U.S. Energy Corp. (NASDAQ: USEG) said Aug. 22 it aims to double its existing production base through the acquisition of Bakken properties for roughly $17.8 million in cash and stock.

The acquisition consists of a non-binding memorandum of understanding between Denver-based U.S. Energy and APEG I Partners for the purchase of all of APEG's interest in 67 wells concentrated in Williams and McKenzie counties, N.D.

APEG is a Texas partnership and an affiliate of U.S. Energy's largest stockholder, APEG Energy II LP.

The APEG assets include 1,600 net acres with 400 boe/d of current production and 1.1 million boe of proved developed reserves (79% oil). The assets are complementary to U.S. Energy's existing portfolio in North Dakota with similar operators and development potential, according to the company release.

Denver-based U.S. Energy expects the APEG acquisition to create additional opportunities for development and acreage swaps that would permit the company to continue consolidating its leasehold position in the area.

"This is an exciting transaction for U.S. Energy that, upon closing, will approximately double the company's existing production base in a highly economic area in which we have significant experience," CEO David Veltri said in a statement.

"While management has been primarily focused over the past several quarters on the divestment of both legacy mining obligations and underperforming nonoperated oil and gas assets, upon the closing of the transaction, we would complete an initial step on our mission to build shareholder value with the cooperation and support of our strategic partner, Angelus Private Equity Group," Veltri continued.

In conjunction with Angelus, he said U.S. Energy successfully restructured its balance sheet while also adding oil assets to the company's portfolio currently focused in the Williston Basin of North Dakota and South Texas.

"U.S. Energy will remain focused on adding accretive assets that immediately increase the production, revenue and cash flow of the company," he said. "Additionally, through proactively enhancing, developing and drilling on existing company assets, such as our recent announcement regarding participation in continued drilling that will target the Georgetown Formation in Zavala County, Texas, we can begin to pull forward value from legacy company assets that have significant upside opportunity."

Additionally, U.S. plans to establish a new $8 million revolving credit facility, for which the company said it has received a non-binding term sheet from a traditional reserved based lender. Subsequent to closing, the company plans to continue reducing leverage through positive cash flow from operations and potential strategic dispositions, using the proceeds to reduce borrowings under the new credit facility.

The closing of the APEG acquisition is conditioned on obtaining the required debt and equity financing, NASDAQ approval and the approval of the stockholders of the company at a special meeting to be scheduled for December. If completed, the acquisition will have an effective date of July 1.

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