HOUSTON, April 16, 2013 /PRNewswire/ -- Far East Energy Corporation (OTCBB: FEEC) today announced the release of an updated independent engineering report prepared by RISC Operations Pty Ltd (RISC), an internationally recognized independent petroleum advisory evaluation and valuation firm based in Perth, Australia, with respect to its coalbed methane (CBM) project located in the Shouyang block in Shanxi Province, China as of December 31, 2012. The reserves estimates in the updated RISC report were prepared in accordance with the standards recognized by the Society of Petroleum Engineers (SPE) in the Petroleum Resources Management System (PRMS).
The updated RISC report indicates that the net total proved reserves under PRMS standards are now approximately 303.7 billion cubic feet (Bcf), with estimated future net cash flow, on an NPV10 basis, of approximately US$1.1 billion. In addition, the updated RISC report estimates the net total proved and probable reserves under PRMS standards are now approximately 440.8 Bcf, with estimated future net cash flow, on an NPV10 basis, of approximately US$2.0 billion. And the updated RISC report estimates the net total proved, probable and possible reserves to be approximately 552.3 Bcf, with an estimated NPV10 of US$2.8 billion.
SEC Net Reserves NPV10*
Proved 51.3 Bcf $40.4 million
Proved +
Probable 443.7 Bcf
Prov + Prob
+Poss 556.2 Bcf
PRMS Net Reserves NPV10
Proved 303.7 Bcf $1.1 billion
Proved +
Probable 440.8 Bcf $2.0 billion
Prov + Prob
+Poss 552.3 Bcf $2.8 billion
* The NPV10 for SEC proved reserves is equal to the
standardized measure of future cash flows of SEC proved
reserves.
In March 2013, RISC had released its reserves report prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The primary difference in the two reports is in regard to the calculation of proved reserves. The PRMS guidelines allow for more Proved Undeveloped locations to be assigned (that would otherwise be assigned as Probable reserves under the rules and regulations of the SEC) when an area is known to have certain geologic connectivity in a region. This difference is particularly relevant to CBM projects where the coal seam characteristics are well known.
CEO Michael R. McElwrath said "Our appraisal well drilling and testing is reflected in the increased 1P, 2P and 3P numbers contained in this updated RISC report on PRMS reserves, compared to the same study at year-end 2011. We are pleased that the report once again underscores the strength of our Shouyang project."
McElwrath added "The updated RISC report supports FEEC's confidence in this project. With funding in place, we are moving ahead with our 2013 drilling program and will provide an update on the status of the drilling program in Thursday's update call."
The full updated RISC report can be found at www.fareastenergy.com.
Additional Information Regarding Estimates of PRMS Reserves
PRMS reserves do not constitute SEC reserves. The estimates in the RISC report were prepared in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Professional Engineers. The resources shown in the RISC report are estimates only and should not be construed as exact quantities. Readers are urged to read the report in its entirety.
NPV10 for PRMS 1P, 2P and 3P reserves may be considered a non-GAAP financial measure as defined by the SEC. Because the standardized measure of discounted future net cash flows applies only to SEC proved reserves, there are no directly comparable US GAAP financial measures to NPV10 for PRMS 1P, 2P and 3P reserves. NPV10 is computed on the same basis as the standardized measure of discounted future net cash flows for SEC proved reserves but using the specified amount of PRMS reserves, as applicable, without deducting future income taxes and using estimates of future gas prices. We believe NPV10 for PRMS 1P, 2P and 3P reserves is a useful measure for investors for evaluating the relative monetary significance of our CBM properties. We further believe investors may utilize NPV10 for PRMS 1P, 2P and 3P reserves as a basis for comparison of the relative size and value of our PRMS reserves to other companies that report similar information. Our management uses this measure when assessing the potential return on investment related to our CBM properties and acquisitions. However, NPV10 for PRMS 1P, 2P and 3P reserves is not a substitute for the standardized measure of discounted future net cash flows for SEC proved reserves. NPV10 for PRMS 1P, 2P and 3P reserves does not purport to present the fair value of our proved CBM gas reserves or our PRMS reserves.
NPV10 for the PRMS 1P, 2P and 3P reserves amounts above represent the present value of estimated future revenues to be generated from the production of the specified amounts of PRMS reserves, calculated using the assumptions set forth in the RISC report, 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%.
Far East Energy Corporation cautions that the disclosures shown above are based on estimates of PRMS reserves 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 PRMS reserves. Estimates of economically recoverable PRMS reserves and of future net cash flows 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 PRMS reserves 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 CBM may differ materially from the amounts estimated.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves as defined in SEC Regulation S-X Section 210.4-10(a). We use certain terms in this news release, such as "PRMS reserves" and "NPV10," that are not permitted to be included in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, File No. 0-32455, available over the Internet at the SEC's website at http://www.sec.gov.
CEO Update Conference Call
FEEC recently announced it will host a CEO update conference call on April 18, 2013 beginning at 9:00 a.m. CDT for shareholders and other interested parties. Details for participation in the upcoming call can be found on the Company's website at: www.fareastenergy.com.
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.
Resource Investment Strategy Consultants (RISC)
RISC is an independent advisory firm that works in partnership with companies to support their interests in the oil and gas industry. RISC offers the highest level of technical, commercial and strategic advice to clients around the world. RISC services include the preparation of independent reports for listed companies in accordance with regulatory requirements. RISC is independent with respect to Far East Energy Corporation.
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. 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.
