Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Dec. 03, 2014 | |
Document And Entity Information | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Sep-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Trading Symbol | 'VYEY | ' |
Entity Registrant Name | 'VICTORY ENERGY CORP | ' |
Entity Central Index Key | '0000700764 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity a Well-known Seasoned Issuer | 'No | ' |
Entity a Voluntary Filer | 'No | ' |
Entity's Reporting Status Current | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock Shares Outstanding | ' | 28,927,826 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets | ' | ' |
Cash | $46,062 | $20,858 |
Accounts receivable - less allowance for doubtful accounts of $200,000, and $200,000 for September 30, 2014 and December 31, 2013, respectively | 56,541 | 116,542 |
Accounts receivable - affiliates | 169,141 | 68,571 |
Prepaid expenses | 21,956 | 38,663 |
Total current assets | 293,700 | 244,634 |
Fixed Assets | ' | ' |
Furniture, equipment, and application software | 46,883 | 43,173 |
Accumulated depreciation | -16,349 | -11,597 |
Total furniture and fixtures, net | 30,534 | 31,576 |
Oil gas properties (successful efforts method) | 6,619,685 | 3,715,648 |
Accumulated depletion, depreciation and amortization | -1,553,356 | -1,517,836 |
Total oil and gas properties, net | 5,066,329 | 2,197,812 |
Other Assets | ' | ' |
Deferred debt financing costs | 98,089 | 0 |
Total Assets | 5,488,652 | 2,474,022 |
Current Liabilities | ' | ' |
Accounts payable | 1,361,558 | 351,435 |
Accrued liabilities | 199,531 | 196,913 |
Accrued liabilities - affiliates | 33,323 | 18,542 |
Liability for unauthorized preferred stock issued | 9,283 | 9,283 |
Current note payable | 800,000 | 0 |
Total current liabilities | 2,403,695 | 576,173 |
Other Liabilities | ' | ' |
Asset retirement obligations | 42,117 | 51,954 |
Total long term liabilities | 42,117 | 51,954 |
Total liabilities | 2,445,812 | 628,127 |
Stockholders' Equity | ' | ' |
Common stock, $0.001 par value, 47,500,000 shares authorized, 28,927,826 shares and 27,563,619 shares issued and outstanding for September 30, 2014 and December 31, 2013, respectively | 28,928 | 27,564 |
Additional paid-in capital | 34,915,154 | 34,404,239 |
Accumulated deficit | -37,687,804 | -36,901,894 |
Total Victory Energy Corporation stockholders' deficit | -2,743,722 | -2,470,091 |
Non-controlling interest | 5,786,562 | 4,315,986 |
Total stockholders' equity | 3,042,840 | 1,845,895 |
Total Liabilities and Stockholders' Equity | $5,488,652 | $2,474,022 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Accounts receivable - less allowance for doubtful accounts | $200,000 | $200,000 |
Common Stock, par value (in Dollars per share) | $0.00 | $0.00 |
Common Stock, shares authorized | 47,500,000 | 47,500,000 |
Common Stock, issued (shares) | 28,927,826 | 27,563,619 |
Common Stock, outstanding (shares) | 28,927,826 | 27,563,619 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
OIL AND GAS REVENUES | $173,527 | $244,848 | $606,487 | $500,526 |
COSTS AND EXPENSES | ' | ' | ' | ' |
Lease operating expenses | 42,154 | 55,849 | 157,786 | 130,835 |
Production taxes | 9,547 | 14,113 | 34,809 | 34,716 |
Dry hole costs | 576 | 87,626 | 576 | 91,236 |
Exploration | 27,641 | 3,082 | 51,813 | 18,659 |
General and administrative expense | 656,586 | 383,458 | 2,120,214 | 1,283,901 |
Impairment | 0 | 11,160 | 0 | 11,160 |
Depletion, depreciation, and amortization | 81,952 | 90,962 | 252,024 | 168,861 |
Total cost and expenses | 818,456 | 646,250 | 2,617,222 | 1,739,368 |
LOSS FROM OPERATIONS | -644,929 | -401,402 | -2,010,735 | -1,238,842 |
OTHER INCOME (EXPENSE): | ' | ' | ' | ' |
Gain on sale of oil and gas properties | 507 | 20,765 | 2,160,099 | 20,765 |
Management fee income | 3,470 | 0 | 92,362 | 0 |
Interest expense | -18,631 | 111 | -49,639 | -835 |
Total net other income and expense | -14,654 | 20,876 | 2,202,822 | 19,930 |
INCOME (LOSS) BEFORE TAX EXPENSE | -659,583 | -380,526 | 192,087 | -1,218,912 |
TAX EXPENSE | 0 | 0 | 0 | 0 |
NET INCOME (LOSS) | -659,583 | -380,526 | 192,087 | -1,218,912 |
Less: net income (loss) attributable to non-controlling interest | -36,788 | -39,470 | 977,997 | -151,759 |
NET LOSS ATTRIBUTABLE TO VICTORY ENERGY CORPORATION | ($622,795) | ($341,056) | ($785,910) | ($1,067,153) |
Weighted average shares | ' | ' | ' | ' |
Basic (shares) | 28,788,533 | 27,563,619 | 28,154,497 | 27,563,619 |
Diluted (shares) | 28,788,533 | 27,563,619 | 28,154,497 | 27,563,619 |
Net income (loss) per share, basic and diluted | ' | ' | ' | ' |
Basic (in Dollars per share) | ($0.02) | ($0.01) | ($0.03) | ($0.04) |
Diluted (in Dollars per share) | ($0.02) | ($0.01) | ($0.03) | ($0.04) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ' | ' |
Net income (loss) | $192,087 | ($1,218,912) |
Adjustments to reconcile net income (loss) from operations to net cash used in operating activities | ' | ' |
Amortization of debt financing costs | 24,380 | ' |
Accretion of asset retirement obligation | 2,686 | 2,994 |
Gain from sale of oil and gas properties | -2,160,099 | -20,765 |
Depletion, depreciation, and amortization | 252,024 | 168,861 |
Impairment of assets | 0 | 11,160 |
Stock based compensation | 461,237 | 52,106 |
Warrants for services | 0 | 22,500 |
Restricted stock in exchange for services | 51,042 | 0 |
Change in operating assets and liabilities | ' | ' |
Accounts receivable | 60,001 | 96,912 |
Accounts receivable - affiliates | -100,570 | -34,917 |
Prepaid expense | 16,707 | -15,428 |
Accounts payable | 1,010,123 | 341,851 |
Accrued liabilities | 2,618 | -28,519 |
Accrued interest | 0 | -25,639 |
Accrued liabilities – affiliates | 14,781 | 71,871 |
Net cash used in operating activities | -172,983 | -575,925 |
CASH FLOWS FROM INVESTING ACTIVITIES | ' | ' |
Drilling and completion costs | -1,569,514 | -1,926,816 |
Acquisition of oil and gas properties | -3,397,122 | -81,550 |
Proceeds from the sale of assets | 4,021,000 | 375,000 |
Purchase of furniture and fixtures | -3,710 | 0 |
Renewal of leaseholds | -22,577 | 0 |
Sale-farm out of leaseholds | 0 | 160,000 |
Net cash (used in) in investing activities | -971,923 | -1,473,366 |
CASH FLOWS FROM FINANCING ACTIVITIES | ' | ' |
Non-controlling interest contributions | 1,140,000 | 2,056,000 |
Non-controlling interest distributions | -647,421 | 0 |
Debt financing costs | -122,469 | 0 |
Proceeds from debt financing | 1,233,000 | 0 |
Principal payments on debt financing | -433,000 | 0 |
Net cash provided by financing activities | 1,170,110 | 2,056,000 |
Net change in cash | 25,204 | 6,709 |
Beginning cash | 20,858 | 158,165 |
Ending cash | $46,062 | $164,874 |
Organization_and_Summary_of_Si
Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization and Summary of Significant Accounting Policies | ' |
Organization and Summary of Significant Accounting Policies | |
Victory is an independent, growth oriented natural resources company engaged in the acquisition, exploration and production of oil and natural gas properties, through its partnership with Aurora Energy Partners, a Texas general partnership (“Aurora”). Current operations are located primarily onshore in the State of Texas. The Company was organized under the laws of the State of Nevada on January 7, 1982. The Company is authorized to issue 47,500,000 shares of $0.001 par value common stock, and has 28,927,826 shares of common stock outstanding as of September 30, 2014. The Company’s corporate headquarters are located at 3355 Bee Caves Road Suite 608, Austin, TX 78746. | |
A summary of significant accounting policies followed in the preparation of the accompanying condensed consolidated financial statements is set forth below. | |
Basis of Presentation and Consolidation: | |
Victory is the managing partner of Aurora, and holds a 50% partnership interest in Aurora. Aurora, a subsidiary of the Company, is consolidated with Victory for financial statement reporting purposes, as the terms of the partnership agreement that governs the operations of Aurora give Victory effective control of the partnership. The condensed consolidated financial statements include the accounts of Victory and the accounts of Aurora. The Company’s management, in considering accounting policies pertaining to consolidation, has reviewed the relevant accounting literature. The Company follows that literature, in assessing whether the rights of the non-controlling interests should overcome the presumption of consolidation when a majority voting or controlling interest in its investee “is a matter of judgment that depends on facts and circumstances.” In applying the circumstances and contractual provisions of the partnership agreement, management determined that the non-controlling rights do not, individually or in the aggregate, provide for the non-controlling interest to “effectively participate in significant decisions that would be expected to be made in the ordinary course of business.” The rights of the non-controlling interest are protective in nature. All intercompany balances have been eliminated in consolidation. | |
The accompanying condensed consolidated balance sheet as of December 31, 2013, which has been derived from audited consolidated financial statements, and the accompanying interim condensed consolidated financial statements as of September 30, 2014, for three and nine month periods ended September 30, 2014 and 2013, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the consolidated financial condition, results of operations and cash flows of Victory and Aurora (hereinafter collectively referred to as the "Company" unless the context suggests otherwise) as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been included. | |
Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or for any other interim period during such year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013 filed with the SEC on April 21, 2014. | |
Non-controlling Interests: | |
The Navitus Energy Group, a Texas general partnership (“Navitus”) is a partner with Victory in Aurora. Victory and Navitus each own a 50% partnership interest in Aurora. Victory is the Managing Partner and has contractual authority to manage the business affairs of Aurora. | |
The non-controlling interest in Aurora is held by Navitus. As of September 30, 2014, $5,786,562 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in Aurora, with income (losses) attributable to non-controlling interests of $(36,788) and $(39,470) for the three months ended September 30, 2014 and 2013, respectively, and $977,997 and $(151,759) for the nine months ended September 30, 2014 and September 30, 2013, respectively. As of December 31, 2013, $4,315,986 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in Aurora. | |
Use of Estimates: | |
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used primarily when accounting for depreciation, depletion, and amortization (“DD&A”) expense, property costs, estimated future net cash flows from proved reserves, cost to abandon oil and natural gas properties, taxes, accruals of capitalized costs, operating costs and production revenue, general and administrative costs and interest, exploration expense, the purchase price allocation on properties acquired, various common stock, warrants and option transactions, and contingencies. | |
Oil and Natural Gas Properties: | |
We account for investments in oil and natural gas properties using the successful efforts method of accounting. Under this method of accounting, only successful exploration drilling costs that directly result in the discovery of proved reserves are capitalized. Unsuccessful exploration drilling costs that do not result in an asset with future economic benefit are expensed. All development costs are capitalized because the purpose of development activities is considered to be building a producing system of wells, and related equipment facilities, rather than searching for oil and natural gas. Items charged to expense generally include geological and geophysical costs. Capitalized costs for producing wells and associated land and other assets are depleted using a Units of Production methodology based on the proved, developed reserves and calculated on a by well basis, based upon reserve reports prepared by an independent petroleum engineer in accordance with SEC rules. | |
The net capitalized costs of proved oil and natural gas properties are subject to an impairment test which compares the net book value of assets, based on historical cost, to the undiscounted future cash flow of remaining oil and natural gas reserves based on current economic and operating conditions. Impairment of an individual producing oil and natural gas field is first determined by comparing the undiscounted future net cash flows associated with the proved property to the carrying value of the underlying property. If the cost of the underlying property is in excess of the undiscounted future net cash flows the carrying cost of the impaired property is compared to the estimated fair value and the difference is recorded as an impairment loss. Management’s estimate of fair value takes into account many factors such as the present value discount rate, pricing, and when appropriate, possible and probable reserves when activities justified by economic conditions and actual or planned drilling or other development. | |
Under the successful efforts method of accounting, the depletion rate is the current period production as a percentage of the total proved producing reserves. The depletion rate is applied to the net book value of property costs to calculate the depletion expense. Proved reserves materially impact depletion expense. If the proved reserves decline, then the depletion rate (the rate at which we record depletion expense) increases, reducing net income. | |
We depreciate other property and equipment using the straight-line method based on estimated useful lives ranging from five to 10 years. | |
Asset Retirement Obligations: | |
The Company records the estimate of the fair value of liabilities related to future asset retirement obligations (“ARO”) in the period the obligation is incurred. Asset retirement obligations relate to the removal of facilities and tangible equipment at the end of an oil and natural gas property’s useful life. The application of this rule requires the use of management’s estimates with respect to future abandonment costs, inflation, market risk premiums, useful life and cost of capital and required government regulations. U.S. GAAP requires that our estimate of our asset retirement obligations does not give consideration to the value the related assets could have to other parties. | |
Earnings (Losses) per Share: | |
Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to controlling interests by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share takes into account the dilutive effect of potential common stock that could be issued by the Company in conjunction with stock awards that have been granted to directors and employees. In accordance with ASC 260, Earnings Per Share, awards of nonvested shares shall be considered outstanding as of the respective grant dates for purposes of computing diluted EPS even though their exercise is contingent upon vesting. | |
Income Taxes: | |
The Company accounts for income taxes in accordance with ASC 740 “Income Taxes” which requires an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | |
The realization of future tax benefits is dependent on our ability to generate taxable income within the carry forward period. Given the Company’s history of net operating losses, management has determined that it is likely that the Company will not be able to realize the tax benefit of the carry forwards. ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. | |
Accordingly, the Company has a full valuation allowance against its net deferred tax assets at September 30, 2014 and December 31, 2013. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the deferred tax benefit associated with the use of the net operating loss carry forwards and will recognize a deferred tax asset at that time. | |
Stock Based Compensation: | |
The Company applies ASC 718, “Compensation-Stock Compensation” to account for the issuance of options and warrants to employees, directors, officers and Navitus investors. The standard requires all share-based payments, including employee stock options, warrants and restricted stock, be measured at the fair value of the award and expensed over the requisite service period (generally the vesting period). The fair value of options and warrants granted to employees, directors and officers is estimated at the date of grant using the Black-Scholes option pricing model by using the historical volatility of the Company’s stock price. The calculation also takes into account the common stock fair market value at the grant date, the exercise price, the expected life of the common stock option or warrant, the dividend yield and the risk-free interest rate. | |
The Company from time to time may issue stock options, warrants and restricted stock to acquire goods or services from third parties. Restricted stock, options or warrants issued to third parties are recorded on the basis of their fair value, which is measured as of the date issued. The options or warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying equity instrument on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance, is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. | |
The Company recognized stock-based directors compensation expense from warrants and stock awards granted to directors for services of $365,675 and $22,500 for the nine months ended September 30, 2014 and 2013, respectively. For the three months ended September 30, 2014 and 2013, the Company recognized stock-based director compensation from warrants and stock awards granted to directors for services of $73,200 and $6,000, respectively. | |
The Company recognized stock-based incentive compensation expense from stock options granted to officers and employees of the company of $10,937 and $8,781 for the three months ended September 30, 2014 and 2013, respectively, and $95,562 and $52,106 for the nine months ended September 30, 2014 and 2013, respectively. | |
The Company also recognized stock-based general and administrative expense of $30,625 and $51,042 from stock issued to an investor relations management company for the three and nine months ended September 30, 2014, respectively. | |
Going Concern: | |
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not contain adjustments, including adjustments to recorded assets and liabilities, which might be necessary if the Company were unable to continue as a going concern. | |
As presented in the condensed consolidated financial statements, the Company is reporting a net loss, attributable to Victory Energy Corporation, of $622,795 and $341,056 for the three months ended September 30, 2014 and 2013, respectively, and a net loss of $785,910 and $1,067,153 for the nine months ended September 30, 2014 and 2013, respectively. | |
Proceeds from debt and Navitus contributions to Aurora have allowed the Company to continue operations and invest in oil and natural gas properties. Management anticipates that operating losses will continue until new wells are drilled and or acquisitions are successfully completed and incremental production increases operating profit. | |
The Company has invested $1,701,947 and $4,966,636, respectively, in leases, drilling and completion costs, and property acquisitions for the three and nine months ended September 30, 2014, respectively. | |
The Company remains in active discussions with Navitus and with third parties relating to the capital infusion and longer term financing required to fund our capital expenditures planned for 2014 and 2015. Without additional outside investment from the sale of equity securities and/or debt financing, our capital expenditures and overhead expenses must be reduced to a level commensurate with available cash flows. The Company, through Aurora as borrower, entered a $25 million credit facility (the "Credit Agreement") with Texas Capital Bank, National Association on February 20, 2014. See Note 6 “Revolving Credit Agreement”. As of September 30, 2014 the Company has $800,000 in principal amount outstanding under the Credit Agreement. The accompanying consolidated financial statements are prepared as if the Company will continue as a going concern. The consolidated financial statements do not contain adjustments, including adjustments to recorded assets and liabilities, which might be necessary if the Company were unable to continue as a going concern. |
Acquisitions_and_Dispositions
Acquisitions and Dispositions | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Business Combinations [Abstract] | ' | |||
Acquisitions and Dispositions | ' | |||
Acquisitions and Dispositions | ||||
Dispositions | ||||
On June 5, 2014, Aurora completed the sale of all of its interest in the Lightnin’ property for cash consideration of $4,021,000. The effective date for the transaction was April 1, 2014. Aurora held a 20% working and 15% net revenue interest in the Lightnin’ property operated by a third party. Estimated daily net production to Aurora’s interest was approximately 36 BOEPD (barrels of oil equivalent per day) at the time of the sale from the 3 producing wells. The Company recognized a gain on the sale of the Lightnin’ property of $2,160,099 in its consolidated statement of operations for the three and nine months ended September 30, 2014. | ||||
Acquisitions | ||||
On June 30, 2014, Aurora completed the initial closing (the “First Closing”) of a purchase of a 10% working and 7.5% net revenue interest in the proved and unproved Permian Basin Fairway Operations from a third party (the “Fairway Seller”) for an initial payment of $2,491,888 in cash, subject to customary purchase price adjustments ( the "Fairway Acquisition"), pursuant to the terms and conditions of the Purchase and Sale Agreement dated June 30, 2014 between Aurora and the Fairway Seller (the "PSA"). On the First Closing, the Fairway Seller assigned certain assets in its Permian Basin Fairway Operation (the “First Closing Assets”) to Aurora. The second closing (the “Second Closing”) was planned to follow the completion of curative title work and was expected in August 2014. On the Second Closing, the Fairway Seller should have assigned the remainder of its assets in its Permian Basin Fairway Operations to Aurora. The Effective Date for the transfer of all assets was May 1, 2014. The acquisition of the First Closing Assets included 7 producing wells and 4 wells completed and awaiting production start-up. | ||||
On September 23, 2014, the Company mutually agreed to the termination of the Purchase and Sale Agreement dated June 30, 2014. As previously disclosed, the PSA provided for the acquisition of certain of TELA’s right, title and interest in certain oil and gas assets (the “Acquired Assets”) at two closings, the first of which occurred on June 30, 2014, on which date Aurora acquired a 10% working interest and a 7.5% net revenue interest in approximately 2,080 gross acres located in Glasscock County and Howard County. On July 31, 2014, the Company made an additional purchase price adjustment payment in accordance with the PSA of $558,246. The remaining Acquired Assets were to be purchased by Aurora at a second closing (the “Second Closing”). Pursuant to the termination of the PSA, the Second Closing will no longer occur as the result of certain title impairment issues that were uncovered during the due diligence process and that were not remedied to the satisfaction of the Company and TELA. No penalties or payments were due as a result of the termination of the PSA. The Company has determined that a Seller’s invoice dated September 18, 2014 for additional leasehold cost related purchase price adjustments in the amount of $346,988, is valid and the Company has accrued such costs at September 30, 2014. This brings the total acquisition cost for the Fairway project to $3.4 million. The completed acquisition of all assets includes 50 additional drilling locations. | ||||
The financial impact of the Lightnin’ Asset disposition and the Fairway Acquisition was reported in the Company’s Current Report Form 8-K/A filed September 15, 2014 and is incorporated by reference herewith. As a result of the aforementioned termination of the PSA, only the additional leasehold cost component of the acquisition was finalized. There were no changes to the pro forma results of operations disclosed in the Form 8- K/A noted above. The final purchase price allocation is summarized below: | ||||
Proved Producing Lease and Well Costs Acquired | $ | 2,240,530 | ||
Proved Producing Leasehold Costs Acquired | 197,654 | |||
Unproved Leasehold Costs Acquired | 958,938 | |||
Total Oil and Gas Property Costs Acquired | $ | 3,397,122 | ||
Oil_and_natural_gas_properties
Oil and natural gas properties (under successful efforts accounting) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Extractive Industries [Abstract] | ' | |||||||
Oil and natural gas properties | ' | |||||||
Oil and natural gas properties (under successful efforts accounting) | ||||||||
Oil and natural gas properties are comprised of the following: | ||||||||
September 30, | 31-Dec-13 | |||||||
2014 | ||||||||
Oil and natural gas properties | $ | 6,619,685 | $ | 3,715,648 | ||||
Less: accumulated depletion | (1,553,356 | ) | (1,517,836 | ) | ||||
Oil and natural gas properties, net | $ | 5,066,329 | $ | 2,197,812 | ||||
Depletion, depreciation, accretion, and amortization expense for the three months ended September 30, 2014 and 2013 was $81,952 and $90,962, respectively, and for the nine months ended September 30, 2014 and 2013 was $252,024 and $168,861, respectively. |
Asset_Retirement_Obligations
Asset Retirement Obligations | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Asset Retirement Obligation Disclosure [Abstract] | ' | |||||||
Asset Retirement Obligations | ' | |||||||
Asset Retirement Obligations | ||||||||
The following table is a reconciliation of the ARO liability for continuing operations for the nine months ended September 30, 2014 and the twelve months ended December 31, 2013. | ||||||||
September 30, | 31-Dec-13 | |||||||
2014 | ||||||||
Asset retirement obligation at beginning of period | $ | 51,954 | $ | 39,905 | ||||
Liabilities incurred on properties acquired and developed | 17,069 | 8,930 | ||||||
Revisions to previous estimates | (11,990 | ) | — | |||||
Liabilities on properties sold (Lightnin' properties) | (17,602 | ) | — | |||||
Accretion expense | 2,686 | 3,119 | ||||||
Asset retirement obligation at end of period | $ | 42,117 | $ | 51,954 | ||||
Navitus_Partnership_Agreement
Navitus Partnership Agreement | 9 Months Ended |
Sep. 30, 2014 | |
Partnership Agreement Disclosure [Abstract] | ' |
Navitus Partnership Agreement | ' |
Navitus Partnership Agreement | |
Under terms of the Second Amended Partnership Agreement of Aurora, Navitus earns a net profits interest respective to its 50% partnership interest. Any distributions of the net profits interest to partners are at the discretion of Victory, as managing partner, together with 100% of the partnership interests. The accumulated net deficits of Navitus, along with historical contributions, net of distributions, are reported as non-controlling interests in the equity section of the condensed consolidated financial statements. | |
Under the terms of Aurora’s Seconded Amended Partnership Agreement, Navitus Partners, LLC, the fourth partner of Aurora, admitted under the Navitus Private Placement Memorandum (the "Navitus PPM"), earns a preferred return distribution of 10% based upon capital contributions to Aurora used by Victory to acquire or develop oil and gas prospects or related enterprises on behalf of Aurora. The preferred return distribution is in addition to and does not reduce any net profits interest. Since August 23, 2012, preferred distributions rights total $568,324 ($25,942 attributable to 2012, $241,784 attributable 2013, and $300,598 attributable to the nine months ended September 30, 2014). Victory, as managing partner, may, in its sole discretion, choose to distribute all or a portion of the preferred returns, or, apply these funds to other partnership purposes. | |
Navitus Partners, LLC, a partner in Navitus, also receives warrants for Victory’s common stock, allocated as 50,000 warrants for every Unit purchased under the Navitus PPM (equivalent of 1 warrant for every $1.00 invested), exercisable under the terms of Aurora’s Second Amended Partnership Agreement and the Navitus PPM. Since August 23, 2012, $4,565,900 of capital contributions have resulted in issuance of 4,565,900 common stock warrants (1,089,900 in 2012, 2,336,000 in 2013, and 1,140,000 for the nine months ended September 30, 2014). |
Revolving_Credit_Agreement
Revolving Credit Agreement | 9 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
Revolving Credit Agreement | ' |
Revolving Credit Agreement | |
On February 20, 2014, Aurora, as borrower, entered the Credit Agreement with Texas Capital Bank (“the Lender”). Guarantors on the Credit Agreement are Victory and Navitus, the two partners of Aurora. Pursuant to the Credit Agreement, the Lender agreed to extend credit to Aurora in the form of (a) one or more revolving credit loans (each such loan, a “Loan”) and (b) the issuance of standby letters of credit, of up to an aggregate principal amount at any one time not to exceed the lesser of (i) $25,000,000 or (ii) the borrowing base in effect from time to time (the “Commitment”). The initial borrowing base on February 20, 2014 was set at $1,450,000 . The borrowing base is determined by the Lender, in its sole discretion, based on customary lending practices, review of the oil and natural gas properties included in the borrowing base, financial review of Aurora, the Company and Navitus and such other factors as may be deemed relevant. The borrowing base is re-determined (i) on or about June 30 of each year based on the previous December 31 reserve report prepared by an independent reserve engineer, and (ii) on or about August 31 of each year based on the previous June 30 reserve report prepared by Aurora’s internal reserve engineers or an independent reserve engineer and certified by an officer of Aurora. The Credit Agreement will mature on February 20, 2017. Amounts borrowed under the Credit Agreement will bear interest at rates equal to the lesser of (i) the maximum rate of interest which may be charged or received by the Lender in accordance with applicable Texas law and (ii) the interest rate per annum publicly announced from time to time by the Lender as the prime rate in effect at its principal office plus the applicable margin. The applicable margin is, (i) with respect to Loans, one percent (1.00%) per annum, (ii) with respect to letter of credit fees, two percent (2.00%) per annum and (iii) with respect to commitment fees, one-half of one percent (0.50%) per annum. Loans made under the Credit Agreement are secured by (i) a first priority lien in the oil and gas properties of Aurora, the Company and Navitus, and (ii) a first priority security interest in substantially all of the assets of Aurora and its subsidiaries, if any, as well as in 100% of the partnership interests in Aurora held by the Company and Navitus. Loans made under the Credit Agreement to Aurora are fully guaranteed by the Company and Navitus. | |
The Credit Agreement contains various affirmative and negative covenants. These covenants, among other things, limit additional indebtedness, additional liens and transactions with affiliates. Among the covenants contained in the Credit Agreement are financial covenants that Aurora will maintain a minimum EBITDAX to Cash Interest Ratio of 3.5 to 1.0 and a minimum Current Ratio of not less than 1.0 to 1.0. The Current Ratio is defined under the covenants to include, as a current asset, the revolving credit availability. At September 30, 2014, Aurora's Current Ratio was 0.10 to 1 and it was therefore not in compliance with the aforementioned Current Ratio covenant requiring a ratio of current assets to current liabilities of not less than 1 to 1. Aurora notified the Lender that it is out compliance with the Current Ratio covenant and the Lender instructed the Company to fully explain its plans to come back into compliance with the Current Ratio covenant in their September 30, 2014 Compliance Certificate which is made upon filing of the Company’s September 30, 2014 SEC Form 10-Q filing. | |
On November 19, 2014, Aurora entered into a Waiver of Event of Default (the “Waiver Agreement”) with the Lender. Under the terms of the Waiver Agreement, the Lender agreed to waive an event of default under the Loan Agreement resulting from Aurora’s failure to maintain a current ratio of at least 1.00 to 1.00 as of the end of the fiscal quarter ending September 30, 2014 subject to certain conditions set forth therein, including the receipt by Aurora by December 1, 2014 of Navitus of at least $1.5 million to be used to reduce Aurora's outstanding liabilities. As of December 1, 2014, the required equity contributions from Navitus had not been received by Aurora, therefore the lender has the right but not the obligation to elect certain remedies, including, among other things, the acceleration of all amounts due under the Credit Agreement. As a result, the $800,000 outstanding balance of the Credit Agreement has been classified as a current liability in accordance with GAAP. The Company has not been notified by the Lender of any changes in the terms of the debt repayment at this time. Aurora continues to be current in all related interest and fee obligations, and expects the required Navitus equity contributions over the next thirty days and be in compliance with all Credit Agreement covenants at December 31, 2014. | |
The Company has fully utilized its borrowing base as of September 30, 2014. During the first quarter ended March 31, 2014 and second quarter ended June 30, 2014, Aurora drew $868,000, and $365,000 respectively, of the initial $1,450,000 borrowing base. In May 2014, revisions to the Credit Agreement lowered the borrowing base from $1,450,000 to $800,000 due to the sale of the Lightnin’ properties. In effect, Victory was obligated to pay $433,000 of the $1.23 million in credit loans utilized to meet the requirements of the new borrowing base. | |
Amortization of debt financing costs and interest expense on this debt for the three months and nine months ended September 30, 2014 was $18,631 and $49,639, respectively. |
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions | ' |
Related Party Transactions | |
The Company has a combined receivable from Navitus and Blackacre Resources, LLC. (an investment firm in which two of the Company's board of directors are members of management) of $169,141 and $68,571 as of September 30, 2014 and December 31, 2013, respectively. The Company also uses legal and consulting services of three members of its Board of Directors in the ordinary course of the Company’s business and reimburses for travel related costs. These charges totaled $268,219 and $89,375 for the nine months ended September 30, 2014 and 2013, respectively. Accrued liabilities to affiliates as of September 30, 2014 and December 31, 2013 were $33,323 and $18,542, respectively. In accordance with the Second Amended Partnership Agreement, the Company receives a 2% management fee on gross receipts of Aurora. The management fee totaled $3,470 and $92,632 for the three and nine months ended September 30, 2014, respectively. There were no management fees charged during the three and nine months ended September 30, 2013, respectively. |
Stockholders_Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2014 | |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
Shareholders’ Equity | |
Common stock | |
The Company estimates the fair value of employee stock options and warrants granted using the Black-Scholes Option Pricing Model. Key assumptions used to estimate the fair value of warrants and stock options include the exercise price of the award, the fair value of the Company’s common stock on the date of grant, the expected warrant or option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on the Company’s common stock. | |
During the three months ended September 30, 2014 and nine months ended September 30, 2014, and in consideration of capital contributions by Aurora of $250,000 and $1,140,000, respectively, pursuant to the Company’s capital contribution agreement with Aurora, the Company issued 250,000 and 1,140,000 common stock warrants, respectively, to Navitus with an exercise price ranging from $0.14-$0.41. The warrants vest immediately and the Company valued the common stock warrants using the Black Scholes Option Pricing Model, for the three and nine months ended September 30, 2014 was $77,500 and $339,700, respectively. | |
During the three and nine months ended September 30, 2014, and respectively, the Company issued 1,250,000 shares of common stock, 400,000 common stock options, and 175,000 shares of restricted common stock. The common stock options are vesting over a period of 36 months. |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
Commitments and Contingencies | |
Contingencies | |
Liabilities and other contingencies are recognized upon determination of an exposure, which when analyzed indicates that it is both probable that an asset has been impaired or that a liability has been incurred and that the amount of such loss is reasonably estimable. | |
Volatility of Oil and Natural Gas Prices | |
Our revenues, future rate of growth, results of operations, financial condition and ability to borrow funds or obtain additional capital, as well as the carrying value of our properties, are substantially dependent upon prevailing prices of oil and natural gas. | |
Legal Proceedings | |
Cause No. 08-04-07047-CV; Oz Gas Corporation v. Remuda Operating Company, et al. v. Victory Energy Corporation.; In the 112th District Court of Crockett County, Texas. | |
Plaintiff Oz Gas Corporation (“Oz”) sued Victory and other parties for bad faith trespass, among other claims, regarding the drilling of two wells on lands that Oz claims title to. Victory has a 50% interest in one of the named wells involved in this lawsuit (that being well 155-2 on the Adams Baggett Ranch in Crockett County, Texas). The lawsuit was originally filed against other parties in April 2008, and Victory intervened in the case on November 18, 2009 to protect its interest in the 155-2 well. | |
The case was tried on February 8 and 9, 2012. The Court found in favor of Oz and rendered a trespass finding against Victory and the other defendants. This case was appealed to the 8th Court of Appeals in El Paso, Texas, wherein that Court affirmed the ruling of the trial court. A Motion for Rehearing has been filed with the 8th Court of Appeals in El Paso, Texas. Victory has no monetary liability beyond those funds that were held in the registry of the Court on the date of judgment. | |
Cause No. CV-47,230; James Capital Energy, LLC and Victory Energy Corporation v. Jim Dial, et al.; In the 142nd District Court of Midland County, Texas. | |
This lawsuit was filed in the 142nd District Court of Midland County, Texas on January 19, 2010 by James Capital Energy, LLC and Victory against numerous parties for fraud, fraudulent inducement, and negligent misrepresentation, breach of contract, breach of fiduciary duty, trespass, conversion and a few other related causes of action. This lawsuit stems from an investment made by Victory for the purchase of six wells on the Adams Baggett Ranch. | |
On December 9, 2010, Victory was granted an interlocutory Default Judgment against Defendants Jim Dial, 1st Texas Natural Gas Company, Inc., Universal Energy Resources, Inc., Grifco International, Inc., and Precision Drilling & Exploration, Inc. The total judgment amounted to approximately $17.2 million. Recently Victory has added additional parties to this lawsuit. Discovery is ongoing in this case and no trial date has been set at this time. | |
Victory believes that it will be victorious against all the remaining Defendants in this case. | |
On October 20, 2011 defendant Remuda filed a Motion to Consolidate and a Counterclaim against Victory. Remuda is seeking to consolidate this case with two other cases in which Remuda is the named Defendant. An objection to this motion was filed and the cases have not been consolidated. Additionally, we do not believe that the counterclaim made by Remuda has any legal merit. | |
Cause No. 10-09-07213; Perry Howell, et al. v. Charles Gary Garlitz, et al.; In the 112th District Court of Crockett County, Texas. | |
The above referenced lawsuit was filed in the 112th District Court of Crockett County, Texas on September 6, 2010. This lawsuit alleges that Cambrian Management, Ltd. and Victory trespassed on lands owned by the plaintiffs named in the lawsuit in the drilling of the Adams-Baggett 115-8 well in Crockett County, Texas. | |
Discovery is ongoing in this case and Victory believes that the claims have no merit and that it will prevail. | |
Cause No. D-1-GN-13-00044; Aurora Energy Partners and Victory Energy Corporation v. Crooked Oaks; In the 261st District Court of Travis County, Texas. | |
The Company has yet to collect an installment balance of $200,000 for the sale of its Jones County, Texas oil and gas interests in May of 2012. The Company has provided for it as an allowance for doubtful accounts, and has not included it in the net accounts receivable balance of the Company’s condensed consolidated financial statements. |
Subsequent_Events_Subsequent_E
Subsequent Events Subsequent Events | 9 Months Ended | 0 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Nov. 01, 2014 |
Investor Relations Management Company | ||
Subsequent event | ||
Subsequent Event [Line Items] | ' | ' |
Restricted common stock (shares) | 175 | 175 |
Subsequent Events | ' | ' |
Subsequent Events | ||
On November 1, 2014, the Company issued 175,000 shares of restricted stock to an investor relations management company. | ||
On November 19, 2014, Aurora entered into a Waiver of Event of Default (the “Waiver Agreement”) with the Lender. Refer to Note 6 regarding the Waiver Agreement. |
Organization_and_Summary_of_Si1
Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Basis of Presentation and Consolidation | ' |
Basis of Presentation and Consolidation: | |
Victory is the managing partner of Aurora, and holds a 50% partnership interest in Aurora. Aurora, a subsidiary of the Company, is consolidated with Victory for financial statement reporting purposes, as the terms of the partnership agreement that governs the operations of Aurora give Victory effective control of the partnership. The condensed consolidated financial statements include the accounts of Victory and the accounts of Aurora. The Company’s management, in considering accounting policies pertaining to consolidation, has reviewed the relevant accounting literature. The Company follows that literature, in assessing whether the rights of the non-controlling interests should overcome the presumption of consolidation when a majority voting or controlling interest in its investee “is a matter of judgment that depends on facts and circumstances.” In applying the circumstances and contractual provisions of the partnership agreement, management determined that the non-controlling rights do not, individually or in the aggregate, provide for the non-controlling interest to “effectively participate in significant decisions that would be expected to be made in the ordinary course of business.” The rights of the non-controlling interest are protective in nature. All intercompany balances have been eliminated in consolidation. | |
The accompanying condensed consolidated balance sheet as of December 31, 2013, which has been derived from audited consolidated financial statements, and the accompanying interim condensed consolidated financial statements as of September 30, 2014, for three and nine month periods ended September 30, 2014 and 2013, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the consolidated financial condition, results of operations and cash flows of Victory and Aurora (hereinafter collectively referred to as the "Company" unless the context suggests otherwise) as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been included. | |
Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or for any other interim period during such year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013 filed with the SEC on April 21, 2014. | |
Non-controlling Interests | ' |
Non-controlling Interests: | |
The Navitus Energy Group, a Texas general partnership (“Navitus”) is a partner with Victory in Aurora. Victory and Navitus each own a 50% partnership interest in Aurora. Victory is the Managing Partner and has contractual authority to manage the business affairs of Aurora. | |
The non-controlling interest in Aurora is held by Navitus. As of September 30, 2014, $5,786,562 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in Aurora, with income (losses) attributable to non-controlling interests of $(36,788) and $(39,470) for the three months ended September 30, 2014 and 2013, respectively, and $977,997 and $(151,759) for the nine months ended September 30, 2014 and September 30, 2013, respectively. As of December 31, 2013, $4,315,986 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in Aurora. | |
Use of Estimates | ' |
Use of Estimates: | |
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used primarily when accounting for depreciation, depletion, and amortization (“DD&A”) expense, property costs, estimated future net cash flows from proved reserves, cost to abandon oil and natural gas properties, taxes, accruals of capitalized costs, operating costs and production revenue, general and administrative costs and interest, exploration expense, the purchase price allocation on properties acquired, various common stock, warrants and option transactions, and contingencies. | |
Oil and Natural Gas Properties | ' |
Oil and Natural Gas Properties: | |
We account for investments in oil and natural gas properties using the successful efforts method of accounting. Under this method of accounting, only successful exploration drilling costs that directly result in the discovery of proved reserves are capitalized. Unsuccessful exploration drilling costs that do not result in an asset with future economic benefit are expensed. All development costs are capitalized because the purpose of development activities is considered to be building a producing system of wells, and related equipment facilities, rather than searching for oil and natural gas. Items charged to expense generally include geological and geophysical costs. Capitalized costs for producing wells and associated land and other assets are depleted using a Units of Production methodology based on the proved, developed reserves and calculated on a by well basis, based upon reserve reports prepared by an independent petroleum engineer in accordance with SEC rules. | |
The net capitalized costs of proved oil and natural gas properties are subject to an impairment test which compares the net book value of assets, based on historical cost, to the undiscounted future cash flow of remaining oil and natural gas reserves based on current economic and operating conditions. Impairment of an individual producing oil and natural gas field is first determined by comparing the undiscounted future net cash flows associated with the proved property to the carrying value of the underlying property. If the cost of the underlying property is in excess of the undiscounted future net cash flows the carrying cost of the impaired property is compared to the estimated fair value and the difference is recorded as an impairment loss. Management’s estimate of fair value takes into account many factors such as the present value discount rate, pricing, and when appropriate, possible and probable reserves when activities justified by economic conditions and actual or planned drilling or other development. | |
Under the successful efforts method of accounting, the depletion rate is the current period production as a percentage of the total proved producing reserves. The depletion rate is applied to the net book value of property costs to calculate the depletion expense. Proved reserves materially impact depletion expense. If the proved reserves decline, then the depletion rate (the rate at which we record depletion expense) increases, reducing net income. | |
We depreciate other property and equipment using the straight-line method based on estimated useful lives ranging from five to 10 years. | |
Asset Retirement Obligations | ' |
Asset Retirement Obligations: | |
The Company records the estimate of the fair value of liabilities related to future asset retirement obligations (“ARO”) in the period the obligation is incurred. Asset retirement obligations relate to the removal of facilities and tangible equipment at the end of an oil and natural gas property’s useful life. The application of this rule requires the use of management’s estimates with respect to future abandonment costs, inflation, market risk premiums, useful life and cost of capital and required government regulations. U.S. GAAP requires that our estimate of our asset retirement obligations does not give consideration to the value the related assets could have to other parties. | |
Earnings (Losses) per Share | ' |
Earnings (Losses) per Share: | |
Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to controlling interests by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share takes into account the dilutive effect of potential common stock that could be issued by the Company in conjunction with stock awards that have been granted to directors and employees. In accordance with ASC 260, Earnings Per Share, awards of nonvested shares shall be considered outstanding as of the respective grant dates for purposes of computing diluted EPS even though their exercise is contingent upon vesting. | |
Income Taxes | ' |
Income Taxes: | |
The Company accounts for income taxes in accordance with ASC 740 “Income Taxes” which requires an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | |
The realization of future tax benefits is dependent on our ability to generate taxable income within the carry forward period. Given the Company’s history of net operating losses, management has determined that it is likely that the Company will not be able to realize the tax benefit of the carry forwards. ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. | |
Accordingly, the Company has a full valuation allowance against its net deferred tax assets at September 30, 2014 and December 31, 2013. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the deferred tax benefit associated with the use of the net operating loss carry forwards and will recognize a deferred tax asset at that time. | |
Stock-Based Compensation | ' |
Stock Based Compensation: | |
The Company applies ASC 718, “Compensation-Stock Compensation” to account for the issuance of options and warrants to employees, directors, officers and Navitus investors. The standard requires all share-based payments, including employee stock options, warrants and restricted stock, be measured at the fair value of the award and expensed over the requisite service period (generally the vesting period). The fair value of options and warrants granted to employees, directors and officers is estimated at the date of grant using the Black-Scholes option pricing model by using the historical volatility of the Company’s stock price. The calculation also takes into account the common stock fair market value at the grant date, the exercise price, the expected life of the common stock option or warrant, the dividend yield and the risk-free interest rate. | |
The Company from time to time may issue stock options, warrants and restricted stock to acquire goods or services from third parties. Restricted stock, options or warrants issued to third parties are recorded on the basis of their fair value, which is measured as of the date issued. The options or warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying equity instrument on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance, is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. | |
The Company recognized stock-based directors compensation expense from warrants and stock awards granted to directors for services of $365,675 and $22,500 for the nine months ended September 30, 2014 and 2013, respectively. For the three months ended September 30, 2014 and 2013, the Company recognized stock-based director compensation from warrants and stock awards granted to directors for services of $73,200 and $6,000, respectively. | |
The Company recognized stock-based incentive compensation expense from stock options granted to officers and employees of the company of $10,937 and $8,781 for the three months ended September 30, 2014 and 2013, respectively, and $95,562 and $52,106 for the nine months ended September 30, 2014 and 2013, respectively. | |
The Company also recognized stock-based general and administrative expense of $30,625 and $51,042 from stock issued to an investor relations management company for the three and nine months ended September 30, 2014, respectively. | |
Going Concern | ' |
Going Concern: | |
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not contain adjustments, including adjustments to recorded assets and liabilities, which might be necessary if the Company were unable to continue as a going concern. | |
As presented in the condensed consolidated financial statements, the Company is reporting a net loss, attributable to Victory Energy Corporation, of $622,795 and $341,056 for the three months ended September 30, 2014 and 2013, respectively, and a net loss of $785,910 and $1,067,153 for the nine months ended September 30, 2014 and 2013, respectively. | |
Proceeds from debt and Navitus contributions to Aurora have allowed the Company to continue operations and invest in oil and natural gas properties. Management anticipates that operating losses will continue until new wells are drilled and or acquisitions are successfully completed and incremental production increases operating profit. | |
The Company has invested $1,701,947 and $4,966,636, respectively, in leases, drilling and completion costs, and property acquisitions for the three and nine months ended September 30, 2014, respectively. | |
The Company remains in active discussions with Navitus and with third parties relating to the capital infusion and longer term financing required to fund our capital expenditures planned for 2014 and 2015. Without additional outside investment from the sale of equity securities and/or debt financing, our capital expenditures and overhead expenses must be reduced to a level commensurate with available cash flows. The Company, through Aurora as borrower, entered a $25 million credit facility (the "Credit Agreement") with Texas Capital Bank, National Association on February 20, 2014. See Note 6 “Revolving Credit Agreement”. As of September 30, 2014 the Company has $800,000 in principal amount outstanding under the Credit Agreement. The accompanying consolidated financial statements are prepared as if the Company will continue as a going concern. The consolidated financial statements do not contain adjustments, including adjustments to recorded assets and liabilities, which might be necessary if the Company were unable to continue as a going concern. |
Acquisitions_and_Dispositions_
Acquisitions and Dispositions (Tables) | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Business Combinations [Abstract] | ' | |||
Schedule of purchase price allocation | ' | |||
The final purchase price allocation is summarized below: | ||||
Proved Producing Lease and Well Costs Acquired | $ | 2,240,530 | ||
Proved Producing Leasehold Costs Acquired | 197,654 | |||
Unproved Leasehold Costs Acquired | 958,938 | |||
Total Oil and Gas Property Costs Acquired | $ | 3,397,122 | ||
Oil_and_natural_gas_properties1
Oil and natural gas properties (under successful efforts accounting) (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Extractive Industries [Abstract] | ' | |||||||
Components of Oil and Natural Gas Properties | ' | |||||||
Oil and natural gas properties are comprised of the following: | ||||||||
September 30, | 31-Dec-13 | |||||||
2014 | ||||||||
Oil and natural gas properties | $ | 6,619,685 | $ | 3,715,648 | ||||
Less: accumulated depletion | (1,553,356 | ) | (1,517,836 | ) | ||||
Oil and natural gas properties, net | $ | 5,066,329 | $ | 2,197,812 | ||||
Asset_Retirement_Obligations_T
Asset Retirement Obligations (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Asset Retirement Obligation Disclosure [Abstract] | ' | |||||||
Asset Retirement Obligations | ' | |||||||
The following table is a reconciliation of the ARO liability for continuing operations for the nine months ended September 30, 2014 and the twelve months ended December 31, 2013. | ||||||||
September 30, | 31-Dec-13 | |||||||
2014 | ||||||||
Asset retirement obligation at beginning of period | $ | 51,954 | $ | 39,905 | ||||
Liabilities incurred on properties acquired and developed | 17,069 | 8,930 | ||||||
Revisions to previous estimates | (11,990 | ) | — | |||||
Liabilities on properties sold (Lightnin' properties) | (17,602 | ) | — | |||||
Accretion expense | 2,686 | 3,119 | ||||||
Asset retirement obligation at end of period | $ | 42,117 | $ | 51,954 | ||||
Organization_and_Summary_of_Si2
Organization and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' |
Common Stock, shares authorized | 47,500,000 | ' | 47,500,000 | ' | 47,500,000 |
Common Stock, par value (in Dollars per share) | $0.00 | ' | $0.00 | ' | $0.00 |
Common Stock, outstanding (shares) | 28,927,826 | ' | 28,927,826 | ' | 27,563,619 |
Warrant granted | $286,075 | ' | $286,075 | ' | ' |
Stock based compensation | ' | ' | 461,237 | 52,106 | ' |
Stock options granted to officers and employees | 10,937 | 8,781 | 95,562 | 52,106 | ' |
Restricted stock in exchange for services | 30,625 | ' | 51,042 | 0 | ' |
NET INCOME (LOSS) | -622,795 | -341,056 | -785,910 | -1,067,153 | ' |
Payment to acquire in leases, drilling and completion costs, and property acquisitions | 1,701,947 | ' | 4,966,636 | ' | ' |
Directors | ' | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' |
Warrant granted | ' | ' | 365,675 | 22,500 | ' |
Stock based compensation | $73,200 | $6,000 | ' | ' | ' |
Minimum | ' | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' |
Property, Plant and Equipment, Useful Life | ' | ' | '5 years | ' | ' |
Maximum | ' | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' |
Property, Plant and Equipment, Useful Life | ' | ' | '10 years | ' | ' |
Organization_and_Summary_of_Si3
Organization and Summary of Significant Accounting Policies - Noncontrolling Interest (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Feb. 20, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Revolving Credit Facility | Aurora | Aurora | Aurora | Aurora | Aurora | ||||||
Texas Capital Bank | |||||||||||
Noncontrolling Interest [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership percentage of subsidiary | ' | ' | ' | ' | ' | ' | 50.00% | ' | 50.00% | ' | ' |
Noncontrolling ownership percentage of subsidiary | ' | ' | ' | ' | ' | ' | 50.00% | ' | 50.00% | ' | ' |
Non-controlling interest | $5,786,562 | ' | $5,786,562 | ' | $4,315,986 | ' | $5,786,562 | ' | $5,786,562 | ' | $4,315,986 |
Net income (loss) attributable to non-controlling interest | -36,788 | -39,470 | 977,997 | -151,759 | -429,511 | ' | -36,788 | -39,470 | 977,997 | -151,759 | ' |
Maximum borrowing capacity | ' | ' | ' | ' | ' | 25,000,000 | ' | ' | ' | ' | ' |
Amount outstanding | ' | ' | ' | ' | ' | $800,000 | ' | ' | ' | ' | ' |
Acquisitions_and_Dispositions_1
Acquisitions and Dispositions - Dispositions (Details) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | ||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Jun. 05, 2014 | Sep. 30, 2014 | Jun. 05, 2014 | |
Lightninb Property | Aurora | Aurora | Aurora | |||||
Lightninb Property | Lightninb Property | Lightninb Property | ||||||
Boe | producing_well | |||||||
producing_well | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' |
Cash consideration received | ' | ' | ' | ' | ' | $4,021,000 | ' | ' |
Working interest held | ' | ' | ' | ' | ' | 20.00% | ' | ' |
Net revenue interest held | ' | ' | ' | ' | ' | 15.00% | ' | ' |
Daily production of oil (barrels per day) | ' | ' | ' | ' | ' | 36 | ' | ' |
Number of productive wells | ' | ' | ' | ' | ' | ' | ' | 3 |
Gain from sale of property | $507 | $20,765 | $2,160,099 | $20,765 | $2,160,099 | ' | $2,160,099 | ' |
Acquisitions_and_Dispositions_2
Acquisitions and Dispositions - Acquisitions (Details) (Permian Basin Fairway Operations, USD $) | 0 Months Ended | 9 Months Ended | ||||
Sep. 18, 2014 | Jul. 31, 2014 | Jun. 30, 2014 | Sep. 30, 2014 | Sep. 18, 2014 | Jun. 30, 2014 | |
drilling_location | producing_well | |||||
acre | ||||||
completed_well | ||||||
Permian Basin Fairway Operations | ' | ' | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' |
Percentage of working interest acquired | ' | ' | ' | ' | ' | 10.00% |
Percentage of net revenue interest acquired | ' | ' | ' | ' | ' | 7.50% |
Acquisition cost | ' | ' | $2,491,888 | $3,400,000 | ' | ' |
Number of productive wells | ' | ' | ' | 50 | ' | 7 |
Number of wells in process | ' | ' | ' | ' | ' | 4 |
Gross acres (acres) | ' | ' | ' | ' | ' | 2,080 |
Purchase price adjustment payment | 346,988 | 558,246 | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract] | ' | ' | ' | ' | ' | ' |
Proved Producing Lease and Well Costs Acquired | ' | ' | ' | ' | 2,240,530 | ' |
Proved Producing Leasehold Costs Acquired | ' | ' | ' | ' | 197,654 | ' |
Unproved Leasehold Costs Acquired | ' | ' | ' | ' | 958,938 | ' |
Total Oil and Gas Property Costs Acquired | ' | ' | ' | ' | $3,397,122 | ' |
Oil_and_natural_gas_properties2
Oil and natural gas properties (under successful efforts accounting) (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Extractive Industries [Abstract] | ' | ' |
Oil and natural gas properties | $6,619,685 | $3,715,648 |
Less: accumulated depletion | -1,553,356 | -1,517,836 |
Total oil and gas properties, net | $5,066,329 | $2,197,812 |
Oil_and_natural_gas_properties3
Oil and natural gas properties (under successful efforts accounting) (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Extractive Industries [Abstract] | ' | ' | ' | ' |
Depletion, depreciation, and accretion expense | $81,952 | $90,962 | $252,024 | $168,861 |
Asset_Retirement_Obligations_D
Asset Retirement Obligations (Details) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | ' | ' |
Asset retirement obligation at beginning of period | $51,954 | $39,905 |
Liabilities incurred on properties acquired and developed | 17,069 | 8,930 |
Revisions to previous estimates | -11,990 | 0 |
Liabilities on properties sold (Lightnin' properties) | -17,602 | 0 |
Accretion expense | 2,686 | 3,119 |
Asset retirement obligation at end of period | $42,117 | $51,954 |
Navitus_Partnership_Agreement_
Navitus Partnership Agreement (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | 25 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2014 | |
Schedule of Partnership Agreements [Line Items] | ' | ' | ' | ' |
Percentage of partnership interests | 100.00% | ' | ' | 100.00% |
Aurora | ' | ' | ' | ' |
Schedule of Partnership Agreements [Line Items] | ' | ' | ' | ' |
Noncontrolling ownership percentage of subsidiary | 50.00% | ' | ' | 50.00% |
Navitus Partners, LLC | ' | ' | ' | ' |
Schedule of Partnership Agreements [Line Items] | ' | ' | ' | ' |
Noncontrolling ownership percentage of subsidiary | 50.00% | ' | ' | 50.00% |
Preferred return distribution (percent) | 10.00% | ' | ' | ' |
Preferred distribution rights | $300,598 | $241,784 | $25,942 | $568,324 |
Number of warrants issued per unit acquired | $50,000 | ' | ' | ' |
Number of warrants issued per dollar invested | 1 | ' | ' | ' |
Capital contributions | ' | ' | ' | 4,565,900 |
Navitus Partners, LLC | Common Stock | ' | ' | ' | ' |
Schedule of Partnership Agreements [Line Items] | ' | ' | ' | ' |
Common stock warrants issued during period | $1,140,000 | $2,336,000 | $1,089,900 | $4,565,900 |
Revolving_Credit_Agreement_Det
Revolving Credit Agreement (Details Narrative) (USD $) | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | ||||||||||
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Feb. 20, 2014 | Feb. 20, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Sep. 30, 2014 | 31-May-14 | Feb. 20, 2014 | Feb. 20, 2014 | Feb. 20, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Nov. 19, 2014 | Dec. 01, 2014 | |
Letter of Credit | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Navitus Partners, LLC | ||||
Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Aurora | Aurora | Aurora | Revolving Credit Facility | ||||
Loans | Letter of Credit | Texas Capital Bank | Texas Capital Bank | Texas Capital Bank | Aurora | ||||||||||||
Minimum | Minimum | Texas Capital Bank | |||||||||||||||
Subsequent event | Subsequent event | ||||||||||||||||
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum borrowing capacity | ' | ' | ' | $25,000,000 | ' | ' | ' | ' | ' | ' | $25,000,000 | ' | ' | ' | ' | ' | ' |
Minimum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | 800,000 | 1,450,000 | ' | ' | ' | ' | ' | ' |
Debt instrument interest rate (percent) | ' | ' | ' | ' | 0.50% | ' | ' | ' | ' | ' | ' | 1.00% | 2.00% | ' | ' | ' | ' |
Cash interest ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3.5 | ' | ' |
Current ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' | ' |
Current ratio during current period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.1 | ' | ' | ' |
Debt covenant, current ratio waived under event of default agreement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' |
Amount to be received from partner to satisfy covenant terms | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,500,000 |
Current note payable | 800,000 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 800,000 | ' | ' | ' |
Proceeds from line of credit | ' | ' | ' | ' | ' | ' | 365,000 | 868,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal payments of line of credit | 433,000 | 0 | ' | ' | ' | ' | ' | ' | 433,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum amount outstanding during period | ' | ' | ' | ' | ' | ' | ' | ' | 1,230,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization of debt financing costs and interest expense | ' | ' | ' | ' | ' | $18,631 | ' | ' | $49,639 | ' | ' | ' | ' | ' | ' | ' | ' |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' |
Accrued liabilities - related parties | $33,323 | ' | $33,323 | ' | $18,542 |
Management fee received from related party | 3,470 | 0 | 92,362 | 0 | ' |
Navitus | ' | ' | ' | ' | ' |
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' |
Accounts receivables from related parties | 169,141 | ' | 169,141 | ' | 68,571 |
Board of Directors | ' | ' | ' | ' | ' |
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' |
Number of directors engaged in related party transactions | ' | ' | 3 | ' | ' |
Legal and consulting services received from related parties | ' | ' | 268,219 | 89,375 | ' |
Affiliates | ' | ' | ' | ' | ' |
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' |
Accrued liabilities - related parties | 33,323 | ' | 33,323 | ' | 18,542 |
Aurora | ' | ' | ' | ' | ' |
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' |
Management fee charged to related party (percent) | ' | ' | 2.00% | ' | ' |
Management fee received from related party | $3,470 | ' | $92,632 | ' | ' |
Shareholders_Equity_Details_Na
Shareholders' Equity (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Class of Stock [Line Items] | ' | ' |
Common stock issued (shares) | ' | 1,035,000 |
Common stock options issued (shares) | ' | 400,000 |
Restricted common stock (shares) | ' | 175,000 |
Common stock options vesting period | ' | '36 months |
Common Stock | ' | ' |
Class of Stock [Line Items] | ' | ' |
Common stock issued (shares) | 1,250,000 | ' |
Common stock options issued (shares) | 400,000 | ' |
Common stock options vesting period | '36 months | ' |
Restricted Stock | ' | ' |
Class of Stock [Line Items] | ' | ' |
Restricted common stock (shares) | 175,000 | ' |
Aurora | ' | ' |
Class of Stock [Line Items] | ' | ' |
Capital contributions | $250,000 | $1,140,000 |
Aurora | Common Stock Warrants | ' | ' |
Class of Stock [Line Items] | ' | ' |
Warrants issued | 250,000 | 1,140,000 |
Value of warrants using the Black Scholes Option Pricing Model | $77,500 | $339,700 |
Navitus | Maximum | Common Stock Warrants | ' | ' |
Class of Stock [Line Items] | ' | ' |
Warrant exercise price | ' | $0.41 |
Navitus | Minimum | Common Stock Warrants | ' | ' |
Class of Stock [Line Items] | ' | ' |
Warrant exercise price | ' | $0.14 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (USD $) | Apr. 30, 2008 | Dec. 09, 2010 | Sep. 30, 2014 |
Oz Gas Corporation v. Remuda Operating Company, et al. v. Victory Energy Corporation | Victory v. Jim Dial, et al. | Aurora Energy Partners and Victory Energy Corporation v. Crooked Oaks | |
Judicial Ruling | |||
Loss Contingencies [Line Items] | ' | ' | ' |
Ownership percentage | 50.00% | ' | ' |
Judgment amount granted | ' | $17,200,000 | ' |
Installment balance past due | ' | ' | $200,000 |