Storm Cat Energy Corporation Announces 2007 Year-end Operating & Financial Results



    DENVER and CALGARY, Alberta, March 17 /CNW/ -- Storm Cat Energy
Corporation (Amex:   SCU; TSX: SME) today reported 2007 year-end financial and
operating results.
    In 2007, Storm Cat achieved several record financial and operating
results:
    
    -- Average daily production was 8.641 MMcf/d, a 96% increase over 2006
       average daily production;
    -- Reserve replacement ratio was 718% in 2007;
    -- Year end proved reserves were 44.5 Bcf, a 78% increase over 2006 year
       end proved reserves;
    -- Estimated discounted future net cash flow of proved reserves discounted
       at 10% was $98.4 million, an increase of 208% over 2006;
    -- Total net revenue from gas sales was $16.8 million, a 77% increase over
       2006
    
    Storm Cat achieved these record results notwithstanding a very difficult
commodity price environment covering almost all of our operations.  2007
presented several challenges to the Rocky Mountains producing region and,
specifically, our Powder River Basin (PRB) operations. Insufficient Rockies
pipeline takeaway capacity created difficult "gas-on-gas" competition
throughout much of the year, resulting in significant natural gas price
deterioration.  This difficult price environment forced us to reprioritize our
capital budget with the goal of bringing most of our production growth on line
at the end of 2007 rather than sequentially throughout the year.
    A September fire on the Cheyenne Plains interstate gas pipeline reduced
Rockies take-away capacity even further, deteriorating already reduced Rockies
gas prices.  As a consequence, we were forced to curtail our production in the
third and fourth quarters of 2007.  Fortunately, our hedging allowed us to
partially mitigate the impacts of this price collapse and deliverability
curtailment.
    Finally, certain pipeline interruptions and operational delays occurred
in the fourth quarter within our operating areas of the PRB that impacted our
ability to maximize production from our properties.  Impacts of interruptions
and delays are still being experienced in the first quarter of 2008 as we
ultimately recover fully from and advance beyond these impacts.
    Storm Cat Energy Chief Executive Officer Joe Brooker commented, "2007
presented significant pricing and associated production challenges to our
company.  Notwithstanding these challenges we were still able to substantially
increase our Powder River Basin reserves and made significant progress in
Fayetteville and Elk Valley, including adding proved reserves in the
Fayetteville.  2008 will be an exciting year for Storm Cat with significantly
improved Rockies pricing and our first sales from Fayetteville.  We fully
expect to and continue to grow shareholder value through increased production,
reserves and cashflow."
    
    Financial Update (all figures in U.S. Dollars)
    
    Inclusive of hedging, the average realized gas price for the year was
$5.31 per thousand cubic feet (Mcf), 9.6% lower than the year ended 2006
average price of $5.88 per thousand cubic feet (Mcf).  Excluding hedging, the
realized gas price for the full year 2007 was $3.54 per Mcf.
    For the year, the Company reported a net loss of $41.0 million, or $0.51
per share, as compared to a net loss of $6.9 million, or $0.10 per share, for
the full-year 2006.  The net loss for the year reflected a $25.0 million
impairment expense, incurred in the third quarter, against the book value of
our proved properties due to abnormally weak natural gas prices, an impairment
of $2.8 million against the book value of our unproved Canadian properties,
interest expense of $4.7 million, debt issuance costs related to our Series A
& B convertible notes financing of $2.0 million and higher general and
administrative expenses, comprised of $0.9 million in increased salaries and a
onetime severance payment of $0.4 million.  Stock based compensation decreased
to $1.1 million for the year-ended 2007.  Net income for 2007 also reflected a
tax benefit of $1.4 million related the Canadian flow through shares.
Excluding one-time items and impairment costs, the 2007 net loss would have
been $12.2 million, or $0.15 per share.
    Gathering and transportation expenses increased approximately $0.4
million from $1.9 million in 2006 to $2.3 million in 2007.  The increase in
total expense was a direct result of increased production volumes.  Gathering
expense per Mcf decreased, attributable to significantly lower natural gas
prices.
    Lease operating expenses (excluding taxes) increased approximately $2.4
million to $4.8 million in 2007 compared to $2.4 million in 2006.  The
increase is primarily a result of additional wells added from our successful
2007 drilling program and from the full year effects of an acquisition made in
the third quarter 2006.  Lease operating expenses increased $0.11 per Mcf from
2006 to 2007.  Most of this increase was due to start-up operating expenses
incurred after new wells were placed on production.
    Ad valorem and property taxes increased approximately $0.2 million to
$1.3 million in 2007 compared to $1.1 million in 2006.  The increase resulted
from gas volume increases over the past year.  Ad valorem and property taxes
as a percentage of natural gas sales decreased from 11.1% in 2006 to 7.9% in
2007.  Additionally, the decrease in ad valorem and property tax on a per Mcf
basis between 2006 and 2007 was due to lower gas prices in the PRB in 2007.
    Depreciation, depletion and amortization increased by $4.1 million to
$8.0 million in 2007 compared to $3.9 million in 2006.  This increase resulted
from increased production resulting from our successful drilling activities
over the past year and from an acquisition made in the third quarter of 2006.
The per Mcf rate increased marginally primarily due to additions to the
reserve estimate.
    Total assets increased 18.4% to $132.6 million in 2007 from $112.00
million in 2006.  The book value of oil and gas properties increased 21.8% to
$117.7 million at year-end 2007 from $96.6 million at year-end 2006. Year-end
2007 oil and gas assets reflect an impairment of $25.0 million recorded in the
third quarter of 2007 as results of abnormally low gas prices.
    Weighted average shares outstanding for year-end 2007 increased to 80.9
million as compared to 70.4 million at year-end 2006.  The increase in average
shares outstanding is attributed to the exercise of outstanding options and
vesting of or issuance of restricted share units.
    
    Operations Update (all figures in U.S. Dollars)
    
    Current net production is 12.5 million cubic feet per day (MMcf/d), an
increase of 2.5% from 12.2 MMcf/d at year end 2007.  The Company has commenced
its 2008 capital drilling program in both the PRB and the Fayetteville and is
currently running four rigs in the PRB and one rig in the Fayetteville.
    
    Powder River Basin
    
    In 2007 we invested $23.6 million in capital on our drilling and
completion activities in the PRB and grew proved reserves there by 18.3 Bcf,
after consideration of production of 3.154 Bcf in 2007.  Our resulting finding
and development cost ("F&D") of $1.29/Mcf is significantly better than the
market trend of $2.79/Mcf.
    
    Fayetteville Shale
    
    On the Company's Fayetteville Shale acreage, located in the Arkoma Basin
in Arkansas, drilling operations have commenced and the first 2008 well has
been spud.  The Fayetteville Shale project occupies the first priority
position for the 2008 capital budget. We anticipate a continual program
drilling 12 gross / 8 net wells on our Fayetteville acreage in 2008.  In 2009,
we anticipate drilling 24 gross/16 net wells.  The Fayetteville provides a
very attractive growth opportunity for us for several years.
    Construction of the sales pipeline by our third party gatherer is
progressing according to plan.  The low pressure gathering system is
substantially complete.  The high pressure transportation pipeline connecting
to the Ozark pipeline is approximately 75% complete.  The third party gatherer
expects that our three wells which were drilled and completed in 2007 and our
first wells drilled in 2008 will to be tied in to sales by early second
quarter as projected.
    
    Elk Valley, B.C.
    
    In Elk Valley we have nine wells on production and continue to progress
in our dewatering efforts.  To advance our de-watering, installation of larger
down hole equipment and fluid level sensors is being performed and should be
substantially complete in the next two weeks.
    During 2007 we invested approximately $9.1 million in Elk Valley to
finish completion and commence production of five wells drilled in 2006 and
for dewatering operating expenses, miscellaneous repairs and maintenance, and
line projects.  Storm Cat's activities to date have been encouraging resulting
in the production of 2,000 to 2,500 barrels of water per day and upwards of
1,300 Mcf/d from the nine producing wells.  Both the observed water and gas
rates are a significant step change from the rates observed by the prior
operator.
    To avoid migrating coal fines and production of hydraulic fracture sand,
we intentionally have not withdrawn water at maximum rate to this point.  We
have maintained high water levels in the wellbores which in turn exerts
hydrostatic pressure against the coal seams, particularly the lower coal
seams.
    Although significant progress was made on the project during 2007, we
believe that in order to fully assess the gas production potential of the
project, fluid levels in the producing wellbores must be lowered from the
upper coal seams to below the bottom coal seams.  This will then allow
evaluation of the unrestricted productive potential (water and gas) of all
completed coal seams.

    Storm Cat's fixed-price natural gas hedges are summarized as follows:

    
        2008 remaining -- 3,027,840 MMBtu at average price $6.89 CIG
        2009 -- 3,828,910 MMBtu at average price $7.20 CIG
        2010 -- 1,298,061 MMBtu at average price $6.91 CIG
    
    Financial and operations tables accompany this release.  Please reference
the Company's filing on Form 10-K with the Securities and Exchange Commission
and    with Canadian securities regulators on SEDAR for important notes to the
    
                            financial statements.
    About Storm Cat Energy
    
    Storm Cat Energy is an independent oil and gas company focused on the
exploration, production and development of large unconventional gas reserves
from fractured shales, coal beds and tight sand formations and, secondarily,
from conventional formations. The Company has producing properties in
Wyoming's Powder River Basin and Arkansas' Arkoma Basin and exploration and
development acreage in Canada. The Company's shares trade on the American
Stock Exchange under the symbol "SCU" and in Canada on the Toronto Stock
Exchange under the symbol "SME."
    
    Forward-looking Statements
    
    This press release contains certain "forward-looking statements", as
defined in the United States Private Securities Litigation Reform Act of 1995,
and within the meaning of Canadian securities legislation, relating to
proposed new wells and infrastructure improvements affecting the Company's
operations. Forward-looking statements are statements that are not historical
facts; they are generally, but not always, identified by the words "expects,"
"plans," "anticipates," "believes," "intends," "estimates," "projects,"
"aims," "potential," "goal," "objective," "prospective," and similar
expressions, or that events or conditions "will," "would," "may," "can,"
"could" or "should" occur. Forward-looking statements are based on the
beliefs, estimates and opinions of Storm Cat's management on the date the
statements are made and they involve a number of risks and uncertainties.
Consequently, there can be no assurances that such statements will prove to be
accurate and actual results and future events could differ materially from
those anticipated in such statements. Storm Cat undertakes no obligation to
update these forward-looking statements if management's beliefs, estimates or
opinions, or other factors, should change. Factors that could cause future
results to differ materially from those anticipated in these forward-looking
statements include, but are not limited to, the volatility of natural gas
prices, the possibility that exploration efforts will not yield economically
recoverable quantities of gas, accidents and other risks associated with gas
exploration and development operations, the risk that the Company will
encounter unanticipated geological factors, the Company's need for and ability
to obtain additional financing, the possibility that the Company may not be
able to secure permitting and other governmental clearances necessary to carry
out the Company's exploration and development plans, and the other risk
factors discussed in greater detail in the Company's various filings on SEDAR
(http://www.sedar.com) with Canadian securities regulators and its filings
with the U.S. Securities and Exchange Commission, including the Company's Form
10-K for the fiscal year ended December 31, 2007.  NO STOCK EXCHANGE HAS
REVIEWED OR ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR
    ACCURACY OF THIS NEWS RELEASE.



    SELECT OPERATING DATA

    
    Selected Operating Data:                    Year Ended December 31,
                                           2007      2006   $ Change % Change
    Net natural gas sales volume (MMcf)  3,154.3   1,606.2   1,548.1   96.4%
    

    Natural gas sales (In Thousands)     $16,757    $9,444    $7,313   77.4%

    Average sales price (per Mcf)          $5.31     $5.88    $(0.57)  (9.7)%

    
    Additional data (per Mcf):
      Gathering and transportation         $0.73     $1.20    $(0.47) (39.2)%
      Operating expenses:
        Lease operating expenses           $1.54     $1.43     $0.11    7.7%
        Ad valorem and property taxes      $0.40     $0.71    $(0.31) (43.7)%
      Depreciation, depletion, amortization
       and accretion expense               $2.49     $2.44     $0.05    2.1%
      Asset impairment                     $8.83     $1.26     $7.57  600.8%
    

    
      General and administrative expense,
       excluding stock-based compensation
       and gain on sale of property        $2.26     $2.55    $(0.29) (11.4)%
      Stock-based compensation             $0.36     $1.73    $(1.37) (79.2)%
    



    
                         CONSOLIDATED BALANCE SHEETS
     (Stated in U.S. Dollars and in thousands, except per share amounts)
    

    
                                                             December 31,
                                                           2007         2006
                                     ASSETS
    CURRENT ASSETS:
      Cash and cash equivalents                           $1,133       $5,299
      Accounts receivable:
        Joint interest billing                             1,701        1,932
        Revenue receivable                                 2,444        2,121
      Fair value of derivative instruments                 1,760        2,670
      Prepaid costs and other current assets               2,941        1,445
        Total current assets                               9,979       13,467
    PROPERTY AND EQUIPMENT (full cost method), at cost:
      Oil and gas properties:
        Unproved properties                               51,438       54,873
        Proved properties                                 78,096       46,446
        Less: accumulated depreciation, depletion,
         and amortization                                (12,228)      (4,764)
        Oil and gas properties, net                      117,306       96,555
      Other property                                       1,180        1,057
      Accumulated depreciation                              (778)        (408)
        Total other property, net                            402          649
        Total property and equipment, net                117,708       97,204
    OTHER NON-CURRENT ASSETS:
      Restricted cash                                        685          511
      Debt issuance costs, net of accumulated
       amortization of $1,988 and $522, respectively       3,435            -
      Accounts receivable - long-term                        759            -
      Fair value of derivative instruments                     -          782
        Total other non-current assets                     4,879        1,293
          Total assets                                  $132,566     $111,964
    


    
                                                             December 31,
                                                           2007        2006
                  LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
      Accounts payable                                    $5,825       $7,302
      Revenue payable                                      1,678        2,063
      Accrued and other liabilities                        4,131       10,011
      Interest payable                                        12          952
      Stock-based compensation liability                     394            -
      Flow-through shares liability                            -        1,233
      Notes payable                                            -        7,500
        Total current liabilities                         12,040       29,061
    NON-CURRENT LIABILITIES:
      Asset retirement obligation                          1,713        1,871
      Fair value of derivative instruments                   183            -
      Notes payable                                       43,056       19,350
      Convertible Notes payable                           50,195            -
        Total non-current liabilities                     95,147       21,221
        Total liabilities                                107,187       50,282
    

    
    Commitments (Note 10 and Note 13)
    STOCKHOLDERS' EQUITY:
      Common Shares, without par value, unlimited
       common shares authorized, issued and
       outstanding: 81,087,320 at December 31, 2007
       and 80,429,820 at December 31, 2006                69,834       69,518
      Additional paid-in capital                           5,640        4,910
      Accumulated other comprehensive income               7,483        3,877
      Accumulated deficit                                (57,578)     (16,623)
        Total stockholders' equity                        25,379       61,682
        Total liabilities and shareholders' equity      $132,566     $111,964
    



    
                    CONSOLIDATED STATEMENTS OF OPERATIONS
     (Stated in U.S. Dollars and in thousands, except per share amounts)
    

    
                                                       Year Ended December 31,
                                                           2007         2006
    OPERATING REVENUES:
      Natural gas revenue                                $16,757       $9,444
    

    
    OPERATING EXPENSES:
      Gathering and transportation                         2,313        1,921
      Lease operating expenses                             6,132        3,443
      General and administrative                           8,266        6,695
      Depreciation, depletion, amortization and
       accretion of asset retirement obligation            7,976        3,916
      Impairment of oil and gas properties                27,861        2,027
        Total operating expenses                          52,548       18,002
      Operating loss                                     (35,791)      (8,558)
    

    
    OTHER INCOME (EXPENSE):
      Interest expense                                    (4,745)           -
      Interest and other miscellaneous income                219          173
      Amortization of debt issuance costs                 (1,988)           -
        Total other income (expense)                      (6,514)         173
        Loss before taxes                                (42,305)      (8,385)
    

    
      Recovery of future income tax asset from
       flow-through shares                                 1,350        1,524
    

    
    NET LOSS                                            $(40,955)     $(6,861)
    Basic and diluted net loss per share                   $(.51)      $(0.10)
    Weighted average number of shares outstanding     80,912,950   70,429,219
    



    
                     CONSOLIDATED STATEMENT OF CASH FLOWS
     (Stated in U.S. Dollars and in thousands, except per share amounts)
    

    
                                                       Year Ended December 31,
                                                           2007         2006
    Cash flows from operating activities:
      Net loss                                          $(40,955)     $(6,861)
      Adjustments to reconcile net loss to net cash
       used in operating activities:
        Recovery of future tax asset from flow-through
         shares                                           (1,350)      (1,524)
        Stock-based compensation                           1,145        2,707
        Depreciation, depletion, amortization and
         accretion of asset retirement obligations         7,976        3,777
        Asset impairment                                  27,861        1,975
        Gain on disposition of properties                      -         (185)
        Amortization of debt issuance costs                1,988            -
        Changes in operating working capital:
          Accounts receivable                                (84)      (3,180)
          Other current assets                            (3,295)        (666)
          Accounts payable                                   970        3,331)
          Accrued interest and other current liabilities  (1,488)       4,601
        Net cash used in operating activities             (7,232)      (2,687)
    Cash flows from investing activities:
      Restricted cash                                       (917)        (335)
      Capital expenditures - oil and gas properties      (62,240)     (71,258)
      Proceeds from sale of gathering system                   -        1,000
      Other capital expenditures                             (55)        (145)
        Net cash used in investing activities            (63,212)     (70,738)
    Cash flows from financing activities:
      Issuance of stock                                      293       18,660
      Flow-through shares                                      -        2,755
      Proceeds from (repayments of) bank debt             12,729       27,532
      Proceeds from Convertible Notes payable             51,169            -
        Net cash provided by financing activities         64,191       48,947
    Effect of exchange rate changes on cash                2,087          275
    Net increase (decrease) in cash and cash equivalents  (4,166)     (24,203)
    Cash and cash equivalents and beginning of year        5,299       29,502
    Cash and cash equivalents at end of year              $1,133       $5,299
    

    
    Cash paid during the year for:
      Interest                                            $7,288          $ -
    




For further information:

For further information: William Kent, Director, Investor Relations of 
Storm Cat Energy Corporation, +1-303-991-5070 Web Site:
http://www.stormcatenergy.com

Organization Profile

STORM CAT ENERGY CORPORATION

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890