Far East Energy CorporationMarch 2013[2013.1]Corporate Presentation
PageIndustry Overview 6Company Overview 9Business Strategy 19Table of Contents1
Value Proposition – Shouyang Block■ 20 year sales agreement with pipeline provider Compelling economics at a gas price of...
SEC and PRMS ReservesSEC Report 12/31/2012(1) PRMS Report 12/31/2011(2) (YE 2012 report in progress)SEC Net Reserves Bcf P...
 35+ years of experience Former U.S. Assistant Secretary of Energy under the elder President Bush (41stpresident) during...
 Former Founder, Director, President or CFO of publicly and privately heldbanking, energy and technology companies Chair...
Industry Overview6
Source: EIAChina Energy Demand Projected Evolution, 2011-2030Cumulative % change in projected energy mix (base year = 2010...
Increasing Focus on Unconventional GasChinese natural gas demand expected to double by 2017 and quadruple by 2030(1)With g...
Company Overview9
Favorable Shouyang Production Sharing Contract Approximately 1693.6 km2 (418,500 acres) PSC expiring in 2032 with approxi...
High Permeability Yields Superior EconomicsShouyang High Perm is a Differentiating Factor in ChinaMany coal reservoirs in ...
Resource ComparisonTechnical data suggests that theCompany’s Northern (evaluated) Shouyang acreage compares very wellto pr...
 Black Warrior Basin (Alabama Brookwood)First well drilled in 1977, first gas sold in 1982, firstmonetization in 1985 Bo...
High Perm Development – Marathon Case Study14Early Production HistoryPowder River Basin ProjectNorthwest Location Twp 53N ...
High Permeability Across Entire Shouyang BlockContinue the drilling of appraisal/explorationwells designed to rapidly enha...
First Pipeline Contract for a ForeignCBM Operator in China• Flowing in a pipeline with 1.13 million cubic meters (MMcm/d),...
Gas Sales Agreement 20 year sales contract between ShanxiProvincial Guoxin Energy DevelopmentGroup (“SPG”) and CUCBM on b...
Strong & Growing Local and Regional Market Taiyuan is the Capital of Shanxi Province Taiyuan has a population of 4.2 mil...
Business Strategy19
 Grow Shouyang production, gas sales and, hence, revenues at Shouyang Organically grow valuation attributable to the res...
Increase Production and Revenues Red 1: Developed andproducing at YE 2011 Orange 1A: Planneddevelopment wells at widespa...
 The drilling plan includes aproduction enhancementprogram and an appraisal drillingprogram There are 46 potentialparame...
Pipeline Off-Take and PotentialAdditional CapacityCurrent/Potential Off-Take Capacity (Approximations)MarketMillion Cubic ...
Value Proposition – Shouyang Block■ 20 year sales agreement with pipeline provider Compelling economics at a gas price of...
ContactsWebsitewww.fareastenergy.comInvestor Relations ContactsJennifer H. Whitley – Interim CFODavid Nahmias – Investor R...
Cautionary StatementsPlease note that any comments made today about expectations are to be considered forward-looking stat...
Cautionary Statements• Definition of Technical Terms:Certain technical terms used in this presentation associated with des...
Cautionary StatementsAdditional Information Regarding Estimates of Reserves and Resources• The estimates in the RISC SEC r...
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Far eastenergymar13pres

  1. 1. Far East Energy CorporationMarch 2013[2013.1]Corporate Presentation
  2. 2. PageIndustry Overview 6Company Overview 9Business Strategy 19Table of Contents1
  3. 3. Value Proposition – Shouyang Block■ 20 year sales agreement with pipeline provider Compelling economics at a gas price of Rmb 1.45/m3 (approximately $6.50/Mcf)with current subsidies; gas price projected to rise to Rmb 1.85/m3 (approximately$8.30/Mcf) when announced subsidies are implemented China gas prices and CBM production incentives are both increasingExcellent Gas Pricing■ 4 Year extension of most productive acreage and key amendments to Shouyang PSCallow Far East Energy to produce and sell gas and retain its acreage with greatercertainty Netherland Sewell and ARI have verified high gas/high permeability (much soughtafter combination; unique in China coals) and project high production ratesShouyang is Unique4 Year Extension/EasierAcreage RetentionHigh Permeability Production Sharing Contract covering one of China’s largest coalbed methaneblocks: Shouyang, plus two other PSCs RISC YE 2012 SEC reserve report presents total net proved + probable reserves (2P)of 443.7 Bcf with NPV-10 of $816.1million. The standardized measure of discountedfuture net cash flows for proved oil and gas reserves and the NPV10% valuation forproved reserves is $40.4 million. RISC YE 2011 SPE-PRMS reserve report presents net2P (proved + probable) reserves of 433.2 Bcf (12.27 Bcm), NPV-10 2P US $1.5 billion(YE 2012 report in progress) Exceptional pipeline access (critical for large-scale projects). Shanjing II Pipelinenearby Shouyang PSCLarge Acreage PositionSignificant 1P and 2P ReservesExceptional Infrastructure Shouyang project at stage where high perm reservoirs often begin to exhibitexponential production increases. Additional wells projected to create pressure sinkand production spike Completed pipeline off-take potential of 230 MMcf/d (6.51 MMcm/d) with anadditional 95 MMcf/d (2.69 MMcm/d) of potential off-take currently underconstruction and/or consideration (assumes access to nearby pipelines, power plant,and micro LNG facility)Project Readiness2
  4. 4. SEC and PRMS ReservesSEC Report 12/31/2012(1) PRMS Report 12/31/2011(2) (YE 2012 report in progress)SEC Net Reserves Bcf PRMS Net Reserves BcfSEC Total Proved (1P) 51.3 PRMS Total Proved (1P) 319.5SEC Total Probable 392.4 PRMS Total Probable 113.7SEC Total Net 2P (Proved + Probable) Reserves 443.7 PRMS Total Net 2P (Proved + Probable Reserves) 433.212/31/2012 12/31/2011 (YE 2012 report in progress)SEC Future Net Revenue NPV-10 ($millions) PRMS Future Net Revenue NPV-10 ($millions)SEC NPV-10 Proved (1P) $40.4 PRMS NPV-10 Proved (1P) $830.7SEC NPV-10 Probable $775.7 PRMS NPV-10 Probable $668.6Total 2P (Proved + Probable) NPV-10 $million $816.1 Total 2P(Proved + Probable) NPV 10 $1,499.3(1) SEC reserve report prepared by RISC as of 12/31/2012(2) PRMS reserve report prepared by RISC as of 12/31/2011 (2012 reserve report in progress)3
  5. 5.  35+ years of experience Former U.S. Assistant Secretary of Energy under the elder President Bush (41stpresident) during period of highest CBM growth in United States; Responsible for allfossil energy programs and policy Director of National Institute Petroleum & Energy ResearchHighly Experienced Management TeamMichael R. McElwrathCEO, President & DirectorDr. Zhendong YangSenior Vice President -Geology 40+ years of experience Pioneer in China CBM, Chief Geologist with Amoco, Arco, BP CBM projectsRebecca LePresident, CFO FEEB 30+ years of experience CBM Drilling & Production Manager; District Manager for Halliburton - RussiaRobert HockertChina Country Manager 15+ years of experience CPA, MPA, BBA; Amerada Hess, PriceWaterhouse, CitiCorp, Con Edison 15+ years of experience Former Finance Director of Global Energy Development PLC, CFO of Zero EmissionEnergy Plants, Ernst & Young LLP, CPAJennifer H. WhitleyInterim CFO4
  6. 6.  Former Founder, Director, President or CFO of publicly and privately heldbanking, energy and technology companies 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 working with NDRCBoard of DirectorsC. P. ChiangWilliam A. AndersonDr. Donald A. Juckett Former China Country Manager of Burlington Resources 40 years with Exxon, British Gas, Tenneco, etc.John C. Mihm Retired Senior Vice President of ConocoPhillips China background dates to 1983Lucian L. Morrison Founder and Director of numerous trust and investment companies Former Chairman and CEO of Wing Corp. (exploration and productioncompany)Thomas E. Williams Retired President of Mauer Technology and VP, R&BD of Noble TechnologyServices Division (both Noble Corporation subsidiaries) Over 35+ years of experience Former U.S. Assistant Secretary of Energy Director of National Institute Petroleum & Energy ResearchMichael R. McElwrath5
  7. 7. Industry Overview6
  8. 8. Source: EIAChina Energy Demand Projected Evolution, 2011-2030Cumulative % change in projected energy mix (base year = 2010)Source: Interfax, FEEC China has indicated intent to expand natural gaspricing reform in the coming year Current price subsidy of $1.12/Mcf projected toincrease to approximately $2.90/Mcf 100% refund of VAT tax PRC royalty set to zero until gas production exceeds50 MMcf/d, and maximum PRC royalty of 3% after gasproduction exceeds 500 MMcf/dChina CBM IncentivesSpecifically incentivizing CBM developmentSource: China Statistical Yearbook 2010China Estimated Gas ResourcesBy type, 2010 China is the world’s largestconsumer of energy, andits growth in energy use isprojected to outstrip therest of the world Energy demand projectedto shift from coal to naturalgas and renewables:− Gas demand projected todouble by 2017 and morethan quadruple by 2030 China’s gas resources arelargely unconventional,and CBM accounts formore than one third totalsupply:− China’s policy seeks tospecifically incentivizedevelopment of CBMresources via subsidiesand favorable fiscal termsSource: WoodMackenzie, EIA-1.2% -2.4% -3.2%-4.4%-5.6%-7.0%-8.2% -8.8% -9.4% -9.7% -9.6% -9.7% -10.0% -10.2% -10.6% -10.8% -10.9% -10.9% -10.9% -10.7%1.0% 1.3% 1.3% 1.4% 1.5% 1.7% 1.8% 2.0% 2.0% 2.1% 2.3% 2.3% 2.4% 2.4% 2.5% 2.6% 2.7%0.9% 1.4% 1.7% 2.4% 2.8% 3.2% 3.6% 3.6% 3.6% 3.5% 3.5% 3.4% 3.3% 3.3% 3.3% 3.4% 3.4%0.9% 1.1% 1.4%1.6% 1.9% 2.1% 2.3% 2.5% 2.6% 2.8% 2.9% 3.0% 3.1% 3.2% 3.4% 3.5% 3.6%1.6%1.9%2.5%2.6%2.6% 2.4% 1.9% 1.6% 1.4% 1.5% 1.7% 1.9% 2.0% 1.9% 1.8% 1.4%0.9%2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Coal Natural Gas Renewables Nuclear Liquids2011Coal60%Gas6%Other34%Coal71%Gas3%Other26%China Projected Energy Mix2010 2030Conventional2%ConventionalYet-to-Find24%CoalbedMethane35%Shale Gas29%Tight Gas10%Total = 3,687 TcfOverview of Chinese Gas MarketEnergy demand continues upswing, while gas increases in importance7
  9. 9. Increasing Focus on Unconventional GasChinese natural gas demand expected to double by 2017 and quadruple by 2030(1)With gas demand increasing from just over 150 billion cubic meters (approximately 5.3 Tcf) nowto more than 600 Bcm (approximately 21.2 Tcf) by 2030, China will have to rely onunconventional supplies such as CBM and coal-to-gas,as well as both piped and liquefied natural gas (LNG) imports(1)Coalbed methane, coal-to-gas to exceed shale gas production until after 2020(1)Chinese government officials have stated that given that CBM is an integral part of the Chineseenergy infrastructure, the country’s aim is to see a 250% increase in CBM production over the nextfive years and a 300% increase in the amount of natural gas used by 2020(1) Gavin Thompson, Wood Mackenzie, Head of Asia Pacific Gas Research, May 2012 8
  10. 10. Company Overview9
  11. 11. Favorable Shouyang Production Sharing Contract Approximately 1693.6 km2 (418,500 acres) PSC expiring in 2032 with approximately 1658.8 km2 operated by Far East Energy(one of the largest PSCs in China) 4 year extension of exploration period for Areas A1 & B 2 year extension of exploration period for Area C (deeper and likely not as prospective) FEEC has 100% interest in the approximately 65 km2 (15,990 acres) area of certified CBM resources comprising Area A1(certified by the Chinese Ministry of Land and Resources (MLR)) CUCBM has 100% interest in the approximately 35 km2 (8,675 acres) of certified CBM resources comprising Area A2 (certifiedby the MLR) 70% Far East /30% CUCBM split in remaining 1591 km2 (393,835 acres) CUCBM pays 30% development costs; FEEB recovers all exploration costs out of production ConocoPhillips has 3.5% Revenue Interest out of FEEC share PRC royalty is zero until reaching 50 MMcf/d (1.416 MMcm/d) of gas production, and up to 3% after reaching 500 MMcf/d(14.16 MMcm/d) 10Shouyang Contract AreaTaiyuan
  12. 12. High Permeability Yields Superior EconomicsShouyang High Perm is a Differentiating Factor in ChinaMany coal reservoirs in China have very high gas content, but few also have thebenefit of high permeability, with none, so far, as high as Shouyang Coal reservoirs with high perm have a greater propensity for producing at higher levels relative totight gas reservoirs Higher perm allows wells to maintain production for longer periods of time, enabling higher gasrecovery rates, so fewer wells can drain the same acreage, resulting in superior economics Similar discoveries in Black Warrior and San Juan basins led to the incredible growth of CBM industryin U.S. Combination of high perm and high gas are desired characteristics a major is looking for in a CBM play Large portion of CBM acquisitions in 2008 and 2009 involved high perm/high gas plays in Australia atprices averaging $1.5 billion per Tcf for 2P PRMS reserves This gas is primarily targeted at Asian export markets, including China We have an attractive commodity that shares the same characteristics without the added cost ofshipping to China; our CBM is produced and domestically sold directly into a pipeline11
  13. 13. Resource ComparisonTechnical data suggests that theCompany’s Northern (evaluated) Shouyang acreage compares very wellto premier U.S. CBM playsSan Juan Black WarriorN. ShouyangAcreageCoal Gas Content, scf/ton(m3/ton)(b)400-500(11.33-14.16)350-500(9.91-14.16)400-600(a)(11.33-16.99)Coal Thickness: Typical Net Coal, feet(m)(b)40(12)5(1.5)10-15(3-4.5)Pressure (psi)(MPa)(b)1500(10.3)400(2.8)400(2.8)Permeability (mD)(b) 25 75 100(d)Recovery Factor, %(c) 80 65 50-70Note: Actual results are likely to vary from the following preliminary estimates, which are based on various assumptionsNotes: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. and Southwest Partnership on Carbon Sequestration.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, 2008.12Units of Measure:scf/ton = Standard cubic feet per ton m3/ton = Cubic meters per tonPsi = Pounds per square inch MPa = megapascalmD = Millidarcy
  14. 14.  Black Warrior Basin (Alabama Brookwood)First well drilled in 1977, first gas sold in 1982, firstmonetization in 1985 Bowen Basin (Fairview Australia)First well drilled in 1993, first gas sold in 1998, firstmonetization in late 2005, second large monetization in 2008 San Juan Basin (Fruitland Coal)(Colorado/New Mexico)Amoco drilled first coal well in 1977, first gas sales in about1982, big developments from 1985-1990 Powder River Basin (Montana/Wyoming)Marathon drilled 100 wells in 15 months and had noappreciable gas production during that period. After a fewmore months and another 10 wells, production began to climbat a rate of 1 million cubic feet (28,320 m3) per day permonth. In other words, Marathon had to have 100+ wells thathad achieved significant dewatering before gas productionramped up substantially.Robust Economics in High Permeability ProjectsVirtually all world-class CBMfields have high permeability.High perm is important tofacilitate robust economics.Many high perm CBM projectshave required 4 to 8 years toreach substantial production.We are at that point. Thekey is to drill enough wells toget a core area dewatered.We put this into perspectiveagainst the developmenttimelines for several well-known, world-class projects.Companies with large financial resources took 4 to 8 years and anywhere from 21 to 110wells to achieve significant gas production. These projects became world-class.Critical Mass of Wells Necessary to Initially Dewaterand Achieve Significant Production Increases13
  15. 15. High Perm Development – Marathon Case Study14Early Production HistoryPowder River Basin ProjectNorthwest Location Twp 53N Rge 77WHigh perm economics unlocked by having sufficientnumber of wells to dewater core areaShouyang gas content is 4 to 8 times higher, potentially yielding commensurately higher gas volumesMarathon drilled 100+ wells in 15 months before appreciable gas production. Aftersufficient dewatering had occurred, production began to climb at a rate of1 million cubic feet (28,320 m3) per day month over month.Among known analogs, this project required the highest number of wells to dewaterand achieve a large gas spike.
  16. 16. High Permeability Across Entire Shouyang BlockContinue the drilling of appraisal/explorationwells designed to rapidly enhance valuationby adding reserves and contingent resourcesdelineating the block’s full potential15
  17. 17. First Pipeline Contract for a ForeignCBM Operator in China• Flowing in a pipeline with 1.13 million cubic meters (MMcm/d),40 million cubic feet per day (40 MMcf/d) of capacity20 year gas sales contract with ShanxiProvincial Guoxin Energy DevelopmentGroup (SPG)• Gas sales agreement price is 1.20 Rmb/m3 plus current governmentsubsidy of 0.2 Rmb/m3 plus 0.05 Rmb/m3 Shanxi Province subsidy.Announcement was made 11/2012 to increase the governmentsubsidy to 0.6 Rmb/m3Current wellhead price is 1.45 Rmb/m3,including current subsidies, which couldrise to 1.85 Rmb/m3 (when announcednew subsidies are implemented)• Pipeline must “take” all gas produced up to300,000 m3/d (10.6 MMcf/d), or pay for available volumes not takenFavorable “take-or-pay” contract terms• Setting stage for strong competitive bidding for selling gas intosecond pipeline built to the areaAbility to renegotiate contract forvolumes in excess of 300,000 m3/d• Second pipeline built to our block presents possibility of even higherprices as two lines may compete for Far East Energy’s gas; powerplant, LNG facility and chemical plant are all in progress and nearour 1H pilot areaAdditional Gas Off-Take Possibilities16
  18. 18. Gas Sales Agreement 20 year sales contract between ShanxiProvincial Guoxin Energy DevelopmentGroup (“SPG”) and CUCBM on behalf ofFEEB Take-or-pay contract for 300,000 m3/d(approximately 10.6 MMcf/d) Current price is Rmb 1.45/m3 ($6.50/Mcf)with current subsidy, and could rise to Rmb1.85/m3 ($8.30/Mcf) when announcedsubsidies are implemented 54 wells connected to the gathering lines asof 12/31/2012 Far East has ability to renegotiate contractfor volumes in excess of 300,000 m3/d SPG must commit to accept at least1,000,000 m3/d (approximately 35 MMcf/d)by 2015, but this does not obligate FEEB tosell in excess of 300,000 m3/d1 – Power plant2 – LNG facility3 – Chemical plantNote: Chart not to scaleSPG gas pipelineSI competing gas pipeline17
  19. 19. Strong & Growing Local and Regional Market Taiyuan is the Capital of Shanxi Province Taiyuan has a population of 4.2 million as of2010 Taiyuan to increase the role of gas in itsenergy mix The city intends all buses and taxis to begas-powered by 2015, with 62 vehicular gasrefilling stations to be built by the sameperiod Local Surrounding Area Nanyanzhu and Shouyang: Plans havebeen announced to convert all homes inNanyanzhu and Shouyang to the localCBM grid Chemical plant under construction12 kilometers south of 1H pilot areausing CBM as a feedstock 120 MW power plant (25 MMcf/d) and a20 MMcf/d (566,400 m3/d) LNG facility(very close proximity to our 1Hproduction area)18Map not to scale and city, village locations are approximate
  20. 20. Business Strategy19
  21. 21.  Grow Shouyang production, gas sales and, hence, revenues at Shouyang Organically grow valuation attributable to the reserve base Convert 2P reserves to 1P reserves Establish additional 2P reserves and 2C resources to optimize value Expand our relationships with key CBM purchasers in Shanxi ProvinceBusiness Strategy20
  22. 22. Increase Production and Revenues Red 1: Developed andproducing at YE 2011 Orange 1A: Planneddevelopment wells at widespacing Yellow 1B: Planneddevelopment wells at 40acspacing expanding to 100-160ac spacing in SW pilot Blue 3: PRMS ProvedundevelopedExpanding the 1H Pilot Area (Area A – 2013/2014) All wells will be drilled on already Proved locations (PRMS) 1B wells to the east drilled on 40ac spacing will optimize near-term production 1A wells identify best potential locations for the next concentration of wells 1A and 1B wells in SW corner on wider spacing (100-160ac) to evaluate optimalspacing to maximize economics 1A wells in mid-section may reveal ability to drill on spacing even greater than160ac21
  23. 23.  The drilling plan includes aproduction enhancementprogram and an appraisal drillingprogram There are 46 potentialparameter/test well locations inthe middle and southeasternportions of the Shouyang block,(minimum 25 to be drilled 1H2013) which may assist inretaining about 1000 km2 throughthe establishment of certifiedCBM resources by the ChineseMinistry of Land and Resources An Environment ImpactAssessment (EIA) for 38 wells iscompleted 4 year extension was an integralpart of this strategy and makesretention of key areas(approximately 1200 km2)achievableOrganically Grow Reserve Base2013/2014 Proposed Appraisal Well Drilling Plan22
  24. 24. Pipeline Off-Take and PotentialAdditional CapacityCurrent/Potential Off-Take Capacity (Approximations)MarketMillion Cubic Feet Per Day(MMcf/d)/(MMcm/d)Current Contract withSPG Pipeline (PL)40/1.13SPG Parallel PL(1) 50/1.42Shanxi International PL(1)(completed)190/5.38Power Plant(1) 25/0.71LNG Facility(1) 20/0.57Total Near-TermOff-Take Potential325/9.20(1) Volumes stated represent maximum amounts that could potentially be contracted to these facilities. Preliminary discussions only; no formal contractual discussions to date. 23
  25. 25. Value Proposition – Shouyang Block■ 20 year sales agreement with pipeline provider Compelling economics at a gas price of Rmb 1.45/m3 (approximately $6.50/Mcf)with current subsidies; gas price projected to rise to Rmb 1.85/m3 (approximately$8.30/Mcf) when announced subsidies are implemented China gas prices and CBM production incentives are both increasingExcellent Gas Pricing■ 4 Year extension of most productive acreage and key amendments to Shouyang PSCallow Far East Energy to produce and sell gas and retain its acreage with greatercertainty Netherland Sewell and ARI have verified high gas/high permeability (much soughtafter combination; unique in China coals) and project high production ratesShouyang is Unique4 Year Extension/EasierAcreage RetentionHigh Permeability Production Sharing Contract covering one of China’s largest coalbed methaneblocks: Shouyang, plus two other PSCs RISC YE 2012 SEC reserve report presents total net proved + probable reserves (2P)of 443.7 Bcf with NPV-10 of $816.1million. The standardized measure of discountedfuture net cash flows for proved oil and gas reserves and the NPV10% valuation forproved reserves is $40.4 million. RISC YE 2011 SPE-PRMS reserve report presents net2P (proved + probable) reserves of 433.2 Bcf (12.27 Bcm), NPV-10 2P US $1.5 billion(YE 2012 report in progress) Exceptional pipeline access (critical for large-scale projects). Shanjing II Pipelinenearby Shouyang PSCLarge Acreage PositionSignificant 1P and 2P ReservesExceptional Infrastructure Shouyang project at stage where high perm reservoirs often begin to exhibitexponential production increases. Additional wells projected to create pressure sinkand production spike Completed pipeline off-take potential of 230 MMcf/d (6.51 MMcm/d) with anadditional 95 MMcf/d (2.69 MMcm/d) of potential off-take currently underconstruction and/or consideration (assumes access to nearby pipelines, power plant,and micro LNG facility)Project Readiness24
  26. 26. ContactsWebsitewww.fareastenergy.comInvestor Relations ContactsJennifer H. Whitley – Interim CFODavid Nahmias – Investor RelationsHuw Williams – Investor Relations, Asiainvestorrelations@fareastenergy.com281.606.1600Corporate Headquarters363 N. Sam Houston Parkway E., Suite 380Houston, Texas 77060Telephone: 832.598.047025
  27. 27. Cautionary StatementsPlease note that any comments made today about expectations are to be considered forward-looking statements and are subject to risks and uncertainties. Many factors could cause actualresults to differ materially. Accordingly, please refer to the accompanying slides and our SEC filings on our website that define forward-looking statements and list risk factors and otherevents that could impact future results, which cautionary statement is incorporated herein by reference. Also please note that the Company undertakes no duty to update forward-lookingstatements.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 itsmanagement 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, asamended. 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 differmaterially 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; the volume of gas that is ultimately produced or sold from our wells may be less than anticipated; the fracturestimulation 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 betweenShanxi Province Guoxin Energy Development Group Limited and China United Coalbed Methane Corporation, Ltd., to which we are an express beneficiary; additional wells may not bedrilled, or if drilled may not be timely whether due to poor weather conditions, lack of availability of drilling rigs, poor execution by our drilling contractors, or other reasons; additional pipelinesand 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 localdistribution/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 withcoal mining operations or coordination of our exploration and production activities with mining activities could adversely impact or add significant costs to our operations; the Company’sinability to comply with certain covenants and obligations, satisfy certain continuing representations, or remedy a material adverse effect to the business of the Company or other events ofdefault could result in early termination of the Standard Chartered Bank credit facility and the outstanding senior secured notes and require immediate repayment of all outstanding amountsthereunder; the Company may be unable to enter into a resources-based lending facility or obtain additional debt financing on commercially advantageous terms, if at all; the Company maynot have sufficient capital to drill sufficient appraisal wells to retain productive acreage upon expiration of the exploration period under the Shouyang production sharing contract; our lack ofoperating 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 or at all and, if reported, may be smaller than anticipated; our inability to extract or sell all or a substantial portion of our estimatedcontingent resources; we may not satisfy requirements for listing our securities on a securities exchange; expropriation and other risks associated with foreign operations; disruptions incapital markets affecting fundraising; matters affecting the energy industry generally; lack of availability of oil and gas field goods and services; environmental risks; drilling and productionrisks; 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 withthe 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.26
  28. 28. Cautionary 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” inthe 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:– PRMS Reserves: This term refers to those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulationsfrom a given date forward under defined conditions under the Petroleum Resources Management System (PRMS) methodology promulgated by the Society of ProfessionalEngineers. PRMS reserves must further satisfy four criteria: they must be discovered, recoverable, commercial and remaining (as of the evaluation date) based on thedevelopment project(s) applied.– 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 becontained 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 provedreserves; but technical, contractual, economic, or regulatory uncertainties preclude such resources from being classified as proved reserves. Recoverable CBM resourcesmay also be estimated assuming future economic conditions different from those prevailing at the time of the estimate.– SPE Contingent Resources: Those quantities of CBM estimated, as of a given date, to be potentially recoverable from known accumulations by application of developmentprojects, 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:The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formationtests to be economically and legally producible under existing economic and operating conditions. We discuss certain terms and methodologies, such as PRMS reserves andcontingent resources, that are not permitted to be included in filings with the SEC. Investors are urged to consider closely the disclosures in our Form 10-K, File No. 0-32455,available on our website at http://www.fareastenergy.com under the heading, “SEC Filings.” You can also obtain our Form 10-K and our other SEC filings over the Internet at theSECs website at http://www.sec.gov. This presentation contains information about adjacent properties on which we have no right to explore. U.S. investors are cautioned thatpetroleum/mineral deposits on adjacent properties are not necessarily indicative of such deposits on our properties. This presentation also includes various estimates andcomparisons contained in studies and reports posted on our website at http://www.fareastenergy.com under the heading “Presentations.” Actual results are likely to vary from theresults in the studies and reports.27
  29. 29. Cautionary StatementsAdditional Information Regarding Estimates of Reserves and Resources• The estimates in the RISC SEC reserve report as of December 31, 2012 were prepared in accordance with the definitions and regulations of the U.S. Securities and ExchangeCommission and the FASB Accounting Standards Codification Topic 932, Extractive Industries-Oil and Gas with the exclusion of future income tax and Chinese VAT. The estimatesin the RISC PRMS reserve and contingent resources report as of December 31, 2011 were prepared in accordance with the definitions and guidelines contained within the PetroleumResources Management System promulgated by the Board of the Society of Professional Engineers in March 2007.• Pre-Tax PV10 for SEC Proved Reserves, Pre-Tax PV10 for PRMS Reserves, and the standardized measure of discounted future net cash flows do not purport to be, nor should theybe interpreted to present, the fair value of the coal bed methane reserves. An estimate of fair value would take into account, among other things, the recovery of reserves not presentlyclassified as proved, the value of unproved properties, and consideration of expected future economic and operating conditions.• Estimated future production of SEC proved reserves and estimated future production and development costs of SEC proved reserves are based on current costs and economicconditions. Future income tax expenses are computed using the appropriate year-end statutory tax rates applied to the future pretax net cash flows from SEC proved reserves, lessthe tax basis of Far East Energy. All wellhead prices are held flat over the forecast period for all reserve categories. The estimated future net cash flows are then discounted at a rateof 10%.• Pre-Tax PV10 for SEC proved reserves may be considered a non-GAAP financial measure as defined by the SEC and is derived from the standardized measure of discounted futurenet cash flows for SEC proved reserves, which is the most directly comparable US GAAP financial measure. Pre-tax PV10 for SEC proved reserves is computed on the same basisas the standardized measure of discounted future net cash flows for proved reserves but without deducting future income taxes. As of December 31, 2012, our estimated discountedfuture income taxes were $0 and our standardized measure of after-tax discounted future net cash flows for proved reserves was $40.4 million.• Pre-Tax PV10 for PRMS reserves may be considered non-GAAP financial measures as defined by the SEC. There do not exist any directly comparable US GAAP measures. Pre-taxPV10 for PRMS reserves is computed on the basis set forth in the RISC PRMS reserve and contingent resources report as of December 31, 2011 and includes proved, probable andpossible reserves as described therein.• We believe pre-tax PV10 is a useful measure for investors for evaluating the relative monetary significance of our natural gas properties. We further believe investors may utilize ourpre-tax PV10 as a basis for comparison of the relative size and value of our proved reserves to other companies because many factors that are unique to each individual companyimpact the amount of future income taxes to be paid. Our management uses this measure when assessing the potential return on investment related to our coal bed methaneproperties and acquisitions. However pre-tax PV10 is not a substitute for the standardized measure of discounted future net cash flows.• Far East Energy cautions that the disclosures shown above are based on estimates of proved, probable or possible reserve quantities and future production schedules which areinherently imprecise and subject to revision, and the 10% discount rate is arbitrary. Estimates of economically recoverable oil and natural gas reserves and of future net revenues arebased 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 gainedfrom production histories and on assumptions as to geologic formations and other matters. Actual quantities of oil and natural gas may differ materially from the amounts estimated.Additional Information Regarding Statements of ValuationStatements of valuation contained in this presentation are presented for illustrative purposes only and do not represent the actual value that Far East may realize in an arm’s lengthtransaction on commercially reasonable terms, which may be significantly more or less favorable than suggested by such statements. Valuation of assets is a complex process involving theapplication of subjective business and financial judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particularcircumstances. In making such statements of valuation, Far East did not apply any generally accepted valuation methods, but presented such statements solely for illustrative purposes incomparison to other CBM fields. Such statements do not purport to be appraisals or necessarily reflect the prices at which any assets actually may be sold, which are inherently subject touncertainty. 28

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