Victory Energy Corporation (VYEY) is an independent, growth oriented oil and gas company engaged in the acquisition, exploration and production of oil and natural gas properties, through its partnership with Aurora Energy Partners. The company’s objective is to create long-term shareholder value by increasing oil reserves, improving financial returns (higher production volumes and lower costs), and managing the capital on its balance sheet.
VYEY is geographically focused onshore, with a primary focus in the Permian Basin of Texas and southeast New Mexico. The company leverages both internal capabilities and strategic industry relationships to acquire working interest positions in low-to-moderate risk oil and gas prospects. Its focus is primarily on oil or liquid-rich gas projects within longer-life reservoirs that offer competitive finding and development (F&D) costs per barrel of oil equivalent (BOE).
- Early Stage Growth Company with Increasing Reserves and Cash Flow
- Strong Management Team, Experienced Operators
- Offering Multiple Investment Opportunities
- Established Industry Relationships Producing High Quality Prospects
- Focused on Permian Basin Resources – the Nation’s Most Active Play
- Management Has Guided Operations to Debt-Free Status
Aurora Energy Partners
Through its partnership with Aurora Energy Partners, VYEY continues to build a portfolio of non-operated working interests in oil and gas prospects and expects in the near future to begin adding projects that it can operate
Its strategy is to continue diversifying those non-operated and operated interests by targeting additional prospects that offer land positions large enough for multiple well drilling programs and significant Proven Undeveloped Reserve (PUD) opportunities. These properties will ideally be located in established trends that offer long-term development potential. Its primary objectives are two-fold: 1) increase oil and gas reserves through the drill bit and expand existing reserve opportunities, 2) grow the business via acquisition of larger, oil focused projects with a higher working interest position where possible.
To support these objectives, VYEY has put in place a highly-experienced management and technical team and is continuing to build outside relationships with established E&P operators and geologists.
Assets and Prospects
Aggressively Seek and Acquire Working Interest Positions in Permian Basin
- Two wells has been completed and are producing
- Two additional wells are planned for 2013
- Formation focus is Wolfberry (with Wolfcamp & Strawn) Fusselman and Cline
- 640 acre prospect property
- Room for 8 vertical wells on 80 acre spacing
- Estimated Ultimate Recovery (EUR) range of 115,140 - 128,000 barrels of oil equivalent per well
- Well cost to the 100%: $2.24M
- Working Interest: 25%
- ROI estimated at 2.53 • Net Revenue Interest 18.75%
- Located in Glasscock County, Texas
- Three wells in production as of April 2013
- One Proven Undeveloped Well available for future drilling
- Formation focus is the Ellenburger and Connell
- Over 5,000 acres of lease available for additional drilling
- Estimated Ultimate Recovery (EUR) of 187,240 barrels of oil equivalent per well
- Expected payback of drilling capital in 1.5 years with continued production for nearly 15 years
- Well cost to 100%: $1.55M
- Working Interest: 5%
- Net Revenue Interest: $78,000
- Return on capital multiple: 7.79
- Located in Pecos County, Texas
- Natural Gas Focused
- Nine wells completed and producing
- The company, through its partnership with Aurora Energy Partners, holds a working interest in nine wells; 100% WI and a 75% NRI in seven wells and a 50% WI with 38% NRI in two wells.
- Well cost to the 100%: $600,000
- High Btu premium price to market of 28%
- Located in Crockett County, Texas
Projects Under Evaluation:
- Planned acquisition, March-April 2013 (1,306 acres)
- Potential 19 well drilling program
- 3D seismic controlled
- Estimated first well spud May 2014
- Well cost to the 100%: $1.40M
- Working interest available: 25%, net revenue interest 19.25%
- Return of capital estimated at 2.2
- Located in Lea County, NM
- To be acquired late 2013 (320 acres)
- Acreage is held by production
- Conventional drilling play (verticle)
- First well yet to be scheduled
- Single wildcat well with opportunity to rill two additional wells with success
- Well cost to the 100%: $2.0M
- Working interest: 5%, net revenue interest 3.75%
- Return of capital estimated at 4.0
- 3D seismic supported
- Located in Lea County, NM
3-Pronged Business Model
- Develop and expand the company into a NYSE qualified entity within two years
- Follow a predictable and proven business model
• Acquire a moderate working interest (5%-25%) in Permian Basin, liquids rich oil and gas prospects.
• Properties are optimized to provide multiple PUD reserves per well completed.
• Locate multi-well drilling opportunities that provide 3+ years of drilling.
• No single well or property will make or break the company.
• Focus these acquisitions on lower risk development opportunities that offer significant seismic and analogous well data support.
• Diversify the portfolio to include royalty interests and purchase of in place production.
- Acquisitions must meet rigorous standards
• Minimal promotion to Victory.
• Must be geologically reviewed by Victory and/or our third-party service providers.
• The operator must have an established track record and a team of management, geologists, engineers and service providers who have worked together on similar plays.
• The operator must have a significant portion of the working interest.
• Property is surrounded by top-tier E&P companies.
• Return of investment capital occurs in less than 24 months, ideally in one year.
VYEY’s business strategy is to develop a sizable portfolio of non-operated, proved producing and proved undveloped reserves by acquiring and developing prospects in resource plays that have consistently repeatable drilling and completion processes. Its focus is on oil or liquid-rich gas projects within longer-life reservoirs that offer competitive finding and development (F&D) costs per barrel of oil equivalent (BOE).
A cornerstone of this strategy is an emphasis on developing and maintaining relationships with proven, well established oil and gas exploration and development partners.
Targeted prospects generally provide the company with a rapid return of capital while offering multiple well locations for additional drilling on an established trend. Acreage acquisitions typically come from companies wishing to “sell-down” their working interest in projects to maintain their budgeted capital expenses.
To execute this strategy, VYEY is focused on the continued development of existing properties and the acquisition of new resource properties, primarily located in the prolific Permian Basin of Texas and southeast New Mexico.
The company will source new capital to facilitate this growth by continuing to utilize an established pipeline of investors available through Aurora Energy Partners and additional third-party sources. The company is committed to creating long-term shareholder value by increasing oil reserves, lowering costs, boosting production volumes, and prudently managing the capital on its balance sheet.
Last year, the International Energy Agency forecast that the United States would outpace both Russia and Saudi Arabia in terms of oil production as early as 2017. More recently, the Energy Information Administration issued its projection that the United States will take the top spot this year.
As one of the largest and most active plays in the United States is the Permian Basin, a 400 billion barrel oil cache covering an area approximately 250 miles wide and 300 miles long. Nearly six out of every 10 barrels of oil produced in the United States is pumped out of the Permian. As of August 2013, oil production in the Permian had practically matched the oil produced in all of 2012.
Increased use of enhanced-recovery practices in the Permian Basin has produced a substantial impact on U.S. oil production, making up 71% of all oil production in Texas.
The estimated ultimate recovery (EUR) for a Permian Basin vertical well is between 125,000 and 150,000 BOE, while horizontal wells yield much more, averaging an EUR anywhere from 350,000 BOE to more than 600,000 BOE.
The breakeven cost of doing business in the Permian Basin is about $50 per barrel.
According to consultants, Bentek Energy, production in the Permian Basin is estimated to grow 60% between now and 2016, reaching a total of 1.8 million barrels per day.
Opportunity for 2103 & 2014
Production to Profitability
VYEY will be targeting investment in larger working interest projects that are weighted toward oil and high-Btu natural gas. This approach of increasing its economic interest should allow it to realize economies of scale, cost efficiencies and, thus, improve returns. To further this objective, the company is managing its cash G&A expenses while pursuing additional properties that add revenue at competitive F&D costs per BOE. Lower expenses and additional capital will give VYEY the flexibility to invest in developing its current proven undeveloped, possible and probable reserves. Its increased use of in-house and third-party technical and geological capabilities will also help generate additional oil and gas prospects with improved working interest positions.
2103 & 2015 Strategic Financial Deliverables
VYEY’s longer term strategy is concentrated on three primary goals: to increase reserves, improve returns and manage its balance sheet.
- Deploy a higher percentage of capital toward E&P development
- Target longer-life, quality prospects with improved PUD opportunity
- Expand strategic relationships and geographical reach
- Focus on Permian Basin wells with 75% or better oil profile
- Reduce F&D costs; shift investment mix to include higher working interest projects with upside potential; focus more on oil and liquids
- Reduce G&A expense
- Achieve higher annual production rates
Manage Balance Sheet
- Leverage both private equity and Aurora sources to provide additional development funds ($12M raise underway)
- Acquire capital as needed and when deployable
- Lower G&A dramatically (Q4 through 2014)
- Establish first credit facility be end of 2013
- Achieve up listing to a better exchange (i.e. NYSX)
VYEY is under the leadership of a highly experienced and well-rounded management team with a diverse background in business development, financial management, and the oil and gas industry.
Kenneth Hill - Chief Executive Officer and Director
Kenneth (Kenny) Hill was appointed CEO in January 2012. Mr. Hill previously served as Victory Energy’s vice president and chief operating officer from January 2011 to January 2012 and has been a member of the board of directors since April 2011. Prior to joining Victory Energy, Mr. Hill held titles of interim CEO, VP of operations and VP of investor relations for the U.S. subsidiary of a publicly traded oil and gas company on the Australian Stock Exchange.
Since 2001, Mr. Hill through his private company has raised several million dollars of venture capital, personally invested in and consulted for a number of successful entrepreneurial ventures across a variety of industries, including oil and gas. Prior to 2001, he was employed for 16 years at Dell, Inc. As one of the first 20 employees at Dell, Mr. Hill served in variety of management positions including manufacturing, sales, marketing and business development. Prior to joining Dell, he studied business management and business marketing at Southwest Texas State University (now Texas State University). While at Dell, Mr. Hill continued his education at The University of Texas Graduate School of Business Executive Education program, The Aspen Institute and the Center for Creative Leadership. He is a team builder with a unique set of proven leadership, management and technical skills.
Luther D. Poehlmann - Controller
Luther D. Poehlman joined Victory Energy Corporation as Interim Controller in December 2012 and became Controller in July 2013. He brings over 35 years of relevant oil and gas financial management experience to the company. Since his early days with El Paso Natural Gas, Luther has worked for a variety small and mid-size oil and gas companies helping them to build and then grow their in-house accounting and operations infrastructure. He has held titles of Partner, Treasurer, Controller and Contract Controller for private companies, public companies, trusts and partnerships.
His areas of expertise include COPAS accounting, full cost and successful efforts GAAP reporting, collars implementation, financing, lines of credit, mergers and acquisitions advisement, Federal and State Tax preparation, E&P accounting software deployment and operator accounting related to joint interest billings, royalties, ledgers and interest financial reporting. He is also familiar with E&P specific SEC reporting needs.
All of these capabilities will be leveraged as the company looks to begin operating its first oil and gas properties this year while aggressively lowering its operating expenses by moving all outside accounting and reporting functions in-house. These capabilities will be instrumental in helping raise capital and grow Victory Energy in a profitable manner.
Luther earned a BBA in Accounting, Magna Cum Laude, from The University of Houston while on a football scholarship. He is a Certified Public Accountant (CPA), Texas State Board of Public Accountancy.
Cliff Hair - Vice President of Land
Cliff Hair has over 40 years of oil and gas experience in prospect evaluation, acquisition, exploration, drilling, development and divestitures. This includes 25 years of management and executive level experience. Mr. Hair is based in Midland, Texas.
Mr. Hair is the founder and managing member of privately held C&F Minerals LLC. He has run this privately owned company since 1985. Prior to building his own company, Mr. Hair held the position of Division Land Manager for Samedan Oil Corporation, an explorer of crude oil and natural gas founded by Lloyd Noble. Samedan later became Noble Affiliates and in 1980 was listed on the New York Stock Exchange (NBL). In 1984 Mr. Hair joined Castilla Energy Inc., another NYSE company as their Executive Vice President and Secretary.
Mr. Hair earned a BBA in Accounting at The University of Houston in 1971. He is a member of the Permian Basin Landman’s Association, the Permian Basin Oil and Gas Association and serves on the Board of Director’s for Habitat for Humanity Permian Basin.
Dr. Ronald W. Zamber – Board Member, Audit Committee Member, Interim Chairman
Dr. Ronald W. Zamber is founder, Managing Director and Chairman of Visionary Private Equity Group. He brings more than 20 years of experience in corporate management and business development extending across the public, private and non-profit arenas. Dr. Zamber has helped build profitable companies in healthcare, private and public petroleum E&P, consumer products and Internet technology industries. He is a Managing Director of Navitus Energy Group, Navitus Partners and James Capital Energy.
Dr. Zamber is a Board Certified Ophthalmologist and founder of International Vision Quest, a non-profit organization that performs humanitarian medical and surgical missions, builds water treatment facilities and supports food delivery programs to impoverished communities around the world. He has served as an examiner with the American Board of Ophthalmologists and Secretariat for State Affairs with the American Academy of Ophthalmology.
He is the 2009 recipient of Notre Dame’s prestigious Harvey Foster Humanitarian Award. He now serves on the advisory board of Feed My Starving Children, one of the highest rated and fastest growing charities in the country. Dr. Zamber received his bachelor's degree with high honors from the University of Notre Dame and his medical degree with honors from the University of Washington.
David McCall – Board Member, Director and General Counsel
David McCall has over 35 years of experience in the oil and gas industry, and is currently a partner in The McCall Firm in Austin, Texas. Mr. McCall's law practice has centered on the upstream, midstream and downstream activities of major and independent oil companies.
His expertise encompasses all aspects of oil and gas operations. He has been instrumental in negotiating operating leases and agreements; production purchase and sale agreements; pipeline and exploration agreements.
Mr. McCall has been lead counsel on complex oil and gas litigation matters including disputes between interest holders in producing properties; contract and lease disputes; title controversies and other traditional oil and gas matters. He has represented clients in federal royalty valuation disputes and Minerals Management Service (MMS) administrative proceedings.
Mr. McCall is also experienced in the preparation of drilling title opinions, loan opinions, division order title opinions, and acquisition opinions. He is board-certified in oil, gas and mineral law. Mr. McCall is also an author and has served as an expert witness in title matters involving oil and gas properties.
In 1971, Mr. McCall received a Bachelor of Arts in marketing from McMurry University, Abilene, Texas. He graduated from Texas Tech School of Law, Lubbock, Texas in 1974. He is a Member of the Bar, State of Texas; a Life Fellow, Texas Bar Foundation; and a Founding Fellow, Austin Bar Foundation.
Patrick Barry - Board Member, Director and Audit Committee Chairman
Prior to joining VYEY’s board, Patrick Barry served as a financial and operations consultant for the company. He is an experienced general manager with strengths in financial management, profitability improvement, strategy development, and implementing disciplined operating processes in both public and private companies.
Mr. Barry has a Bachelor of Science in Mechanical Engineering from the University of Notre Dame and an MBA in Finance from Wharton. Mr. Barry is a principal in Visionary Private Equity, a major investor in the Company.
Mr. Barry is a former Managing Director of the Gigot Center for Entrepreneurial Studies at the University of Notre Dame where he was also an Adjunct Professor. Prior to Notre Dame, he spent eight years turning around Quality Dining, Inc., a publicly held restaurant company headquartered in South Bend, IN. Mr. Barry was a consultant with Andersen Consulting in its Strategic Service Group, focusing in strategy development and general management consulting.
Mr. Barry’s extensive practical business experiences coupled with his impressive education credentials in the fields of engineering and finance make him a significant and timely addition to the company.
Robert Grenley – Director and Audit Committee Member
Robert Grenley has over 25 years of experience in financial management, business development, and entrepreneurial experience. This financial experience includes 12 years managing early stage organizations with equity capital.
Mr. Grenley's broader financial management experience includes over 10 years of direct portfolio management and investment expertise, including common and preferred stock, stock options, corporate and municipal bonds as well as syndicated investments and private placements.
Mr. Grenley holds a BA in Economics from Duke University.