Exclusive Interview With The President, CEO And Director: Far East Energy Corporation (FEEC) - Michael R. McElwrath
67 WALL STREET, New York - January 9, 2012 - The Wall Street Transcript has just published its Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online. Topics covered: Narrower Trading Range for Oil and Gas - Capital Expenditures and Consolidation Activity - Refining Crude Price Differentials - Frontier Exploration and Development
Companies include: Enterprise Products Partners (EPD); Aker (ASKO.OL); Anadarko (APC); Apache (APA); Atlas Energy (ATLS); and many more.
In the following brief excerpt from the Oil & Gas: Refining, Independent and Major Integrated Report , expert analysts discuss the outlook for the sector and for investors.
Michael R. McElwrath is President, Chief Executive Officer and Director at Far East Energy Corporation. Previously, he was Vice President of TMP/Hudson Global Resources, the parent company of Monster.com. He served as Acting Assistant Secretary of Energy in the first Bush administration, charged with development of the nation's coal, oil and gas policies and management of $2.1 billion in programs including the Clean Coal Program, the National Oil and Gas Research Program and the Strategic Petroleum Reserve.
He was an International Negotiator and Policy Adviser in the Reagan administration. Upon leaving the Bush administration, Mr. McElwrath served as Director of the National Institute for Petroleum and Energy Research and Director of BP plc's outsourced exploration and production lab for the Americas. He holds a law degree from The University of Texas School of Law, as well as a B.A.
TWST: Please begin with an introduction to the company, including some highlights from its history and an overview of its primary projects.
Mr. McElwrath: The heart of the Far East Energy (FEEC) story is that we have discovered and are pursuing what may be one of the more significant coalbed methane, CBM, plays in the world - our Shouyang Project in China. One of the reasons that our Shouyang Block has the potential to be one of the world's significant CBM plays is because it contains a very large area where high-gas content is coupled with high permeability, and virtually every world-class CBM play in the world is characterized by high permeability. Stated another way: Without high perm, you cannot have a world-class CBM project, which stands to reason since permeability refers to the ease with which the gas can flow through the coal to the wellbore. The other element that makes Shouyang significant and unique is that it is in energy-starved, high-growth China.
And while China has enormous coal deposits that are incredibly rich in gas content, nevertheless they have heretofore been difficult to produce because China's coals are virtually all very low in permeability. Far East has discovered the first large area of high permeability coal in China, which may be the needed breakthrough in China's efforts to convert its enormous coalbed methane reserves into a much-needed source of gas and cleaner-burning energy. As a company, we are focused totally on coalbed methane in China. We have about 1,250,000 acres under contract in China. That's an area roughly the size of the state of Delaware. The gas in place is estimated to be about 20 to 27 trillion cubic feet. As a frame of reference, that's enough gas to supply the needs of the entire United States for a year - so lots of gas. But it is that high permeability area in Shouyang that has us excited because the gas there can potentially be produced with fewer wells over a larger area and with higher rates of recovery, potentially yielding the economics associated with the premier CBM plays in the world.
We recently received an independent engineering report from Netherland, Sewell and Associates that places the net present value at 10% discount, NPV10, of the net contingent cash flow for the three target coal seams in Far East Energy's Shouyang Block at $1.05 to $1.7 billion. If you are lucky enough to discover a high-permeability/high-gas area with the potential to be a major project, you have to secure a means to deliver large volumes of gas to the market. That is not always easy in China, which is in the process of developing a pipeline network, and in fact, most foreign producers of gas in China market it as compressed natural gas, CNG, from facilities that are constrained as to the volumes that can be processed and moved to market. Here again, we have set ourselves apart and have uniquely positioned Far East.
In 2010, a little over a year ago, we secured a gas contract with a pipeline, which again is something unique. We found the only area of high perm, and now we have the only contract held with a pipeline by a Western CBM company in China. Those two big events, that high permeability and that pipeline contract, have allowed us to do something else that we're pleased with and it is certainly a milestone in our history. We recently attracted investment from Blackrock, Jennison and Soros funds. The three of those probably own about 20% to 25% of the company. They joined the IFC out of the World Bank Group and Goldman Sachs funds, who together probably hold another 15% or so. So between Blackrock, Jennison, Goldman, IFC, Soros, that's probably about 40% of our company.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.