CorEnergy Releases Second Quarter 2014 Results

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KANSAS CITY, Mo.--(BUSINESS WIRE)-- CorEnergy Infrastructure Trust, Inc. (NYSE: CORR) (“CorEnergy” or the “Company”) today announced financial results for the second quarter ended June 30, 2014.

Second Quarter Highlights and Subsequent Events

  • Declared second quarter 2014 dividend distribution of $0.130, payable on August 29, 2014
  • Reiterating annualized dividend guidance of no less than $0.52 per share
  • Joined the Russell 2000, Russell 3000, Russell Microcap and Russell Global Indexes
  • Amended and upsized the Black Bison secured financing transaction
  • Entered into a non-binding term sheet to upsize and replace existing credit facility

“Second quarter results reflect CorEnergy’s commitment to providing stable dividends, executing our strategy consistently and expanding partnerships with operating companies. We covered our $0.130 dividend with AFFO, while maintaining a low level of total debt,” said David Schulte, Chief Executive Officer of CorEnergy. “We are gaining visibility in the equity capital markets, including recent listings in the Russell and FTSE NAREIT indices. For the second half of the year, we have already closed a follow-on water disposal well acquisition financing and remain active in reviewing potential acquisitions.”

Quarterly Performance Review

CorEnergy reported total revenues of $9.0 million in the quarter ended June 30, 2014. A second quarter dividend of $0.130 was declared on July 31, 2014, and is payable on August 29, 2014. Total assets were $327.8 million and total stockholders' equity was $220.5 million as of June 30, 2014, compared to $283.9 million and $177.2 million, respectively, at Dec. 31, 2013. AFFO for the quarter ended June 30, 2014, was $0.14 per share as compared to $0.14 per share for the quarter ended March 31, 2014.

 
Second Quarter Ended June 30, 2014 Financial Summary
 
For the Three-Month Period Ended June 30, 2014
Total     Per Share
Net Income (attributable to CorEnergy Stockholders) $3,005,908 $0.10
Funds From Operations (FFO) $4,799,701 $0.15
Adjusted Funds From Operations (AFFO)   $4,470,169     $0.14
 

FFO and AFFO are non-GAAP measures presented in accordance with the guidelines for calculation and reporting issued by the National Association of Real Estate Investment Trusts. FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate-related depreciation and amortization (excluding amortization of deferred financing costs or loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. The Company considers FFO an important supplemental measure of operating performance that is frequently used by securities analysts, investors and other interested parties. CorEnergy defines AFFO as FFO plus transaction costs, amortization of debt issuance costs, deferred leasing costs, above-market rent, and certain costs of a nonrecurring nature, less maintenance, capital expenditures (if any), amortization of debt premium and other adjustments as deemed appropriate. Management uses AFFO as a measure of long-term sustainable operational performance.

Portfolio Update

Portland Terminal Facility

The Portland Terminal Facility, a multimodal petroleum products terminal in Oregon, is subject to a 15-year triple net participating lease. Beginning in August 2014, minimum lease payments will be $5 million per year. The base rent is expected to increase during the initial year of the lease based on a percentage of specified construction costs at the Portland Terminal Facility, estimated at $10 million. Assuming such improvements are completed, the base rent will increase by an ancillary amount of approximately $1.1 million per year in addition to the minimum lease payment of $5 million. As of June 30, 2014, additional spending on terminal-related projects totaled approximately $2.8 million.

Subsequent Events

Black Bison

On July 23, 2014, CorEnergy increased its secured financing to Black Bison Water Services, LLC (“Black Bison”) from $11.5 million to $15.3 million. The incremental borrowings were made available through an upsize of the pre-existing facility from $11.5 million to $12 million and a new $3.3 million taxable REIT subsidiary loan (the “TRS Loan”).

Collectively, the $15.3 million 10-year secured financing has a base interest rate of 12 percent per annum, escalating at 2 percent of the base interest rate per annum. In addition, beginning in April 2015, the outstanding principal on the TRS Loan will also bear variable interest based on the volume of water treated by Black Bison. Interest income on the TRS Loan will be subject to income taxes. CorEnergy has advanced the full $15.3 million to fund Black Bison’s third acquisition of a salt water disposal property.

Balance Sheet and Liquidity

The Company has signed a non-binding term sheet for a new credit facility that will replace the Company’s current credit facility. The new credit facility has anticipated capacity of up to $30 million. Management expects to complete this additional financing in the third quarter and anticipates using the credit facility thereafter to fund property acquisitions, capital improvements or for other permitted corporate purposes. Management expects that the Portland Terminal Facility will qualify as eligible collateral under the facility. Management believes the increased availability of additional senior debt will allow for greater financial flexibility.

Securing the new credit facility is subject to a number of usual and customary conditions and processes, for which the signed term sheet is just the first step. Those conditions include, among other things, lender due diligence, agreement on definitive terms and final documents, and the negotiation of acceptable fee arrangements. Additional details regarding the anticipated debt financing for the Company will be available on Form 8-K to be filed with the Securities and Exchange Commission upon closing.

Outlook

CorEnergy expects its energy infrastructure assets – the Pinedale LGS, the Eastern Interconnect Project, the Portland Terminal Facility, Mowood and Black Bison – to produce stable and recurring revenues in 2014. The Company believes that the cash flows from its holdings will support annualized dividend payments of no less than $0.52 per share. The Company has a broadening set of opportunities in the pipeline, which provide the potential to reach $50 to $200 million per project type. There can be no assurance that any of these acquisition opportunities will result in consummated transactions. The Company expects to utilize balance sheet resources, including prudent leverage when available, supplemented with accretive equity issuance as needed.

Dividend Policy

In 2013, CorEnergy changed its fiscal year end from Nov. 30 to Dec. 31 as part of its transition from a business development company to a REIT. As a result of this change, the dividend payment schedule for calendar 2014 will vary from prior years. Going forward, the Company intends to maintain a quarterly February, May, August, November dividend payment cycle. Dividend payouts may be affected by cash flow requirements and remain subject to other risks and uncertainties.

2014 Second Quarter Earnings Conference Call

CorEnergy will host a conference call Tuesday, August 12, 2014, at 1:00 p.m. Central Time to discuss its financial results. Please dial into the call at 877-407-8035 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.corridortrust.com.

A replay of the call will be available until 11:59 p.m. Central Time September 12, 2014, by dialing 877-660-6853. The Conference ID # is 13587198. A replay of the webcast will also be available on the company’s website at corenergy.corridortrust.com through August 12, 2015.

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 with energy companies. These assets include pipelines, storage tanks, transmission lines and gathering systems. The Company’s principal objective is to provide stockholders with an attractive risk-adjusted total return, with an emphasis on distributions and long-term distribution growth (reported to our investors on Form 1099). CorEnergy is managed by Corridor InfraTrust Management, LLC, a real property asset manager focused on U.S. energy infrastructure real assets, and is an affiliate of Tortoise Capital Advisors, L.L.C., an investment manager specializing in listed energy investments, with approximately $17.9 billion of assets under management in NYSE-listed closed-end investment companies, open-end funds and other accounts as of July 31, 2014. For more information, please visit corenergy.corridortrust.com.

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.

         
 
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED BALANCE SHEETS
 
June 30, 2014 December 31, 2013
Assets (Unaudited)

Leased property, net of accumulated depreciation of $18,949,516, and
$12,754,588

$ 270,189,704 $ 232,220,618
Other equity securities, at fair value 25,786,785 23,304,321
Financing note and related accrued interest receivable, net 4,299,356 -
Cash and cash equivalents 18,986,616 17,963,266

Property and equipment, net of accumulated depreciation of $2,179,305 and
$2,037,685

3,176,863 3,318,483
Lease receivable 1,099,264 711,229
Accounts receivable 1,116,161 2,068,193

Intangible lease asset, net of accumulated amortization of $875,816 and
$729,847

218,955 364,924

Deferred debt issuance costs, net of accumulated amortization of $862,512
and $572,830

935,842 1,225,524

Deferred lease costs, net of accumulated amortization of $93,955 and
$63,272

826,507 857,190
Hedged derivative asset 294,607 680,968
Income tax receivable 412,495 834,382
Prepaid expenses and other assets   483,614   326,561
Total Assets $ 327,826,769 $ 283,875,659
 
Liabilities and Equity
Current maturities of long-term debt $ 3,528,000 $ 2,940,000
Long-term debt (net of current maturities) 65,296,000 67,060,000
Accounts payable and other accrued liabilities 2,961,460 2,920,267
Unearned revenue 2,133,686 -
Deferred tax liability 5,734,405 5,332,087
Line of credit   -   81,935
Total Liabilities $ 79,653,551 $ 78,334,289
 
Equity

Warrants, no par value; 0 and 945,594 issued and outstanding at June 30,
2014 and December 31, 2013, respectively (5,000,000 authorized)

$ - $ 1,370,700

Capital stock, non-convertible, $0.001 par value; 31,640,158 shares issued
and outstanding at June 30, 2014 and 24,156,163 shares issued and
outstanding at December 31, 2013 (100,000,000 shares authorized)

31,640 24,156
Additional paid-in capital 220,080,751 173,441,019
Accumulated retained earnings - 1,580,062
Accumulated other comprehensive income   435,945   777,403
Total CorEnergy Equity   220,548,336   177,193,340

Non-controlling interest

  27,624,882   28,348,030
Total Equity   248,173,218   205,541,370
Total Liabilities and Equity $ 327,826,769 $ 283,875,659
 
           
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended For the Six Months Ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Revenue
Lease revenue $ 7,065,677 $ 5,638,244 $ 13,828,085 $ 11,276,488
Sales revenue 1,813,607 1,929,772 5,073,137 4,445,345
Financing revenue   139,728     -     165,347     -  
Total Revenue   9,019,012     7,568,016     19,066,569     15,721,833  
 
Expenses
Cost of sales (excluding depreciation expense) 1,384,998 1,476,348 4,092,356 3,479,987
Management fees 761,265 646,394 1,545,133 1,290,208
Asset acquisition expenses 20,732 53,394 36,949 85,211
Professional fees 265,514 431,508 664,642 885,691
Depreciation expense 3,204,911 2,857,412 6,336,548 5,714,448
Amortization expense 15,342 15,342 30,683 30,621
Operating expenses 213,533 303,480 436,274 510,384
Directors' fees 63,276 32,557 128,310 50,557
Other expenses   224,173     151,312     392,881     274,018  
Total Expenses   6,153,744     5,967,747     13,663,776     12,321,125  
Operating Income

$

2,865,268  

$

1,600,269  

$

5,402,793  

$

3,400,708  
Other Income (Expense)
Net distributions and dividend income $ 5,988 $ 2,701 $ 11,044 $ 15,825
Net realized and unrealized gain on trading securities - - - 316,063
Net realized and unrealized gain on other equity securities 2,084,026 (30,976 ) 3,378,208 2,395,010

Interest expense

  (819,360 )   (907,275 )   (1,646,337 )   (1,644,656 )
Total Other Income   1,270,654     (935,550 )   1,742,915     1,082,242  
Income before income taxes   4,135,922     664,719     7,145,708     4,482,950  
Taxes
Current tax expense - 581,757 854,075 867,648
Deferred tax expense (benefit)   742,879     (340,003 )   402,317     395,050  
Income tax expense, net   742,879     241,754     1,256,392     1,262,698  
Net Income 3,393,043 422,965 5,889,316 3,220,252
Less: Net Income attributable to non-controlling interest   387,135     352,893     778,249     737,427  
Net Income attributable to CORR Stockholders $ 3,005,908   $ 70,072   $ 5,111,067   $ 2,482,825  
 
Net income $ 3,393,043 $ 422,965 $ 5,889,316 $ 3,220,252

Other comprehensive income (expense):

Changes in fair value of qualifying hedges attributable to CORR Stockholders (270,838 ) 921,442 (341,458 ) 921,442
Changes in fair value of qualifying hedges attributable to non-controlling interest   (63,324 )   215,439     (79,835 )   215,439  
Net Change in Other Comprehensive Income $ (334,162 ) $ 1,136,881   $ (421,293 ) $ 1,136,881  
Total Comprehensive Income 3,058,881 1,559,846 5,468,023 4,357,133
Less: Comprehensive income attributable to non-controlling interest   323,811     568,332     698,414     952,866  
Comprehensive Income attributable to CORR Stockholders $ 2,735,070   $ 991,514   $ 4,769,609   $ 3,404,267  
Earnings Per Common Share:
Basic and Diluted $ 0.10 $ - $ 0.17 $ 0.10
Weighted Average Shares of Common Stock Outstanding:
Basic and Diluted 31,637,568 24,147,958 30,810,060 24,144,856
Dividends declared per share $ 0.129 $ 0.125 $ 0.254 $ 0.250
 
 
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
         

Accumulated
Other
Comprehensive
Income

 

Retained
Earnings
(Accumulated
Deficit)

   
Capital Stock

Additional Paid-
in Capital

Non-
Controlling
Interest

Shares Amount Warrants   Total
Balance at December 31, 2012 24,140,667 $ 24,141 $ 1,370,700     $ 175,256,675   $ -   $ 4,209,023   $ 29,981,653   $ 210,842,192  
 
Net income - - - - - 4,502,339 1,466,767 5,969,106
 
Net change in cash flow hedges -   -   -     -     777,403     -     181,762     959,165  
 
Total comprehensive income - - - - 777,403 4,502,339 1,648,529 6,928,271
 
Dividends - - - (1,923,760 ) - (7,131,300 ) - (9,055,060 )
Distributions to non-controlling interest - - - - - - (3,282,152 ) (3,282,152 )
Reinvestment of dividends paid to stockholders 15,496   15   -     108,104     -     -     -     108,119  
Balance at December 31, 2013 24,156,163 $ 24,156 $ 1,370,700   $ 173,441,019   $ 777,403   $ 1,580,062   $ 28,348,030   $ 205,541,370  
 
Net income - - - - - 5,111,067 778,249 5,889,316
 

Net change in cash flow hedges

-   -   -     -     (341,458 )   -     (79,835 )   (421,293 )
 
Total comprehensive income - - - - (341,458 ) 5,111,067 698,414 5,468,023
 
Net offering proceeds 7,475,000 7,475 - 45,617,088 - - - 45,624,563
 
Dividends - - - (409,376 ) - (6,691,129 ) - (7,100,505 )
Distributions to non-controlling interest - - - - - - (1,421,562 ) (1,421,562 )
Reinvestment of dividends paid to stockholders 8,995 9 - 61,320 - - - 61,329
 
Warrant expiration -   -   (1,370,700 )   1,370,700     -     -     -     -  
Balance at June 30, 2014 (Unaudited) 31,640,158 $ 31,640 $ -   $ 220,080,751   $ 435,945   $ -   $ 27,624,882   $ 248,173,218  
 
       
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
For the Six Months Ended
June 30, 2014 June 30, 2013
Operating Activities
Net Income $ 5,889,316 $ 3,220,252
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax, net 402,318 395,050
Depreciation 6,336,548 5,714,448
Amortization 466,334 433,386
Realized and unrealized gain on trading securities - (316,063 )
Realized and unrealized gain on other equity securities (3,378,208 ) (2,395,010 )
Unrealized (gain) loss on derivative contract (34,932 ) 46,228
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 952,032 (352,037 )
(Increase) in lease receivable (388,035 ) -
(Increase) decrease in prepaid expenses and other assets (94,053 ) 31,321
Decrease in accounts payable and other accrued liabilities (366,777 ) (1,217,791 )
Increase in dividends payable to shareholders - 3,018,495
Increase in distributions payable to non-controlling interest - 1,690,413
Increase (decrease) in current income tax liability 421,887 (3,855,947 )
Increase (decrease) in unearned revenue   2,133,686     (1,422,457 )
Net cash provided by (used in) operating activities $ 12,340,116   $ 4,990,288  
 
Investing Activities
Proceeds from sale of long-term investment of trading and other equity securities - 5,563,865
Deferred lease costs - (5,620 )
Acquisition of leased assets (43,536,044 ) -
Purchases of property and equipment - (42,242 )
Issuance of financing note receivable (4,299,356 ) -
Return of capital on distributions received   832,744     631,524  
Net cash (used in) provided by investing activities $ (47,002,656 ) $ 6,147,527  
 
Financing Activities
Payments on lease obligation - (20,698 )
Debt financing costs (220,000 ) (10,999 )
Net offering proceeds 45,624,563 -
Dividends paid (7,039,176 ) (5,986,937 )
Distributions to non-controlling interest (1,421,562 ) (1,690,413 )
Advances on revolving line of credit 2,535,671 139,397
Payments on revolving line of credit (2,617,606 ) (139,397 )
Principal payment on credit facility   (1,176,000 )   -  
Net cash provided by (used in) financing activities $ 35,685,890   $ (7,709,047 )
Net change in cash and cash equivalents $ 1,023,350 $ 3,428,768
Cash and cash equivalents at beginning of period   17,963,266     17,680,783  
Cash and cash equivalents at end of period $ 18,986,616   $ 21,109,551  
 
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 1,399,619 $ 1,242,441
Net income taxes paid (refunds received) $ 432,187 $ 4,776,354
Non-Cash Investing Activities
Change in accounts payable and accrued expenses related to acquisition expenditures $ 627,970 $ -
Non-Cash Financing Activities
Reinvestment of distributions by common stockholders in additional common shares $ 61,329 $ 49,141
Change in accounts payable and accrued expenses related to debt financing costs $ (220,000 ) $ -
 
                 
CorEnergy Infrastructure Trust, Inc.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
FFO and AFFO Reconciliation
 
For the Three Months Ended   For the Six Months Ended
June 30, 2014   June 30, 2013   June 30, 2014   June 30, 2013
Net Income (attributable to CorEnergy Stockholders): $ 3,005,908 $ 70,072 $ 5,111,067 $ 2,482,825
Add:
Depreciation 3,204,911 2,857,412 6,336,548 5,714,448
Distributions received from investment securities 341,484 317,184 832,744 631,524
Income tax expense, net 742,879 241,754 1,256,392 1,262,698
Less:
Net realized and unrealized gain on trading securities - - - 316,063
Net realized and unrealized gain (loss) on other equity securities 2,084,026 (30,976 ) 3,378,208 2,395,010
Non-controlling interest attributable to FFO reconciling items   411,455     411,384     822,910     822,762
Funds from operations (FFO): $ 4,799,701 $ 3,106,014 $ 9,335,633 $ 6,557,660
Add:
Transaction costs 20,732 53,394 36,949 85,211
Amortization of debt issuance costs 144,840 128,320 289,682 256,794
Amortization of deferred lease costs 15,342 15,342 30,623 30,621
Amortization of above market leases 72,985 72,985 145,969 145,970
Noncash costs associated with derivative instruments (17,443 ) 71,850 (34,932 ) 75,200
Nonrecurring personnel costs - 113,232 - 113,232
Less:
EIP lease adjustment 542,809 542,809 1,085,618 1,085,618
Non-controlling interest attributable to AFFO reconciling items   23,179     39,929     46,349     75,210
Adjusted funds from operations (AFFO): $ 4,470,169   $ 2,978,399   $ 8,671,957   $ 6,103,860
 
Weighted Average Shares 31,637,568 24,147,958 30,810,060 24,144,856
FFO per share $ 0.15 $ 0.13 $ 0.30 $ 0.27
AFFO per share $ 0.14 $ 0.12 $ 0.28 $ 0.25
 

CorEnergy Infrastructure Trust, Inc.
Katheryn Mueller, 877-699-CORR (2677)
Investor Relations
info@corridortrust.com

Source: CorEnergy Infrastructure Trust, Inc.

Released August 11, 2014