HOUSTON, Sept. 15, 2014 /PRNewswire/ -- Far East Energy
Corporation (OTCBB:FEEC), the U.S. listed company that
operates the Shouyang Coalbed Methane (CBM) Production Sharing
Contract (PSC) in Shanxi Province,
People's Republic of China,
welcomes the recent announcement by the National Development and
Reform Commission (NDRC) to raise city-gate gas prices by 20% for
base volume non-residential customers.
China Raises City-gate Gas Prices
Effective
September 1, 2014, city-gate natural
gas prices for base volumes rose by RMB
0.4/cubic meter (equivalent to $1.83 per Mcf), or approximately 20%. These
increases affect non-residential buyers only, such as industrial
consumers and bulk buyers. In July
2013, the NDRC introduced a new pricing structure to bring
its domestic natural gas prices closer to the cost of imports in
order to not only encourage higher domestic output but to
address pollution problems as well. A similar price hike
of RMB 0.4/cubic meter announced in
July of 2013 allowed the Company to successfully negotiate a 42%
increase in the wellhead gas price received for its
gas.
Far East Energy Corporation expects to enter into a new round of
gas price negotiations before the end of 2014 at which time
management would expect to secure another increase in gas prices
for future gas sales.
Commenting, CEO Michael McElwrath
said, "We welcome this increase because it should translate into
significantly higher pricing for our gas. And we believe that
gas prices in China will maintain
their upward trend, hopefully providing an ongoing opportunity for
significant annual enhancement to the price we receive at the
wellhead. The Chinese government is committed to improving
the environment, and supporting the use of more domestic gas is an
integral part of their strategy. Even with this rise in gas
pricing, gas prices remain significantly below those of competing
fuels, such as fuel oil and diesel – both of which are far more
polluting than cleaner burning natural gas, so there is ample room
for the government to provide further increases in the coming
years."
Production, Sales and Drilling Update
Gas production
from the Shouyang PSC remained consistent during July and August at
roughly 1.92 million cubic feet per day, mirroring production rates
seen in May and June after wells were shut-in for various reasons
including Area B wells shut-in due to distance from the production
area and certain Area A gel-frac wells shut-in because they were
not tied in to the gathering system. However, partially as a
result of production increases from gathered wells in the
production area and also improved efficiencies across the summer,
sales have increased from an average of 1.4 million cubic feet per
day in May to 1.55 million cubic feet per day thus far in
September. Drilling has also begun on the P8 replacement well
with CUCBM, which committed to fund the drilling of a replacement
well in the northeast portion of Area B pursuant to the terms of
the April 26, 2012 Modification
Agreement of the Shouyang PSC. Management worked with CUCBM on the
design and planning of the P8 replacement well (designated
FCC-SYE01), and the well has now been spudded with drilling
underway.
Extension of Facility Maturity
The maturity date of
the bridge facility with SCB has been extended to October 31, 2014, from the previous maturity date
of September 15, 2014.
Commenting, CFO Jennifer Whitley
said "This added extension of the facility underlines SCB's ongoing
support as we further our discussions with various third
parties." The Company will advise shareholders as
appropriate, as developments progress.
Far East Energy Corporation
Based in
Houston, Texas, with offices in
Beijing, 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.
SOURCE Far East Energy Corporation