SOURCE: Far East Energy

May 25, 2005 06:00 ET

Far East Energy Corporation Signs Contracts for First Horizontal Wells

HOUSTON, TX -- (MARKET WIRE) -- May 25, 2005 -- Far East Energy Corporation (OTC BB: FEEC) announced today it signed contracts with the No. 1 Drilling Company of Zhongyuan Petroleum Exploration Bureau (ZPEB) to drill its first two long-reach, underbalanced horizontal wells in the Shanxi Province of China beginning in June 2005. ZPEB, a subsidiary of Sinopec, is one of China's premier drilling companies and utilizes Western equivalent technology.

Far East Energy anticipates spudding the first of two horizontal wells the first week of June. The wells will be drilled in the Shouyang Block of Far East's 4,280 square kilometers (1,057,650 acres) coalbed methane (CBM) project in Shanxi Province, which it holds by virtue of a farmout agreement from ConocoPhillips. Drilling to a depth of approximately 550 meters (1,800 feet), these two wells will be large horizontal wells drilling to the Numbers 15 and 3 coal seams, respectively. Laterals will then be drilled with a goal of completing over 4,000 meters (13,100 feet) of horizontal drilling inside the coal seam for each well.

Far East Energy anticipates that the two wells will each require 35 to 60 days to drill and complete, with additional time required to dewater and test the wells for sustainable production of CBM. Far East Energy will have additional contracts with NQL Energy Services/Black Max Downhole Tools for the provision of directional drilling equipment and with another Western company for compressor services.

According to Michael R. McElwrath, CEO and President of Far East Energy, "These first wells represent a careful blending of Chinese and Western experience and technology. ZPEB is a top-notch, ISO 9001 certified drilling company with excellent equipment and personnel. We have overlaid that expertise with a carefully selected combination of seasoned underbalanced horizontal drilling and/or CBM experienced personnel from the West to provide the greatest possible likelihood of success on these initial wells.

"The drilling of these wells clearly represents a significant milestone in the history of Far East Energy," said Mr. McElwrath. He continued, "Not only are these long-reach, horizontal wells with potential to produce large quantities of gas, but, if successful, they will go a long way toward validating our theory that the key to unlocking the commercial potential of China's enormous CBM resources is the application of underbalanced horizontal drilling."

The highly publicized West-East Pipeline to Shanghai runs approximately ten kilometers (6 miles) south of the southern border of Far East Energy's Shanxi Project, and, the Shanjing II Pipeline to Beijing, which is scheduled for completion in September 2005, is approximately 40 kilometers (25 miles) north of the northern border of the Shouyang Block. Additionally, the Shanxi Province has several local projects planned that are also seeking gas supplies.

Far East Energy expects to drill its third horizontal well in late 2005 in southern China under its Production Sharing Contract for Yunnan Province, which covers roughly 265,000 acres. Far East Energy will solicit bids for its horizontal well project in Yunnan Province early this summer.

Based in Houston, Texas, with offices in Beijing and Kunming, China, Far East Energy Corporation is focused on the acquisition of, and exploration for, coalbed methane through its agreements with ConocoPhillips and China United Coalbed Methane Company (CUCBM).

Statements contained in this press release that state the intentions, hopes, 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 1993, 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: our lack of operating history; limited and potentially inadequate cash resources; risk and uncertainties associated with exploration, development and production of oil and gas; expropriation and other risks associated with foreign operations; matters affecting the oil and gas 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 and subsequent filings with the Securities and Exchange Commission.

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