Supplementary Financial Information on Oil and Natural Gas Exploration, Development and Production Activities (Unaudited)

The following disclosures provide unaudited information required by ASC 932, “Extractive Activities – Oil and Gas” on oil and natural gas producing activities. These disclosures include non-controlling interests in Aurora which is managed and owned 50% by Victory.

Results of operations from oil and natural gas producing activities (Successful Efforts Method)

The Company’s oil and natural gas properties are located within the United States. The Company currently has no operations in foreign jurisdictions. Results of operations from oil and natural gas producing activities are summarized below for the years ended December 31:



	Years Ended December 31,
	2015			2014
Revenues	$	650,648		$	695,318
Costs incurred:
Exploration and dry hole costs	2,513			56,351
Lease operating costs and production taxes	192,504			225,074
Impairment of oil and natural gas reserves	867,048			3,721,042
Depletion, depreciation and accretion	637,121			430,912
Totals, costs incurred	1,699,186			4,433,379
Pre-tax (loss) from producing activities	(1,048,538		)	(3,738,061		)
Results (loss) from of oil and natural gas producing activities (excluding overhead, income taxes, and interest costs)	$	(1,048,538	)	$	(3,738,061	)

Costs incurred in oil and natural gas property acquisition, exploration and development activities are summarized below for the years ended December 31:



	Years Ended December 31,
	2015		2014
Property acquisition and developmental costs:
Development	$	1,058,704	$	841,270
Property Acquisition	—		3,214,872
Undrilled Leaseholds	—		22,577
Asset retirement obligations	2,506		3,721
Totals costs incurred	$	1,061,210	$	4,082,440

Oil and natural gas reserves

Proved reserves are estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods.

Proved oil and natural gas reserve quantities at December 31, 2015 and 2014 and the related discounted future net cash flows are based on estimates prepared by independent petroleum engineers. Such estimates have been prepared in accordance with guidelines established by the Securities and Exchange Commission.

Standardized measure of discounted future net cash flows relating to proven oil and gas reserves (SMOG)

The following information has been prepared in accordance with the Financial Accounting Standards Board pronouncements and the regulations of the Securities and Exchange Commission, which require the standardized measure of discounted future cash flows based on sales prices, costs and statutory interest rates. The standardized measure of oil and gas producing activities is the present value of estimated future cash inflow from proved oil and natural gas reserves, less future development, abandonment, production and income tax expenses, discounted to reflect timing of future cash flows.

The Company’s proved oil and natural gas reserves for the years ended December 31, 2015 and December 31, 2014 are shown below:



	Years Ended December 31,
Volumes	2015		2014
Natural gas:	(Mcfs)
Proved developed and undeveloped reserves (mcf):
Beginning of year	600,000		723,190
Purchase (sale) of natural gas properties in place	—		(46,770	)
Discoveries and extensions	26,680		—
Revisions	(410,362	)	(30,843	)
Production	(37,568	)	(45,577	)
Proved reserves, at end of year (a)	178,750		600,000



	Years Ended December 31,
	2015		2014
Oil:	(Bbls)
Proved developed and undeveloped reserves:
Beginning of year	20,700		49,020
Purchase (sale) of oil producing properties in place	—		(26,290	)
Discoveries and extensions	30,720		1,175
Revisions	2,112		3,700
Production	(12,152	)	(6,905	)
Proved reserves, at end of year (a)	41,380		20,700


(a)	Includes 89,375 Mcf and 20,690 bbl and 300,000 Mcf and 10,350 bbl for the twelve months ended December 31, 2015 and 2014, respectively of proved reserves attributable to a consolidated subsidiary in which there is a 50% non-controlling interest.



	Years Ended December 31,
Values	2015			2014
Future cash inflows	$	2,345,940		$	4,920,190
Future costs:
Production	(964,520		)	(2,144,600		)
Development	(87,650		)	(87,650		)
Future cash flows	1,293,770			2,687,940
10% annual discount for estimated timing of cash flow	(421,640		)	(1,223,370		)
Standardized measure of discounted cash flow (a)	$	872,130		$	1,464,570


(a)	Includes $436,065 and $732,285 for the twelve months ended December 31, 2015 and 2014, respectively, of discounted cash flows attributable to a consolidated subsidiary in which there is a 50% non-controlling interest.

Using the SEC adjusted guidelines in place for 2016, the gas and oil prices for this analysis were set at the average price received on the “first-day-of-the-month” for 2015, for appropriate differentials. The “benchmark” prices are $50.28 per barrel and $2.58 per Mcf. The average quarterly price received for natural gas for 2015 ranged from $2.85 /Mcf to $3.33 /Mcf . The average quarterly price received oil for 2015 ranged from $39.41/bbl to $46.54/bbl.

Future income taxes are based on year-end statutory rates, adjusted for tax basis of oil and natural gas properties and availability of applicable tax assets, such as net operating losses. A discount factor of 10% was used to reflect the timing of future net cash flows.

The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair market value of the Company’s oil and natural gas properties. An estimate of fair value may also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and may require a discount factor more representative of the time value of money and the risks inherent in reserve estimates.

Changes in standardized measure

Included within standardized measure are reserves purchased in place. The purchase of reserves in place includes undeveloped reserves which were acquired at minimal value that have been estimated by independent reserve engineers to be recoverable through existing wells utilizing equipment and operating methods available to the Company and that are expected to be developed in the near term based on an approved plan of development contingent on available capital.

Changes in the standardized measure of future net cash flows relating to proved oil and natural gas reserves for the years ended December 31 is summarized below:



	For the years ended December 31,
	2015			2014
Increase (decrease)
Sale of gas and oil, net of operating expenses	$	(458,144	)	$	(470,244	)
Discoveries, extensions and improved recovery, net of future production and development costs	—			—
Accretion of discount	146,500			242,210
Net increase (decrease)	$	(311,644	)	$	(228,034	)
Standardized measure of discounted future cash flows:
Beginning of the year	$	1,464,570		$	2,422,100

Before Income Taxes	$	872,130		$	1,464,570
Income Taxes	(287,358		)	(500,586		)
End of the year (a)	$	584,772		$	963,984


(a)	Includes $292,386 and $481,992 for the twelve months ended December 31, 2015 and 2014, respectively of future net cash flows attributable to a consolidated subsidiary in which there is a 50% non-controlling interest.