exhibit10_1.htm


    
      

    

     

     

    
      877 North 8th West, Riverton,
WY  82501  USA, Ph:  (307) 856-9271, Fx:  (307) 857-3050,
www.usnrg.com


      


      


      For
Immediate Release

      


      U.S.
ENERGY CORP. SIGNS LEASE PURCHASE AND DRILLING AGREEMENT WITH PRIVATE
TEXAS-BASED COMPANY

      


      PROVIDES
UPDATE ON RECENTLY COMPLETED BLUFFS PROSPECT

      


      RIVERTON, Wyoming – October 13,
2008 – U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) (“USE” or the
“Company”), a natural resources exploration and development company with
interests in molybdenum, oil and gas, and real estate, today announced that it
has entered into a Lease Purchase and Drilling Agreement with a private,
Texas-based oil and gas company to acquire a 25% non-operating working interest
in an oil prospect located in east Texas.

      


      Under the
terms of the agreement, U.S. Energy will pay a $45,000 prospect fee and be
responsible for 33% of the costs for the first well to the tanks, if
successful.  The initial commitment under the agreement is
approximately $360,000, and dry hole costs are estimated at $230,000 net to
USE.  Subsequent wells will be drilled on a “heads-up” basis, with the
Company responsible for 25% of all costs.  Spudding of the first well
is expected to commence in late 2008 or the 1st quarter
of 2009 with a planned drilling depth of approximately 6,000
feet.  The currently envisioned drilling program could include up to
10 wells.

      


      “Our oil
and gas strategy continues to gain momentum having now secured a third working
interest partner,” stated Keith Larsen, CEO of U.S. Energy Corp.  “We
remain committed to assembling a solid and diverse portfolio of oil and gas
assets and are actively seeking and carefully evaluating additional
opportunities to acquire working interests in known producing regions,” he
added.

      


      The
prospect is adjacent to an oil field that produces low gravity oil from the
Upper Cretaceous sandstones, and is characterized as a low-to-moderate risk
stepout drilling prospect.  Well recoveries in the immediate area have
averaged 100,000 to 250,000 barrels per well.

      


      The
Bluffs Prospect Update:

      The
Company also announced today that the operator of the Bluffs Prospect,
PetroQuest Energy LLC (PetroQuest) (NYSE:  PQ), recently announced in
an October 6th
Operations and Guidance Update that it is currently installing facilities to
produce the recently completed Bluffs prospect.  The well logged
approximately 85 net feet of pay and production is expected to commence within
approximately four weeks at an initial gross rate of approximately 10,000 Mcfe
per day.  U.S. Energy Corp. has an approximate 15% working interest
and an approximate 11% net revenue interest in the well.

      


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      Press
Release

      October 13, 2008

      Page
2 of 2


    
      



      


       

      About
U.S. Energy Corp.

      


      U.S.
Energy Corp. is a diversified natural resource company with interests in
molybdenum, oil and gas, and real estate.  The Company is
headquartered in Riverton, Wyoming, and its common stock is listed on The NASDAQ
Capital Market under the symbol “USEG”.

      


      * * * *
*

      


      Disclosure
Regarding Mineral Resources Under SEC and Canadian Regulations; and
Forward-Looking Statements

      


      The
Company owns or may come to own stock in companies which are traded on foreign
exchanges, and may have agreements with some of these companies to acquire
and/or develop the Company’s mineral properties.  An example is Sutter
Gold Mining Inc.  These other companies are subject to the reporting
requirements of other jurisdictions.

      


      United
States residents are cautioned that some of the information available about our
mineral properties, which is reported by the other companies in foreign
jurisdictions, may be materially different from what the Company is permitted to
disclose in the United States.

      


      This
news release includes statements which may constitute “forward-looking”
statements, usually containing the words “believe,” “estimate,” “project,”
“expect," or similar expressions.  These statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995.  Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements.  Factors that would cause or contribute to
such differences include, but are not limited to, future trends in mineral
prices, the availability of capital, competitive factors, and other
risks.  By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revision or changes
after the date of this release.

      


      For
further information on the differences between the reporting limitations of the
United States, compared to reports filed in foreign jurisdictions, and also
concerning forward-looking statements, please see the Company’s Form 10-K
(“Disclosure Regarding Forward-Looking Statements”; “Disclosure Regarding
Mineral Resources under SEC and Canadian Regulation”; and “Risk Factors”); and
similar disclosures in the Company’s Forms 10-Q.

      


      *
* * * *

      


      For
further information, please contact:

      


      Reggie
Larsen

      Director
of Investor Relations

      U.S.
Energy Corp.

      1 800 776
9271

      Reggie@usnrg.com

      


      Nick
Hurst

      The
Equicom Group

      Investor
Relations

      403 538
4845

      nhurst@equicomgroup.com