |   |
|                                                                 |   |   |   |   |   |   |   |

----

| **U.S.                  ENERGY CORP. AND SUBSIDIARIES**              |   |
|----------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS** |   |
| **(Unaudited)**                                                      |   |
|                                                                 |   |   |   |   |   |
|                                                                 |   | Six                  months ended June 30, |   |
|                                                                 |   | 2006 |   | 2005 |   |
| NON-CASH                  INVESTING AND FINANCING ACTIVITIES:        |   |   |   |   |   |   |   |
| Conversion                  of Enterra shares                        |   |   |   |   |   |   |   |
| to                  tradable units                                   |   | $ | 13,880,100 |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |
| Issuance                  of stock warrants in                       |   |   |   |   |   |   |   |
| conjunction                  with agreements                         |   | $ | 727,300 |   | $ | -- |   |
|                                                                 |   |   |   |   |   |   |   |
| Acquisition                  of assets                               |   |   |   |   |   |   |   |
| through                  issuance of debt                            |   | $ | 355,800 |   | $ | 50,000 |   |
|                                                                 |   |   |   |   |   |   |   |
| Unrealized                  gain on securities                       |   | $ | 42,200 |   | $ | 1,249,400 |   |
|                                                                 |   |   |   |   |   |   |   |
| Satisfaction                  of receivable - employee               |   |   |   |   |   |   |   |
| with                  stock in company                               |   | $ | 30,600 |   | $ | 20,500 |   |
|                                                                 |   |   |   |   |   |   |   |
| Issuance                  of stock warrants in                       |   |   |   |   |   |   |   |
| conjunction                  with debt                               |   | $ | -- |   | $ | 1,226,200 |   |
|                                                                 |   |   |   |   |   |   |   |
| Issuance                  of stock as conversion of                  |   |   |   |   |   |   |   |
| subsidiary                  stock                                    |   | $ | -- |   | $ | 499,700 |   |
|                                                                 |   |   |   |   |   |   |   |
| Issuance                  of stock for services                      |   | $ | -- |   | $ | 35,600 |   |
|                                                                 |   |   |   |   |   |   |   |

----

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

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

----

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

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

|                                                                                                                                                         |   | Six                Months Ended |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                                                                                         |   | June                30,         |       |
|                                                                                                                                                         |   | 2005                            |       |
|                                                                                                                                                         |   |                            |       |
| Net                gain                                                                                                                                      |   | $                               | 12,304,000 |   |
| Deduct:                                                                                                                                                      |   |                            |       |   |
| Stock-based                employee compensation determined under fair value method for all                awards,                net of related tax effects |   |                            | (206,200   | ) |
|                                                                                                                                                         |   |                            |       |   |
| Net                income/(loss) available to common stockholders - pro forma                                                                                |   | $                               | 12,097,800 |   |
|                                                                                                                                                         |   |                            |       |   |
| Basic                gain per share as reported                                                                                                              |   | $                               | 0.86       |   |
| Diluted                gain per share as reported                                                                                                            |   | $                               | 0.81       |   |
| Basic                gain per share pro forma                                                                                                                |   | $                               | 0.80       |   |
| Diluted                gain per share pro forma                                                                                                              |   | $                               | 0.79       |   |
|                                                                                                                                                         |   |                            |       |   |
| Weighted                average basic common stock outstanding                                                                                               |   |                            | 14,896,413 |   |
|                                                                                                                                                         |   |                            |       |   |
| Weighted                average diluted common stock outstanding                                                                                             |   |                            | 15,339,171 |   |
|                                                                                                                                                         |   |                            |       |   |

|                                           |   |   |       | Accumulated                    |   |                        |   |
|------------------------------------------------|--------|--------|------------|--------------------------------|--------|-----------------------------|--------|
|                                           |   |   |       | Amortization                   |   |                        |   |
|                                           |   |   |       | Depletion                  and |   | Net                         |   |
|                                           |   | Cost   |       | Depreciation                   |   | Book                  Value |   |
|                                           |   |   |       |                           |   |                        |   |
| Mining                  and oil properties     |   | $      | 2,582,900  |                           | $      | (1,773,600                  | )      | $ | 809,300 |   |
| Buildings,                  land and equipment |   |   | 11,301,400 |                           |   | (5,448,000                  | )      |   | 5,853,400 |   |
| Totals                                         |   | $      | 13,884,300 |                           | $      | (7,221,600                  | )      | $ | 6,662,700 |   |
|                                           |   |   |       |                           |   |                        |   |   |   |   |
|                                           |   |   |       |                           |   |                        |   |   |   |

----

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

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

|                                                      |   | Six                  months ending June 30, |       |
|-----------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                      |   | 2006                                        |       | 2005 |   |
| Net                  (loss) gain                          |   | $                                           | (7,346,000 | ) | $ | 12,304,000 |   |
|                                                      |   |                                        |       |   |   |   |   |
| Comprehensive                  loss from the              |   |                                        |       |   |   |   |   |
| unrealized                  loss on marketable securities |   |                                        | (55,900    | ) |   | -- |   |
|                                                      |   |                                        |       |   |   |   |   |
| Comprehensive                  income from the            |   |                                        |       |   |   |   |   |
| unrealized                  loss on hedging activities    |   |                                        | --         |   |   | 1,249,400 |   |
| Comprehensive                  loss                       |   | $                                           | (7,401,900 | ) | $ | 13,553,400 |   |
|                                                      |   |                                        |       |   |   |   |   |

|                               |   |   |    |                          |   | Unrealized |   |
|------------------------------------|--------|--------|---------|-------------------------------|--------|------------|--------|
|                               |   | Cost   |    | Market                  Value |   | Loss       |   |
| Equity                  Securities |   |   |    |                          |   |       |   |   |   |   |
| UPC                  shares        |   | $      | 946,700 |                          | $      | 890,800    |   | $ | (55,900 | ) |
| Total                              |   | $      | 946,700 |                          | $      | 890,800    |   | $ | (55,900 | ) |
|                               |   |   |    |                          |   |       |   |   |   |   |

*Investments:      Non-affiliated companies*

----

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

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

| Current                portion of long term debt for the purchase of aircraft and equipment                and                insurance policies at various interest rates and due dates |   | $      | 294,200   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                                                                                                                     |   |   |      |   |
| Long                term portion of debt for the purchase of aircraft and equipment and                insurance policies at various interest rates and due dates                        |   |   | 1,104,900 |   |
|                                                                                                                                                                                     |   | $      | 1,399,100 |   |

----

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

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

|                                       |   | Six                  months ended June 30, |      |
|--------------------------------------------|--------|--------------------------------------------|-----------|
|                                       |   | 2006                                       |      | 2005 |   |
| Balance                  December 31, 2005 |   | $                                          | 5,902,200 |   | $ | 8,075,100 |   |
| Addition                  to Liability     |   |                                       | 83,400    |   |   | -- |   |
| Liability                  Settled         |   |                                       | --        |   |   | -- |   |
| Sale                  of RMG               |   |                                       | --        |   |   | (463,700 | ) |
| Accretion                  Expense         |   |                                       | 385,600   |   |   | 183,400 |   |
| Balance                  June 30, 2006     |   | $                                          | 6,371,200 |   | $ | 7,794,800 |   |
|                                       |   |                                       |           |   |   |   |   |

|                                                     |   |                          |       |   |   | Additional |   |
|----------------------------------------------------------|--------|-------------------------------|------------|--------|--------|------------|--------|
|                                                     |   | Common                  Stock |       |   |   | Paid-In    |   |
|                                                     |   | Shares                        |       | Amount |   | Capital    |   |
|                                                     |   |                          |       |   |   |       |   |
| Balance                  December 31, 2005               |   |                          | 18,825,134 |   | $      | 188,200    |   | $ | 68,005,600 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Stock                  issued to outside directors       |   |                          | 3,140      |   |   | 100        |   |   | 17,900 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| 2001                  stock compensation plan            |   |                          | 30,000     |   |   | 300        |   |   | 174,100 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Exercise                  of options                     |   |                          | 159,476    |   |   | 1,600      |   |   | 110,700 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Exercise                  of warrants                    |   |                          | 221,400    |   |   | 2,200      |   |   | 801,400 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Expense                  of employee options             |   |                          |       |   |   |       |   |   |   |   |
| vesting                                                  |   |                          | -          |   |   | -          |   |   | 273,600 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Stock                  issued for a professional service |   |                          |       |   |   |       |   |   |   |   |
| agreement                                                |   |                          | 69,930     |   |   | 700        |   |   | 474,800 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Value                  of company warrants issued        |   |                          |       |   |   |       |   |   |   |   |
| for                  a professional service agreement    |   |                          | -          |   |   | -          |   |   | 251,800 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Value                  of company warrants issued and    |   |                          |       |   |   |       |   |   |   |   |
| extended                                                 |   |                          | -          |   |   | -          |   |   | 484,700 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |
| Valuation                  of Company warrants issued    |   |                          |       |   |   |       |   |   |   |   |
| for                  professional services               |   |                          | -          |   |   | -          |   |   | 900 |   |
|                                                     |   |                          | 19,309,080 |   | $      | 193,100    |   | $ | 70,595,500 |   |
|                                                     |   |                          |       |   |   |       |   |   |   |   |

----

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

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

----

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

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

----

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

**Overview      of Business**

**Uranium**

**Gold**

**Molybdenum**

----

| ·   | Whether                a feasibility study will show volumes and grades of mineralization                and                manageable costs of mining, transportation and processing, which                are                sufficient to make a profit and to bring industry partners to the                point of                investment; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Whether                the Company can negotiate terms with industry partners which will                return a                profit to the Company for its retained interest and the project’s                development costs to that point in                time. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Forward      Looking Statements**

**Critical      Accounting Policies**

*Asset      Impairments*

*Mineral      Claims*

----

*Asset      Retirement Obligations*

*Revenue      Recognition*

*Use      of Accounting Estimates*

*Income      Taxes*

*Marketable      Securities *

----

**Recent      Accounting Pronouncements**

**SFAS      123(R)**

**Liquidity      and Capital Resources**

----

----

**Capital      Resources**

----

----

----

**Capital      Requirements**

**Maintaining      Mineral Properties**

**Uranium      Properties**

----

**Plateau      Resources Limited, Inc., Properties**

**Agreement      with Uranium Power Corp**

----

**Sutter      Gold Mining Inc. (SGMI) Properties**

**Lucky      Jack Molybdenum Project**

----

**Debt      Payments**

**Reclamation      Costs**

**Other**

**Results      of Operations**

**Six      months Ended June 30, 2006 compared with the Six Months Ended June 30,      2005**

----

----

**Six      Months Ended June 30, 2005 compared with the Six Months Ended June 30,      2004**

----

**Contractual      Obligations**

|                                         |   |   |      | Less                      |   | One                  to |   | Three                  to |      | More                  than |   |
|----------------------------------------------|--------|--------|-----------|---------------------------|--------|-------------------------|--------|---------------------------|-----------|----------------------------|--------|
|                                         |   |   |      | than                  one |   | Three                   |   | Five                      |      | Five                       |   |
|                                         |   | Total  |      | Year                      |   | Years                   |   | Years                     |      | Years                      |   |
| Long-term                  debt obligations  |   | $      | 1,399,100 |                      | $      | 294,200                 |   | $                         | 1,031,900 |                       | $      | 73,000 |   |   | - |   |
|                                         |   |   |      |                      |   |                    |   |                      |      |                       |   |   |   |   |   |   |
| Other                  long-term liabilities |   |   | 6,371,200 |                      |   | 233,200                 |   |                      | 430,600   |                       |   | 2,099,800 |   |   | 3,607,600 |   |
| Totals                                       |   | $      | 7,770,300 |                      | $      | 527,400                 |   | $                         | 1,462,500 |                       | $      | 2,172,800 |   | $ | 3,607,600 |   |
|                                         |   |   |      |                      |   |                    |   |                      |      |                       |   |   |   |   |   |   |
|                                         |   |   |      |                      |   |                    |   |                      |      |                       |   |   |   |   |   |   |

----

**Subsequent      Events**

**Exclusivity      Agreement for potential sale of uranium properties**

| ·   | $49,250,000                in Uranium One common stock at a set price at closing (the set price                is                the volume weighted average price of Uranium One stock for the 10                days                prior to signing the Exclusivity Agreement, which is $7.45 per share).                This represents the $50 million portion, less the cash paid for the                Exclusivity Agreement. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $20                million in cash upon the start of commercial operation of the Shootaring                Canyon uranium mill. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | $7.5                million in cash upon the first delivery of mineralized material to                a                commercial uranium mill from any of the purchased properties that                are                subject to the Agreement. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                cash royalty equivalent to 5% of the revenues derived from the sales                value                of any commodity produced from the Shootaring Canyon uranium mill,                to a                maximum royalty payment of $12.5                million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Litigation      with Phelps Dodge**

**Patent      Mining Claims at Lucky Jack Molybdenum Project **

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

**Risk      Factors**
** **

**The      following risk factors should be considered in evaluating the information in      this Form 10-Q.**

----

**Uncertainties      in the value of the mineral properties**

| ·   | In                the event that SXR does not purchase the uranium assets owned by                USECC, we                will have to continue to pursue an equity or industry partner to                assist in                the development of the properties. Profitability of the uranium properties                will depend on several factors which include continued sustained                higher                prices for uranium oxide, :, we need to maintain cost controls at                the                Shootaring Uranium property in Southern Utah on the mining, transportation                and milling of ores and successfully finance and commence refurbishment                of                the mill.. Additionally we may need to either acquire additional                mineral                properties in the vicinity of the Shootaring mill or acquire ore                from                contract miners in the area. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                profitable mining and processing of gold by Sutter Gold Mining Inc.                will                depend on many factors, including compliance with permit conditions;                delineation through extensive drilling and sampling of sufficient                volumes                of mineralized material, with sufficient grades, to make mining and                processing economic over time; continued sustained high prices for                gold;                and obtaining the capital required to initiate and sustain mining                operations and build and operate a gold processing                mill. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Lucky Jack molybdenum property has had extensive work conducted by                prior                owners, but this data will have to be updated to the level of a current                feasibility study to determine the viability of starting mining                operations. Obtaining mining and other permits to begin mining the                molybdenum property may be very difficult, and, like any mining operation,                capital requirements for a molybdenum mine/mill operation will be                substantial. There is a history of opposition by local government                entities                and environmental organizations to the prior owners seeking permits                to                mine this property. This opposition has been expressed in litigation                from                time to time. Continued legal challenges may delay putting the Lucky                Jack                Project into production. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | USECC                has not yet obtained feasibility studies on any of our mineral properties.                These studies would establish the economic viability, or not, of                the                different properties based on extensive drilling and sampling, the                design                and costs to build and operate gold and uranium/vanadium mills, the                cost                of capital, and other factors. Feasibility studies can take many                months to                complete. These studies are conducted by professional third party                consulting and engineering firms, and will have to be completed,                at                considerable cost, to determine if the deposits contain proved reserves                (amounts of minerals in sufficient grades that can be extracted profitably                under current pricing assumptions for development and operating costs                and                commodity prices). A feasibility study usually must be completed                in order                to raise the substantial capital needed to put a property into production.                USECC has not established any reserves (economic deposits of mineralized                materials) on any of our molybdenum, uranium/vanadium, or gold properties,                and future studies may indicate that some or all of the properties                will                not be economic to put into production. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Compliance      with environmental regulations may be costly**

**Possible      Dilution to Shareholders.**

----

**ITEM      4. Controls and Procedures**

----

**PART      II. OTHER INFORMATION**

**ITEM      1. **
**Legal      Proceedings**

**Sheep      Mountain Partners Arbitration/Litigation**

**Phelps      Dodge Corporation Litigation**

----

**United      States Tenth Circuit Court of Appeals Affirmation of Lower Court Dismissal      of      Challenges to Mt. Emmons Patents**
**.      **

**Coastline      Capital Partners**

**Plateau      Resources Ltd.**

----

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

**ITEM      3. **
**Defaults      Upon Senior Securities**

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

| Name                of Director |   | Votes                For |   | Abstain   |
|---------------------------------|--------|--------------------------|--------|-----------|
| Keith                G. Larsen  |   | 15,923,436               |   | 1,280,607 |
| John                L. Larsen   |   | 15,922,591               |   | 1,281,452 |

|                                                                                                                                             |   | Votes                For |   | Votes                Against |   | Abstain |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|------------------------------|--------|---------|
| Amendment                of the Articles of Incorporation to Allow Shareholders to Remove                Directors                Only for Cause |   | 5,822,094                |   | 1,768,550                    |   | 26,428  |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Votes                For |   | Votes                Against |   | Abstain |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|------------------------------|--------|---------|
| To                comply with Nasdaq Marketplace Rule 4350(i)(1)(D), approve the issuance                of                more than 3,726,400 shares of common stock in connection with the                transaction with Cornell Capital Partners, LP (“Cornell”), comprised of :                3,556,470 shares of common stock to Cornell pursuant to the Standby                Equity                Distribution Agreement, plus 100,000 shares of common stock on exercise                of                a stock purchase warrant held by Cornell, plus 1,000,000 shares of                common                stock on exercise of milestone stock purchase warrants (as such milestone                warrants may be issued to Cornell; plus 68,531 shares already issued                to                Cornell; plus 1,399 shares already issued to Newbridge Securities                Corporation. |   | 5,805,671                |   | 1,713,100                    |   | 98,301  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                     |   |                         |   |    |

|                                                                                                   |   | Votes                For |   | Votes                Against |   | Abstain |
|--------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|------------------------------|--------|---------|
| Appoint                Epstein, Weber and Conover, PLC as Independent Auditors for                2006 |   | 16,609,830               |   | 575,764                      |   | 18,449  |

----

**ITEM      5. **
**Other      Information**

**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 8 reports on Form 8-K for the quarter ended June                30,                2006. The events reported were as follows: |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 1.                                                                                                                                                                                                     | The                report filed on April 13, 2006, under Item 1.01 referenced the April                11,                2006 Standby Equity Distribution Agreement (“SEDA”) with Cornell Capital                Partners, LP.  |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 2.                                                                                                                                                                                                     | The                report filed on May 9, 2006, under Item 1.01 referenced the termination                of                the April 11, 2006 SEDA and a new SEDA executed on May 5, 2006 with                Cornell Capital Partners, LP. |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 3.                                                                                                                                                                                                     | The                report filed on May 12, 2006, under Item 8.01 referenced the May                9, 2006                agreement with Uranium Power Corp. on two new uranium                projects.                                     |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 4.                                                                                                                                                                                                     | The                report filed on May 19, 2006, under Item 8.01 referenced the receipt                of                the May 15, 2006 Clarification of the Arbitration Award in the Nukem                litigation.                     |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 5.                                                                                                                                                                                                     | The                report filed on May 31, 2006, under Item 8.01 referenced the $3 million                (Cdn) private placement for Sutter Gold Mining, Inc.                                                                               |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 6.                                                                                                                                                                                                     | The                report filed on June 8, 2006, under Item 8.01 referenced the May                15 and                June 5, 2006 amendments to the SEDA with Cornell Capital Partners,                LP                                |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 7.                                                                                                                                                                                                     | The                report filed on June 15, 2006, under Item 8.01 referenced the June                12,                2006 Final Arbitration Award in the Arbitration with Coastline Capital                Partners                       |
|   |   |                                                                                                                                                                                                   |                                                                                                                                                                                                                                         |
|   |   | 8.                                                                                                                                                                                                     | The                report filed on June 26, 2006, under Item 8.01 referenced the results                of                the June 23, 2006 Annual Shareholders                Meeting.                                                      |

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**SIGNATURES**

|                                 |   | U.S.                ENERGY CORP. |
|--------------------------------------|--------|----------------------------------|
|                                 |   | (Company)                        |
|                                 |   |                             |   |   |
|                                 |   |                             |   |   |
|                                 |   |                             |   |   |
| Date:                August 11, 2006 |   | By:                              | /s/                Keith G. Larsen |   |
|                                 |   |                             | KEITH                G. LARSEN, |   |
|                                 |   |                             | Chairman                and CEO |   |
|                                 |   |                             |   |   |
|                                 |   |                             |   |   |
|                                 |   |                             |   |   |
|                                 |   |                             |   |   |
| Date:                August 11, 2006 |   | By:                              | /s/                Robert Scott Lorimer |   |
|                                 |   |                             | ROBERT                SCOTT LORIMER |   |
|                                 |   |                             | Principal                Financial Officer and |   |
|                                 |   |                             | Chief                Accounting Officer |   |

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