Far East Energy Announces Signing of Extension Agreement for Yunnan Coalbed Methane Production Sharing Contract

HOUSTON, Jan. 9, 2012 /CNW/ -Far East Energy Corporation (OTCBB:FEEC) announced today the signing of a Modification Agreement extending the exploration period of its Production Sharing Contract in Yunnan Province.  The Modification Agreement signed by Far East Energy (Bermuda), Ltd. (Far East Energy) and China United Coal Bed Methane Corporation (CUCBM) will now be forwarded to the Ministry of Commerce (MofCom) of the People's Republic of China for formal approval.

Under the terms of the Modification Agreement between Far East Energy and CUCBM, Far East will relinquish the Enhong Block while retaining the 483 square kilometer (119,340 acres) Laochang Block, which it considers to hold much greater potential.  Far East has drilled eleven wells in the Laochang Block, compared to three in the Enhong Block, and large portions of Enhong were considered to be marginal or non-prospective.

Commenting on the successful conclusion of the Modification Agreement, Michael McElwrath, CEO and President of Far East Energy Corporation, stated, "This is an excellent resolution for Yunnan.  For the past several years, as we focused our attention on validating Shouyang as the premier, or one of the premier CBM Blocks in China, due to its uniquely high permeability and pipeline access, we have endeavored to determine the potential of our Yunnan blocks.  After reviewing the results of the three exploration wells in the Enhong Block and eleven in the Laochang Block, as well as considering the very difficult topography in Enhong, we have concluded that the Laochang Block has superior potential, and have elected to focus all Yunnan activities there."

McElwrath continued, "Over the space of the last two weeks, China has unveiled a goal to triple CBM production by 2015; has declared that it will further liberalize well-head prices for CBM; and has stated that it is also discussing increasing CBM subsidies for producers from the current level of 0.2 yuan up to 0.5 yuan per cubic meter, which, if enacted, would increase the total for which gas produced by Far East may be sold to approximately $7.85, inclusive of government subsidies.  Just at this point in time, Far East has signed these extensions for Shouyang and Yunnan and is ideally positioned to capitalize on the increasing emphasis upon unconventional gas in China."

Far East Energy Corporation

Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy Corporation is focused on coalbed methane exploration and development in China.

Statements contained in this press release that state the intentions, hopes, estimates, 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; there can be no assurance as to the volume of gas that is ultimately produced or sold from our wells; the fracture stimulation program may not be successful in increasing gas volumes; 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 CUCBM, to which we are an express beneficiary; additional wells may not be drilled, or if drilled may not be timely; additional 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; the pipeline and local distribution/compressed natural gas companies may decline to purchase or take our gas, or we may not be able to enforce our rights under definitive agreements with pipelines; conflicts with coal mining operations or coordination of our exploration and production activities with mining activities could adversely impact or add significant costs to our operations; MofCom may not approve the Modification Agreement on a timely basis or at all, or, if so, on commercially advantageous terms; our Chinese partner companies or MofCom may require certain changes to the terms and conditions of the Modification Agreement or our PSCs in conjunction with their approval, including reductions in acreage or a reduction in the term of the extension for the exploration period; our lack of operating history; limited and potentially inadequate management of our cash resources; risk and uncertainties associated with exploration, development and production of coalbed methane; proved reserves may not be reported in a timely manner or at all and, if reported, may be smaller than anticipated; our inability to extract or sell all or a substantial portion of our estimated Contingent Resources; we may not satisfy requirements for listing our securities on a securities exchange; 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 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and subsequent filings with the Securities and Exchange Commission.


SOURCE Far East Energy Corporation

For further information:

Investor Relations, Far East Energy Corporation, +1-281-606-1600, Investorrelations@fareastenergy.com, or Bruce Huff, +1-832-598-0470, bhuff@fareastenergy.com, or Catherine Gay, cgay@fareastenergy.com, both of Far East Energy Corporation


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