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Far East Energy Corporation Announces Financing For Development of Coalbed Methane Projects in China

Posted on: Tuesday, 28 August 2007, 09:22 CDT

Far East Energy Corporation (OTC BB: FEEC) announced today that it entered into a subscription agreement on August 24, 2007 with International Finance Corporation (IFC), a member of the World Bank Group, to help fund Far East Energy's coalbed methane exploration and development program in China. Far East Energy, one of the largest holders of coalbed methane deposits in China, will use the proceeds to finance a portion of its operations in China, including planned drilling and development of coalbed methane production, and for working capital purposes.

Far East Energy sold, at a price of $1.306 per share, a total of 11,485,452 shares of its common stock to IFC for total gross proceeds of $15 million. Far East Energy also issued warrants to IFC to purchase 4,019,908 shares of common stock with an exercise price of $2.61 per share. Far East Energy may redeem the warrants if the shares of the company's common stock trade at a price equal to or in excess of $3.92 per share for fifteen or more consecutive trading days. Far East Energy will pay no commissions or finder fees in connection with the offering.

"We certainly are proud that IFC's first investment in coalbed methane in China is with Far East Energy. We consider this to be a strong vote of confidence in our projects," said Michael R. McElwrath, Chairman and CEO of Far East Energy. "This financing supports the acceleration of our drilling program, making us better positioned to act on the findings of the Netherland, Sewell & Associates report issued earlier this summer. Its findings were that Far East Energy's #15 coal seam has high permeability on the order of 100 millidarcies, gas content on the high end of CBM fields, and indications of a potential gas production profile of 1 million to 2 million cubic feet per day from horizontal wells. The NSA report and the recently announced gas production in our Shouyang Block, now coupled with the IFC financing, support Far East Energy's plan to step up the pace of our exploration and development program."

"Given China's significant coalbed methane resources, this investment has great potential to help China meet its growing energy needs by using domestic resources in an environmentally conscious manner," said Somit Varma, IFC's director for oil, gas mining and chemicals. "IFC is excited to partner with Far East Energy, a company that brings excellent management and technical expertise needed to develop this unconventional energy source."

IFC is a highly respected global development institution and is well positioned to provide advisory capabilities to Far East Energy. IFC has also indicated that it is interested in considering future long-term project financing. In addition to this potential project financing, IFC, as a member of the World Bank Group, can potentially render political risk mitigation, guidance on developing a long term strategy to leverage potential carbon finance opportunities under the Kyoto Protocol, and assistance on other aspects of Far East Energy's activities in China.

About IFC

IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments. IFC's vision is that poor people have the opportunity to escape poverty and improve their lives. In fiscal year 2006, IFC committed $8.3 billion, including syndications, to 284 investments in 66 developing countries. For more information, please visit www.ifc.org.

Far East Energy Corporation

Far East Energy's operations in China include the Shouyang and Qinnan Blocks, which are part of the 1,057,650 acre coalbed methane (CBM) project in Shanxi Province that Far East Energy holds under farmouts from ConocoPhillips. Far East Energy also has a 264,863 acre CBM project in Yunnan Province. Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy is focused on CBM exploration and development in China through its agreements with ConocoPhillips and China United Coalbed Methane Company, Ltd. (CUCBM). For more information, including a complete copy of the NSA report, which contains further information and qualifications, please visit www.fareastenergy.com.

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.

Source: Business Wire

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