CORR - CorEnergy Announces Fiscal Year 2018 Results

February, 27 2019 04:30 PM CorEnergy Infrastructure Trust Inc.

CorEnergy Infrastructure Trust, Inc. (“CorEnergy” or the “Company”) today announced financial results for the fiscal year ended December 31, 2018.

Fiscal Year 2018 Performance Summary

Fiscal Year 2018 financial highlights are as follows:








For the Year Ended



December 31, 2018






Per Share



Total


Basic


Diluted
Net Income (Attributable to Common Stockholders)¹


$
34,163,499



$
2.86



$
2.79
NAREIT Funds from Operations (NAREIT FFO)¹


$
46,796,201



$
3.92



$
3.61
Funds From Operations (FFO)¹


$
47,959,311



$
4.02



$
3.69
Adjusted Funds From Operations (AFFO)¹


$
49,024,120



$
4.11



$
3.70
Dividends Declared to Common Stockholders





$
3.00

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

Sale of Portland Terminal to tenant, Zenith Energy: Sold the Portland Terminal Facility and the Company’s remaining interest in the Joliet Terminal to Zenith Energy for an aggregate consideration of $61 million
Exchange of Convertible Debt: Exchanged $43.8 million face amount of the Company’s 7% Convertible Senior Notes for an aggregate of 837,040 shares of common stock and $19.8 million in cash
Repurchase of Preferred Equity: Repurchased $4.5 million par value of the Company’s 7.375% Series A Preferred Stock
Maintained dividend: Declared common stock dividend of $0.75 per share ($3.00 annualized) for the fourth quarter 2018, in line with the previous 13 quarterly dividends

“CorEnergy entered 2019 a different company than it began 2018, having sold the Portland Terminal to our tenant, an asset which returned rates in the mid-teens since its purchase in January 2014. Recently, we deleveraged our capital structure through the repurchase of preferred equity and the exchange of convertible debt,” said CorEnergy President, Chairman and CEO Dave Schulte. “We engaged in several deep dives of evaluating asset acquisitions which, while not ultimately resulting in a transaction, allowed our team to stretch our understanding of which assets best fit our risk-return profile. In 2019, we expect to continue our disciplined approach in assessing real property assets to add to our portfolio.”

Portfolio Update

Grand Isle Gathering System: On October 18, 2018, the parent company of the tenant of the GIGS, EGC, completed its previously announced acquisition by the privately-held Gulf of Mexico operator, Cox Oil, for approximately $332 million. The tenant continues to utilize the system and make timely rent payments.

Pinedale Liquids Gathering System: UPL made strides to strengthen its balance sheet in 2018 and refocused its drilling plan on vertical wells, following mixed results from horizontal well testing. Utilization of the Pinedale LGS generated $4.3 million of variable rent revenue in 2018, despite UPL’s financial results being adversely affected by lower realized natural gas prices. CorEnergy intends to utilize excess cash flows such as these to reduce its leverage profile and / or invest in new assets.

MoGas Pipeline: On May 31, 2018, MoGas filed a general rate case before the FERC with a proposed revenue requirement of approximately $20.0 million, annually. The proposed rates went into effect on December 1, 2018, subject to refund upon final ruling. The FERC rate case remains ongoing.

Omega Pipeline: Omega and its third-party consultants are reviewing potential projects, including those for its utility energy services contract (UESC) at Fort Leonard Wood in south-central Missouri. The UESC initiative is expected to last four to five years and will produce incremental earnings.

Portland Terminal: On December 21, 2018, CorEnergy sold the Portland Terminal Facility to its tenant, Zenith Energy, as well as its remaining interest in the Joliet Terminal, for an aggregate consideration of $61 million. The Company had purchased the Portland Terminal in January 2014 for $42 million and invested an additional $10 million for improvements in the asset.

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 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 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 convertible 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 fourth quarter 2018 dividend of $0.75 per share (or $3.00 per share annualized) was declared for CorEnergy’s common stock. The dividend is payable on February 28, 2019, to stockholders of record on February 14, 2019.

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 February 28, 2019, to stockholders of record on February 14, 2019.

Fiscal Year 2018 Earnings Conference Call

CorEnergy will host a conference call on Thursday, February 28, 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 March 28, 2019 by dialing 877-481-4010 (for international, 1-919-882-2331). The Conference ID is 43972. 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 (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 (gain) loss, 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, (gain) loss on the settlement of ARO, 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, 2018


December 31, 2017
Assets






Leased property, net of accumulated depreciation of $87,154,095 and $72,155,753


$
398,214,355



$
465,956,467
Property and equipment, net of accumulated depreciation of $15,969,346 and $12,643,636


109,881,552



113,158,872
Financing notes and related accrued interest receivable, net of reserve of $600,000 and $4,100,000


1,300,000



1,500,000
Note receivable


5,000,000



–
Other equity securities, at fair value


–



2,958,315
Cash and cash equivalents


69,287,177



15,787,069
Deferred rent receivable


25,942,755



22,060,787
Accounts and other receivables


5,083,243



3,786,036
Deferred costs, net of accumulated amortization of $1,290,236 and $623,764


2,838,443



3,504,916
Prepaid expenses and other assets


668,584



742,154
Deferred tax asset, net


4,948,203



2,244,629
Goodwill


1,718,868



1,718,868
Total Assets


$
624,883,180



$
633,418,113
Liabilities and Equity






Secured credit facilities, net of debt issuance costs of $210,891 and $254,646


37,261,109



40,745,354
Unsecured convertible senior notes, net of discount and debt issuance costs of $1,180,729 and $1,967,917


112,777,271



112,032,083
Asset retirement obligation


7,956,343



9,170,493
Accounts payable and other accrued liabilities


3,493,490



2,333,782
Management fees payable


1,831,613



1,748,426
Income tax liability


–



2,204,626
Unearned revenue


6,552,049



3,397,717
Total Liabilities


$
169,871,875



$
171,632,481
Equity






Series A Cumulative Redeemable Preferred Stock 7.375%, $125,555,675 and $130,000,000 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000 authorized; 50,222 and 52,000 issued and outstanding at December 31, 2018 and December 31, 2017, respectively


$
125,555,675



$
130,000,000
Capital stock, non-convertible, $0.001 par value; 11,960,225 and $11,915,830 shares issued and outstanding at December 31, 2018 and December 31, 2017 (100,000,000 shares authorized)


11,960



11,916
Additional paid-in capital


320,295,969



331,773,716
Retained earnings


9,147,701



–
Total Equity


455,011,305



461,785,632
Total Liabilities and Equity


$
624,883,180



$
633,418,113


Consolidated Statements of Income and Comprehensive Income













For the Years Ended December 31,



2018


2017


2016
Revenue









Lease revenue


$
72,747,362



$
68,803,804



$
67,994,130

Transportation and distribution revenue


16,484,236



19,945,573



21,094,112

Financing revenue


–



–



162,344

Total Revenue


89,231,598



88,749,377



89,250,586

Expenses









Transportation and distribution expenses


7,210,748



6,729,707



6,463,348

General and administrative


13,042,847



10,786,497



12,270,380

Depreciation, amortization and ARO accretion expense


24,947,453



24,047,710



22,522,871

Provision for loan (gain) loss


(36,867
)


–



5,014,466

Total Expenses


45,164,181



41,563,914



46,271,065

Operating Income


$
44,067,417



$
47,185,463



$
42,979,521

Other Income (Expense)









Net distributions and dividend income


$
106,795



$
680,091



$
1,140,824

Net realized and unrealized gain (loss) on other equity securities


(1,845,309
)


1,531,827



824,482

Interest expense


(12,759,010
)


(12,378,514
)


(14,417,839
)
Gain on the sale of leased property, net


11,723,257



–



–

Loss on extinguishment of debt


–



(336,933
)


–

Total Other Expense


(2,774,267
)


(10,503,529
)


(12,452,533
)
Income before income taxes


41,293,150



36,681,934



30,526,988

Taxes









Current tax expense (benefit)


(585,386
)


2,831,658



(313,107
)
Deferred tax benefit


(1,833,340
)


(486,340
)


(151,313
)
Income tax expense (benefit), net


(2,418,726
)


2,345,318



(464,420
)
Net Income


43,711,876



34,336,616



30,991,408

Less: Net Income attributable to non-controlling interest


–



1,733,826



1,328,208

Net Income attributable to CorEnergy Stockholders


$
43,711,876



$
32,602,790



$
29,663,200

Preferred dividend requirements


9,548,377



7,953,988



4,148,437

Net Income attributable to Common Stockholders


$
34,163,499



$
24,648,802



$
25,514,763











Net Income


$
43,711,876



$
34,336,616



$
30,991,408

Other comprehensive income (loss):









Changes in fair value of qualifying hedges / AOCI attributable to CorEnergy stockholders


–



11,196



(201,993
)
Changes in fair value of qualifying hedges / AOCI attributable to non-controlling interest


–



2,617



(47,226
)
Net Change in Other Comprehensive Income (Loss)


$
–



$
13,813



$
(249,219
)
Total Comprehensive Income


43,711,876



34,350,429



30,742,189

Less: Comprehensive income attributable to non-controlling interest


–



1,736,443



1,280,982

Comprehensive Income attributable to CorEnergy Stockholders


$
43,711,876



$
32,613,986



$
29,461,207

Earnings Per Common Share:









Basic


$
2.86



$
2.07



$
2.14

Diluted


$
2.79



$
2.07



$
2.14

Weighted Average Shares of Common Stock Outstanding:









Basic


11,935,021



11,900,516



11,901,985

Diluted


15,389,180



11,900,516



11,901,985

Dividends declared per share


$
3.000



$
3.000



$
3.000


Consolidated Statements of Cash Flow



For the Years Ended December 31,



2018


2017


2016
Operating Activities









Net Income


$
43,711,876



$
34,336,616



$
30,991,408

Adjustments to reconcile net income to net cash provided by operating activities:









Deferred income tax, net


(1,845,710
)


(486,340
)


(151,313
)
Depreciation, amortization and ARO accretion


26,361,907



25,708,891



24,548,350

Gain on sale of leased property


(11,723,257
)


–



–

Provision for loan (gain) loss


(36,867
)


–



5,014,466

Loss on extinguishment of debt


–



336,933



–

Non-cash settlement of accounts payable


–



(221,609
)


–

(Gain) loss on sale of equipment


(8,416
)


4,203



–

Gain on repurchase of convertible debt


–



–



(71,702
)
Net distributions and dividend income, including recharacterization of income


–



148,649



(117,004
)
Net realized and unrealized (gain) loss on other equity securities


1,845,309



(1,531,827
)


(781,153
)
Unrealized gain on derivative contract


–



–



(75,591
)
Settlement of derivative contract


–



–



(95,319
)
Loss on settlement of asset retirement obligation


310,941



–



–

Common stock issued under directors compensation plan


67,500



67,500



60,000

Changes in assets and liabilities:









Increase in deferred rent receivables


(7,038,848
)


(7,184,005
)


(8,360,036
)
(Increase) decrease in accounts and other receivables


(1,297,207
)


752,848



(174,390
)
Decrease in financing note accrued interest receivable


–



–



95,114

(Increase) decrease in prepaid expenses and other assets


73,505



(16,717
)


329,735

Increase (decrease) in management fee payable


83,187



13,402



(28,723
)
Increase (decrease) in accounts payable and other accrued liabilities


476,223



(225,961
)


(231,151
)
Increase (decrease) in income tax liability


(2,204,626
)


2,204,626



–

Increase (decrease) in unearned revenue


(152,777
)


2,884,362



155,961

Net cash provided by operating activities


$
48,622,740



$
56,791,571



$
51,108,652

Investing Activities









Proceeds from the sale of leased property


55,553,975



–



–

Proceeds from sale of other equity securities


449,067



7,591,166



–

Proceeds from assets and liabilities held for sale


–



–



644,934

Purchases of property and equipment, net


(105,357
)


(116,595
)


(191,926
)
Proceeds from asset foreclosure and sale


17,999



–



223,451

Principal payment on financing note receivable


236,867



–



–

Increase in financing notes receivable


–



–



(202,000
)
Return of capital on distributions received


663,939



120,906



4,631

Net cash provided by investing activities


$
56,816,490



$
7,595,477



$
479,090

Financing Activities









Debt financing costs


(264,010
)


(1,462,741
)


(193,000
)
Net offering proceeds on Series A preferred stock


–



71,161,531



–

Repurchases of common stock


–



–



(2,041,851
)
Repurchases of convertible debt


–



–



(899,960
)
Repurchases of Series A preferred stock


(4,275,553
)


–



–

Dividends paid on Series A preferred stock


(9,587,500
)


(8,227,734
)


(4,148,437
)
Dividends paid on common stock


(34,284,059
)


(34,731,892
)


(34,896,727
)
Distributions to non-controlling interest


–



(1,833,650
)


–

Advances on revolving line of credit


–



10,000,000



44,000,000

Payments on revolving line of credit


–



(54,000,000
)


–

Proceeds from term debt


–



41,000,000



–

Principal payments on secured credit facilities


(3,528,000
)


(45,600,577
)


(60,131,423
)
Purchase of non-controlling interest


–



(32,800,000
)


–

Net cash used in financing activities


$
(51,939,122
)


$
(56,495,063
)


$
(58,311,398
)
Net Change in Cash and Cash Equivalents


$
53,500,108



$
7,891,985



$
(6,723,656
)
Cash and Cash Equivalents at beginning of period


15,787,069



7,895,084



14,618,740

Cash and Cash Equivalents at end of period


$
69,287,177



$
15,787,069



$
7,895,084











Supplemental Disclosure of Cash Flow Information









Interest paid


$
11,200,835



$
10,780,150



$
12,900,901

Income taxes paid (net of refunds)


2,136,563



199,772



37,736











Non-Cash Investing Activities









Note receivable in consideration of the sale of leased property


$
5,000,000



$
–



$
–

Investment in other equity securities


–



(1,161,034
)


–

Change in accounts and other receivables


–



–



(450,000
)
Net change in Assets Held for Sale, Property and equipment, Prepaid expenses and other assets, Accounts payable and other accrued liabilities and Liabilities held for sale


–



–



(1,776,549
)










Non-Cash Financing Activities









Change in accounts payable and accrued expenses related to debt financing costs


$
(255,037
)


$
255,037



$
–

Reinvestment of distributions by common stockholders in additional common shares


1,509,830



962,308



815,889

Common stock issued upon conversion of convertible notes


42,654



–



–


NAREIT FFO, FFO Adjusted for Securities Investment and AFFO Reconciliation (Unaudited)



For the Years Ended December 31,



2018


2017


2016
Net Income attributable to CorEnergy Stockholders


$
43,711,876



$
32,602,790



$
29,663,200

Less:









Preferred Dividend Requirements


9,548,377



7,953,988



4,148,437

Net Income attributable to Common Stockholders


$
34,163,499



$
24,648,802



$
25,514,763

Add:









Depreciation


24,355,959



23,292,713



21,704,275

Less:









Gain on the sale of leased property, net


11,723,257



–



–

Non-Controlling Interest attributable to NAREIT FFO reconciling items


–



1,632,546



1,645,819

NAREIT funds from operations (NAREIT FFO)


$
46,796,201



$
46,308,969



$
45,573,219

Add:









Distributions received from investment securities


106,795



949,646



1,028,452

Income tax expense (benefit) from investment securities


(682,199
)


1,000,084



760,036

Less:









Net distributions and dividend income


106,795



680,091



1,140,824

Net realized and unrealized gain (loss) on other equity securities


(1,845,309
)


1,531,827



824,482

Funds from operations adjusted for securities investments (FFO)


$
47,959,311



$
46,046,781



$
45,396,401

Add:









Loss of extinguishment of debt


–



336,933



–

Provision for loan (gain) loss, net of tax


(36,867
)


–



4,409,359

Transaction costs


521,311



592,068



520,487

Amortization of debt issuance costs


1,414,457



1,661,181



2,025,478

Amortization of deferred lease costs


91,932



91,932



91,932

Accretion of asset retirement obligation


499,562



663,065



726,664

Non-cash (gain) loss associated with derivative instruments


–



33,763



(75,591
)
Loss on settlement of ARO


310,941



–



–

Less:









Non-cash settlement of accounts payable


–



221,609



–

Income tax (expense) benefit


1,736,527



(1,345,234
)


619,349

Non-Controlling Interest attributable to AFFO reconciling items


–



13,154



37,113

Adjusted funds from operations (AFFO)


$
49,024,120



$
50,536,194



$
52,438,268











Weighted Average Shares of Common Stock Outstanding:









Basic


11,935,021



11,900,516



11,901,985

Diluted


15,389,180



15,355,061



15,368,370

NAREIT FFO attributable to Common Stockholders









Basic


$
3.92



$
3.89



$
3.83

Diluted ⁽¹⁾


$
3.61



$
3.59



$
3.54

FFO attributable to Common Stockholders









Basic


$
4.02



$
3.87



$
3.81

Diluted ⁽¹⁾


$
3.69



$
3.57



$
3.53

AFFO attributable to Common Stockholders









Basic


$
4.11



$
4.25



$
4.41

Diluted ⁽²⁾


$
3.70



$
3.81



$
3.93

(1)

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

(2)

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20190227005977/en/

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

Company Name:	CorEnergy Infrastructure Trust Inc.
Stock Symbol:	CORR
Market:	NYSE

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