Translation of Victory's PR:
The PR may be technically confusing (perhaps intentionally) but here's what you can glean from it.
It is now quite certain this venture is a Limited Partnership and Victory Energy is one of the General Partners. How can one know that? The terminology - "Carried Interest", which is how General Partners typically get compensated.
Carried Interest is a share of profits given to the general partners despite not contributing any equity (funds) to the partnership. Typical Limited Partnership made up of Limited Partners, who makes all the equity contribute (provide the funds) and the General Partners who finds the deal, organizes the deal and operates the deal for the share of the partnership. Partnership Agreements are pretty open ended and generally does not follow a pro-rata distribution of income or gains.
Usually, the General partner will receive a Guranteed Payment and/or Carried Interest as compensation during the operating cycle of the entity as compensation.
"Carried Interest" doesn't mean Victory has pro-rata interest or OWNS 11.1 % (15% x 74%) of the assets. In fact it is impossible to tell what the ownership structure is without the Operating Agreement. Unlike a coporation, the ownership percentages do not have to follow any specified method. All we know form the PR is that Victory will receive 11.1% (15% of the 74% working interest) of the revenue for their role in the operations.
The "finacial facility with institutional investors" = lending instution e.g. banks, insurance companies, hedge funds etc... In another words, there will be some debt taken on by the partnership. Equity investor (partners) has a stake (ownership) in the entity. On the other hand creditors (financial facility) will have recourse against the entities' assets, and claim against the General Partnerh's assets.
So we still don't know Grifco/FTXN's involvement, their ownership (capital) basis, and the distributive shares. It is quite likely that there are other General Partners that also receive Carried Interest.
Also, assuming PDI is the contractor drilling these wells, by no means would it be a "lucrative" venture. First of all, intercompany transaction e.g. between FTXN, UERI, and PDI will be eliminated when consolidating the financial statement. Why? Well imgaine your in the painting business and you decide to paint your own home by yourself without a helper. Based on our rate the project is going to cost$3,000. So you wirte-out a check for this amount and you pay yourself the check and deposit it inot the bank, In essence you're taking $3,000 out of your own account and putting it right back in the same account. There is no economic gain - no increase in wealth. Same thing with intercompany transaction. Selling services back and forth internally creates no economic benefit.
Secondly, IRS Section 482 deals with Transfer Pricing, which is intercompany sales. Basically, the IRS expect intercompany sales transaction to be resonable, competitve, and fair. The look at these types of transactions very closely because of this is one are where companies fudge the numbers to cook their books. There has been a lot of abuses in the past. Both SEC IRS has really clamped down.
