CorEnergy Releases Second Quarter 2013 Financial Results
CorEnergy Releases Second Quarter 2013 Financial Results
Second Quarter Highlights and Subsequent Events
Stable revenue delivered by Pinedale LGS for second consecutive quarter
Declared second quarter dividend of $0.125 per share, paid on July 5, 2013
Reiterated annualized dividend payments of no less than $0.50 per share
Second quarter assets meet requirements for Real Estate Investment Trust (REIT) status
Quarterly Performance Review
CorEnergy reported total revenues of $7.6 million in the quarter ended June 30, 2013. A second quarter dividend of $0.125 was declared on May 29, 2013 and subsequently paid on July 5, 2013. Total assets were $288.7 million and total CorEnergy stockholders' equity was $207.5 million as of June 30, 2013, compared to $289.6 million and $210.7 million respectively at March 31, 2013. The modest decrease in total assets is primarily due to a decrease in the fair value of privately-held investment securities. The decrease in stockholders' equity is primarily due to the timing of the quarterly dividend declaration of $0.125 per share. Net income attributable to common stockholders was $70 thousand, or $0.003 per common share. Net income was adversely affected during the second quarter due to the recognition of a tax expense on gains related to a sale of liquid securities.
"At the beginning of the year, we expressed our commitment to three key objectives - provide shareholders with stable dividends that have potential for long-term growth, meet the tests to qualify and elect to be taxed as a REIT in 2013, and grow shareholder value through accretive acquisitions of energy infrastructure real property. We are on track to deliver on those objectives," said David Schulte, Chief Executive Officer of CorEnergy. "Generating consistent, repeatable performance is a top priority for CorEnergy, and our year-to-date results meet that goal. With two strong, stable quarters behind us, the foundation is laid to deliver on our 2013 objectives. Our focus continues to be on optimizing future development of our asset portfolio."
Because a majority of the company's assets are now REIT qualifying, management believes that non-GAAP performance measures utilized by REITs, including Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), also provide useful insights into CorEnergy's operational performance.
|Second Quarter Ended June 30, 2013 Financial Summary|
For the Three Month Period Ended June 30, 2013
|Net Income (attributable to CorEnergy Stockholders)||$ 70,072||$0.003|
|Funds From Operations (FFO)||$3,106,014||$0.129|
|Adjusted Funds From Operations (AFFO)||$3,016,684||$0.125|
|Dividends Paid to Stockholders (on July 5, 2013)||$3,018,495||$0.125|
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. FFO represents net income (loss) before allocation to minority interests (computed in accordance with GAAP, excluding gains or losses) from sales of depreciable operating 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. 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, and above market rent, and certain costs of a nonrecurring nature less maintenance, capital expenditures (if any), amortization of debt premium and adjustments to lease revenue resulting from asset sales. Management uses AFFO as a measure of long-term sustainable operational performance.
Real Property Assets and Leases
Pinedale Liquids Gathering System ("LGS"), Oil & Gas Gathering System, Wyoming
The Pinedale LGS, our largest acquisition of REIT-qualifying assets to date, is subject to a 15-year triple net participating lease with Ultra Petroleum. Annual rent for the initial lease term includes a minimum of $20 million (as adjusted annually for changes based on the Consumer Price Index ("CPI"), subject to annual maximum adjustments of 2 percent) and a maximum of $27.5 million, with the exact rental amount determined by the actual volume handled by the Pinedale LGS.
Approximately 88.7 percent of the Company's total lease revenue for the second quarter of 2013 was derived from Ultra Petroleum Corp. As of June 30, 2013, approximately 94 percent of the Company's leased property, based on the gross book value of real estate investments, was leased to Ultra Petroleum Corp. The Pinedale LGS is being depreciated for book purposes over an estimated useful life of 26 years.
CorEnergy holds 81.1 percent of the economic interest in the Pinedale LGS. Prudential Financial, Inc., which invested $30 million to fund a portion of the acquisition, holds 18.9 percent of the economic interest.
Eastern Interconnect Project, Electric Transmission, New Mexico
The Company's 40 percent undivided interest in a 216-mile power transmission line that moves electric power across New Mexico between Albuquerque and Clovis, called the Eastern Interconnect Project ("EIP"), is leased to Public Service Company of New Mexico ("PNM") under a net operating lease.
Approximately 11.3 percent of the Company's total lease revenue for the second quarter of 2013 was derived from PNM. As of June 30, 2013, approximately 5.8 percent of the Company's leased property, based on the gross book value of real estate investments, was leased to PNM.
Private Company Update
The fair value of Lightfoot as of June 30, 2013, increased approximately $37 thousand or 0.4 percent, as compared to the valuation at March 31, 2013, primarily due to market value changes in the MLP comparable companies. Lightfoot's assets consist of an 83.5 percent interest in Arc Terminals ("Arc") and a minority position in a Liquefied Natural Gas facility located in Mississippi.
Throughout 2012 Arc retained cash for capital expenditures and potential acquisitions and in February 2013 announced the acquisition of Gulf Coast Asphalt Company's marine terminalling facility in Mobile, Alabama, and rail transloading facility in Saraland, Alabama. The transaction expands Arc's capacity to more than 2.5 million barrels of storage and three rail (un)loading operations.
The fair value of VantaCore as of June 30, 2013, decreased $693 thousand, or 5.6 percent, as compared to the fair value at March 31, 2013. The decrease is attributable to changes in VantaCore's debt during the second quarter. VantaCore increased borrowings against its revolving credit facility to begin funding capital expenditures during the quarter, which we expect to benefit earnings in the future.
Mowood, LLC is the holding company of Omega Pipeline Company, LLC ("Omega"). Omega's sales revenue performance was higher for the quarter ended June 30, 2013, compared to May 31, 2012, which is largely attributable to an increase in the market price of gas combined with increased usage due to consistently cooler temperatures during the first six months of 2013. Due to the seasonal nature of gas sales, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
CorEnergy satisfied the quarterly REIT asset test for the quarter ended June 30, 2013, and anticipates that it will satisfy the quarterly asset tests and annual income test necessary to qualify and elect to be taxed as a REIT for 2013. Because certain of CorEnergy's assets do not qualify as REIT assets and do not produce REIT-qualifying income, the Company contributed those assets into wholly-owned taxable REIT subsidiaries prior to 2013.
CorEnergy expects its major energy infrastructure assets, the Pinedale LGS and the Eastern Interconnect Project, to produce stable and recurring revenues in the second half of 2013. The Company believes that the cash flows from its holdings will continue to support the 2013 annualized dividend payments of no less than $0.50 per share. A number of possible acquisitions ranging in value from $50 to $200 million are in preliminary stages of review. There can be no assurance that any of these acquisition opportunities will result in consummated transactions. The Company has a $20 million revolving credit facility in place, which can be utilized for future acquisitions. As of June 30, 2013, there were no outstanding borrowings against the facility.
2013 Second Quarter Earnings Conference Call
CorEnergy will host a conference call Monday, August 12, 2013, at 1:00 p.m. CDT to discuss its financial results. Please dial into the call at 877-407-8035 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.corridortrust.com.
A replay of the call will be available until 11:59 p.m. CDT September 12, 2013, by dialing 877-660-6853. The Conference ID # is 418496. A replay of the webcast will also be available on the company's website at corenergy.corridortrust.com through August 12, 2014.
CorEnergy Infrastructure Trust, Inc. (NYS: CORR) , primarily owns midstream and downstream U.S. energy infrastructure assets subject to long-term triple net participating leases with energy companies. These assets include pipelines, storage tanks, transmission lines and gathering systems. The Company's principal objective is to provide stockholders with an attractive risk-adjusted total return, with an emphasis on distributions and long-term distribution. CorEnergy is managed by Corridor InfraTrust Management, LLC, a real property asset manager focused on U.S. energy infrastructure and is an affiliate of Tortoise Capital Advisors, L.L.C., an investment manager specializing in listed energy investments, with approximately $13.1 billion of assets under management in NYSE-listed closed-end investment companies, open-end funds and other accounts as of July 31, 2013. For more information, please visit corenergy.corridortrust.com.
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.
|CorEnergy Infrastructure Trust, Inc.|
|CONSOLIDATED BALANCE SHEETS|
June 30, 2013
|Leased property, net of accumulated depreciation of $7,180,903, and $1,131,680, respectively||$||237,512,375||$||12,995,169|
|Other equity securities, at fair value||21,239,935||19,866,621|
|Cash and cash equivalents||21,109,551||14,333,456|
|Trading securities, at fair value||-||55,219,411|
|Property and equipment, net of accumulated depreciation of $1,896,009 and $1,751,202, respectively||3,460,158||3,589,022|
|Intangible lease asset, net of accumulated amortization of $583,878 and $413,580, respectively||510,893||681,191|
|Deferred debt issuance costs, net of accumulated amortization of $273,324 and $0, respectively||1,275,029||-|
|Deferred lease costs, net of accumulated amortization of $32,588 and $0, respectively||887,874||-|
|Hedged derivative asset||823,773||-|
|Prepaid expenses and other assets||567,434||2,477,977|
|Liabilities and Equity|
|Accounts payable and other accrued liabilities||2,928,749||2,885,631|
|Dividends payable to shareholders||3,018,495||-|
|Distributions payable to non-controlling interest||1,690,413||-|
|Deferred tax liability||2,791,093||7,172,133|
|Line of credit||-||120,000|
|Warrants, no par value; 945,594 issued and outstanding at June 30, 2013 and November 30, 2012 (5,000,000 authorized)||$||1,370,700||$||1,370,700|
|Capital stock, non-convertible, $0.001 par value; 24,147,958 shares issued and outstanding at June 30, 2013 and 9,190,667 shares issued and outstanding at November 30, 2012 (100,000,000 shares authorized)||24,148||9,191|
|Additional paid-in capital||169,269,731||91,763,475|
|Accumulated retained earnings||6,691,848||5,712,419|
|Accumulated other comprehensive income||921,442||-|
|Total CorEnergy Equity||178,277,869||98,855,785|
|Total Liabilities and Equity||$||288,661,953||$||111,431,833|
|CorEnergy Infrastructure Trust, Inc.|
|CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)|
|For the Three Months Ended||
For the Six Months Ended
|June 30, 2013||May 31, 2012||June 30, 2013||May 31, 2012|
|Cost of sales (excluding depreciation expense)||1,476,348||1,031,114||3,479,987||3,035,786|
|Management fees, net of expense reimbursements||646,394||254,965||1,290,208||502,346|
|Asset acquisition expenses||53,394||94,699||85,211||94,699|
|Operating Income (Loss)||1,600,269||(100,636||)||3,400,708||123,000|
|Other Income (Expense)|
|Net distributions and dividend income||$||2,701||$||55,462||$||15,825||$||140,724|
|Net realized and unrealized gain (loss) on trading securities||-||(3,600,082||)||316,063||(737,810||)|
|Net realized and unrealized gain (loss) on other equity securities||(30,976||)||6,837,407||2,395,010||12,906,601|
|Total Other Income (Expense)||(935,550||)||3,267,558||1,082,242||12,256,877|
|Income before income taxes||664,719||3,166,922||4,482,950||12,379,877|
|Current tax expense||581,757||-||867,648||10,000|
|Deferred tax expense (benefit)||(340,003||)||1,190,162||395,050||4,646,076|
|Income tax expense, net||241,754||1,190,162||1,262,698||4,656,076|
|Less: Net Income attributable to non-controlling interest||352,893||-||737,427||-|
|Net Income attributable to CORR Stockholders||$||70,072||$||1,976,760||$||2,482,825||$||7,723,801|
|Other comprehensive income|
|Changes in fair value of qualifying hedges attributable to CORR Stockholders||921,442||-||921,442||-|
|Changes in fair value of qualifying hedges attributable to non-controlling interest||215,439||-||215,439||-|
|Other Comprehensive Income||$||1,136,881||$||
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