Far East Energy Corporation (OTCBB:FEEC) announced today that it has commenced the drilling of its HZ08V well, in its Shouyang Block in Shanxi Province, China. Like its predecessors, this well will be completed in the Number 15 coal seam, and it will be the fifth vertical well to be stimulated by cavitating the targeted coal seam with air. All wells drilled have revealed strong gas content and high permeability.
Accelerated Drilling Program: Based upon these results, Far East has determined to enter into a contract with Beijing China Coal Dadi Technology Development Company (Dadi) to drill an additional seven (7) wells in a pattern that represents an orderly progression of the field in a westerly direction. Far East will contract for a second drilling rig from Dadi so that it can drill two wells in this pattern simultaneously.
"While the ramp-up of production to commercial gas volumes is taking longer than expected (production for the past ninety days has ranged from approximately 30 to 100 mcf per day), our data indicates we have made significant progress toward the level of critical desorption pressure. Therefore, we are accelerating the pace of drilling, and that should hasten the onset of significant gas production while beginning the westward expansion of our field," said Michael R. McElwrath, CEO and President of Far East.
Given the high permeability of the coal in this area of the Shouyang Block, the Company believes that vertical wells have the potential to be a very cost-effective approach to development of this field. The new wells may form the foundation for a Pilot Development Work Program ("PDWP"), which is the first official step in the development program for the Block under the terms of the Company's Production Sharing Contract. Far East intends to complete most of these wells via air-based cavitation, but intends to stimulate at least two of these wells with a water-based fracture treatment. The expected drilling cost of the seven wells is approximately $2.5 million, reflecting a positive trend of lower costs per well.
Exploration Wells in New Areas: In addition, Far East confirmed plans to drill five exploratory wells at four to six kilometer intervals across the northern section of the Shouyang Block to expand its database of geologic information about the multiple prospective coal seams on the block. Each of these wells will be cored and production tested, with the goal to identify additional acreage that is prospective for subsequent pattern drilling programs.
"We are very hopeful that some or all of these exploratory wells will reveal high gas content associated with high permeability, similar to that discovered in the area of our current wells," said McElwrath. "If so, we may have a field of very significant size."
Far East Energy Corporation
Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy Corporation is focused on CBM exploration and development in China 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 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, 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; anticipated pipeline construction and transportation of gas; 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.
