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CorEnergy Releases Third Quarter 2014 Results

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CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) (“CorEnergy” or the “Company”) today announced financial results for the third quarter ended September 30, 2014.

Third Quarter Highlights and Subsequent Events

  • Declared third quarter 2014 dividend distribution of $0.130, payable on November 28, 2014
  • Reiterating annualized dividend guidance of no less than $0.52 per share
  • Successfully established a new $30 million senior secured revolving facility, replacing prior facility
  • Completed VantaCore sale for approximately $13.6 million in gross proceeds
  • Amended and upsized Black Bison secured financing transaction

“This first three quarters of 2014 demonstrate CorEnergy’s ability to deliver stable dividends covered by growing cash flows from our energy infrastructure assets, while optimizing our balance sheet for a pipeline of investment opportunities,” said David Schulte, Chief Executive Officer of CorEnergy. “We successfully completed the sale of VantaCore, a legacy investment, and established an upsized credit facility. Our capital position prepares CorEnergy to continue to execute on disciplined, accretive investments to drive shareholder value.”

Quarterly Performance Review

CorEnergy reported total revenues of $9.3 million in the quarter ended September 30, 2014. A third quarter dividend of $0.130 was declared on October 31, 2014, and is payable on November 28, 2014. Total assets were $324.3 million and total stockholders’ equity was $218.6 million as of September 30, 2014, compared to $283.9 million and $177.2 million, respectively, at Dec. 31, 2013. AFFO for the quarter ended September 30, 2014, was $0.16 per share as compared to $0.14 per share for the quarter ended June 30, 2014.

Third Quarter Ended September 30, 2014 Financial Summary
For the Three-Month Period Ended September 30, 2014
Total Per Share
Net Income (attributable to CorEnergy Stockholders) $1,888,418 $0.06
Funds From Operations (FFO) $5,082,515 $0.16
Adjusted Funds From Operations (AFFO) $4,995,439 $0.16

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 (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, 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.

Portfolio Update

Portland Terminal Facility

In August 2014, base rent increased to $5 million per year. The base rent is expected to increase by a percentage of specified construction costs at the Portland Terminal Facility, estimated at $10 million. As of September 30, 2014, these costs totaled approximately $4.4 million. Assuming such construction projects are completed, the base rent will increase by an ancillary amount of approximately $1.2 million per year in addition to the minimum lease payment of $5 million.

Black Bison

In July 2014, CorEnergy increased and fully advanced a $15.3 million secured financing to Black Bison Water Services, LLC (“Black Bison”) to fund Black Bison’s acquisition of salt water disposal properties in Wyoming.

The $15.3 million secured financing was made available through an upsize of the pre-existing facility from $11.5 million to $12 million and a new $3.3 million taxable REIT subsidiary loan. Collectively, the $15.3 million 10-year secured financing has a base interest rate of 12 percent per annum, escalating at 2 percent of the base interest rate per annum. Beginning in April 2015, and continuing for each month thereafter, the outstanding principal will also provide the Company with variable interest based on the growth in volume of water treated by Black Bison.

Subsequent Events

VantaCore

CorEnergy completed the sale of its equity investment in VantaCore Partners LP (“VantaCore”), effective October 1, 2014. The Company received approximately $13.6 million in gross proceeds, of which $2.9 million will be held in escrow pending certain post closing obligations or the expiration of certain time periods. CorEnergy’s net proceeds from the sale are expected to be used for the construction or acquisition of real property assets in the U.S. energy infrastructure sector.

The Company will elect to pay income tax on the VantaCore sale as cash distributions are received. The first cash tax payment attributable to VantaCore, estimated at approximately $3 million, is expected to be paid in the fourth quarter. The remaining cash tax payments will be made in subsequent years as distributions from escrow are received.

Balance Sheet and Liquidity

As previously announced, the Company entered into a new $30 million senior secured credit facility (“Credit Facility”) with Regions Bank. The new four-year Credit Facility replaces the Company’s prior $20 million revolving line of credit that was scheduled to mature in May 2016. The Portland Terminal Facility will qualify as eligible collateral under the new facility. Management expects to use the credit facility to fund property acquisitions, capital improvements or for other permitted corporate purposes.

Outlook

CorEnergy expects its energy infrastructure assets – the Pinedale LGS, the Eastern Interconnect Project, the Portland Terminal Facility, Mowood and Black Bison – to produce stable and recurring revenues. The Company believes that the cash flows from its holdings will support annualized dividend payments of no less than $0.52 per share. The Company has a broadening set of opportunities in the pipeline, which provide the potential to reach $50 to $200 million per project type. There can be no assurance that any of these acquisition opportunities will result in consummated transactions. The Company expects to utilize balance sheet resources, including prudent leverage when available, supplemented with accretive equity issuance as needed.

Dividend Policy

In 2013, CorEnergy changed its fiscal year end from Nov. 30 to Dec. 31 as part of its transition from a business development company to a REIT. As a result of this change, the dividend payment schedule for calendar 2014 will vary from prior years. Going forward, the Company intends to maintain a quarterly February, May, August, November dividend payment cycle. Dividend payouts may be affected by cash flow requirements and remain subject to other risks and uncertainties.

2014 Third Quarter Earnings Conference Call

CorEnergy will host a conference call Monday, November 10, 2014, at 1:00 p.m. Central Time 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. Central Time December 10, 2014, by dialing 877-660-6853. The Conference ID # is 13593891. A replay of the webcast will also be available on the company’s website at corenergy.corridortrust.com through November 10, 2015.

About CorEnergy Infrastructure Trust, Inc.

CorEnergy Infrastructure Trust, Inc. (NYSE: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 growth (reported to our investors on Form 1099). CorEnergy is managed by Corridor InfraTrust Management, LLC, a real property asset manager focused on U.S. energy infrastructure real assets, and is an affiliate of Tortoise Capital Advisors, L.L.C., an investment manager specializing in listed energy investments, with approximately $18.1 billion of assets under management in NYSE-listed closed-end investment companies, open-end funds and other accounts as of October 31, 2014. For more information, please visit corenergy.corridortrust.com.

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.

CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED BALANCE SHEETS
September 30, 2014 December 31, 2013
Assets (Unaudited)
Leased property, net of accumulated depreciation of $22,115,766, and $12,754,588 $ 268,670,473 $ 232,220,618
Other equity securities, at fair value 25,420,877 23,304,321
Financing notes and related accrued interest receivable, net 15,510,956
Cash and cash equivalents 5,476,216 17,963,266
Property and equipment, net of accumulated depreciation of $2,243,135 and $2,037,685 3,116,874 3,318,483
Lease receivable 1,421,211 711,229
Accounts receivable 1,086,587 2,068,193
Warrant investment 508,000
Intangible lease asset, net of accumulated amortization of $948,800 and $729,847 145,971 364,924
Deferred debt issuance costs, net of accumulated amortization of $918,811 and $572,830 1,081,881 1,225,524
Deferred lease costs, net of accumulated amortization of $109,299 and $63,272 811,164 857,190
Hedged derivative asset 577,584 680,968
Income tax receivable 834,382
Prepaid expenses and other assets 497,391 326,561
Total Assets $ 324,325,185 $ 283,875,659
Liabilities and Equity
Current maturities of long-term debt $ 3,528,000 $ 2,940,000
Long-term debt (net of current maturities) 64,414,000 67,060,000
Accounts payable and other accrued liabilities 3,329,284 2,920,267
Unearned revenue 1,422,458
Deferred tax liability 5,573,233 5,332,087
Income tax payable 75,522
Line of credit 81,935
Total Liabilities $ 78,342,497 $ 78,334,289
Equity
Warrants, no par value; 0 and 945,594 issued and outstanding at September 30, 2014 and December 31, 2013, respectively (5,000,000 authorized) $ $ 1,370,700
Capital stock, non-convertible, $0.001 par value; 31,644,877 shares issued and outstanding at September 30, 2014 and 24,156,163 shares issued and outstanding at December 31, 2013 (100,000,000 shares authorized) 31,645 24,156
Additional paid-in capital 217,893,695 173,441,019
Accumulated retained earnings 1,580,062
Accumulated other comprehensive income 650,547 777,403
Total CorEnergy Equity 218,575,887 177,193,340
Non-controlling interest 27,406,801 28,348,030
Total Equity 245,982,688 205,541,370
Total Liabilities and Equity $ 324,325,185 $ 283,875,659
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Revenue
Lease revenue $ 7,191,187 $ 5,638,244 $ 21,019,272 $ 16,914,732
Sales revenue 1,741,209 1,935,868 6,814,346 6,381,213
Financing revenue 413,482 578,829
Total Revenue 9,345,878 7,574,112 28,412,447 23,295,945
Expenses
Cost of sales (excluding depreciation expense) 1,284,711 1,411,318 5,377,067 4,891,305
Management fees 813,921 647,380 2,359,054 1,937,588
Asset acquisition expenses 102,591 640,302 139,540 725,513
Professional fees 622,864 305,326 1,287,506 1,191,017
Depreciation expense 3,237,261 2,857,412 9,573,809 8,571,860
Amortization expense 15,343 15,342 46,026 45,963
Operating expenses 210,009 204,446 646,283 714,830
Directors’ fees 50,481 74,437 178,791 124,994
Other expenses 251,636 129,748 644,517 403,766
Total Expenses 6,588,817 6,285,711 20,252,593 18,606,836
Operating Income $ 2,757,061 $ 1,288,401 $ 8,159,854 $ 4,689,109
Other Income (Expense)
Net distributions and dividend income $ 1,688,830 $ 568,332 $ 1,699,874 $ 584,157

Net realized and unrealized loss on trading securities

(567,276 ) (251,213 )
Net realized and unrealized gain (loss) on other equity securities (865,470 ) 1,439,296 2,512,738 3,834,306
Interest expense (977,635 ) (818,134 ) (2,623,972 ) (2,462,790 )
Total Other Income (Expense) (154,275 ) 622,218 1,588,640 1,704,460
Income before income taxes 2,602,786 1,910,619 9,748,494 6,393,569
Taxes
Current tax expense (benefit) 486,054 (680,281 ) 1,340,129 187,367
Deferred tax expense (161,171 ) 1,785,406 241,146 2,180,456
Income tax expense, net 324,883 1,105,125 1,581,275 2,367,823
Net Income 2,277,903 805,494 8,167,219 4,025,746
Less: Net Income attributable to non-controlling interest 389,485 366,042 1,167,734 1,103,469
Net Income attributable to CORR Stockholders $ 1,888,418 $ 439,452 $ 6,999,485 $ 2,922,277
Net income $ 2,277,903 $ 805,494 $ 8,167,219 $ 4,025,746
Other comprehensive income (expense):
Changes in fair value of qualifying hedges attributable to CORR Stockholders 214,602 (262,972 ) (126,856 ) 658,470
Changes in fair value of qualifying hedges attributable to non-controlling interest 50,175 (61,485 ) (29,660 ) 153,954

Net Change in Other Comprehensive Income (Expense)

$ 264,777 $ (324,457 ) $ (156,516 ) $ 812,424
Total Comprehensive Income 2,542,680 481,037 8,010,703 4,838,170
Less: Comprehensive income attributable to non-controlling interest 439,660 304,557 1,138,074 1,257,423
Comprehensive Income attributable to CORR Stockholders $ 2,103,020 $ 176,480 $ 6,872,629 $ 3,580,747
Earnings Per Common Share:
Basic and Diluted $ 0.06 $ 0.02 $ 0.23 $ 0.12
Weighted Average Shares of Common Stock Outstanding:
Basic and Diluted 31,641,851 24,151,700 31,090,370 24,147,163
Dividends declared per share $ 0.130 $ 0.125 $ 0.384 $ 0.375
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF EQUITY

Accumulated
Other

Accumulated

Capital Stock

Additional Paid-

Comprehensive

Retained

Non-Controlling

Shares Amount Warrants

in Capital

Income

Earnings

Interest

Total
Balance at December 31, 2012 24,140,667 $ 24,141 $ 1,370,700 $ 175,256,675 $ $ 4,209,023 $ 29,981,653 $ 210,842,192
Net income 4,502,339 1,466,767 5,969,106
Net change in cash flow hedges 777,403 181,762 959,165
Total comprehensive income 777,403 4,502,339 1,648,529 6,928,271
Dividends (1,923,760 ) (7,131,300 ) (9,055,060 )
Distributions to non-controlling interest (3,282,152 ) (3,282,152 )
Reinvestment of dividends paid to stockholders 15,496 15 108,104 108,119
Balance at December 31, 2013 24,156,163 $ 24,156 $ 1,370,700 $ 173,441,019 $ 777,403 $ 1,580,062 $ 28,348,030 $ 205,541,370
Net income 6,999,485 1,167,734 8,167,219
Net change in cash flow hedges (126,856 ) (29,660 ) (156,516 )
Total comprehensive income (126,856 ) 6,999,485 1,138,074 8,010,703
Net offering proceeds 7,475,000 7,475 45,617,088 45,624,563
Dividends (2,634,179 ) (8,579,547 ) (11,213,726 )
Distributions to non-controlling interest (2,079,303 ) (2,079,303 )
Reinvestment of dividends paid to stockholders 13,714 14 99,067 99,081
Warrant expiration (1,370,700 ) 1,370,700
Balance at September 30, 2014 (Unaudited) 31,644,877 $ 31,645 $ $ 217,893,695 $ 650,547 $ $ 27,406,801 $ 245,982,688
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended
September 30, 2014 September 30, 2013
Operating Activities
Net Income $ 8,167,219 $ 4,025,746
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax, net 241,146 2,180,456
Depreciation 9,573,809 8,571,860
Amortization 860,960 650,330
Realized and unrealized loss on trading securities 251,213
Realized and unrealized gain on other equity securities (4,199,375 ) (3,834,306 )
Unrealized (gain) loss on derivative contract (53,132 ) 29,239
Distributions received from investment securities 823,499 (567,276 )
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 981,606 (220,004 )
(Increase) in lease receivable (709,982 )
(Increase) decrease in prepaid expenses and other assets (170,830 ) 330,715
Increase (decrease) in accounts payable and other accrued liabilities (68,421 ) (1,571,999 )
Increase (decrease) in current income tax liability 909,904 (4,626,710 )
Increase (decrease) in unearned revenue 1,422,458 (2,133,685 )
Net cash provided by operating activities $ 17,778,861 $ 3,085,579
Investing Activities
Proceeds from sale of long-term investment of trading and other equity securities 5,563,865
Deferred lease costs (5,620 )
Acquisition of leased assets (45,524,755 ) (37,696 )
Purchases of property and equipment (11,970 ) (42,242 )
Issuance of financing note receivable (15,510,956 )
Retirement of property and equipment 948
Return of capital on distributions received 873,820 1,142,488
Net cash (used in) provided by investing activities $ (60,172,913 ) $ 6,620,795
Financing Activities
Payments on lease obligation (20,698 )
Debt financing costs (383,678 ) (10,999 )
Net offering proceeds 45,624,563
Dividends paid (11,114,645 ) (5,957,317 )
Distributions to non-controlling interest (2,079,303 ) (2,479,425 )
Advances on revolving line of credit 2,535,671 139,397
Payments on revolving line of credit (2,617,606 ) (139,397 )
Principal payment on credit facility (2,058,000 )
Net cash provided by (used in) financing activities $ 29,907,002 $ (8,468,439 )
Net (decrease) increase in cash and cash equivalents $ (12,487,050 ) $ 1,237,935
Cash and cash equivalents at beginning of period 17,963,266 17,680,783
Cash and cash equivalents at end of period $ 5,476,216 $ 18,918,718
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 2,104,349 $ 1,948,486
Net income taxes paid (refunds received) $ 430,225 $ 4,781,617
Non-Cash Investing Activities
Change in accounts payable and accrued expenses related to acquisition expenditures $ 408,778 $
Non-Cash Financing Activities
Reinvestment of distributions by common stockholders in additional common shares $ 99,081 $ 78,755
Change in accounts payable and accrued expenses related to debt financing costs $ (220,000 ) $
CorEnergy Infrastructure Trust, Inc.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
FFO and AFFO Reconciliation
For the Three Months Ended For the Nine Months Ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Net Income (attributable to CorEnergy Stockholders): $ 1,888,418 $ 439,452 $ 6,999,485 $ 2,922,277
Add:
Depreciation 3,237,261 2,857,412 9,573,809 8,571,860
Distributions received from investment securities 864,575

510,963

1,697,319 1,142,486
Income tax expense, net 324,883 1,105,125 1,581,275 2,367,823
Less:

Net distributions and dividend income from investment securities

$ 1,686,637 $ 567,276 $ 1,686,637 $ 567,276
Net realized and unrealized gain on trading securities (567,276 ) (251,213 )
Net realized and unrealized gain (loss) on other equity securities (865,470 ) 1,439,296 2,512,738 3,834,306
Non-controlling interest attributable to FFO reconciling items 411,455 411,384 1,234,365 1,234,146
Funds from operations (FFO): $ 5,082,515 $

3,062,272

$ 14,418,148 $ 9,619,931
Add:
Asset acquisition costs 102,591 640,302 139,540 725,513
Amortization of debt issuance costs 306,300 128,618 595,982 385,412
Amortization of deferred lease costs 15,343 15,342 46,026 45,963
Amortization of above market leases 72,985 72,985 218,954 218,955
Noncash costs associated with derivative instruments (18,200 ) (16,990 ) (53,132 ) 58,210
Nonrecurring personnel costs 113,232
Less:
EIP lease adjustment 542,809 542,809 1,628,427 1,628,427
Non-controlling interest attributable to AFFO reconciling items 23,286 23,138 69,635 98,348
Adjusted funds from operations (AFFO): $ 4,995,439 $

3,336,582

$ 13,667,456 $ 9,440,441
Weighted Average Shares 31,641,851 24,151,700 31,090,370 24,147,163
FFO per share $ 0.16 $ 0.13 $ 0.46 $ 0.40
AFFO per share $ 0.16 $ 0.14 $ 0.44 $ 0.39

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