FAR EAST ENERGY ANNOUNCES EARLY GAS FROM FIRST HORIZONTAL WELL
Houston, Texas – May 31, 2006 – Far East Energy Corporation (OTC BB:FEEC) announced that it has successfully achieved continuous gas flow in its first horizontal well in the Shouyang Block (FCC HZ01) of its project in Shanxi Province, China. At this early stage, the volume being produced is still small and the data obtained is not yet sufficient to be able to project peak gas production.
“We have attained a significant milestone with gas being desorbed from the coal,” stated Michael McElwrath, CEO and President of Far East Energy. “We have been very pleased with the dewatering of the HZ01 well because our initial well data evidences that the permeability of the #15 coal seam is much higher than we had anticipated. This high permeability and our desire to build a grouping of wells for production purposes are precisely why we located our third horizontal well, the FCC HZ03, in very close proximity to the HZ01.”
In coalbed methane production water must be produced before the pressure in the coal seam drops sufficiently to allow gas to release (desorb) and begin to flow. Water production from the HZ01 was higher than projected, but numerous water analyses and data from an observation well 400 feet from the HZ01 indicated that the produced water in the HZ01 was not from an extraneous source, and that the water level was being lowered, thus reducing the pressure in the coal seam. The higher water production is considered to be a positive indication of higher than anticipated permeability in the coal. Permeability measures the ease with which a gas or liquid can flow through rock or a similar medium, and the greater the permeability the easier it is for gas to flow through the coal.
“This information is very significant as it could suggest both a higher volume of total gas production over the economic life of the well, as well as a more rapid rate of production in the early years,” said Garry Ward, Senior Vice President Engineering.
As previously disclosed, in April 2006, Far East Energy began drilling its third horizontal well (FCC HZ03) in the Shouyang Block of its Shanxi Province project in China. The Company chose to drill the FCC HZ03 well adjacent to the HZ01 well because of the high permeability observed in the HZ01. This made the area around the HZ01 the preferred locale for the establishment of a large gas drainage pattern and gas production unit. The Company has now completed drilling a short-radius horizontal well with approximately 1075 feet in the targeted #15 seam, and Far East is preparing to begin dewatering. The belief that the high permeability in the coal seam makes significant production possible with shorter horizontal laterals, as well as difficulties encountered while drilling, led to the conclusion that the well should be completed to 1,075 feet.
The Shouyang Block is part of the 4,280 square kilometer (1,057,650 acres) coalbed methane (CBM) project in Shanxi Province that Far East holds under farmouts from ConocoPhillips. Including its 1073 square kilometer project in Yunnan Province, the coalbed methane concessions of Far East Energy contain a land mass slightly larger than the State of Delaware.
Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy Corporation is focused on the acquisition of, and exploration for, coalbed methane through its agreements with ConocoPhillips and China United Coalbed Methane Company, Ltd. (CUCBM).
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 1993, 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 and commercial viability of the wells; risk and uncertainties associated with exploration, development and production of oil and gas; drilling and production risks; our lack of operating history; limited and potentially inadequate cash resources; expropriation and other risks associated with foreign operations; matters affecting the oil and gas industry generally; lack of availability of oil and gas field goods and services; environmental risks; changes in laws or regulations affecting our operations, as well as other risks described in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission.
