HOUSTON, Sept. 8 /CNW/ -- Far East Energy Corporation (OTC Bulletin
Board: FEEC) announced today that gas production in the Number 15 coal seam of
its 1H Pilot Area in the Shouyang Block of Shanxi Province, China continues to
rise. Far East also announced that preliminary results indicate that it may
have discovered a second coal seam capable of significant gas production.
Additionally, a parameter well some 7 kilometers distant from the 1H Pilot
Area has started producing gas from the Number 15 coal seam and shows promise
for production from the Number 9 seam.
Gas production in the 1H Pilot Area has now risen to over 300,000 cubic
feet, or 300 Mcf per day. Although fluctuating daily, overall gas production
has been increasing since January 1, 2009.
Additionally, Far East recompleted a well in the Number 9 coal seam in
the 1H Pilot Area on June 30th, and that well began producing gas from the
Number 9 coal seam on July 15, 2009. Production in that well has generally
ranged between 20 and 37 Mcf per day since late July.
The P2 parameter well, which was drilled to test the production
characteristics and potential of an area approximately seven kilometers away
from the 1H Pilot Area, recently started producing gas from the Number 15 coal
seam, the same seam that is highly permeable in the 1H Pilot Area and from
which most of the current production is derived. Moreover, core from the
Number 9 seam in the P2 parameter well has revealed very promising gas data.
"We reached critical desorption pressure in the Number 15 coal seam in a
portion of the Pilot Area earlier this year, and more and more wells are
beginning to produce," said Bob Hockert, Operations Manager of Far East
Energy. "This is the trend we have been waiting for. We currently have nine
wells that appear to meet the volumetric element of the Chinese reserves
standards, although some of the wells that have recently come on do not yet
meet the time requirement for length of sustained production at the required
volumes. That is up from four wells in April, and indicates that we are
achieving critical desorption pressure in an ever-increasing area."
"Furthermore," continued Hockert, "getting gas production so quickly
after recompleting a well in the 1H Pilot Area in the Number 9 coal seam gives
us reason to hope that the Number 9 seam is nearly saturated and will give us
two seams to target for production in our wells. And if the Number 15 seam
and the Number 9 seam should prove to be productive some seven kilometers away
from our current pilot area, that will be quite exciting."
Due to the quantity of gas being produced in the field, Far East has
begun discussions with its Chinese partner, China United Coalbed Methane Co.
Ltd. (CUCBM), regarding a gas marketing agreement that would allow Far East to
jointly market its gas with CUCBM through a gas sales facility. Far East
believes that any initial gas sales facility would be a compressed natural gas
(CNG) facility and would likely have a potential capacity to process 1 to 3
million cubic feet of gas per day. "We plan to begin negotiations for this
facility after completing discussions with CUCBM for the marketing agreement,
and believe we will begin gas sales in the last half of 2010," stated Phil
Christian, COO of Far East Energy.
In April 2009, Far East completed drilling and coring of the P2 parameter
well. Parameter wells are wells drilled at some distance from the current
pilot area with the objective of determining whether these distant areas also
look prospective. The P2 parameter well is located nearly seven kilometers
west of the 1H Pilot Area. Core analysis of the #9 coal seam in this well
indicates that the coal seam is almost completely saturated at this location
with a gas content of approximately 450 standard cubic feet per ton (scf/ton).
The #15 coal seam has a gas content of approximately 490 scf/ton and is 75 to
80% gas saturated. A saturated coal seam, such as the #9 coal seam appears to
be in this area, contains the maximum amount of gas that can exist in the coal
based upon the reservoir temperature and pressure. In a saturated condition,
the coal seam does not need to be dewatered to begin producing gas. This
eliminates much of the delay in the start of gas production that is associated
It was on the basis of these encouraging results that, in late June 2009,
Far East recompleted the existing 4H well in the 1H Pilot Area to the Number 9
coal seam and began production testing. Gas began to flow from the #9 coal
seam within fifteen days of the commencement of production testing. This
seems to indicate that the #9 coal seam is very close to being saturated in
both the P2 parameter well area and in the 1H Pilot Area. Thus, the #9 coal
seam is a completion and production target in nearly all of the 1H Pilot Area
wells and in the area surrounding the P2 parameter well.
Production testing of the #15 coal seam in the P2 parameter well began in
July 2009. The well has been on continuous water production since that time
and recently began producing gas. As this well is nearly seven kilometers
away from the existing 1H Pilot Area, achieving gas production in such a short
period of time (i.e. less than 60 days) at this location seems to confirm the
high gas saturation of the Number 15 coal seam in the area. Far East now
plans to recomplete in the Number 9 seam in the P2 area in hopes of
determining that both seams are prospective in the P2 parameter well area as
well as in the IH Pilot Area.
The work plan for the remainder of 2009 has not been completed at this
time. However, Far East anticipates that the work plan when completed will
include additional testing of the #9 coal seam as well as a recompletion of
another 1H Pilot Area well to the #3 coal seam to further testing of
additional coal seams. We believe, based on a short flow test of an offset
well in the 1H Pilot Area, that drainage of water due to a local mining
activity may have liberated significant volumes of gas in the #3 coal seam in
the 1H Pilot Area.
"We have now been producing significant volumes of water continuously
since September of 2008, with positive results being seen since December 2008
and gas is being produced in more wells than at any point in the history of
this development ," said Michael R. McElwrath, CEO and President of Far East.
He continued, "As the #15 coal seam gas production appears to be moving in the
anticipated direction, we have elected to pursue additional uphole completion
opportunities in this 1H area. This allows for cheaper prospecting of the
reserve potential in this area without giving up the data gathering needed in
the #15 coal seam. This prospecting in the Shouyang PSC includes the #3 and
the #9 coal seams. We have recently completed one well to the #9 coal seam
and discovered that this coal seam is nearly saturated and appears to have
good production characteristics. Additional testing for the #3 coal seam is
planned due to reported gas production from the local mine. For obvious
reasons, with gas now flowing from the Pilot Area, we are anxious to determine
whether our area of high permeability and high gas content extends across a
broad swath of the Shouyang Block."
About 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: the gas produced
at our wells may not increase to commercially viable quantities or may
decrease; certain of the proposed transactions with Arrow 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 Arrow may not be realized; the final amounts received by us from Arrow
may be different than anticipated; Chinese Ministry of Commerce (MOFCOM) may
not approve the extensions of the Qinnan Production Sharing Contract (Qinnan
PSC) on a timely basis or at all; PetroChina or MOFCOM may require certain
changes to the terms and conditions of the Qinnan PSC in conjunction with
their approval of any extension; our lack of operating history; limited and
potentially inadequate management of our cash resources; risk and
uncertainties associated with exploration, development and production of CBM;
expropriation and other risks associated with foreign operations; disruptions
in capital markets effecting 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 Annual Report on Form 10-K for 2008 and subsequent filings with the
Securities and Exchange Commission.
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