Far East Energy Closes Financing for China Operations

Far East Energy has received total gross proceeds of $10.25 million in a private placement of shares of its common stock with investors located outside the United States. The Company intends to use the proceeds to finance a portion of its operations in China, including planned horizontal drilling for coalbed methane in 2005, and for working capital purposes.

The Company issued, at a price of $1.60 per unit, a total of 6,406,250 units. Each unit consisted of two shares of common stock and one warrant with a term of three years and an exercise price of $2.50 per share, for a total of 12,812,500 shares of common stock and 6,406,250 warrants. The Company will pay commissions of $820,000 and will issue placement agent warrants to purchase 1,537,500 shares of common stock in connection with this transaction.

The securities have not been registered under the Securities Act of 1933 or under any state securities laws, and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer, offer to sell, or solicitation of an offer to buy any securities in any jurisdiction in which such offering, solicitation or sale would be unlawful.

Based in Houston, Texas, with offices in Beijing and Kunming, China, Far East Energy is focused on the acquisition of, and exploration for, coalbed methane through its agreements with ConocoPhillips and China United Coalbed Methane Company (CUCBM).