AUSTIN, Texas, Nov. 14, 2012 /PRNewswire/ -- Victory Energy Corporation (OTCQB: VYEY) announced today that financial and operational results for the third quarter of 2012 have been filed with the Securities and Exchange Commission (SEC).   A more detailed Form 10-Q is available on the company web site.  

Kenny Hill, Victory Energy's CEO, stated, "The Company entered 2012 with a 94% gas-weighted, proved and developed (PDP) reserves of 121,080 barrels of oil equivalent (BOE).  Our primary goal this year was to shift our reserve focus to a predominantly oil-centric development strategy while acquiring larger land positions that offer multiple well locations capable of delivering a rapid increase in reserves and an improvement in cash flow.  After acquiring new prospects during the first half of the year totaling 2,196 gross acres with the potential to add over 477,066 BOE of future oil weighted reserves to the Company's net interest, that goal is beginning to deliver its first benefits.  Our third quarter saw a 13% sequential growth in revenues and an increase in oil production volumes that reflect the strategic shift toward oil.

"As we continue to drill available locations on our current properties, and add additional properties that are accessible to the Company, we anticipate a continued acceleration toward an oil-weighted portfolio and the first addition of proven undeveloped (PUD) and probable reserves by the time our reserves are audited and reported for 2012" 

Victory had $99,363 in cash on the balance sheet as of September 30, 2012.  Subsequent to the end of the third quarter, Navitus Energy Partners contributed  a further $600,000 in additional capital.  Future funding is expected to come from cash generated by operations, the sale of a 50% working interest position in the Lightnin' prospect, capital raised from third party institutions and through the Company's existing financing arrangement with the Navitus Energy Group.  Capital expenditures for oil and gas properties for the first nine months of 2012 totaled $925,933 million, and the Company expects to spend approximately $100,000 to $200,000 for the remainder of the year. 

During the three months ended September 30, 2012, Victory generated revenues of $77,035, compared to $90,570 in the third quarter of 2011 and $68,151 in the second quarter of 2012.

Oil sales volumes increased to 406 barrels during the third quarter, compared to 111 barrels in the year ago period, and 289 barrels in the second quarter of 2012.  The 40% sequential increase in oil production was due to completion of the second development well at Bootleg Canyon.  The Company's natural gas production totaled 14,349 Mcf compared to 16,688 Mcf in the prior year period and 13,935 Mcf in the second quarter of 2012.

Oil prices realized during the third quarter declined to $81.39 per barrel from $87.75 in the prior year period and $90.90 in the second quarter.  The average realized price per Mcf declined to $4.03 compared to $7.10 in the prior year period and increased from $3.51 in the second quarter.

The Company reported an after tax, combined net loss of $868,093, or $0.03 per share, for the third quarter of 2012 compared to a loss of $765,134, or $0.10 per share, in the prior year period and $396,735, or $0.01 per share, in the second quarter.  Third quarter 2012 results included a non-cash charge for bad debt expense of $200,000 related to the prior sale of oil and gas properties, and a further charge of $162,703 associated with the impairment for the non-commercial Uno Mas well and an undeveloped land prospect in New Mexico.  Third quarter 2011 results included non-cash G&A expense of $138,875.  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 sale of the Atwood and Jones County projects.

OPERATIONS UPDATE

Below is a summary of the current status at the Company's most prominent oil and gas prospects.  Detail regarding other properties held by the Company can be found on the web site or in the Company Fact Sheet.  Please note that cash revenue tends to trail initial production by 60-90 days due to the nature of typical oil and gas purchasing agreements and logistics.

Ellenberger (Bootleg Canyon) – There are now two producing Ellenberger oil wells on this 3D seismic controlled property with a third well tentatively planned for December.   Additional wells will be drilled throughout the 2013 calendar year.   Since the completion of the original discovery well in June 2011, the operator has increased the gross acreage of this prospect from 1,607 gross acres to the over 5,000 gross acres held today.  Well spacing on this property is currently 160 acres.

Pinetop – As previously announced, the first of nine development wells was successfully completed by the operator in August.  First oil sales occurred in October 2012, so production from this initial well is not reflected in third quarter results. The well had initial flow rates of over 400 barrels of oil per day (BOPD) and unmetered flow of 300 Mcf of natural gas per day.    After being put on production, the well naturally flowed over 3,000 barrels of oil and 2,125 Mcf of natural gas during the first ten days of operation.   The well is now on pump.  Once stabilized, this well is anticipated to flow between 80 BOPD and 150 BOPD.  Each of the nine development wells on this property are anticipated to have gross Estimated Ultimate Recovery (EUR) rates of 390,000 BOE (76% oil), delivering a net 8,599.5 BOE per well to the company net interest.  Reserves will be re-evaluated after three months of production data becomes available.  Victory holds a 4% Before Payout (BPO) working interest at a 3.125% net revenue interest, and a 3% After Payout (APO) working interest at a 2.344% net revenue interest in the initial well, with the company's interest in subsequent wells being its APO working interest.

Lightnin' - This resource play is also referred to as the Wolfberry Play, which is composed of the lower Spraberry, Dean, Wolfcamp, Cline Shale, into the Pennsylvanian.  The 320 acreage prospect is surrounded by existing production and some of the nation's largest independent operators.  The most active operators in the area are Apache Corporation, Laredo Petroleum, Pioneer Natural Resources, Energen Resources, Endeavor and Nadel and Gussman. 

Base-case estimated gross EUR per well of 115,140 BOE, a mid-case of 175,000 BOE and a high case of 228,000 BOE (58.7% oil, 41.3% NGL).  Our held acreage currently provides 40 acre spacing and thus an opportunity to drill a minimum of eight (8) vertical wells on the prospect acreage. Additional opportunities to downsize the spacing to 20 acres and drill up to 16 total wells may be available.

Utilizing an average EUR of 115,140 BOE, these wells could deliver a total EUR of 1,842,240 BOE (72% oil, 19% NGL, 9% gas) or the equivalent of $115M in future undiscounted cash flow to the 100% interest.   The first well at this prospect is expected to spud in with then next 60-90 days.  Prior to the commencement of drilling operations, the Company anticipates farming out a 50% working interest in this prospect to a third party.  When drilled, the Company will hold a 25% working interest (18.75% NRI) in the prospect.

Other Projects - The first well at Chapman Ranch has been completed and is currently undergoing evaluation.  The drilling of a second well at that prospect is contingent upon the outcome of that evaluation.  Although the Uno Mas well has been on production during the first three quarters of 2012, the production rate dropped significantly in the third quarter.  As a result, the Company recorded a one-time impairment charge due to the non-commercial economics the well now exhibits.  No drilling is currently planned at the SRV prospect during 2012.

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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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