CORR CorEnergy Infrastructure Trust Inc NEW

CorEnergy Infrastructure Trust, Inc. (“CorEnergy” or the “Company”) today announced financial results for the fiscal year ended December 31, 2017.

Fiscal Year 2017 Performance Summary

Fiscal Year 2017 financial highlights are as follows:

    For the Year Ended December 31, 2017     Per Share Total Basic     Diluted Net Income (Attributable to Common Stockholders)1 $ 24,648,802 $ 2.07 $ 2.07 NAREIT Funds from Operations (NAREIT FFO)1 $ 46,308,969 $ 3.89 $ 3.59 Funds From Operations (FFO)1 $ 46,046,781 $ 3.87 $ 3.57 Adjusted Funds From Operations (AFFO)1 $ 50,536,194 $ 4.25 $ 3.81 Dividends Declared to Common Stockholders $ 3.00  

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

Recent Developments

• Maintained dividend: Declared common stock dividend of $0.75 per share ($3.00 annualized) for the fourth quarter 2017, in line with the previous nine quarterly dividends
• Building relationship with new tenant: Acquisition of Portland Terminal tenant, Arc Logistics, by Zenith Energy U.S. LP ("Zenith Energy") closed on December 21, 2017.
• Last of BDC legacy portfolio rolling off: Received $7.6 million in cash proceeds, plus an interest in Arc Terminal Joliet Holdings, valued at $1.2 million for the Company's pro-rata share of the sale of Lightfoot Partners to Zenith Energy
• Increased interest in prolific Pinedale Field: Purchased from Prudential Insurance Group of America ("Prudential") its 18.95% minority interest in the Pinedale LGS for $32.9 million
  • Prudential provided $41 million of 6.5% fixed rate debt, due December 2022, which was utilized to pay off the Pinedale LP credit facility balance and to complete the purchase of the minority interest
• Received favorable PLR: Converted Omega Pipeline to a qualified REIT subsidiary, from a taxable REIT subsidiary (TRS) following the receipt of a private letter ruling (PLR) from the IRS
• Increased activity at Fort Leonard Wood: Omega was selected for a Utility Energy Service Contract (UESC) at Fort Leonard Wood.

"CorEnergy exited 2017 in a much stronger position than we entered it. The energy downturn has enabled us to demonstrate the durability of our overall strategy and revenue model. CORR acquired the minority stake in the Pinedale LGS and sold our last remaining BDC investment. We strengthened our balance sheet by issuing perpetual preferred stock, upsizing our credit facility, and refinancing the asset level debt on the Pinedale LGS," said CorEnergy CEO Dave Schulte. "We believe CorEnergy is well positioned for additional growth in 2018, with over $155 million of liquidity and multiple acquisition opportunities in various stages of evaluation. The REIT model of infrastructure ownership is emerging as a flexible source of long-term capital for energy companies. CORR has the ability to own and lease assets in a passive financing, as well as in operating subsidiaries where the preponderance of assets are pipelines and storage terminals."

Dividend Declaration

Common Stock: A fourth quarter 2017 dividend of $0.75 per share (or $3.00 per share annualized) was declared for CorEnergy’s common stock. The dividend was payable on February 28, 2018, to stockholders of record on February 14, 2018.

Preferred Stock: For the Company’s 7.375% Series A Cumulative Redeemable Preferred Stock, a cash dividend of $0.4609375 per depositary share was declared. The preferred stock dividend, which equates to an annual dividend payment of $1.84375 per depositary share, was payable on February 28, 2018, to stockholders of record on February 14, 2018.

Portfolio Update

Grand Isle Gathering System: The tenant of the Grand Isle Gathering System, Energy XXI Gulf Coast, continues to make strides towards optimizing production while maintaining costs. The company recently announced its 2018 capital budget plan and anticipates drilling six wells this year. These wells are expected to be in the West Delta and South Timbalier fields, which are considered core properties by EXXI and partially served by our system.

Pinedale Liquids Gathering System: On December 29, 2017, we purchased the remaining 18.95% interest in Pinedale LP, from Prudential for approximately $32.9 million. Concurrently, Pinedale LP entered into an amended $41.0 million credit facility, with Prudential as the lender, for a fixed rate of 6.5% for five years.

CorEnergy received approximately $587,000 in participating rents from the utilization of the Pinedale LGS by Ultra Petroleum in 2017. The Company is further encouraged by the recent successes of its tenant in horizontal well drilling, and its plans to expand the program in 2018.

Portland Terminal: On December 21, 2017, Zenith Energy closed on its acquisition of the parent company of the Portland Terminal tenant, Arc Logistics. Pursuant to the Portland Terminal Lease, the tenant maintains the option to repurchase the asset from CorEnergy, subject to a 90-day notice, as well as the right to terminate the lease on the fifth and tenth anniversaries of the agreement. CorEnergy provided Zenith Energy an extension of the deadline for notification of an exercise of its option to terminate the lease agreement on its fifth anniversary to August 1, 2018, from February 1, 2018.

MoGas Pipeline: MoGas continues to explore means to offset the decline in revenue from the amended Spire contract, announced in March 2017. MoGas currently anticipates filing a rate case with the Federal Energy Regulatory Commission (FERC) in the second quarter of 2018.

Omega Pipeline: In November 2017, Omega was selected for a UESC at Fort Leonard Wood in south-central Missouri. The pipeline currently serves that United States Army post with natural gas distribution services and the UESC program will provide comprehensive gas, electricity and water efficiency improvements. CorEnergy believes this initiative could last four to five years and produce incremental earnings.

During 2017, the Company received a private letter ruling from the IRS which qualified the revenue from Omega's long-term contract with Fort Leonard Wood as REIT-qualifying rent income from real property. Effective December 31, 2017, Omega was converted to a qualified REIT subsidiary, from a taxable REIT subsidiary.

Lightfoot Partners: In connection with the Arc Logistics acquisition by Zenith Energy, we received our pro-rata share of the proceeds upon the closing of the transaction for our holdings in Lightfoot. Total cash proceeds of $7.6 million were net of approximately $1.2 million related to a required reinvestment in Arc Terminal Joliet Holdings. As of December 31, 2017, our remaining private company interests in Lightfoot and Arc Terminal Joliet Holdings were valued at approximately $3.0 million.

Outlook

CorEnergy believes acquisitions enhance the stability of its operations, reducing risk to existing stockholders, because of the diversification benefits and added potential for dividend growth. The Company is evaluating a broad set of infrastructure opportunities and targets transacting on one to two acquisitions per year, with a target range of $50 to $250 million per project. CorEnergy intends to finance these acquisitions through the use of capacity on its revolver, partnerships with co-investors, portfolio level debt, and, if beneficial to existing stockholders, prudent preferred and/or common equity issuances. There can be no assurance that any of these acquisition opportunities will result in consummated transactions.

CorEnergy intends to continue paying quarterly dividends of $0.75 per share ($3.00 annualized). The Company targets revenue growth of 1-3% annually from existing contracts through inflation-based and participating rent adjustments and additional growth from acquisitions. Dependent upon the level of revenue growth achieved, CorEnergy will assess its ability to responsibly grow its dividend above current levels.

Fiscal Year 2017 Earnings Conference Call

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

A replay of the call will be available until 1:00 p.m. Central Time on April 1, 2018 by dialing 877-481-4010 (for international, 1-919-882-2331). The Conference ID is 25600. A replay of the conference call will also be available on the Company’s website.

About CorEnergy Infrastructure Trust, Inc.

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

Forward-Looking Statements

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

Notes

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

  Consolidated Balance Sheets           December 31, 2017 December 31, 2016 Assets Leased property, net of accumulated depreciation of $72,155,753 and $52,219,717 $ 465,956,467 $ 489,258,369 Property and equipment, net of accumulated depreciation of $12,643,636 and $9,292,712 113,158,872 116,412,806 Financing notes and related accrued interest receivable, net of reserve of $4,100,000 and$4,100,000 1,500,000 1,500,000 Other equity securities, at fair value 2,958,315 9,287,209 Cash and cash equivalents 15,787,069 7,895,084 Deferred rent receivable 22,060,787 14,876,782 Accounts and other receivables 3,786,036 4,538,884 Deferred costs, net of accumulated amortization of $623,764 and $2,261,151 3,504,916 3,132,050 Prepaid expenses and other assets 742,154 354,230 Deferred tax asset, net 2,244,629 1,758,289 Goodwill 1,718,868   1,718,868   Total Assets $ 633,418,113   $ 650,732,571   Liabilities and Equity

Secured credit facilities, net of debt issuance costs of $254,646 and $212,592(including $0 and $8,860,577 with related party)

40,745,354 89,387,985

Unsecured convertible senior notes, net of discount and debt issuance costs of$1,967,917 and $2,755,105

112,032,083 111,244,895 Asset retirement obligation 9,170,493 11,882,943 Accounts payable and other accrued liabilities 2,333,782 2,416,283 Management fees payable 1,748,426 1,735,024 Income tax liability 2,204,626 — Unearned revenue 3,397,717   155,961   Total Liabilities $ 171,632,481   $ 216,823,091   Equity

Series A Cumulative Redeemable Preferred Stock 7.375%, $130,000,000 and$56,250,000 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000authorized; 52,000 and 22,500 issued and outstanding at December 31, 2017 andDecember 31, 2016, respectively

$ 130,000,000 $ 56,250,000

Capital stock, non-convertible, $0.001 par value; 11,915,830 and 11,886,216 sharesissued and outstanding at December 31, 2017 and December 31, 2016 (100,000,000shares authorized)

11,916 11,886 Additional paid-in capital 331,773,716 350,217,746 Accumulated other comprehensive loss —   (11,196 ) Total CorEnergy Equity 461,785,632   406,468,436   Non-controlling Interest —   27,441,044   Total Equity 461,785,632   433,909,480   Total Liabilities and Equity $ 633,418,113   $ 650,732,571       Consolidated Statements of Income and Comprehensive Income             For the Years Ended December 31, 2017 2016 2015 Revenue Lease revenue $ 68,803,804 $ 67,994,130 $ 48,086,072 Transportation and distribution revenue 19,945,573 21,094,112 14,345,269 Financing revenue — 162,344 1,697,550 Sales revenue —   —   7,160,044   Total Revenue 88,749,377   89,250,586   71,288,935   Expenses Transportation and distribution expenses 6,729,707 6,463,348 4,609,725 Cost of Sales — — 2,819,212 General and administrative 10,786,497 12,270,380 9,745,704 Depreciation, amortization and ARO accretion expense 24,047,710 22,522,871 18,766,551 Provision for loan loss and disposition —   5,014,466   13,784,137   Total Expenses 41,563,914   46,271,065   49,725,329   Operating Income $ 47,185,463   $ 42,979,521   $ 21,563,606   Other Income (Expense) Net distributions and dividend income $ 680,091 $ 1,140,824 $ 1,270,755 Net realized and unrealized gain (loss) on other equity securities 1,531,827 824,482 (1,063,613 ) Interest expense (12,378,514 ) (14,417,839 ) (9,781,184 ) Loss on extinguishment of debt (336,933 ) —   —   Total Other Expense (10,503,529 ) (12,452,533 ) (9,574,042 ) Income before income taxes 36,681,934   30,526,988   11,989,564   Taxes Current tax expense (benefit) 2,831,658 (313,107 ) 922,010 Deferred tax benefit (486,340 ) (151,313 ) (2,869,563 ) Income tax expense (benefit), net 2,345,318   (464,420 ) (1,947,553 ) Net Income 34,336,616 30,991,408 13,937,117 Less: Net Income attributable to non-controlling interest 1,733,826   1,328,208   1,617,206   Net Income attributable to CorEnergy Stockholders $ 32,602,790 $ 29,663,200 $ 12,319,911 Preferred dividend requirements 7,953,988   4,148,437   3,848,828   Net Income attributable to Common Stockholders $ 24,648,802   $ 25,514,763   $ 8,471,083     Net Income $ 34,336,616 $ 30,991,408 $ 13,937,117 Other comprehensive income (loss): Changes in fair value of qualifying hedges / AOCI attributable to CorEnergy stockholders 11,196 (201,993 ) (262,505 ) Changes in fair value of qualifying hedges / AOCI attributable to non-controlling interest 2,617   (47,226 ) (61,375 ) Net Change in Other Comprehensive Income (Loss) $ 13,813   $ (249,219 ) $ (323,880 ) Total Comprehensive Income 34,350,429 30,742,189 13,613,237 Less: Comprehensive income attributable to non-controlling interest 1,736,443   1,280,982   1,555,831   Comprehensive Income attributable to CorEnergy Stockholders $ 32,613,986   $ 29,461,207   $ 12,057,406   Earnings Per Common Share: Basic $ 2.07 $ 2.14 $ 0.79 Diluted $ 2.07 $ 2.14 $ 0.79 Weighted Average Shares of Common Stock Outstanding: Basic 11,900,516 11,901,985 10,685,892 Diluted 11,900,516 11,901,985 10,685,892 Dividends declared per share $ 3.000 $ 3.000 $ 2.750     Consolidated Statements of Cash Flow     For the Years Ended December 31, 2017     2016     2015 Operating Activities Net Income $ 34,336,616 $ 30,991,408 $ 13,937,117 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax, net (486,340 ) (151,313 ) (2,869,563 ) Depreciation, amortization and ARO accretion 25,708,891 24,548,350 20,662,297 Provision for loan loss — 5,014,466 13,784,137 Loss on extinguishment of debt 336,933 — — Non-cash settlement of accounts payable (221,609 ) — — Loss on sale of equipment 4,203 — — Gain on repurchase of convertible debt — (71,702 ) — Net distributions and dividend income, including recharacterization of income 148,649 (117,004 ) (371,323 ) Net realized and unrealized (gain) loss on other equity securities (1,531,827 ) (781,153 ) 1,063,613 Unrealized gain on derivative contract — (75,591 ) (70,333 ) Settlement of derivative contract — (95,319 ) — Common stock issued under directors compensation plan 67,500 60,000 90,000 Changes in assets and liabilities: Increase in deferred rent receivables (7,184,005 ) (8,360,036 ) (5,016,950 ) Decrease (increase) in accounts and other receivables 752,848 (174,390 ) 2,743,858 Decrease (increase) in financing note accrued interest receivable — 95,114 (355,208 ) (Increase) decrease in prepaid expenses and other assets (16,717 ) 329,735 (37,462 ) Increase (decrease) in management fee payable 13,402 (28,723 ) 599,348 Decrease in accounts payable and other accrued liabilities (225,961 ) (231,151 ) (847,683 ) Increase in income tax liability 2,204,626 — — Increase (decrease) in unearned revenue 2,884,362   155,961   (711,230 ) Net cash provided by operating activities $ 56,791,571   $ 51,108,652   $ 42,600,618   Investing Activities Proceeds from sale of other equity securities 7,591,166 — — Proceeds from assets and liabilities held for sale — 644,934 7,678,246 Deferred lease costs — — (336,141 ) Acquisition expenditures — — (251,513,344 ) Purchases of property and equipment, net (116,595 ) (191,926 ) (138,918 ) Proceeds from asset foreclosure and sale — 223,451 — Increase in financing notes receivable — (202,000 ) (524,037 ) Principal payment on financing note receivable — — 100,000 Return of capital on distributions received 120,906   4,631   121,578   Net cash provided by (used in) investing activities $ 7,595,477   $ 479,090   $ (244,612,616 ) Financing Activities Debt financing costs (1,462,741 ) (193,000 ) (1,617,991 ) Net offering proceeds on Series A preferred stock 71,161,531 — 54,210,476 Net offering proceeds on common stock — — 73,184,679 Net offering proceeds on convertible debt — — 111,262,500 Repurchases of common stock — (2,041,851 ) — Repurchases of convertible debt — (899,960 ) — Dividends paid on Series A preferred stock (8,227,734 ) (4,148,437 ) (3,503,125 ) Dividends paid on common stock (34,731,892 ) (34,896,727 ) (28,528,224 ) Distributions to non-controlling interest (1,833,650 ) — (2,486,464 ) Advances on revolving line of credit 10,000,000 44,000,000 45,392,332 Payments on revolving line of credit (54,000,000 ) — (77,533,609 ) Proceeds from term debt 41,000,000 — 45,000,000 Principal payments on secured credit facilities (45,600,577 ) (60,131,423 ) (6,328,000 ) Purchase of non-controlling interest (32,800,000 ) —   —   Net cash (used in) provided by financing activities $ (56,495,063 ) $ (58,311,398 ) $ 209,052,574   Net Change in Cash and Cash Equivalents $ 7,891,985 $ (6,723,656 ) $ 7,040,576 Cash and Cash Equivalents at beginning of period 7,895,084   14,618,740   7,578,164   Cash and Cash Equivalents at end of period $ 15,787,069   $ 7,895,084   $ 14,618,740     Supplemental Disclosure of Cash Flow Information Interest paid $ 10,780,150 $ 12,900,901 $ 7,873,333 Income taxes paid (net of refunds) 199,772 37,736 747,406   Non-Cash Investing Activities Investment in other equity securities $ (1,161,034 ) $ — $ — Change in accounts and other receivables — (450,000 ) — Change in accounts payable and accrued expenses related to acquisition expenditures — — (614,880 )

Change in accounts payable and accrued expenses related to issuance offinancing and other notes receivable

— — (39,248 )

Net change in Assets Held for Sale, Property and equipment, Prepaid expensesand other assets, Accounts payable and other accrued liabilities and Liabilitiesheld for sale

— (1,776,549 ) —   Non-Cash Financing Activities Change in accounts payable and accrued expenses related to the issuance of common equity $ — $ — $ (72,685 ) Change in accounts payable and accrued expenses related to debt financing costs 255,037 — (43,039 ) Reinvestment of distributions by common stockholders in additional common shares 962,308 815,889 817,915     NAREIT FFO, FFO Adjusted for Securities Investment and AFFO Reconciliation (Unaudited)     For the Years Ended December 31, 2017     2016     2015 Net Income attributable to CorEnergy Stockholders $ 32,602,790 $ 29,663,200 $ 12,319,911 Less: Preferred Dividend Requirements 7,953,988   4,148,437   3,848,828   Net Income attributable to Common Stockholders $ 24,648,802 $ 25,514,763 $ 8,471,083 Add: Depreciation 23,292,713 21,704,275 18,351,011 Less:

Non-Controlling Interest attributable to NAREIT FFO reconciling items                   

1,632,546   1,645,819   1,645,819   NAREIT funds from operations (NAREIT FFO) $ 46,308,969 $ 45,573,219 $ 25,176,275 Add: Distributions received from investment securities 949,646 1,028,452 1,021,010 Income tax expense (benefit) from investment securities 1,000,084 760,036 (196,270 ) Less: Net distributions and dividend income 680,091 1,140,824 1,270,755 Net realized and unrealized gain (loss) on other equity securities 1,531,827   824,482   (1,063,613 ) Funds from operations adjusted for securities investments (FFO) $ 46,046,781 $ 45,396,401 $ 25,793,873 Add: Loss of extinguishment of debt 336,933 — — Provision for loan losses, net of tax — 4,409,359 12,526,701 Transaction costs 592,068 520,487 870,128 Amortization of debt issuance costs 1,661,181 2,025,478 1,822,760 Amortization of deferred lease costs 91,932 91,932 76,498 Accretion of asset retirement obligation 663,065 726,664 339,042 Amortization of above market leases — — 72,987 Non-cash (gain) loss associated with derivative instruments 33,763 (75,591 ) (70,333 ) Less: Non-cash settlement of accounts payable 221,609 — — Income tax (expense) benefit (1,345,234 ) 619,349 493,847 EIP Lease Adjustment (1) — — 542,809 Non-Controlling Interest attributable to AFFO reconciling items 13,154   37,113   88,645   Adjusted funds from operations (AFFO) $ 50,536,194   $ 52,438,268   $ 40,306,355     Weighted Average Shares of Common Stock Outstanding: Basic 11,900,516 11,901,985 10,685,892 Diluted 15,355,061 15,368,370 12,461,733 NAREIT FFO attributable to Common Stockholders Basic $ 3.89 $ 3.83 $ 2.36 Diluted (2) $ 3.59 $ 3.54 $ 2.35 FFO attributable to Common Stockholders Basic $ 3.87 $ 3.81 $ 2.41 Diluted (2) $ 3.57 $ 3.53 $ 2.40 AFFO attributable to Common Stockholders Basic $ 4.25 $ 4.41 $ 3.77 Diluted (3) $ 3.81 $ 3.93 $ 3.56

(1)

 

Based on the economic return to CorEnergy resulting from the sale of our 40 percent undivided interest in EIP, we determined that it was appropriate to eliminate the portion of EIP lease income attributable to return of capital, as a means to more accurately reflect the EIP lease revenue contribution to our sustainable AFFO. We believe that the portion of the EIP lease revenue attributable to return of capital, unless adjusted, overstates our distribution-paying capabilities and is not representative of sustainable EIP income over the life of the lease. We completed the sale of EIP on April 1, 2015.

(2)

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

(3)

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

 

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CorEnergy Infrastructure Trust, Inc.Investor RelationsLesley Schorgl, 877-699-CORR (2677)info@corenergy.reit