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Storm Cat Energy Storm Cat Energy Corporation Provides Operational Update; Completes Powder
River and Fayetteville Shale Acquisitions
Tuesday May 16, 9:00 am ET
CALGARY, Alberta and DENVER May 16, 2006 Storm Cat Energy Corporation
(AMEX: SCU; TSX:
SME)
today provided an
update on the Company's U.S. and Canadian operations. It
also announced the closing of two mineral leasehold acquisitions.
The highlights of the Company's operations and details of
the transactions are included below.
Powder River Basin
Storm Cat's current production is approximately 4.2 million cubic feet
per day (MMcfd) from 140 wells on its Powder River Basin properties.
Activity in the Powder continues at a brisk pace. Drilling with three
rigs will continue and a fourth rig will be added in as needed. The
Company currently is experiencing an average cycle time from spud to
first production of 15 days. This is a strong cycle time by industry
standards.
In early May, Storm Cat closed a mineral leasehold transaction in the
Powder River Basin, Campbell County, Wyoming, with two private
companies. The acquisition includes a 90% working interest in
3,942 gross / 3,548 net undeveloped acres. As consideration, Storm Cat
paid 50% in cash at closing and the private companies retain a carried
interest as to capital costs covering their 10% working interest to be
paid over a period of 18 months after closing. The acquisition expands
Storm Cat's core Powder River operating area by providing up to an
additional 40 gross multi-seam locations prospective for CBNG
development drilling based on 80-acre spacing. The leasehold consists
of primarily federal lands. Internal, un-audited reserve projections
for the 40 locations are 4 billion cubic feet.
Elk Valley Operations
The Company finished completing the a-84-L and the d-85-L wells drilled
in December 2005. The a-84-L well, completed in the "F," "G" and "H"
coal seams by fracture stimulating down casing, has been on production
for 60 days. Initial production rates have been as high as 203
thousand cubic feet per day (Mcfd). The d-85-L well was completed in
the "G" through "L" coal seams by fracture stimulating down coil tubing
in eight separate stages. The well has produced for 42 days at initial
rates as high as 162 Mcfd. Preliminary results and evaluation by Storm
Cat engineers are showing better per-well performance than models
predicted.
Storm Cat re-activated three wells shut-in by the previous operator.
The three wells are producing a combined 150 Mcfd. Company engineers
are again encouraged by initial results from the wells which are
performing as expected at this stage of production.
Based on the results to date, six wells are being licensed to target
both the upper and lower Mist Mountain coal sections with expected
initial spud dates of mid-June to early July, subject to rig
availability. An additional six drilling locations are currently being
considered for drilling in the late fall. In addition, engineering
services to aid in the design of compression and related facilities are
being evaluated.
Fayetteville Shale / Other Properties
In early May, Storm Cat closed a $2 million transaction
in the Fayetteville Shale play in Arkansas with two private
operators. Storm Cat acquired a 100% working interest
(80% NRI) in approximately 16,166 gross undeveloped acres
and 12,034.53 net mineral acres in Van Buren, Pope and
Searcy Counties, Arkansas at a cost per net mineral acre
of $166. The acquisition marks Storm Cat's entrance into
the active Fayetteville Shale play. Storm Cat intends
to opportunistically lease in the area to consolidate
the existing acreage block. The Company is identifying
potential drill sites and is determining a prudent drilling
program to assess productive potential from its leasehold.
Storm Cat completed the drilling operations of three
wells on its Moose Mountain Saskatchewan prospect. Each
of the wells encountered greater than 20 metres of potential
pay in the Second White Specks Formation. Completion
operations will commence once wet ground conditions allow
for access.
Storm Cat was a successful bidder at April and May Alberta
Crown land sales acquiring 7,680 acres in the Wainwright
area. The lands are prospective for gas from the Mid-Mannville
coal which is 4 to 5 Meters thick and suitable for horizontal
drilling. Storm Cat's acreage position in the Mannville
coal fairway is 15,508 gross (13,516 net) acres.
At March 31, 2006, Storm Cat was the operator of approximately
380,850 gross (159,200 net) acres in North America.
Management Comment
J. Scott Zimmerman, President
and Chief Executive officer said: "Closing the two
leasehold acquisitions adds critical mass to our Powder
River core area and provides Storm
Cat with a foothold in an emerging shale play. We will
evaluate other operators' progress in the Fayetteville
Shale to best determine the next steps in developing
or monetizing the Fayetteville asset. The attractive
acquisition cost basis provides us with flexibility while
we assess the play. We continue to make progress in Elk
Valley and anticipate spudding the next set of wells
in the late second to early third quarter. Monitoring
production from re-entries and new wells will allow engineers
to better understand reservoir characteristics in what
we believe is an area with vast resource potential."
About Storm Cat Energy
Storm Cat Energy is an independent oil and gas company focused
on the pursuit, exploration and development of large unconventional gas reserves from fractured shales, coal beds
and tight sand formations. The Company has producing properties in Wyoming's Powder River Basin, exploration and
development acreage in Canada, Arkansas and Alaska. 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
CAUTIONARY STATEMENT: This press release contains certain forward-looking statements, as defined in the United States Private Securities
Litigation Reform Act of 1995 relating to matters such as the Companys drilling and other exploration plans and projected well economics.
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 Cats management on the date the statements are made; including production and
reserve estimates, and potential benefits to Storm Cat of such acquisitions; 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 managements 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 receipt of necessary
approval from regulatory bodies, the failure to achieve the anticipated benefits of the acquisition, the failure to close the
acquisition, 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 Companys need for and availability of additional financing, the possibility
that the Company may not be able to secure permitting and other governmental clearances necessary to carry out the Companys
exploration and development plans, and the other risk factors discussed in greater detail in the Companys various filings on
SEDAR (www.sedar.com) with Canadian securities regulators and its filings with the U.S. Securities and Exchange Commission,
including the Companys Form 20-F for the fiscal year ended December 31, 2005.
NO STOCK EXCHANGE HAS REVIEWED OR ACCEPTED RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS NEWS RELEASE.
Source:
Storm Cat Energy Corporation
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