Far East Energy Corporation (OTCBB:FEEC) today announced that 9 new wells have commenced drilling in the 21 days since the last 2013 drilling program update release issued on Thursday, June 27, bringing to 52 the total number of wells spudded in 2013. Additionally 8 more wells reached total depth, and 15 wells have now been fraced as Far East approaches the halfway point in the first of its planned 2013 frac campaigns. Currently there are 29 rigs in the field.
CEO Michael R. McElwrath commented, "Twenty-nine rigs, several wells spudded per week – this is a remarkable level of drilling activity. Three of the 8 wells that recently reached total depth did so within 12 days from their commencement – very efficient indeed. And the real rewards come from fracing and tying wells into the gathering system. The 15 fracs have gone off well, and 5 wells are being tied into the gathering system now, with 6 more to be tied in shortly. Another 20 wells are planned to be fraced in this campaign, the first of at least two major frac campaigns planned for the year.”
Of the 52 wells commenced by FEEC in 2013, 25 are production wells and 20 of those production wells have reached total depth, with 12 of those 20 having been fraced as of July 17. Another well is scheduled to be fraced today.
McElwrath continued, “We are fracing at a rate of almost 1 well per day, perhaps 3 wells every 4 days. We anticipate major increases in water production as these fracs kick in, which should then be followed by gas when sufficient de-pressuring has occurred. We look forward to the results and will discuss this in more detail as results become available. In the meantime, we will continue our regular drilling and fracing updates; and again pay tribute to the team in China for a truly outstanding field operations performance that compares favorably to the best of CBM operations worldwide.”
As previously announced, effective July 10, city gate gas prices in China increased by an average of 15% across the country following action by the National Development and Reform Commission, China's top policy-making body, with analysts projecting that this will translate into an increase of approximately 25% at the wellhead.
“The gas price increases, which analysts predict may result in an uptick of as much as 25% in wellhead prices, combined with potential tripling of the CBM subsidy from .2 RMB per cubic meter to .6 RMB per cubic meter, could translate to a potential increase in the gas sales price of between 45% and 50% when implemented. This and recent announcements underlining the industry’s continued strong interest in China’s CBM assets put Far East in a solid position as we continue executing the largest and most strategic drilling program of the Company’s history,” said Jennifer Whitley, CFO of Far East.