Far East Energy Corporation Announces Gas
Far East Energy Corporation (OTC BB:FEEC) announced today that the rate of gas production in the recently drilled FCC HZ06V has been building steadily to a current level of 95 thousand cubic feet per day (Mcfpd).
“This is a landmark day,” said Michael R. McElwrath, CEO and President of Far East Energy. “The gas rate is continuing to climb, and we will see where it peaks. We can now report that gas production has begun in the area of our first wells in the #15 coal seam in the Shouyang Block in Shanxi Province, China,” said McElwrath.
This flow rate confirms the high permeability reported earlier by Far East Energy and reported in the previously released Netherland, Sewell and Associates (NSAI) report. In the NSAI report, the #15 coal seam was identified as a coal seam having a permeability of 100 millidarcies . The well is located in the drilling pattern surrounding the HZ01H well and commenced production in a short period of time because of pattern dewatering. We plan to continue to closely monitor our first pattern of horizontal and vertical wells with the objective of determining the optimal approach to reduce costs and maximize gas recovery.
“The fact that production has been achieved so quickly after commencing dewatering is a clear indication that the dewatering of our group of wells has begun to lower the pressure in the area. When the pressure drops sufficiently in a well, the gas flow begins,” said Garry Ward, Senior Vice President of Engineering.
NSAI comments in its report that the reservoir pressure is declining and there is a high likelihood of commercial gas being produced once the reservoir pressure falls below the critical desorption pressure. Based on the production from the HZ06V well, it is evident that the area around that well is below the critical desorption pressure and gas is desorbing out of the coal and being produced. There is also evidence in the offset HZ04V that the #15 coal seam at that location is also very near the critical desorption pressure. Although 95 Mcfpd is not yet a commercial production rate, it does represent the start of significant free gas flow from the #15 coal seam. A complete copy of the NSAI report, which contains further information and qualifications, may be found on company’s website at www.fareastenergy.com.
The five horizontal wells and four vertical wells included in the HZ01 drilling pattern in the Shouyang Block are producing a total of approximately 1,000 barrels of water per day and increasing gas rate, which is currently at approximately 110 Mcfpd and includes the HZ06V. Based on the initial results of the HZ06V well, Far East Energy announced plans to drill another vertical underbalanced well (HZ07V) and to cavitate the wellbore offsetting the HZ06V well to further expand this promising method of drilling in the Shouyang Block.
Qinnan Block
Far East Energy began drilling in June 2007, a horizontal well in the Qinnan Block in the No. 3 coal seam. This well is being drilled under a turnkey contract with a Chinese drilling company and is anticipated to be completed in September 2007. This well is planned to be drilled to 3,000 meters in the coal seam.
Far East Energy’s operations include the Shouyang and Qinnan Blocks, which are part of 1,057,650 acre coalbed methane (CBM) project in Shanxi Province that Far East holds under farmouts from ConocoPhillips. Including its 264,863 acre project in Yunnan Province, the CBM concessions of Far East Energy contain a land mass slightly larger than the State of Delaware. The Shanxi properties are strategically located next to China’s two largest pipelines leading to the industrial centers of Shanghai and Beijing.
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 through its agreements with ConocoPhillips and China United Coalbed Methane Company, Ltd. (CUCBM).
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: the preliminary nature of well data, including permeability and gas content, and commercial viability of the wells; risk and uncertainties associated with exploration, development and production of oil and gas; drilling and production risks; our lack of operating history; limited and potentially inadequate cash resources; expropriation and other risks associated with foreign operations; anticipated pipeline construction and transportation of gas; matters affecting the oil and gas industry generally; lack of availability of oil and gas field goods and services; environmental risks; changes in laws or regulations affecting our operations, as well as other risks described in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission.