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

    -- Total Current Production at 12.2 Million Cubic Feet Per Day Net

    -- Three Fayetteville Shale Wells Drilled; Two Completed

    -- Pipeline Agreement in Place for Fayetteville Acreage

    DENVER and CALGARY, Alberta, Nov. 8 /CNW/ -- Storm Cat Energy Corporation
(Amex:   SCU; TSX: SME) today provided an operations update and announced third
quarter 2007 financial and operating results.
    During the quarter the Company drilled 28 wells bringing the total number
of wells drilled during the first nine months of 2007 to 67.  Current net
production is 12.2 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 8.5% quarter-to-
quarter to 808.2 million cubic feet (MMcf) during the third quarter 2007 from
745.0 MMcf in the second quarter 2007. PRB production growth in the third
quarter was adversely impacted by force majeure production curtailments and
abnormally low Rockies gas prices. Year-over-year production increased 117.6%
to 808.2 MMcf in the third quarter 2007 from 371.5 MMcf in the second quarter
    Operations Update (all figures in U.S. Dollars)
    During the third quarter, Storm Cat built upon its first half production
growth, but was impacted negatively by production curtailment on a portion of
its PRB gas production due to force majeure events on important Rocky Mountain
pipeline infrastructure and abnormally low Rockies gas prices. The force
majeure events related to a September 16, 2007 fire on the Cheyenne Plains gas
pipeline which reduced Rockies take-away capacity, further deteriorating
Rockies gas prices. In light of these events, the Company partially curtailed
its production and activity in the PRB. The pipeline operator returned the
pipeline to full capacity on November 7, 2007.
    Curtailed production from the PRB at September 30, 2007 was 14.7 MMcf/d
gross and 7.7 MMcf/d net. Coming out of curtailment, production currently is
21.5 MMcf/d gross and 11.9 MMcf/d net. Because of the price environment and
curtailment, Storm Cat made the decision to delay additional well completions
and pipeline hookups during the third quarter. Barring those elections, the
Company estimates that production from the PRB would currently be 23.7 MMcf/d
gross and 13.4 MMcf/d net.  The Company drilled and completed 25 wells during
the quarter bringing its year-to-date total to 63.  The total well count is
now 380 wells, of which 339 are Company-operated.  Storm Cat expects to add
approximately 44 additional wells during the remainder of 2007 and exit the
year producing approximately 17.0 net MMcf/d in the PRB.
    Storm Cat successfully drilled and began completion operations during the
third quarter on the first two of its three Company-operated horizontal wells
budgeted in 2007 in the Fayetteville Shale. The Company hydraulically
fractured both the Kamalmaz 1-13H well and the Vaughn 1-18H well, employing
approximately 60,000 barrels of fluid and 1.25 million pounds of sand over
five stages per well. The Company is presently conducting post-frac well
cleanup and is encouraged by gas rates observed in the limited flow-back
period. The third well, the Files 1-12H, commenced drilling during the third
quarter. The Company has subsequently completed drilling to its planned depth
and ran casing. Completion of the Files well is scheduled in the fourth
quarter. In addition, in early October, Storm Cat reached an agreement with an
unrelated third party gatherer for the construction of field gathering,
compression and a transportation lateral to connect to the Ozark pipeline.
Subject to retained rights of the parties in the agreement, the pipeline is
expected to be completed and operational in March 2008. Finally, current net
production associated with the Company's non-operated wells in the play is 0.3
MMcf/d net.
    In Elk Valley, located in South-Eastern 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 disclose its progress on the
project at year-end 2007.
    In Alberta, during the third quarter, the Company drilled and completed
one well targeting the Ellerslie Sand. The well is undergoing production and
pressure testing. At present, the Company is evaluating additional prospects
in the immediate area.
    Storm Cat Chief Executive Officer, Joe Brooker, said, "During the quarter
we advanced our Fayetteville Shale acreage completing two of our three 2007
budgeted wells. Further, with a pipeline agreement in place in the
Fayetteville we should begin to realize cash flow from this area by late first
quarter 2008. Despite the difficult price environment and curtailments in the
PRB we anticipate delivering on the expectations for both year end rate and
reserves in the PRB. Rate, cash flow and reserves are the key components that
will create shareholder value"
    Storm Cat President and Chief Operating Officer Keith Knapstad commented,
"From an operational stand point the third quarter represented continued
progress in our three core areas.  In the PRB, we are well positioned to ramp
production into year-end and achieve our estimated exit rate of 17.0 net
Mmcf/d. We reached the goals we set in the Fayetteville having now drilled and
completed Company operated wells.  Post stimulation we saw favorable gas rates
during limited flow-back periods. In Elk Valley, we continue to be encouraged
by water and gas production rates.  However, until we achieve and maintain
lower water levels in the wellbores, allowing unrestricted production flow
from all producing coal seams, we will not be able to fully evaluate the
commercial viability of the project."
    Financial Overview (all figures in U.S. Dollars)
    For the quarter ended September 30, 2007 Storm Cat reported oil and gas
sales revenue of $4.2 million, a 91.7% increase over third quarter 2006 sales
of $2.2 million.  Sales volumes increased to 808.2 MMcf for the third quarter
2007 from 371.5 MMcf in the second quarter 2006, an increase of 117.6%.
Increased volumes are attributed primarily to successful development of our
properties.  The Company's average sales price for natural gas decreased 11.9%
to $5.17 per thousand cubic feet (Mcf) in the third quarter 2007 from $5.87
per Mcf in the third quarter 2006 inclusive of hedges.
    The Company reported a net loss of $30.7 million, or $0.38 per share, for
the third quarter 2007, as compared to a net loss of $3.8 million, or $0.05
per share, in the same period in 2006.  The extraordinary net loss is
primarily attributable to a $25.0 million impairment on the Company's U.S.
assets and a $2.8 million impairment on the Company's Canadian assets.
    The first impairment charge of $25.0 million relates to the ceiling test
comparing the U.S. Full Cost pool to discounted future net revenues of proved
reserves in the PRB using flat pricing based on the September 30, 2007 market
price for natural gas of $1.9855 per MMBtu at the Colorado Interstate Gas
(CIG) - Mainline index including any contribution of hedging on future net
revenues.  At that date, the U.S. Full Cost pool exceeded the ceiling value by
$25.0 million and the Company elected to take an impairment.  The SEC permits
a re-measurement, under certain criteria, if prices recover subsequent to the
end of the reporting period and before filing the quarterly report.  While the
market price did, in fact, exceed the price necessary to avoid an impairment
for a short time during such period, the Company is of the opinion that a
recovery of price was not sustained sufficiently to warrant avoidance of the
impairment.  There are indicators suggesting a sustained improvement of market
prices in the Rocky Mountain producing region upon the commencement of natural
gas deliveries on the Rockies Express pipeline that is schedule to commence
service in January 2008, however, the timing of such recovery is not within
the price recovery measurement time constraints as set by the SEC.
    The second impairment charge of $2.8 million is attributable to the
Company evaluating a portion of its Alberta, Canada unproved properties using
the lower of cost or market test.
    Lease operating expenses increased approximately $1.08 million to $1.73
million in the third quarter of 2007 from $0.65 million the third quarter of
2006. This increase resulted primarily from additional wells added through the
Company's successful drilling program and from an acquisition the Company made
in the third quarter of 2006. On a per Mcf basis, lease operating expenses
increased by 90.7% from the third quarter of 2006 to the third quarter of
2007. The higher costs are primarily related to fuel and generator costs
associated with new wells in development areas where the electrical
infrastructure is not yet installed. These higher operating costs are
anticipated to be short lived as the electrical grid is built out to the well
    Salaries and related benefits and taxes in the third quarter of 2007
totalled $0.80 million. Additionally the Company recorded a write-down for bad
debt reserve of $0.08 million and $0.52 million for amortization of deferred
financing costs was reclassified from general and administrative expense to
other expense. Stock-based compensation decreased by $1.37 million from the
three months ended September 30, 2006 to the same period in 2007 due to the
full expensing of legacy stock options in 2006 and the reclassification of
certain stock-based compensation from the equity method to the liability
method in 2007. In the third quarter of 2006, $0.46 million of internal costs
were capitalized.  Beginning in 2007, Storm Cat discontinued the
capitalization of internal costs.
    Weighted average shares outstanding for the third quarter 2007 increased
to 81.0 million as compared to 68.6 million in the third 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.
    Storm Cat's fixed-price natural gas hedges are summarized as follows (As
of 10/4/07):

     2007 - 783,666   MMbtu at weighted average price $6.18 CIG
     2008 - 3,941,617 MMbtu at weighted average price $6.91 CIG
     2009 - 2,368,452 MMbtu at weighted average price $7.33 CIG
     2010 - 1,298,061 MMbtu at weighted average price $6.91 CIG
    Chief Financial Officer Paul Wiesner commented "The third quarter was
extremely challenging due to record low price realizations per Mcf in the
Rockies. We have 80% of our mid-year 2007 forecasted PDP production stream
hedged at attractive CIG pricing for the remainder of 2007 and all of 2008.
Although we are bullish regarding long term natural gas prices, hedging allows
us to protect our cash flow in the short term so we can continue to develop
our core areas. The impairment of $25.0 million is a required calculation of
the full cost accounting method that requires flat pricing; this quarter's
price being $1.9855. Strip pricing at the end of the quarter would have
yielded a value in excess of our book basis and is in our opinion, more
indicative of the discounted value of the future cash flows from the
    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
proposed new wells, production rate and reserves expectations, commodity
prices and new sources of cash flows, 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 ( 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.



    Select Operating Data:                   Three Months Ended September 30
                                                        2007           2006
      Net Sales Volume:
        Natural Gas (MMcf)                             808.2          371.5

    Natural Gas Sales                             $4,181         $2,181

      Average Sales Prices:
        Natural Gas (per Mcf)                          $5.17          $5.87

      Additional Data (per Mcf):
        Gathering and transportation                   $0.72          $1.05
        Operating expenses:
          Lease operating expenses                     $1.77          $0.93
          Ad valorem and property taxes                $0.37          $0.81
        Impairment                                    $34.36          $5.38
        Depreciation, depletion, amortization and
         accretion expense                             $3.24          $2.26
        General and administrative expense,
         excluding stock-based compensation and
         capitalized overhead                          $1.49          $4.83
        Stock-based compensation                      $(0.72)         $2.12

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

                                                  September 30,   December 31,
                                                         2007          2006
      Cash and cash equivalents                         $4,745         $5,299
        Accounts receivable:
          Joint interest billing                         1,548          1,932
          Revenue receivable                               630          2,121
      Fair value of derivative instruments               3,637          2,670
      Prepaid costs and other current assets             3,575          1,445
        Total current assets                            14,135         13,467
    PROPERTY AND EQUIPMENT (Full Cost Method), at cost:
      Oil and gas properties:
        Unproved properties, net of impairments         57,911         54,873
        Proved properties                               57,048         46,446
        Less accumulated depreciation, depletion,
         and amortization                              (10,509)        (4,764)
        Oil and gas properties, net                    104,450         96,555
      Other property                                     1,160          1,057
      Accumulated depreciation                            (684)          (408)
        Total other property, net                          476            649
        Total property and equipment, net              104,926         97,204
      Restricted cash                                      378            511
      Debt issuance costs, net of accumulated
       amortization                                      2,895              0
      Fair value of derivative instruments               1,574            782
        Total other assets                               4,847          1,293
         Total assets                                 $123,908       $111,964

      Accounts payable                                  $2,393         $7,302
      Revenue payable                                      890          2,063
      Accrued and other liabilities                      5,394         10,011
      Flow-through shares liability                          0          1,233
      Notes payable                                          0          7,500
      Taxes payable                                        657              0
      Interest payable                                     399            952
      Stock-based compensation liability                   608              0
        Total current liabilities                       10,341         29,061
      Asset retirement obligation                        1,541          1,871
      Ad valorem taxes payable                             539              0
      Bank debt                                         29,219         19,350
      Series A & B convertible notes                    50,195              0
        Total non-current liabilities                   81,494         21,221
         Total liabilities                              91,835         50,282
      Common stock                                      69,756         69,518
      Additional paid-in capital                         4,746          4,910
      Accumulated other comprehensive income            10,848          3,877
      Accumulated deficit                              (53,277)       (16,623)
        Total stockholders' equity                      32,073         61,682
        Total liabilities and stockholders' Equity    $123,908       $111,964

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

                                                          Three Months Ended
                                                             September 30
                                                          2007           2006
    NATURAL GAS REVENUE:                                $4,181         $2,181

      Gathering and transportation                         581            390
      Operating expenses                                 1,733            645
    General and administrative                             621          2,582
    Depreciation, depletion, amortization and
     accretion of asset retirement obligation            2,616            840
    Impairment                                          27,773          2,000
        Total operating costs                           33,324          6,457
    Operating loss                                     (29,143)        (4,276)

    Interest expense                                     1,133            311
    Interest and other miscellaneous income                (43)           (93)
    Amortization of deferred financing costs               522              0
        Total other expense (income)                     1,612            218

    Net loss before taxes                          (30,755)        (4,494)

    Recovery of future income tax asset from
     flow-through shares                                   (40)          (731)

    NET LOSS                                          $(30,715)       $(3,763)
    Basic and diluted loss per share                    $(0.38)        $(0.05)
    Weighted average number of shares outstanding   81,029,861     68,581,241

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

                                                     For the Nine Months Ended
                                                            September 30,
                                                         2007           2006
    Cash flows from operating activities:
      Net loss                                        (36,654)        (6,212)
      Adjustments to reconcile net loss to net
      cash provided by (used in) operating activities:
        Recovery of future income tax asset from
         flow-through shares                           (1,318)          (731)
        Stock-Based compensation                          607          2,238
        Depreciation, depletion, and amortization       5,985          1,807
        Accretion of asset retirement obligation          144            146
        Asset Impairment                               27,773          2,000
        Gain on disposition of properties                   -            185
        Amortization of debt issuance costs               522              -
        Changes in operating assets and liabilities:
          Accounts receivable                             467           (427)
          Prepaid costs and other current assets         (563)          (844)
          Accounts payable                                122         (3,784)
          Accrued interest and other current
           liabilities                                   (790)         3,284
        Net cash used in operating activities          (3,705)        (2,338)
    Cash flows from investing activities:
      Restricted cash                                     147           (259)
      Capital expenditures - oil and gas properties   (48,563)       (56,446)
      Capital expenditures - other assets                 (39)          (145)
        Net cash used in investing activities         (48,455)       (56,850)
    Cash flows from financing activities:
      Flow-Through shares                                   -          1,950
      Issuance of common stock                            243         19,483
      Debt issuance costs                              (3,417)             -
      Proceeds from bank debt                           2,369         27,500
      Proceeds from Series A & B Convertible Notes     50,195              -
        Net cash provided by financing activities      49,390         48,933
    Effect of exchange rate changes on cash             2,216            892
    Net decrease in cash and cash equivalents            (554)        (9,363)
    Cash and cash equivalents at beginning of period    5,299         29,502
    Cash and cash equivalents at end of period         $4,745        $20,139
    Supplemental disclosure of cash flow information:
      Cash paid for interest (net of amount
       capitalized)                                    $3,616             $-
    Supplemental disclosure of non-cash investing
     and financing activities:
      Accruals of oil and gas properties               $7,070        $15,841

For further information:

For further information: William Kent, Director, Investor Relations of 
Storm Cat Energy, +1-303-991-5070 Web Site:

Organization Profile


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