Far East Energy Corporation Announces Significant China Development
HOUSTON, May 9 /PRNewswire-FirstCall/ — Far East Energy Corporation (BULLETIN BOARD: FEEC) announced major progress in its dewatering efforts for its initial wells in the Shouyang Block located in the Shanxi Province, China. In coalbed methane projects, the wells must first produce excess water from the coal seam. Production of this excess water reduces the pressure that is holding the gas in the coal seam. Once sufficient water is produced to reduce the pressure in the coal seam to “desorption pressure,” then the gas begins to release, gradually increasing in volume as the additional water is produced.
Aggressive dewatering of its wells in the Shouyang Block has achieved a significant pressure drop in the No. 15 coal seam. The pressure drop across the entire area was confirmed by pressure measurements, which indicate that dewatering at the HZ01 and HZ03 wells resulted in reduced pressure at the HZ05 well even prior to the commencement of the dewatering efforts at the HZ05 well. This is significant because the HZ01 and HZ03 wells are separated from the HZ05 well by a distance of approximately one kilometer. The company believes that the dewatering activities at the HZ01 and HZ03 wells could impact a well more than a kilometer away only if the area was highly permeable, allowing water to flow from long distances.
“We believe that the observed pressure drop in the HZ05 area prior to dewatering efforts at that well is a clear indication that the wells are interacting across the one kilometer distance between the HZ01 and the HZ05, evidence of a large area of high permeability,” stated Michael R. McElwrath, CEO and President of Far East Energy. “Significant gas production potential normally accompanies areas of high gas content coupled with high permeability. The same permeability that allows water to flow from long distances to our wellbores should likewise allow gas to flow from long distances to our wellbores.”
Lowering of the reservoir pressure is critical to reaching the desorption pressure and achieving a gas saturation necessary to provide sustained gas production from the coal seam. Sections of the coal seam are already at the desorption pressure and additional dewatering of the coal seam will continue to expand the area exposed to the desorption pressure. At the present time, the HZ01, HZ03, HZ04 and HZ05 wells have small sustained gas flows. Far East Energy believes that with combined water production volumes of 800-1,000 barrels of water per day, the gas flow rate should continue to increase.
Extension Agreements. As previously announced, CUCBM has executed two- year extension agreements for the exploration period of each of the Far East Energy individual PSCs, subject to final approval of the Ministry of Commerce. Once finally approved by the Ministry of Commerce, the exploration periods of the Shouyang, Qinnan, and the Enhong-Laochang PSCs will be extended to June 30, 2009.
Qinnan Block. The vertical well data obtained in the fourth quarter of 2006 has been used to determine the location of the planned horizontal well in the No. 3 coal seam in the Qinnan Block. By June 1, 2007, Far East Energy plans to begin drilling a horizontal well in its Qinnan Block in the No. 3 coal seam. Like the Shouyang Block, the Qinnan Block contains approximately 500,000 acres or 2,000 square kilometers, and the Qinnan Block is located about 100 miles south of the Shouyang Block, near the West-East Pipeline to Shanghai. The company estimates that the total contract cost of the new well will be approximately $1.2 million, which continues a trend of declining well costs as Far East Energy pursues its development efforts.
Operations Update Webcast. Far East Energy plans to host a China operations update webcast with CEO and President Michael R. McElwrath later this quarter.
Far East Energy’s operations include the Shouyang and Qinnan Blocks, which are part of 1,057,650 acre (4,280 square kilometers) coalbed methane (CBM) project in Shanxi Province that Far East holds under farmouts from ConocoPhillips. Including its 264,863 acre (1,072 square kilometers) 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.
Contact: David Nahmias Far East Energy Investor Relations 901-218-7770 dnahmias@fareastenergy.com Warren Laird / Vice President Warren@ctaintegrated.com CTA Integrated Communications 303-665-4200
Far East Energy Corporation
CONTACT: David Nahmias, Far East Energy Investor Relations,+1-901-218-7770, dnahmias@fareastenergy.com; or Warren Laird, Vice Presidentof CTA Integrated Communications, +1-303-665-4200, Warren@ctaintegrated.com,for Far East Energy Corporation