Far East Energy, www.fareastenergy.com – the Houston, TX-based oil and gas developer, with satellite offices in Beijing, Kunming, and Taiyuan, which has a specific focus on coal bed methane (CBM) in China, announced the results today of an independent report on the Company’s 485k-acre Shouyang Block in Shanxi Province.
The report, which can be found on the Company’s website, was compiled by Netherland, Sewell & Associates, Inc. (NSAI) and is compliant with the 2007 Petroleum Resources Management System approved by the Society of Professional Engineers. The report contains a great deal of information and estimates (as of Dec. 31, 2010) that the three targeted coal seams at Shouyang have a NPV10 (net present value at 10% discount) Best Estimate of $738.3M (High Estimate of $1.46B, Low Estimate of $131.3M).
President and CEO of FEEC, Michael R. McElwrath, called the glowing report a clear indicator of the robust potential of the Shouyang Block, indicating that as development progresses and dewatering/production optimization ramps up, these figures will rise significantly and lead to the reclassification of some of these resources as reserves.
McElwrath explained that while the Company received payment under its gas sales agreement for gas at the end of 2010, proven reserves were not recognized in the FY10 financials due to the ongoing work on the gas system, testing and commissioning process. Every effort will be made by FEEC to provide updated reports on probable and possible gas reserves as 2011 progresses and McElwrath expressed high confidence that the Company would be recognizing proved gas reserves as appropriate in 2011.
With a strong cash position of $34M on hand, FEEC plans to accelerate drilling and has made preparations to fund the program out to the end of 2011. McElwrath further stipulated the Company’s aggressive strategy targeting as many as 250 wells in 2012 and 400 in 2013. Costs of this aggressive drilling strategy will be partially financed by incoming revenue from gas sales, as the Company will be in a prime position to deliver gas directly to the booming Chinese energy market, where soaring demand has created a seemingly limitless requirement for inputs.
The Company is also in ongoing negotiations to secure debt financing to extend its drilling program due to the soaring demand globally for oil, the prime Chinese market and the richness of the Shouyang, the true potential of which is becoming more and more apparent with each successive technical piece of analysis FEEC receives.
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