RIVERTON, Wyo., Oct. 1, 2008  -- U.S. Energy Corp. today announced that PetroQuest Energy L.L.C. has spudded the Highlands Prospect in
Louisiana.

U.S. Energy Corp. is participating in this well as a 20% working interest partner with PetroQuest. This initial well will be drilled to a depth of about 13,700 feet, and PetroQuest believes it is targeting a
resource of 12 BCFE. This well is the second of the previously announced three well drilling program. Drilling is expected to be completed in the fourth quarter of 2008.

"With drilling completed at the Bluffs prospect, our oil and gas program continues to expand as our partner, PetroQuest, has redeployed the rig to begin drilling at the second of three projects where we have
an interest," stated Keith Larsen, CEO of U.S. Energy Corp. "As we advance our oil and gas program through the balance of 2008, we expect to report initial production rates at the Bluffs and additional
drilling at our other prospects. With approximately $70 million held in U.S. Treasuries and cash, we are well positioned to take advantage of any additional opportunities identified in the year ahead," he added.