Contenu connexe Similaire à Far eastenergyapr2012corporatepresentation (20) Far eastenergyapr2012corporatepresentation1. Far East Energy Corporation
Corporate Presentation
April 17, 2012
2012-05
Copyright © 2012 Far East Energy Corp., All rights reserved.
2. Cautionary Statements
• Statements contained in this presentation 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. 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 program 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 (“CUCBM”), 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; the Chinese Ministry of Commerce (“MofCom”) may not approve the Modification Agreement to the Shouyang PSC (the
“Modification Agreement”) on a timely basis or at all, or, if so, on commercially advantageous terms; the MofCom’s failure to approve the extension of the Modification Agreement by March 1, 2012 limited our ability to borrow additional amounts under the credit facility absent a waiver from
Standard Chartered; the MofCom’s failure to approve the extension of the Modification Agreement by May 30, 2012 could result in the early termination of the credit facility and require immediate repayment of all outstanding amounts thereunder; our inability to comply with certain quarterly
financial covenants, satisfy certain continuing representations, or remedy a material adverse effect to our business or to certain other conditions could result in an early termination of the credit facility and require immediate repayment of all outstanding amounts thereunder; our Chinese partner
companies or MofCom may require certain changes to the terms and conditions of the Modification Agreement or our PSCs in conjunction with their approval, including reductions in acreage or a reduction in the term of the extension for the exploration period; 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
the listing of 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. Statements contained in this
presentation speak only as of the date hereof. We assume no obligation to update any of these statements.
• Definition of Technical Terms:
We use certain terms in this presentation, such as “Original Gas-in-Place,” “Recoverable CBM Resources,” “Contingent Resources,” and “Estimated Ultimate Recovery” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC because such technical terms are not
consistent with the definition of “Proved Reserves” in the SEC rules. Such terms used herein are defined as follows:
– SPE Contingent Resources: Those quantities of CBM estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more
contingencies.
– Original Gas-in-Place: This term refers to discovered and undiscovered Gas-In-Place, which is the quantity of hydrocarbons which is estimated, on a given date, to be contained in known accumulations, plus those quantities already produced therefrom, plus those estimated
quantities in accumulations yet to be discovered.
– Recoverable CBM Resources: This term refers to discovered and undiscovered Gas-In-Place, which is the quantity of hydrocarbons which is estimated, on a given date, to be contained in known accumulations, plus those quantities already produced therefrom, plus those
estimated quantities in accumulations yet to be discovered.
– Estimated Ultimate Recovery: The sum of resources remaining as of a given date and the cumulative production as of that date.
• Note to Investors Regarding PV-10 Value:
• PV-10 Value – This term is considered a non-GAAP financial measure under SEC regulations and represents a pre-tax number. We believe that pre-tax PV-10 Value is an important measure that can be used to evaluate the relative significance of its coalbed methane gas reserves and that PV-
10 Value is widely used by security analysts and investors when evaluating oil and gas companies. Because many factors that are unique to each individual company impact the amount of future income taxes to be paid, we believe that the use of a pre-tax measure provides greater
comparability of assets when evaluating companies.
• The PV-10 Value does not purport to be, nor should it be interpreted to present, the fair value of the gas reserves of the property. 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. The estimates of future cash flows and future production and development costs as of December 31, 2011 are based on the unweighted arithmetic average first-day-of-the-month price for the preceding 12-month period.
Prices were adjusted by lease for quality, transportation fees and regional price differentials. Estimated future production of proved reserves and estimated future production and development costs of proved reserves are based on current costs and economic conditions.
• Far East Energy cautions that the disclosures contained in this presentation related to the PV-10 Value are based on estimates of proved reserve quantities and future production schedules which are inherently imprecise and subject to revision, and the 10% discount rate applied to the PV-10
Value 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 oil and gas 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 coal bed methane gas may differ materially from the amounts estimated.
• Note to Investors Regarding Adjacent Properties:
• This presentation contains information about adjacent properties on which we have no right to explore. U.S. investors are cautioned that petroleum/mineral deposits on adjacent properties are not necessarily indicative of such deposits on our properties. This presentation also includes various
estimates and comparisons contained in studies and reports. Actual results are likely to vary from the results in the studies and reports.
Copyright © 2012 Far East Energy Corp., All rights reserved. 2
3. Far East Energy Profile
• Coalbed methane development company operating under three production sharing contracts
(PSCs) in Shanxi and Yunnan Provinces (see SEC filings for current status)
– Total 1.1 million acres (~4450 km2)(d)
– Estimated 21.3-29.2 Tcf (603-827 Bcm) of gross original gas-in-place (OGIP)(b)
– Shouyang coals exhibit both high permeability and high gas content, properties that are
consistent with the most commercially successful CBM basins worldwide
• Exceptional infrastructure and market access
– 20 year gas pipeline sales agreement in place in Shouyang
– Approximately $6.45 to $7.34/Mcf(c) wellhead price
• Strong management and board
– Solid experience in CBM and with Chinese energy industry and policy makers
• Funding in place
– Bank note payable issued in November 2011 securing the funding needs for current drilling
program without issuance of equity
a. 1.1 million gross acres includes acres subject to the Qinnan PSC. Note that the exploration period of the Qinnan PSC has not been extended and remains subject to approval by
Chinese authorities, we can not be optimistic at this time. The Qinnan PSC covers approximately 528,620 gross acres (2,139 km 2).
b. OGIP estimates (P10 -P90) for Qinnan from ConocoPhillips; for Yunnan from Yunnan Provincial Coal Geological Bureau; for Shouyang from July 2011 report by Netherland, Sewell &
Associates, Inc. (NSAI), and does not take into account recently relinquished acreage.
c. Inclusive of current and announced estimated government subsidies, and subject to annual review and exchange rate fluctuations.
d. Estimates based on recent extensions and modification agreements for Shouyang and Yunnan PSC. The extensions of the Shouyang and Yunnan PSCs have been executed and are
pending Chinese government approval from MofCom.
Copyright © 2012 Far East Energy Corp., All rights reserved. 3
4. Investment Highlights
(Trades on OTC:BB as FEEC)
• Beneficiary of CHINA’S ECONOMIC GROWTH/robust energy demand
– Gas demand far exceeds supply with demand expected to triple over next 10 years. PRC
focusing on CBM as desirable alternative to LNG imports
• Far East Energy’s blocks have enormous gas-in-place, and discovery of HIGH
PERMEABILITY in Shouyang makes acreage unique in China and potentially world class
– Netherland Sewell and ARI have verified high gas content/high permeability and project high
production rates
– Shouyang Block could support 4,000 to 5,000 vertical wells on 80-acre spacing
• SALES AGREEMENT WITH PIPELINE PROVIDES CAPACITY to move large volumes
which is ESSENTIAL FOR LARGE-SCALE DEVELOPMENT. Believed to be first of its kind
for foreign operators. At $6.45 to $7.34/Mcf and assuming ARI projected production levels,
economics are compelling
• Second competing pipeline to Shouyang is now completed, creating likely competition and
potentially adding up to 50 MMcf/d of off-take capacity (Total possible off-take of 90 MMcf/d
from both pipelines)
• Critical desorption pressure (CDP) reached in portions of the Shouyang 1-H pilot area. At stage
where high permeability reservoirs often begin to exhibit significant production increases
• Multi-year drilling program planning– ramping up to an annual pace of 200 wells per year and up
to 500 wells per year in outer years
Copyright © 2012 Far East Energy Corp., All rights reserved. 4
5. Far East Energy’s
Production Sharing Contract Areas
Estimates are based on recent
extension and modification
agreement which has been
executed and is now pending
Chinese government approval.
Shouyang contract area
1656.3 km2
(409,282 ac)
Yunnan contract area
483 km2
(119,338 ac)
Estimates are based on recent extension
and modification agreement which has
been executed and is now pending
Chinese government approval.
Qinnan contract area
2317.4 km²
(572,642 ac)
Note that the exploration period of the Qinnan PSC has not
been extended and remains subject to approval by Chinese
authorities. If the Qinnan PSC is not extended, Far East
Energy will hold rights to approximately 528,620 gross acres
(2,139 km2).
Copyright © 2012 Far East Energy Corp., All rights reserved. 5
6. Why Coalbed Methane in China?
Why China? Why Coalbed Methane?
Enormous energy demand/enormous
environmental problems CBM addresses both concerns
DEMAND: SUPPLY:
World’s largest China has the largest CBM resources
consumer of energy in the world (1305 Tcf gas-in-place)
DIRTY ENERGY: CLEAN CBM:
73% of energy supply from coal CBM (gas) burns substantially cleaner than coal
ENVIRONMENTAL CONCERNS: China targets 27X increase in gas
20 out of 30 of the world’s most polluted cities in the world;
Number 1 in CO2 emissions
consumption in energy mix
CBM production eliminates mine venting and reduces
Number 1 in methane emissions
(21X heat trapping of CO2)
emission of methane to atmosphere
China coal has among the highest gas
content in the world, but over 5,000 Degasification in advance of
miners/year die in methane explosions mining coal saves lives
Copyright © 2012 Far East Energy Corp., All rights reserved. Slide Sources: Business Week, EIA, World Bank, EPA, China Daily, Trading Markets 6
7. China’s Current Energy Targets
• China aims for 2.5x increase in CBM
production in next 5 years
• China also wants to triple the use of gas by 2020
• Chinese government officials have stated an
intent to double the subsidy for CBM
production to 0.4 RMB/m3 which would move
the price paid for Far East Energy gas from U.S.
$6.45 per Mcf to $7.34 per Mcf, a significant
premium over the Henry Hub U.S. gas price of
$2.98 per Mcf as of December 30, 2011
Copyright © 2012 Far East Energy Corp., All rights reserved. 7
8. A Chinese Coalbed Methane Breakthrough
To Supply Growing Demand
• Far East Energy’s discovery is a breakthrough
for China’s CBM industry
– Shouyang’s primary coal seams exhibit both
high permeability (80 to 120 millidarcies)
China
and high gas content
– Coal seams with similar properties in San
Juan and Black Warrior basins initiated
dramatic CBM production growth in U.S.
– Established operators in China are
accelerating major development plans
• Coalbed methane may hold some of the
greatest potential for increasing Chinese
domestic gas supplies
– Demand fundamentals drove flurry of
acquisitions of Australian CBM in 2008 Australia
– Domestic sources obviously desirable,
fueling interests by majors in China CBM
Copyright © 2012 Far East Energy Corp., All rights reserved. 8
9. Resource Comparison
Preliminary technical data suggests that the
Company’s North Shouyang acreage compares very well
to premier U.S. CBM plays
Note: Actual results are likely to vary from the following preliminary estimates, which are based on various assumptions
Black N. Shouyang
San Juan
Warrior Acreage
Coal Gas Content (Scf/ton)(b) 400-500 350-500 400-600(a)
Coal Thickness: Typical net coal (feet)(b) 40 5 10-15
(12 m) (1.5 m) (3-4.5 m)
Pressure (psi)(b) 1500 400 400
(10.3 MPa) (2.8 MPa) (2.8 MPa)
Permeability (mD)(b) 25 75 100(d)
Recovery Factor(c) 80% 65% 50-70%
Notes:
a. Based on recent gas content test results from several pilot development test wells.
b. Source: Data on U.S. Basins from John P. Seidle, Sproule Associates, Inc., Coalbed Methane. of North America.
c. Source: Gas Research Institute and March 2008 ARI report.
d. Permeability in Shouyang Pilot area ranges from 80-120 mD, according to the ARI Report of March 21, 2008.
Copyright © 2012 Far East Energy Corp., All rights reserved. 9
10. Netherland, Sewell & Associates, Inc. (NSAI)
Reports on OGIP for Shouyang PSC*
Gross OGIP (Tcf / Bcm)
As of June 30, 2011
Low Estimate Best Estimate High Estimate
Coal Seam Tcf Bcm Tcf Bcm Tcf Bcm
No. 3 0.900 25.47 1.487 42.08 2.100 59.43
No. 9 0.860 24.34 1.047 29.63 1.216 34.41
No. 15 4.964 140.48 6.056 171.38 7.053 199.60
Total 6.724 190.29 8.590 243.10 10.369 293.44
*The NSAI report s on OGIP estimates, which contains further information and qualifications, can be found on Far East Energy’s website at: www.fareastenergy.com. Note that some
numbers may not total exactly, due to rounding. Estimates are based on original acreage held by the Shouyang PSC. The extension of the exploration period of the Shouyang PSC has
been executed and is now pending Chinese government approval.
Copyright © 2012 Far East Energy Corp., All rights reserved. 10
11. Netherland, Sewell & Associates, Inc. (NSAI)
Contingent Resource Report* for Shouyang PSC
RESTATED BASED ON PSC MODIFICATION
As of June 30, 2011
Shouyang Block Low Best High
Net Contingent Resources, Bcf 100.4 Bcf 319.6 Bcf 461.8 Bcf
(Bcm) (2.8 Bcm) (9.1 Bcm) (13.1 Bcm)
Net Cash Flow (NPV10) $259,689,000 $1,057,426,000 $1,689,875,000
(Relinquished 16% of acreage in Shouyang for a 10% reduction in NPV10 of contingent resources)
Contingent resources are those quantities of CBM estimated, as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are not currently considered to be commercially recoverable
due to one or more contingencies.
* The contingent resources report is posted to the FEEC website, www.fareastenergy.com. The NPV10 amounts are shown before consideration of any income taxes.
Copyright © 2012 Far East Energy Corp., All rights reserved. 11
12. Shouyang US SEC Reserves – RISC
As of December 31, 2011
Gross Net Future Net Revenue
Category Reserves Reserves $million
MMscf MMscf 10% Discount
Proved Developed 14,160 13,505 $34.5
Proved Undeveloped 45,469 41,094 30.9
Total Proved 59,629 54,599 65.4
Total Probable 514,953 379,603 663.9
Total Possible 165,265 114,436 378.9
Total Proved, Probable
and Possible Reserves 739,847 548,638 $1,108.2
Totals may differ due to rounding.
Gas volumes are expressed in units of million standard cubic feet at reference conditions of 60 deg F and 14.696 psia
Copyright © 2012 Far East Energy Corp., All rights reserved. 12
13. First Pipeline Sales Agreement
for Foreign CBM Operator in China
20 year gas sales contract with Shanxi
• Flowing in newly constructed pipeline with 40 million cubic feet
Provincial Guoxin Energy per day (40 MMcf/d) of capacity
Development Group (SPG)
Wellhead price of
• Price includes enacted and announced government subsidies
1.45 to 1.65 RMB/m3, • Wellhead price approximately 2.5x that of U.S. Henry Hub gas(b)
or approximately $6.45 to $7.34/Mcf(a)
• Pipeline must “take” all gas produced up to 300,000 m3/d
Favorable “take-or-pay” contract terms (10.6 MMcf/d), or pay for available volumes not taken
Ability to renegotiate contract for • Setting stage for strong competitive bidding for selling gas into
second pipeline built to the area
volumes in excess of 10.6 MMcf/d
Second pipeline built to • Presents possibility of even higher prices as two lines may
compete for Far East Energy’s gas
Shouyang is complete
Notes: a. Inclusive of existing government subsidies (0.2 RMB/m3 from central government plus 0.05 RMB/m3 from Shanxi provincial government) plus estimated 0.2 RMB m3
government subsidy (announced but not yet implemented), and subject to annual review and exchange rate fluctuations.
b. Henry Hub average natural gas price of $2.98/Mcf at December 30, 2011 close.
Copyright © 2012 Far East Energy Corp., All rights reserved. 13
14. Extension Agreement for
Shouyang Block CBM PSC Signed
• Agreement signed November 15, 2011, by FEEB and CUCBM extending
exploration period of Shouyang Block PSC (currently pending Ministry of
Finance approval)
• 84.5% of acreage retained (1656.3 km2 or approximately 409,281 acres)
• Relinquished approximately 306.5 km2 (approximately 75,738 acres)
• Portions of relinquished acreage are considered by management to be marginal
or non-prospective
• Approximately 100 km2 (24,710 acres) is currently pending reserves
certification by Chinese authorities (includes 1H pilot area as well as several
nearby PDT wells)
– Pending Chinese reserves area constitutes basis of a potential Overall Development
Plan (ODP)
– Of this pending reserves area, FEEB is entitled to100% of reserves of approximately
65 km2 (16,062 acres) and includes all wells in the 1H pilot area
– Of this pending reserves area, CUCBM is entitled to100% of reserves of
approximately 35 km2 (8,649 acres)
Copyright © 2012 Far East Energy Corp., All rights reserved. 14
15. Gas Gathering System
Compressor Stations
Copyright © 2012 Far East Energy Corp., All rights reserved. 15
16. A D
B R CUCBM to drill well for FEEB to replace P8
C
Shouyang PSC Exploration Agreement Acreage Diagram
84.5% of acreage retained
A. Approximately 65 km2 with FEEB entitled to100% of reserves
B. 35 km2 with CUCBM entitled to100% of reserves
C. 1656.3 km2 (includes area A)
D. Of the 306.5 km2 relinquished, 104 km2 was either a no coal or thin coal zone
Copyright © 2012 Far East Energy Corp., All rights reserved. 16
17. Operations Update
• 16 new wells completed in July-August 2011 completion cycle
Drilling and • 3 wells completed in November-December 2011 completion cycle;
7 deferred to March 2012 due to freezing conditions
• De-watering continuing on 1H Pilot Area wells
Completion • Currently drilling one well per month over the winter; continued focus on pattern
drilling in 1H Pilot Area
•Located in east central Shouyang Block
•Thickness of #15 coal seam: 3.85m (12.63 ft)
SY-P18 •Top of the #15 coal seam: 1070 m (3510 ft)
•Current Production Rate: 40 Mcf/d (1132m3/d)
•Has produced over 100 Mcf/d at 40 psi surface flowing pressure; 220 M fluid over #15 coal seam
•Initial test results indicate gas content of 660 scf/ton
•Demonstrates further permeability continuity across the Shouyang Block
•Located in southeast Shouyang Block
•Thickness of #15 coal seam: 6.4m (21 ft)
•Approximate Vertical Depth:1372m (4501 ft)
SYS-05 •Current Production Rate: 77 Mcf /d (2180m3/d)
•Test results indicate gas content of 935 scf/ton
•Saturation: 95%
Copyright © 2012 Far East Energy Corp., All rights reserved. 17
18. Shouyang Block
Appraisal Wells
Approximately
18 km west of 50-70 mD
1H pilot area
140 mD 80-100 mD
Prod Test 20-40 mD Prod Test Approximately
Prod Test 12 km due east
180mD
+200 mD of 1H pilot area
120 mD Prod Test 50 mD
Prod Test
CUCBM to drill well Approximately
R for FEEB to replace P8. 22 km southeast
30 mD Location TBD. of 1H pilot area
50 mD Prod Test
Prod Test 10-20 mD
Prod Test 300 mD Approximately
Prod Test 2H/2V 26 km southeast
60 mD of 1H pilot area
Prod Test
20 mD 10 mD
IFO Test Gas Content:
529 scf/ton
Depth: 1070 m
Gas Content: 660 scf/ton
Located midway between
northern and southern
boundaries of block and is
approximately 20km south of
1H pilot area
300+ mD
Gas Content:
479 scf/ton
SYS-05
Approximately 14 km south and
22 km east of SYS02 and 35 km
south of 1H pilot area
Depth 1372m
Gas Content: 935 scf/ton
Saturation: 95%
Copyright © 2012 Far East Energy Corp., All rights reserved. 18
19. Shouyang Results of
Appraisal Wells
Approximately
18 km west of Approximately Approx. Depth: 662 m
1H pilot area 12 km due east of Perm: 200 mD
1H pilot area Prelim Gas Content: 520 scf/ton
1H Pilot Area
Perm: 80-100 mD R CUCBM to drill well for FEEB to replace P8. Location TBD.
Average Depth: approx. 600 m
Average Gas Content: 400-600 scf/ton SY-P12
Average Thickness: 3-4.5 m Approx. Depth: 970 m
Perm: 10 mD
SY-P17 Prelim Gas Content: 529 scf/ton
Approx. Depth: 1196 m
Gas Content: 583 scf/ton Approximately 26 km
Approximately 22 km southeast
SY-P20 southeast of 1H pilot area
Approx. Depth: 1054m SYS-02 of 1H pilot area
Gas Content: 561 scf/ton Approx. Depth: 1274m SY-P18: Promising Area
Perm: 300+ mD Approx. Depth: 1070 m
Gas Content: 479 scf/ton Prelim Gas Content: 660 scf/ton
Average Thickness: 4m Reached Production Rate over
100 Mcfpd
Located midway between
northern and southern
boundaries of block and is SYS-05
approximately 20km south of
Approx. Depth:1372m Approximately 14 km
1H pilot area
Gas Content: 935 scf/ton south and 22 km east of
Saturation: 95% SYS02 and 35 km south of
1H pilot area
Copyright © 2012 Far East Energy Corp., All rights reserved. 19
20. Shouyang Block Permeability*
Permeability
Range Number of Wells
Well Area (mD) In this Range
1H Pilot Area 80-100 1H Pilot Area Wells
PDTW 200-300 3
PDTW 100-199 3
PDTW 50-99 4
PDTW 10-49 6
*Results of Pilot Development Test Wells (PDTW) to determine the extent of high permeability in Shouyang Block
Copyright © 2012 Far East Energy Corp., All rights reserved. 20
21. Projected Drilling
Program at Shouyang
Subject to approval by CUCBM
Wells
Drilled, Drilling
and/or Completed
2010 (actual) 26
2011 (actual spud) 33
2012 (estimated next12 mos.) 200
2013 (estimated) 300-400
2014 (estimated) 500
• FEEC is currently considering various financial sources to secure project
finance to fund costs not covered by gas sales.
• The revenue from additional wells could provide substantial offset to well costs.
Copyright © 2012 Far East Energy Corp., All rights reserved. 21
22. Bank Financing of 2012
Shouyang Development Costs
Gross Loan Amount: $25 Million
Proceeds Net of Issuance Costs: $23.5 Million
Tenor: 9 months with potential additional 3 month
Interest Rate: LIBOR plus 9.5%
Common Stock Dilution: NONE
Amount Drawn at Closing: $17.87 Million
Use of Proceeds: Operational costs related to first half of 2012
and finance and related expenses
Bank: Standard Chartered PLC
(Leading international bank, operated over 150 years
and earned over 90% of income and profit from Asia,
Africa and the Middle East)
Copyright © 2012 Far East Energy Corp., All rights reserved. 22
23. Key Validation Points
• China’s economy robust; energy demand enormous; gas consumption expected to rise
• Far East Energy well-positioned to benefit from China’s demand for clean burning gas
– In-Country (a competitive advantage over LNG), with enormous resource base of
1.1 million acres and 21.3-29.2 Tcf (603-827 Bcm) of estimated gas-in-place (see SEC filings for current
status)*
– Discovery of breakthrough area of high permeability, high gas content is unique in China with potential
to generate optimal economics akin to world’s best CBM plays
– Netherland Sewell, ARI verified high permeability, high gas content and projected very attractive
economic rates of production
• Excellent access to market through national trunk and provincial pipelines
• 20 year gas sales contract already secured at $6.45 to $7.34/Mcf. Believed to be first foreign
CBM operator to secure pipeline access essential for large-scale development
• Netherland Sewell Contingent Resource Report of June 30, 2011, as restated for PSC extension,
NPV10 “Best” case $1.1 billion , “High” case $1.7 billion and “Low” case $260 million
• Initial independent reserves report by RISC (in accordance with SEC guidelines) showing
NPV10 of $65.4 million-Proved, $663.9 million-Probable, and $378.9 million-Possible
*Does not take into account acreage relinquished under modification agreement to PSCs pending MofCom approval.
Copyright © 2012 Far East Energy Corp., All rights reserved. 23
25. Third Party Review
Shouyang Block #15 Coal Seam
Advanced Resources International, Inc. (ARI) 2008 Netherland, Sewell & Associates, Inc. (NSAI) 2007
Initial permeability: Study stated Shouyang Block #15 coal
80 and 120 millidarcies (md) seam has high permeability,
approximately 100 millidarcies (md)
Gas content estimate:
500 scf/ton dry ash free
Gas content measurements:
400-600 scf/ton
Forecast peak daily production
rate estimates
•Vertical well 80 acre spacing: 300-500 Mcfpd (8496-14,160 m3pd) Higher gas rates of 1 to 2 MMcfpd
•Horizontal well 400 acre spacing: 2.3-5 MMcfpd (65-142 Mcmpd) (28-57 Mcmpd) are possible in future
horizontal wells
Forecast gas recovery rate estimates
(20 year, P50) Most likely and mean recovery estimate of
• Vertical well 40-160 acre spacing: 0.5-1.2 Bcf/well 1.1 Bcf and 1.8 Bcf
(14.2-34 MMcm/well)
• Horizontal well 250 & 550 acre spacing: 3.4-5.3 Bcf/well
(31.2 and 51 MMcm), respectively, per
(96.3-150.1 MMcm/well) horizontal well
Note: Actual results are likely to vary from the foregoing preliminary estimates, which are based on various assumptions. The third party reports, which contain further information and qualifications,
may be found on Far East Energy’s website (www.fareastenergy.com). ARI is a research and consulting firm that provides services related to coalbed methane, gas shale, tight sands, enhanced oil
recovery and carbon sequestration (www.adv-res.com). NSAI is an independent engineering firm that provides engineering studies of reservoirs for oil and gas companies worldwide
(www.netherlandsewell.com).
Copyright © 2012 Far East Energy Corp., All rights reserved. 25
26. Financial Highlights
As of December 31, 2011
Outstanding Shares 342,209,884
Outstanding Warrants 21,994,982
Outstanding Options 10,823,833
Market Cap Daily Volume
OTC.BB @ 12/31/2011
(3 month average
@ 12/31/2011)
FEEC $71.9 MM 1,366,579
Copyright © 2012 Far East Energy Corp., All rights reserved. 26
27. Vision and Commitment
Our vision is zero harm to
people and the
environment while creating
value for our shareholders
as well as for China
Comply with International
No lost-time accidents in laws and regulations
6+ years and no major concerning the
environmental incidents environment, occupational
safety and health in China
Good corporate citizens of
China, utilizing very high
Employ numerous safety
levels of Chinese content
precautions
in personnel, services, and
equipment
Copyright © 2012 Far East Energy Corp., All rights reserved. 27
28. FEEC Management and
Operations Team
Michael R. McElwrath
CEO, President and Director
Former U.S. Assistant Secretary of Energy, Director
National Institute Petroleum & Energy Research
Robert “Bob” Hockert (30+ years) Dr. Zhendong “Alex”
China Country Manager Yang
CBM Drilling & Production Sr. Vice President - Geology
Manager; District Manager for Pioneer in China Coalbed
Halliburton – Russia Methane, Chief Geologist with
(20+ years) Amoco, Arco, BP CBM projects
(40+ years)
Bruce N. Huff David J. Minor
Chief Financial Officer Executive Director of
Operations
Former President, Director and
Chief Financial Officer Former President and General
of Harken Energy Manager of Walter Black
(35+ years) Warrior Basin, LLC
(30+ years)
Rebecca B. “Beckie” Le
President and CFO – FEEB
Sr. VP Government Relations
Amerada Hess, Price
Waterhouse, Consolidated
Edison (15+ years)
Copyright © 2012 Far East Energy Corp., All rights reserved. 28
29. FEEC Board of Directors
Donald A. Juckett
Chairman, retired U.S. Department of Energy;
Director, Office of Natural Gas; Director, DC Office of
American Association of Petroleum Geologists;
Established U.S.-China Oil & Gas Industry Forum
William A. Anderson C. P. Chiang
Former Founder, Director, President or CFO of publicly and Former China Country Manager of
privately held banking, energy and technology companies Burlington Resources;
40 yrs with Exxon, British Gas, Tenneco, etc.
Michael R. McElwrath John C. Mihm
Former U.S. Assistant Secretary of Energy; Retired Senior Vice President of ConocoPhillips
Director National Institute China background dates to 1983
Petroleum & Energy Research
(30+ years energy industry)
Lucian L. Morrison Thomas E. Williams
Founder and Director of numerous trust and investment companies; Retired President of Mauer Technology and VP, R&BD of Noble
former Chairman and CEO of Wing Corp. Technology Services Division
(exploration and production company) (both Noble Corporation subsidiaries)
Copyright © 2012 Far East Energy Corp., All rights reserved. 29
30. Production Sharing Contract Briefs
Shanxi Province Shouyang PSC(a) Yunnan Province PSC(a)
• FEEC has 100% interest in H-1 proved • 60/40 split with CUCBM
reserves area, including development costs and • FEEC pays 100% exploration costs/60%
all production development costs
• 70/30% split in other areas
• CUCBM pays 40% development costs
• CUCBM pays 30% development costs in areas
outside H-1 • FEEC recovers all exploration costs out of
production
• FEEC recovers all exploration costs and
CUCBM recovers all pre-contract costs • Parties recover development costs out of
(US$2.8M) out of production, including H-1 production with 9% interest
• ConocoPhillips 3.5% ORRI out of FEEC share • Parties pay up to 3% PRC royalty(b)
• Parties recover development costs out of
production with 9% interest
• Parties pay up to 3% PRC royalty(b)
Shanxi Province Qinnan PSC is similar to Shouyang before the most recent amendment,
however force majeure relating to transfer from CUCBM to PetroChina is pending
(a) The exploration period for the Yunnan PSC and Shouyang PSC expired on 6/30/2011, however an extension has been agreed for Shouyang and
Yunnan and are awaiting final government approval.
(b) PRC royalty is zero until 50 million cubic feet per day of gas production, and up to 3% after reaching 500 MMcf/d; however, FEEC understands that
the royalty regime is changing to a tax regime
Copyright © 2012 Far East Energy Corp., All rights reserved. 30
31. Shanxi Province
Gas Pipeline Network 1
Shouyang Block Pipeline
Opportunities 2
Shouyang Block
1
20 year gas sales agreement signed with SPG
(Pipeline arrived to Shouyang PSC in July 2010)
2
Shanxi International
(second competing pipeline complete)
Copyright © 2012 Far East Energy Corp., All rights reserved. 31
32. Acreage Comparison
San Juan Basin (Fruitland Coal)
Source: Map: Energy Information Administration (November, 2007); Shouyang Block Overlay: Jay Smith, Viking Engineering, L.C.
This map is not an indication that the Shouyang Block will be as successful as the San Juan Basin.
Copyright © 2012 Far East Energy Corp., All rights reserved. 32
33. Acreage Comparison
Black Warrior Basin
Shouyang
Block
Acreage
Size
Source: Map: Energy Information Administration (November, 2007); Shouyang Block Overlay: Jay Smith, Viking Engineering, L.C.
This map is not an indication that the Shouyang Block will be as successful as the Black Warrior Basin
Copyright © 2012 Far East Energy Corp., All rights reserved. 33
34. Far East Energy Corporation
Website
www.fareastenergy.com
Investor Relations Contacts
Michael R. McElwrath – CEO and President
Bruce N. Huff – Chief Financial Officer
Catherine Gay – Assistant to CEO
investorrelations@fareastenergy.com
281.606.1600
Corporate Headquarters
363 N. Sam Houston Parkway E., Suite 380
Houston, Texas 77060
Telephone: 832.598.0470
Copyright © 2012 Far East Energy Corp., All rights reserved. 34