Cash Bonus Bid Accepted Right to Competitive Oil and Gas Lease Awarded Additional Bonus Money, Rental and Interest Required

FEDERAL EXPRESS TRK#

792159847 564

RETURN RECEIPT REQUESTED

^The TRUST

LAND OFFICE

December 15, 2004

AWARD NOTICE

Storm Cat Energy Corporation

Oil and Gas Lease

Attn: Scott Zimmerman

MHT 9300054 Suite 430-580 Hornby Street

Vancouver, British Columbia V6C 3B6

Cash Bonus Bid Accepted
Right to Competitive Oil and Gas Lease Awarded
Additional Bonus Money, Rental and Interest Required

LEASE AWARDED: Tract 29 has been offered in the Alaska Mental Health Trust 2004 Cook Inlet Area Competitive Oil & Gas Lease Sale held November 9, 2004. The highest responsible bid submitted by a qualified bidder has been determined. The above named bidder is hereby awarded the right to said tract.

BID ACCEPTED: The sum of $18,730.07 tendered as the required 20.0% minimum deposit to the total cash bonus bid of $66,270.11, is hereby accepted.

FILE NUMBER ASSIGNED: This tract has been assigned MHT File Number 9300054. This number must be referenced in any correspondence regarding this lease.

DOCUMENTS DUE TO The Trust Land Office (TLO): Two fully executed lease forms, including mitigation measures, and the required certificate(s) of insurance must be returned within 30 days from receipt of this notice.

Two lease forms, including mitigation measures, are enclosed with this letter. The leases must be executed by the bidder or the bidder's agent, as authorized by instruments included in the bidder's qualification file. Notary acknowledgment of lessee's signature block must be completed on the lease forms in the space provided. Future notices and correspondence regarding this lease will be mailed to the name and address specified in paragraph 11(c)(1). If the notification address is different form the billing address, please include both.

All Certificate(s) of Insurance, as specified in the lease document, must be furnished and must provide for a thirty (30) day prior notice to Lessor of cancellation, non-renewal, or material change of the policies.

Additionally, two originals of a Memorandum of Lease are included in the packet. Sign and complete the notary acknowledgement for this document and return with the above information.

AWARD NOTICE

Page 1 of 3

MHT 9300054

Alaska Mental Health Trust Land Office

These documents must be received by the TLO, Attention: Mike Franger., 718 L Street, Suite 202, Anchorage, Alaska 99501, within 30 days from receipt of this notice, in accordance with 11 AAC 82.465 and the Instructions to Bidders included in the sale packet. Note that failure to comply with this requirement will result in automatic forfeiture of the deposit to the TLO.

PAYMENTS DUE TO TLO: Payments must be received within 30 days of receipt of this notice, in accordance with 11 AAC 82.465 and the Instructions to Bidders. The following payments are due:

1)

Balance of fixed cash bonus.

2)

Interest on the balance of fixed cash bonus. The interest rate is 1.90% per annum, which is the market interest rate for 90 day U.S. Treasury Bills averaged for the week of November 8, 2004. Interest begins accruing from the day following receipt of the Lease Award Notice and continues accruing up to and including the day payment is made. Please note: Interest calculations should be based on a 365-day year times the actual number of consecutive days that interest is owed, including weekends,. Please remember there is a four-hour time difference between Alaska Standard Time and Eastern Standard Time that may affect the date payment is received.

The formula for calculating the interest due is:

Balance of Bonus x Number of Days x 0.000052 ** = Interest Due

** 0.000052 is the interest rate of 1.90% divided by 365.

 3)  Payment due for the first year's annual rental is $1.00 per acre or portion of an acre. (Do not pay interest on this amount.)

Payment for this lease is:

(1) Balance of

+

(2) Interest on

+ (3) First year annual

= (4) Total

cash bonus

balance of

rental (no interest

bid (not

cash bonus

due on this amount).

including

bid. interest).

(1)    $47,540.04

+

(2) $

   +    (3)   $5971.00

= (4) $

METHOD OF PAYMENT: Payment of the required funds may be tendered directly to the Trust Land Office at the following address:

Alaska Mental Health Trust Land Office 718 L Street, Suite 202 Anchorage, Alaska 99501

All funds must be in U.S. dollars and must be made in cash, or by bank draft, money order, cashier's check, or certified check. All checks, bank drafts, or money orders must be made payable to the Alaska Mental Health Trust Land Office and must reference the Mental Health Trust (MHT) number assigned to each tract.

AWARD NOTICE

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MHT 9300054

Payments may also be made by wire transfer of federal funds to:

State Street Bank and Trust Company, Boston, Massachusetts, ABA #011000028, for credit to State of Alaska, General Investment Fund, AY01, Account #00657189, Attention: Kim Chan, Public Funds.

The wire transfer must specify on whose behalf the payment is being made. If possible, bidders should use only one wire transfer for all leases.

Before the wire transfer the successful bidder must deliver to or fax the following information to the State of Alaska, Department of Revenue, Treasury Division, Attention: Bronze Ickes, FAX number (907) 465-4019, and the Mental Health Trust Land Office, Attention: Leann McGinnis, FAX number (907) 269-8905.

1)

The Mental Health Trust Land Office (MHT) number assigned to each tract;

2)

Total amount submitted for each tract and the breakdown showing the balance of cash bonus bid being paid per tract, interest on that balance, and annual rental;

3)

Name(s) of the bidder(s) on whose behalf the funds are being wire transferred;

4)

Originating bank of the wire transfer; and

5)

Total amount of the wire transfer.

ISSUANCE OF LEASE: Upon full compliance with this notice, a lease will be issued. The effective date of the lease will be the first day of the month following the day on which the lease is signed by the Executive Director of the TLO. This date will be noted on the face of the lease; lessee must not enter the effective date.

COMPLIANCE: Failure or refusal by the bidder to comply with any provision of this notice will cause forfeiture of the right to lease this sale tract and forfeiture of the entire bid deposit to the TLO.

FURTHER INFORMATION: Should you have any questions regarding this notice please contact Mike Franger at the Trust Land Office. (phone: (907) 269-8657 or via e-mail at mikefr@dnr. state. ak. us)