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Recent merger to prove victorious for Lucas Energy

Despite its recent announcement that it has defaulted on a debt payment, Houston-based oil production company Lucas Energy announced today that it is working on a deal to merge with West Texas operator Victory Energy and will be seeking capital to drill in the Eagle Ford Shale. On Friday, Lucas Energy said in a statement that it defaulted on a debt payment dating back to December 13 of last year and would be paying a defaulted interest of 18 percent on a $7.7 million loan.

Victory Energy, a rapidly growing Permian Basin-focused oil and gas company, and Lucas Energy, an asset rich Austin Chalk and Eagle Ford-focused oil and gas company, announced today that they have executed a Letter of Intent and Term Sheet for a proposed business combination between the two companies. The deal between the two companies is contingent upon the signing of a definitive merger agreement, which contains customary terms and conditions. Victory’s shareholders will be issued equity in Lucas Energy as part of the deal, with no cash being involved as part of the agreement.

Kenny Hill, CEO of Victory Energy on the merger:

“The expected combination of the two companies will allow Victory and Lucas shareholders to enjoy the benefits of a much larger NYSE MKT listed company, the synergies of a single management structure and reporting company, which will hold valuable assets in two of the most active and profitable basins in North America, the Permian and the Eagle Ford.”

Lucas Energy, which has been struggling for months to generate revenue, will now be able to fund and bring into production a portfolio of 130 future drilling locations in Eagle Ford. Both parties are anticipating that the monthly production revenue from these combined wells will exceed $1.1 million in revenue to the company interest. Those numbers are based on projections that a barrel of oil will be at or near $50 a barrel. The cash flow generated from that portfolio alone would bring both companies into a positive cash-flow position and add significant proven reserves to the combined 2015 portfolio.

Anthony Schnur, CEO of Lucas Energy on the merger:

“We are extremely excited by the opportunity to combine with Victory. We believe that the proposed combination will enhance our access to capital, diversify our asset base, strengthen our balance sheet and allow us to scale. We are pleased to have identified a strategic partner that can help us expand our scope of operations and improve our financial condition.”

You can read the full press release here.


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