Storm Cat to Acquire Powder River Basin Properties

Storm Cat Energy Corp.

Storm Cat Energy Corp. said that it has signed a definitive purchase and sale agreement (PSA) with Bill Barrett Corp. to acquire approximately 25,200 gross acres (17,000 net acres) in the Powder River Basin coalbed methane (CBM) play in Campbell County, Wyo., for approximately US$30.65 million.

The properties are located in and around Storm Cat's core Powder River operating area, allowing the company to further capitalize on economies of scale and operating efficiencies. The acreage is approximately 81% undeveloped, and more than 90% is located on U.S. federal lands.

With this transaction, Storm Cat is acquiring approximately 10.2 billion cubic feet (Bcf) of proved reserves, 9.6 Bcf of probable reserves, and 7.8 Bcf of possible reserves. Storm Cat's reserve quantity estimations were evaluated by Netherland Sewell & Associates (NSAI), a Dallas-based, independent reservoir engineering firm. Production from the acquired properties is approximately 6.6 million cubic feet per day (MMcf/d), (approximately 3.0 MMcf/d net), of natural gas from 64 producing CBM wells, 46 of which will be operated by Storm Cat.

Pro forma for the acquisition, Storm Cat will have approximately 19.8 Bcf of proved reserves, 13.8 Bcf of probable reserves, and 7.9 Bcf of possible reserves as audited by NSAI. Gross production will be approximately 11.6 MMcf/d (approximately 6.2 MMcf/d net), and acreage will be 39,235 gross (29,250 net) in the Powder River Basin.

“These producing Powder River Basin properties that we are acquiring are located in our core Northeast Spotted Horse operating area and will be immediately accretive to reserves, production, and cash flow,” said J. Scott Zimmerman, Storm Cat’s president and CEO. “Given the close proximity to our current Powder River CBM operations, we view this as a strategic fit to our asset base and an excellent way to provide future reserves and production growth in the area. Additionally, these properties can be developed using the multi-seam completion technique that provides for increased recovery and reduced finding and development costs, ultimately maximizing the value of the asset. Acquisitions are a key component of our growth strategy. We will continue to look for acquisitions that can expand core areas allowing us to leverage economies of scale and to capitalize on the depth of our CBM technical expertise.”

The initial purchase price of US$30.65 million, net of closing adjustments, is to be paid in cash. The adjustments will be determined by the terms of the PSA. Storm Cat will have 30 days to perform due diligence and will have 10 days to close the transaction after that time. The transaction is expected to close on or before Aug. 29, 2006; however, the company makes no assurances that it will successfully close the transaction. Storm Cat intends to finance the transaction with some combination of cash, bank, and other debt. The PSA is subject to standard closing conditions. Upon closing, the effective date of the transaction will be July 1, 2006.

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, exploitation and development acreage in Canada and Alaska, and high-risk, high-reward exploration acreage in Mongolia.