Storm Resources Ltd. Announces Processing Arrangement at Umbach and Increased 2017 Production Guidance

CALGARY, ALBERTA--(Marketwired - Sept. 7, 2016) - Storm Resources Ltd. ("Storm" or the "Company") (TSX VENTURE:SRX) is pleased to announce that it has entered into a natural gas processing arrangement at Umbach with Spectra Energy ("Spectra") that is expected to reduce operating costs and support future growth. In addition, production guidance for 2017 is being increased with the anticipated increase in funds flow resulting from this arrangement being used to accelerate Storm's growth in 2017.

The effective date of the processing arrangement is January 1, 2017 with total contracted volume being 65 Mmcf per day of raw gas with the contract terms ranging from 5 - 15 years. Storm has a deep inventory of future horizontal drilling locations and the 15 year commitment to Spectra will use less than 20% of this inventory. The longer term processing arrangement is expected to result in Storm's corporate operating cost declining by approximately 15% to 20%.

The arrangement with Spectra represents a significant step forward in terms of reducing operating costs, supporting future growth and thus adding value for Storm's shareholders. An additional benefit of the arrangement is access to three sales pipelines through the McMahon Gas Plant (Alliance Pipeline to Chicago, TransCanada NGTL system to AECO, the Spectra T-north mainline to BC Station 2) which enables continued diversification of natural gas sales. Other alternatives that were considered by Storm's management included building a new gas plant both in partnership with a midstream company or at a 100% working interest; however, Storm concluded that the highest rate of return will be achieved by drilling and completing horizontal wells under the new arrangement with Spectra.

The increase in funds flow which is anticipated to result from the arrangement with Spectra will be used to accelerate growth in 2017 with start-up of a third field compression facility at Umbach being moved forward to January 2017 (previously April 2017) and additional horizontal wells being drilled and completed in 2016 and 2017. The third field compression facility at Umbach will initially be sized for 35 Mmcf per day of raw gas and is expandable to 70 Mmcf per day of raw gas for an incremental investment of $7 million. Once the expansion is completed, capacity from Storm's three field compression facilities is expected to exceed 150 Mmcf per day of raw gas which would support growth in corporate production to more than 25,000 Boe per day.

Capital investment in 2016 is being increased by $20 million from previous guidance with the majority of the increase relating to the construction of the third field compression facility ($15 million) at Umbach. In addition, two more horizontal wells (2.0 net) will be drilled and two more horizontal wells (2.0 net) will be completed. The higher level of investment in 2016 is expected to result in increased production and cash flow in 2017. Updated guidance also reflects the reduction in completion costs for recently completed horizontal wells, estimated to be $300,000 per well (reducing budgeted cost to $1.9 million from $2.2 million).

Capital investment in 2017 is relatively unchanged from previous guidance. Two more horizontal wells (2.0 net) will be completed plus four more horizontal wells (4.0 net) will be pipeline connected with the cost of this activity being offset by moving construction of the third field compression facility into 2016. In addition, the estimated cost to complete horizontal wells was reduced to $2.1 million in the updated guidance (from $2.4 million).

Commodity price hedges will continue to be added in support of accelerating growth with up to 50% of current production being hedged (forecast production growth is not hedged). Storm's hedge position for 2017 currently includes 22,000 GJ per day at AECO $2.54 per GJ (17,600 Mmcf per day at AECO $3.18 per Mcf) plus 475 barrels of oil per day with an average floor of WTI Cdn$63.07 per barrel and a ceiling of WTI Cdn $67.82 per barrel. This represents approximately 26% of current production or 20% of forecast 2017 production. The hedge position will be updated periodically in the presentation posted on Storm's website.

Storm Resources Ltd. began operations in August 2010. Storm is headquartered in Calgary, Alberta and is primarily active in the Umbach and Horn River Basin areas of northeast British Columbia.

Boe Presentation - For the purpose of calculating unit revenues and costs, natural gas is converted to a barrel of oil equivalent ("Boe") using six thousand cubic feet ("Mcf") of natural gas equal to one barrel of oil unless otherwise stated. Boe may be misleading, particularly if used in isolation. A Boe conversion ratio of six Mcf to one barrel ("Bbl") is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All Boe measurements and conversions in this report are derived by converting natural gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. Mboe means 1,000 Boe.

Forward-Looking Information - This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "will", "expect", "anticipate", "intend", "believe", "plan", "potential", "outlook", "forecast", "estimate" and similar expressions are intended to identify forward-looking statements or information. More particularly, and without limitation, this press release contains forward-looking statements and information concerning: the anticipated benefits of the arrangement with Spectra including reducing operating costs, supporting future growth of the Company, adding value for Storm's shareholders and accessing three sales pipelines through the McMahon Gas Plant; the drilling location inventory of Storm; the use of proceeds from the increase in funds flow including the construction of a third field compression facility at Umbach, and drilling and completing horizontal wells; Storm's compression facilities; 2016 and 2017 guidance including commodity pricing, estimated average operating costs, estimated average royalty rates, estimated operations capital, estimated cash G&A net of recoveries, forecast fourth quarter production, forecast annual production, and Umbach wells completed, drilled and connected; and hedging.

The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by Storm, including: prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; future well production rates; reserve and resource volumes; the performance of existing wells; success to be expected in drilling new wells; the adequacy of budgeted capital expenditures to carrying out planned activities; the availability and cost of services; and the receipt, in a timely manner, of regulatory and other required approvals. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on these forward-looking statements and information because of their inherent uncertainty. In particular, there is no assurance that exploitation of the Company's undeveloped lands and prospects will result in the emergence of profitable operations. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the oil and gas industry in general such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; ability to access sufficient capital from internal and external sources; stock market volatility; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of the Company are included or are incorporated by reference in the company's MD&A for the three and six months ended June 30, 2016.

The forward-looking statements and information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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