United States Exploration Announces First-Quarter Earnings, Sale of New Kansas Stock and Preferred Stock Redemption

Business Wire, May 16, 2001

Business Editors

DENVER--(BUSINESS WIRE)--May 16, 2001

United States Exploration, Inc. (ASE:UXP) today announced earnings for the first quarter of 2001.

Net income for the quarter was $2,800,000, before accrued preferred stock dividends, compared to a loss of $450,000 in the first quarter of 2000. After accrued preferred stock dividends, first-quarter income applicable to common stockholders was $2,750,000 ($.15 basic and $.14 fully diluted per share) in 2001, compared to a loss of $500,000 ($.03 basic and fully diluted per share) in 2000.

Increased product pricing and the results of the Company's ongoing development program more than offset the effects of the sale of 60 producing wells effective May 1, 2000. Sales of Company-produced oil and gas increased from $2,300,000 in the first quarter of 2000 to $4,700,000 in the first quarter of 2001. During the first quarter of 2000, interest was accruing on the Company's former credit facility at the rate of approximately $934,000 per quarter. Interest in the first quarter of 2001 was approximately $41,000.

"The first-quarter results reflect the combined effects of the restructuring of the Company's debt in 2000 and the general increase in oil and gas prices," said Bruce D. Benson, Chairman, CEO and President of the Company. "We are proceeding with the development of our properties in the Wattenburg area and believe that our cash flow and available borrowings will be more than adequate to complete that process. The Company is encouraged by continued improved fundamentals in the industry and continues to aggressively pursue strategic alternatives with its advisor McDonald Investments."

The Company also announced that it has called for redemption all of the outstanding shares of its Series C Convertible Preferred Stock. Some holders of the Series C Preferred elected to convert their shares into common stock rather than have them redeemed. As a result of these redemptions and conversions, the Company will pay $2,295,468 to redeem 378,166 shares of Series C Preferred and will issue 144,981 shares of common stock upon conversion of the remaining 65,000 shares of Series C Preferred. At the time of the call for redemption, the Company paid $584,980 in accrued dividends on the Series C Preferred.

In April 2001, the Company acquired oil and gas leases covering approximately 65,000 acres, primarily in Neosho County, Kansas, from Benson Mineral Group, Inc. ("BMG"), for a purchase price of approximately $1,450,000. BMG is owned by Mr. Benson. The Company announced today that it has entered into an agreement to sell its interests in those leases to an unaffiliated independent oil and gas company for approximately $6,000,000. The sale agreement is subject to certain conditions, including title and environmental investigations by the purchaser. The transaction is expected to close in June 2001.

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning the results of oil and natural gas drilling. Although the company believes that its expectations are based on reasonable assumptions, it can give no assurance that expected results will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include drilling risks, operating risks, market risks, including particularly the effects of fluctuations in prevailing price levels for oil and gas and the availability and cost of necessary goods and services, risks related to the need to obtain additional financing for development of its oil and gas properties and other risk factors as described in the Company's Form 10-QSB for the quarter ended September 30, 2000, as filed with the Securities and Exchange Commission.

United States Exploration, Inc. is engaged in the acquisition, exploration, development, production and marketing of natural gas and crude oil in North America. The Company's principal reserves and producing properties are located in northeast Colorado. The Company's common stock trades on the American Stock Exchange under the symbol UXP.