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CorEnergy Announces Third Quarter 2019 Results
KANSAS CITY, MO - October 30, 2019 - CorEnergy Infrastructure Trust, Inc. ("CorEnergy" or the "Company") today announced financial results for the third quarter, ended September 30, 2019.
Third Quarter Performance Summary
Third quarter financial highlights, including the impact of the Convertible Notes Exchange, are as follows:
 
For the Three Months Ended
 
September 30, 2019
 
 
 
Per Share
 
Total
 
Basic
 
Diluted
Net Income (Loss) (Attributable to Common Stockholders)1
$
(21,733,380
)
 
$
(1.65
)
 
$
(1.65
)
NAREIT Funds from Operations (NAREIT FFO)1
$
(16,222,013
)
 
$
(1.23
)
 
$
(1.23
)
Funds From Operations (FFO)1
$
(16,176,808
)
 
$
(1.23
)
 
$
(1.23
)
Adjusted Funds From Operations (AFFO)1
$
13,067,911

 
$
0.99

 
$
0.94

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 (Loss) Attributable to CorEnergy Stockholders are included at the end of this press release. See Note 1 for additional information.
Recent Developments
MoGas FERC Rate Case: The rate case before the Federal Energy Regulatory Commission (FERC) for CorEnergy’s interstate MoGas Pipeline was settled, with final approval received from the FERC in September 2019.
Convertible Notes Offering and Exchange: In August 2019, CorEnergy completed an offering of $120 million of its 5.875% Convertible Senior Notes (due 2025) in a private placement to institutional buyers. CorEnergy used a portion of the $116 million in net proceeds, together with shares of its common stock, valued at $33 million, to repurchase approximately $64 million of its 7.00% Convertible Senior Notes (due 2020). These actions significantly increased CorEnergy’s liquidity and extended the maturity of its debt facilities, while reducing its weighted average cost of capital with a lower interest rate on the 2025 notes. CorEnergy recorded a loss on extinguishment of debt of approximately $29 million in connection with the exchange, affecting third-quarter 2019 net income as reported under Generally Accepted Accounting Principles (GAAP), NAREIT FFO and FFO. Adjusted Funds from Operations (AFFO) remained relatively consistent.
Maintained Dividend: The Board of Directors declared a common stock dividend of $0.75 per share ($3.00 annualized) for the third quarter of 2019, in line with the previous 16 quarterly dividends.

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"The third quarter and first nine months of 2019 marked a further strengthening of CorEnergy’s financial position, as well as an improvement in operating income and Adjusted Funds from Operations from the prior year. We continue evaluating assets with potential partners to find the right investments for CorEnergy, in a capital-markets environment where many energy producers are seeking alternative financing," said CorEnergy Chairman and Chief Executive Officer Dave Schulte. "Our balance sheet management steps will benefit earnings and provide liquidity to fund growth. As anticipated, we concluded our FERC rate case for the MoGas Pipeline with a favorable agreement providing a steady source of transportation and distribution revenue."
Portfolio Update
MoGas Pipeline: MoGas and all intervenors in its FERC rate case, filed May 31, 2018, agreed on new rates totaling approximately $14.8 million. FERC gave final approval to the settlement in September 2019. In conjunction with the settlement, MoGas entered into 5-year firm transportation service agreements with its customers, in exchange for modest discounts.
Pinedale Liquids Gathering System: In September 2019, Ultra Petroleum Corp. (UPL), the tenant for CorEnergy’s Pinedale LGS, announced it had agreed to an amended credit facility with lenders to remove financial maintenance covenants, while also placing limits on capital expenditures and suspending UPL’s drilling program during this time of multi-year lows in natural gas prices. UPL also announced that its 2020 production expectations are lower than for 2019.
Outlook
CorEnergy regularly assesses its ability to pay and grow its dividend to common stockholders above the current $0.75 per quarter. The Company targets long-term revenue growth of 1-3% annually from existing contracts through inflation-based and potential participating rent adjustments and additional growth from acquisitions. CorEnergy believes that a number of actions can be taken to adequately offset the lost revenue from the December 2018 sale of the Portland Terminal, which could include a combination of (i) additional investments in revenue generating assets and / or (ii) deleveraging of the Company's balance sheet through preferred equity and debt repurchases, at attractive prices. There can be no assurance that any potential acquisition opportunities will result in consummated transactions.
Dividend Declaration
Common Stock: A third quarter 2019 dividend of $0.75 per share was declared for CorEnergy's common stock. The dividend is payable on November 29, 2019, to stockholders of record on November 15, 2019. The third quarter 2019 dividend will be paid entirely in cash.
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 November 29, 2019, to stockholders of record on November 15, 2019.
Third Quarter Earnings Call
CorEnergy will host a conference call on Thursday, October 31, 2019, 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 30, 2019, by dialing 877-481-4010 (for international, 1-919-882-2331). The Conference ID is 54913. A replay of the conference call will also be available on the Company’s website.

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About CorEnergy Infrastructure Trust, Inc.
CorEnergy Infrastructure Trust, Inc. (NYSE: CORR, CORRPrA), is a real estate investment trust (REIT) that owns critical 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 (loss) (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 other 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 (gain) loss, net of tax, transaction costs, amortization of debt issuance costs, amortization of deferred lease costs, accretion of asset retirement obligation, non-cash costs associated with derivative instruments, and certain costs of a nonrecurring nature, less maintenance, capital expenditures (if any), income tax (expense) benefit unrelated to securities investments, 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 (Loss) Attributable to CorEnergy Stockholders are included in the additional financial information attached to this press release.


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




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Consolidated Balance Sheets
 
 
 
 
 
September 30, 2019
 
December 31, 2018
Assets
(Unaudited)
 
 
Leased property, net of accumulated depreciation of $101,157,834 and $87,154,095
$
384,235,493

 
$
398,214,355

Property and equipment, net of accumulated depreciation of $18,498,371 and $15,969,346
107,640,017

 
109,881,552

Financing notes and related accrued interest receivable, net of reserve of $600,000 and $600,000
1,267,500

 
1,300,000

Note receivable

 
5,000,000

Cash and cash equivalents
120,430,110

 
69,287,177

Deferred rent receivable
29,599,410

 
25,942,755

Accounts and other receivables
3,001,569

 
5,083,243

Deferred costs, net of accumulated amortization of $1,790,091 and $1,290,236
2,338,588

 
2,838,443

Prepaid expenses and other assets
694,288

 
668,584

Deferred tax asset, net
4,883,349

 
4,948,203

Goodwill
1,718,868

 
1,718,868

Total Assets
$
655,809,192

 
$
624,883,180

Liabilities and Equity
 
 
 
Secured credit facilities, net of debt issuance costs of $171,275 and $210,891
$
34,654,725

 
$
37,261,109

Unsecured convertible senior notes, net of discount and debt issuance costs of $3,942,712 and $1,180,729
121,583,288

 
112,777,271

Asset retirement obligation
8,289,320

 
7,956,343

Accounts payable and other accrued liabilities
7,133,813

 
3,493,490

Management fees payable
1,665,026

 
1,831,613

Unearned revenue
6,511,572

 
6,552,049

Total Liabilities
$
179,837,744

 
$
169,871,875

Equity
 
 
 
Series A Cumulative Redeemable Preferred Stock 7.375%, $125,493,175 and $125,555,675 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000 authorized; 50,197 and 50,222 issued and outstanding at September 30, 2019 and December 31, 2018, respectively
$
125,493,175

 
$
125,555,675

Capital stock, non-convertible, $0.001 par value; 13,534,856 and 11,960,225 shares issued and outstanding at September 30, 2019 and December 31, 2018 (100,000,000 shares authorized)
13,535

 
11,960

Additional paid-in capital
369,884,338

 
320,295,969

Retained earnings (deficit)
(19,419,600
)
 
9,147,701

Total Equity
475,971,448

 
455,011,305

Total Liabilities and Equity
$
655,809,192

 
$
624,883,180









5



Consolidated Statements of Income (Unaudited)
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Revenue
 
 
 
 
 
 
 
Lease revenue
$
16,984,903

 
$
18,391,983

 
$
50,338,489

 
$
54,259,701

Transportation and distribution revenue
4,068,338

 
4,244,722

 
13,808,064

 
12,071,858

Financing revenue
28,003

 

 
89,532

 

Total Revenue
21,081,244

 
22,636,705

 
64,236,085

 
66,331,559

Expenses
 
 
 
 
 
 
 
Transportation and distribution expenses
1,116,194

 
2,241,999

 
3,866,092

 
5,349,419

General and administrative
2,494,240

 
3,046,481

 
8,104,502

 
8,881,314

Depreciation, amortization and ARO accretion expense
5,645,342

 
6,289,459

 
16,935,688

 
18,868,871

Provision for loan losses

 

 

 
500,000

Total Expenses
9,255,776

 
11,577,939

 
28,906,282

 
33,599,604

Operating Income
$
11,825,468

 
$
11,058,766

 
$
35,329,803

 
$
32,731,955

Other Income (Expense)
 
 
 
 
 
 
 
Net distributions and other income
$
360,182

 
$
5,627

 
$
902,056

 
$
65,292

Net realized and unrealized loss on other equity securities

 
(930,147
)
 

 
(1,797,281
)
Interest expense
(2,777,122
)
 
(3,183,589
)
 
(7,582,199
)
 
(9,590,427
)
Loss on extinguishment of debt
(28,920,834
)
 

 
(33,960,565
)
 

Total Other Expense
(31,337,774
)
 
(4,108,109
)
 
(40,640,708
)
 
(11,322,416
)
Income (loss) before income taxes
(19,512,306
)
 
6,950,657

 
(5,310,905
)
 
21,409,539

Taxes
 
 
 
 
 
 
 
Current tax expense (benefit)
(1,270
)
 
(8,393
)
 
352,474

 
(54,727
)
Deferred tax expense (benefit)
(91,436
)
 
(738,274
)
 
64,854

 
(1,751,615
)
Income tax expense (benefit), net
(92,706
)
 
(746,667
)
 
417,328

 
(1,806,342
)
Net Income (loss) attributable to CorEnergy Stockholders
(19,419,600
)
 
7,697,324

 
(5,728,233
)
 
23,215,881

Preferred dividend requirements
2,313,780

 
2,396,875

 
6,941,688

 
7,190,625

Net Income (loss) attributable to Common Stockholders
$
(21,733,380
)
 
$
5,300,449

 
$
(12,669,921
)
 
$
16,025,256

 
 
 
 
 
 
 
 
Earnings (Loss) Per Common Share:
 
 
 
 
 
 
 
Basic
$
(1.65
)
 
$
0.44

 
$
(0.98
)
 
$
1.34

Diluted
$
(1.65
)
 
$
0.44

 
$
(0.98
)
 
$
1.34

Weighted Average Shares of Common Stock Outstanding:
 
 
 
 
 
 
 
Basic
13,188,546

 
11,939,360

 
12,870,357

 
11,928,929

Diluted
13,188,546

 
11,939,360

 
12,870,357

 
11,928,929

Dividends declared per share
$
0.750

 
$
0.750

 
$
2.250

 
$
2.250


6



Consolidated Statements of Cash Flows (Unaudited)
 
 
 
 
 
For the Nine Months Ended
 
September 30, 2019
 
September 30, 2018
Operating Activities
 
 
 
Net income (loss)
$
(5,728,233
)
 
$
23,215,881

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Deferred income tax, net
64,854

 
(1,751,615
)
Depreciation, amortization and ARO accretion
17,828,773

 
19,929,691

Provision for loan losses

 
500,000

Loss on extinguishment of debt
33,960,565

 

Gain on sale of equipment
(1,800
)
 
(8,416
)
Net realized and unrealized loss on other equity securities

 
1,797,281

Common stock issued under directors' compensation plan

 
67,500

Changes in assets and liabilities:
 
 
 
Increase in deferred rent receivable
(3,656,655
)
 
(5,403,281
)
Decrease in accounts and other receivables
2,081,674

 
936,672

Increase in prepaid expenses and other assets
(26,026
)
 
(22,001
)
Increase (decrease) in management fee payable
(166,587
)
 
72,885

Increase in accounts payable and other accrued liabilities
3,449,442

 
2,436,421

Decrease in current income tax liability

 
(2,172,200
)
Increase (decrease) in unearned revenue
(40,477
)
 
121,731

Net cash provided by operating activities
$
47,765,530

 
$
39,720,549

Investing Activities
 
 
 
Purchases of property and equipment, net
(311,566
)
 
(94,980
)
Proceeds from sale of property and equipment

 
17,999

Principal payment on note receivable
5,000,000

 

Principal payment on financing note receivable
32,500

 

Net cash provided by (used in) investing activities
$
4,720,934

 
$
(76,981
)
Financing Activities
 
 
 
Debt financing costs
(161,963
)
 
(264,010
)
Net offering proceeds on convertible debt
116,355,125

 

Cash paid for extinguishment of convertible notes
(78,939,743
)
 

Repurchases of preferred stock
(60,550
)
 

Dividends paid on Series A preferred stock
(6,941,340
)
 
(7,190,625
)
Dividends paid on common stock
(28,949,060
)
 
(25,718,189
)
Principal payments on secured credit facilities
(2,646,000
)
 
(2,646,000
)
Net cash used in financing activities
$
(1,343,531
)
 
$
(35,818,824
)
Net Change in Cash and Cash Equivalents
$
51,142,933

 
$
3,824,744

Cash and Cash Equivalents at beginning of period
69,287,177

 
15,787,069

Cash and Cash Equivalents at end of period
$
120,430,110

 
$
19,611,813

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Interest paid
$
5,893,078

 
$
6,404,134

Income taxes paid (net of refunds)
282,786

 
2,117,473

 
 
 
 
Non-Cash Financing Activities
 
 
 
Change in accounts payable and accrued expenses related to debt financing costs
$
197,227

 
$
(255,037
)
Reinvestment of distributions by common stockholders in additional common shares
403,831

 
1,113,727

Common stock issued upon exchange and conversion of convertible notes
62,639,326

 
42,654




7



NAREIT FFO, FFO Adjusted for Securities Investment and AFFO Reconciliation (Unaudited)
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Net Income (loss) attributable to CorEnergy Stockholders
$
(19,419,600
)
 
$
7,697,324

 
$
(5,728,233
)
 
$
23,215,881

Less:
 
 
 
 
 
 
 
Preferred Dividend Requirements
2,313,780

 
2,396,875

 
6,941,688

 
7,190,625

Net Income (loss) attributable to Common Stockholders
$
(21,733,380
)
 
$
5,300,449

 
$
(12,669,921
)
 
$
16,025,256

Add:
 
 
 
 
 
 
 
Depreciation
5,511,367

 
6,138,548

 
16,533,762

 
18,416,138

NAREIT funds from operations (NAREIT FFO)
$
(16,222,013
)
 
$
11,438,997

 
$
3,863,841

 
$
34,441,394

Add:
 
 
 
 
 
 
 
Distributions received from investment securities
360,182

 
5,627

 
902,056

 
65,292

Net realized and unrealized loss on other equity securities

 
930,147

 

 
1,797,281

Less:
 
 
 
 
 
 
 
Net distributions and other income
360,182

 
5,627

 
902,056

 
65,292

Income tax (expense) benefit from investment securities
(45,205
)
 
249,420

 
(203,910
)
 
491,407

Funds from operations adjusted for securities investments (FFO)
$
(16,176,808
)
 
$
12,119,724

 
$
4,067,751

 
$
35,747,268

Add:
 
 
 
 
 
 
 
Loss on extinguishment of debt
28,920,834

 

 
33,960,565

 

Provision for loan losses, net of tax

 

 

 
500,000

Transaction costs
14,799

 
66,895

 
157,380

 
123,791

Amortization of debt issuance costs
313,022

 
353,639

 
893,084

 
1,060,820

Amortization of deferred lease costs
22,983

 
22,983

 
68,949

 
68,949

Accretion of asset retirement obligation
110,992

 
127,928

 
332,977

 
383,784

Less:
 
 
 
 
 
 
 
Income tax (expense) benefit
137,911

 
497,247

 
(213,418
)
 
1,314,935

Adjusted funds from operations (AFFO)
$
13,067,911

 
$
12,193,922

 
$
39,694,124

 
$
36,569,677

 
 
 
 
 
 
 
 
Weighted Average Shares of Common Stock Outstanding:
 
 
 
 
 
 
 
Basic
13,188,546

 
11,939,360

 
12,870,357

 
11,928,929

Diluted
15,609,545

 
15,393,644

 
15,197,745

 
15,383,386

NAREIT FFO attributable to Common Stockholders
 
 
 
 
 
 
 
Basic
$
(1.23
)
 
$
0.96

 
$
0.30

 
$
2.89

Diluted (1)
$
(1.23
)
 
$
0.89

 
$
0.30

 
$
2.67

FFO attributable to Common Stockholders
 
 
 
 
 
 
 
Basic
$
(1.23
)
 
$
1.02

 
$
0.32

 
$
3.00

Diluted (1)
$
(1.23
)
 
$
0.93

 
$
0.32

 
$
2.75

AFFO attributable to Common Stockholders
 
 
 
 
 
 
 
Basic
$
0.99

 
$
1.02

 
$
3.08

 
$
3.07

Diluted (2)
$
0.94

 
$
0.92

 
$
2.89

 
$
2.77

(1) The three and nine months ended September 30, 2019 diluted per share calculations exclude dilutive adjustments for convertible note interest expense, discount amortization and deferred debt issuance amortization because such impact is antidilutive. The three and nine months ended September 30, 2018 include these dilutive adjustments. For periods presented without per share dilution, the number of weighted average diluted shares is equal to the number of weighted average basic shares presented.
(2) Diluted per share calculations include a dilutive adjustment for convertible note interest expense.


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