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CorEnergy Announces Second Quarter 2018 Results

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CorEnergy Infrastructure Trust, Inc. ("CorEnergy" or the "Company")
today announced financial results for the second quarter, ended June 30,
2018.

Second Quarter Performance Summary

Second quarter financial highlights are as follows:

   
For the Three Months Ended
June 30, 2018
    Per Share
Total Basic     Diluted
Net Income (Attributable to Common Stockholders)1 $ 5,413,974 $ 0.45 $ 0.45
NAREIT Funds from Operations (NAREIT FFO)1 $ 11,553,145 $ 0.97 $ 0.89
Funds From Operations (FFO)1 $ 12,213,745 $ 1.02 $ 0.94
Adjusted Funds From Operations (AFFO)1 $ 12,348,559 $ 1.04 $ 0.93
Dividends Declared to Common Stockholders $ 0.75

1 Management uses AFFO as a measure of long-term sustainable
operational performance. NAREIT FFO, FFO, and AFFO are non-GAAP
measures. Reconciliations of NAREIT FFO, FFO and AFFO, as presented, to
Net Income Attributable to CorEnergy Stockholders are included at the
end of this press release. See Note 1 for additional information.

Recent Developments

  • Maintained dividend: Declared common
    stock dividend of $0.75 per share for the second quarter 2018, in line
    with the previous eleven quarterly dividends
  • Pinedale LGS participating rents:
    Continued receipt of participating rents on the Pinedale LGS
  • Grand Isle Gathering System: Tenant,
    Energy XXI Gulf Coast, announced acquisition by Cox Oil
  • MoGas Pipeline: Filed its FERC rate case
    on May 31, 2018
  • Repurchase Program: The Board of
    Directors authorized the repurchase of up to $10 million of preferred
    stock over a period of 12 months, effective August 6, 2018. Any such
    repurchase will be subject to the covenants under our Credit Facility.

"The CorEnergy team was focused on portfolio management activities
during the second quarter. We filed a general rate case with the FERC
for our MoGas Pipeline and engaged in the evaluation of prospects for
the Grand Isle Gathering System," said CorEnergy President and CEO Dave
Schulte. "Success of our stewardship is exhibited in the $1.1 million of
participating rents CorEnergy received in the second quarter from the
utilization of our Pinedale Liquids Gathering System. We expect to use
excess cash flows such as these to reduce our leverage profile, and plan
to implement repurchases of preferred shares to accomplish that goal."

Portfolio Update

Grand Isle Gathering System: On June 18,
2018, the tenant of our GIGS asset, Energy XXI Gulf Coast, announced a
definitive agreement to be acquired by the privately held Gulf of Mexico
operator, Cox Oil, for approximately $322 million. The transaction is
expected to close in the third quarter 2018 and is subject to
stockholder approval. Since the announcement of the acquisition, the
Company and EGC have had no further discussions about CorEnergy
assisting EGC in its efforts to generate adequate liquidity to fund
further development.

Pinedale LGS: Despite actual and forward
Rockies gas prices pressuring Ultra Petroleum's earnings and market
capitalization, UPL continues to see promising results from its
horizontal drilling program in the Pinedale field. The company plans to
temporarily pause vertical well development and focus drilling on
horizontal wells, due to their superior economic returns, and
anticipates the development and drilling of 25 to 30 wells in 2018.
Success in production resulted in utilization of the Pinedale LGS at
levels which resulted in $1.1 million of participating rents in the
second quarter.

MoGas Pipeline: On May 31, 2018, MoGas
filed a general rate case before the FERC. The proposed change in rates
seeks to recover increases in capital, operating and maintenance
expenditures incurred, mitigate decreased revenues from certain customer
contracts and reflect changes in the corporate tax rate. The case is
progressing as expected. MoGas anticipates the proposed revenue
requirements would be approximately $20 million annually, and that the
requested rates will go into effect on December 1, 2018, subject to a
refund upon final ruling.

Outlook

CorEnergy regularly assesses its ability to pay and grow its dividend to
common stockholders above the current level of $0.75 per quarter. The
Company targets long-term revenue growth of 1-3% annually from existing
contracts, through inflation-based and participating rent adjustments,
and additional growth from acquisitions. There can be no assurance that
any potential acquisition opportunities will result in consummated
transactions.

Dividend Declaration

Common Stock: A second quarter 2018
dividend of $0.75 per share was declared for CorEnergy's common stock.
The dividend is payable on August 31, 2018, to stockholders of record on
August 17, 2018.

Preferred Stock: For the Company's 7.375%
Series A Cumulative Redeemable Preferred Stock, a cash dividend of
$0.4609375 per depositary share was declared. The preferred stock
dividend, which equates to an annual dividend payment of $1.84375 per
depositary share, is payable on August 31, 2018, to stockholders of
record on August 17, 2018.

Second Quarter Earnings Call

CorEnergy will host a conference call on Thursday, August 2, 2018,
at 1:00 p.m. Central Time to discuss its financial results. Please dial
into the call at 877-407-8035 (for international, 1-201-689-8035)
approximately five to ten minutes prior to the scheduled start time. The
call will also be webcast in a listen-only format. A link to the webcast
will be accessible at corenergy.reit.

A replay of the call will be available until 1:00 p.m. Central Time on
November 2, 2018 by dialing 877-481-4010 (for international,
1-919-882-2331). The Conference ID is 34308. A replay of the conference
call will also be available on the Company's website.

About CorEnergy Infrastructure Trust, Inc.

CorEnergy Infrastructure Trust, Inc. (NYSE:CORR, CORRPrA)), is a real
estate investment trust (REIT) that owns essential energy assets, such
as pipelines, storage terminals, and transmission and distribution
assets. We receive long-term contracted revenue from operators of our
assets, primarily under triple-net participating leases. For more
information, please visit corenergy.reit.

Forward-Looking Statements

This press release contains certain statements that may include
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, included
herein are "forward-looking statements." Although CorEnergy believes
that the expectations reflected in these forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties, and
these expectations may prove to be incorrect. Actual results could
differ materially from those anticipated in these forward-looking
statements as a result of a variety of factors, including those
discussed in CorEnergy's reports that are filed with the Securities and
Exchange Commission. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Other than as required by law, CorEnergy does not assume
a duty to update any forward-looking statement. In particular, any
distribution paid in the future to our stockholders will depend on the
actual performance of CorEnergy, its costs of leverage and other
operating expenses and will be subject to the approval of CorEnergy's
Board of Directors and compliance with leverage covenants.

Notes

1NAREIT FFO represents net income (computed in accordance
with GAAP), excluding gains (or losses) from sales of depreciable
operating property, impairment losses of depreciable properties, real
estate-related depreciation and amortization (excluding amortization of
deferred financing costs or loan origination costs) and other
adjustments for unconsolidated partnerships and non-controlling
interests. Adjustments for non-controlling interests are calculated on
the same basis. FFO as we have presented it here, is derived by further
adjusting NAREIT FFO for distributions received from investment
securities, income tax expense (benefit) from investment securities, net
distributions and dividend income and net realized and unrealized gain
or loss on other equity securities. CorEnergy defines AFFO as FFO
Adjusted for Securities Investment plus (gain) loss on extinguishment of
debt, provision for loan losses, net of tax, transaction costs,
amortization of debt issuance costs, amortization of deferred lease
costs, accretion of asset retirement obligation, income tax expense
(benefit) unrelated to securities investments, non-cash costs associated
with derivative instruments, and certain costs of a nonrecurring nature,
less maintenance, capital expenditures (if any), amortization of debt
premium, and other adjustments as deemed appropriate by Management.
Reconciliations of NAREIT FFO, FFO Adjusted for Securities Investments
and AFFO to Net Income Attributable to CorEnergy Stockholders are
included in the additional financial information attached to this press
release.

 
Consolidated Balance Sheets
       
June 30, 2018 December 31, 2017
Assets (Unaudited)
Leased property, net of accumulated depreciation of $82,749,089 and
$72,155,753
$ 455,363,130 $ 465,956,467
Property and equipment, net of accumulated depreciation of
$14,312,665 and $12,643,636
111,514,726 113,158,872
Financing notes and related accrued interest receivable, net of
reserve of $4,600,000 and $4,100,000
1,000,000 1,500,000
Other equity securities, at fair value 2,091,181 2,958,315
Cash and cash equivalents 14,175,860 15,787,069
Deferred rent receivable 25,769,989 22,060,787
Accounts and other receivables 3,373,602 3,786,036
Deferred costs, net of accumulated amortization of $956,999 and
$623,764
3,171,680 3,504,916
Prepaid expenses and other assets 1,068,526 742,154
Deferred tax asset, net 4,115,834 2,244,629
Goodwill 1,718,868   1,718,868
Total Assets $ 623,363,396   $ 633,418,113
Liabilities and Equity
Secured credit facilities, net of debt issuance costs of $237,302
and $254,646
$ 38,998,698 $ 40,745,354
Unsecured convertible senior notes, net of discount and debt
issuance costs of $1,574,323 and $1,967,917
112,425,677 112,032,083
Asset retirement obligation 9,426,350 9,170,493
Accounts payable and other accrued liabilities 2,512,598 2,333,782
Management fees payable 1,814,105 1,748,426
Income tax liability 36,971 2,204,626
Unearned revenue 5,321,069   3,397,717
Total Liabilities $ 170,535,468   $ 171,632,481
Equity
Series A Cumulative Redeemable Preferred Stock 7.375%, $130,000,000
liquidation preference ($2,500 per share, $0.001 par value),
10,000,000 authorized; 52,000 issued and outstanding at June 30,
2018 and December 31, 2017
$ 130,000,000 $ 130,000,000
Capital stock, non-convertible, $0.001 par value; 11,933,774 and
11,915,830 shares issued and outstanding at June 30, 2018 and
December 31, 2017 (100,000,000 shares authorized)
11,934 11,916
Additional paid-in capital 322,815,994   331,773,716
Total Equity 452,827,928   461,785,632
Total Liabilities and Equity $ 623,363,396   $ 633,418,113
 
 
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
               
For the Three Months Ended For the Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
Revenue
Lease revenue $ 18,275,859 $ 17,050,092 $ 35,867,718 $ 34,116,618
Transportation and distribution revenue 3,874,157   4,775,780   7,827,136   9,786,370  
Total Revenue 22,150,016   21,825,872   43,694,854   43,902,988  
Expenses
Transportation and distribution expenses 1,534,524 1,362,980 3,107,420 2,698,550
General and administrative 3,107,776 2,558,339 5,834,833 5,619,579
Depreciation, amortization and ARO accretion expense 6,290,082 6,005,995 12,579,412 12,011,903
Provision for loan losses     500,000    
Total Expenses 10,932,382   9,927,314   22,021,665   20,330,032  
Operating Income $ 11,217,634   $ 11,898,558   $ 21,673,189   $ 23,572,956  
Other Income (Expense)
Net distributions and dividend income $ 55,714 $ 221,440 $ 59,665 $ 264,902
Net realized and unrealized gain (loss) on other equity securities (881,100 ) 614,634 (867,134 ) 70,426
Interest expense (3,196,248 ) (3,202,837 ) (6,406,838 ) (6,657,234 )
Total Other Expense (4,021,634 ) (2,366,763 ) (7,214,307 ) (6,321,906 )
Income before income taxes 7,196,000   9,531,795   14,458,882   17,251,050  
Taxes
Current tax expense (benefit) (10,785 ) 57,651 (46,334 ) 23,891
Deferred tax expense (benefit) (604,064 ) 38,084   (1,013,341 ) (260,762 )
Income tax expense (benefit), net (614,849 ) 95,735   (1,059,675 ) (236,871 )
Net Income 7,810,849 9,436,060 15,518,557 17,487,921
Less: Net Income attributable to non-controlling interest   435,888     818,271  
Net Income attributable to CorEnergy Stockholders $ 7,810,849 $ 9,000,172 $ 15,518,557 $ 16,669,650
Preferred dividend requirements 2,396,875   2,123,129   4,793,750   3,160,238  
Net Income attributable to Common Stockholders $ 5,413,974   $ 6,877,043   $ 10,724,807   $ 13,509,412  
 
Net Income $ 7,810,849 $ 9,436,060 $ 15,518,557 $ 17,487,921
Other comprehensive income:
Changes in fair value of qualifying hedges / AOCI attributable to
CorEnergy stockholders
3,006 5,978
Changes in fair value of qualifying hedges / AOCI attributable to
non-controlling interest
  702     1,396  
Net Change in Other Comprehensive Income $   $ 3,708   $   $ 7,374  
Total Comprehensive Income 7,810,849 9,439,768 15,518,557 17,495,295
Less: Comprehensive income attributable to non-controlling interest   436,590     819,667  
Comprehensive Income attributable to CorEnergy Stockholders $ 7,810,849   $ 9,003,178   $ 15,518,557   $ 16,675,628  
Earnings Per Common Share:
Basic $ 0.45 $ 0.58 $ 0.90 $ 1.14
Diluted $ 0.45 $ 0.58 $ 0.90 $ 1.14
Weighted Average Shares of Common Stock Outstanding:
Basic 11,928,297 11,896,616 11,923,627 11,892,670
Diluted 11,928,297 11,896,616 11,923,627 11,892,670
Dividends declared per share $ 0.750 $ 0.750 $ 1.500 $ 1.500
 
 
Consolidated Statements of Cash Flows (Unaudited)
       
For the Six Months Ended
June 30, 2018 June 30, 2017
Operating Activities
Net Income $ 15,518,557 $ 17,487,921
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income tax, net (1,013,341 ) (260,762 )
Depreciation, amortization and ARO accretion 13,286,595 12,949,644
Provision for loan losses 500,000
Non-cash settlement of accounts payable (171,609 )
Gain on sale of equipment (3,724 )
Net distributions and dividend income, including recharacterization
of income
148,649
Net realized and unrealized (gain) loss on other equity securities 867,134 (70,426 )
Unrealized gain on derivative contract (16,453 )
Common stock issued under directors compensation plan 37,500 30,000
Changes in assets and liabilities:
Increase in deferred rent receivable (3,709,202 ) (3,588,136 )
Decrease in accounts and other receivables 412,434 1,162,548
(Increase) decrease in prepaid expenses and other assets (326,372 ) 134,023
Increase in management fee payable 65,679 10,301
Increase (decrease) in accounts payable and other accrued liabilities 433,853 (53,621 )
Decrease in current income tax liability (2,167,655 )
Increase (decrease) in unearned revenue (1,383,757 ) 29,695  
Net cash provided by operating activities $ 22,517,701   $ 27,791,774  
Investing Activities
Purchases of property and equipment (47,883 ) (13,745 )
Proceeds from sale of property and equipment 11,499
Return of capital on distributions received   61,828  
Net cash (used in) provided by investing activities $ (36,384 ) $ 48,083  
Financing Activities
Debt financing costs (264,010 ) (2,512 )
Net offering proceeds on Series A preferred stock 71,170,611
Dividends paid on Series A preferred stock (4,793,750 ) (3,433,984 )
Dividends paid on common stock (17,270,766 ) (17,318,618 )
Distributions to non-controlling interest (480,488 )
Payments on revolving line of credit (44,000,000 )
Principal payments on secured credit facilities (1,764,000 ) (4,389,261 )
Net cash (used in) provided by financing activities $ (24,092,526 ) $ 1,545,748  
Net Change in Cash and Cash Equivalents $ (1,611,209 ) $ 29,385,605
Cash and Cash Equivalents at beginning of period 15,787,069   7,895,084  
Cash and Cash Equivalents at end of period $ 14,175,860   $ 37,280,689  
 
Supplemental Disclosure of Cash Flow Information
Interest paid $ 5,546,660 $ 5,777,328
Income taxes paid (net of refunds) 2,121,321 132,202
 
Non-Cash Financing Activities
Change in accounts payable and accrued expenses related to debt
financing costs
$ (255,037 ) $
Reinvestment of distributions by common stockholders in additional
common shares
610,219 516,565
 
 
NAREIT FFO, FFO Adjusted for Securities Investment and AFFO
Reconciliation (Unaudited)
    For the Three Months Ended     For the Six Months Ended
June 30, 2018     June 30, 2017   June 30, 2018     June 30, 2017
Net Income attributable to CorEnergy Stockholders $ 7,810,849 $ 9,000,172 $ 15,518,557 $ 16,669,650
Less:
Preferred Dividend Requirements 2,396,875   2,123,129   4,793,750   3,160,238  
Net Income attributable to Common Stockholders $ 5,413,974 $ 6,877,043 $ 10,724,807 $ 13,509,412
Add:
Depreciation 6,139,171 5,822,383 12,277,590 11,644,679
Less:
Non-Controlling Interest attributable to NAREIT FFO reconciling
items (1)
  411,455     822,910  
NAREIT funds from operations (NAREIT FFO) $ 11,553,145 $ 12,287,971 $ 23,002,397 $ 24,331,181
Add:
Distributions received from investment securities 55,714 252,213 59,665 475,379
Less:
Net distributions and dividend income 55,714 221,440 59,665 264,902
Net realized and unrealized gain (loss) on other equity securities (881,100 ) 614,634 (867,134 ) 70,426
Income tax (expense) benefit from investment securities 220,500   (310,622 ) 241,987   (114,862 )
Funds from operations adjusted for securities investments (FFO) $ 12,213,745 $ 12,014,732 $ 23,627,544 $ 24,586,094
Add:
Provision for loan losses, net of tax 500,000
Transaction costs 24,615 211,269 56,896 470,051
Amortization of debt issuance costs 353,637 468,871 707,181 937,742
Amortization of deferred lease costs 22,983 22,983 45,966 45,966
Accretion of asset retirement obligation 127,928 160,629 255,856 321,258
Less:
Non-cash settlement of accounts payable 171,609 171,609
Non-cash gain (loss) associated with derivative instruments (10,619 ) 16,453
Income tax benefit 394,349 214,887 817,688 351,733
Non-Controlling Interest attributable to AFFO reconciling items (1)   3,358     6,709  
Adjusted funds from operations (AFFO) $ 12,348,559   $ 12,499,249   $ 24,375,755   $ 25,814,607  
 
Weighted Average Shares of Common Stock Outstanding:
Basic 11,928,297 11,896,616 11,923,627 11,892,670
Diluted 15,382,843 15,351,161 15,378,172 15,347,215
NAREIT FFO attributable to Common Stockholders
Basic $ 0.97 $ 1.03 $ 1.93 $ 2.05
Diluted (2) $ 0.89 $ 0.94 $ 1.78 $ 1.87
FFO attributable to Common Stockholders
Basic $ 1.02 $ 1.01 $ 1.98 $ 2.07
Diluted (2) $ 0.94 $ 0.93 $ 1.82 $ 1.89
AFFO attributable to Common Stockholders
Basic $ 1.04 $ 1.05 $ 2.04 $ 2.17
Diluted (3) $ 0.93 $ 0.94 $ 1.84 $ 1.94

(1)

 

There is no noncontrolling interest outstanding for the three
and six months ended June 30, 2018.

(2)

Diluted per share calculations include dilutive adjustments for
convertible note interest expense, discount amortization and
deferred debt issuance amortization.

(3)

Diluted per share calculations include a dilutive adjustment
for convertible note interest expense.

 

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