DENVER and CALGARY, Alberta, March 17 /PRNewswire-FirstCall/ --
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 $ - DATASOURCE: Storm Cat Energy
Corporation CONTACT: William Kent, Director, Investor Relations of
Storm Cat Energy Corporation, +1-303-991-5070 Web site:
http://www.stormcatenergy.com/
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