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Victory Updates Permian Basin Exploration and Development Activities

Three New Wells Underway & Two Others Near Spud

AUSTIN, Texas, Jan. 16, 2013 /PRNewswire/ -- Victory Energy Corporation (OTCQB: VYEY), a growth oriented non-operating oil and gas company, today provided a drilling operations update for Aurora Energy Partners ("Aurora") which the Company manages and in which it owns a 50 percent interest.  Aurora has three new wells (Hickory 14 State #1, University 7 #1, Morgan #1) in various states of completion, a fourth well (Cotter #1) planned to spud within the next week and a fifth well (Milan 12 State #1) on plan to spud in February.  

"This level of activity represents a new high for the Company and a great beginning to the new year," said Kenny Hill, Victory Energy CEO.  "With a favorable estimated ultimate recovery (EUR) and substantial 25 percent working interest, the Cotter #1 well has the potential to generate greater monthly cash flow than any of our previous wells.  The imminent spud of this well and the continued planned development of the Lightnin' property offers the most immediate and strategic path to improve our cash flow and achieve profitability this year."

ABOUT THE PROPERTIES

The Lightnin' Prospect - Acquired in March of 2012, the Lightnin' Prospect, located in Glasscock County, Texas, was the first high-value acquisition of 2012 under our new strategy of acquiring larger working interest positions.  The Company originally acquired a 75% working interest.  In January of 2013 Victory completed a farm-out of a 50 percent working interest to four buyers and selected an operator for the prospect.  The first well (Cotter #1) is planned to spud in January and is expected to be drilled to a total depth of 10,700 feet.  This resource play is also referred to as the Wolfberry Play, which is composed of the lower Spraberry, Dean, Wolfcamp, Cline Shale, Fusselman, into the Pennsylvanian. The 320 acre prospect is surrounded by existing production and some of the nation's largest independent operators. The most active operators in the area are Apache Corporation, Laredo Petroleum, Pioneer Natural Resources, Energen Resources, Endeavor and Nadel and Gussman. 

A third-party reservoir engineer estimates base-case gross EUR per well of 115,140 barrels of oil equivalent (BOE), a mid-case of 175,000 BOE and a high case of 228,000 BOE, assuming an estimated 86 percent of which is oil and 14 percent is natural gas liquids (NGL) and gas.  The acreage held currently provides 40 acre spacing and thus an opportunity to drill a minimum of eight vertical wells on the prospect acreage. Additional opportunities to downsize the spacing to 20 acres and drill up to 16 total wells may be available.  Utilizing an average gross EUR of 175,000 BOE, these eight wells could deliver a total gross EUR of 1,400,000 BOE or the equivalent of $109.1 million in future gross undiscounted cash flow to the 100 percent interest, assuming $86/bbl oil and combined NGL and gas pricing of $5.00/mcf.

Aurora now holds a 25 percent working interest and an 18.75 percent net revenue interest.  Average costs to the 25 percent working interest are anticipated to be approximately $600,000 per well.

The Morgan Prospect - Acquired in December of 2012, this 80 acre property is located in Martin County, Texas.  The first well (Morgan #1) spud on December 5, 2012, has been drilled to a target depth of 10,616 feet, and is now awaiting a multi-stage fracture stimulation which is currently scheduled for late January 2013.  This is a Wolfberry resource play, as is the Lightnin' Prospect, and mud logs from the well bore compare favorably to the producing offset wells nearby.  

A third-party reservoir engineer estimates base-case gross EUR per well of 101,623 BOE (assuming an estimated 84 percent of which is oil, and 16 percent of which is NGL and gas).  The acreage held currently provides 40 acre spacing and thus an opportunity to drill a second vertical well on the prospect acreage.  Utilizing an average gross EUR of 101,623 BOE, these two wells could deliver a total gross EUR of 203,246 BOE or the equivalent of $14.84 million in future gross undiscounted cash flow to the 100 percent interest, assuming $86/bbl oil and combined NGL and gas pricing of $5.00/mcf.

Aurora holds a 3 percent working interest and a 2.25 percent net revenue interest.  Average costs to the 3 percent working interest are anticipated to be approximately $72,000 per well.


The Bootleg Canyon "Tunis Creek" Prospect - Acquired in 2011, this 5,000+ acre lease is located in Pecos County, Texas.  There are now two producing Ellenburger oil wells on this 3D seismic-controlled property.  The third Ellenburger well (University 7 #1) spud on December 23, 2012 and is currently being drilled to a total estimated depth of 7,200 feet.

A third-party reservoir engineer estimates gross EUR per well of 187,240 BOE (assuming an estimated 98 percent oil, 2 percent gas).  The two producing wells and a Proven Undeveloped Well (PUD) location will be included in the Company's 2012 reserve report.   The acreage held currently provides 160 acre spacing and thus an opportunity to drill additional wells on the prospect acreage.  Utilizing an average gross EUR of 187,240 BOE, the three wells could deliver a total gross EUR of 561,720 BOE or the equivalent of $47.3M in future gross undiscounted cash flow to the 100 percent interest, assuming $86/bbl oil and combined NGL and gas pricing of $5/mcf.

Aurora holds a 5 percent working interest and a 3.75 percent net revenue interest.  Average costs to the 5 percent working interest are anticipated to be approximately $78,000 per well.

The Concho Farm-In Prospect - Acquired in November 2012 as part of a farm-in type arrangement with COG Operating, LLC, a Concho Resources Company, this 320 acre non-contiguous property is located Lea County, New Mexico.  A four well drilling program has been proposed by the operator consisting of two test wells and two development wells.  The first test well (Hickory 14 State #1) was spud on November 17, 2012 and has been drilled to a vertical depth of 8,600 feet.  The well has undergone a multi-stage frac completion procedure and is being brought into production. The formation focus for this well is the Yeso and Drinkard (Blinbry).  A second test well (Milan 12 State #1) has been proposed for February spud.

A third-party reservoir engineer estimates base-case gross EUR per well of 101,925 BOE, mid-case of 143,808 and a high case of 187,106 (assuming an estimated 83 percent of which is oil, and 17 percent of which is NGL and gas).  The acreage held provides an opportunity to drill up to four total wells.  Utilizing an average gross EUR of 143,808 BOE, these four wells could deliver a total gross EUR of 575,232 BOE or the equivalent of $41.5 million in future gross undiscounted cash flow to the 100 percent interest, assuming $86/bbl oil and combined NGL and gas pricing $5/mcf.

Aurora has a 1.25 percent carried working interest through drilling, completion and equipping of the two test wells and a right to back-in after payout for an additional 1.25% working interest, giving the Company a total of 2.5 percent working interest and 1.875 percent net revenue interest in the two test wells and the two development wells, if it chooses to participate after completion.   

Our references to estimated ultimate recovery or "EUR" in this press release refers to the estimated unrisked adjusted reserves for a well from proved, probable and possible categories of reserves.

Please note that Victory Energy intends to use its website, www.vyey.com, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the Victory Energy website in the "Investor Relations" section. Accordingly, investors should monitor such portions of the Victory Energy website in addition to following press releases, SEC filings and public conference calls and webcasts.

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About Victory Energy Corporation

Victory Energy Corporation (OTCQB: VYEY) is a growth oriented non-operating oil and gas company engaged in the exploration, acquisition, development, and production of domestic oil and gas properties. Victory leverages both internal capabilities and strategic industry relationships to acquire working interest positions in low-to-moderate risk oil and gas prospects.

Future investment will focus primarily on oil or liquid-rich gas projects within longer-life reservoirs that offer competitive finding and development costs. The Company's current producing oil and gas assets are located onshore in the Permian Basin of Texas and New Mexico.

The Company's objective is to create long term shareholder value by increasing oil reserves, improving financial returns (higher production volumes, lower costs), and managing the capital on our balance sheet.

Download the investor Fact Sheet for current summary of projects and activity.   Victory Energy is current with its SEC filings and is a full reporting company.  The Company is traded under the ticker symbol VYEY on the OTCQB tier, operated by OTC Markets Group.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release 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 developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management's experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words "will," "potential," "believe," "estimated," "intend," "expect," "may," "should," "anticipate," "could," "plan," "project," or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Among these forward-looking statements are statements regarding EURs, estimated BOE, estimated future gross undiscounted cash flow and estimated drilling and completion costs. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including but not limited to, changes to drilling plans and schedules by the operators of prospects, overruns in  costs of operations, hazards, delays, and any other difficulties related to drilling for and producing oil or gas, the price of oil, NGLs, and gas, results of marketing and sales of produced oil and gas, estimates made in evaluating reserves, competition, general economic conditions and the ability to manage and continue growth, and other factors described in the Company Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011 and any updates to those risk factors set forth in the Company's Quarterly Reports on Form 10-Q. Further information on such assumptions, risks and uncertainties is available in the Company's other filings with the Securities and Exchange Commission ("SEC") that are available on the SEC's website at www.sec.gov, and on the Company's website. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

CONTACTS:

Victory Energy Corporation


Kenny Hill, CEO


512-347-7300




Investor Relations:


DRG&L, LLC


Ken Dennard / Ben Burnham


713-529-6600

SOURCE Victory Energy Corporation

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