Far East Energy Corporation U.S. - China Oil and Gas Industry Forum Chengdu, China Shouyang CBM Project Design for Production David J. Minor, P.E. Executive Director of Operations September 24-26, 2011
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; 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, Ltd., to which we are an express beneficiary; 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; certain of the proposed transactions with Dart Energy (formerly Arrow Energy) ( Dart Energy ) may not close on a timely basis or at all, including due to a failure to satisfy closing conditions or otherwise; the anticipated benefits to us of the transactions with Dart Energy may not be realized; the final amounts received by us from Dart Energy may be different than anticipated; Dart Energy may exercise its right to terminate the Farmout Agreement at any time; the Chinese Ministry of Commerce ( MOC ) may not approve the extension of the Qinnan production sharing contract ( PSC ); our Chinese partner companies or the MOC may require certain changes to the terms and conditions of our PSCs in conjunction with their approval of any extension on our other PSCs; 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; proved reserves may not be reported in a timely manner and, if reported, may be smaller than expected; we may not satisfy requirements for listing on a securities exchange; expropriation and other risks associated with foreign operations; disruptions in capital markets affecting fundraising; an inability to obtain debt financing; 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 ( SEC ). Statements contained in this presentation speak only as of the date hereof. We assume no obligations to update any of these statements. Definition of Technical Terms: Certain technical terms used in this presentation associated with descriptions of the potential for oil and gas properties are not consistent with the definition of Proved Reserves in the SEC rules and thus the SEC guidelines prohibit us from including such terms in filings with the SEC. Such terms used herein are defined as follows: 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: Recoverable CBM resources refer to a calculation based on geologic and/or engineering data similar to that used in estimates of proved reserves; but technical, contractual, economic, or regulatory uncertainties preclude such resources from being classified as proved reserves. Recoverable CBM resources may also be estimated assuming future economic conditions different from those prevailing at the time of the estimate. 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. Estimated Ultimate Recovery: The sum of resources remaining as of a given date and the cumulative production as of that date. Note to Investors: 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. 2
Far East Energy Profile In-Country (a competitive advantage over LNG), with large resource base of 1.3 million acres and 21.3-29.2 Tcf (603-827 Bcm) of estimated gas-in-place Discovery of high permeability, high gas content is relatively unique in China and consistent with the most commercially successful CBM basins worldwide Netherland, Sewell & Associates, Inc. (NSAI) and Advanced Resources International, Inc. (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 $6.35 to $7.23/Mcf Second competing pipeline to Shouyang is now complete, creating likely competition and potentially adding up to 50 MMcf/d of off-take capacity Updated NSAI report of June 30, 2011 indicates original gas-in-place in Shouyang: Best Estimate 8.59 Tcf/243.10 Bcm; High Estimate 10.369 Tcf/293.44 Bcm and Low Estimate 6.72 Tcf/190.3 Bcm Updated NSAI Contingent Resource Report of June 30, 2011, NPV10 Best case $1.2 billion and High case $2.1 billion and Low case $319 million 3
Shouyang CBM Project Location Shouyang contract area 1962.8 km 2 (485,018 ac) 4
Shouyang CBM Project Overview Project initiated: 2005 Project area: approximately 2000 km 2 (772 mi 2 ) High permeability: 100 md confirmed by independent engineering analysis performed by NSAI and ARI Thick coal, primarily #15 seam (#3 & #9 seams also present) Gas saturation: 75-80% Average gas content: 12-15 m 3 /T (400-600 scf/t); 98% methane #15 Coal depth: 450-600 m (1500 2000 ft) Early completions consist of horizontal, cavitated, deviated and vertical wells; current completions consist of vertical and deviated (pad drilled) wells Currently 80 wells; expect significant increase in drilling pace 5
Shouyang CBM Project Operational Review Early in the project, efforts were made to optimize individual operational components drilling, cementing, perforating, stimulation A wide variety of practices was tested Current practice is to consider each operational impact as part of an integrated, overall approach Items reviewed: wellbore stability and gauge, cementing practices, perforating efficiency, stimulation design and, most recently, well orientation Far East has engaged a highly-experienced team of CBM experts to optimize project planning and execution OBJECTIVE DESIGN FOR PRODUCTION! 6
Shouyang CBM Project Design for Production Timed drilling to reduce washouts in coal Lower cement slurry weight Deep penetrating perforating charges Ball-sealer perforation breakdown prior to frac Greater proppant loads in frac: 12,000 kg/m (8000 lb/ft); lower pump rates; higher slurry concentrations (up to 720 kg/m 3 (6 ppg); 480 kg/m 3 (4 ppg) typical), larger proppant size (16-20 and 12-20 mesh) Well orientation impact review ALL OPERATIONS FOCUSED ON PRODUCTION IMPACT! 7
Shouyang CBM Project Well Orientation Impact 8
Shouyang CBM Project 9
MCFD/BWPD Shouyang CBM Project Well Orientation Impact 120 100 80 60 40 20 0 day 10 20 30 40 50 60 70 80 90 100 110 120 43D 45V 46V 47D 70D 71D 10
Shouyang CBM Project Well Orientation Impact Vertical wells: Lower drilling time and cost Reduced washouts More efficient cementing Lower tubular goods requirement (casing/tubing) Improved pumping mechanics More effective stimulation More consistent production results; better drainage Directional wells: Reduced surface footprint; reduced land cost Lower location construction cost Simplified gathering Reduced manpower requirement 11
Shouyang CBM Project Summary Shouyang Block is a huge resource Recent increase in development pace sets stage for significant ramp-up in activity Experienced Far East team focused on continuous operational enhancement All aspects of operation focused on production optimization DESIGN FOR PRODUCTION! 12
Thank you! 谢谢! 13
Appendix 14
Initial permeability: 80 and 120 millidarcies (md) Gas content estimate: 500 scf/ton dry ash free Forecast peak daily production rate estimates Third Party Review Shouyang Block #15 Coal Seam ARI, 2008 NSAI, 2007 Study stated Shouyang Block #15 coal seam has high permeability, approximately 100 millidarcies (md) Gas content measurements: 400-600 scf/ton Vertical well Horizontal well 80 acre spacing: 300-500 Mcfpd (8496-14,160 m 3 pd) 400 acre spacing: 2.3-5 MMcfpd (65-142 Mcmpd) Forecast gas recovery rate estimates (20 year, P50) Vertical well Horizontal well 40-160 acre spacing: 0.5-1.2 Bcf/well (14.2-34 MMcm/well) 250 & 550 acre spacing: 3.4-5.3 Bcf/well (96.3-150.1 MMcm/well) Higher gas rates of 1 to 2 MMcfpd (28-57 Mcmpd) are possible in future horizontal wells Most likely and mean recovery estimate of 1.1 Bcf and 1.8 Bcf (31.2 and 51 MMcm), respectively, per 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). 15
Shouyang Block Pilot Development Test Wells (PDTW) Approximately 18 km west of 1H pilot area 50-70 md 140 md 120 md 180mD 20-40 md 50 md 80-100 md +200 md Approximately 12 km due east of 1H pilot area 50 md 30 md 10-20 md 300 md 2H/2V 60 md Approximately 22 km southeast of 1H pilot area Approximately 26 km southeast of 1H pilot area 10 md Located midway between northern and southern boundaries of block and is approximately 20km south of 1H pilot area 20 md IFO Test 16
Shouyang Block Results of PDTW Approximately 18 km west of 1H pilot area Approximately 12 km due east of 1H pilot area Approx. Depth: 661 m Perm: 200 md Prelim Gas Content: 565 scf/ton 1H Pilot Area Perm: 80-100 md Average Depth: approx. 600 m Average Gas Content: 400-600 scf/ton Average Thickness: 3-4.5 m Approximately 22 km southeast of 1H pilot area Approx. Depth: 972 m Perm: 10 md Prelim Gas Content: 628 scf/ton Approximately 26 km southeast of 1H pilot area Located midway between northern and southern boundaries of block and is approximately 20km south of 1H pilot area SYS02 Approx. Depth: 1278 m Prelim Gas Content: 635 scf/ton Approximately 14 km south and 22 km east of SYS02 and 35 km south of 1H pilot area Depth 1372m In the most recent NSAI contingent resources report for Shouyang Block, an area of 106,000 out of 485,000 acres was covered. 17
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 18