Storm Cat Energy to Acquire Arkansas Fayetteville Shale Leases

Storm Cat Energy has entered into a Purchase and Sale Agreement with a privately held company to purchase 100% right, title and interest in oil and gas leases in Van Buren, Searcy and Pope Counties, Arkansas. The acreage is undeveloped and contains approximately 20,000 gross and 16,000 net mineral acres. Pending the satisfactory completion of due diligence review, the transaction is due to occur by mid-April, 2006. The effective date of the transaction is February 1, 2006. Transaction terms were not disclosed.

Storm Cat Energy's President, Scott Zimmerman, said: "Today's transaction, in one of the highest profile plays in North America, complements our business plan of acquiring leasehold in emerging unconventional gas resource plays. The acreage is located in the regionally extensive Fayetteville shale play in the Arkoma Basin of northwest Arkansas. The Fayetteville shale is an unconventional shale gas reservoir ranging in depth from 1,000 feet to 6,500 feet. Acquiring acreage in the Fayetteville Shale play is consistent with Storm Cat's stated focus of pursuing, exploring and developing unconventional gas reserves from fractured shales, coal beds and tight sand formations. We have seen the repeatable success that companies like Southwestern Energy are enjoying and are pleased to gain entry into the play. By our initial evaluation, we anticipate estimated ultimate recoveries of 1.0 Bcfe to 1.4 Bcfe per horizontal well with an average cost to drill and complete of $1.6 million. These are attractive finding costs, even with higher service costs of drilling these horizontal wells. This position provides us with over 120 net drillable locations. By developing these properties in a timely fashion, we anticipate adding to the cash flow provided by our Powder River Basin properties while we continue to unlock the vast resource potential that exists in our Elk Valley play in British Columbia."

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 and Alaska, and high-risk, high-reward exploration acreage in Mongolia. The Company's shares trade on the American Stock Exchange under the symbol "SCU" and in Canada on the TSX Venture Exchange under the symbol "SME."