CorEnergy Announces Third Quarter 2019 Results

KANSAS CITY, Mo.–(BUSINESS WIRE)–


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.

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.

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.

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

 

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

 

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

 

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.

 

Contacts

CorEnergy Infrastructure Trust, Inc.

Investor Relations

Debbie Hagen

877-699-CORR (2677)

info@corenergy.reit

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