HOUSTON, June 19, 2012 /CNW/ - Far East Energy Corporation (OTCBB:FEEC) announced today that its Modification Agreement extending the exploration period of its Production Sharing Contract for the Enhong and Laochang Area in Yunnan Province has received formal approval from the Ministry of Commerce (MofCom) of the People's Republic of China (PRC).
Michael R. McElwrath, CEO and President, said, "We are delighted to have received news of MofCom's approval of the Modification Agreement covering our CBM project in Yunnan. We now look forward to MofCom approval of the Modification Agreement covering our important Shouyang PSC, in Shanxi Province, which was also previously agreed to with CUCBM late last year."
Under the terms of the Modification Agreement between Far East Energy (Bermuda), Ltd. and China United Coalbed Methane Corporation (CUCBM), Far East will relinquish the Enhong Block while retaining the right to continue to explore approximately 483 square kilometer (approximately 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 only three in the Enhong Block, and large portions of Enhong were considered to be marginal or non-prospective. The extension moves the end of the exploration period to December 31, 2013.
McElwrath had previously 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 value 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."
Far East Energy Corporation
Based in Houston, Texas, with offices in Beijing, 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; the Chinese Ministry of Commerce ("MofCom") may not approve the Modification Agreement to the Shouyang PSC (the "Modification Agreement") on a timely basis or at all, or, if so, on commercially advantageous terms; MofCom's failure to approve the extension of the Modification Agreement by August 30, 2012 could limit our ability to borrow additional amounts under the credit facility absent a waiver from Standard Chartered Bank; MofCom's failure to approve the extension of the Modification Agreement by August 30, 2012 could result in the early termination of the credit facility and require immediate repayment of all outstanding amounts thereunder; our inability to comply with certain quarterly financial covenants, periodic information requirements (including periodic updates on strategic transactions, refinancing plans and the status of MofCom approval), satisfy certain continuing representations, or remedy a material adverse effect to our business or to certain other conditions could result in an early termination of the credit facility and require immediate repayment of all outstanding amounts thereunder; our Chinese partner companies or MofCom may require certain changes to the terms and conditions of the Modification Agreement 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; our inability to extract or sell all or a substantial portion of our reserves and other resources; we may not satisfy requirements for the listing of 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. Statements contained in this press release speak only as of the date hereof. We assume no obligation to update any of these statements.
SOURCE Far East Energy Corporation
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