Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________

FORM 10-Q

___________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33292

_________________________________________________________

CORENERGY INFRASTRUCTURE TRUST, INC.

______________________________________________________________________

(Exact name of registrant as specified in its charter)



Maryland		20-3431375
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)



1100 Walnut, Ste. 3350 Kansas City, MO		64106
(Address of Principal Executive Offices)		(Zip Code)

(816) 875-3705

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

___________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No x

As of August 1, 2018, the registrant had 11,934,575 common shares outstanding.

CorEnergy Infrastructure Trust, Inc.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2018

TABLE OF CONTENTS

____________________________________________________________________________________________



				Page No.
Glossary of Defined Terms				4
Forward-Looking Statements				7
PART I		FINANCIAL INFORMATION		9
	Item 1.	Financial Statements (unaudited)		9
		Consolidated Balance Sheets		9
		Consolidated Statements of Income and Comprehensive Income		10
		Consolidated Statement of Equity		11
		Consolidated Statements of Cash Flows		12
		Notes to Consolidated Financial Statements		13
		1.	Introduction and Basis of Presentation	13
		2.	Recent Accounting Pronouncements	13
		3.	Leased Properties and Leases	14
		4.	Transportation and Distribution Revenue	16
		5.	Financing Notes Receivable	18
		6.	Income Taxes	19
		7.	Property and Equipment	20
		8.	Management Agreement	20
		9.	Fair Value	20
		10.	Debt	23
		11.	Stockholders' Equity	25
		12.	Earnings Per Share	26
		13.	Subsequent Events	26
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		41
	Item 4.	Controls and Procedures		41

PART II.		OTHER INFORMATION		42
	Item 1.	Legal Proceedings		42
	Item 1A.	Risk Factors		42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
	Item 3.	Defaults Upon Senior Securities		42
	Item 4.	Mine Safety Disclosures		42
	Item 5.	Other Information		42
	Item 6.	Exhibits		42
Signatures				43

This Report on Form 10-Q ("Report") should be read in its entirety. No one section of the Report deals with all aspects of the subject matter. It should be read in conjunction with the consolidated financial statements, related notes, and with the Management's Discussion & Analysis ("MD&A") included within, as well as provided in the Annual Report on Form 10-K, for the year ended December 31, 2017.

The consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or for any other interim or annual period. For further information, refer to the consolidated financial statements and footnotes thereto included in the CorEnergy Infrastructure Trust, Inc. Annual Report on Form 10-K, for the year ended December 31, 2017.



Table of Contents	GLOSSARY OF DEFINED TERMS

Certain of the defined terms used in this Report are set forth below:

Accretion Expense: the expense recognized when adjusting the present value of the GIGS ARO for the passage of time.

Administrative Agreement: the Administrative Agreement dated December 1, 2011, as amended effective August 7, 2012, between the Company and Corridor.

Amended Pinedale Term Credit Facility: Pinedale LP's $41.0 million second amended and restated term credit agreement and note purchase agreement with Prudential as lender.

Arc Logistics: Arc Logistics Partners LP, a wholly-owned subsidiary of Zenith Energy U.S., LP.

ARO: the Asset Retirement Obligation liabilities assumed with the acquisition of GIGS.

ASC: FASB Accounting Standards Codification.

ASU: Accounting Standard Update.

Bbls: standard barrel containing 42 U.S. gallons.

Company or CorEnergy: CorEnergy Infrastructure Trust, Inc. (NYSE: CORR).

Convertible Notes: the Company's 7.00% Convertible Senior Notes due 2020.

CorEnergy Credit Facility: the Company's upsized $160.0 million CorEnergy Revolver and the $1.0 million MoGas Revolver with Regions Bank.

CorEnergy Revolver: the Company's $160.0 million secured revolving line of credit facility with Regions Bank.

CorEnergy Term Loan: the Company's $45.0 million secured term loan with Regions Bank that was paid off in conjunction with the amendment and restatement of the CorEnergy Credit Facility on July 28, 2017.

Corridor: Corridor InfraTrust Management, LLC, the Company's external manager pursuant to the Management Agreement.

Corridor MoGas: Corridor MoGas, Inc., a wholly-owned taxable REIT subsidiary of CorEnergy and the holding company of MoGas, United Property Systems and CorEnergy Pipeline Company, LLC.

Corridor Private: Corridor Private Holdings, Inc., an indirect wholly-owned taxable REIT subsidiary of CorEnergy.

CPI: Consumer Price Index.

Exchange Act: the Securities Exchange Act of 1934, as amended.

EGC: Energy XXI Ltd, the parent company (and guarantor) of our tenant on the Grand Isle Gathering System lease, emerged from a reorganization under Chapter 11 of the US Bankruptcy Code on December 30, 2016, with the succeeding company named Energy XXI Gulf Coast, Inc. Throughout this document, references to EGC will refer to both the pre- and post-bankruptcy entities.

EGC Tenant: Energy XXI GIGS Services, LLC, a wholly-owned operating subsidiary of Energy XXI Gulf Coast, Inc. that is the tenant under Grand Isle Corridor's triple-net lease of the Grand Isle Gathering System.

FASB: Financial Accounting Standards Board.

FERC: Federal Energy Regulatory Commission.

Four Wood Corridor: Four Wood Corridor, LLC, a wholly-owned subsidiary of CorEnergy.

Four Wood Energy: Four Wood Energy Partners LLC, a wholly-owned subsidiary of Four Wood Capital Partners LLC.

Four Wood Notes: the financing notes between Four Wood Corridor and Corridor Private and SWD.

GAAP: U.S. generally accepted accounting principles.

GIGS: the Grand Isle Gathering System, owned by Grand Isle Corridor, LP and triple-net leased to a wholly-owned subsidiary of Energy XXI Gulf Coast, Inc.



Table of Contents	GLOSSARY OF DEFINED TERMS (Continued from previous page)

Grand Isle Corridor: Grand Isle Corridor, LP, an indirect wholly-owned subsidiary of the Company.

Grand Isle Gathering System: a subsea midstream pipeline gathering system located in the shallow Gulf of Mexico shelf and storage and onshore processing facilities.

Grand Isle Lease Agreement: the June 2015 agreement pursuant to which the Grand Isle Gathering System assets are triple-net leased to EGC Tenant.

Lightfoot: collectively, Lightfoot Capital Partners LP and Lightfoot Capital Partners GP LLC.

Management Agreement: an agreement between the Company and Corridor entered into May 8, 2015, effective as of May 1, 2015.

MoGas: MoGas Pipeline LLC, an indirect wholly-owned subsidiary of CorEnergy.

MoGas Pipeline System: an approximately 263-mile interstate natural gas pipeline system in and around St. Louis and extending into central Missouri, owned and operated by MoGas.

MoGas Revolver: a $1.0 million secured revolving line of credit facility at the MoGas subsidiary level with Regions Bank.

Mowood: Mowood, LLC, an indirect wholly-owned subsidiary of CorEnergy and the holding company of Omega Pipeline Company, LLC.

Mowood/Omega Revolver: a $1.5 million revolving line of credit facility at the Mowood subsidiary level with Regions Bank.

NAREIT: National Association of Real Estate Investment Trusts.

Omega: Omega Pipeline Company, LLC, a wholly-owned subsidiary of Mowood, LLC.

Omega Pipeline: Omega's natural gas distribution system in south central Missouri.

Pinedale Credit Facility: a $70.0 million secured term credit facility, with the Company and Prudential as refinance lenders, used by Pinedale Corridor, LP to finance a portion of the acquisition of the Pinedale LGS.

Pinedale LGS: the Pinedale Liquids Gathering System, a system consisting of approximately 150 miles of pipelines and four above-ground central gathering facilities located in the Pinedale Anticline in Wyoming, owned by Pinedale LP and triple-net leased to a wholly-owned subsidiary of Ultra Petroleum.

Pinedale Lease Agreement: the December 2012 agreement pursuant to which the Pinedale LGS assets are triple-net leased to a wholly owned subsidiary of Ultra Petroleum.

Pinedale LP: Pinedale Corridor, LP, an indirect wholly-owned subsidiary of CorEnergy.

Pinedale LP I: Pinedale LP I, LLC, a wholly-owned subsidiary of CorEnergy, which purchased the 18.95 percent noncontrolling equity interest in Pinedale LGS from Prudential on December 29, 2017.

Pinedale GP: the general partner of Pinedale LP and a wholly-owned subsidiary of CorEnergy.

Portland Lease Agreement: the January 2014 agreement pursuant to which the Portland Terminal Facility is triple-net leased to Zenith Terminals.

Portland Terminal Facility: a petroleum products terminal located in Portland, Oregon.

Prudential: the Prudential Insurance Company of America.

REIT: real estate investment trust.

SEC: Securities and Exchange Commission.

Series A Preferred Stock: the Company's 7.375% Series A Cumulative Redeemable Preferred Stock, par value $0.001 per share, of which there currently are outstanding 52,000 shares represented by 5,200,000 depositary shares, each representing 1/100th of a whole share of Series A Preferred.

SWD: SWD Enterprises, LLC, a wholly-owned subsidiary of Four Wood Energy Partners, LLC.



Table of Contents	GLOSSARY OF DEFINED TERMS (Continued from previous page)

TRS: taxable REIT subsidiary.

UPL: Ultra Petroleum Corp.

Ultra Wyoming: Ultra Wyoming LGS LLC, an indirect wholly-owned subsidiary of Ultra Petroleum.

United Property Systems: United Property Systems, LLC, an indirect wholly-owned subsidiary of CorEnergy, acquired with the MoGas transaction in November 2014.

VIE: variable interest entity.

Zenith: Zenith Energy U.S., LP.

Zenith Terminals: Zenith Energy Terminal Holdings, LLC (f/k/a Arc Terminal Holdings, LLC), a wholly-owned operating subsidiary of Arc Logistics LP (and, subsequent to December 21, 2017, an indirect wholly-owned subsidiary of Zenith).



Table of Contents		Glossary of Defined Terms

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this Quarterly Report on Form 10-Q may be deemed "forward-looking statements" within the meaning of the federal securities laws. In many cases, these forward-looking statements may be identified by the use of words such as "will," "may," "should," "could," "believes," "expects," "anticipates," "estimates," "intends," "projects," "goals," "objectives," "targets," "predicts," "plans," "seeks," or similar expressions.

Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. Our actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:


•	the ability of our tenants and borrowers to make payments under their respective leases and mortgage loans, our reliance on certain major tenants under single tenant leases and our ability to re-lease properties;


•	changes in economic and business conditions in the energy infrastructure sector where our investments are concentrated, including the financial condition of our tenants or borrowers and general economic conditions in the particular sectors of the energy industry served by each of our infrastructure assets;


•	the inherent risks associated with owning real estate, including real estate market conditions, governing laws and regulations, including potential liabilities related to environmental matters, and the relative illiquidity of real estate investments;


•	risks associated with the bankruptcy or default of any of our tenants or borrowers, including the exercise of the rights and remedies of bankrupt entities;


•	the impact of laws and governmental regulations applicable to certain of our infrastructure assets, including additional costs imposed on our business or other adverse impacts as a result of any unfavorable changes in such laws or regulations;


•	the potential impact of greenhouse gas regulation and climate change on our or our tenants' business, financial condition and results of operations;


•	the loss of any member of our management team;


•	our continued ability to access the debt and equity markets;


•	our ability to successfully implement our selective acquisition strategy;


•	our ability to obtain suitable tenants for our properties;


•	our ability to refinance amounts outstanding under our credit facilities and our convertible notes at maturity on terms favorable to us;


•	changes in interest rates under our current credit facilities and under any additional variable rate debt arrangements that we may enter into in the future;


•	our ability to comply with certain debt covenants;


•	dependence by us and our tenants on key customers for significant revenues, and the risk of defaults by any such tenants or customers;


•	the risk of adverse impacts to our results of operations if the tenant exercises its early lease termination or lease buy-out options at our Portland Terminal Facility;


•	our or our tenants' ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;


•	the continued availability of third-party pipelines, railroads or other facilities interconnected with certain of our infrastructure assets;


•	risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by extreme weather patterns and other natural phenomena;


•	our ability to sell properties at an attractive price;


•	market conditions and related price volatility affecting our debt and equity securities;


•	competitive and regulatory pressures on the revenues of our interstate natural gas transmission business;


•	changes in federal or state tax rules or regulations that could have adverse tax consequences;


•	declines in the market value of our investment securities;



Table of Contents		Glossary of Defined Terms


•	our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected;


•	changes in federal income tax regulations (and applicable interpretations thereof), or in the composition or performance of our assets, that could impact our ability to continue to qualify as a real estate investment trust for federal income tax purposes; and


•	risks related to potential terrorist attacks, acts of cyber-terrorism, or similar disruptions that could disrupt access to our information technology systems or result in other significant damage to our business and properties, some of which may not be covered by insurance and all of which could adversely impact distributions to our stockholders.

Forward-looking statements speak only as of the date on which they are made. While we may update these statements from time to time, we are not required to do so other than pursuant to applicable laws. For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 28, 2018, and Part II, Item 1A, "Risk Factors", in this Report.



Table of Contents		Glossary of Defined Terms

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CorEnergy Infrastructure Trust, Inc.

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
See accompanying Notes to Consolidated Financial Statements.



Table of Contents		Glossary of Defined Terms

CorEnergy Infrastructure Trust, Inc.

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
See accompanying Notes to Consolidated Financial Statements.



Table of Contents		Glossary of Defined Terms

CorEnergy Infrastructure Trust, Inc.

CONSOLIDATED STATEMENT OF EQUITY



	Capital Stock			Preferred Stock		Additional Paid-in Capital			Retained Earnings			Total
	Shares	Amount		Amount		Additional Paid-in Capital			Retained Earnings			Total
Balance at December 31, 2017	11,915,830	$	11,916	$	130,000,000	$	331,773,716		$	—		$	461,785,632
Cumulative transition adjustment upon the adoption of ASC 606, net of tax	—	—		—		(2,449,245		)	—			(2,449,245		)
Net income	—	—		—		—			15,518,557			15,518,557
Series A preferred stock dividends	—	—		—		—			(4,793,750		)	(4,793,750		)
Common stock dividends	—	—		—		(7,156,178		)	(10,724,807		)	(17,880,985		)
Common stock issued under director's compensation plan	1,006	1		—		37,499			—			37,500
Reinvestment of dividends paid to common stockholders	16,938	17		—		610,202			—			610,219
Balance at June 30, 2018 (Unaudited)	11,933,774	$	11,934	$	130,000,000	$	322,815,994		$	—		$	452,827,928
See accompanying Notes to Consolidated Financial Statements.



Table of Contents		Glossary of Defined Terms

CorEnergy Infrastructure Trust, Inc.

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
See accompanying Notes to Consolidated Financial Statements.



Table of Contents		Glossary of Defined Terms

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2018

1. INTRODUCTION AND BASIS OF PRESENTATION

Introduction

CorEnergy Infrastructure Trust, Inc. ("CorEnergy" or "the Company"), was organized as a Maryland corporation and commenced operations on December 8, 2005. The Company's common shares are listed on the New York Stock Exchange ("NYSE") under the symbol "CORR" and its depositary shares representing Series A Preferred Stock are listed on the NYSE under the symbol "CORR PrA".

The Company is primarily focused on acquiring and financing real estate assets within the U.S. energy infrastructure sector and concurrently entering into long-term triple-net participating leases with energy companies. The Company also may provide other types of capital, including loans secured by energy infrastructure assets. Targeted assets include pipelines, storage tanks, transmission lines, and gathering systems, among others. These sale-leaseback or real property mortgage transactions provide the energy company with a source of capital that is an alternative to other sources such as corporate borrowing, bond offerings, or equity offerings. Many of the Company's leases contain participation features in the financial performance or value of the underlying infrastructure real property asset. The triple-net lease structure requires that the tenant pay all operating expenses of the business conducted by the tenant, including real estate taxes, insurance, utilities, and expenses of maintaining the asset in good working order. CorEnergy considers its investments in these energy infrastructure assets to be a single business segment and reports them accordingly in its financial statements.

Basis of Presentation

The accompanying consolidated financial statements include CorEnergy accounts and the accounts of its wholly-owned subsidiaries and have been prepared in accordance with GAAP set forth in the ASC, as published by the FASB, and with the SEC instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented. There were no adjustments that, in the opinion of management, were not of a normal and recurring nature. All intercompany transactions and balances have been eliminated in consolidation, and the Company's net earnings have been reduced by the portion of net earnings attributable to non-controlling interests, when applicable.

The FASB issued ASU 2015-02 "Consolidations (Topic 810) - Amendments to the Consolidation Analysis" ("ASU 2015-02"), which amended previous consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. Under this analysis, limited partnerships and other similar entities are considered a variable interest entity ("VIE") unless the limited partners hold substantive kick-out rights or participating rights. Management determined that Pinedale LP and Grand Isle Corridor LP are VIEs under the amended guidance because the limited partners of both partnerships lack both substantive kick-out rights and participating rights. However, based on the general partners' roles and rights as afforded by the partnership agreements and its exposure to losses and benefits of each of the partnerships through its significant limited partner interests, management determined that CorEnergy is the primary beneficiary of both Pinedale LP and Grand Isle Corridor LP. Based upon this evaluation and the Company's 100 percent ownership of the limited partnership interest in both Pinedale LP and Grand Isle Corridor LP, the consolidated financial statements presented include full consolidation with respect to both of the partnerships.

Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any other interim or annual period. These consolidated financial statements and Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with CorEnergy's Annual Report on Form 10-K, for the year ended December 31, 2017, filed with the SEC on February 28, 2018 (the "2017 CorEnergy 10-K").

2. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers" ("ASU 2014-09" or "ASC 606"), which became effective for all public entities on January 1, 2018, if not adopted early. ASC 606 supersedes previously existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g. leases). The model requires an entity to recognize as revenue the amount of consideration to which it expects to be entitled for the transfer of promised



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goods or services to customers. A substantial portion of the Company's revenue consists of rental income from leasing arrangements, which is specifically excluded from ASC 606. However, the Company's transportation and distribution revenue is within the scope of the new guidance. The Company adopted ASC 606 effective on January 1, 2018 using the modified retrospective method. The Company elected to apply the guidance only to open contracts as of the effective date. The Company recognized the cumulative effect of applying the new standard as an adjustment to the opening balance of stockholders' equity. The comparative information has not been restated and continues to be reported under accounting standards in effect for those periods. Refer to Note 4 ("Transportation And Distribution Revenue") for further discussion of our transportation and distribution revenue recognition policy, transition impact and related disclosures under ASC 606.

In February 2016, the FASB issued ASU 2016-02 "Leases" ("ASU 2016-02"), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. At adoption, the standard will be applied using a modified retrospective approach. Management is in the process of evaluating the impact of the standard on its consolidated financial statements and related disclosures. As part of its assessment work, the Company has formed an implementation team, completed training on the new lease standard and is undertaking a review of its contracts.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" ("ASU 2016-13"), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The new model, referred to as the current expected credit losses ("CECL model"), will apply to financial assets subject to credit losses and measured at amortized cost, and certain off-balance sheet credit exposures. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact that adopting the new standard will have on the Company's consolidated financial statements but believes that, unless the Company acquires any additional financing receivables, the impact would not be material.

3. LEASED PROPERTIES AND LEASES

As of June 30, 2018, the Company had three significant leased properties located in Oregon, Wyoming, Louisiana, and the Gulf of Mexico, which are leased on a triple-net basis to major tenants, described in the table below. These major tenants are responsible for the payment of all taxes, maintenance, repairs, insurance, and other operating expenses relating to the leased properties. The long-term, triple-net leases generally have an initial term of 11 to 15 years with options for renewals. Lease payments are scheduled to increase at varying intervals during the initial terms of the leases. The following table summarizes the significant leased properties, major tenants and lease terms:



Summary of Leased Properties, Major Tenants and Lease Terms
Property	Grand Isle Gathering System	Pinedale LGS	Portland Terminal Facility
Location	Gulf of Mexico/Louisiana	Pinedale, WY	Portland, OR
Tenant	Energy XXI GIGS Services, LLC	Ultra Wyoming LGS, LLC	Zenith Energy Terminals Holdings LLC
Asset Description	Approximately 153 miles of offshore pipeline with total capacity of 120 thousand Bbls/d, including a 16-acre onshore terminal and saltwater disposal system.	Approximately 150 miles of pipelines and four central storage facilities.	A 39-acre rail and marine facility property adjacent to the Willamette River with 84 tanks and total storage capacity of approximately 1.5 million barrels.
Date Acquired	June 2015	December 2012	January 2014
Initial Lease Term	11 years	15 years	15 years⁽¹⁾
Renewal Option	Equal to the lesser of 9-years or 75 percent of the remaining useful life	5-year terms	5-year terms
Current Monthly Rent Payments	7/1/2017 - 6/30/2018: $2,854,667 7/1/2018 - 6/30/2019: $2,860,917	$1,776,772	$513,355
Initial Estimated Useful Life	27 years	26 years	30 years
(1) The lessee of the Portland Terminal Facility has a purchase option on the facility, which it can exercise with 90-days notice, as well as lease termination options on the fifth and tenth anniversaries of the lease. If exercised, the purchase option and termination options are subject to additional payment provisions and termination fees prescribed under the lease.



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The future contracted minimum rental receipts for all leases as of June 30, 2018, are as follows:



Future Minimum Lease Receipts ⁽¹⁾
Years Ending December 31,	Amount
2018	$	30,919,514
2019	64,103,462
2020	71,264,921
2021	77,445,396
2022	76,553,434
Thereafter	302,242,184
Total	$	622,528,911
(1) Future minimum lease receipts include base rents for the Portland Terminal Facility through its initial 15-year term.

The table below displays the Company's individually significant leases as a percentage of total leased properties and total lease revenues for the periods presented:



	As a Percentage of ⁽¹⁾
	Leased Properties				Lease Revenues
					For the Three Months Ended				For the Six Months Ended
	June 30, 2018		December 31, 2017		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Pinedale LGS⁽²⁾	39.9	%	39.9	%	35.3	%	30.6	%	34.1	%	30.6	%
Grand Isle Gathering System	49.7	%	49.7	%	55.6	%	59.6	%	56.7	%	59.6	%
Portland Terminal Facility	10.2	%	10.1	%	9.0	%	9.6	%	9.1	%	9.7	%
(1) Insignificant leases are not presented; thus percentages may not sum to 100%.
(2) Pinedale LGS lease revenues include variable rent of $1.1 million and $1.5 million for the three and six months ended June 30, 2018, respectively.

The following table reflects the depreciation and amortization included in the accompanying Consolidated Statements of Income associated with the Company's leases and leased properties:



	For the Three Months Ended				For the Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Depreciation Expense
GIGS	$	2,751,272	$	2,438,649	$	5,502,544	$	4,877,298
Pinedale	2,217,360		2,217,360		4,434,720		4,434,720
Portland Terminal Facility	318,915		318,915		637,830		637,830
United Property Systems	9,120		9,060		18,242		18,119
Total Depreciation Expense	$	5,296,667	$	4,983,984	$	10,593,336	$	9,967,967
Amortization Expense - Deferred Lease Costs
GIGS	$	7,641	$	7,641	$	15,282	$	15,282
Pinedale	15,342		15,342		30,684		30,684
Total Amortization Expense - Deferred Lease Costs	$	22,983	$	22,983	$	45,966	$	45,966
ARO Accretion Expense
GIGS	$	127,928	$	160,629	$	255,856	$	321,258
Total ARO Accretion Expense	$	127,928	$	160,629	$	255,856	$	321,258

The following table reflects the deferred costs that are included in the accompanying Consolidated Balance Sheets associated with the Company's leased properties:



	June 30, 2018		December 31, 2017
Net Deferred Lease Costs
GIGS	$	244,601	$	259,883
Pinedale	581,033		611,717
Total Deferred Lease Costs, net	$	825,634	$	871,600



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Tenant Information

Substantially all of the lease tenants' financial results are driven by exploiting naturally occurring oil and natural gas hydrocarbon deposits beneath the Earth's surface. As a result, the tenants' financial results are highly dependent on the performance of the oil and natural gas industry, which is highly competitive and subject to volatility. During the terms of the leases, management monitors the credit quality of its tenants by reviewing their published credit ratings, if available, reviewing publicly available financial statements, or reviewing financial or other operating statements, monitoring news reports regarding the tenants and their respective businesses, and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.

Ultra Petroleum

UPL is currently subject to the reporting requirements under the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. Its SEC filings can be found at www.sec.gov. Its stock is trading on the NASDAQ under the symbol UPL. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of UPL but has no reason to doubt the accuracy or completeness of such information. In addition, UPL has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of UPL that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.

Energy Gulf Coast

EGC is currently subject to the reporting requirements of the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. Its SEC filings can be found at www.sec.gov. Effective March 21, 2018, EGC changed its NASDAQ ticker symbol from EXXI to EGC. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of EGC but has no reason to doubt the accuracy or completeness of such information. In addition, EGC has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of EGC that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing. Upon closure of the previously announced acquisition of EGC by an affiliate of the privately-held Cox Oil, expected in the third quarter of 2018, EGC will no longer be subject to the filing and reporting requirements of the SEC.

Zenith

Currently our tenant, Zenith Terminals, has a number of different actions available to it under the Portland Lease Agreement, which include (i) continuing with the current terminal lease, (ii) exercising its buy-out option on the terminal or (iii) terminating the lease at its fifth or tenth anniversaries, subject to the termination provisions in the lease. The Company has entered into amendments with Zenith which have extended the notice period for the fifth anniversary termination option through September 1, 2018. The Company has not received notice with respect to either a buy-out or termination option election and, to date, the terminal lease continues to operate in the same manner as prior to the merger.

4. TRANSPORTATION AND DISTRIBUTION REVENUE

The Company's contracts related to transportation and distribution revenue are primarily comprised of a mix of natural gas supply, transportation and distribution performance obligations, as well as limited performance obligations related to system maintenance and expansion. Under the Company's natural gas supply, transportation and distribution performance obligations, the customer simultaneously receives and consumes the benefit of the services as natural gas is delivered. Therefore, the transaction price is allocated proportionally over the series of identical performance obligations with each contract. The transaction price is calculated based on (i) index price, plus a contractual markup in the case of natural gas supply agreements (considered variable due to fluctuations in the index), (ii) FERC regulated rates or negotiated rates in the case of transportation agreements and (iii) contracted amounts (with annual CPI escalators) in the case of the Company's distribution agreement. Based on the nature of the agreements, revenue for all but one of the Company's natural gas supply, transportation and distribution performance obligations is recognized on a right to invoice basis as the performance obligations are met, which represents what the Company expects to receive in consideration and is representative of value delivered to the customer. The Company has a contract with Spire that has fixed pricing which varies over the contract term. For this specific contract, the transaction price has been allocated ratably over the contractual performance obligation, as discussed further below. All invoicing is done in the month following service, with payment typically due a month from invoice date.



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Based on a downward revision of the rate during the Company's long-term natural gas transportation contract with Spire, ASC 606 requires the Company to record the contractual transaction price, and therefore aggregate revenue, from the contract ratably over the term of the contract. Accordingly, on January 1, 2018, the Company recorded a cumulative adjustment to recognize a contract liability of approximately $3.3 million, and a corresponding reduction to beginning equity (net of deferred tax impact). The adjustment reflects the difference in amounts previously recognized as invoiced, versus cumulative revenues earned under the contract on a straight-line basis in accordance with ASC 606, as of the date of adoption. The contract liability will continue to accumulate additional unrecognized performance obligations at a rate of approximately $992 thousand per quarter until the contractual rate decrease takes effect in November 2018. Following the rate decline, recognized performance obligations will exceed amounts invoiced and the contract liability is expected to decline at a rate of approximately $138 thousand per quarter through the end of the contract in October 2030. As of June 30, 2018, the revenue allocated to the remaining performance obligation under this contract is approximately $66.2 million.

The Company's contracts also contain performance obligations related to system maintenance and expansion, which are completed on an as-needed basis. The work performed is specific and tailored to the customer's needs and there are no alternative uses for the services provided. Therefore, as the work is being completed, control is transferring to the customer. These services are billed at the Company's cost, plus an agreed upon margin, and the Company has an enforceable right to payment for services provided. The Company invoices for this service on a monthly basis according to an agreed upon billing schedule. Revenue is recognized on an input method, based on the actual cost of a service as a measure of performance obligations satisfaction, which the Company determined to be the method which faithfully depicts the transfer of services. Differences between the amounts invoiced and revenue recognized under the input method are reflected as an asset or liability on the Consolidated Balance Sheet. Any differences are generally expected to be recognized within a year.

The table below summarizes the Company's contract asset and contract liability balances related to its transportation and distribution revenue contracts as of June 30, 2018:



	Contract Asset⁽¹⁾			Contract Liability⁽²⁾
Beginning Balance January 1, 2018	$	328,033		$	—
Cumulative Transition Adjustment Upon Adoption of ASC 606	—			3,307,109
Unrecognized Performance Obligations	(418,314		)	1,984,266
Recognized Performance Obligations	111,656			—
Ending Balance June 30, 2018	$	21,375		$	5,291,375
(1) The contract asset balance is included in prepaid expenses and other assets in the Consolidated Balance Sheets.
(2) The contract liability balance is included in unearned revenue in the Consolidated Balance Sheets.

The following is a breakout of the Company's transportation and distribution revenue for the three and six months ended June 30, 2018 and 2017:



	For the Three Months Ended				For the Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Natural gas transportation contracts	66.1	%	74.1	%	66.3	%	72.9	%
Natural gas distribution contracts	27.2	%	21.4	%	26.8	%	20.7	%

In accordance with ASC 606 transition disclosure requirements, the cumulative effect of changes made to the Consolidated Balance Sheet as of January 1, 2018 for the adoption of ASC 606 were as follows:



Balance Sheet	Balance at December 31, 2017		Adjustments Due to ASC 606			Balance at January 1, 2018
Assets
Deferred Tax Asset	$	2,244,629	$	857,864		$	3,102,493
Liabilities
Unearned revenue	3,397,717		3,307,109			6,704,826
Equity
Additional paid in capital	331,773,716		(2,449,245		)	329,324,471



Table of Contents		Glossary of Defined Terms

The tables below disclose the impact of adoption on the Consolidated Balance Sheet and Consolidated Statement of Income as of and for the period ended June 30, 2018:



	As of June 30, 2018
Balance Sheet	As Reported		Balances Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Assets
Deferred Tax Asset	$	4,115,834	$	2,743,252	$	1,372,582
Liabilities
Unearned revenue	5,321,069		29,694		5,291,375
Equity
Additional paid in capital	322,815,994		326,734,786		(3,918,792		)



	For the Three Months Ended June 30, 2018									For the Six Months Ended June 30, 2018
Statement of Income	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)			As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Revenues
Transportation and distribution revenue	$	3,874,157		$	4,866,290		$	(992,133	)	$	7,827,136		$	9,811,402		$	(1,984,266	)
Taxes
Deferred tax benefit	(604,064		)	(346,705		)	(257,359		)	(1,013,341		)	(498,622		)	(514,719		)

5. FINANCING NOTES RECEIVABLE

Financing notes receivable are presented at face value plus accrued interest receivable and deferred loan origination costs, and net of related direct loan origination income. Each quarter the Company reviews its financing notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Factors may include credit quality, timeliness of required periodic payments, past due status, and management discussions with obligors. The Company evaluates the collectability of both interest and principal of each of its loans to determine if an allowance is needed. An allowance will be recorded when, based on current information and events, the Company determines it is probable that it will be unable to collect all amounts due according to the existing contractual terms. If the Company does determine an allowance is necessary, the amount deemed uncollectable is expensed in the period of determination. An insignificant delay or shortfall in the amount of payments does not necessarily result in the recording of an allowance. Generally, when interest and/or principal payments on a loan become past due, or if management otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing financing revenue on that loan until all principal and interest have been brought current. Interest income recognition is resumed if and when the previously reserved for financing notes become contractually current and performance has been demonstrated. Payments received subsequent to the recording of an allowance will be recorded as a reduction to principal.

Four Wood Financing Note Receivable

As a result of decreased economic activity by SWD, the Company recorded a provision for loan loss with respect to the SWD Loans and the loans were placed on non-accrual status during the first quarter of 2016. During the first quarter of 2018, the Company recorded an additional provision for loan loss on the SWD Loans of $500 thousand. The balance of the loans has been valued based on the enterprise value of SWD, the collateral supporting the loans, at $1.0 million and $1.5 million as of June 30, 2018 and December 31, 2017, respectively.



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6. INCOME TAXES

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company's deferred tax assets and liabilities as of June 30, 2018 and December 31, 2017, are as follows:



Deferred Tax Assets and Liabilities
	June 30, 2018			December 31, 2017
Deferred Tax Assets:
Deferred contract revenue	$	1,372,582		$	—
Net operating loss carryforwards	1,602,683			957,719
Loan loss provision	263,508			247,814
Basis reduction of investment in partnerships	233,158			261,549
Other loss carryforwards	2,965,320			2,965,321
Sub-total	$	6,437,251		$	4,432,403
Deferred Tax Liabilities:
Net unrealized gain on investment securities	$	(134,317	)	$	(342,669	)
Cost recovery of leased and fixed assets	(2,177,589		)	(1,845,105		)
Basis reduction in tax goodwill	(9,511		)	—
Sub-total	$	(2,321,417	)	$	(2,187,774	)
Total net deferred tax asset	$	4,115,834		$	2,244,629

As of June 30, 2018, the total deferred tax assets and liabilities presented above relate to the Company's TRSs. The Company recognizes the tax benefits of uncertain tax positions only when the position is "more likely than not" to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company's policy is to record interest and penalties on uncertain tax positions as part of tax expense. Tax years subsequent to the year ended December 31, 2013 remain open to examination by federal and state tax authorities.

The Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted on December 22, 2017. The 2017 Tax Act reduces the US federal corporate tax rate from 35 percent to 21 percent. The 2017 Tax Act also repealed the alternative minimum tax for corporations. The Company has completed its provisional accounting for the tax effects of enactment of the 2017 Tax Act. Due to the timing and complexities of the new legislation, the SEC has issued Staff Accounting Bulletin 118, which allows for the recognition of provisional amounts during a measurement period similar to the measurement period used when accounting for business combinations. The Company remeasured deferred tax assets and liabilities based on the updated rates at which they are expected to reverse in the future, in the table above, which resulted in a $1.3 million transition adjustment that reduced net deferred tax assets at December 31, 2017. The Company will continue to assess the impact of the new tax legislation, as well as any future regulations and updates, and will record any additional impacts as identified during the measurement period, if necessary.

Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 21 percent for the three and six months ended June 30, 2018 and 35 percent for the three and six months ended June 30, 2017 to income from operations and other income and expense for the periods presented, as follows:



Income Tax Expense (Benefit)
	For the Three Months Ended						For the Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Application of statutory income tax rate	$	1,511,160		$	3,158,922		$	3,036,365		$	5,726,827
State income taxes, net of federal tax expense (benefit)	(121,069		)	3,786			(265,019		)	(31,651		)
Federal Tax Attributable to Income of Real Estate Investment Trust	(2,004,940		)	(3,066,973		)	(3,819,436		)	(5,932,047		)
Other	—			—			(11,585		)	—
Total income tax expense (benefit)	$	(614,849	)	$	95,735		$	(1,059,675	)	$	(236,871	)



Table of Contents		Glossary of Defined Terms

The components of income tax expense (benefit) include the following for the periods presented:



Components of Income Tax Expense (Benefit)
	For the Three Months Ended						For the Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Current tax expense (benefit)
Federal	$	(8,537	)	$	52,031		$	(36,676	)	$	21,562
State (net of federal tax expense (benefit))	(2,248		)	5,620			(9,658		)	2,329
Total current tax expense (benefit)	$	(10,785	)	$	57,651		$	(46,334	)	$	23,891
Deferred tax expense (benefit)
Federal	$	(485,243	)	$	39,918		$	(757,981	)	$	(226,782	)
State (net of federal tax expense (benefit))	(118,821		)	(1,834		)	(255,360		)	(33,980		)
Total deferred tax expense (benefit)	$	(604,064	)	$	38,084		$	(1,013,341	)	$	(260,762	)
Total income tax expense (benefit), net	$	(614,849	)	$	95,735		$	(1,059,675	)	$	(236,871	)

7. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:



Property and Equipment
	June 30, 2018			December 31, 2017
Land	$	580,000		$	580,000
Natural gas pipeline	124,303,315			124,303,315
Vehicles and trailers	675,517			650,634
Office equipment and computers	268,559			268,559
Gross property and equipment	$	125,827,391		$	125,802,508
Less: accumulated depreciation	(14,312,665		)	(12,643,636		)
Net property and equipment	$	111,514,726		$	113,158,872

Depreciation expense was $843 thousand and $1.7 million for the three and six months ended June 30, 2018, respectively, and $838 thousand and $1.7 million for the three and six months ended June 30, 2017, respectively.

8. MANAGEMENT AGREEMENT

The Company pays its manager, Corridor, pursuant to a Management Agreement as described in the 2017 CorEnergy 10-K. Fees incurred under the Management Agreement for the three and six months ended June 30, 2018 were $1.9 million and $3.8 million, respectively, compared to $1.8 million and $3.6 million for the three and six months ended June 30, 2017, respectively. Fees incurred under the Management Agreement are reported in the general and administrative line item on the Consolidated Statements of Income.

The Company pays its administrator, Corridor, pursuant to an Administrative Agreement. Fees incurred under the Administrative Agreement for the three and six months ended June 30, 2018 were $70 thousand and $139 thousand, respectively, compared to $67 thousand and $134 thousand for the three and six months ended June 30, 2017, respectively. Fees incurred under the Administrative Agreement are reported in the general and administrative line item on the Consolidated Statements of Income.

9. FAIR VALUE

The following tables set forth the Company's assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of June 30, 2018 and December 31, 2017:



	June 30, 2018
			Fair Value
	Total		Level 1		Level 2		Level 3
Assets:
Other equity securities	$	2,091,181	$	—	$	—	$	2,091,181
Total Assets	$	2,091,181	$	—	$	—	$	2,091,181



Table of Contents		Glossary of Defined Terms



	December 31, 2017
			Fair Value
	Total		Level 1		Level 2		Level 3
Assets:
Other equity securities	$	2,958,315	$	—	$	—	$	2,958,315
Total Assets	$	2,958,315	$	—	$	—	$	2,958,315

At June 30, 2018 and December 31, 2017, the only assets and liabilities measured at fair value on a recurring basis were the Company's equity securities.

The changes for all Level 3 securities measured at fair value on a recurring basis using significant unobservable inputs for the six months ended June 30, 2018 and 2017 are as follows:



Level 3 Rollforward
For the Six Months Ended June 30, 2018	Fair Value Beginning Balance		Acquisitions		Disposals		Total Realized and Unrealized Gains (Losses) Included in Net Income			Return of Capital Adjustments Impacting Cost Basis of Securities			Fair Value Ending Balance		Changes in Unrealized Gains (Losses), Included In Net Income, Relating to Securities Still Held ⁽¹⁾
Other equity securities	$	2,958,315	$	—	$	—	$	(867,134	)	$	—		$	2,091,181	$	(867,134	)
Total	$	2,958,315	$	—	$	—	$	(867,134	)	$	—		$	2,091,181	$	(867,134	)

For the Six Months Ended June 30, 2017
Other equity securities	$	9,287,209	$	—	$	—	$	70,426		$	(210,477	)	$	9,147,158	$	70,426
Total	$	9,287,209	$	—	$	—	$	70,426		$	(210,477	)	$	9,147,158	$	70,426
(1) Located in Net realized and unrealized gain on other equity securities in the Consolidated Statements of Income

The Company utilizes the beginning of reporting period method for determining transfers between levels. There were no transfers between levels 1, 2 or 3 for the six months ended June 30, 2018 and 2017.

Valuation Techniques and Unobservable Inputs

The Company's other equity securities, which represent securities issued by private companies, are classified as Level 3 assets and the Company has elected to report at fair value under the fair value option. Significant judgment is required in selecting the assumptions used to determine the fair values of these investments.

As of both June 30, 2018 and December 31, 2017, the Company's investment in Lightfoot and Arc Terminal Joliet Holdings are its only remaining private company investments. The Company's Lightfoot investment consists of a 6.6 percent and 1.5 percent equity interest in Lightfoot LP and Lightfoot GP, respectively. As of both June 30, 2018 and December 31, 2017, Lightfoot's only material asset consists of its remaining investment in Gulf LNG, a 1.5 billion cubic feet per day ("bcf/d") receiving, storage, and regasification terminal in Pascagoula, Mississippi. Additionally, the Company owns a 0.6 percent interest in Arc Terminal Joliet Holdings, which was acquired in conjunction with the terms of Zenith's acquisition of Arc Logistics discussed below.

On December 21, 2017, Zenith closed its acquisition of Arc Logistics, except for terms pending with respect to the Gulf LNG arbitration with ENI USA. Under the terms of the agreement, Zenith will purchase the remaining 4.16 percent of Lightfoot's Gulf LNG interest ("the Conditional Interest") for an additional $27.3 million upon a successful outcome (as defined) of the Gulf LNG arbitration with Eni USA that is described below.

On March 1, 2016, an affiliate of Gulf LNG received a Notice of Disagreement and Disputed Statements and a Notice of Arbitration from Eni USA, one of the two companies that had entered into a terminal use agreement for capacity of the liquefied natural gas facility owned by Gulf LNG and its subsidiaries. On June 29, 2018, the arbitration panel delivered its award, and the panel's ruling calls for the termination of the agreement and Eni USA's payment of compensation to Gulf LNG. As a result, the Company recorded a loss on its Lightfoot investment of $881 thousand and $867 thousand for the three and six months ended June 30, 2018, respectively. The loss is recorded in net realized and unrealized gain (loss) on other equity securities in the Consolidated Statements of Income.

The Company's remaining private company investments in Lightfoot and Arc Terminal Joliet holdings represent less than 0.5 percent of its total assets. The fair value of the Company's private company investments at June 30, 2018 and December 31, 2017 was approximately $2.1 million and $3.0 million, respectively. As of June 30, 2018, the Lightfoot fair value estimate is based on



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Level 3 valuation assumptions and judgments, including probability weighted discounted cash flow analyses for various forecasted scenarios. The discount rate used in the cash flow analyses was developed by considering several factors, including the Company's minority interest in the investment. This valuation methodology is considered a change from prior periods. As of December 31, 2017, the Lightfoot fair value estimate was determined using recent transaction data and expected proceeds, discounted using a risk-free rate through the expected receipt date. As of both June 30, 2018 and December 31, 2017, the Arc Terminal Joliet fair value estimate was determined using recent transaction data. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investment may fluctuate from period to period. Additionally, the fair value of the Company's investment may differ from the values that would have been used had a ready market existed for such investment and may differ materially from the values that the Company may ultimately realize.

The following section describes the valuation methodologies used by the Company for estimating fair value for financial instruments not recorded at fair value, but fair value is included for disclosure purposes only, as required under disclosure guidance related to the fair value of financial instruments.

Cash and Cash Equivalents — The carrying value of cash, amounts due from banks, federal funds sold and securities purchased under resale agreements approximates fair value.

Financing Notes Receivable — The financing notes receivable are valued on a non-recurring basis. The financing notes receivable are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Financing Notes with carrying values that are not expected to be recovered through future cash flows are written-down to their estimated net realizable value. Estimates of realizable value are determined based on unobservable inputs, including estimates of future cash flow generation and value of collateral underlying the notes.

Secured Credit Facilities — The fair value of the Company's long-term variable-rate and fixed-rate debt under its secured credit facilities approximates carrying value.

Unsecured Convertible Senior Notes — The fair value of the unsecured convertible senior notes is estimated using quoted market prices.



Carrying and Fair Value Amounts
	Level within fair value hierarchy	June 30, 2018				December 31, 2017
	Level within fair value hierarchy	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	14,175,860	$	14,175,860	$	15,787,069	$	15,787,069
Financing notes receivable (Note 5)	Level 3	$	1,000,000	$	1,000,000	$	1,500,000	$	1,500,000
Financial Liabilities:
Secured Credit Facilities	Level 2	$	38,998,698	$	38,998,698	$	40,745,354	$	40,745,354
Unsecured convertible senior notes	Level 1	$	112,425,677	$	132,032,520	$	112,032,083	$	139,101,660
(1) The carrying value of debt balances are presented net of unamortized original issuance discount and debt issuance costs.



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10. DEBT

The following is a summary of the Company's debt facilities and balances as of June 30, 2018 and December 31, 2017:



	Total Commitment or Original Principal		Quarterly Principal Payments			June 30, 2018				December 31, 2017
	Total Commitment or Original Principal		Quarterly Principal Payments		Maturity Date	Amount Outstanding		Interest Rate		Amount Outstanding		Interest Rate
CorEnergy Secured Credit Facility:
CorEnergy Revolver	$	160,000,000	$	—	7/28/2022	$	—	4.84	%	$	—	4.32	%
MoGas Revolver	1,000,000		—		7/28/2022	—		4.84	%	—		4.32	%
Omega Line of Credit	1,500,000		—		7/31/2019	—		6.09	%	—		5.57	%
Pinedale Secured Credit Facility:
Amended Pinedale Term Credit Facility	41,000,000		882,000		12/29/2022	39,236,000		6.50	%	41,000,000		6.50	%
7.00% Unsecured Convertible Senior Notes	115,000,000		—		6/15/2020	114,000,000		7.00	%	114,000,000		7.00	%
Total Debt						$	153,236,000			$	155,000,000
Less:
Unamortized deferred financing costs ⁽¹⁾						$	333,827			$	375,309
Unamortized discount on 7.00% Convertible Senior Notes						1,477,798				1,847,254
Long-term debt, net of deferred financing costs						$	151,424,375			$	152,777,437
Debt due within one year						$	3,528,000			$	3,528,000
(1) Unamortized deferred financing costs related to our revolving credit facilities are included in Deferred Costs in the Assets section of the Consolidated Balance Sheets. Refer to the "Deferred Financing Costs" paragraph below.

CorEnergy Credit Facility

On July 28, 2017, the Company entered into an amendment and restatement of the CorEnergy Credit Facility with Regions Bank (as lender and administrative agent for other participating lenders). The amended facility provides for borrowing commitments of up to $161.0 million, consisting of (i) $160.0 million on the CorEnergy Revolver, subject to borrowing base limitations, and (ii) $1.0 million on the MoGas Revolver.

The amended facility has a 5-year term maturing on July 28, 2022, and provides for a springing maturity on February 28, 2020, and thereafter, if the Company fails to meet certain liquidity requirements from the springing maturity date through the maturity of the Company's convertible notes on June 15, 2020. Borrowings under the credit facility will generally bear interest on the outstanding principal amount using a LIBOR pricing grid that is expected to equal a LIBOR rate plus an applicable margin of 2.75 percent to 3.75 percent, based on the Company's senior secured recourse leverage ratio. Total availability is subject to a borrowing base. The CorEnergy Credit Facility contains, among other restrictions, certain financial covenants including the maintenance of certain financial ratios, as well as default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods). As of June 30, 2018, the Company was in compliance with all covenants of the CorEnergy Credit Facility.

As of June 30, 2018, the Company had approximately $145.6 million and $1.0 million of availability under the CorEnergy Revolver and MoGas Revolver, respectively.

Pinedale Credit Facility

On December 20, 2012, Pinedale LP closed on a $70.0 million secured term credit facility. On March 4, 2016, the Company obtained a consent from its lenders under the CorEnergy Credit Facility, which permitted the Company to utilize the CorEnergy Credit Facility to refinance the Company's pro rata share of the remaining balance of the Pinedale secured term credit facility. On March 30, 2016, the Company and Prudential (collectively, "the Refinancing Lenders"), refinanced the remaining $58.5 million principal balance of the $70.0 million credit facility (on a pro rata basis equal to their respective equity interests in Pinedale LP, with the Company's 81.05 percent share being approximately $47.4 million) and executed a series of agreements assigning the credit facility to CorEnergy Infrastructure Trust, Inc. as Agent for the Refinancing Lenders. The facility was further modified to extend the maturity date to March 30, 2021; to increase the LIBOR Rate to the greater of (i) 1.00 percent and (ii) the one-month LIBOR rate; and to increase the LIBOR Rate Spread to 7.00 percent per annum.

On December 29, 2017, Pinedale LP entered into the Amended Pinedale Term Credit Facility with Prudential and a group of lenders affiliated with Prudential as the sole lenders and Prudential serving as administrative agent. Under the terms of the Amended Pinedale Term Credit Facility, Pinedale LP was provided with a 5-year $41.0 million term loan facility, bearing interest at a fixed rate of 6.5 percent, which matures on December 29, 2022. Principal payments of $294 thousand, plus accrued interest, are payable



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monthly. The Amended Pinedale Term Credit Facility was utilized to pay off the balance due to the Refinancing Lenders under the previously existing Pinedale LP credit facility.

Outstanding balances under the facility are secured by the Pinedale LGS assets. The Amended Pinedale Term Credit Facility contains, among other restrictions, specific financial covenants including the maintenance of certain financial coverage ratios and a minimum net worth requirement which, along with other provisions of the credit facility, limit cash dividends and loans by Pinedale LP to the Company. At June 30, 2018, the net assets of Pinedale LP were $139.6 million and Pinedale LP was in compliance with all of the financial covenants of the Amended Pinedale Term Credit Facility.

Deferred Financing Costs

A summary of deferred financing cost amortization expenses for the three and six months ended June 30, 2018 and 2017 is as follows:



	For the Three Months Ended				For the Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
CorEnergy Credit Facility	$	143,635	$	272,074	$	287,270	$	544,148
Pinedale Credit Facility	13,205		—		26,317		—
Total Deferred Debt Cost Amortization Expense ⁽¹⁾⁽²⁾	$	156,840	$	272,074	$	313,587	$	544,148
(1) Amortization of deferred debt issuance costs is included in interest expense in the Consolidated Statements of Income.
(2) For the amount of deferred debt cost amortization relating to the Convertible Notes included in the Consolidated Statements of Income, refer to the Convertible Note Interest Expense table below.

CorEnergy Credit Facilities

Prior to the July 28, 2017 amendment and restatement, previously existing deferred financing costs related to the CorEnergy Credit Facility were approximately $1.8 million, of which approximately $1.6 million continue to be deferred and amortized under the amended and restated facility. Additionally, the Company incurred approximately $1.3 million in new debt issuance costs which have been deferred and are being amortized over the term of the new facility. Total deferred financing costs of $2.9 million are being amortized on a straight-line basis over the 5-year term of the amended and restated CorEnergy Credit Facility.

Amended Pinedale Term Credit Facility

In connection with entering into the Amended Pinedale Term Credit Facility, Pinedale LP incurred approximately $367 thousand in new debt issuance costs, of which $264 thousand were deferred and are being amortized on a straight-line basis over the 5-year term of the Amended Pinedale Term Credit Facility.

Contractual Payments

The remaining contractual principal payments as of June 30, 2018 under the Pinedale credit facility are as follows:



Year	Pinedale Credit Facility
2018	$	1,764,000
2019	3,528,000
2020	3,528,000
2021	3,528,000
2022	26,888,000
Thereafter	—
Total Remaining Contractual Payments	$	39,236,000

Convertible Debt

On June 29, 2015, the Company completed a public offering of $115.0 million aggregate principal amount of 7.00% Convertible Senior Notes Due 2020 (the "Convertible Notes"). The Convertible Notes mature on June 15, 2020 and bear interest at a rate of 7.00 percent per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015. On May 23, 2016, the Company repurchased $1.0 million of its convertible bonds on the open market.



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The following is a summary of the impact of Convertible Notes on interest expense for the three and six months ended June 30, 2018 and 2017:



Convertible Note Interest Expense
	For the Three Months Ended				For the Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
7.00% Convertible Notes	$	1,995,000	$	1,995,000	$	3,990,000	$	3,990,000
Discount Amortization	184,728		184,728		369,456		369,456
Deferred Debt Issuance Amortization	12,069		12,069		24,138		24,138
Total Convertible Note Interest Expense	$	2,191,797	$	2,191,797	$	4,383,594	$	4,383,594

The Convertible Notes were initially issued with an underwriters' discount of $3.7 million which is being amortized over the life of the Convertible Notes. Including the impact of the convertible debt discount and related deferred debt issuance costs, the effective interest rate on the Convertible Notes is approximately 7.7 percent for each of the three and six months ended June 30, 2018 and 2017.

11. STOCKHOLDERS' EQUITY

PREFERRED STOCK

As of June 30, 2018, the Company has a total of 5,200,000 depository shares outstanding, or 52,000 whole shares of its 7.375% Series A Preferred Stock. See Note 13 ("Subsequent Events") for further information regarding the declaration of a dividend on the 7.375% Series A Preferred Stock.

COMMON STOCK

As of June 30, 2018, the Company has 11,933,774 of common shares issued and outstanding. See Note 13 ("Subsequent Events") for further information regarding the declaration of a dividend on the common stock.

SHELF REGISTRATION

On February 18, 2016, the Company had a new shelf registration statement declared effective by the SEC, pursuant to which it may publicly offer additional debt or equity securities with an aggregate offering price of up to $600.0 million.

As of June 30, 2018, the Company has issued 79,153 shares of common stock under the its dividend reinvestment plan pursuant to the February 18, 2016 shelf, reducing availability by approximately $2.4 million. Shelf availability was further reduced by approximately $73.8 million as a result of the follow-on offering of additional 7.375% Series A Preferred Stock during the second quarter of 2017. As of June 30, 2018, availability on the current shelf registration is approximately $523.8 million.



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12. EARNINGS PER SHARE

Basic earnings per share data is computed based on the weighted-average number of shares of common stock outstanding during the periods. Diluted EPS data is computed based on the weighted-average number of shares of common stock outstanding, including all potentially issuable shares of common stock. Diluted EPS for the three and six months ended June 30, 2018 and 2017 excludes the impact to income and the number of shares outstanding from the conversion of the 7.00% Convertible Senior Notes because such impact is antidilutive. If converted, the 7.00% Convertible Senior Notes would result in an additional 3,454,545 common shares outstanding.



	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
Weighted average shares - basic	11,928,297		11,896,616		11,923,627		11,892,670
Basic earnings per share	$	0.45	$	0.58	$	0.90	$	1.14

Net income attributable to common stockholders (from above)	$	5,413,974	$	6,877,043	$	10,724,807	$	13,509,412
Add: After tax effect of convertible interest	—		—		—		—
Income attributable for dilutive securities	$	5,413,974	$	6,877,043	$	10,724,807	$	13,509,412
Weighted average shares - diluted	11,928,297		11,896,616		11,923,627		11,892,670
Diluted earnings per share	$	0.45	$	0.58	$	0.90	$	1.14

13. SUBSEQUENT EVENTS

The Company performed an evaluation of subsequent events through the date of the issuance of these financial statements and determined that no additional items require recognition or disclosure, except for the following:

Common Stock Dividend Declaration

On July 25, 2018, the Company's Board of Directors declared a 2018 second quarter dividend of $0.75 per share for CorEnergy common stock. The dividend is payable on August 31, 2018 to stockholders of record on August 17, 2018.

Preferred Stock Dividend Declaration

On July 25, 2018, the Company's Board of Directors also declared a dividend of $0.4609375 per depositary share for its 7.375% Series A Preferred Stock. The preferred stock dividend is payable on August 31, 2018 to stockholders of record on August 17, 2018.

Preferred Stock Repurchase Program

The Company's Board of Directors authorized a share repurchase program for the Company to buy up to $10.0 million of its preferred stock, which will commence August 6, 2018. The Company plans to repurchase shares from time to time through open market transactions, including through block purchases, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any repurchases are to be determined by senior management, depending on market prices and other conditions, and will be made in accordance with the Company's covenants under the CorEnergy Credit Facility. Purchases may be made through the program through August 5, 2019. The Company is not obligated to repurchase any shares of stock under the program and may terminate the program at any time. The Company did not repurchase any preferred shares during the six months ended June 30, 2018.



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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto in this Report on Form 10-Q ("Report") of CorEnergy Infrastructure, Inc. ("the Company," "CorEnergy," "we" or "us"). The forward-looking statements included in this discussion and elsewhere in this Report involve risks and uncertainties, including anticipated financial performance, business prospects, industry trends, stockholder returns, performance of leases by tenants, performance on loans to customers, and other matters, which reflect management's best judgment based on factors currently known. See "Cautionary Statement Concerning Forward-Looking Statements" which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 28, 2018, and Part II, Item 1A, "Risk Factors" in this Report.

BUSINESS OBJECTIVE

CorEnergy primarily owns assets in the U.S. energy sector that perform utility-like functions, such as pipelines, storage terminals, rail terminals and gas and electric transmission and distribution assets. Our objective is to generate long-term contracted revenue from operators of our assets, primarily under triple-net participating leases without direct commodity price exposure. We believe our leadership team's energy and utility expertise provides CorEnergy with a competitive advantage to acquire, own and lease U.S. energy infrastructure assets in a tax-efficient, transparent and investor-friendly REIT. Our leadership team also utilizes a disciplined investment philosophy developed through an average of over 25 years of relevant industry experience.

We expect our leases to provide us with contracted base rent, plus participating rent based upon asset-specific criteria. The energy industry commonly employs contracts with participating features, and we provide exposure to both the risk and opportunity of utilization of our assets, which we believe is a hallmark of infrastructure assets of all types. Our participating triple-net leases require the operator to pay all expenses of the business including maintaining our assets in good working order.

The majority of our assets leased to tenants under triple-net leases are dependent upon the tenants' exploitation of hydrocarbon reserves in the fields where our assets are located. These reserves are depleted over time, and therefore, may economically diminish the value of our assets over the period that the underlying reserves are exploited. Accordingly, we expect the contracted base rents under these leases, including fair market renewal rent expectations, to provide for a return-on-capital, as well as a return of our invested capital, over the life of the asset. The portion of rents we believe to constitute a return of our invested capital are utilized for debt repayment and/or are reserved for capital reinvestment activities in order to maintain our long-term earnings and dividend paying capacity. The return-on-capital is that portion of rents which are available for distribution to our stockholders through dividend payouts.

Base rents under our leases are structured on an estimated fair market value rent structure over the initial term, which includes assumptions related to the terminal value of our assets and expectations of tenant renewals. At the conclusion of the initial lease term, our leases generally contain fair market value repurchase options or fair market rent renewal terms. These clauses also act as safeguards against our tenants pursuing activities which would undermine or degrade the value of our assets faster than the underlying reserves are depleted. Our participating rents are structured to provide exposure to the commercial activity of the tenant, and as such, also provide protection in the event that the economic life of our assets is reduced based on accelerated production by our tenants.

Our assets are primarily mission-critical to our customers, in that utilization of our assets is necessary for the business they seek to conduct and their rental payments are an essential operating expense. For example, our crude oil gathering system assets are necessary to the exploitation of upstream crude oil reserves, so the operators' lease of those assets is economically critical to their operations. Some of our assets are subject to rate regulation by FERC or state public utility commissions. Further, energy infrastructure assets are an essential and growing component of the U.S. economy that give us the opportunity to assist the capital expansion plans and meet the capital needs of various midstream and upstream participants.

We intend to distribute substantially all of our cash available for distribution, less prudent reserves, on a quarterly basis. We regularly assess our ability to pay and to grow our dividend to common stockholders. CorEnergy targets long-term revenue growth of 1-3 percent annually from existing contracts, through inflation escalations and participating rents, and additional growth from acquisitions. There can be no assurance that any potential acquisition opportunities will result in consummated transactions. Our management contract includes incentive provisions, aligning our leadership team with our stockholders' interests in raising the dividend only if we believe the rate is sustainable.



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Basis of Presentation

The consolidated financial statements include CorEnergy Infrastructure Trust, Inc., as of June 30, 2018, and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

RESULTS OF OPERATIONS

The following tables summarize the financial data and key operating statistics for CorEnergy for the three and six months ended June 30, 2018 and 2017. We believe the Operating Results detail presented below provides investors with information that will assist them in analyzing our operating performance. The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Part I, Item 1 of this Report. All information in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," except for balance sheet data as of December 31, 2017, is unaudited.

The following table and discussion is a summary of our results of operations for the three and six months ended June 30, 2018 and 2017:



	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