Summary of FAR EAST ENERGY CORP

Entry into a Material Definitive Agreement, Creation of a Direct Financial O

Item 1.01. Entry into a Material Definitive Agreement.

On March 13, 2009, Far East Energy Corporation (the "Company") and its wholly-owned subsidiary, Far East Energy (Bermuda), Ltd. ("FEEB"), formed a strategic alliance with Arrow Energy International Pte Ltd ("Arrow"), the Singapore-based subsidiary of Arrow Energy Limited, a large Australian coalbed methane producer. Specifically, on that date, (i) FEEB and Arrow entered into a Farmout Agreement (the "Farmout Agreement") under which, subject to certain conditions, FEEB will assign to Arrow 75.25% of its rights (the "Assignment") in the Production Sharing Contract for the Exploitation of Coalbed Methane Resources for the Qinnan Area in Shanxi Province, Qinshui Basin, the People's Republic of China dated April 16, 2002 between China United Coalbed Methane Corporation Ltd. and Phillips China Inc. (the "Qinnan PSC"), (ii) the Company, FEEB and Arrow entered into a Securities Purchase Agreement (the "Purchase Agreement"), (iii) FEEB issued an Exchangeable Note, $10,000,000 principal amount (the "Exchangeable Note"), to Arrow for $10,000,000 in cash, (iv) the Company issued a Warrant (the "Warrant") to Arrow for 7,420,000 shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), at an exercise price of $1.00 per share, and (v) the Company and Arrow entered into a Registration Rights Agreement (the "Registration Rights Agreement" and, collectively with the other agreements described in the preceding clauses
(i) through (iv), the "Agreements").

Farmout Agreement

The Farmout Agreement conditions the Assignment on, among other things, the receipt of required approvals from the government of the People's Republic of China (collectively, the "Farm-In Conditions") on or prior to October 15, 2009 or such later date as the parties may agree upon (the "Farm-In Deadline"). The parties are required to exercise their respective commercially reasonable efforts in good faith to satisfy the Farm-In Conditions within the specified timeframe. Upon satisfaction of the Farm-In Conditions, Arrow will make an initial payment to the Company of $8,000,000, and, subject to certain conditions, including government approval for the extension of the current exploration period, Arrow will fund all exploration costs associated with the Qinnan PSC up to a maximum of $30,000,000. After Arrow reaches such $30,000,000 cap, FEEB and Arrow will share further Qinnan area exploration costs in proportion to their participating interests in the Qinnan PSC, provided that FEEB may, in its discretion, instead elect to assign all of its interest in the Qinnan PSC to Arrow subject to retaining a 2% overriding royalty interest. In addition, under the Farmout Agreement, if the parties obtain Chinese governmental approval of an overall development program for the Qinnan area, Arrow will pay FEEB an additional $8,000,000 in cash as a bonus, and FEEB will have the option to assign all of its interest in the Qinnan PSC to Arrow, while retaining a 5% overriding royalty interest. If an overall development program is approved, then FEEB and Arrow will share related development costs and any future revenues for such area on a pro-rata basis in accordance with their participating interests in the Qinnan PSC.

If the Farm-In Conditions are not satisfied prior to the Farm-In Deadline, then either party has the right to terminate the Farmout Agreement by delivering notice of such termination to the other party. In addition to the foregoing, the Farmout Agreement contains certain customary representations, warranties and covenants of the parties. Further, if certain events of default occur, then FEEB will be entitled to exercise rights to revoke the Assignment and the Farmout Agreement will automatically terminate.

Purchase Agreement

Under the Purchase Agreement, FEEB issued Arrow the Exchangeable Note, the Company issued Arrow the Warrant and Arrow paid FEEB $10,000,000 in cash. The offer and issuance of the Exchangeable Note and Warrant were exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Rule 506 of Regulation D

thereunder ("Rule 506"), which provides an exemption for offers and sales solely to "accredited investors" (as such term is defined in Regulation D under the Securities Act) in compliance with the provisions stated therein. The Purchase Agreement contains customary representations and warranties of the parties, including as to facts relevant to the parties' reliance on the registration exemption provided by Rule 506, each party's authorization and ability to consummate the transactions contemplated by the Agreements and certain information about the business, operations and position of the Company and its subsidiaries.

Exchangeable Note

The Exchangeable Note has an initial principal amount of $10,000,000 and bears interest at a rate of 8% per annum, beginning on the Farm-In Deadline, with maturity occurring on March 13, 2011 (the "Maturity Date"), unless repaid earlier. Principal and interest is due and payable on the Maturity Date or earlier if payment is accelerated upon the occurrence and continuance of an Event of Default (addressed below).

Arrow has the right at any time to exchange the Exchangeable Note in whole or in part for shares of Common Stock at an exchange rate of 21,052.63 shares per . . .