HOUSTON, April 1, 2014 /PRNewswire/ -- Far East Energy
Corporation (OTCBB:FEEC), the U.S. listed company that operates
the Shouyang Block Coalbed Methane (CBM) Production Sharing
Contract (PSC) in Shanxi Province,
People's Republic of China is
pleased to announce that the maturity date of the existing bridge
facility with Standard Chartered Bank (SCB) has been extended to
July 15, 2014, from the previous date
of April 15, 2014.
In connection with the release of its 2013 results, the Company
announced the results of its updated SEC reserve report prepared by
the independent petroleum engineers, Resource Investment Strategy
Consultants ("RISC"). As of December 31,
2013, the Company had estimated net proved gas reserves of
67.5 billion cubic feet ("Bcf"), an increase of 32% over last
year's net proved gas reserves of 51.3 Bcf. This increase reflects
the results of the 2013 drilling program, specifically in the 1H
Pilot Area, which is the core gas production zone for the Company
and, hence, provides the ability to upgrade reserves to the Proved
from the Probable category. The increased reserve figures, together
with the higher gas prices now being received (2014 price of
approximately $9 per thousand cubic
feet) have combined to drive an increase in the value of the block.
The net present value of future cash flows discounted at 10%
("NPV10") for the Proved and Probable (2P) reserves is now
$1.4 billion (up 73% compared to the
same period last year).
Commenting, CEO Mike McElwrath
said, "It is gratifying that the work that went in on the Shouyang
Block during 2013 has resulted in a significant increase to SEC
Proved reserves. I think it's also important to remember that these
reserves are still based on the evaluation of only a portion of the
block, which implies significant upside potential for our
reserves."
As a result of the 2013 drilling and fracing program, gas
production from Shouyang has risen significantly in recent months.
During the first quarter of 2014, FEEC produced a total of
175.5MMcf of gas, up 96% compared to the same period in 2013.
The 2013 Form 10-K has been filed with the SEC, is available on
our web site, and includes the following relating to our
reserves:
The Year End 2013 Reserve Report prepared by RISC, evaluates, as
of December 31, 2013, the estimated
proved, probable and possible coalbed methane gas reserves
attributable to the three (3) target coal seams (#3, #9 and #15) in
Far East Energy's Shouyang Block, Shanxi
Province, PRC.
The reserve estimates have been prepared in accordance with
definitions and regulations of the U.S. Securities and Exchange
Commission (SEC) and the FASB Accounting Standards Codification
Topic 932, Extractive Industries-Oil and Gas with the exclusion of
future income tax and Chinese VAT. RISC's estimates of Proved,
Probable and Possible follow:
|
Net
Reserves
|
Future Net Revenue $ Million
|
Category
|
MMscf
|
Undiscounted
|
10% Discount
|
Total Proved
|
67,501
|
343.5
|
167.3
|
Total Probable
|
372,418
|
2,254.8
|
1,242.9
|
Total Possible
|
109,378
|
873.3
|
563.1
|
Notes:
- Totals may differ due to rounding
- Gas volumes are expressed in units of million standard cubic
feet at reference conditions of 60 degrees F and 14.697
psia
- Net Gas Reserves are net of CUCBM participating interest and
COP revenue interest
|
The standardized measure of discounted future net cash flows for
proved oil and gas reserves is $151.8
million and the NPV10 valuation for proved reserves is
$167.3 million, while the combined 2P
(proved and probable) NPV10 valuation for these reserves is
$1.4 billion. Adding in the NPV10
value of the possible reserves would take the total 3P value to
$2.0 billion.
Additional Information Regarding Estimates of
Reserves
NPV10 and the standardized measure of discounted future net cash
flows do not purport to be, nor should they be interpreted to
present, the fair value of the coalbed methane reserves of the
Shouyang project. An estimate of fair value would take into
account, among other things, the recovery of reserves not presently
classified as proved, the value of unproved properties, and
consideration of expected future economic and operating
conditions.
Estimated future production of Proved Reserves and estimated
future production and development costs of Proved Reserves are
based on current costs and economic conditions. Future income tax
expenses are computed using the appropriate year-end statutory tax
rates applied to the future pre-tax net cash flows from proved
coalbed methane reserves, less the tax basis of Far East Energy.
All wellhead prices are held flat over the forecast period for all
reserve categories. The estimated future net cash flows are then
discounted at a rate of 10%.
NPV10 for proved reserves may be considered a non-GAAP financial
measure as defined by the SEC and is derived from the standardized
measure of discounted future net cash flows for proved reserves,
which is the most directly comparable US GAAP financial measure.
NPV10 is computed on the same basis as the standardized measure of
discounted future net cash flows for proved reserves but without
deducting future income taxes. As of December 31, 2013, our estimated discounted
future income taxes were $15.5
million and, accordingly, our standardized measure of
after-tax discounted future net cash flows for Proved Reserves was
$151.8 million whereas our NPV10 was
$167.3 million. We believe NPV10 is a
useful measure for investors for evaluating the relative monetary
significance of our coalbed methane properties. We further believe
investors may utilize our NPV10 as a basis for comparison of the
relative size and value of our proved reserves to other companies
because many factors that are unique to each individual company
impact the amount of future income taxes to be paid. Our management
uses this measure when assessing the potential return on investment
related to our coalbed methane properties and acquisitions.
However, NPV10 is not a substitute for the standardized measure of
discounted future net cash flows. Our NPV10 and the standardized
measure of discounted future net cash flows do not purport to
present the fair value of our proved coalbed methane gas
reserves.
NPV10 for probable and possible reserve amounts above represent
the present value of estimated future revenues to be generated from
the production of probable or possible reserves, calculated net of
estimated lease operating expenses, production taxes and future
development costs, using costs as of the date of estimation without
future escalation and using contracted prices and 12-month average
exchange rate, without giving effect to non-property related
expenses such as general and administrative expenses, debt service
and depreciation, depletion and amortization, or future income
taxes and discounted using an annual discount rate of 10%. With
respect to NPV10 amounts for probable or possible reserves, there
do not exist any directly comparable US GAAP measures, and such
amounts do not purport to present the fair value of our probable
and possible reserves.
It is not intended that NPV10 or the FASB's standardized measure
of discounted future net cash flows for proved reserves represent
the fair market value of Far East Energy's proved, probable or
possible reserves. Far East Energy cautions that the disclosures
shown above are based on estimates of proved, probable or possible
reserve quantities and future production schedules which are
inherently imprecise and subject to revision, and the 10% discount
rate is arbitrary. In addition, costs and prices as of the
measurement date are used in the determinations, and no value may
be assigned to probable or possible reserves. Estimates of
economically recoverable coalbed methane reserves and of future net
revenues are based upon a number of variable factors and
assumptions, all of which are to some degree subjective and may
vary considerably from actual results. Therefore, actual
production, revenues, development and operating expenditures may
not occur as estimated. The reserve data are estimates only, are
subject to many uncertainties and are based on data gained from
production histories and on assumptions as to geologic formations
and other matters. Actual quantities of coalbed methane may differ
materially from the amounts estimated.
Far East Energy Corporation
Based in Houston, Texas, with
offices in Beijing, and Taiyuan
City, China, Far East Energy
Corporation is focused on coalbed methane exploration and
development in China.
Statements contained in this press release that state the
intentions, hopes, estimates, beliefs, anticipations, expectations
or predictions of the future of Far East Energy Corporation and its
management are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. It is
important to note that any such forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties, including that the amendment to the PSC may not be
entered into or if entered into may not be on the same terms as
originally agreed upon by the parties. Actual results could differ
materially from those projected in such forward-looking statements.
Factors that could cause actual results to differ materially from
those projected in such forward-looking statements include: the
preliminary nature of well data, including permeability and gas
content; there can be no assurance as to the volume of gas that is
ultimately produced or sold from our wells; the fracture
stimulation and drilling programs may not be successful in
increasing gas volumes; due to limitations under Chinese law, we
may have only limited rights to enforce the gas sales agreement
between Shanxi Province Guoxin Energy Development Group Limited and
China United Coalbed Methane Corporation, to which we are an
express beneficiary; additional wells may not be drilled, or if
drilled may not be timely; additional pipelines and gathering
systems needed to transport our gas may not be constructed, or if
constructed may not be timely, or their routes may differ from
those anticipated; the pipeline and local distribution/compressed
natural gas companies may decline to purchase or take our gas, or
we may not be able to enforce our rights under definitive
agreements with pipelines; conflicts with coal mining operations or
coordination of our exploration and production activities with
mining activities could adversely impact or add significant costs
to our operations; our lack of operating history; limited and
potentially inadequate management of our cash resources; risk and
uncertainties associated with exploration, development and
production of coalbed methane; our inability to extract or sell all
or a substantial portion of our reserves and other resources; we
may not satisfy requirements for listing our securities on a
securities exchange; expropriation and other risks associated with
foreign operations; disruptions in capital markets affecting
fundraising; matters affecting the energy industry generally; lack
of availability of oil and gas field goods and services;
environmental risks; drilling and production risks; changes in laws
or regulations affecting our operations, as well as other risks
described in our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and subsequent filings with the Securities and Exchange
Commission.