July 6, 2007

U.S. ENERGY CORP. PROVIDES “LUCKY JACK” MOLYBDENUM PROJECT UPDATE KOBEX APPROVES $14 MILLION BUDGET

Riverton, Wyoming (July 6, 2007) — U.S. Energy Corp. (NASDAQ Capital Market:  “USEG”) is pleased to provide the following update on its “Lucky Jack” molybdenum project located in west central Colorado.

Background
The Lucky Jack (formerly known as Mt. Emmons) molybdenum project was originally discovered by AMAX Inc. in the 1970s on mineral claims held by U.S. Energy Corp. and Crested Corp. (“USECC”).  The mineral claims were subsequently sold to AMAX, which reportedly spent in excess of $150 million delineating and planning for the production of a “world-class” molybdenum deposit.  In 1980, AMAX was granted a permit for a 20,000 ton per day (tpd) block cave mining operation.  They did not sign the permit due to depressed molybdenum prices.  Historical records filed with the Bureau of Land Management (BLM) in the 1990s for the application of patented mineral claims identify resources of some 220 million tons of having a grade of 0.366% MoS2.  A high grade section of the mineralization containing some 22.5 million tons at a grade of 0.701% MoS2 was also reported.

In 2002, water rights for the property were granted, and in 2004 additional patents were granted by the BLM.  In 2006, the property was contractually returned to USECC by Phelps Dodge Corporation, the successor to AMAX.  In 2007, USECC and Kobex Resources, Ltd. (TSX Venture Exchange:  “KBX.V”) entered into an agreement whereby Kobex has a right to earn up to a 65% interest in the project and reduce USECC’s gross royalty to 2%, if certain terms and conditions are met (see April 3, 2007 8-K filing).

Project Status
Currently, USECC and Kobex (“the companies”) are evaluating historical data and engineering studies ranging from a 6,000 tpd to a 20,000 tpd operation for drafting a Plan of Operations (POO) to be submitted to the U.S. Forest Service in the fourth quarter of 2007.  The companies have retained consultants to prepare hydrological, geotechnical, electrical, transportation and socioeconomic studies.  Additionally, several upgrades have been made at the water treatment plant and more are planned to optimize operations.

The companies initiated a community relations program with the hiring of Clyde Gillespie in October 2006.  Mr. Gillespie is a former Kinross Gold employee who moved to Gunnison, Colorado after spearheading the effort to obtain a permit for the Buckhorn Gold Project in north-central Washington State.  While with Kinross, Clyde also permitted mines in Alaska and Nevada.  Once the POO has been filed, the companies plan to work with the local communities concerning mine plan options.

In addition, a comprehensive underground rehabilitation program will be started to enhance the existing underground mine workings.  The program is scheduled to begin later this month and should be completed in nine to ten months.  This work will pave the way for drilling crews to enter existing drill stations in the high-grade section of the mine for the commencement of a close-spaced drilling program to further delineate the deposit.  Diamond drill results will facilitate further resource analyses and a full feasibility study to be initiated in early 2008.

In addition to Mr. Gillespie and numerous consultants now working on the project, Kobex has hired project management, engineering, geology, resource and administrative personnel that are collectively assigned to the project at Kobex’s corporate offices in Vancouver, British Columbia, and at field offices in both Gunnison and at the Lucky Jack Project site near Crested Butte, Colorado.  The USECC joint venture (between U. S. Energy and its majority-owned subsidiary Crested Corp.) contributes management and accounting resources from its Riverton, Wyoming headquarters.

Last week Kobex management approved a $14 million (May 1, 2007 through April 30, 2008) budget for the project.  To date (since December 2006), approximately $5 million in expenditures have been authorized for work presently underway.  Kobex is contractually required to spend only $4.2 million this year but any amounts spent in excess of $4.2 million will be credited towards future years’ expenditure commitments.

The companies will further evaluate the geological model of the mine, the mine production schedule, the tailings and plant design, infrastructure and manpower requirements.  The full feasibility study should be completed by 2010, and an Environmental Impact Statement decision should also be issued during that year.  If these timelines are met, the companies expect construction of the mine to begin in 2011, with first production anticipated in 2013.

The Market
The market for molybdenum remains robust.  Since 2005, annual global demand has risen from 380 million pounds (lbs.) to an estimated 426 million lbs. in 2007, with demand projected to reach 461 million lbs. by 2009.  With demand being fueled by economic and industrial growth in China, India, the U.S. and the global energy sector, some economists forecast growth at a 4.5% compound annual growth rate for the foreseeable future.  If such forecasts prove realistic, worldwide demand for molybdenum could reach or exceed 700 million pounds annually by 2020.  Today molybdic oxide (Mo) is trading in the $33-35/lb. range in a tight supply/demand market environment.

Kobex Funding
On May 11, 2007, Kobex announced the completion of an approximate $25 million equity financing, with the proceeds of the capital raise dedicated to the Lucky Jack project.  On May 23, 2007, Kobex paid the first $750,000 option payments with shares of Kobex common stock. For more information please see the Form 8-K filed on June 4, 2007.

“We are very pleased with the progress that has been made since signing our Letter Agreement on October 10, 2006 with Kobex,” stated Mark J. Larsen, President and Chief Operating Officer of U.S. Energy Corp.  “Kobex’s experienced management team has recognized the ‘world-class’ nature of this molybdenum deposit and has immediately set out to advance the project towards further resource delineation in an effort to commence a full feasibility study as soon as possible.  They are putting their recently raised capital to work in an accelerated fashion and we couldn’t be more delighted with their efforts and management team.  The market for molybdenum is projected to remain robust, and I firmly believe that Lucky Jack is a mine whose time has come.  With technological advances, sound planning and strong management, I am very confident that our collective efforts will allow Lucky Jack to become the world’s next major primary molybdenum mine.”

"As the Lucky Jack project moves forward,  we will continue to engage the local communities in the permitting process with the goal of making this project a win/win situation for all stakeholders to the maximum extent possible,"  stated Keith Larsen, Chairman of U. S. Energy Corp.  "Kobex and USECC are fully committed to minimizing environmental impacts and to also work with the public at large about the significant economic benefits that will be realized when the mine is brought into production."


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