## Overview 

2014 was a year of continued strong growth for Storm. Production for the year increased by 92% compared to 2013 as the Company expanded its liquids-rich natural gas play at Umbach in northeast British Columbia. The Company drilled 16 horizontal wells (16.0 net) and one vertical well and tied in 10 horizontal wells (9.6 net) at Umbach. At December 31, 2014 Storm had drilled a total of 31 horizontal wells at Umbach, comprising 23 producing wells, three standing completed wells and five wells awaiting completion. In early 2014, Storm added to its land position at Umbach by acquiring two horizontal wells, then producing 359 Boe net per day, and 29 sections of undeveloped land contiguous to the Company’ s 100% working interest lands at Umbach South. The total cost of the acquisition was approximately $88.0 million, which consisted of $30.0 million in cash plus 13.6 million common shares at a deemed value of $4.25 per share. In mid-August a new field compression facility was commissioned at Umbach South. The new compressor station has been operating at 27 Mmcf per day capacity since late August. No wells were drilled in 2014 on any properties owned by the Company other than Umbach. 

Umbach is a high NGL content natural gas property producing from the Montney formation. Although Storm is at an early stage in development of the play, results indicate that it is areally large and that drilling, completion and tie-in methodologies are highly repeatable, enabling the Company to manage downwards both capital and operating costs. At year end Storm had a total of 23 producing wells at Umbach with eight wells awaiting tie-in when facility capacity becomes available. Profitability of natural gas production at Umbach is supported by associated NGL, currently approximating 35 barrels per Mmcf, of which 60% is high value condensate and pentanes. The Company held a total of 141 net sections at the end of the year. A successful drilling program saw year-over-year reserve growth of 187% for proved reserves and 117% for proved plus probable reserves. Reserves have been recognized over approximately 18% of the Company’ s year-end land position. 

In the Horn River Basin (“ HRB” ), the Company’ s one producing horizontal well continues to meet expectations and production is consistent with type curves in the region. At December 31, 2014 Storm had a net interest in 78,000 acres in the area. The scale of the resource in the HRB is potentially immense. However, development in the area continues to be challenged by prevailing natural gas prices and the Company has no plans for additional activity in the area until there is evidence of a substantial and sustainable increase in natural gas prices. The Company faces no immediate land expiries and can afford to be patient regarding future exploitation programs. 

Production from the Company’ s Alberta properties, which were received as part of the Bellamont Exploration Ltd. acquisition in early 2012, is approximately 35% crude oil and has a stable decline rate, providing reasonably sustainable cash flow. Although the Alberta properties have development potential, it is limited in scale, certainly when compared to Umbach, and no capital programs are planned for the area in 2015. 

Average daily production in 2014 increased 92% to 6,980 Boe per day from 3,637 Boe per day in 2013 with fourth quarter production rising by 113% from 4,773 Boe per day in 2013 to 10,173 Boe per day. These increases were a result of the increase in natural gas and associated NGL production at Umbach. Fourth quarter production at Umbach increased by 169% year over year; in the HRB production declined by 15%; and Alberta production decreased by 5%. 

During 2014, Storm’ s production mix was 79% natural gas, 15% NGL and 6% crude oil, compared to 73% natural gas, 14% NGL and 13% crude oil in the prior year. Natural gas production increased by 109% relative to 2013. During the year, crude oil production dropped by 16% relative to 2013 as declines were not replaced through reinvestment. Meanwhile, NGL production increased 108% to 1,064 barrels per day from 512 barrels per day in 2013, commensurate with increased natural gas production at Umbach. However, the financial benefit of increased production was countered by falling prices for all of the Company’ s products. A slow erosion in prices realized by the Company throughout the year accelerated rapidly in the fourth quarter, with the result that the average realized price per Boe fell by nearly one-third between the first and fourth quarters of the year, with the average realized price for natural gas, Storm’ s most important product, falling by a largely similar amount as illustrated below. 

