HOUSTON, November 17, 2011 /PRNewswire/ --
Far East Energy Corporation (OTCBB:FEEC) announced today the signing of a Modification Agreement extending the exploration period of its Shouyang Block Production Sharing Contract. The Modification Agreement signed by Far East Energy Bermuda 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 (PRC) for formal approval.
Commenting on the successful conclusion of the Modification Agreement, Wu Weifeng, President of CUCBM stated, "Far East Energy has long been one of our best and most diligent foreign partners, and we are very pleased to continue our strong working relationship with them. CUCBM is now fifty percent owned by CNOOC, one of China's largest international oil companies, and CNOOC has recently announced a strong focus on unconventional resources such as coalbed methane and shale gas as key elements of its growth strategy. This extension and Modification Agreement provides not only for our ongoing cooperation with Far East in the Shouyang CBM Project, but also may present possibilities for CUCBM and Far East to pursue shale gas and other unconventional gas opportunities, as well as new coalbed methane opportunities."
Michael McElwrath, CEO and President of Far East Energy Corporation, commented, "CUCBM has pioneered coalbed methane exploration in China. It has been an exceptional partner through the years and, with CNOOC's backing, is now becoming even more supportive as it opens a new chapter in CBM development in China." McElwrath continued, "We are very happy to secure this extension and are very pleased with the terms of the Modification Agreement. Far East can now proceed apace with its efforts to finalize pilot testing and seek to convert portions of the Shouyang Block into the development and production phases. Recent step-out exploration wells have revealed a broad expanse of high permeability areas, and with the extension, all the key pieces are now in place to pursue stepwise expansion across the block."
Under the terms of the Modification Agreement, when final MofCom approval is received, Far East will relinquish approximately 306.5 square kilometers (approximately 75,737.80 acres) of the Shouyang Block, leaving a balance of approximately 1656.5 square kilometers (approximately 411,554 acres), or 84% of the original acreage, still covered by the Shouyang Production Sharing Contract. Portions of the acreage to be relinquished are considered to be marginal or non-prospective.
An area of approximately 100 square kilometers (24,710.54 acres) is currently pending reserves certification by the Chinese authorities, and encompasses the 1-H Pilot Area as well as some nearby step-out exploration or parameter wells. This pending Chinese reserves area constitutes the basis of a potential Overall Development Plan area, within which CUCBM and Far East would normally be entitled to share in development with CUCBM being able to claim up to a 30% participating interest, and Far East retaining the balance. Approximately 35 square kilometers (8,648.69 acres) out of the 306.5 square kilometers (75,737.80 acres) being relinquished is part of this pending Chinese reserves area. In return for Far East relinquishing its interest in this area, CUCBM has agreed that Far East can retain a 100% participating interest in the remaining pending reserves area of approximately 65 square kilometers (approximately 16,061.85 acres), including all of the wells in the 1-H pilot Area.
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, 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; 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 China United Coalbed Methane Corporation, Ltd., 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 2010 Annual Report and subsequent filings with the Securities and Exchange Commission.
SOURCE Far East Energy Corporation