Storm Cat Energy Corporation Announces Default Under Subordinated Convertible Notes, Provides Update of Credit Facility and Engages Parkman Whaling LLC and Alvarez & Marsal



    DENVER and CALGARY, Alberta, Oct. 31 /CNW/ -- Storm Cat Energy
Corporation (Amex:   SCU; TSX: SME) today reported that it failed to make its
required quarterly interest payment when due on September 30, 2008, and such
failure has continued for a period of 30 days, with respect to its Series A
and Series B Subordinated Convertible Notes each due March 31, 2012.  The
failure of Storm Cat to make the required quarterly interest payment prior to
the expiration of such 30 day grace period constitutes an "Event of Default"
under the terms of each of the respective Note Purchase Agreements.
    In connection with Storm Cat's previously reported and continuing
defaults under its Credit Agreement, its Lenders notified the noteholders that
pursuant to the terms of the Note Purchase Agreements and the Subordination
and Intercreditor Agreement previously entered into by the noteholders, that
the Lenders were enforcing their rights (1) to prohibit Storm Cat from making
any payments to the noteholders, and (2) to require that the noteholders
standstill and not accelerate any amounts due under the Notes upon an Event of
Default or seek other enforcement or redemption actions otherwise permitted
under the Note Purchase Agreements. Additionally, as a result of the Event of
Default, the rate of interest on the outstanding principal amount of the Notes
as well as any overdue interest will increase from 9 1/4% to 12.0% per annum.
    Storm Cat has been in discussions with its Lenders since mid-August in
order to seek a waiver or forbearance of the defaults under the Credit
Agreement, to amend the Credit Agreement or otherwise restructure the Company
and seek a liquidity event.  Although Storm Cat intends to pursue in good
faith efforts to renegotiate or restructure the terms of the Credit Agreement,
there can be no assurance that these efforts will ultimately be successful. In
addition, any restructuring plan ultimately agreed upon by Storm Cat and its
Lenders may involve implementation through a bankruptcy filing by Storm Cat
and/or certain of its subsidiaries. In the event that Storm Cat and its
Lenders fail to agree on the terms of a consensual restructuring of the
obligations under the Credit Agreement, the Lenders may attempt to effect an
acceleration of the obligations under the Credit Agreement. In such event, a
material adverse effect on the Company and its results of operations would
result.
    In connection with the above mentioned defaults under the Credit
Agreement, an affiliate of one of the Lenders recently exercised its right to
declare a cross-default on Storm Cat's natural gas commodity swap agreements.
The swap agreements were terminated and amounts in the aggregate of $9.4
million owing to Storm Cat upon termination of the swap agreements were paid
to the Lenders to be set-off and reduce the amounts outstanding under the
Company's revolving credit facility.  Because Storm Cat remains in default
under the Credit Agreement, it may not re-borrow any funds used to pay down
the revolving credit facility without the consent of the Lenders in their sole
discretion.  As a result of the termination of the swap agreements, Storm Cat
is now fully exposed to the impact of gas price fluctuations in the commodity
markets.
    As previously reported, Storm Cat has been exploring since mid-May
numerous alternatives to improve liquidity, including raising capital,
refinancing outstanding debt or the potential sale of assets.  Unfortunately,
as a result of falling commodity prices and the global financial crisis Storm
Cat has been unsuccessful to date.  Nonetheless, in connection with on-going
discussions with its Lenders regarding potential restructuring initiatives,
Storm Cat has engaged Houston-based Parkman Whaling LLC for the purpose of
assisting the Company in exploring strategic business alternatives as well as
engaged Alvarez & Marsal, a turnaround and restructuring firm, for the purpose
of assisting the Company with its restructuring efforts.
    
    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
potential future production and growth, 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: (i) the Company's
ability to continue as a going concern; (ii) the ability to consummate any
strategic alternatives; (iii) the ability of the Company to obtain and
maintain normal terms with vendors and service providers; (iv) the Company's
ability to maintain contracts that are critical to its operations; (v) the
potential adverse impact of continuing defaults under its credit facility and
convertible notes on the Company's liquidity or results of operations; (vi)
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, (vii) the
ability of the Company to fund and execute its business plan; (viii) the
ability of the Company to attract, motivate and/or retain key executives and
employees; (ix) the ability of the Company to attract and retain customers and
(*) the other risk factors discussed in greater detail in the Company's various
filings on SEDAR (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.




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

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STORM CAT ENERGY CORPORATION

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