Storm Cat Energy Corporation Provides Operations Update; Announces Second Quarter 2007 Results



    
    -- Current Production at 10.0 Million Cubic Feet Per Day Net

    -- First Company operated Fayetteville Well Drilling Operations Completed

    -- Three Rigs running in the Powder River Basin

    -- Continued Strong De-Water Rates In Elk Valley
    

    DENVER and CALGARY, Alberta, Aug. 9 /CNW/ -- Storm Cat Energy Corporation
(Amex:   SCU; TSX: SME) today provided an operations update and announced second
quarter 2007 financial and operating results.
    Storm Cat continued to build on its track record of production growth in
the second quarter of 2007. During the quarter the Company drilled 18 wells
bringing the total number of wells drilled during the first half of 2007 to
39.  Current net production is 10.0 million cubic feet per day (MMcf/d) from
producing properties in Wyoming's Powder River Basin (PRB) and from the Arkoma
Basin in Arkansas (Fayetteville Shale).  Total net sales increased 12.6%
quarter-to-quarter to 745.8 million cubic feet (MMcf) during the second
quarter 2007 from 662.6 MMcf in the first quarter 2007.  Exit rate production
for the quarter increased 15.3% to 9.8 Mmcf/d at June 30, 2007 from 8.5 Mmcf/d
at March 31, 2007.   Year-over-year production increased 218.2% to 745.8 MMcf
in the second quarter 2007 from 234.4 MMcf in the second quarter 2006.
    
    Operations Update (all figures in U.S. Dollars)
    
    Current net production in the PRB is 9.8 MMcf/d, an increase of 15.3%
from 8.5 MMcf/d at March 31, 2007.  The Company drilled and completed 18 wells
in the PRB during the second quarter of 2007 as compared to 20 in the first
quarter of 2007.  The Company reprioritized its drilling schedule during the
quarter to drill wells that have longer de-water times to maximize sales
volume at year end 2007 in order to minimize the impact of weak gas prices in
the Rockies during the second and third quarters of 2007.  Storm Cat has three
rigs running in the PRB and expects to drill approximately 87 additional wells
during the remainder of 2007.
    On the Company's Fayetteville Shale acreage the first of three 2007
budgeted Storm Cat operated wells reached total depth of 4,724 feet on July
30, 2007 and production casing has been run in the wellbore.  The drilling rig
is currently being moved to the second location and drilling is expected to
commence within the next two weeks. Completion activities will begin as the
third well in the 2007 program reaches total depth, which is expected to occur
during late third quarter 2007.  The Company anticipates preliminary flow test
rates from these three Fayetteville wells to be available in late 2007. The
Company owns an average working interest of 80% in the three wells.  In
addition, the Company is in negotiations with third parties to construct a
sales pipeline and associated facilities.  Based on current discussions, the
Company anticipates that the pipeline will be in place and initial sales from
the wells will commence during late fourth quarter of 2007. The Company holds
interests in 16 non-operated Fayetteville Shale wells that have current net
production of 0.2 MMcf/d.
    In Elk Valley, located in southeastern British Columbia, the Company has
nine producing wells, including five wells drilled in 2006, in the de-watering
and evaluation stage. The Company remains encouraged by observed water and
associated gas production rates and expects to make a determination on next
steps for the project at year end 2007.
    In Alberta, the Company drilled one Horseshoe Canyon / Belly River sand
well during the first quarter of 2007.  Results from this well are pending
additional production testing.  The Company recently drilled and ran casing on
a conventional well in the Wetaskiwin area of Alberta and anticipates
completion activities and production testing results in the next few weeks.
    Storm Cat Chief Executive Officer, Joe Brooker, said, "I am pleased with
the results that Storm Cat was able to produce during the second quarter.  We
have made progress in all aspects of our business plan with the year end goal
of not only increasing production and reserves, but also shareholder value.
The Company is at a key stage of its development and we are focused on the
execution of our business plan."
    Storm Cat President and Chief Operating Officer Keith Knapstad commented,
"During the second quarter Storm Cat met a number of aggressive operational
goals.  We continued to grow our core Powder River Basin asset, drilling 18
wells and bringing additional production online.  We spudded our first
Fayetteville Shale well, where initial geological indications are encouraging.
Finally we continue to make measured progress on our Elk Valley project and
are anticipating a decision point at year end."
    
    Financial Overview (all figures in U.S. Dollars)
    
    For the quarter ended June 30, 2007 Storm Cat reported oil and gas sales
revenue of $3.7 million, a 129.4% increase over second quarter 2006 sales of
$1.6 million.  Sales volumes increased to 745.8 MMcf for the second quarter
2007 from 234.4 MMcf in the second quarter 2006, an increase of 218.2%.
Increased volumes are attributed primarily to acquisitions and successful
drilling.  The Company's average sales price for natural gas decreased 27.9%
to $4.92 per thousand cubic feet (Mcf) in the second quarter 2007 from $6.82
per Mcf in the second quarter 2006.
    The Company reported a net loss of $4.6 million, or $0.06 per share, for
the second quarter 2007, as compared to a net loss of $1.2 million, or $0.02
per share, in the same period in 2006.  The net loss is primarily attributable
to higher than average general and administrative expenses relating to a
number of non-recurring items, including the closing of the Series B
Convertible Notes, registering the common shares underlying both the Series A
and Series B Convertible Notes with the SEC, amendment to the JP Morgan senior
credit facility and the departure of the Company's former President and Chief
Executive Officer Scott Zimmerman. Gathering and transportation, lease
operating expenses and production taxes decreased to $2.22 per Mcf in the
second quarter of 2007 from $4.49 per Mcf in the second quarter of 2006.
    Weighted average shares outstanding for the second quarter 2007 increased
to 81.0 million as compared to 66.5 million in the second quarter 2006.  The
increase in average shares outstanding is attributed to the private placement
the Company completed in Canada in September 2006 as well as the exercise of
outstanding warrants and options.
    The Company was not in compliance with the debt covenant in its JP Morgan
senior credit facility for the second quarter due, principally, to the impact
of abnormally low gas prices in the Rocky Mountains on un-hedged production.
JP Morgan has waived the covenant for the second and third quarter and is in
negotiations with the Company to amend the credit agreement covenants. Until
such agreement is reached, the borrowing base under its credit facility is
$27.5 million.
    Storm Cat's fixed-price natural gas hedges are summarized as follows (As
of 6/30/07):

    
    2007 - 1,227,600 MMbtu at average price $6.24 Colorado Interstate
     Gas (CIG)
    2008 - 3,149,200 MMbtu at average price $7.10 CIG
    2009 - 2,365,500 MMbtu at average price $7.33 CIG
    2010 through April - 557,000 MMbtu at average price $7.75 CIG
    
    Chief Financial Officer Paul Wiesner commented, "The second quarter
showed improvement in operating efficiency as evidenced by lower costs per Mcf
for lease operating and gathering and transportation expenses.  General and
administrative expenses were unusually high due to a significant number of one
time items related to financing and senior management changes.   We fully
expect to bring G&A back in line in the ensuing quarters.  Finally, our
hedging program continues to provide relief from the current abnormally high
differential in the Rockies which we expect to abate by year end with the
completion of the western leg of the Rockies Express Pipeline."
    Financial and operations tables accompany this release.  Please reference
the Company's filing on Form 10-Q 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 the
proposed use of proceeds.  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 a change in the use of proceeds, 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 (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, 2006.

    
           NO STOCK EXCHANGE HAS REVIEWED OR ACCEPTS RESPONSIBILITY
              FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.
    


    SELECT OPERATING DATA (UNAUDITED)

    
    Selected Operating Data:                             Three Months Ended
                                                               June 30,
                                                          2007         2006
    Net Sales Volume:
      Natural gas (MMcf)                                 745.8          234.4
    

    
    Oil and Gas Sales (In Thousands)
      Natural gas                                       $3,668         $1,599
    

    
    Average Sales Prices:
      Natural gas (per Mcf)                              $4.92          $6.82
    

    
    Additional Data (per Mcf):
      Gathering and transportation                       $0.53          $1.19
      Lease operating expenses                           $1.31          $2.52
      Ad valorem and property taxes                      $0.38          $0.78
      Depreciation, depletion, amortization
       and accretion                                     $2.52          $2.98
      General and administrative, net of
       capitalization                                    $3.70          $2.03
      Stock-based compensation                           $0.98          $2.91
    


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

    
                                                       June 30,  December 31,
                                                         2007          2006
                                                     (Unaudited)
                                 ASSETS
    CURRENT ASSETS:
      Cash and cash equivalents                         $1,015         $5,299
        Accounts receivable:
          Joint interest billing                         2,790          1,932
          Revenue receivable                             1,037          2,121
      Fair value of derivative instruments - current     2,403          2,670
      Prepaid costs and other current assets             2,148          1,445
        Total Current Assets                             9,393         13,467
    PROPERTY AND EQUIPMENT (Full Cost Method), at cost:
      Oil and gas properties:
        Unproved properties, net of impairments         69,918         54,873
        Proved properties                               55,526         46,446
        Less accumulated depreciation, depletion,
         amortization and accretion                     (8,051)        (4,764)
        Oil and gas properties, net                    117,393         96,555
      Fixed assets                                       1,117          1,057
      Accumulated depreciation                            (555)          (408)
        Total fixed assets, net                            562            649
        Total property and equipment, net              117,955         97,204
      Restricted investments                               526            511
      Debt issuance costs                                3,551              0
      Fair value of derivative instruments - long term                    782
        Total Non-Current Assets                         4,077          1,293
        Total Assets                                  $131,425       $111,964
    

    LIABILITIES AND STOCKHOLDERS' EQUITY

    
    CURRENT LIABILITIES:
      Accounts payable                                    $759         $7,302
      Revenue payable                                    1,193          2,063
      Accrued and other liabilities                      4,764         10,011
      Flow-through shares liability                         15          1,233
      Notes payable - current                                0          7,500
      Interest payable                                     429            952
        Total Current Liabilities                        7,160         29,061
      Asset retirement obligation                        1,721          1,871
      Fair value of derivative instruments - long term     313              0
      Bank debt - long term                             13,219         19,350
      Series A & B convertible notes                    50,195              0
        Total Non-Current Liabilities                   65,448         21,221
        Total Liabilities                               72,608         50,282
      Commitments and contingencies                          -              -
    STOCKHOLDERS' EQUITY
      Common Shares, without par value, unlimited
       authorized, issued and outstanding:
       80,993,570 at June 30, 2007 and
       80,429,820 at December 31, 2006                  69,759         69,518
      Contributed surplus                                6,137          4,910
      Accumulated other comprehensive income             5,483          3,877
      Accumulated deficit                              (22,562)       (16,623)
        Total Stockholders' Equity                      58,817         61,682
        Total Liabilities and Stockholders' Equity    $131,425       $111,964
    



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

    
                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                               2007         2006         2007         2006
    NATURAL GAS REVENUE       $3,668       $1,599       $7,580       $2,878
    

    
    OPERATING COSTS:
      Gathering and
       transportation            398          280          958          563
      Operating expenses       1,256          774        2,159        1,350
      General and
       administrative          3,491        1,159        6,152        2,577
      Depreciation, depletion,
       amortization and
       accretion               1,879          698        3,513        1,201
         Total Operating
          Costs                7,024        2,911       12,782        5,691
      Operating loss          (3,356)      (1,312)      (5,202)      (2,813)
    

    
    OTHER EXPENSE (INCOME):
      Interest expense         1,519            0        2,148            0
      Interest and other
       miscellaneous income     (101)        (139)        (133)        (334)
      Loss on foreign exchange     0           11            0           11
        Total Other Expense
         (Income)              1,418         (128)       2,015         (323)
        Net loss before taxes (4,774)      (1,184)      (7,217)      (2,490)
    

    
      Recovery of future
       income tax asset from
       flow-through shares      (182)           0       (1,278)           0
    

    
    NET LOSS                 $(4,592)     $(1,184)     $(5,939)     $(2,490)
    Basic and diluted loss
     per share                $(0.06)      $(0.02)      $(0.07)      $(0.04)
    Weighted average
     number of shares
     outstanding          81,045,122   66,504,095   80,816,505   66,145,091
    



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

    
                                                          Six Months Ended
                                                             June 30,
                                                        2007          2006
    Cash flows from operating activities:
      Net loss                                        $(5,939)       $(2,490)
      Adjustments to reconcile net loss to net cash
       used in operating activities:
         Recovery of future income tax asset from
          flow-through shares                          (1,252)             -
         Stock-based compensation                       1,161          1,441
         Depreciation, depletion, amortization
          and accretion                                 3,521          1,201
         Gain on disposition of properties                  -            185
         Changes in operating assets and liabilities:
           Accounts receivable                           (761)          (144)
           Prepaid costs and other current assets         381            204
           Accounts payable                            (2,674)        (1,342)
           Accrued and other current liabilities       (1,461)         2,719
         Net cash provided by (used in) operating
          activities                                   (7,024)         1,774
    Cash flows from investing activities:
      Restricted investments                               (8)          (258)
      Capital expenditures - oil and gas properties   (32,386)       (21,616)
      Other capital expenditures                          (23)          (118)
        Net cash used in investing activities         (32,417)       (21,992)
    Cash flows from financing activities:
      Issuance of common shares for cash                   914          2,093
      Debt issuance costs                              (3,556)             -
      Repayment of bank debt                          (13,278)             -
      Proceeds from Series A & B Convertible Notes     50,194              -
        Net cash provided by financing activities      34,274          2,093
    Effect of exchange rate changes on cash               883            958
    Net decrease in cash and cash equivalents          (4,284)       (17,167)
    Cash and cash equivalents at beginning of period    5,299         29,502
    Cash and cash equivalents at end of period         $1,015        $12,335
    Supplemental disclosure of noncash investing
     and financing activities:
        Cash paid for interest                         $2,449             $-
    




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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