Victory Oilfield Tech, Inc. · OTC:VYEY
Victory Oilfield Tech — Victory Energy — Investor Presentation (December 2014)
36 slides from Victory Oilfield Tech's investor presentation, Dec 2, 2014
Slide 1: A Public Pure Play Permian Basin Company
(OTCQX: VYEY) A Public Pure Play Permian Basin Company December 2014
Slide 2: Forward-Looking and Cautionary Statements
2 Forward-Looking and Cautionary Statements This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or dev
Slide 3: Investor Highlights
3 Investor Highlights • Public-Pure-Play-Permian company • Early stage rapid-growth company • Oil and liquid rich gas focus, growing reserves and cash flow • Experienced management team and operators • Asset value upside – PUD, Probable and over 50 additional exploration and development well locatio
Slide 4: Company Profile and Financial Profile
4 Company Profile Financial Profile 1 Ticker VYEY Share Price $0.35 Market Cap $10.12 M Shares Authorized 47.5 M Shares Outstanding 28.9 M Float 2 21.0 M Warrants Issued 6.01 M Cash $.1 M Debt $0.8 M Current Liquidity 5 $26.2 M (1) As of 01121/2014 (2) Includes 10.3 M shares held in certificate • Hi
Slide 5: Q3 2014 Highlights (Unaudited)
5 Q3 2014 Highlights (Unaudited) • $5.5 million of total assets • Issued Updated Reserve Report showing a proved reserve increase of 62.6% • Identified additional Permian production and development acquisition targets that will continue to increase reserves and cash flow into 2015. • Year-to-date pr
Slide 6: Business Model Near-Term Focus
6 Business Model Near-Term Focus • Utilize our established $25M bank credit facility and $15M capital relationship through Aurora Energy Partners for near term acquisition and development needs. • Acquire Permian Basin properties with proved producing reserves and future drilling expansion. • Permia
Slide 7: Established Capital Sources for Sustained Growth
7 Established Capital Sources for Sustained Growth • Financial relationship established in October 2011 • Members include sophisticated investors & boutique private equity • $15 M private placement now underway (Navitus Partners) • Issue of VYEY warrants with each investment provides additional capi
Slide 8: 2014 – Early 2015 Strategic Financial Deliverables
8 2014 – Early 2015 Strategic Financial Deliverables • Disciplined use of acquisition capital as needed and when deployable • Short-term capital deployment focused on growing cash-flow • Secondary capital deployment focused on upside development • Leverage and balance private capital, equity and deb
Slide 9: Significant Permian Basin Assets
9 Significant Permian Basin Assets • Fairway Project (Proved Producing) • Glasscock & Howard Counties • 80% oil, 20% gas • ~2,080 gross acres • At least 40 more drilling locations with 40 acre spacing • 10% WI / 7.5% NRI • Fusselman & Wolfberry Focus • Bootleg Canyon (Proved Producing) • Pecos Count
Slide 10: Geology of Assets Offers Stacked Pay Upside
10 Geology of Assets Offers Stacked Pay Upside • Midland and Central Basin offers multiple productive zones in the Fusselman, Wolfberry, Strawn and Atoka, with potential for future horizontal Wolfcamp, Clearfork and Cline development. • Deliver value from vertical wells today and horizontal wells in
Slide 11: Year to Date 2014 vs. 2013 Growth Highlights
11 Year to Date 2014 vs. 2013 Growth Highlights - 2,000 4,000 6,000 8,000 10,000 12,000 YTD 2013 YTD 2014 BOE Volumes, Net 0% 25% 50% YTD 2013 YTD 2014 Oil As a % of Total Production 0% 25% 50% 75% YTD 2013 YTD 2014 Oil as % of Gross Revenue Year to Year Change 1 In Key Metr ics 6% 18% 21% 23% 0% 5%
Slide 12: Historical Annual Revenue Growth and Guidance
12 $305,180 $326,384 $735,413 Through Q3 [VALUE] $856,548 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 2011 2012 2013 2014 Histor ical Annual Revenue Growth Permian Oil Focus is Driving 2014 Results Q4 Guidance reflects additional production from Fairway Sprayb
Slide 13: 2014 & 2015 Reserve Acceleration Underway
13 2014 & 2015 Reserve Acceleration Underway In thousands $137,400 $1,745,300 $2,422,100 $4,309,780 $10,302,880 $5,993,100 $ $2,000 $4,000 $6,000 $8,000 $10,000 2011 2012 2013 2014 Q1 2015 Planned Growth In PV -10 Through Q1 2015 Planned Q4 Acquisition $2,422,100 $4,309,780 $105,938 $565,030 $830,16
Slide 14: Fairway Vertical Well Economic Summary
14 Fairway (Proved and Producing) Vertical Well Economic Summary • Well cost to the 100% $1.8M to $2.1M • Working Interest 10% • Net Revenue Interest 7.5% • Well Costs to working interest $180,000 to $210,000 • Anticipated IRR >50% Description • Acquired June 2014 (~2,080) • Located in Glasscock and
Slide 15: Fairway is in the Heart of the Tier 1 Zone
15 Fairway is in the Heart of the “Tier 1” Zone Source: Pioneer 2013, 3Q Report
Slide 16: Fairway 2,080 Acre Economic Plan & Assessment
16 Fairway 2,080 Acre Economic Plan & Assessment • The company plans to grow reserves through drilling, improve the property’s current cash-flow and drive up property valuation via a three year or shorter development plan • Total three year acquisition and drilling Capex of $9.3 million • $3.1 milli
Slide 17: Bootleg Canyon Vertical Well Economic Summary
17 Bootleg Canyon (Proved and Producing) Vertical Well Economic Summary • Well cost to the 100% $1.55M • Working Interest 5% • Net Revenue Interest 3.75% • Well Costs to working interest $78,000 • Return on capital multiple 7.79 Description • Acquired April 2011 (over 5,000 acres) • Located in Pecos
Slide 18: Adams Baggett Gas Field Per Well Economics
18 Adams Baggett Gas Field (Proved and Producing) Per Well Economics • Well cost to the 100% $600K • Working Interest in 7 wells 100% o Net Revenue Interest 75% • Working Interest in 2 wells 50% o Net Revenue Interest 38% • High Btu premium price to market of 28% Description • Acquired 2008 (180 acr
Slide 19: Chapman Ranch Per Well Economics
19 Chapman Ranch (Proved and Producing) Per Well Economics • Well cost to the 100% $1.2M • Working Interest 5% • Net Revenue Interest 3.75% • Well cost to working interest $78,000 Description • Acquired in April 2012 (320 acres) • Located in Nueces County, TX. • Shale drilling play (vertical) • One
Slide 20: Reserve Breakdown August 2014
20 Reserve Breakdown August 2014 Reserves Oil Mbbl Gas MMcf Total MBOE Revenue PV-0 PV-10 PDP 27.22 667.28 140.10 $6,470,890 $3,440,490 $2,185,490 PDNP 11.5 21.18 15.03 $1,242,690 $722,810 $565,030 PUD 12.76 11.44 14.67 $1,287,100 $714,300 $396,590 Probable 28.42 44.23 35.76 $3,016,50 $1,385,710 $83
Slide 21: 2014 Acquisition and Development Methodology
21 2014 Acquisition and Development Methodology Drill and complete undeveloped leasehold on current high-value properties (ongoing) Sell properties with limited development upside and re-deploy capital to properties with higher production and more than three years of development (i.e. Lightnin’
Slide 22: Experienced E&P Management
22 Experienced E&P Management Kenneth Hill (CEO) Fred Smith (CFO) David McCall (General Counsel, Director) Cliff Hair (VP of Land and Development) • Served as Victory’s COO from Jan. 2011 – Jan. 2012. • 21 years of professional experience, seven in E&P. • Previously held titles of Interim CEO, VP of
Slide 23: Investment Summary
23 Investment Summary • Proven management team with over 175 years of combined oil and gas experience • Predictable IRRs offered by the largest resource play in the U.S. (Permian Basin) • Significant access to proved producing properties and development project deal flow • Strong balance sheet – exc
Slide 24: Contacts
24 Contacts Investor Relations Derek Gradwell Senior Vice President, Natural Resources – MZ North America Main: 212-301-7130 Direct: 512-270-6990 Email: dgradwell@mzgroup.us www.mzgroup.us Victory Energy Corporation Kenneth Hill, CEO Email: Kenny@vyey.com Phone: (512) 347-7300 www.vyey.com
Slide 25: Appendix and Support Material
(OTCQX: VYEY) Appendix and Support Material
Slide 26: Permian Basin Data
Permian Basin Data
Slide 27: Why Focus on the Permian Basin?
27 Why Focus on the Permian Basin? • The play is the largest oil field in the U.S. (Baker-Hughes rig count & Pioneer recoverable resources). 1,2 • Predictable vertical well economics deliver break-even points at less than $55 per bbl (Midland Basin). 3 Standard & Poor’s 2013 Report • Increased use o
Slide 28: Largest U.S. Oil Fields
Largest U.S. Oil Fields Estimated Recoverable Resource (BBOE)' ° 25 50 8 Spraberry/Wolfcarnp [en Eagle Ford Shale | Prudhoe Bay, AK | Bakken Shale | Delaware Basin | East Texas Basin | Midway-Sunset, CA | Wilmington, CA | Kuparuk River, AK | Kern River, CA Thunder Horse, GOM Yates, West TX | Belridg
Slide 29: Predictable Economics Deliver Predictable Outcomes
29 Predictable Economics Deliver Predictable Outcomes Our current focus is on vertical wells with $49 - $55 WTI Oil Price Break Even 32% 25% 24% 22% 20% 10% 4% 0% 5% 10% 15% 20% 25% 30% 35% * Returns are based on Standard & Poor’s West Texas Intermediate price assumptions of US$85 per barrel for 201
Slide 30: Putting Current Price Decline in Context
30 Putting Current Price Decline in Context
Slide 31: Where is Oil Headed?
Where is Oil Headed? TPH Capital Markets’ Crude Oil Survey (October 2014 Question to Survey Participants: What is Your Crude Oil Price Deck? = <$80 $80-$85 = $85-$90 $90-$95 = $95-$100 ™>$100 50% 32% 33% 1% 2% 21% ‘One Year Three Year Five Year TUDORPICKERING arc: Say resis Fan TPH Capa Warkats wekl
Slide 32: Why Focus on the Permian Basin?
32 Why Focus on the Permian Basin? The accelerated drilling into the Wolfcamp and other horizons in the Permian Basin anticipate this area will produce more tight oil volumes than any other tight play in North America. Additionally, the total rig count of the top eleven operators in less than the to
Slide 33: Vertical Activity Growing, Horizontal Activity Less Than Half
33 Vertical Activity Growing, Horizontal Activity Less Than Half
Slide 34: Permian Dominance in Rig Count
34 Permian Dominance in Rig Count
Slide 35: VYEY Horizontal Decision Metrics
35 VYEY Horizontal Decision Metrics (Best Cost Curve Drives Choice) • Deploy capital in the sweet spot • Completion techniques for optimal EUR and lower drilling costs provide more predictable returns • Lower cost acreage positions remain available • Geoscience and other technical data provide solid
Slide 36: Opportunity for Secondary Development
36 Opportunity for Secondary Development The Permian is also attractive because it has multiple pay zones – some of which are extremely amenable to horizontal drilling (Develop vertical now, horizontal later) • Most Permian companies have been exploiting “Wolfcamp” or “Clear Fork” plays using inexpe
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