Mr. McElwrath: Far East is one of the largest coalbed methane acreage holders in China. Coalbed methane (CBM) exploration, production and gas sales in China is our only business. We have about 1.3 million acres under concession in China, with estimated recoverable coalbed methane resources of 9.2 trillion cubic feet to 12.5 Tcf. So lots of gas, and the two largest blocks are very nicely located in terms of pipeline infrastructure. They are each roughly 500,000 acres in size, and the northernmost of those two blocks sits close by the large pipeline to Beijing. The southern block sits just a few kilometers north of the west-east pipeline running to Shanghai. In addition, there is a provincial pipeline network with branches in various stages of completion. One of the branches runs along the eastern edge of the southern block and another is planned to be built directly across the location of the most active area of drilling. Regarding production, we've had very exciting news over the past three years. China's coals are all known to contain very high gas content; they're all full of methane. Hence, the yearly loss of life from mine explosions in China during mining operations ranges upwards of 6,000 miners annually. That's an ugly statistic, but certainly bears out the fact that the coals are full of gas. To the extent there is any negative challenge in producing gas from the coals in China - well, the coals are generally low in permeability, meaning they're somewhat tightly packed and it can be more difficult for the gas to move through the coal to the well bore from longer distances. But in our northernmost block (which, by the way, is called the Shouyang Block), in 2006 we discovered an area of very high permeability, which is a breakthrough for China. High permeability is critical in the sense that it was the discovery of large areas of coal in the Black Warrior and San Juan Basins in the United States that contained not only high gas content, but also high permeability. That really led to the dramatic growth of CBM in the US. So we believe that we've discovered a breakthrough area in China that will hopefully become a truly world-class asset. Over the past three years, we've been dewatering that area, and we've reached desorption pressure in a portion of the area being explored. The gas is beginning to produce, and we think we're now on the verge of capitalizing on the advantages of high permeability. Typically, this means having the gas flow to the wellbore from much greater distances than is normally the case in coalbed methane. Also, it allows the drilling of fewer wells with each well producing substantially more gas and maintaining production rates for longer periods of time, all of which should result in superior economics.Ê
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