Victory Energy Discusses 2011 Highlights and 2012 Outlook

AUSTIN, Texas, March 30, 2012 /PRNewswire/ -- Victory Energy Corporation (OTCQB: VYEY) today released commentary on its 2011 results and provided some perspective for 2012 regarding its investment strategy, estimated capital and exploration expenditures, production volumes and G&A costs.  In conjunction with this press release, Victory has posted a new detailed slide presentation on its website at www.vyey.com.  The Company expects to file its 2011 annual report on Form 10-K with the Securities and Exchange Commission (SEC) today.

Kenny Hill, Victory Energy's CEO, stated, "We invested considerable time and expense in 2011 to build a foundation for growth. We enter 2012 as a significantly different company thanks to those efforts, and we appreciate the patience and commitment shown by our investors as we navigated through those turnaround efforts.

"In addition to the turnaround efforts, we also made significant investments in new oil and gas assets during the latter half of 2011 and early 2012 and we anticipate a continued acceleration of the pace of capital spend on high value oil and gas properties.

"The remainder of 2012 is when we begin to reap the benefits from last year's investments.  We increased our net acreage position last year by 61% and increased the PV-10 (proved developed) value of our reserves by 38%.  We look forward to the addition of development wells on some of this existing acreage as well as the quantification of proved undeveloped reserves which should also be accretive to shareholder value."

2011 Highlights

During 2011 the Company began to hire a new management team, raised funds through the issuance of convertible debentures, negotiated a new partnership agreement to facilitate access to new capital, settled litigation with a former company officer, and caught up on financial filings with the SEC for 2007, 2008, 2009 and 2010. The accounting, management and legal charges associated with the above events added about $0.8 million to G&A costs in 2011 that are of a non-recurring nature.

As of December 31, 2011, Victory Energy's reserves consisted of 8,000 barrels of oil and condensate ("BO") and 691.1 million cubic feet (MMcf) of natural gas.  This compares to no oil and 709.7 MMcf of natural gas at December 31, 2010.  The discounted present value (PV-10) of the Company's proved reserves increased 38% to $1.4 million at December 31, 2011 compared to $1.0 million the prior year.  Due to a late year completion, the Uno-mas well was not included in the reserves calculation.   

Victory Energy's capital and exploration expenditures totaled $1.1 million in 2011.  The Company participated in the drilling of 9 gross exploration wells and directly acquired an interest in 3 gross producing oil wells. Victory also acquired a 2% working interest in an Oklahoma water flood project.  All oil and gas investments utilized proceeds from the private placement of Convertible Debentures.

2012 Outlook

Victory's objectives are to create long-term shareholder value by increasing oil and gas reserves, improving financial returns (higher volumes and lower G&A costs), and managing capital on our balance sheet. Our work plans and forecast for 2012 are aligned with these objectives.

Leadership Team

On January 10, 2012, Mr. Mark W. Biggers joined the Company as the new Chief Financial Officer.  Mark previously served as a Senior Director in the Energy Practice of Alvarez and Marsal, and prior to that spent over 20 years with Mobil Oil Corporation in a variety of roles.

On January 17, 2012, Mr. Kenneth Hill was elected President and Chief Executive Officer.  Mr. Hill previously served as the Company's Vice President of Operations since January 2011.

Managing Capital and Balance Sheet

On January 12, 2012, the Financial Industry Regulatory Authority approved a reverse stock split and the amended and restated articles of incorporation. As of March 29, 2012, the total number of outstanding common shares is 26,973,707.

As of February 29, 2012, all outstanding convertible debentures and accrued interest charges to-date were converted to common shares. As of that date there was no outstanding debt on the balance sheet.

Estimated Capital and Exploration Expenditures in 2012

Our estimated 2012 capital and exploration budget, for current properties, is forecast to exceed $4.0 million. The company may also invest additional capital not included in the above forecast, including the acquisition of resource play acreage ahead of the land cost curve. Prospects have already been identified.  

Capital expenditures are expected to be funded by cash on-hand, cash flow from operations, the potential sale of conventional oil assets, and new convertible debentures funded by Navitus which has agreed to provide up to $15 million of new capital into the Aurora partnership. 

The primary focus of 2012 capital and exploration expenditures is to further develop existing assets, including the Bootleg Canyon Ellenberger Field where Victory owns a 5% working interest, the recently announced Lightnin' Prospect in Glasscock County, Texas where we  hold  a 75% working interest, and the ClearWater Wolfberry resource play where the Company owns a 1.5% working interest. We also intend to explore the oil potential of the Tippett shale formation in our Adams-Baggett wells where the Company holds a 100% working interest in seven wells and a 50% working interest in two wells.

Victory, through its partnership with Aurora Energy Partners, anticipates drilling or recompleting at least 15 new wells on current properties at an average working interest of 24%. This compares to our participation in 9 new wells in 2011 at an average working interest of 3.3%. Based on their current drilling plans and well result assumptions, management expects full-year 2012 production to be in the range of 42 to 46 MBOE, of which slightly more than half is expected to be oil, with the remainder comprised of natural gas.

Cost Management

General and administrative expenses are expected to decline approximately 40% compared to the previous year, to $1.2 million.  The decline is the result of the elimination of significant non-recurring expenses through 2011 and early Q1 of 2012.  The consolidation of all company personnel and service-related companies to Texas will also contribute to better efficiency and lower operating costs. 

Please note that Victory Energy intends to use its website, www.vyey.com, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the Victory Energy website in the "Investor Relations" section. Accordingly, investors should monitor such portions of the Victory Energy website in addition to following press releases, SEC filings and public conference calls and webcasts.

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About Victory Energy Corporation

Victory Energy Corporation is engaged in the exploration, acquisition, development, and production of domestic oil and gas properties. The company now leverages both internal capabilities and strategic industry relationships to acquire working interest positions in low-to-moderate risk oil and gas prospects. Current assets are held in partnership with Aurora Energy Partners, in which Victory has a 50% ownership interest and is the managing partner.

Future investment will focus primarily on oil or liquid-rich gas projects within longer-life reservoirs that offer lower F&D costs / BOE.

The company had nine wells on production entering FY 2011 and seventeen on production at the end of the calendar year. Acreage held as of March 2012 provides a potential pipeline of 31 additional gross wells that could be drilled. The capital budget for 2012 includes 15 of those 31 wells.  The company also has line of sight to incremental projects beyond current acreage.

The company's current producing oil and gas assets are located in the United States. Download the investor fact sheet for current summary of projects and activity.   Victory Energy is current with its SEC filings and is a full reporting company.  The Company is traded under the ticker symbol VYEY on the OTCQB tier, operated by OTC Markets Group.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

There are forward-looking statements contained in this news release.  They use such words as "intend," "will," "may," "expect," "believe," "plan," or other similar terminology.  These statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results to be materially different than those expressed or implied in such statements.  These factors include, but are not limited to: risks associated with the implementation of the Company's strategic growth plan; legislation and government regulation including the ability to obtain satisfactory regulatory approvals; conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customer base or acts of war or terrorism; availability and cost of materials and labor; demand for natural gas; cost and availability of capital; competition; the Company's overall marketing, operational and financial performance; economic and political conditions; the continued service of the Company's executive officer; adverse developments in and increased or unforeseen legal costs related to the Company's litigation; the success of the Company's strategic partnerships and joint venture relationships; the Company's ability to pay certain debts; adoption of new, or changes in, accounting policies and practices; adverse court rulings; results of other litigation in which the company is involved; and other factors discussed from time to time in the Company's news releases, public statements and/or filings with the Securities and Exchange Commission.  Forward-looking information is provided by Victory Energy Corporation pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors.  In addition, the Company disclaims any intent or obligation to update these forward-looking statements.

SOURCE Victory Energy Corporation