Far East Energy Announces 42% Increase in Gas Price for 2014 and Operations Updates
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HOUSTON, Dec. 16, 2013
Far East Energy Corporation (OTCBB:FEEC), the U.S. listed company that operates the Shouyang Block Coalbed Methane (CBM) Production Sharing Contract (PSC) in Shanxi Province, People's Republic of China, today announced a substantial increase in its gas pricing for gas sales beginning January 1, 2014, as well as a continued increase in gas volumes.
Effective 2014, Far East Energy's contracted base gas sales price for its 20-year take-or-pay contract with Shanxi Provincial Guoxin (SPG) will be RMB 1.7/m3, equivalent to US$7.90/Mcf, up 42% from the current RMB 1.2/m3 (US $5.58/Mcf). Because CBM prices are negotiated outside the State pricing regime management believes that this increase highlights the rising and strong demand for natural gas from Shanxi Province as it seeks to add more gas into its energy mix.
In addition to the increased base price, the current subsidies of 0.25 RMB/m3 will mean a total price of US $9.07/Mcf for gas production in 2014. If previous pronouncements made by various government sources to the effect that there will be an increase in the subsidy to a total of RMB 0.65/m3 are implemented, Far East Energy's price will then rise to approximately $10.93/Mcf; or, a 62% increase on current gas pricing based on the current RMB/USD exchange rate.
Commenting, CEO Mike McElwrath said, "Obviously this is an exceptionally high gas price and we are grateful for the assistance of CUCBM in our recent negotiations. This is pricing that would be exceptional for onshore gas anywhere in the world, and we are gratified by this accomplishment. This new pricing underlines the growth in demand for domestically produced natural gas in China as households, city fleets and industry are increasingly being converted to run on natural gas, substituting for more expensive and/or polluting coal, diesel and fuel oil. In and around Shouyang we are seeing the positive results of local households receiving our gas and residents are pleased to be receiving a clean domestic fuel source. The trend in Chinese natural gas prices is upward, and Far East is well-positioned to benefit from these current price increases."
Updating its announcement of December 12th that gas production had increased to 1,034,038 cubic feet per day (1,034Mcf/d), the Company announced that production for December 15th was 1,157,967 cubic feet per day (1,158Mcf/d).
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.
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.
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