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CorEnergy Announces Second Quarter 2018 Results
KANSAS CITY, MO - August 1, 2018 - 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.

Contact Information:
CorEnergy Infrastructure Trust, Inc.
Investor Relations
Lesley Schorgl, 877-699-CORR (2677)
info@corenergy.reit






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.