Far East Energy All Smiles over 'Highly Prospective' Shouyang Block

Far East Energy announced positive test results from three more appraisal wells located at significant distances from the 1H Pilot Area in the Company's Shouyang Block, continuing a series of successful appraisal wells that have revealed much of the block to be highly prospective.

SYS-05 Appraisal Well

The SYS-05 appraisal well was drilled in the southeast portion of the Company's Shouyang Block and is located approximately 19 miles (35 kilometers) south southeast of the 1H pilot area (the 1H Pilot Area is located near the midpoint of the northern boundary of the block). Final test results reveal the SYS-05 to have higher gas content than any well drilled by the Company to date in the Shouyang Block, testing at a final average of 935 scf per ton (dry ash free), which is extraordinarily high gas content. The well is currently producing 77 Mcf (2180m3) per day, after peaking at 103 Mcf (2915m3) per day, with the production rate being held back to ensure a steady rate of production is maintained to satisfy Chinese reserves requirements which require production averaging 70 Mcf (2000m3) per day for 90 consecutive days. The total vertical depth is 4501 feet (1372 meters), and the #15 coal seam is 21 feet (6.4 meters) thick at this location.

P18 Appraisal Well

The P18 appraisal well, located in the eastern part of the Shouyang Block is approximately 13.67 miles (22 kilometers) east southeast of the 1H Pilot Area, and recently began producing gas. This well peaked at over 100 Mcf (2831m3) per day and tested at a rate of over 80 Mcf (2265m3) per day for a ten day period with a surface flowing pressure of 40 psi. The well is currently producing about 1132m3 (40 Mcf) per day. The top of the #15 coal at this location is at a depth of approximately 3510 feet (1070 meters) and the #15 coal seam is 12.63 feet (3.85 meters) thick at this location. Preliminary measured gas content for the P18 is estimated at 660 scf per ton (dry ash free). Permeability calculations have not been completed, but it is believed that this well may demonstrate the presence of good permeability at the eastern boundary of the block.

SYS-02 Appraisal Well

The SYS-02 appraisal well, located nearly 12 miles (20 kilometers) due south of the 1H Pilot Area has been producing since May 2011. Its depth is approximately 4180 feet (1274 meters). The gas content of the #15 coal at this location was measured at 635 scf per ton (dry ash free), which is very high gas content, and the permeability is estimated to exceed 100 millidarcies. This is unusually high permeability for coal at this depth.

Commenting on the appraisal wells and test results, Michael R. McElwrath, CEO and President of Far East Energy, stated, "This now makes 17 out of 18 appraisal wells, drilled all over the Shouyang Block, that have confirmed very high gas content and strong potential. Of these, 15 wells have tested to have high permeability, with permeability not yet determined for the P18 and SYS-05. The news on the SYS-02 is exceptional, as we have now demonstrated high permeability in the #15 coal seam even at a depth of 4180 feet (1274 meters) which is far higher permeability than we expected. This holds open the possibility that the preponderance of the block will demonstrate world class gas content and permeability. The SYS-05 appears to be even more exciting, as its sustained production rate is impressive for a stand-alone appraisal well, and its gas content would be exceptional in virtually any CBM play in the world. We are quite excited with the recent positive results that these far-reach appraisal wells have shown, and we look forward to drilling additional wells that we believe will result in a significant amount of additional contingent resources for our Shouyang Block as we seek to optimize valuation."