Victory Energy is a domestic energy company engaged in the production of oil and natural gas through its onshore wells in west Texas, Oklahoma, and New Mexico. Currently, the company has 17 wells in production with the capacity to expand to an additional 31 wells. VYEY seeks to maximize shareholder value over the long term by increasing accessible oil reserves, producing more oil, lowering its costs, and carefully managing the capital entrusted to it. For 2012, the company looks to invest in acreage with proved reserves in order to minimize its exploration and development costs.
To gauge how the company has progressed, the 2012 goals have to be viewed in the context of the major accomplishments made in 2011. In 2011, VYEY completed a massive overhaul of its operations from top to bottom.
Several changes were made to its management team in 2011 that became effective this year. On January 10, 2012, Mr. Mark W. Biggers joined the company as the new Chief Financial Officer. Mr. Biggers had previously served as a Senior Director in the Energy Practice of Alvarez and Marsal. Prior to Alvarez and Marsal, Mr. Biggers had spent over 20 years with Mobil Oil Corporation in a variety of roles. Also in January of this year, Mr. Kenneth Hill was selected as President and Chief Executive Officer. Mr. Hill had previously served as the company’s Vice President of Operations. The management team now has a total of 107 combined years of industry experience, truly an asset that can be put to use immediately.
Victory Energy became current on all filings with the SEC. Full compliance makes the company more attractive to creditors and investors.
The company settled a major lawsuit with a former employee, and secured future access to capital through the negotiation of a partnership agreement, the “Aurora Partnership.” VYEY is the managing partner of the Aurora entity, owning at 50% interest in the venture. The company raised $3.1 million in funds and converted $1.2 million in debt to equity.
At year end on December 31, 2011, VYEY had $475,623 of cash and cash equivalents, as compared to $111,572 at December 31, 2010. At December 31, 2011, total assets increased by $790,330 to $1,553,363 as compared to total assets of $538,729 as of December 31, 2010. This increase in total assets includes a net increase of $552,421 of investments in oil & natural gas properties.
This represented a 100% increase in oil in comparison to the prior fiscal year. 2011 saw the company drill 9 exploration wells and acquire interests in 3 producing wells. These wells represented the first acquisition of oil and gas properties for the company since 2009. Also, the company began to transition its management offices from California to Texas.
Having made such drastic changes in 2011, where does the company want to go from here?
For the rest of 2012, Victory, says its primary objective is to create long-term shareholder value by increasing oil and gas reserves, improving financial returns through pumping more oil and cutting overhead, and prudently managing its capital. First and foremost will be the completion of moving all back-office and management operations to Texas. Next will be the selection of an auditor in Texas that has exploration and production audit experience.
Victory ended the month of February 2012 in an enviable position: No debt and $1.7 million in cash. This resulted from a reverse stock split and the conversion of debt to equity. Victory expects to spend about $4.0 million this year on capital expenditures and exploration activities. Additional money may be spent to purchase acreage with resources where the price of the land does not accurately reflect its true value. Several prospects have already been identified.
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 VYEY holds a 75% working interest, and the ClearWater Wolfberry resource play where the company owns a 1.5% working interest. VYEY also intends to explore the oil potential of the Tippett shale formation in its Adams-Baggett wells where the company holds a 100% working interest in seven wells and a 50% working interest in two wells.
Victory plans to drill or recomplete at least 15 new wells on current properties at an average working interest of 24% in partnership with Aurora. This compares very favorably to its participation in 9 new wells in 2011 at an average working interest of 3.3%.
Victory forecasts an increase in production of about 80% in 2012 over 2011 depending on its drilling schedule and the success of its operations. Last year, the company produced 8 MBOE and the target this year is between 42 to 46 MBOE. Of the 80% increase, half is expected to be oil and the rest will be natural gas.
Victory’s changes include an expected decline of 40%, to $1.2 million, in general and administrative expenses compared to last year’s figure of $3 million. The decline is the result of the elimination of significant non-recurring expenses through 2011 and early Q1 of 2012. The company expects that consolidation of all company personnel and service-related companies to Texas will also contribute to better efficiency and lower operating costs.
Investors drawn to conservative gas and oil plays, seeking to produce oil from proven fields, should keep a close watch on VYEY and see if it can cross the 2012 finish line in first place.
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