Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CorEnergy Infrastructure Trust, Inc. | intellisightslides_8k.htm |
Intellisight Investor Conference | 1
Intellisight Investor Conference
David Schulte, President and Chief Executive Officer
August 23, 2017
LISTED
CORR
NYSE
Intellisight Investor Conference | 2
Disclaimer
This presentation 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 presentation.
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.
Intellisight Investor Conference | 3
Infrastructure assets have desirable investment characteristics
• Long-lived assets, critical to tenant operations
• High barriers to entry with strategic locations
• Contracts provide predictable revenue
• Limited sensitivity to price/volume changes
Asset Fundamentals
• High cash flow component to total return
• Attractive potential risk-adjusted returns
• Diversification vs. other asset classes
• Potential inflation protection
Investment Characteristics
• Infrastructure assets are essential for our customers’ operations to produce revenue
• CorEnergy’s triple-net leases and other contracts generate operating expense for our tenants
• Total long-term return of 8-10% on assets from base rents, plus acquisitions and participating rents
• Growing CorEnergy through disciplined acquisitions that are accretive to AFFO and dividends per share
Infrastructure REIT Strategy Overview
Intellisight Investor Conference | 4
Becky Sandring
Senior Vice President, Secretary & Treasurer
Ms. Sandring has over 20 years of experience in the energy
industry. Prior to CorEnergy, Ms. Sandring was a Vice
President with The Calvin Group. From 1993-2008, Ms.
Sandring held various roles at Aquila Inc., formerly UtiliCorp
United.
CorEnergy senior management
Dave Schulte
Co-Founder, CEO & President
Mr. Schulte has 27 years of investment experience, including
18 years in the energy industry. Previously, Mr. Schulte was a
co-founder and Managing Director of Tortoise Capital Advisors,
an investment advisor with $16 billion under management. and
a Managing Director at Kansas City Equity Partners (KCEP).
Before joining KCEP, he spent five years as an investment
banker at the predecessor of Oppenheimer & Co.
Rick Green
Co-Founder, Executive Chairman
Mr. Green has spent more than 30 years in the energy
industry, with 20 years as CEO of Aquila, Inc., an
international electric and gas utility business and national
energy marketing and trading business. During his tenure,
Mr. Green led the strategy and successful business
expansion of Aquila, Inc. to a Fortune 30 company.
Jeff Fulmer
Senior Vice President
Mr. Fulmer is a petroleum engineer and professional geologist
with more than 30 years of energy industry experience. Prior
to joining CorEnergy, Mr. Fulmer spent six years as a Senior
Advisor with Tortoise Capital Advisors, led a post 9/11 critical
infrastructure team for the U.S. Department of Defense, and
held leadership and technical positions with Statoil Energy,
ARCO Oil and Tenneco Oil Exploration and Production.
Rick Kreul
President, MoGas, LLC & MoWood, LLC
Mr. Kreul, a mechanical engineer with more than 35 years of
energy industry experience, serves as President of
CorEnergy’s wholly-owned subsidiaries, Mowood, LLC and
MoGas Pipeline, LLC. Previously, Mr. Kreul served as Vice
President of Energy Delivery for Aquila, Inc., Vice President
for Inergy, L.P., and various engineering and management
roles with Mobil Oil.
Nate Poundstone
Chief Accounting Officer
Mr. Poundstone has nearly 20 years of experience in the
accounting profession. Prior to joining CorEnergy, Mr.
Poundstone was Vice President and Chief Accounting
officer with CVR Energy, a diversified holding company
primarily engaged in the petroleum refining and nitrogen
fertilizer manufacturing industries. Prior to CVR Energy, he
held various audit and professional practice roles as a
senior manager with KPMG LLP.
Jeff Teeven
Vice President, Finance
Mr. Teeven has more than 20 years of experience in private
equity management and mergers and acquisitions in multiple
sectors including energy. He served as a founding partner of
Consumer Growth Partners, a private equity firm focused on
the specialty retail and branded consumer products sectors,
as well as 10 years with Kansas City Equity Partners (KCEP).
Sean DeGon
Vice President
Mr. DeGon has nearly 20 years of energy industry experience.
Prior to joining CorEnergy in 2017, Mr. DeGon was a Director
at IHS Markit where he led and participated in well over 100
consulting projects focused on liquid storage terminals,
pipelines, refineries, processing facilities and other energy
assets, primarily in the U.S. and the rest of the Americas.
Intellisight Investor Conference | 5
Comparison of technical characteristics of infrastructure vehicles
Institutional, tax exempt and non-U.S. investors desire access to the infrastructure asset class
REIT structure provides more attractive access to energy infrastructure than MLP & Fund structures
MLPs
MLP / Closed
End Funds
REITs
Investor Tax Form K-1 Form 1099 Form 1099
Investment Company
Friendliness
No No Yes
Non-U.S. Investor
Friendliness
No No Yes
Tax Exempt Owners No Yes Yes
Shareholders Vote No Yes Yes
Primarily
Institutionally Held
No No Yes
Intellisight Investor Conference | 6
Differentiated and larger investor audience for REITs than MLPs
Utility & REIT markets are larger and more institutional than MLP
(1) Fidelity Sectors & Industry Overviews, July 31, 2017
(2) Estimated using Bloomberg Shareholder Data
(3) Includes preferred stock and convertible bonds
Market Cap: ~$1.1Tn(1)(2) Market Cap: ~$1.2Tn(1)(2)
REITs
Market Cap: ~$255bn(1)(2)
MLPs Utilities
Retail Institutional Insiders & Sponsors
Market Cap: ~$680mm(2)(3)
71%
28%
CorEnergy
Tortoise Capital
<1%
30%
31%
35%
4%
<1%
79%
20%
<1%
83%
14%
3%
Intellisight Investor Conference | 7
Leveraging expertise across the energy value chain
Intellisight Investor Conference | 8
Portfolio of essential assets
CorEnergy assets critically support our partners in conducting their
businesses in the U.S. energy industry
Type Asset Description
Purchase
Price Location
Upstream
Pinedale Liquids
Gathering System
Liquids gathering, processing & storage system for
condensate & water production
$228MM WY
Midstream
Grand Isle Gathering
System
Subsea to onshore pipeline & storage terminal for oil &
water production
$245MM GoM-LA
Midstream MoGas Pipeline Interstate natural gas pipeline supplying utilities $125MM MO-IL
Downstream Omega Pipeline
Natural gas utility supplying end-users at Fort Leonard
Wood
$6MM MO
Midstream &
Downstream
Portland Terminal
Crude oil and petroleum products terminal with barge, rail
and truck supply
$50MM1 OR
1) Includes $40MM purchase price, plus $10 in construction costs
Intellisight Investor Conference | 9
Infrastructure provides stable cash flows
• CorEnergy owns mission critical assets
• Lease payments are “operating” expenses, not “financing” expenses
• In bankruptcy, real property operating leases are subject to special provisions
• CORR stock moved with commodity prices; revenue and dividends were stable
Commodity Prices vs. CORR Performance Metrics
in
m
illio
n
s
In
d
e
xe
d
Co
m
m
o
d
it
y
& S
h
a
re
Pr
ic
e
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 1Q17 2Q17
$0
$5
$10
$15
$20
$25
Revenues AFFO
$30
$50
$70
$90
$110
$130
WTI Oil Nat. Gas AMZ Index CORR
Intellisight Investor Conference | 10
Increasing opportunities for CorEnergy’s pipeline
Which one or two options do you think will be the
most likely path that lenders & borrowers will take if
faced with a borrowing base deficiency in spring
2017?2
U.S. Rig Count Normalizing1
Oil and gas companies are:
• pursuing efficient, low cost operations
• focusing on accessing low cost of capital
• returning to growth and implementing capex projects…
1) Baker Hughes North American Rig Count, Aug 4, 2017
2) Haynes and Boone, LLP Borrowing Base Redetermination Survey, April 4, 2017
…Oil and gas companies are willing to sell low-returning infrastructure to fund
high-returning growth initiatives
Intellisight Investor Conference | 11
CORR’s financial flexibility
• CorEnergy’s capital structure remains conservative, providing financial flexibility to
acquire assets
• Recent financing initiatives have enhanced available liquidity
1) As adjusted reflects the impact of upsizing of the credit facility and the repayment of the term loan utilizing cash on hand and $10.0 million in revolver borrowings, as if these events
had occurred on June 30, 2017
2) Sum of CORR and related party debt
As adjusted1 Total Debt/Total
Capitalization of 21% is below 25-50%
target ratio
As adjusted1 Preferred/Total Equity
of 27% is below 33% target ratio
Capital Structure
Liquidity
June 30, 2017
(in millions) Historical As Adjusted1
Debt
Secured credit facility2 $41.2 $17.7
Unsecured convertible notes, proceeds gross of fees 114.0 114.0
Total debt $155.2 $131.7
Equity
Preferred stock 130.0 130.0
Common stock & additi nal paid in capital 343.6 343.6
Total CORR equi y $473.6 $473.6
Non-controlling inter st $27.8 $27.8
Total capitalization $656.6 $633.1
(in millions) June 30, 2017 July 31, 2017
Cash $37.3 $15.2
Revolver availability 98.1 131.5
Total liquidity $135.4 $146.7
Intellisight Investor Conference | 12
Durable revenues + low leverage = dividend stability
• Lease payments produce predictable cash flows
• Assets are critical to tenant revenue production
• Lease expense is an operating cost (not a financing cost)
• Lease payments are made during bankruptcy
• Results in utility-like consistency of revenue for CORR
• Conservative leverage profile & multiple capital sources
• We believe the $3.00 annualized dividend is a sustainable payout
• Dividends are based solely on minimum rents
• CorEnergy retains debt repayment and reinvestment capital prior to
dividend payment
• Upside from portfolio growth and participating rents
Energy REIT provided a new business model in 2012:
Investor friendly access to infrastructure assets
Intellisight Investor Conference | 13
Financing Optionality
Outlook for 2017
One to Two Acquisitions
Size Range of $50-250 Million
Active Deal Pipeline
1) As of July 31, 2017
Long-term Stable & Growing Dividend
• $146.7 million of
available liquidity1
• Bank Debt
• Convertible Debt
• Preferred Equity
• Common Equity
• Co-Investors
Intellisight Investor Conference | 14
APPENDIX
Intellisight Investor Conference | 15
(1) Paid off March 31, 2016
(2) Upsized from $108 million on July 28, 2017
(3) Paid off July 28, 2017
CORR has pioneered broad access to deep capital markets
C
o
m
m
o
n
Stoc
k
B
a
n
k
D
e
b
t
$30,000,000
Co-Investor Equity for
Pinedale LGS Acquisition
Joint Venture Partner:
Prudential Financial
December 2012
$70,000,0001
Project Level Debt for
Pinedale LGS Acquisition
Lead Bank:
December 2012
J
u
n
io
r
C
a
p
ita
l
$101,660,000
Common Stock
Lead Underwriters:
November 2014
$161,000,0002
Revolving Line of Credit
Lead Banks:
November 2014
$45,000,0003
Term Loan Debt
Lead Banks:
July 2015
$115,000,000
7% Convertible Bonds
Lead Underwriters:
June 2015
$89,700,000
Common Stock
Lead Underwriters:
December 2012
$77,625,000
Common Stock
Lead Underwriters:
June 2015
$48,587,500
Common Stock
Lead Underwriter:
January 2014
$56,300,000
Series A 7.375% Cumulative
Preferred Stock
Lead Underwriters:
January 2015
$73,750,000
Series A 7.375% Cumulative
Preferred Stock
Lead Underwriters:
April 2017
Intellisight Investor Conference | 16
Terminal value conviction
Pinedale LGS
Grand Isle
Gathering System
Portland Terminal MoGas Pipeline Omega Pipeline
Long-lived assets, critical to
tenant operations
High barriers to entry with
strategic locationsAsset
Owne
rship
Criteri
a
Assets essential to operators’ cash flow support lease renewal expectations
Tenant may not devalue CORR’s asset, i.e. construct a replacement asset
CORR targets an AFFO to dividend coverage ratio of 1.5x
Underwriting of terminal value Lif of Field Life of Field Mark t Market M rket
Contracts and imilar services
based on fair value f assets
Asset value based on
production estimate of
reserve reports / market values
for similar assets
Leases enable tenant to
purchase asset or renew lease
at FMV
Cont
ractu
al Pr
otec
tions
Retain portion of rent payment
for reinvestment & debt
repayment
Supports sustainable, long-
term dividend
Dividend Sustainme
nt
Intellisight Investor Conference | 17
Corporate structure alignment with investors
CORR Expense Metrics vs. Peer Group1
Base Fee
Incentive Fee
Administration Fee
Grand Isle
Gathering
System
Pinedale
LGS
MoGas
Pipeline
Portland
Terminal
Omega
Pipeline
Assets Fees
Management Fee
• Services provided:
• Presents the Company with suitable acquisition opportunities,
responsible for the day-to-day operations of the Company and
performs such services and activities relating to the assets and
operations of the Company as may be appropriate
• Base Fees paid:
• Quarterly management fee equal to 0.25 percent (1.00 percent
annualized) of the value of the Company’s Managed Assets3 as of
the end of each quarter
• Incentive Fees paid:
• Quarterly incentive fee of 10 percent of the increase in distributions
earned over a threshold distribution equal to $0.625 per share per
quarter. The Management Agreement also requires at least half of
any incentive fees to be reinvested in the Company’s common
stock
Administrative Fee
• Services provided:
• Performs (or oversees or arranges for the performance of) the
administrative services necessary for our operation, including
without limitation providing us with equipment, clerical,
bookkeeping and record keeping services
• Fees paid:
• 0.04 percent of our aggregate average daily Managed Assets, with
a minimum annual fee of $30 thousand
External Fee Structure Corporate Structure
Management
Agreement
(1) Peer group consists of REITs included in the RMZ index under $1BN market cap (excludes STAR, RAS)
(2) Gross Asset Value = Asset Value of Investment Properties + Accumulated Depreciation
(3) “Managed Assets” is defined as Total Assets of CORR minus the initial invested value of non-controlling interests, the value of any hedged derivative assets, any prepaid
expenses, all of the accrued liabilities other than deferred taxes and debt entered into for the purposed of leverage
Intellisight Investor Conference | 18
Non-GAAP Financial Metrics: FFO/AFFO Reconciliation
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Net Income attributable to CorEnergy Stockholders 9,000,172$ 8,954,527$ 16,669,650$ 12,345,648$
Less:
Preferred Dividend Requirements 2,123,129 1,037,109 3,160,238 2,074,218
Net Income attributable to Common Stockholders 6,877,043$ 7,917,418$ 13,509,412$ 10,271,430$
Add:
Depreciation 5,822,383 5,539,667 11,644,679 10,629,420
Less:
Non-Controlling Interest attributable to NAREIT FFO reconciling items 411,455 411,455 822,910 822,910
NAREIT funds from operations (NAREIT FFO) 12,287,971$ 13,045,630$ 24,331,181$ 20,077,940$
Add:
Distributi ns received from investment securities 252,213 215,139 475,379 474,873
Income tax expense from investment securities 310,622 533,765 114,862 58,128
Less:
Net distributions and dividend income 221,440 214,169 264,902 589,742
Net realized and unrealized gain (loss) on other equity securities 614,634 1,199,665 70,426 (429,087)
Funds from operations adjusted for securities investments (FFO) 12,014,732$ 12,380,700$ 24,586,094$ 20,450,286$
NAREIT FFO, FFO Adjusted for Securities Investment and AFFO Reconciliation
For the Three Months Ended For the Six Months Ended
Intellisight Investor Conference | 19
Non-GAAP Financial Metrics: FFO/AFFO Reconciliation (cont.)
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Add:
Provision for loan losses, net of tax — 369,278 — 4,409,359
Transaction costs 211,269 1,000 470,051 37,915
Amortization of debt issuance costs 468,871 470,506 937,742 1,087,603
Amortization of deferred lease costs 22,983 22,983 45,966 45,966
Ac retion of asset retirement obligation 160,629 174,375 321,258 358,457
Unrealized (gain) loss associated with derivative instruments 10,619 33,820 (16,453) 57,695
Less:
Non-cash settlement of accounts payable 171,609 — 171,609 —
Income tax benefit 214,887 123,327 351,733 297,709
Non-Controlling Interest attributable to AFFO reconciling items 3,358 9,064 6,709 45,868
Adjusted funds from operations (AFFO) 12,499,249$ 13,320,271$ 25,814,607$ 26,103,704$
For the Three Months Ended For the Six Months Ended
Intellisight Investor Conference | 20
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Weighted Average Shares of Common Stock Outstanding:
Basic 11,896,616 11,912,030 11,892,670 11,927,984
Diluted 15,351,161 15,383,892 15,347,215 15,406,339
NAREIT FFO attributable to Common Stockholders
Basic 1.03$ 1.10$ 2.05$ 1.68$
Diluted 0.94$ 0.99$ 1.87$ 1.59$
FFO attributable to Common Stockholders
Basic 1.01$ 1.04$ 2.07$ 1.71$
Diluted 0.93$ 0.95$ 1.89$ 1.61$
AFFO attributable to Common Stockholders
Basic 1.05$ 1.12$ 2.17$ 2.19$
Diluted 0.94$ 0.99$ 1.94$ 1.95$
For the Three Months Ended For the Six Months Ended
Non-GAAP Financial Metrics: FFO/AFFO Reconciliation (cont.)
Intellisight Investor Conference | 21
Non-GAAP Financial Metrics: Fixed-Charges Ratio
1) Fixed charges consist of interest expense, as defined under U.S. generally accepted accounting principles, on all indebtedness
2) This line represents the amount of preferred stock dividends accumulated as of June 30, 2017.
For the S ix
Months Ende d
June 3 0 ,
2017 2016 2015 2014 2013
Earnings:
Pre-tax income from continuing operations before adjustment for
income or loss from equity investees 16,915,722$ 28,561,682$ 11,782,422$ 6,973,693$ 2,967,257
Fixed charges(1) 6,657,234 14,417,839 9,781,184 3,675,122 3,288,378
Amortization of capitalized interest — — — — —
Distributed income of equity investees 264,902 1,140,824 1,270,754 1,836,783 584,814
Pre-tax losses of equity investees for which charges arising from
guarantees are included in fixed charges — — — — —
Subtract:
Interest capitalized — — — — —
Preference security dividend requirements of consolidated subsidiaries — — — — —
Noncontrolling interest in pre-tax income of subsidiaries that have not
incurred fixed charges — — — — —
Earnings 23,837,858$ 44,120,345$ 22,834,360$ 12,485,598$ 6,840,449$
Combined Fixed Charges and Preference Dividends:
Fixed charges(1) 6,657,234$ 14,417,839$ 9,781,184$ 3,675,122$ 3,288,378
referred security dividend(2) 3,160,238 4,148,437 3,848,828 — —
Combined fixed charges and preference dividends 9,817,472$ 18,566,276$ 13,630,012$ 3,675,122$ 3,288,378$
Ratio of earnings to fixed charges 3.58 3.06 2.33 3.40 2.08
Ratio of earnings to combined fixed charges and preference
dividends 2.43 2.38 1.68 3.40 2.08
Ratio of Earnings to Combine Fixed Charges and Preferred Stock
For the Ye a rs Ende d De c e mbe r 3 1,
Intellisight Investor Conference | 22