Victory Energy Corp. (VYEY) Carving-Out Opportunity in Permian Basin’s Prolific Oil Boom

Earlier this month, BloombergBusiness reported that the number of oil rigs in the United States clipped a record high amid beefed up horizontal drilling in the Texas-New Mexico Permian Basin, one of the oldest and most infamous fields in the United States. The number of rigs surged by 13 to 1,443, marking the highest level in 26 years. Horizontal rigs in the Permian Basin rose by 10 to 265 while vertical rigs in the area gained three and directional count added one, says the report.

Relatively new technology and advances, such as hydraulic fracturing – called “fracking” – paired with horizontal drilling have unlocked huge reservoirs of oil that were once deemed impossible to access, increasing crude output to the benefit of nationwide energy needs. Unlocking these deposits has helped the United States achieve 86 percent of its energy needs in the first 11 months of 2014, according to the Energy Information Administration (EIA).

The EIA forecasts March 2014 oil production in the Permian Basin to reach 1.4 million barrels a day, and increase to 1.4 million the following month – both figures increasing year-over-year. For comparison purposes, in April five years ago the Permian Basin as producing roughly 900,000 barrels of oil a day. Overall, Texas is projected to produce more than 3 million barrels a day, making the Lone Star State the eighth largest oil producer in the world.

The Permian Basin is one of six regions that account for nearly 90 percent of domestic oil production growth and virtually all domestic natural gas production during 2011-2012, and it is in the Permian Basin that independent, growth-oriented oil and gas company Victory Energy focuses its efforts. Headquartered in Austin, Texas, Victory Energy has established additional technical and specialized resources located in Midland, Texas, the hot seat of the biggest oil boom in Texas.

Victory Energy’s strategy is to grow unconventional oil, liquids-rich natural gas reserves and cash-flow through continued low-risk vertical well development on existing properties, as well as by acquiring new resource properties offering more than 20 percent rates of return and break-even points below $65 per barrel oil price. The company targets predictable resources plays and consistent reservoir quality across multiple target horizons, long-lived reserve characteristics, and high drilling success rates of the Permian Basin of Texas and southeast New Mexico.

Victory Energy is currently focused on a new Permian Basin well (McCauley 6 #2), which is now on production and averaging 52 barrels of oil and 58 Mcf of liquids rich gas per day since December 12, 2013. A second Permian well (Cotter 6 #2) has reached target depth with significant shows in the Fusselman, Mississippian and through the Wolfcamp formations, and it is now prepping for a multi-stage frac completion. Both of these vertical wells are located at the company’s “Lightnin” property in Glasscock County Texas. Prior vertical wells drilled by the company in this field have each averaged estimated ultimate recovery rates of approximately 100,000 Barrels of Oil Equivalent (BOE). Additional wells remain to be drilled. The company has a 20 percent working interest and an 18.75 percent net revenue interest in these wells.

The company and partner Navitus Energy Group are part of Aurora Energy Partners, a Texas Partnership that was established in January 2008. In this alliance, Victory Energy and Navitus work together to increase proved reserves and the valuation of the partnership, with a future goal of consolidating the two partners into a single entity and uplisting to a larger stock exchange such as the NYSE or NASDAQ.

In late February the partnership closed a $26.4 million operations and acquisition credit facility, of which $1.4 million will provide operating capital for the partnership. Victory Energy has allocated the remaining $25 million and access to $10 million of private placement capital from its partner Navitus to aggressively grow the companies’ Permian Basin assets.

For more information about the company, visit www.vyey.com

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