CorEnergy Infrastructure Trust Inc (CORR) 2016 Q3 法說會逐字稿

Greetings, and welcome to the CorEnergy third quarter 2016 earnings call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Lesley Robertshaw. Please go ahead.

Thank you, and welcome to CorEnergy Infrastructure Trust's third quarter 2016 earnings call. I'm joined today by Dave Schulte, CEO and President.

Consistent with our practice started last quarter, we will provide abbreviated commentary on this call. We will not pause for questions at the end due to the pendency of mediation with Ultra Petroleum so other management team members are not participating today.

The presentation materials for this call, as well as information included in our press release issued Wednesday, and an audio replay of this conference call will be available on CorEnergy's website.

We would like to remind you that statements made during the course of this presentation that are not purely historical may be forward-looking statements and are subject to the Safe Harbor protection available under applicable securities laws. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our filings with the SEC. These documents can be accessed through the Investor Relations section of our website. We do not update our forward-looking statements.

Reconciliations between GAAP and non-GAAP results, which we discuss on this call, can be found in our related earnings release. At this time, I would like to turn the call over to President and CEO Dave Schulte.

Thank you, Lesley. Beginning with last quarter's key events, our Board approved a $0.75 common stock dividend for the third quarter, or $3.00 annualized, flat to the prior quarter and consistent with our previous guidance.

All of our tenants remain timely on their lease payments, but we will continue to pay dividends at this rate pending the outcome of bankruptcy processes affecting our tenants.

We completed the restructuring of the second saltwater disposal investment early in the fourth quarter.

The Four Wood financing note now has an interest rate of 10% with a principal amortization scheduled to begin in September of 2018. We expect to convert our $1 million TRS loan into a preferred ownership interest in the borrower. These adjustments will not affect AFFO until Four Wood generates sustainable operating margins and the reserves for collection have been removed.

Finally, we'd like to welcome Nate Poundstone to the CorEnergy team. Nate joins us with 18 years of accounting experience, most recently serving as Vice President and Chief Accounting Officer of CVR Energy, a publicly traded holding company which also in control of two publicly traded master limited partnerships. These MLPs reached consolidated revenues of approximately $9 billion during his tenure, with operations in refining and nitrogen fertilizer.

Prior to that, Nate served as a senior manager at KPMG, with audit and professional practice responsibilities.

Following the filing of our third quarter 10-Q report, Nate will take over the reins of the Chief Accounting Officer and we look forward to having him utilize his expertise as we grow our Company.

Adding Nate will enable Becky Sandring to focus her time on REIT accounting and tax matters to support our business development activities.

On slides 4 and 5, we provide an update on the bankruptcy processes of the parent companies of our two largest tenants. Energy XXI continues to make progress in their Chapter 11 process and is schedule to begin confirmation hearings on November 7. The company's deadline for exclusivity has been extended until November 14. Our tenant is not a party to the bankruptcy process. However, our tenant's sole customer is the bankrupt entity so the financial and operating condition of Energy XXI are material to the predictability of our rents.

We encourage investors to review the bankruptcy filings and SEC filings of Energy XXI, including an 8K they filed on October 31 with a creditor presentation, rough dates on their events, and remainders of the proceedings.

Slide 5 addresses Ultra Petroleum's bankruptcy. Although Ultra filed within days of Energy XXI, they are not making the same progress. December 15 marks the deadline for Ultra to reject or assume our lease. Should they fail to accept our lease by that date, it will be automatically rejected.

The last week, UPL published revised financial projections supporting a healthy enterprise with $8 billion of reserve value versus $3.8 billion of debt. The CEO had stated on a prior call that UPL was solvent. We infer that the company's financial projections are based on uninterrupted access to the Pinedale LGS.

Now, CorEnergy has agreed to enter a mediation process in order to improve our business relationship. We're confident that the estate will have a net economic benefit from retaining access to our system. We'll announce any material updates at the conclusion of the mediation process.

Moving to slide 6, we present our per-share financial metrics on a quarterly basis for the past year. As you can see, AFFO has remained consistent for each quarter since acquiring GIGS, confirming the predictability of our business model. CorEnergy intends to continue paying dividends based on rents received pending the outcomes of the bankruptcy processes of our two large tenants.

Slide 7 has an overview of our capital structure at the end of the quarter. All of the leverage and coverage ratios remain within targeted ranges and compliant with our debt covenants.

Our total debt to total capitalization ratio of 33.5% is within our target range of 25% to 50%. And our total preferred to total equity ratio of approximately 14% is well below our target level of 33%.

At the end of the third quarter, CorEnergy had approximately $53 million of availability in its line, plus an approximate unrestricted cash of $10 million.

Many investors are interested in our ability and willingness to transact on additional acquisitions. Our business development team remains active in sourcing and analyzing potential assets, and it's our expectation that uncertainty surrounding Energy XXI and UPL will largely be resolved by the time any financing for such transactions would be required.

Given the mediation process with Ultra Petroleum, this quarter we are foregoing answering any questions at the end of this call, but thanks, everyone, for dialing in.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.