Far East Energy Ramps Up Production at Shouyang Block

Shouyang Block
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Far East Energy announced that gas production from its Shouyang Block in Shanxi Province, China, has surpassed 750 Mcf per day. After drilling additional wells and a successful 11-well fracture stimulation program during April 2010, the Company has seen a significant increase in gas production. The 20D well, located in the center of Far East's pattern of wells, is currently producing above 160 Mcf per day; and the 17D well, also in the central part of the pattern, is above 90 Mcf per day. A second fracture program of 7 to 8 wells is now underway. The Company is presently drilling and/or completing 5 new wells in the 1H Pilot Area, and further production increases are expected.

"We are pleased to see the interior wells responding to the extension of the pattern as new wells are drilled," said Garry Ward, Senior Vice President of Engineering. "This is an indication that we are seeing the classic production reactions of a high permeability field. You first dewater for an adequate period to lower the pressure in the field sufficiently to allow the gas to release. This reaction began to occur with rapid production increases last December. Then, as more wells are added to the edges of the pattern, they have a further positive effect of dewatering and further lowering the pressure in the entire area of the pattern. The wells in the center of the pattern generally receive optimal benefits from the dewatering of all the wells around them, and therefore, it is expected that their production will steadily increase as additional wells are added. We believe, that is what we are seeing with the 20D and the 17D wells."

Seven additional step-out or parameter wells are planned to be drilled in the next three months to continue testing the #3, #9 and #15 coal seams all the way to the eastern and western boundaries of the Shouyang Block. These seven wells will be in addition to five parameter wells that have already been drilled at intervals of several kilometers from the 1H Pilot Area to test the extent of high permeability and high gas content in the northern portion of the Shouyang Block. Early testing of the P4 and P5 parameter wells has shown good permeability, which is also true with the other parameter wells the Company has drilled and stimulated reaching out from the 1H Pilot Area. The P3 parameter well is already producing in excess of 70 Mcf per day, and the P4 is above 60 Mcf per day.

Mr. Ward commented, "It is encouraging that these wells should be producing at this rate so quickly. The results of the other seven parameter wells are expected by the third quarter."

"This report is exciting for the Company since it tracks well with our expectations for production increases as we bring more wells on line, and since some of the interior wells are beginning to give us the type of superior gas volumes that are anticipated in a high permeability area," said Michael R. McElwrath, CEO and President of Far East Energy."


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