CorEnergy Releases Second Quarter 2015 Results

Second Quarter Highlights and Subsequent Events

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Acquired Grand Isle Gathering System (GIGS) for total consideration of $259 million, diversifying portfolio of energy infrastructure

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Announced intention to increase common stock dividend 11.1% to $0.15 per share quarterly ($0.60 annualized)

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Expanded capital structure through new convertible debt issue, follow-on equity offering and larger credit facility

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Declared common stock dividend of $0.135 per share ($0.54 annualized) for second quarter, as expected

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Delivered Adjusted Funds from Operations (AFFO) of $0.14 per share (basic) and $0.13 per share (diluted) in quarter

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Reiterated CorEnergy’s long-term annual growth target of 3-5% in common stock dividends

“CorEnergy delivered stable cash flows and dividends for the second quarter consistent with expectations based on the growth of our infrastructure portfolio in 2014. On June 30, 2015, we closed on the $259 million acquisition of the Grand Isle Gathering System – expanding CorEnergy’s assets and enabling an 11.1% increase in dividends that we expect to begin paying in the distribution for the third quarter,” said David Schulte, Chief Executive Officer of CorEnergy. “The Grand Isle asset is a critical midstream system that is essential to transporting crude oil from fields on the Gulf of Mexico shelf that have large proven reserves and attractive economics. We expect this asset to deliver predictable, utility-like cash flows while also diversifying our portfolio of energy infrastructure geographically and financially.”

Quarterly Performance Summary

Results for the second quarter of 2015, including Contribution Margin¹ of $11.1 million and quarterly expenses were consistent with expectations for the portfolio at the start of 2015, as disclosed in pro forma data in the Company’s Form 10-K for 2014. Adjusted Funds from Operations (AFFO) in the second quarter of 2015 were $6.5 million, $0.14 per share (basic) and $0.13 per share (diluted), providing coverage of our common stock dividend of $0.135 for the second quarter.

Second quarter 2015 and second quarter 2014 results are not directly comparable, due to acquisitions and capital markets activity in both years. The acquisition and leaseback of the Grand Isle Gathering System on June 30, 2015, which diversified CorEnergy assets and expanded the capital structure, will contribute additional revenues going forward.

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NAREIT FFO, FFO and AFFO are non-GAAP measures presented in accordance with the guidelines for calculation and reporting issued by the National Association of Real Estate Investment Trusts. NAREIT FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses of depreciable property, real estate-related depreciation and amortization (excluding amortization of deferred financing costs or loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. FFO as we have presented it here, and historically, also excludes the impact of transactions related to the Company’s legacy Business Development Company securities holdings. The Company considers FFO an important supplemental measure of operating performance that is frequently used by securities analysts, investors and other interested parties. CorEnergy defines AFFO as FFO plus transaction costs, amortization of debt issuance costs, deferred leasing costs, above-market rent, and certain costs of a nonrecurring nature, less maintenance, capital expenditures (if any), amortization of debt premium and other adjustments as deemed appropriate. Management uses AFFO as a measure of long-term sustainable operational performance. A reconciliation of NAREIT FFO, FFO and AFFO, as presented, to Net income attributable to CorEnergy stockholders is included in the additional financial information attached to this press release.

As of June 30, 2015, CorEnergy had approximately $60.4 million available for future investment. Following the expansion of the Company’s credit facilities on July 8, 2015, the revised availability for investment was approximately $119.3 million. The ratio of indebtedness to total capitalization is well within the long-term target of 25-50%.

Portfolio Update

Among the recent asset-specific developments:

CorEnergy completed the acquisition of the GIGS system on June 30, 2015, from Energy XXI USA, Inc. ("EXXI") for a cash purchase price of $245 million and the assumption of asset retirement obligation liabilities of approximately $12.2 million, acquisition costs of approximately $1.9 million and deferred lease costs of approximately $298 thousand, for total consideration of $259 million. The GIGS consists of 153 miles of undersea pipeline that connects to offshore oil platforms in seven producing fields, six of which are operated by EXXI and one by ExxonMobil, and includes an onshore terminal, storage tanks and saltwater disposal system.

An EXXI affiliate entered into a long-term, triple-net lease with CorEnergy to operate the GIGS system. The rent will adjust annually over the initial 11-year term, with minimum rents ranging from $31.5 million to $50.8 million per year, averaging approximately $40 million annually. In addition, the GIGS lease provides potential variable rent linked to oil revenues realized by EXXI from the system above a predetermined threshold. After the 11-year term, the lease provides for a renewal term of nine years, subject to certain conditions.

CorEnergy financed the GIGS acquisition with a combination of a follow-on common stock offering that generated $77.6 million in gross proceeds, a new issue of $115 million of convertible debt, and approximately $42 million advanced under the Company's existing Senior Credit Facility. The remainder of the acquisition cost, approximately $20 million, was funded with cash on hand as of June 30, 2015.

CorEnergy continued to progress on construction projects at the Portland Terminal Facility in Oregon, triggering increased base rent under the long-term triple-net lease with operator Arc Terminals. As of June 30, 2015, base rent had increased to approximately $500 thousand per month due to the approximately $8.8 million in completed projects.

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Subsequent Events

Following the GIGS acquisition on June 30, 2015, the Company expanded its credit facilities to provide long-term funding for a portion of the acquisition and to increase liquidity for potential additional acquisitions. As of July 8, 2015, CorEnergy’s credit facilities increased to $153.0 million, consisting of a $108.0 million revolving line of credit, which includes $3.0 million designated for subsidiary operations, and a $45.0 million term loan. Proceeds from the term loan, less fees of approximately $979.6 thousand, were used to repay borrowings against the revolver. Following the expansion of the Company’s credit facilities, total liquidity available for investment on July 8, 2015, was approximately $119.3 million.

Dividend Update

A second quarter common stock cash dividend of $0.135 was declared on July 31, 2015, payable on August 31, 2015. In connection with the GIGS acquisition, CorEnergy has announced its Board of Directors’ intention to increase the annualized dividend rate to $0.60 per share beginning with the distribution for the third quarter of 2015. CorEnergy maintains a quarterly common stock dividend payment cycle of February, May, August and November. Dividend payouts may be affected by cash flow requirements and remain subject to other risks and uncertainties.

For the 7.375% Series A Cumulative Redeemable Preferred Stock, a cash dividend of $0.4609375 per depositary share was declared for the second quarter, payable on August 28, 2015. The preferred dividends, which equate to an annual payment of $1.84375 per depositary share, are paid on or about the last day of August, November, February and May.

Outlook

CorEnergy expects its energy infrastructure portfolio – the GIGS, Pinedale LGS, MoGas Pipeline, Portland Terminal Facility and Omega Pipeline – to produce stable, recurring revenues going forward. The Company believes these cash flows will support annualized dividend payments of $0.60 per share beginning with the distribution for the third quarter of 2015, as well as a long-term dividend growth target of 3-5% annually.

The Company is evaluating a broad set of infrastructure opportunities in the range of $50 to $250 million per project. There can be no assurance that any of these acquisition opportunities will result in consummated transactions. If a potential transaction is accretive to long-term shareholder value, CorEnergy expects to utilize balance sheet resources, including available liquidity and prudent leverage, supplemented with equity issuance, to fund the growth opportunity.

Second Quarter 2015 Earnings Conference Call

A replay of the call will be available until 11:59 p.m. on September 11, 2015, by dialing 1-877-660-6853 (for international callers, 1-201-612-7415). The Conference ID # is 13615201.

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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.

¹ Contribution Margin is a non-GAAP measure defined as Total Lease Revenue, Security Distributions, Financing Revenue and Operating Results, as reported in the MD&A section of CorEnergy’s Form 10-Q. Management believes that Lease Revenue, Security Distributions, Financing Revenue and Operating Results provides investors with information that will assist them in analyzing the operating performance of our leased assets, financing notes receivable, other equity securities and operating entities. As it pertains to other equity securities, the Company believes that net distributions received are indicative of the operating performance of the assets. Reconciliations of these results to Adjusted EBITDA and to Income Attributable to Common Stockholders are included in the additional financial information attached to this press release.

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CorEnergy Infrastructure Trust, Inc.

Investor Relations

Lesley Robertshaw, 877-699-CORR (2677)

Source: CorEnergy Infrastructure Trust, Inc.

 

 

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