DENVER and CALGARY, Alberta, Aug. 11 /PRNewswire-FirstCall/ --
Storm Cat Energy Corporation (Amex: SCU; TSX: SME) today reported
second quarter 2008 financial and operating results. The second
quarter of 2008 was an important step in Storm Cat's transition
towards profitability. During the quarter we initiated sales from
our Fayetteville Shale acreage, bringing a total of six wells
online in the quarter. Production from our Fayetteville property
along with our Powder River Basin (PRB) assets produced both record
production and revenue results for the quarter. Our production for
the quarter was in excess of one billion cubic feet of gas,
totalling 1,151.4 million cubic feet (MMcf). Our revenue for the
quarter was $6.6 million, a 78.6% increase from the second quarter
of 2007. Operating Cash Flow(1) from our oil and gas activities
increased 39.1% to $2.8 million for the quarter and 25.8% to $5.6
million for the first six months of the year. Adjusted EBITDA(2)
for the second quarter was $1.3 million and $2.7 million for the
six months ending June 30, 2008. Reconciliations of non-GAAP
financial measures are provided in the financial schedules
accompanying this press release. Financial Update (all figures in
U.S. Dollars) Natural gas revenue for the quarter ended June 30,
2008 was $6.6 million, representing a 78.6% increase over second
quarter 2007. This record revenue growth was accomplished wholly
through the drill bit. Production sales volume for the second
quarter of 2008 was a record 1,151.4 MMcf an increase of 54.4% over
second quarter 2007. This represents the sixth consecutive quarter
of organic sales volume increases and the first quarter in our
history that we have produced in excess of one billion cubic feet
of gas. For the quarter, we reported a net loss of $4.7 million, or
$0.06 per share, as compared to a net loss of $4.6 million, or
$0.06 per share, for the second quarter of 2007. Excluding the
impact of hedging, net loss for the quarter would have been $3.1
million, or $0.04 per share. Inclusive of hedging, the average
realized gas price for the second quarter was $5.69 per thousand
cubic feet (Mcf), 15.7% higher than the second quarter 2007 average
price of $4.92 per Mcf. Excluding hedging, the realized gas price
for the second quarter of 2008 was $7.12 per Mcf. Gathering and
transportation expenses increased approximately $0.9 million from
$0.4 million in the second quarter of 2007 to $1.3 million in the
second quarter of 2008. The increase is primarily related to
startup transportation fees associated with our Fayetteville
pipeline which began shipping gas in early April and increased
production volumes. Lease operating expenses increased to $2.4
million in the second quarter of 2008 compared to $1.3 million in
the second quarter of 2007. This increase resulted primarily from
additional wells added through our successful drilling program,
higher per well lease operating costs resulting from fuel and
generator rental costs associated with new wells in our PRB
development areas where the electrical infrastructure has yet to be
installed and higher per well lease operating costs on our Sheridan
and Ford Ranch areas resulting from higher water production.
Depreciation, depletion and amortization increased by $1.0 million
to $2.9 million in the second quarter of 2008 compared to $1.9
million in the second quarter of 2007. This increase resulted from
increased production resulting from our successful drilling
activities over the past year. Weighted average shares outstanding
for the second quarter 2008 increased to 81.2 million as compared
to 81.0 million in the second quarter of 2007. The increase in
average shares outstanding is attributed to the exercise of
outstanding options, the vesting of restricted share units and the
issuance of new restricted share units. As of June 30, 2008, we
were not in compliance with the financial and minimum average daily
production covenants set forth in our credit agreement. We are
currently discussing a possible waiver or amendment to our credit
agreement with our lenders. However, absent a waiver or an
amendment to the financial covenants or repayment or refinancing of
the credit facility, it is likely that we will not be in compliance
with our covenants for the next twelve months. Accordingly, the
$64.6 million outstanding under the credit facility at June 30,
2008 is classified as a current liability in the accompanying
Consolidated Balance Sheet at June 30, 2008. Operations Update (all
figures in U.S. Dollars) Current total net production is 15.3
million cubic feet per day (MMcf/d). Powder River Basin During the
second quarter of 2008 we invested a total of $10.2 million in the
PRB. These capital dollars were used for acquisitions, drilling and
completion, permitting, staking and water management plans for the
2008 and 2009 drilling programs, infrastructure upgrades and well
repairs. We drilled 15 wells in the PRB during the quarter,
bringing total wells drilled in 2008 to 36. Since the end of the
second quarter we have drilled one additional well in the PRB. As
previously announced, during the quarter we acquired approximately
14,000 undeveloped net acres in Sheridan County, Wyoming. The
acquisition acreage is located in and around our current operations
in the PRB. Fayetteville Shale We invested $6.7 million in capital
in our Fayetteville Shale project in the second quarter of 2008.
During the quarter we drilled two additional wells, bringing our
total operated wells drilled to the Fayetteville in the first half
of 2008 to seven. Additionally with the commencement of
transportation of gas from our acreage in early April of 2008, we
turned our three 2007 wells to sales as well as three 2008 wells.
The three 2008 wells (the Ballard 1-13H, the Owen 1-18H, and the
Roberts 1-13H), had initial production potential of 1,341 thousand
cubic feet per day (Mcf/d), 1,240 Mcf/d and 1,177 Mcf/d
respectively. Since the end of the quarter we have also commenced
sales from the Vaughan 2-18, a shallow well completed in a
gas-charged zone observed in the Vaughan 1-18H well, with initial
production potential of 500 Mcf/d. Finally, both the Files 2-12H
and the Files 3-12H, the two wells drilled and completed in the
second quarter, are cleaning up post fracture and are pending
sales. Since the end of the second quarter we have commenced
drilling operations on five additional Fayetteville wells. These
five wells are in various stages of drilling and completion. Elk
Valley, B.C. In Elk Valley we have nine wells on production and
continue to progress in our dewatering efforts. We remain
encouraged by the gas rates we are observing and continue to have
active discussions with third-party pipeline operators concerning
the design and possible installation of a gas sales pipeline. Final
pipeline engineering and cost estimates are anticipated to be
completed within the next few weeks. Financial schedules accompany
this press release. Please reference the Company's Quarterly Report
on Form 10-Q filed 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
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,
noncompliance with the covenants in our credit agreement and the
ability of our lenders to accelerate our indebtedness under the
credit facility, 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. CONSOLIDATED BALANCE SHEETS (Stated in
U.S. Dollars and in thousands, except share amounts) June 30,
December 31, 2008 2007 (Unaudited) (Audited) ASSETS CURRENT ASSETS:
Cash and cash equivalents $2,068 $1,133 Accounts receivable: Joint
interest billing 3,053 1,701 Revenue receivable 3,792 2,444 Fair
value of derivative instruments - 1,760 Prepaid costs and other
current assets 2,224 2,941 Total current assets 11,137 9,979
PROPERTY AND EQUIPMENT (full cost method), at cost: Oil and gas
properties: Unproved properties 57,043 51,438 Proved properties
100,283 78,096 Less accumulated depreciation, depletion, and
amortization (17,038) (12,228) Oil and gas properties, net 140,288
117,306 Other property 1,149 1,180 Less accumulated depreciation
(926) (778) Total other property, net 223 402 Total property and
equipment, net 140,511 117,708 OTHER NON-CURRENT ASSETS: Restricted
cash 168 685 Debt issuance costs, net of accumulated amortization
of $2,686 and $1,988, respectively 2,963 3,435 Accounts receivable
long-term - 759 Total other non-current assets 3,131 4,879 Total
assets $154,779 $132,566 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: Accounts payable $10,588 $5,825 Revenue
payable 3,191 1,678 Accrued and other liabilities 8,090 4,131
Interest payable - 12 Share-based payments liability 609 394 Fair
value of derivative instruments 11,708 - Bank debt 64,625 - Total
current liabilities 98,811 12,040 NON-CURRENT LIABILITIES: Bank
debt - 43,056 Ad valorem taxes payable 852 - Asset retirement
obligation 1,844 1,713 Fair value of derivative instruments 2,839
183 Convertible notes payable 50,195 50,195 Total non-current
liabilities 55,730 95,147 Total liabilities 154,541 107,187
Commitments and Contingencies SHAREHOLDERS' EQUITY: Common shares,
without par value, unlimited authorized, issued and outstanding:
81,278,549 at June 30, 2008 and 81,087,320 at December 31, 2007
69,834 69,834 Additional paid-in capital 6,028 5,640 Accumulated
other comprehensive income (loss) (9,709) 7,483 Accumulated deficit
(65,915) (57,578) Total shareholders' equity 238 25,379 Total
liabilities and shareholders' equity $154,779 $132,566 CONSOLIDATED
STATEMENTS OF OPERATIONS (Stated in U.S. Dollars and in thousands,
except share and per share amounts) Three Months Ended Six Months
Ended June 30 June 30 2008 2007 2008 2007 NATURAL GAS REVENUE
$6,550 $3,668 $12,567 $7,580 OPERATING EXPENSES: Gathering and
transportation 1,340 398 2,143 958 Lease operating expenses 2,407
1,256 4,810 2,159 General and administrative 1,819 3,491 3,536
6,152 Depreciation, depletion, amortization and accretion of asset
retirement obligation 2,856 1,879 5,018 3,513 Total operating
expenses 8,422 7,024 15,507 12,782 Operating loss (1,872) (3,356)
(2,940) (5,202) OTHER INCOME (EXPENSE): Interest expense (2,462)
(1,519) (4,731) (2,148) Interest and other miscellaneous income 52
101 32 133 Amortization of deferred financing costs (411) - (698) -
Total other income (expense) (2,821) (1,418) (5,397) (2,015) Loss
before taxes (4,693) (4,774) (8,337) (7,217) Recovery of future
income tax asset from flow-through shares - 182 - 1,278 NET LOSS
$(4,693) $(4,592) $(8,337) $(5,939) Basic and diluted loss per
share $(0.06) $(0.06) $(0.10) $(0.07) Weighted average number of
shares outstanding 81,214,884 81,045,122 81,151,150 80,816,505
CONSOLIDATED STATEMENT OF CASH FLOWS (Stated in U.S. Dollars and in
thousands) Six Months Ended June 30, 2008 2007 Cash flows from
operating activities: Net loss $(8,337) $(5,939) Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: Recovery of future income tax asset from flow-through
shares - (1,252) Share-based payments 625 1,161 Depreciation,
depletion, amortization and accretion of asset retirement
obligation 5,018 3,521 Amortization of debt issuance costs 698 -
Changes in operating assets and liabilities: Accounts receivable
(2,694) (761) Other current assets 700 381 Accounts payable 257
(2,674) Accrued interest and other current liabilities 5,103
(1,461) Net cash provided by (used in) operating activities 1,370
(7,024) Cash flows from investing activities: Restricted cash 1,264
(8) Capital expenditures - oil and gas properties (22,801) (32,386)
Capital expenditures - other assets 21 (23) Net cash used in
investing activities (21,516) (32,417) Cash flows from financing
activities: Issuance of common stock - 914 Debt issuance costs -
(3,556) Proceeds from (repayment of) bank debt 21,569 (13,278)
Proceeds from convertible notes payable - 50,194 Net cash provided
by financing activities 21,569 34,274 Effect of exchange rate
changes on cash (488) 883 Net decrease in cash and cash equivalents
935 (4,284) Cash and cash equivalents at beginning of period 1,133
5,299 Cash and cash equivalents at end of period $2,068 $1,015
Supplemental disclosure of cash flow information: Cash paid for
interest $5,224 $2,449 Supplemental disclosure of non-cash
investing and financing activities: Capital accruals and asset
additions $13,566 $6,700 Increase in asset retirement obligation
$89 $(284) Change in fair value derivatives $(16,123) $(1,360)
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (Stated in U.S.
Dollars and in thousands) Three Months Ended June 30, 2008 2007 Net
loss $(4,693) $(4,774) Depreciation, depletion, amortization and
accretion 2,856 1,879 Interest Expense 2,410 1,418 Income Taxes -
(182) Amortization of Debt Issuance Costs 411 - EBITDA 984 (1,659)
Stock-based compensation expense 351 742 Adjusted EBITDA(1)(3)
$1,335 $(917) Six Months Ended June 30, 2008 2007 Net loss $(8,337)
$(5,939) Depreciation, depletion, amortization and accretion 5,018
3,513 Interest Expense 4,699 2,015 Income Taxes - (1,278)
Amortization of Debt Issuance Costs 698 - EBITDA 2,078 (1,689)
Stock-based compensation expense 617 1,189 Adjusted EBITDA(1)(3)
$2,695 $(500) RECONCILIATION OF OPERATING LOSS TO OPERATING CASH
FLOW (Stated in U.S. Dollars and in thousands) Three Months Ended
June 30, 2008 2007 Operating loss $(1,872) $(3,356) General and
administrative 1,819 3,491 Depreciation, depletion, amortization
and accretion 2,856 1,879 Operating Cash Flow (2)(3) $2,803 $2,014
Six Months Ended June 30, 2008 2007 Operating loss $(2,940)
$(5,202) General and administrative 3,536 6,152 Depreciation,
depletion, amortization and accretion 5,018 3,513 Operating Cash
Flow (2)(3) $5,614 $4,463 (1) We have included Adjusted EBITDA
(earnings before interest, taxes, depreciation and amortization,
and share-based compensation expense) because we believe it
provides investors with a useful industry comparative and is a
financial measure used by management to assess the performance of
our Company. (2) We have included Operating Cash Flow (natural gas
revenues less lease operating expenses, gathering and
transportation expenses and production taxes) because we believe it
provides useful information to assess our performance and to
measure our cash flows from operations for our investors. (3) We
believe EBITDA, Adjusted EBITDA and Operating Cash Flow provide
useful measures of cash flows from operations for our investors
because EBITDA, Adjusted EBITDA and Operating Cash Flow are
industry comparative measures of cash flows generated by our
operations and because they are financial measures used by
management to assess the performance and liquidity of our Company.
EBITDA, Adjusted EBITDA and Operating Cash Flow are not
measurements of financial performance or liquidity under accounting
principles generally accepted in the United States of America and
should not be considered in isolation or construed as a substitutes
for net income (loss) or other operations data or cash flow data
prepared in accordance with accounting principles generally
accepted in the United States of America for purposes of analyzing
our profitability or liquidity. In addition, not all funds depicted
by EBITDA, Adjusted EBITDA and Operating Cash Flow are available
for management's discretionary use. For example, a portion of such
funds are subject to contractual restrictions and functional
requirements to pay debt service, fund necessary capital
expenditures and meet other commitments from time to time as
described in more detail in the Company's 2007 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 17, 2008. EBITDA, Adjusted EBITDA and Operating Cash Flow, as
calculated, may not be comparable to similarly titled measures
reported by other companies. 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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