Far East Energy CBM Project
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Far East Energy has begun several
components of the work programs required under its Production Sharing
Contracts for its projects in Yunnan and in Shanxi Provinces, China.
Enhong No. 1 Well Stimulation -- Yunnan Province Project
Far East has hydraulically fractured the Enhong No. 1 well in the #9 and
#16 coal seams as part of the work program for Phase I of the Yunnan project.
Far East is presently flowing the #9 coal seam, with gas flowing to the
surface at a pressure of 30 psi. The #16 seam was stimulated separately from
the #9 coal seam, with the intention of commingling both zones after gathering
information on the #9 coal seam. Its current plan is to produce both zones
for at least three months. This test is designed to measure reservoir
permeability and pressure. Through this testing Far East will gain a greater
knowledge of the prospective coal seams that will be targeted for horizontal
drilling in the fourth quarter of 2005 in Yunnan Province.
Slim Holes Being Drilled in Yunnan Province Project
Far East has completed its first slim hole, designed to test the coal
seams in the Enhong Block, and has collected coal samples from the #9, #14,
#16 and #19 coal seams. These samples are currently undergoing lab analysis
for gas content, gas composition and coal composition.
The second slim hole is currently drilling and should be completed to a
depth of approximately 500 meters by the end of February 2005. Results of the
two slim holes will be used to assess the quality of the gas content and
further confirm the characteristics of the coal seams in the Yunnan Province
project in preparation for the drilling of a horizontal well in late 2005.
QN-002 Well Stimulation and Test -- Shanxi Province Project
Far East expects dewatering of the QN-002 well to be completed in late
March 2005. Far East has gathered information on the reservoir pressure and
permeability around the wellbore, and both permeability and pressure are in
the range it anticipated. Thus, when this test is completed, Far East will be
able to use that data in the next phase of drilling in its million-plus acre
Horizontal Drilling Plans for 2005 for Shanxi and Yunnan Province Projects
Far East has selected locations for the drilling of two horizontal wells
in Shanxi and one in Yunnan and is currently evaluating several companies that
bring state-of-the-art horizontal and underbalanced drilling technology to the
table. The overall drilling package will be assembled over the next few
Yunnan Project Work Obligation
On February 23, 2005, Far East elected to enter Phase Two of its
Production Sharing Contract for the Yunnan Province. In conjunction with the
work program for Phase Two, Far East expects to spud a horizontal well in the
Yunnan Province by November 2005.
Proceeds Raised to Provide Funds for Work Program
As previously announced, Far East has recently raised approximately
$12.2 million in gross proceeds in private equity placements and another
$1 million from the sale of leased acreage in Montana. These proceeds will be
applied toward the work plans for Far East Energy's projects in China for
"Now the real work begins," said Michael R. McElwrath, President and CEO
of Far East Energy. "With the necessary funding in the bank, we can embark
upon underbalanced horizontal drilling, which we believe holds the key to
unlocking the full potential of coalbed methane in China."