HOUSTON, April 6, 2011 /CNW/ -- Far East Energy Corporation (OTC BB: FEEC) today announced the results of an independent report by Netherland, Sewell & Associates, Inc. (NSAI) evaluating, as of December 31, 2010, the contingent gas resources and Net Present Value at 10% Discount ("NPV10") of the net contingent cash flow for the three target coal seams in Far East Energy's 485,000 acre (1960 square kilometers) Shouyang Block, situated in Shanxi Province, China.
The report gives a Best Estimate of NPV10 of $738.3 million, and a High Estimate of $1.46 billion, net to Far East.
"Obviously, this is a very strong report, and one with which we are well pleased," said Michael R. McElwrath, CEO and President of Far East. "These estimates highlight the robust economic potential of the Block. And, it is important to note that we hope and believe that these numbers are just the beginning, as meaningful improvements in well-by-well gas rates and sustainability - which we certainly expect as we further develop, dewater, and optimize production - should have the impact of increasing these estimates, as well as reclassifying some of these resources as reserves."
McElwrath continued, "This report includes only our interest in the Contingent Resources and, of course, does not constitute a reserves report. While, under the terms of our gas sales agreement, we received payment for gas at year-end 2010, we did not flow gas through the system until mid-January, and even then that was frequently interrupted as we worked out the bugs in the gathering system during the testing and commissioning process. That lack of gas flow at year-end and our anticipation of frequent interruptions as testing and commissioning occurred, led us to decide that under the applicable rules we did not have a sufficiently completed gas sales system functioning as of year-end to recognize proven gas reserves in our December 31, 2010 financials. We will recognize proved gas reserves as appropriate in 2011, and will also provide a report indicating the probable and possible gas reserves at that time."
McElwrath continued, "With our current cash balance of $34 million, we will again accelerate the pace of our drilling program, and drilling should be funded until approximately the end of 2011. Additionally, we are also targeting a total of 200 to 250 wells in 2012, and 300 to 400 in 2013. Of course, the costs of these accelerated outyear drilling programs will be partially offset by growing revenues from gas sales, and discussions are underway with several international banks and other institutions for debt financing. Shouyang's potential becomes more apparent with each successive independent analysis that we receive, and we will proceed apace to realize the value of the underlying resource."
Far East also announced that it is taking steps to attempt to list its stock on a major securities exchange and more information regarding the potential listing will be provided as it becomes available.
The full text of the NSAI report, gives a Low Estimate of NPV10 of $131.3 million, a Best Estimate of $738.3 million, and a High Estimate of $1.46 billion, and contains further information and qualifications. It may be found on the website of Far East Energy at www.fareastenergy.com. Contingent resources do not constitute SEC reserves and are defined as those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from known accumulations, but for which the applied project is not yet considered mature enough for commercial development because of one or more contingencies. The estimates in the NSAI report were prepared in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Professional Engineers. The resources shown in the NSAI report are estimates only and should not be construed as exact quantities. Readers are urged to read the report in its entirety.
Yunnan: Far East also announced that gas is now being produced in limited quantities from its 264,863 acre (1,072 square kilometers) project in Yunnan Province. Gas content measurements are very high at 500-700 scf/ton.
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.
Netherland, Sewell & Associates
Netherland, Sewell & Associates, Inc. provides integrated consulting services encompassing geophysics, geology, petrophysics, engineering, reservoir modeling and economics. NSAI has performed geophysical, geologic and engineering studies of reservoirs around the globe - from the North Sea to South America, from the North Slope to South Florida, and from West Africa to the Middle East and Indonesia - for leading major integrated petroleum companies, both small and large independent oil and gas companies, and various financial institutions and government agencies. For more information about NSAI, please visit their website at www.netherlandsewell.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: there can be no assurance as to the volume of gas that is ultimately produced or sold from our wells; 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 China United Coalbed Methane Corporation, Ltd., to which we are an express beneficiary; 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; certain of the proposed transactions with Dart Energy (formerly Arrow Energy) 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 Dart Energy may not be realized; the final amounts received by us from Dart Energy may be different than anticipated; Dart Energy may exercise its right to terminate the Farmout Agreement at any time; the Chinese Ministry of Commerce ("MOC") may not approve the extension of our PSCs on a timely basis or at all; our Chinese partner companies or the MOC may require certain changes to the terms and conditions of our PSC in conjunction with their approval of any extension of our PSCs; 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 2010 Annual Report and subsequent filings with the Securities and Exchange Commission.
SOURCE Far East Energy Corporation
For further information: Investor Relations, +1-281-606-1600, Investorrelations@fareastenergy.com, Bruce Huff, +1-832-598-0470, firstname.lastname@example.org, Catherine Gay, +1-832-598-0470, email@example.com, all of Far East Energy Corporation Web Site: http://www.fareastenergy.com http://www.netherlandsewell.com