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Forward-Looking Statements

The statements contained on this website that state the intentions, hopes, beliefs, anticipations, expectations or predictions of the future of the company 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. 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, the impact of uncertainties of litigation, as well as other risks described in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission.

Additional Information Regarding Estimates of Reserves

The estimates in the RISC reserve report as of December 31, 2011 were prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission and the FASB Accounting Standards Codification Topic 932, Extractive Industries-Oil and Gas with the exclusion of future income tax and Chinese VAT.
Pre-Tax PV10 and the standardized measure of discounted future net cash flows do not purport to be, nor should they be interpreted to present, the fair value of the coal bed methane reserves of the Shouyang project. An estimate of fair value would take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties, and consideration of expected future economic and operating conditions.

Estimated future production of proved reserves and estimated future production and development costs of proved reserves are based on current costs and economic conditions. Future income tax expenses are computed using the appropriate year-end statutory tax rates applied to the future pretax net cash flows from proved coal bed methane reserves, less the 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 rate of 10%.

Pre-Tax PV10 for Proved Reserves may be considered a non-GAAP financial measure as defined by the SEC and is derived from the standardized measure of discounted future net cash flows for proved reserves, which is the most directly comparable US GAAP financial measure. Pre-tax PV10 is computed on the same basis as the standardized measure of discounted future net cash flows for proved reserves but without deducting future income taxes. As of December 31, 2011, our discounted future income taxes were $2.8 million and our standardized measure of after-tax discounted future net cash flows for proved reserves was $62.6 million. 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 our pre-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 company impact 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 methane properties and acquisitions. However pre-tax PV10 is not a substitute for the standardized measure of discounted future net cash flows. Our pre-tax PV10 and the standardized measure of discounted future net cash flows do not purport to present the fair value of our proved coal bed methane gas reserves.

Pre-Tax PV10 for Probable and Possible Reserve amounts above represent the present value of estimated future revenues to be generated from the production of probable or possible reserves, calculated net of estimated lease operating expenses, production taxes and future development costs, using costs as of the date of estimation without future escalation and using 12-month average prices, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, or future income taxes, and discounted using an annual discount rate of 10%. With respect to pre-tax PV10 amounts for probable or possible reserves, there do not exist any directly comparable US GAAP measures, and such amounts do not purport to present the fair value of our probable and possible reserves.

It is not intended that pre-tax PV10 or the FASB’s standardized measure of discounted future net cash flows for proved reserves represent the fair market value of Far East Energy’s proved, probable or possible reserves. 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 are inherently imprecise and subject to revision, and the 10% discount rate is arbitrary. In addition, costs and prices as of the measurement date are used in the determinations, and no value may be assigned to probable or possible reserves. Estimates of economically recoverable oil and natural gas reserves and of future net revenues are based 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 gained from 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.

Note to Investors

The United States Securities and Exchange Commission ("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 formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms on this website, such as "total gas-in-place" and "recoverable CBM resources," that are not permitted to be included in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, File No. 0-32455, available from us on this website under the heading, "SEC Filings". You can also obtain our Form 10-K and our other SEC filings over the Internet at the SEC's website at http://www.sec.gov. Additionally, you can obtain any document we file with the SEC at its public reference facility. Please call the SEC at 1-800-SEC-0300 for further information on the operation of the public reference facility. This website also contains information about adjacent properties on which we have no right to explore. U.S. investors are cautioned that petroleum/mineral deposits on adjacent properties are not necessarily indicative of such deposits on our properties.

Technical Terms

Certain technical terms used in this website associated with descriptions of the potential for oil and gas properties are not consistent with "Proved Reserves" and thus the SEC guidelines prohibit us from including such terms in filings with the SEC. Such terms used herein are defined as follows:

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 be contained 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 proved reserves; but technical, contractual, economic, or regulatory uncertainties preclude such resources from being classified as proved reserves. Recoverable CBM resources may also be estimated assuming future economic conditions different from those prevailing at the time of the estimate.

Contingent Resources:
Those quantities of CBM estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, 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.

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