SOURCE: Victory Energy Corporation

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March 31, 2015 17:42 ET

Victory Energy Reports Full Year 2014 Results and Lucas Energy Business Combination Update

AUSTIN, TX--(Marketwired - March 31, 2015) - Victory Energy Corporation, (OTCQX: VYEY) ("Victory" or "the Company"), a Permian Basin focused oil and gas company, today announced financial and operating results for the twelve months ended December 31, 2014 and provided an update for the company's planned business combination with Lucas Energy (NYSE MKT: LEI) ("Lucas" ).

2014 Full Year Highlights and Subsequent Events:

The Business Combination with Lucas Energy

  • On February 4, 2014 the Company entered into a letter of intent and term sheet with Lucas for a proposed business combination.
  • On February 26, 2015 the Company entered into collaboration and funding agreements with Lucas valued at $12 million.
    • Among other things, these agreements provide for the assignment of a 50% working interest in two high-grade Eagle Ford well bores, located in Karnes County, Texas in exchange for funding the drilling and completion of these two wells prior to the merger of the two companies.
    • Based on nearby EOG Resources and Marathon Oil well production volumes, production revenue from these combined wells will initially exceed $.5 million per month to the Company interest (assuming $50 a barrel oil) and add significant proved producing reserves to the combined 2015 company portfolio.
  • The Company and Lucas are working collaboratively to file a registration statement on Form S-4 that will register the securities to be issued in connection with the merger and contain a joint proxy statement for the meetings of the shareholders of Victory and Lucas relating to the approval of the merger. Victory expects the merger to be consummated in the second half of 2015.
  • The Company is currently engaged in conversations with separate third-party funding sources to provide additional capital for the acquisition of proved producing properties (cash-flow) and for the development of proven undeveloped well locations held by Lucas, that remain economically viable at today's NYMEX Strip prices.


  • Cost of production (LOE) for fiscal 2014 decreased 6.4%
  • Sold interest in the Lightnin' property for approximately $4 million in cash and recorded a $2.2 million gain.
  • Research Coverage Initiated by See Thru Equity with a target price of $1.27
  • Upgraded our stock trading platform from the OTCQB to the more transparent and investor friendly OTCQX.
  • Upgraded and supplemented our staff including the hiring of a CFO to help guide the financial success of the company effective June 2, 2014.

"We made significant progress in the last two quarters of 2014 to deal with the new economic realities of the marketplace. The divestiture of the Lightnin' Property ($4.0 million in proceeds) just prior to the acceleration of the oil and gas price collapse allowed us to have the capital we needed to finish the year and ready ourselves for the future," said Kenny Hill, Victory Energy's CEO. "In early Q3 we began shifting our focus from drilling new wells towards acquisitions of proved producing properties. This shift exposed us early on to the economic valuation gap that was taking place between buyers and sellers and eventually led us to the opportunity to combine with Lucas Energy. By combining the two companies, we believe that we can collectively bring together approximately $36 million in PV-10 reserves at current prices, drill and complete two Eagle Ford wells before the merger is complete and increase combined company production revenue to over $.7 million by the third quarter of this year (assuming $50 a barrel oil). We believe that the combination with Lucas Energy will bring stability to the company and de-risk the opportunity for access to development and acquisition capital. We look forward to the consummation of the merger, which is conditioned upon, among other things, an up-listing to the NYSE MKT."

Revenues for fiscal 2014 decreased 5.5% year-over-year to $695,318 due primarily to the decrease in the average price received for oil and natural gas sales. Total net production was 38.6 BOE/D, up 6.0% from 36.4 BOE/D in fiscal 2013.

Cost of production (LOE) for fiscal 2014 was $190,207, a decrease of 6.4% from $203,132 in fiscal 2013. Net loss attributable to Victory Energy was $3,209,932 or $0.11 per share, for the twelve months ended December 31, 2014 compared to a loss of $1,686,627 and $0.06, respectively, in fiscal 2013. The weighted-average shares outstanding at December 31, 2014 were 28.5 million shares compared to 27.6 million at December 31, 2013.

General and administrative expenses were $2,687,405, up from $1,507,740 in fiscal 2013. General and administrative expenses increased because of business growth related expenses associated with our combined acquisition and divestiture of approximately $8 million in property transactions, an expansion in our investor relations and capital markets awareness efforts, additional legal and accounting costs associated with public company reporting requirements, transaction fees associated with the move from the OTCQB to the OTCQX stock trading platform and director/employee stock based compensation utilized for key employee acquisition and retention (all noncash). 

Victory had approximately $2,941 of cash and $1.2 million of total assets at December 31, 2014. Total shareholders' deficit was $1.5 million at December 31, 2014. The company's cash on hand is a reflection of management's desire to only draw capital from its partner Navitus Energy Group and from the banking credit facility when needed for asset acquisitions or operations. 

On February 20, 2014, Aurora Energy Partners, as borrower, closed a $25 million revolving credit facility with Texas Capital Bank. The credit facility includes a $1.45 million adjustable borrowing base, with the remainder available for acquisitions. The senior facility is secured by all the assets of Aurora Energy Partners, with pricing at prime plus 1%. Total debt outstanding at December 31, 2014 from its credit facility was $800,000.

Operational Updates

  • Bootleg Canyon Property in Pecos County, Texas had two producing Ellenberger oil wells and one producing Connell gas well as of December 31, 2014; estimated ten remaining well locations on the property.
  • Adams-Baggett Property in Crockett County, Texas had nine wells where Victory Energy holds different working interest and net revenue interest.
  • Fairway Project in Howard County, Texas where Victory Energy acquired five producing wells and the related production.
  • Victory Energy continues to own a 1.5% working interest and 1.125% net revenue interest in the remaining 2,242 acres of the Clearwater Wolfberry Play in Howard County, Texas.


Management's short-term focus is on completing the Lucas merger in the second half of 2015. We plan to work with Lucas and the operator to drill two Eagle Ford wells and bring them into production prior to the consummation of the merger. The two wells of focus are part of a four well proven undeveloped location and are expected to produce IRR's in the 30% range at current oil and gas prices. Additionally, we are evaluating the acquisition of proved producing assets as a vehicle to bring additional cash-flow and proved reserves to the combined company. Third-party funding sources have shown an interest in the drilling development and acquisitions, but financing has not yet been secured. Driving shareholder value is our focus. The Company leverages both internal capabilities and strategic industry relationships to acquire working interest positions in low-to-moderate risk oil and natural gas prospects.

In fiscal 2015, the company plans to:

  1. Complete its proposed business combination with Lucas Energy (NYSE MKT: LEI).
  2. Grow proved reserves and cash flow by focusing on the development and acquisition opportunities available.

About Victory Energy Corporation

Victory Energy Corporation (OTCQX: VYEY), is a public held, growth-oriented oil and gas exploration and production company based in Austin, Texas, with additional resources located in Midland, Texas. The company is focused on the acquisition and development of stacked multi-pay resource play opportunities in the Permian Basin that offer predictable outcomes and long-lived reserve characteristics. The company presently utilizes low-risk vertical well development, which offers repeatable and profitable outcomes. Current Company assets include interest in proven formations such as the Spraberry, Wolfcamp, Wolfberry, Mississippian, Cline and Fusselman formations. For additional information on the company, please visit

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management's experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words "will," "potential," "believe," "estimated," "intend," "expect," "may," "should," "anticipate," "could," "plan," "project," or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Among these forward-looking statements are statements regarding EURs, estimated BOE, estimated future gross undiscounted cash flow and estimated drilling and completion costs. Also included among these forward-looking statements are any statements regarding the expected completion of the proposed business combination between Lucas and Victory, benefits and synergies of the proposed business combination, the timing of production under wells, Victory's ability to obtain funding for the Eagle Ford or other wells that are being transferred to Victory, future opportunities of the combined company, and any other statements regarding Victory's or Lucas' beliefs, plans, objectives, financial conditions, assumptions or future events. Although Victory believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this news release. These include risks that may affect the proposed business combination and related proposed development of the Eagle Ford wells, including the satisfactory completion of due diligence by the parties, the ability of the parties to negotiate and enter into a definitive merger agreement and, if such an agreement is entered into, the satisfaction of the conditions contained in the definitive merger agreement, any delay or inability to obtain necessary approvals or consents from third parties, the ability of the parties to obtain financing for funding obligations, the inability of Lucas to maintain its listing on the NYSE MKT, the ability of the parties to realize the anticipated benefits from the proposed business transaction. Other risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements, include, our ability to successfully complete pending acquisitions, integrate them with our operations and realize the anticipated benefits from the acquisitions, any unexpected costs or delays in connection with the acquisitions, changes to drilling plans and schedules by the operators of prospects, overruns in costs of operations, hazards, delays, and any other difficulties related to drilling for and producing oil or gas, the price of oil, NGLs, and gas, results of marketing and sales of produced oil and gas, estimates made in evaluating reserves, competition, general economic conditions and the ability to manage and continue growth, and other factors described in the Company's most recent Annual Report on Form 10-K and any updates to those risk factors set forth in the Company's Quarterly Reports on Form 10-Q. Further information on such assumptions, risks and uncertainties is available in the Company's other filings with the Securities and Exchange Commission ("SEC") that are available on the SEC's website at, and on the Company's website at Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. 

December 31, 2014 and 2013 
ASSETS  12/31/2014   12/31/2013  
Current Assets           
 Cash and cash equivalents  $2,941   $20,858  
 Accounts receivable - less allowance for doubtful accounts of $200,000, and $200,000 for 2014 and 2013, respectively   41,565    116,542  
 Accounts receivable - affiliate   124,367    18,571  
 Prepaid expenses   21,846    38,663  
  Total current assets   190,719    194,634  
Fixed Assets           
 Furniture and equipment   46,883    43,173  
 Accumulated depreciation   (17,965 )  (11,597 )
  Total furniture and fixtures, net   28,918    31,576  
 Oil gas properties, net of impairment (successful efforts method)   2,838,573    3,715,648  
 Accumulated depletion, depreciation and amortization   (1,942,380 )  (1,517,836 )
  Total oil and gas properties, net   896,193    2,197,812  
Other Assets           
  Deferred debt financing costs   87,883    -  
Total Assets  $1,203,713   $2,424,022  
Current Liabilities           
 Accounts payable  $1,119,896   $351,435  
 Accrued liabilities   221,209    196,913  
 Accrued liabilities - related parties   477,934    118,542  
 Liability for unauthorized preferred stock issued   9,283    9,283  
 Note payable   800,000    -  
 Asset retirement obligation   3,721    -  
  Total current liabilities   2,632,043    676,173  
Other Liabilities           
 Asset retirement obligations   40,493    51,954  
  Total long term liabilities   40,493    51,954  
Total liabilities  $2,672,536   $728,127  
Stockholders' Equity (Deficit)           
 Common stock, $0.001 par value, 47,500,000 shares authorized, 29,202,826 shares and 27,563,619 shares issued and outstanding for 2014 and 2013, respectively  $29,203   $27,564  
 Additional paid-in capital   34,974,441    34,404,239  
 Accumulated deficit   (40,111,826 )  (36,901,894 )
  Total Victory Energy Corporation stockholders' deficit   (5,108,182 )  (2,470,091 )
 Non-controlling interest   3,639,359    4,165,986  
  Total stockholders' equity (deficit)   (1,468,823 )  1,695,895  
Total Liabilities and Stockholders' Equity  $1,203,713   $2,424,022  

The accompanying notes are an integral part of these consolidated financial statements

For the years ended December 31, 2014 and 2013 
   12/31/2014   12/31/2013  
 Oil and gas sales  $695,318   $735,413  
  Total revenues   695,318    735,413  
Operating Expenses:           
 Lease operating costs   190,207    203,132  
 Exploration and dry hole cost   56,351    112,123  
 Production taxes   34,867    44,218  
 General and administrative   2,687,405    1,507,740  
 Impairment of oil and natural gas properties   3,721,042    640,583  
 Depreciation/depletion/amortization   430,912    378,398  
  Total operating expenses   7,120,784    2,886,194  
Loss from operations   (6,425,466 )  (2,150,781 )
Other Income (Expense):           
 Gain on sale of oil and gas properties   2,170,725    20,765  
 Management fee income   90,785    14,708  
 Interest expense   (65,181 )  (830 )
  Total other income and expense   2,196,329    34,643  
Loss before Tax Benefit   (4,229,137 )  (2,116,138 )
Tax benefit   -    -  
Net loss   (4,229,137 )  (2,116,138 )
Less: Net loss attributable to non-controlling interest   (1,019,205 )  (429,511 )
Net loss attributable to Victory Energy Corporation  $(3,209,932 ) $(1,686,627 )
Weighted average shares, basic and diluted   28,453,976    27,563,619  
Net income (loss) per share, basic and diluted  $(0.11 ) $(0.06 )

The accompanying notes are an integral part of the consolidated financial statements

For the years ended December 31, 2014 and 2013 
   12/31/2014   12/31/2013  
Net loss  $(4,229,137 ) $(2,116,138 )
Adjustments to reconcile net loss to net cash used in operating activities           
Accretion of asset retirement obligations   3,360    3,119  
Amortization of debt discount and financing warrants   34,586    -  
Depletion, depreciation, and amortization   430,912    378,398  
Gain from sale of oil and gas properties   (2,170,725 )  (20,765 )
Impairment of oil and natural gas properties   3,721,042    640,583  
Stock based compensation   490,174    52,106  
Stock grants in exchange for services   81,667    -  
Warrants for services   -    27,060  
Change in operating assets and liabilities           
Accounts receivable   74,977    40,939  
Accounts receivable - affiliate   (105,796 )  (18,571 )
Prepaid expense   16,817    30,030  
Accounts payable   131,213    347,096  
Accounts liabilities - related parties   359,392    101,038  
Accrued interest   -    (25,639 )
Accrued liabilities   24,296    (19,531 )
Net cash used in operating activities   (1,137,222 )  (580,275 )
Drilling costs   (841,270 )  (2,346,482 )
Sale-farm out of leaseholds   -    160,000  
Acquisition of oil and gas properties   (3,214,872 )  -  
Proceeds from sale of oil and gas properties   4,031,625    375,000  
Renewal of leasehold costs   (22,577 )  (81,550 )
Purchase of furniture and fixtures   (3,710 )  -  
Net cash used in investing activities   (50,804 )  (1,893,032 )
Non-controlling interest contributions   1,140,000    2,336,000  
Non-controlling interest distributions   (647,422 )  -  
Debt financing costs   (122,469 )  -  
Proceeds from debt financing   1,233,000    -  
Principal payments on debt financing   (433,000 )  -  
Net cash provided by financing activities   1,170,109    2,336,000  
Net Change in Cash and Cash Equivalents   (17,917 )  (137,307 )
Beginning Cash and Cash Equivalents   20,858    158,165  
Ending Cash and Cash Equivalents  $2,941   $20,858  
Supplemental cash flow information:           
Cash paid for:           
 Interest  $30,595   $-  
Non-cash investing and financing activities:           
 Drilling Costs  $637,248   $-  
 Acquisition of oil and gas properties  $182,250   $-  

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