CorEnergy Announces Preliminary First Quarter Results; Provides Business Update
KANSAS CITY, Mo.- June 23, 2020 - CorEnergy Infrastructure Trust, Inc. (NYSE: CORR, CORRPrA) ("CorEnergy" or the "Company") today announced preliminary first quarter operating results, including impairment charges related to the Grand Isle Gathering System (GIGS). The Company also provided an update on its business, including an income statement charge in the second quarter resulting from the anticipated sale of the Pinedale Liquids Gathering System (“Pinedale LGS”). The Company expects to file its complete first quarter results by June 25, 2020 on Form 10-Q.
Dave Schulte, Chief Executive Officer, said, “Over the last several months our team has worked tirelessly to address challenges at two of the Company’s key assets. Tenant-specific actions related to the extraordinary reductions in energy demand coupled with increases in commodity supply have impaired CorEnergy’s revenue and asset values. Our response included negotiating for mutually beneficial outcomes with each tenant, seeking revenue enhancements where possible, implementing operating expense reductions, and seeking the support of our lenders. We retain significant liquidity, and we will manage this important advantage carefully in light of our balance sheet priorities.”
“Regarding GIGS, our impairment charge was triggered by significant decline in the global energy markets as a result of, among other things, the impact of the global pandemic, which adversely impacted the EGC Tenant under the Grand Isle Lease Agreement. We remain open to constructive dialogue with our tenant as they evaluate when they are prepared to restart production,” Schulte said.
“The outcome of the Ultra Petroleum (“UPL”) bankruptcy differed from their prior bankruptcy due to the meaningfully lower reserves and business enterprise value accepted by the UPL lenders in the Plan of Reorganization. No value recovery would exceed the second lien position, including the value of our claim for indemnification for UPL’s actions,” Schulte continued. “After failing to achieve a reasonable revised lease proposal from UPL, we believe the sale was in the best interest of our lenders and shareholders. The proceeds from the sale of $18 million plus any cash remaining at Pinedale Corridor, LP ("Pinedale LP") will be used to fully discharge the associated subsidiary secured debt of approximately $32 million, a resolution we negotiated and expect to sign with our lender.”
Schulte concluded, “We are fortunate to have refinanced our convertible debt last August. We are actively pursuing high quality investment opportunities which could replace a portion of the lost Pinedale rents with a goal of closing by the end of the year.”
Preliminary First Quarter Results
Lease revenue was $15.7 million for the three months ended March 31, 2020, which included rent for both Pinedale LGS and the GIGS asset. Transportation and distribution revenue from CorEnergy’s subsidiaries MoGas and Omega were $5.2 million. These revenue sources were fully offset by the non-cash write-off of the deferred rent receivable of $30.1 million related to the Grand Isle Lease Agreement, resulting in a loss of $9.1 million for the quarter. Transportation and distribution expenses were $1.4 million, and general and administrative expenses were $3.1 million for the first quarter.
The Company recognized an approximately $140 million loss on impairment of leased property related to our GIGS asset. Net loss attributable to CorEnergy stockholders was $162.0 million for the three months ended March 31, 2020 After deducting $2.3 million for the portion of preferred dividends that are allocable to the period, net loss attributable to common stockholders for the three months ended March 31, 2020 was $164.3 million, or $12.04 per basic and diluted common share.
On May 14, 2020, UPL, our tenant at our Pinedale LGS asset, filed for bankruptcy protection due to the low commodity price environment and debt levels. UPL also filed a motion to reject the Pinedale Lease Agreement, with a request that such motion be effective June 30, 2020, so that UPL could start construction from wellpads to the water processing system purchased from Shell (the “SWEPI System”). CorEnergy objected to the motion on a variety of grounds. However, based upon UPL’s reduced drilling and production plan and the relatively low value of the debtor UPL’s estate and those implications for the rejection of our lease, we determined that the sale of the asset at a price consistent with the debtor UPL’s cost of construction from wellpads to the SWEPI System was the best course of action. An agreement in principle has been reached to sell the asset to UPL for $18.0 million, which is expected to have an effective date of June 30, 2020. Proceeds from the sale plus any cash remaining at Pinedale LP is expected to satisfy any remaining debt at Pinedale LGS and thus eliminate any debt repayment obligations from CorEnergy. The second quarter 2020 results will reflect an income statement charge for the Pinedale LGS in an estimated
1100 Walnut Street, Suite 3350, Kansas City, MO 64106 Main:816-875-3705 | Fax:816-875-5875 | corenergy.reit
The following information was filed by Corenergy Infrastructure Trust, Inc. (CORR) on Tuesday, June 23, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.