HOUSTON, March 18, 2013 /PRNewswire/ -- Far East Energy Corporation (OTCBB: FEEC) announced today that its 2013 Shouyang Block drilling campaign is underway, now that the Chinese National Lunar New Year holiday has ended and as weather conditions improve in Shanxi Province.
Two drilling rigs are already operating on location in the Shouyang Block and additional rigs have been mobilized and are expected to begin drilling operations within the next three weeks.
The 2013 drilling program is initially targeted at (i) drilling 70 wells in the core 1H Pilot Production Area to accelerate the drive toward rising gas production and sales levels; and, (ii) an additional 25 appraisal wells across the block, in an effort to further identify the most prospective undeveloped sections of the block.
CEO Michael R. McElwrath stated "Far East has started 2013 in great shape and now has the funding in place to carry out a comprehensive drilling program on the Shouyang Block. We have rigs already in place and, as weather conditions improve, more rigs will be added; in fact, our contractors are already moving new rigs onto the block."With the Chinese Ministry of Land and Resources (MLR) having certified the Company's coalbed methane (CBM) resources as to its core 99.8 km 2 acreage under the Shouyang PSC (in June 2012); the Company is now in the process of preparing the overall development plan (ODP) application for submission. The ODP application is expected to be submitted early in the second half of 2013. The Company has also released its YE 2012 results, with the filing of its Form 10-K, which reveal an 85% increase in gas sales volumes in 2012 compared to 2011, as more wells were connected to the gas gathering, compression and transmission system. The 2012 total sales volume net to Far East was 260,424 Mcf. The Company receives an average price of $6.43/Mcf of gas sold, including the various government and provincial subsidies. The YE 2012 results also include an updated and revised Reserves report (to SEC standards) prepared by the independent consulting firm, RISC Advisory Consultants. This report stated year-end December 2012 net proved reserves of 51.3 MMscf and net probable reserves at 392.4 MMscf. The standardized measure of discounted future net cash flows for proved oil and gas reserves and the NPV10% valuation for proved reserves is $40.4 million, while the combined 2P (proved and probable) NPV10% valuation for these reserves is $816.1 million. Adding in the NPV10% value of the possible reserves would take the total 3P value to $1.2 billion. Mike McElwrath continued "The Company's fracing operations and tying in wells to the gathering system have yielded a significant increase in gas sales during 2012 compared to 2011, despite only limited well drilling activity due to the funding delay related to our late Chinese Ministry of Commerce approval. I believe that the revised and updated RISC valuation for the Company's interest in the Shouyang Block underlines the value of the Company's Shouyang Block CBM gas resource. We look forward to a strong operating year on the Shouyang Block project." Additional Information Regarding Estimates of Reserves NPV10% and the standardized measure of discounted future net cash flows do not purport to be, nor should they be interpreted to present, the fair value of the coalbed methane reserves of the Shouyang project. An estimate of fair value would take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties, and consideration of expected future economic and operating conditions.