Storm Cat leads PIPE news with $21.5 million offering; oil, stocks plummet impacting private placements

By Sheri Kasprzak

New York, Oct. 20 - Despite a marked drop in oil prices on Thursday, Calgary, Alta.'s Storm Cat Energy Corp. priced a $21.5 million stock deal, heading up private placement activity in the United States.

The oil and natural gas explorer intends to sell up to 10 million shares to investors in both the United States and Canada.

Those investors will also receive a warrant for 0.3 of a share for every share purchased. The whole warrants allow for the purchase of an extra share at $2.52 each for two years.

The deal was announced Thursday afternoon, and Storm Cat's stock slid 10.7%, or $0.21, to end at $2.25.

The "discount looks pretty significant and oil was down in general, which didn't help them," said one Canadian market source who saw the deal.

The deal is priced at a 14.7% discount to Storm Cat's closing stock price of $2.52 on Oct. 19.

Scott Zimmerman, Storm Cat's president, was not immediately available for comment Thursday afternoon.

The proceeds will be used for the company's exploration and drilling program.

Moving to the company's earnings, for the quarter ended March 31, Storm Cat reported a net loss of C$148,825, compared to a net loss of C$332,168 for the corresponding quarter of 2004.

In the broader private placement market Thursday, one sellsider said a combination of toppling oil prices and a stock market shaken by troubling economic data may have kept some issuers away for the short term.

"[They're] waiting it out to see whether stocks will rebound after this [data] or if this maybe isn't the best time to price," he said. "Seems to me like it's just a temporary slip."

The Dow Jones Industrial Average dove 133.03 to end at 10,281.10; the Nasdaq composite index slid 23.13 to finish at 2,068.11 and the Standard & Poor's composite index lost 17.96 to close at 1,177.80.

Oil prices lost $2.01, ending the day at $60.10 per barrel.

SouthernEra's $8 million offering

Looking elsewhere in the PIPE market Thursday, another Canadian company priced an U.S. dollar-denominated offering.

SouthernEra Diamonds Inc., based inToronto, said it has agreed to sell 15,636,000 shares at $0.51164 each to BHP Billiton Ltd.

Proceeds will be used for exploration and development of the company's diamond properties in the Democratic Republic of the Congo. The rest will be used for general corporate purposes.

"We are very pleased to have gained the support of BHP Billiton, the world's largest resource company, and look forward to building a long-standing relationship with a company of BHPB's caliber and mine discovery track record," said Alasdair McPhee, SouthernEra's president, in a statement. "It also provides a strong endorsement of the potential of the permits we have under our control in the DRC.

"This association will enable us to more rapidly advance the kimberlite program in the DRC and the private placement will strengthen SouthernEra's diamond discovery and development strategy going forward."

The deal was priced late Wednesday, and on Thursday SouthernEra's stock remained unchanged at $0.387.

SouthernEra is a diamond exploration company.

Simba raises $5 million

Elsewhere in the natural resources sector, Simba Mines Inc. concluded a $5 million PIPE offering with Baxter Capital Co.

Simba will sell 10 million shares to Baxter, and the investor will receive the right to nominate two directors to Simba's board.

Proceeds will be used for a bankable feasibility study on one of the company's mines.

"This financing will enable Simba to expedite the completion of a bankable feasibility study and the commencement of initial production at a rate of 20,000 tonnes per annum," said Nik Zuks, Simba's president and chief executive officer, in a statement. "The association with Baxter Capital is a key long-term relationship that will provide us with additional capital, as required. This will enable us to increase production to 40,000 to 50,000 tonnes per annum as well as allow us to act on some significant additional opportunities."

The company's stock dipped $0.02 to end at $0.40 Thursday.

Based in Bay City, Mich., Simba is a mineral exploration company.

PetroGlobe leads Canadian offerings

Heading up PIPE news north of the border, PetroGlobe Inc. announced its plans to head to the private placement market with a C$9 million unit offering.

The Calgary-based company intends to sell up to 6 million units at C$1.50 each with a C$5,000 minimum subscription level.

The units include one share and one half-share warrant. The whole warrants allow for the purchase of another share at C$2.20 each for the first year and at C$2.50 each for the remaining 18 months.

Proceeds will be used for the company's acquisitions of properties in the Palo Duro basin in Texas, the evaluation of wells on these properties and for general corporate purposes.

PetroGlobe is an oil and natural gas exploration company. Its stock gained C$0.05 to end at C$1.35 Thursday.

Another oil and natural gas company, this one based out of Vancouver, B.C., priced a C$6.06 million offering of flow-through and non flow-through shares Thursday.

International Sovereign Energy Corp. plans to sell 1.1 million flow-through shares at C$4.60 each and 263,158 non flow-through shares at C$3.80 each through agent McFarlane Gordon Inc.

Proceeds from the flow-through portion of the deal will be used for exploration on the company's western Canadian properties. The rest will be used for working capital.

International Sovereign's stock lost C$0.30, or 7.5%, to close at C$3.70 Thursday.

Crosstex stock closes up 0.5%

A day after announcing a private placement of trust units for $105 million, Dallas-based mid-stream natural gas company Crosstex Energy, LP's stock made only slight gains Thursday.

The company's stock edged up $0.19, or 0.51%, to finish at $37.69.

On Wednesday, when it was announced that a group of institutional investors has agreed to buy senior subordinated series B units at $36.84 each from Crosstex, the company's stock closed unchanged at $37.50.

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