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November 18, 2014

Shale Drillers Maintain High Output In Era of Dramatic Price Reduction

Shale drillers are planning on production growth with fewer rigs despite a worldwide glut that has sent crude prices to a four-year low.

Companies including Devon Energy Corp. (DVN), Continental Resources Inc. (CLR) and EOG Resources Inc. (EOG) said they expect to pump more from their prime properties while cutting back in their least productive prospects. That puts the onus on OPEC nations, led by Saudi Arabia, to cut output if they want to stem the slide in global oil prices.

“There’s a lot more production coming online this year and in the first half of 2015,” said Jason Wangler, an analyst at Wunderlich Securities Inc. in Houston. “This isn’t a machine that you can turn on and off with a switch. It’s going to take months, if not quarters, to turn it around.”

Domestic output topped 9 million barrels a day for the first time since at least 1983, the U.S. Energy Information Administration said Nov. 13. West Texas Intermediate crude, the U.S. benchmark oil contract, declined $1.03 today to settle at $74.61 a barrel on the New York Mercantile Exchange. Prices fell to $74.21 on Nov. 13, the lowest close since 2010.

“Certainly if prices fall even further than they are now, it’ll have some impact, and it may slow the growth rate of U.S. production,” said Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy in New York. “I still think, unless they fall significantly further, U.S. production is going to see dramatic increases in growth.”

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Chevron Confirms First Oil Production From Tubular Bells in the Gulf of Mexico

SAN RAMON, CA --(OilAndEnergyNews.com)--  Chevron announced today that the Hess Corporation-operated Tubular Bells deepwater project, located in the U.S. Gulf of Mexico, has started crude oil and natural gas production. The field is located 135 miles (217 km) southeast of New Orleans, in approximately 4,300 feet (1,310 m) of water in the Mississippi Canyon area. The discovery well was drilled in 2003, and project construction began in October 2011.

Tubular Bells is expected to deliver total production of approximately 50,000 barrels of oil-equivalent per day producing from three wells.

“The deepwater Gulf of Mexico plays a significant part in our earnings and production growth. Achieving first oil at Tubular Bells is an important step towards Chevron achieving its production goal of 3.1 million barrels per day by 2017,” said George Kirkland, vice chairman and executive vice president, Upstream, Chevron Corporation.

“Tubular Bells and the Chevron-operated Jack/St. Malo project further strengthens Chevron’s deepwater portfolio,” said Jay Johnson, senior vice president, Upstream, Chevron Corporation. Jack/St. Malo, a large lower Tertiary development, is scheduled to be brought online later this year.

“This project’s success is the result of our strong business relationship with Hess, reinforcing our commitment to achieve results with excellence, and enabling new opportunities in this strategic area,” said Jeff Shellebarger, president, Chevron North America Exploration and Production Company.

The Tubular Bells production facility is producing from the Miocene trend, where, for many years, Chevron subsidiaries have had multiple producing assets and a leading leaseholder position. The floating production facility is a classic spar hull with traditional three-level topsides. The field has an estimated production life of 25 years.

Chevron subsidiary Chevron U.S.A. Inc.has a 42.86 percent working interest in the Tubular Bells development and Hess is the operator with a 57.14 percent working interest in the field.

Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.

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November 17, 2014

Applied LNG Announces its Midlothian, Texas LNG Plant Groundbreaking Ceremony

WESTLAKE VILLAGE, Calif.--(OilAndEnergyNews.com)--Applied LNG, a leading producer, marketer and distributor of Liquefied Natural Gas (LNG) in the United States, will break ground on a multi-liquefier LNG production platform in Midlothian, Texas (the "Midlothian Plant"). The Midlothian Plant will consist of up to five liquefiers with a production capacity of 86,000 LNG gallons per day, per liquefier, and a total on-site storage of up to 1.5 million LNG gallons.

The official groundbreaking, scheduled for November 20, 2014, will mark the start of construction on the first LNG facility in the northwest Texas region, and is expected to be operational in mid-2015. The Midlothian Plant will focus on end users in the high-horsepower, trucking, oil and gas, rail, marine, remote power and mining markets that currently use diesel fuel and are interested in converting to a lower-cost, cleaner-burning alternative.

“The natural gas industry in Texas is growing rapidly and production and storage facilities are vital to further industry advancement,” said Cem Hacioglu, President and CEO of Applied LNG. “Midlothian is a perfect location to build our first production platform in Texas. In addition to having all the required amenities to construct a state-of-the art facility, Midlothian’s strategic location will allow us to tap into a wide range of customers in fast growing verticals, and the company has already been taking orders in this desirable market. The Midlothian Plant is also an important step in Applied's continuing efforts to expand its footprint to provide cost-effective LNG to a growing number of customers.”

City, county and state officials will join Applied LNG leadership and the Midlothian Economic Development Corporation for a ceremonial groundbreaking and reception, on site in Midlothian.

Invited guests to include Commissioner David Porter, Railroad Commission of Texas, State Representative Jason Isaac, State Representative-elect John Wray, City of Midlothian Mayor Bill Houston, and Ellis County Representative Jim Pitts.

"LNG is a proven fuel with a strong track record that will continue to move us towards energy independence and a better way to fuel America," stated Hacioglu.

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Forest Oil Announces Agreement to Sell Arkoma Basin Natural Gas Properties

DENVER--(OilAndEnergyNews)--Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced that it has entered into a definitive agreement to sell its natural gas properties located in the Arkoma Basin for after-tax cash proceeds of approximately $185 million. The transaction is expected to close on or before December 15, 2014, with an economic effective date of October 1, 2014, and is subject to customary closing conditions and post-closing purchase price adjustments. The properties produced 22 MMcfe/d (100% natural gas) during the third quarter of 2014, had estimated proved reserves of 159 Bcfe (100% natural gas) as of December 31, 2013, and generated approximately $23 million of lease-level income during the past twelve months ended September 30, 2014 (when NYMEX Henry Hub pricing averaged $4.27 per Mcf).

The aforementioned Arkoma Basin transaction is not related to Forest’s pending business combination with Sabine Oil & Gas LLC (“Sabine”), and Sabine has given its consent to the sale of Forest’s Arkoma Basin assets. As previously announced, Forest has scheduled the special meeting of shareholders for November 20, 2014, to consider and vote on the proposed combination with Sabine. Forest shareholders of record at the close of business on October 3, 2014, the record date, are entitled to vote at the Forest special meeting. A definitive proxy statement was sent to Forest shareholders on or around October 20, 2014. Closing of the transaction is also subject to other closing conditions. If approved, Forest anticipates the transaction to close in 2014.

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CorEnergy to Acquire MoGas Pipeline for $125 Million

KANSAS CITY, Mo.--(OilAndEnergyNews)--CorEnergy Infrastructure Trust, Inc. (NYSE: CORR) (“CorEnergy”) today announced that it has entered into a definitive agreement to acquire the ownership and operations of the MoGas Pipeline System for $125 million in cash (the “Acquisition”). This 263-mile pipeline is a critical supplier of natural gas in and around the St. Louis region and to small municipalities throughout central Missouri.

CorEnergy intends to finance the acquisition cost with a combination of borrowings under its credit facility and with proceeds of our simultaneously announced public offering of common stock.

The key characteristics of the MoGas Pipeline System include:

  •     Diversification towards a new segment of the energy value chain, with exposure to a long-haul natural gas pipeline serving end-user markets
  •     Key interconnect receipt points on three natural gas transmission pipelines
  •     Steady revenue stream backed by contracts with long-tenured, creditworthy customers
  •     Stable history of both firm and interruptible contracted volumes
  •     Pipeline assets are REIT qualifying under proposed IRS regulations

“We are pleased to add an interstate pipeline to our diversified portfolio of infrastructure assets used by utilities, storage terminal operators, and natural gas producers,” said David Schulte, Chief Executive Officer of CorEnergy. “Our Board of Directors has confirmed its intent to increase the dividend from $0.130 to $0.135 for the quarter ended March 31, 2015 (or $0.54 cents per share annualized) based upon management’s expectation that the increase is sustainable.”

The MoGas Pipeline System

The MoGas Pipeline System is an approximately 263-mile interstate natural gas pipeline system which originates in northeast Missouri, and extends into western Illinois and central Missouri. The pipeline maintains receipt points with Mississippi River Transmission Corporation in eastern St. Louis and with Panhandle Eastern Pipe Line Company and Rockies Express Pipeline on the northern end of the system.

Primary customers are Laclede Gas Company and Ameren Missouri, both serving the St. Louis metropolitan area with local gas distribution services, and Omega Pipeline serving Ft. Leonard Wood in central Missouri. Omega Pipeline is a wholly owned subsidiary of CorEnergy. Transportation agreements are governed by FERC-approved natural gas tariffs.

Transaction Financing

In conjunction with the Acquisition, the Company has signed a commitment letter to amend and upsize its current $30 million revolving senior secured credit facility. The new revolving lines of credit have anticipated capacity of up to $93 million, consisting of $90 million at the parent entity level and $3 million at the subsidiary entity level. The Company expects to utilize borrowings under the credit facility, and the net proceeds of our simultaneously announced equity offering to fund the purchase price.

The transaction is expected to close in late November 2014.

BofA Merrill Lynch is acting as exclusive structuring advisor in connection with CorEnergy's energy infrastructure real asset strategy.

About CorEnergy Infrastructure Trust, Inc.

CorEnergy Infrastructure Trust, Inc. (NYSE: CORR), primarily owns midstream and downstream U.S. energy infrastructure assets subject to long-term triple net participating leases. These assets include pipelines, storage tanks, transmission lines and gathering systems.

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