Storm Cat Issues Ops Update, Posts Q2 Loss

Storm Cat Energy Corp. on Thursday 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."

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.


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