CORR - Earnings call transcript Q4 2017 | CorEnergy Infrastructure Trust, Inc.

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Operator

Greetings and welcome to the CorEnergy's Fiscal Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lesley Schorgl, Manager of Investor Relations. you. Thank

begin. may You

Lesley Schorgl

Accounting joining have Trust’s CEO with Executive Poundstone, Rick for call. and yearXXXX Today, Green, Chief Nate and we us, Chairman; CorEnergy you fiscal Infrastructure earnings President; Officer. Thank David Schulte,

may As Wednesday, well in the as and this CorEnergy’s as found discuss between filing. be CEO, audio that during available statements GAAP which in be course our now laws. historical an The this could not call, Dave the discussed those our made replay not the under documents protection, statements actual a and about XXXX release differ that Schulte forward-looking cause our conference information website. securities issued forward-looking available call presentation presentation are will reminder, press section speak Harbor President Investor for are to year. call, These the applicable SEC. subject do earnings in can materials XX-K Reconciliations materially filings the available and Important CorEnergy’s our the and will in on our we release factors are the results this purely and included of of statements update this statements. on Safe on you related of Relations to from are forward-looking the non-GAAP We results, with website. to be the

Dave Schulte

positioning risk classic hand see over In and few of test return. years. classes measuring be investment curve. asset Slide term asset on XXXX we We and basis. much of the part the on financial we everyone. last the a Thank position upper afternoon, curve has the portfolio it, market mix corner, left exited in a a can you, responded and frontier our long X, how between and longest Lesley, good On the illustrated both entered after Generally relationship a significant you stronger efficient standpoint than the

the debt, also a the have viewed risk, rewards. capital, commensurate bond treasury bank the risk, end, On low such exists spectrum but other venture of one as relatively At is or with which but low investment, higher generally potential return. you investments may as end

was for assets flows. portfolio lease our model to of with owning target achieve returns REIT enable of to strategy, with infrastructure XX% for lower long each assets asset duration CorEnergy’s execute returns intended we solid to creating by predictable Now level of return. And cash XX% to this unit contracts risk

with as as protections tenant, asset in services diverse returns agreements. REIT priority promotes strive versus such finally, used have infrastructure that leases and transactions returns we Our the is and structure utilization. real asset type, we the other for can of versus storage which assets credit in the chart the leases exposure. terminal We of due property depicts half screening via We tolling those diligence in REIT our REIT of a And or a purchased strategy And and participating critical process. pipelines strategy the thus believe We of increase report The a December higher in the and mitigation. illiquidity negotiated features, portfolio since that adopted lived is contractual have are assets. MLP total of is contracts other bottom which commodity use acquired premium XXXX. and risk those receiving our rigorous assets and It indices card. Alerian CorEnergy’s and CorEnergy long to geography

the largely outperformed two significantly our has dividend. CorEnergy indices, see thanks can stable to you As

illustrated in in Now risk as that our by dip say not low is price CorEnergy share as investors have a the always XXXX. perceived investment, the

infrastructure asset which the harshest times model, is durability enabled of of us downturn energy to However, demonstrate class. our the the revenue such even in the the as hallmark

the million XXXX, the utilization million with of our Pinedale completed $X.X very UPL their this and asset Pinedale demonstrated higher which in Cor in slide, we will In Portland its Logistics in continue the that drilling budget. West of the six shows and base held XXXX And Pru company steady us proposition. Delta Gathering the And to asset, for plan Slide to four field we're like received robust from involved risk and for our production. by horizontal on participating in this utilized the rents their which it Drilling update $XX.X this we X, the previously remain which which us is capital for largest past the I’d field with LGS current they also this approximately XXXX, given year, to be Coast, level acquisition drilling equity of the reward continue Isle oversight Pinedale will be in On anticipate announced which for focused to level new acquisition On most believe and portfolio, of next a reserve as in the asset Mexico. our is Zenith was and our partner Morgan Grand located last field our provide $XX to million. South that System, by continues with levels wells Energy valuable provided for asset. drilling this the we they of is of a production to of asset what based week. from serve company purchased its of in in Gulf XXI by At leased XXI debt, their each much announced continues XXI Gulf Gathering is conviction recently Stanley, core and Mexico. Arc both released Petroleum are has test particularly buyout. relationship a a in fields, which initial of LGS, success was asset, is of profile capital the the Energy Timbalier a pleased following minority System the analysis our Pru going of and Gulf equity they our interest in standalone Liquids and properties served partner in partially Energy December. deems Ultra Terminal, to And Energy its strategic years.

and In recent long from to January, discussions management by we As leads period the options remains extend of ongoing as the which term Zenith provided through well termination the lease. us, their X our new an at the the the end August the acquisition agreed buy fee team first terminal. notification X lease we live due to from as options that terminal with and around February anniversary Zenith for early of to the previously the including option with XXth plans Xth to of discussed,

Portland that Pacific the that well and as believe option. the will We their termination the strategic a Terminal's not anticipating as terminal continue it at location we're exercise Zenith asset, to make valuable Northwest of versatility

business assets has $X.X $X.X development the in majority in of which an the November final been assets, aspect CorEnergy to REIT Zenith in of an equity million cash MoGas GP. in received interest that our has Regards a disposition we of of Lightfoot's million. and BDC entities we interest Pipeline, company. our other The time impacts This to acquisition our The us Zenith in the LP as our us moves which to we our impact a XXXX. held bring acquisition our the closer contract, since plan Lightfoot in Spire is since Joliet rates legacy this and continue of plus for in resulted the at which Lightfoot upcoming decline to new valued investment in look which year. sale Terminal, offset at the to the options effective of is available

to this the a Ford We private are which rate Leonard converted a in subsidiary a income from quarter designate filed the to case we'll as as enabled Omega REIT once moves received taxable the anticipating into we plan the year, forward. Pipeline, Wood second the qualifying with XXXX filing and our update income. and case On subsidiary. the letter us REIT our Omega from market We from ruling IRS REIT subsequently contract of

As solidify pioneer as shape, this to to CorEnergy's front. helps this world continues PLR take real the energy position infrastructure a in estate

and and UESC the efficiency from program an of at now turn Portland base. the incremental Omega, call for I'll over provide cover our And agreement on expect provide to The Nate of Wood Omega. last electricity the that were program Department X we the awarded revenue gas we water years Defense. will X comprehensive to to natural Lastly financial will announced improvements and we army a performance.

Nate Poundstone

Thank you, Dave.

Our quarterly financial Slide metrics X. are on outlined

for These decreases deferred with our December. that are note to applying diluted lowered tax to higher primarily the the expense FFO rate federal income relate You'll in the associated during income, quarter. net taxes, reform tax new each the fourth REIT lower existing FFO and following quarter in enacted net adjusted securities

can has adjust office You that impact, steady. which non-cash remained tax AFFO, see

and current term. our provide reinvestment dividends for portfolio X.Xx conservative consecutive XXth our the business as us declared and dividend we target model in repayment, necessary $X.XX base. asset quarter, us share the We of of the dividend to fourth order with the ample capacity sustain model demonstrating capital to ratio consistency paying the per for to ARO activities Additionally, to debt common at revenue our as well funding allow over reserves for long AFFO

year which on for activities was a expected earlier and requirements dividend of financing in for as in quarter to our coverage preferred ourselves pressured This was the short-term to our fourth ratio we X.XXx, the order Our from this growth. undertook pressure continues additional the XXXX. be offering that ratio though by position result

an over the Series of pay our occurred took portion asset leverage basis. Pinedale Then called on in for conditions, rata the Turning the entering initiated Then In connection balance at under Pinedale outstanding and we the level In Preferred the we to into see the amended $XXX Dave at December, Slide facility pro XXXX, balance of as results time. base off the A limitations an amended internally highlighted, additional subject Pinedale to revolver In accumulative, borrowing XX in preferred on July, Stock, to down we of facility subsidiary April, million upsizing outstanding five entered loan facility. credit into positioning Prudential redeemable and X, in facility, that refinanced term extended the had term million the an advantage utilizing our unrestricted March financial million a We the on the facility. has paid included of prior the on with we XXXX. since been proceeds a credit commitments you the in to can to acquisition. lastly we it $XX market amendment its of is and years.

add makes from the that aligned Prudential’s and based leverage pro are we we're rata point at whereby term asset for with the through the liquidity what had million This transaction, a on The us at slide. and reestablished had that a intended. equity the leverage in rate we our leverage XXXX, for of these facility we loan $XX equity interest back transaction through had a conservative proceeds really and With Prudential’s under are we impact back The the five-year from amended on capitalization we financing level a accretive this level neutral million an it conservative from at acquire a fix asset able haven’t X.X%. $XX So our fund consolidated of perspective interests amount facility, on needed refinancing. borrowings to demonstrated was initiatives funding of us to liquidity of the of XXXX our remaining asset level.

million liquidity which of total see CorEnergy million the compares the end at at XXXX of end can that has You $XX XXXX. of to $XXX.X

is debt the position the preferred equity had XX%. offer to low to range on to total opportunities our capitalization total opportunity targeted a financial of end for about outlook to market positioned strengthening XX%. I’ll being which XX% itself. our and our XX%, during to Dave ratio of with preferred target is which acquisition to now We stands at ratio the XXXX. and Our at goal presents And that the we back to to subject call goal approximately stands XX.X%, of at speak very total when that our XXXX efficiently following year, That of in are quickly without pipeline quickly act to be on is able an arise turn acquisition over And to our the conditions. now transact achieved and closer

Dave Schulte

which the X. XX% varying and according with criteria. valuation like as We Nate. sensitivity, Slide diligence our processes has Two diligence asset, provide LGS X, of volume of have On term of to us long that subject acquire. entry as remaining we any what diligence, by purchase processes stages LOIs if and the level were to stringent And critical reiterate evaluated price last of CorEnergy and as we a to assets to due on pipeline reasons long criteria of same assessed In for the active new XXXX. terminated Thanks, a asked entered and the target and might for or eventually our and into we return Pinedale predictable changes. by cash barriers in diligent limited interest our and procedures a of The XXXX, those the we assets, asset due flows we’d the issued assets unrelated on potential We're state financial potential two reviewing other in XX% investments. of number asset to types high projects remained investors often counterparties. were life for our to about it

well primarily that the in geography assets as assets for portfolio, to the storage commodities part, terminals. pipeline diverse are we in are those and the similar near and Now most already transport store. head continuing our as These in well are to see are

we're only profile spending higher regardless of but capital our interest strengthen Given financial to balance from production their low return seen opportunity in activities. return in counterparties offers cash policies and companies those also CorEnergy monetize within looking towards put assets, adopted counterparties today's flow. their where to their environment, to that of we've global not each enabling companies, sheets, of large

able XXXX, X addressable completing we our despite in with On an role larger million we and we with in we're usage level year. original to asset discuss November think partners exercise proposition, the be maintain after will dividend. REIT, counterparties to upcoming Pinedale $XXX that even Slide face. $XX our worthwhile year. in XXXX, charged Now to is energy decrease potential we targeting such pipeline, MoGas ourselves years, still the large LGS. an will of is In that of as Capital's dividend begin each believe, two educating opportunity to our our $X infrastructure Prudential to range, acquisitions we is million one as we our due market the a outlook find this for X, which rates for size value on Spire actionable This

existing interest by be mitigated the decreased the for escalators our the in well through contracts LGS, deferred to and expect based rents. our as the We Pinedale from from revenues adequately CPI as of rate ownership case accretion results MoGas, increased growth participating

acquisitions the the amount reassess but and we our asset prudent additional upside in of Of will sustain line. year. levels, we our so will flow, capacity and of expect dividend to the consistent from we paying cash responsible And infrastructure to dividends core future. the the to during take like hallmark course, the strategy at would can acquisitions in at performance our could investors is set appropriate class. an we result levels, many dividend complete now questions make I flow any It cash in for our dividend should order of deal, complete retain our a

Operator

you. Thank

We question-and-answer-session. be a [Operator conducting now Instructions]. will

proceed line from Oxford your Davidson. with of Our first Please D.A. question. with Barry comes question the

Barry Oxford

I Great, what offset rents If Pinedale more thanks behind color you indicated we that? to XXXX from the that could expect as lease the be in as little just guys. percentage Because might far had of that could MoGas? used get

Dave Schulte

for the question. thanks Sure,

that participating is of to the And we be did years participating we near $XXX,XXX from And position us didn’t rents or have enable We that have first to record several the when there. levels acquisition so of with indication are were first very participating any rents. the to and rents upside rents. of for the asset that to utilization of they are participating able volumes the

the us of joint the on program of levels that generating activity activity, that enabled to be of production start variable the prices could in and company’s however, have field the a level to the that company’s get rigs. participating they they field pleased number in gas rents, their on that access said dependent deploy dependent their will direction we're we and volumes completely So are

don’t would higher MoGas – today, circumstances. than coverage, to we what for as level. to expect So don’t have would it the revenue be and got of dividends, to we but predict but also that utilized that expect for we is try sustainably we think to meaningful we its higher And said, be use offset not portion until that it other

what the Now, acquisition. to we which do on the have is non-controlling to was now count to us due income paid interest, previously for with that’s staying Prudential,

loss. could Pinedale $X the point extra off inflation, That inflation makeup So of Energy us and escalators, had the would lease, something can’t an plus kick and including generate does kick up on some we potential that’s also be, of that XXI. material million predict contracts of which of plus in other that enabled which at part

exercise time. So very not we an the think participating the -- this is at fruitful rents is predicting in that point

Barry Oxford

Right. they that not want on rate, won’t and that lease, reduced it, the to opportunity X%, say we any we part Pinedale Right. a or cancel scenario? Got you. Is but back could you the look, there come of is

Dave Schulte

you think, mean I … Portland

Barry Oxford

I am yes, sorry, yes, yes. sorry, I yes. am Sorry,

Dave Schulte

new be they evaluate some team And patient decision leadership strategy. happy just And owning are just to processes time make continuing We to expect need and think to a that to they not asset and operating in status And Zenith posture. there, an in will do the it’s future the senior In we’d it. have to would would valuable that their we there. believe happen. point sure We to we ownership that meantime, remain at the to it’s we around like options. some like long remain ownership a what to come term in their

Barry Oxford

six total you're there. think targets of an actually right number and of compare the just things now that Last that of probability ago? or are you -- seeing year out acquisition doing to better in Can now than sense the question, of of to in kind of process Great. acquisitions when the us you where a where in XX you months ago and about kind you a months or kind are give six

Dave Schulte

the these be They're that -- they case. activity documentation after Intent diligence outside now. X much been ago our exceeds of able period uncertainty months had prices Letter we've take that. processes and far because generate reflecting level the a we and to But that stock a we And the reflecting are last that the will better were X during where able lenders can that generate due to take in sign what and our months the year you

So the ability

Barry Oxford

assumption gas of now too? Is where or not it an prices And were of necessarily? oil ago year they versus

Dave Schulte

say about Oil price me the this -- let backdrop.

it's for think us. I healthy

assets curves Now CapEx remain costs expected the that the environment. such about lower fund is we're revenue high production to going commodity willing talking We've companies up just and programs. concerned are growing, conviction and their of to volumes infrastructure not are in sell today so are this energy as really Their level And with productive generating less declining yet or to. productivity seen their total their a banks companies leverage. are for

responding all So there for is need us. is are very projects we on XXXX. active think our And the handle environment pipeline We conditions. that today for those about healthy to feel capital some volumes. our very for good or macro of to prospects increase And that

Barry Oxford

I'll thanks yield the floor. Great, guys.

Operator

you. Thank

with Please from comes your question Stifel. next Akyol with proceed Our Selman question.

Selman Akyol

color, all Appreciate helpful. you. that Thank very

Do selling out think of you asset? event think hold liquidation just along? you comes until you that Joliet, some end starting it up So will the do you

Dave Schulte

Joliet has managed by Zenith. been

management owned to owned partially step they the was It partners. partially Arc comprehensive Logistics regard of only and of asset. acquisition Logistics the by with part to So that by series financial into Arc did was

we're and been that point little X%. position, is retention in of will the managing small So as a We're be when less the just going at it, whole sales where than still our to they're asset the in hold -- there equity. liquidity when if a has transaction posture minority in $X interest and and treated over opportunity valuing resulted to and time. long as million at And Zenith is our

liquidity term we're not So for option looking there. any near

Selman Akyol

Can say is GIGS on Okay. today? what utilization you the

Dave Schulte

I and their exactly we rates mentioned by separate least but has at nor our level the program flattened don’t to decline. GIGS it they're think and system served out published so it, this they've in available sustain are specifically measure year on our on may rates we production overall, production utilization to by targeting levels might what they not activity corporate they expect publish you pipeline. can production don't fields field, the us. utilization drilling out GIGS. partially be have And should or by ever But grow overcome The that

they in feel fields, -- sustained growth we least are. production levels about So a if they little emphasize where And our could at little utilization. pretty have potentially good we a

Selman Akyol

you. Got

Dave Schulte

Not the -- were they we did by though, acquisition. the to above, the level when that way, not

expect So participating we rents there. don’t

Selman Akyol

$XX million that is Got you. the And of – then in the down associated amortization? debt, on pay any that with is there

Dave Schulte

so Yes, kept receive. prior million year five per it’s year term. for may We with facilities, Selman, X.X a the on we done what about our we’ve steady amortization before

Selman Akyol

then, to REIT And changing Corp – I taxes, from to it okay. to And MoGas right, had asset? a do then CE a status a you all Okay. clear from on just see with be status there, nothing the that so

Dave Schulte

that in statutory the tax rate on impact reform impact the the existing talk change we QX no, really deferred. in No, on about the XXI is the just

Selman Akyol

me. All you. from right. That's it Thank

Operator

Thank you.

question. Our Co. your comes with and proceed question next Please from with Michael Zuk Oppenheimer

Michael Zuk

color us then site mean, looking Could are and of you what Fort to have give Dave. for a the color assessment at are afternoon, where little you the current us Can Leonard little process you you, in and I orchestrated beginning, and are program on the year? Omega on Good you event a give engineering construction. at the Wood, going

Dave Schulte

that. joined call. to Green the Rick us invite to I for He’s Sure. respond

Rick Green

something like are will energy be Mike, lighting really we a projects, as big as plant. which And day signed the now. to well mix that that a contract start projects to co-generation efficiency any as as on expect of focus

work at going months is of before planning least starts. six take actual that engineering of and to All

get we path that But to when So it. to still the right should soon. very specifically engineering, it’s be more speak be planning, we into and in will able signed now,

Michael Zuk

And my alluded this you a multiyear understanding is is it project? before, to

Rick Green

should over years. Yes, five about stretch this

Michael Zuk

be say two is be generated it’ll project of there or enough systems as Will will be one the the are phased there -- that in, as and revenue running? implemented

Rick Green

expect that We MoGas, know hard around high with uncertain how too to there a will some co-generation which any It’s as actually it’s natural conversation much could well be. is gas, more too would on work to that take side very it. and to out but a far put positive

Michael Zuk

I that. appreciate

you're So sound then this when really looking and is year preliminary it XXXX probably work when that's and more. did really

Dave Schulte

right estimate That’s best our now.

Michael Zuk

color Well, Thanks. appreciate the the insight. and

Dave Schulte

Thanks Mike.

Operator

you. question. [Operator is question the proceed next Please from Instructions] your Adams. investor. a David of private Thank comes He Our with line

David Adams

Dave. cetera? hi, I private guys sources, whether you et deals had question thought Yes, a about any lower you’re funding equity losing to

Dave Schulte

are for or very and infrastructure limited as that those don't They and not things that to And converting funding long equity very duration nature the reasons. of include other we can we role more private the to on it, there of have contract another a us a our a engaged another, lower not form that's private development. and source. passive a the property in couple window commodities on is event equity assets. horizon them plants meaningful where transaction have before we to the alongside in company. assets But the that Well, are activity, a large that a asset are side forced can tends they a I characterization appreciate liquidity and for need real contributor from one of processing One own, is believe

some we So a breadth from can't have advantages, but we what do can they we think do standpoint.

being the Lastly, tend the other subjecting owning say, we expensive indebtedness equity we're and stack equity to to less private at in probably of take we to margin junior the out our private asset because believe contract it and company. a risk lease versus what I'd our right less capital completely the little by

always sources So of particularly of maybe other will competing we're the comment sources final traditional be with capital, capital. with

the and because have the us far own be of And of within property our for of financing transactions negotiated kinds assets on our with has purposes. customization direct to opportunity there assets, pricing to does as essentially so our that counterparties Most we competition it legal more for as affects the transactions than do. capital vis-a-vis stack, a opinion is requirement and real fit posture treatment particular

find we educating And And of overall lot these about there so is our you we are available of companies capital of sources companies cost versus other as to that, things. other a capital suggest, generally today.

David Adams

feel you Do like is that competition increasing?

Dave Schulte

No. I don't think it's increasing.

assets. private and capital. models teams sector, in sitting there not. think with in each funds, competing about the lot seem to that's business operating be and other that on is management a equity a fair acquire are written question. a sponsored to generally. of sidelines number There I They the of private have amount We're And equity the energy funds are that we're

we we're best management to So are solution. team are operating optimize, suitable on that -- rarely for assets own rarely and the

So of with not competing directly really those sources. kinds we're

David Adams

somewhere read road Can think, about the deals the a structural from the abandoned. to Was two I you guys got little you. was that of us? with about And finding down that the you assets then and tell of I've Okay. out or financial more ways that

Dave Schulte

and prospects And each. One the life less us And of in project. example an basis of as regarding until we the we that just we little engaged became at be a productivity. to the to we for advise that, of didn't comfortable later end the do to profile reserve third independent an wanted had on was party that process. the than we one assessment Yes, reserve

one. set so pencil And we on that out down

to thought going we evaluation The with with. the were became we less stages of project to past get one, were comfortable comfortable able of a opportunity we contractual be other that and early an

our And so to risk a an again down put we financial we later on in that we that not assessment, but and had a operating one. pencil risk, diligence, decided risk made assessment financial

David Adams

question, still of a follow-up you type the path new If that deals? I you're to same the of opportunity system. you in GIGS into new one ask get trying that moved Pinedale area and the whole to But receiving guys more or are capable could just system led of find

Dave Schulte

looking are are opportunities. analogies list. Pinedale, a in our some looking broadened We and scope direct at in to GIGS our addition have and variety But to of more very open prospect to bigger are that, current we and at

David Adams

All right. Thank you.

Dave Schulte

you. thank Yes,

Operator

remarks. over Thank time. turn questions further back to at this you. closing like would There to call are the no Mr. I any for Schulte

Dave Schulte

XXXX for Thanks review last year excited And us are attention on our we believe about lie everyone growth We the and appreciate spent opportunities of ahead. preparing for XXXX joining your for we call. the we and much the outlook. that

If any questions you. Thank our to out reach to feel you free team. please further have

Operator

concludes Thank teleconference. you. This today’s

You have your and for disconnect at you wonderful lines time. your Thank a this day. may participation

CorEnergy Infrastructure Trust (CORR) 1 Mar 182017 Q4 Earnings call transcript