Still reeling from the series of its financial and operational woes, Cougar Energy Ltd (ASX: CXY) came out scrambling for the right solutions as the company announced on Thursday that it is currently conducting discussions that could lead to an alliance in developing further underground coal gasification (UCG) projects.

The Melbourne-based synthetic gas producer said that the company's board of directors is seriously considering a proposal "to form a strategic alliance with an investor group for the development of underground coal gasification projects."

Cougar Energy added that the board has already instructed the company's senior management officials to explore further talks and continue their negotiations with the investor group in order to determine the viability of the proposal.

The company has been hit by series of setbacks in the past few week that saw its market shares suffered stinging retreats following its six-week trading suspension that came about when its UCG project in Kingaroy, Queensland was plagued by alleged water contamination scare.

Subsequent tests required by the Queensland government on Cougar Energy's Kingaroy facility yielded negative results for any contamination but the company's pioneering UCG project was not given the green light to resume operations.

The company decided to brings its case before the state parliament as it sent a letter to all Queensland MPs to argue its case and possibly dispel the misconceptions that has hounded its UCG project since news of the water bore contamination scare broke.

Despite its current financial woes, Cougar Energy reaffirmed its commitment to sustain its UCG initiatives in Queensland even as the company reported earlier this month that it has successfully raised considerable funds that it would utilise on other endeavours in China and Western Australia.

As of 1233 AEST on Thursday, Cougar Energy shares were trading at 4.1 cents as it gained 0.4 cents or 10.81 percent following exchanges of up to 32 million Cougar shares.