MEDIA RELEASE PR41568
Far East Energy Announces Commencement of 60 Well Drilling Program and Groundbreaking on
Gathering System
HOUSTON, Oct. 5 /PRNewswire-AsiaNet/ --
Far East Energy Corporation (OTC Bulletin Board: FEEC) announced today
that its second-half 2010 drilling program for the Shouyang Block commenced
recently with three wells, the 34D, 40V, and the 11D having been spudded in
the past week. The drilling program is planned to consist of approximately 60
wells drilled during the remainder of 2010 through the summer of 2011.
Currently, 51 of these wells are planned to be drilled in the 1H Pilot Area
to accelerate gas production and maximize gas sales, projected to begin by
year-end 2010. In addition to these pilot area wells, 9 parameter wells will
be drilled to continue to extend the testing of the #3, #9 and #15 coal seams
across a broad area of the northern half (approximately 242,000 acres or 980
square kilometers) of the Shouyang Block with primary exploration in the #15
coal seam.
Far East also announced that it is presently finishing a 10 well fracture
stimulation program comprised of fracing 6 already-drilled wells in the 1H
Pilot Area and 4 parameter wells located as much as 16km west of the 1H Pilot
Area. Fracing the 6 pilot wells should further increase production in the 1H
Pilot Area, and Far East continues to target gas volumes of 2 million cubic
feet per day by year-end, which would double the production announced in late
August.
In order to execute the planned drilling program, Far East will utilize
as many as eight drilling rigs simultaneously which should allow completion
of the drilling program in the summer of 2011. "Based upon the response to
our last drilling program and the rapid ramp-up in production that we
announced in August, we have designed an aggressive drilling program with the
target of doubling production by year-end," said Michael R. McElwrath, CEO
and President. "We will focus first and foremost upon rapidly increasing
production, with roughly eighty-five percent of the new wells drilled in the
1H Pilot Area. But we will continue drilling parameter wells that will
hopefully continue to expand the size of the area determined to contain high
gas content and high permeability across the northern portion of our Block
because we want the potential to be clear."
Far East also confirmed that the construction of the Shouyang gas gathering
system is underway and is currently on schedule to be completed and
commissioned by year-end. At that time flaring will cease, and gas can be delivered for sale. Shanxi Gas
Gathering, a subsidiary of Shanxi
Provincial Guoxin Energy Development Group Co., Ltd., is managing the
gathering system's completion.
"We were proud to be the first western company to obtain a CBM gas sales
agreement with a pipeline," said McElwrath, "and we will be even more proud
to be the first to sell gas into a pipeline as China begins to transition
from a CBM transportation system comprised mainly of compressed natural gas
(CNG) - which distinctly limits the volumes of gas which can be transported
to market - to a rapidly developing pipeline infrastructure. This gives us a
distinct market advantage in the sense of being able to potentially market
very large volumes of gas."
Far East Energy will soon commence the process of obtaining Chinese
reserve certification with the objective of completing this process in the
second quarter of 2011. Far East Energy has already started the process of
evaluating resources and SEC reserves. The engineering firm of Netherland
Sewell and Associates, Inc. (NSAI) has been engaged to complete a report on
the overall resource base in the Shouyang Block in the coming weeks (two
categories of resources, Contingent and Prospective), to be determined under
the guidelines of the Society of Petroleum Engineers), and to complete a
report on SEC reserves in the Shouyang Block as of December 31, 2010.
Mr. McElwrath commented, "We have been very busy in the second and third
quarters of 2010 moving this project toward commercial production and
development. The recent capital raise of US$32.5 million of net proceeds has
been instrumental in accelerating our plans for gas sales and our potential
for gas reserves by year end. Our relationship with Shanxi Gas Gathering has
proven to be a great benefit in accelerating our progress toward gas sales
and we are very excited at the prospect of beginning to generate revenue from
our Shouyang Block in December 2010."
Garry R. Ward, Senior Vice President - Engineering, commented, "Our
program of parameter wells has been generating very good information
regarding the recurring high permeability and high gas content of the #15
coal seam all the way out to the western edge of the Shouyang Block. Our
recent drilling of new parameter wells is designed to expand our knowledge of
reservoir quality in the northern 240,000 acres of the Shouyang Block. In
addition to the parameter wells, our pilot wells have been showing good gas
production and we are excited at the prospect of accelerating our immediate
gas production through the addition of the most recent fracture stimulated
wells. We are continuing to refine our completion procedures to lower our
drilling costs and improve our gas production."
Additionally, Far East commented that it will fracture stimulate 5 wells
in the Laochang Block in Yunnan to test two coal seams for production. This
fracture stimulation and production testing work will commence in October.
Far East Energy Corporation
Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan
City, China, Far East Energy Corporation is focused on CBM exploration and
development in China.
Statements contained in this press release that state the intentions,
hopes, beliefs, anticipations, expectations or predictions of the future of
Far East Energy Corporation and its management are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. It is
important to note that any such forward-looking statements are not guarantees
of future performance and involve a number of risks and uncertainties. Actual
results could differ materially from those projected in such forward-looking
statements. Factors that could cause actual results to differ materially from
those projected in such forward-looking statements include: there can be no
assurance as to the volume of gas that is ultimately produced or sold from
our wells; due to limitations under Chinese law, we may have only limited
rights to enforce the gas sales agreement between Shanxi Province Guoxin
Energy Development Group Limited and China United Coalbed Methane
Corporation, Ltd., to which we are an express beneficiary; pipelines and
gathering systems needed to transport our gas may not be constructed, or if
constructed may not be timely, or their routes may differ from those
anticipated; certain of the proposed transactions with Dart Energy(formerly
Arrow Energy) may not close on a timely basis or at all, including due to a
failure to satisfy closing conditions or otherwise; the anticipated benefits
to us of the transactions with Dart may not be realized; the final amounts
received by us from Dart may be different than anticipated; Dart may exercise
its right to terminate the Farmout Agreement at any time; the Chinese
Ministry of Commerce ("MOC") may not approve the extension of the Qinnan PSC
on a timely basis or at all; our Chinese partner companies or the MOC may
require certain changes to the terms and conditions of our PSC in conjunction
with their approval of any extension of the Qinnan PSC; our lack of operating
history; limited and potentially inadequate management of our cash resources;
the pipelines currently under consideration may not be constructed, or if
constructed may not be timely, or their routes may differ from those
currently anticipated; risk and uncertainties associated with exploration,
development and production of coalbed methane; expropriation and other risks
associated with foreign operations; disruptions in capital markets affecting
fundraising; matters affecting the energy industry generally; lack of
availability of oil and gas field goods and services; environmental risks;
drilling and production risks; changes in laws or regulations affecting our
operations, as well as other risks described in our 2009 Annual Report and
subsequent filings with the SEC.
SOURCE: Far East Energy Corporation
CONTACT: Bruce Huff,
+1-832-598-0470,
bhuff@fareastenergy.com,
or David Nahmias,
+1-901-218-7770,
dnahmias@fareastenergy.com,
or Catherine Gay,
+1-832-598-0470,
cgay@fareastenergy.com,
all of Far East Energy Corporation
NEWS 
