Victory Energy Reports Second Quarter 2012 Financial And Operational Results

AUSTIN, Texas, Aug. 14, 2012 /PRNewswire/ -- Victory Energy Corporation (OTCQB: VYEY) announced today financial and operational results for the second quarter of 2012.  The data reported represents the combination of Victory Energy and Aurora Energy Partners and is referred to as "the Company's" results, in accordance with GAAP and our historical financial reporting. Victory owns a 50% interest in the oil and gas assets of Aurora Energy Partners and serves as its managing partner.

Kenny Hill, Victory Energy's CEO, stated, "We're pleased to report a sequential improvement in revenues, earnings, and oil production in the second quarter.  We're particularly proud of the 49% sequential reduction of cash G&A expense.

"We commenced drilling on three gross wells during the quarter and all three appear to be commercially successful. One of the three wells spud in the second quarter now has oil flowing to tanks, while the other two are undergoing completion or testing. The Company has an average working interest position of 4.3% across those three wells. More information on all wells will be forthcoming in September and October as production history is established.

"During the first half of the year, our capital expenditures of $0.9 million were weighted towards acreage acquisition, whereas in the second half of this year, the $1.3 million we have budgeted will be much more heavily weighted towards drilling and completion operations.  As a result, we expect a ramp-up in production during the second half of the year, especially during the fourth quarter, assuming success on our prospects at  Pinetop, Bootleg Canyon, Chapman Ranch and Lightnin'. Any success on the Lightnin' prospect will have a significant impact on the Company's reserves, production and revenue due to holding a larger working interest position."

During the three months ended June 30, 2012, Victory generated revenues of $68,151, compared to $81,873 in the second quarter of 2011 and $63,965 in the first quarter of 2012.

Oil sales volumes increased to 289 barrels during the second quarter, compared to negligible oil production in the year ago period, and was up 42% from the first quarter.  Oil prices realized during the second quarter  declined to $90.90 from $95.69 per barrel in the first quarter.  The Company's natural gas production totaled 13,935 Mcf in the second quarter of 2012, compared to 16,444 Mcf in the prior year period and 15,635 Mcf in the first quarter of 2012 which reflects normal field decline.  The average realized price per Mcf declined to $3.51 from $6.51 in the prior year period and $4.74 in the first quarter reflecting a natural gas surplus and downward pressure on prices across the industry.

The Company reported an after tax, combined net loss of $396,735, or $0.01 per share, for the second quarter of 2012 compared to a loss of $1.1 million, or $0.36 per share, in the prior year period and $5.0 million, or $0.46 per share, in the first quarter.  Second quarter 2012 results included non-cash compensation expense of $258,110 and a gain on the sale of oil and gas assets of $268,169 related to the previously announced sale of the Atwood and Jones County projects.  Second quarter 2011 results included non-cash compensation expense of $16,240.  First quarter 2012 results included $0.3 million of non-cash compensation expense and $3.9 million of non-cash finance related charges.

Victory had $320,015 in cash on the balance sheet as of June 30, 2012.  Capital expenditures for oil and gas properties for the first half of 2012 totaled $862,092, and the Company expects to spend approximately $1.6 million in the second half of the year.  Funding is expected to come from cash generated by operations, the sale of a working interest in the Lightnin' prospect, as well as capital raised through the Company's financing arrangement with the Navitus Energy Group.  Victory may also seek additional sources of capital.

OPERATIONS UPDATE
Below is a summary of the current status at several of the Company's oil and gas prospects.  All ownership interests reflect the working interest held by Aurora Energy Partners.  Please note that cash revenue tends to trail initial production by 60-90 days due to gathering line connectivity or other logistical and commercial matters to deal with.

Pinetop - Acquired in June, Victory holds a 4% Before Payout (BPO) working interest and a 2.94% net revenue interest, and a 3% After Payout (APO) working interest at a 2.205% net revenue interest in this oil and gas prospect.  A total of nine wells are planned for this prospect.  Based on 3D seismic data and previously producing wells drilled in the area, Victory estimates potential ultimate recovery per well of 426,741 BOE and a potential IP rate of 330 BOE per day (86% liquids).  The first test well reached a total depth of approximately 11,700' in late July, was drillstem tested at flow rates above anticipated levels and is now being completed as a producer. The Company expects to be in production for at least three months before final results are released to the market.  Subsequent wells will be drilled at the APO working interest.

Chapman Ranch - Acquired in April, the Chapman Ranch two well prospect is located in south central Nueces County, Texas. The prospect wells are a conventional drilling play targeting the Frio Sands formation.  The first well was drilled and is being completed. Multiple pay zones were present in the logs, and the operator has begun completion operations to test for commercial flows.  A second well is planned for drilling later this year. Victory owns a 5% WI (3.75% NRI) in the prospect. The Company expects production from this well to impact revenue in October or early November. 

Lightnin' - The first well at this prospect is now expected to spud in October.  Prior to the commencement of drilling operations, the Company anticipates farming out a 50% working interest in this prospect to a third party prior to spud.  The Company currently holds a 75% working interest (56.25% NRI) in the undeveloped acreage for this prospect.

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 (OTCQB: VYEY) is a non-operating company engaged in the exploration, acquisition, development, and production of domestic oil and gas properties. Victory leverages both internal capabilities and strategic industry relationships to acquire working interest positions in low-to-moderate risk oil and gas prospects.

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

The Company had seventeen wells on production at the end of the calendar year 2011 and has an estimated forty-five (45) additional gross wells available to pursue on its currently held ten-thousand eight hundred and fifty-nine (10,859) acres.

Victory, through its partnership with Aurora Energy Partners, has acquired four prospects this year totaling 2,196 gross acres with the potential to add over 477,066 barrels of net oil equivalent to the Company's future cash flows. The Company's current producing oil and gas assets are located onshore in Texas and New Mexico.

The Company's objective is to create long term shareholder value by increasing oil reserves, improving financial returns (higher production volumes, lower costs), and managing the capital on our balance sheet.

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.

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SOURCE Victory Energy Corporation