Company Quick10K Filing
Corenergy Infrastructure Trust
Price46.73 EPS1
Shares14 P/E43
MCap632 P/FCF13
Net Debt40 EBIT25
TEV672 TEV/EBIT27
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-06-25
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-02
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-01
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-03-02
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-14
10-Q 2015-09-30 Filed 2015-11-10
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-18
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-K 2012-11-30 Filed 2013-02-13
10-Q 2012-08-31 Filed 2012-10-05
10-Q 2012-05-31 Filed 2012-07-05
10-Q 2012-02-29 Filed 2012-04-09
10-K 2011-11-30 Filed 2012-02-13
10-Q 2011-08-31 Filed 2011-10-13
10-Q 2011-05-31 Filed 2011-07-13
10-Q 2011-02-28 Filed 2011-04-07
10-K 2010-11-30 Filed 2011-01-26
10-Q 2010-08-31 Filed 2010-10-07
10-Q 2010-05-31 Filed 2010-07-08
10-Q 2010-02-28 Filed 2010-04-08
10-K 2009-11-30 Filed 2010-02-16
8-K 2020-06-22
8-K 2020-05-20
8-K 2020-05-15
8-K 2020-05-08
8-K 2020-04-27
8-K 2020-04-23
8-K 2020-04-13
8-K 2020-03-23
8-K 2020-02-26
8-K 2020-02-19
8-K 2020-02-19
8-K 2020-02-19
8-K 2020-01-24
8-K 2020-01-22
8-K 2019-12-20
8-K 2019-10-30
8-K 2019-10-23
8-K 2019-08-22
8-K 2019-08-15
8-K 2019-08-12
8-K 2019-08-12
8-K 2019-08-08
8-K 2019-08-07
8-K 2019-08-07
8-K 2019-07-31
8-K 2019-07-24
8-K 2019-05-29
8-K 2019-05-23
8-K 2019-05-01
8-K 2019-04-24
8-K 2019-04-02
8-K 2019-02-27
8-K 2019-02-21
8-K 2019-02-20
8-K 2019-01-24
8-K 2019-01-23
8-K 2019-01-16
8-K 2018-12-28
8-K 2018-12-21
8-K 2018-12-17
8-K 2018-10-31
8-K 2018-10-24
8-K 2018-08-21
8-K 2018-08-14
8-K 2018-08-01
8-K 2018-07-25
8-K 2018-06-28
8-K 2018-05-31
8-K 2018-05-31
8-K 2018-05-18
8-K 2018-05-01
8-K 2018-04-25
8-K 2018-03-29
8-K 2018-02-28
8-K 2018-02-21
8-K 2018-01-24
8-K 2018-01-24
8-K 2018-01-04

CORR 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.2.10 corrq12020ex-10210waiverle.htm
EX-10.2.11 corrq12020ex-10211waiverle.htm
EX-31.1 corrq12020ex-311section302.htm
EX-31.2 corrq12020ex-312section302.htm
EX-32.1 corrq12020ex-321section906.htm

Corenergy Infrastructure Trust Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
70056042028014002012201420172020
Assets, Equity
25167-2-11-202012201420172020
Rev, G Profit, Net Income
22012734-59-152-2452012201420172020
Ops, Inv, Fin

10-Q 1 corrq1202010-q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
___________________________________________
FORM 10-Q
 ___________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number: 001-33292
_________________________________________________________
corenergylogo32.jpg
CORENERGY INFRASTRUCTURE TRUST, INC.
______________________________________________________________________
(Exact name of registrant as specified in its charter)
Maryland
 
20-3431375
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
1100 Walnut, Ste. 3350
Kansas City, MO
 
64106
(Address of Principal Executive Offices)
 
(Zip Code)
(816) 875-3705
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange On Which Registered
Common Stock, par value $0.001 per share
 
CORR
 
New York Stock Exchange
7.375% Series A Cumulative Redeemable Preferred Stock
 
CORRPrA
 
New York Stock Exchange
___________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  x    No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
x
Non-accelerated filer
o
 
Smaller reporting company
x
 
 
 
Emerging growth company
o



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)     Yes   o   No  x
As of June 24, 2020, the registrant had 13,651,521 common shares outstanding.



EXPLANATORY NOTE
As previously disclosed in the Current Report on Form 8-K filed by CorEnergy Infrastructure Trust, Inc. (the “Company”) with the Securities and Exchange Commission on April 23, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2020 (the “Quarterly Report”) was delayed due to the impact of COVID-19 pandemic on the Company, its employees and its tenants, including the impact of the Company’s work from home policy implemented to protect its employees, which slowed the Company’s routine quarterly close process.
The Company is filing this Quarterly Report on Form 10-Q in reliance on an extension granted by the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465). Specifically, the Company disclosed that it would be unable to file the Quarterly Report by its original due date and expected to file the Quarterly Report by no later than June 25, 2020.




CorEnergy Infrastructure Trust, Inc.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2020
TABLE OF CONTENTS
____________________________________________________________________________________________
 
 
 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

This Report on Form 10-Q ("Report") should be read in its entirety. No one section of the Report deals with all aspects of the subject matter. It should be read in conjunction with the consolidated financial statements, related notes, and with the Management's Discussion & Analysis ("MD&A") included within, as well as provided in the Annual Report on Form 10-K, for the year ended December 31, 2019.




The consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020 or for any other interim or annual period. For further information, refer to the consolidated financial statements and footnotes thereto included in the CorEnergy Infrastructure Trust, Inc. Annual Report on Form 10-K, for the year ended December 31, 2019.


2

GLOSSARY OF DEFINED TERMS
 

Certain of the defined terms used in this Report are set forth below:
5.875% Convertible Notes: the Company's 5.875% Convertible Senior Notes due 2025.
7.00% Convertible Notes: the Company's 7.00% Convertible Senior Notes due 2020.
Accretion Expense: the expense recognized when adjusting the present value of the GIGS ARO for the passage of time.
Administrative Agreement: the Administrative Agreement dated December 1, 2011, as amended effective August 7, 2012, between the Company and Corridor.
Amended Pinedale Term Credit Facility: Pinedale LP's $41.0 million Second Amended and Restated Term Credit Agreement and Note Purchase Agreement with Prudential as lender, effective December 29, 2017.
ARO: the Asset Retirement Obligation liabilities assumed with the acquisition of GIGS.
ASC: FASB Accounting Standards Codification.
ASU: FASB Accounting Standard Update.
Bbls: standard barrel containing 42 U.S. gallons.
CARES Act: the Coronavirus Aid, Relief, and Economic Security Act.
Company or CorEnergy: CorEnergy Infrastructure Trust, Inc. (NYSE: CORR).
Compass SWD: Compass SWD, LLC, the current borrower under the Compass REIT Loan.
Compass REIT Loan: the financing notes between Compass SWD and Four Wood Corridor.
Convertible Notes: collectively, the Company's 5.875% Convertible Notes and the Company's 7.00% Convertible Notes.
CorEnergy Credit Facility: the Company's upsized $160.0 million CorEnergy Revolver and the $1.0 million MoGas Revolver with Regions Bank.
CorEnergy Revolver: the Company's $160.0 million secured revolving line of credit facility with Regions Bank.
Corridor: Corridor InfraTrust Management, LLC, the Company's external manager pursuant to the Management Agreement.
Corridor MoGas: Corridor MoGas, Inc., a wholly-owned taxable REIT subsidiary of CorEnergy and the holding company of MoGas, United Property Systems and CorEnergy Pipeline Company, LLC.
Corridor Private: Corridor Private Holdings, Inc., an indirect wholly-owned taxable REIT subsidiary of CorEnergy.
COVID-19: Coronavirus disease of 2019; a pandemic affecting many countries globally.
Cox Acquiring Entity: MLCJR LLC, an affiliate of Cox Oil, LLC.
Cox Oil: Cox Oil, LLC.
CPI: Consumer Price Index.
Exchange Act: the Securities Exchange Act of 1934, as amended.
EGC: Energy XXI Ltd, the parent company (and guarantor) of our tenant on the Grand Isle Gathering System lease, emerged from a reorganization under Chapter 11 of the US Bankruptcy Code on December 30, 2016, with the succeeding company named Energy XXI Gulf Coast, Inc. Effective October 18, 2018, EGC became an indirect wholly-owned subsidiary of MLCJR LLC ("Cox Acquiring Entity"), an affiliate of Cox Oil, LLC, as a result of a merger transaction. Throughout this document, references to EGC will refer to both the pre- and post-bankruptcy entities and, for dates on and after October 18, 2018, to EGC as an indirect wholly-owned subsidiary of the Cox Acquiring Entity.
EGC Tenant: Energy XXI GIGS Services, LLC, a wholly-owned operating subsidiary of Energy XXI Gulf Coast, Inc. that is the tenant under Grand Isle Corridor's triple-net lease of the Grand Isle Gathering System.
FASB: Financial Accounting Standards Board.

3

GLOSSARY OF DEFINED TERMS (Continued from previous page)

FERC: Federal Energy Regulatory Commission.
Four Wood Corridor: Four Wood Corridor, LLC, a wholly-owned subsidiary of CorEnergy.
GAAP: U.S. generally accepted accounting principles.
GIGS: the Grand Isle Gathering System, owned by Grand Isle Corridor, LP and triple-net leased to a wholly-owned subsidiary of Energy XXI Gulf Coast, Inc.
Grand Isle Corridor: Grand Isle Corridor, LP, an indirect wholly-owned subsidiary of the Company.
Grand Isle Gathering System: a subsea midstream pipeline gathering system located in the shallow Gulf of Mexico shelf and storage and onshore processing facilities.
Grand Isle Lease Agreement: the June 2015 agreement pursuant to which the Grand Isle Gathering System assets are triple-net leased to EGC Tenant.
IRS: Internal Revenue Service.
Lightfoot: collectively, Lightfoot Capital Partners LP and Lightfoot Capital Partners GP LLC.
Management Agreement: the current management agreement between the Company and Corridor entered into May 8, 2015, effective as of May 1, 2015.
MoGas: MoGas Pipeline LLC, an indirect wholly-owned subsidiary of CorEnergy.
MoGas Pipeline System: an approximately 263-mile interstate natural gas pipeline system in and around St. Louis and extending into central Missouri, owned and operated by MoGas.
MoGas Revolver: a $1.0 million secured revolving line of credit facility at the MoGas subsidiary level with Regions Bank.
Mowood: Mowood, LLC, an indirect wholly-owned subsidiary of CorEnergy and the holding company of Omega Pipeline Company, LLC.
Mowood/Omega Revolver: a $1.5 million revolving line of credit facility at the Mowood subsidiary level with Regions Bank.
NAREIT: National Association of Real Estate Investment Trusts.
Omega: Omega Pipeline Company, LLC, a wholly-owned subsidiary of Mowood, LLC.
Omega Pipeline: Omega's natural gas distribution system in south central Missouri.
OPEC: the Organization of the Petroleum Exporting Countries.
Pinedale LGS: the Pinedale Liquids Gathering System, a system consisting of approximately 150 miles of pipelines and four above-ground central gathering facilities located in the Pinedale Anticline in Wyoming, owned by Pinedale LP and triple-net leased to a wholly-owned subsidiary of Ultra Petroleum.
Pinedale Lease Agreement: the December 2012 agreement pursuant to which the Pinedale LGS assets are triple-net leased to a wholly owned subsidiary of Ultra Petroleum.
Pinedale LP: Pinedale Corridor, LP, an indirect wholly-owned subsidiary of CorEnergy.
Pinedale GP: the general partner of Pinedale LP and a wholly-owned subsidiary of CorEnergy.
PLR: the Private Letter Ruling dated November 16, 2018 (PLR 201907001) issued to CorEnergy by the IRS.
Prudential: the Prudential Insurance Company of America.
REIT: real estate investment trust.
SEC: Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended.

4

GLOSSARY OF DEFINED TERMS (Continued from previous page)

Series A Preferred Stock: the Company's 7.375% Series A Cumulative Redeemable Preferred Stock, par value $0.001 per share, of which there currently are outstanding approximately 50,108 shares represented by 5,010,814 depositary shares, each representing 1/100th of a whole share of Series A Preferred Stock.
TRS: taxable REIT subsidiary.
UPL: Ultra Petroleum Corp.
Ultra Wyoming: Ultra Wyoming LGS LLC, an indirect wholly-owned subsidiary of Ultra Petroleum.
United Property Systems: United Property Systems, LLC, an indirect wholly-owned subsidiary of CorEnergy, acquired with the MoGas transaction in November 2014.
VIE: variable interest entity.


5


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Quarterly Report on Form 10-Q ("Report") may be deemed "forward-looking statements" within the meaning of the federal securities laws. In many cases, these forward-looking statements may be identified by the use of words such as "will," "may," "should," "could," "believes," "expects," "anticipates," "estimates," "intends," "projects," "goals," "objectives," "targets," "predicts," "plans," "seeks," or similar expressions.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. Our actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
the ability of our tenants and borrowers to make payments under their respective leases and mortgage loans, our reliance on certain major tenants under single tenant leases and our ability to re-lease properties;
the ability and willingness of each of our tenants to satisfy their obligations under the respective lease agreements;
risks associated with the bankruptcy or default of any of our tenants or borrowers, including the exercise of the rights and remedies of bankrupt entities;
changes in economic and business conditions in the energy infrastructure sector where our investments are concentrated, including the financial condition of our tenants or borrowers and general economic conditions in the particular sectors of the energy industry served by each of our infrastructure assets;
the recent outbreak of COVID-19 and certain developments in the global oil markets, including the general decline in business activity and demand affecting our tenants' operations and ability or willingness to pay rent;
the inherent risks associated with owning real estate, including real estate market conditions, governing laws and regulations, including potential liabilities related to environmental matters, and the relative illiquidity of real estate investments;
our continued ability to access the debt and equity markets, including our ability to continue using our SEC shelf registration statements;
our ability to comply with certain debt covenants;
the impact of laws and governmental regulations applicable to certain of our infrastructure assets, including additional costs imposed on our business or other adverse impacts as a result of any unfavorable changes in such laws or regulations;
the potential impact of greenhouse gas regulation and climate change on our or our tenants' business, financial condition and results of operations;
the loss of any member of our management team;
our ability to successfully implement our selective acquisition strategy;
our ability to obtain suitable tenants for our properties;
our ability to refinance amounts outstanding under our credit facilities and our convertible notes at maturity on terms favorable to us;
changes in interest rates under our current credit facilities and under any additional variable rate debt arrangements that we may enter into in the future;
dependence by us and our tenants on key customers for significant revenues, and the risk of defaults by any such tenants or customers;
our or our tenants' ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
the continued availability of third-party pipelines, railroads or other facilities interconnected with certain of our infrastructure assets;
risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by extreme weather patterns and other natural phenomena;
our ability to sell properties at an attractive price;
market conditions and related price volatility affecting our debt and equity securities;
competitive and regulatory pressures on the revenues of our interstate natural gas transmission business;
changes in federal or state tax rules or regulations that could have adverse tax consequences;

6


our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected;
changes in federal income tax regulations (and applicable interpretations thereof), or in the composition or performance of our assets, that could impact our ability to continue to qualify as a real estate investment trust for federal income tax purposes; and
risks related to potential terrorist attacks, acts of cyber-terrorism, or similar disruptions that could disrupt access to our information technology systems or result in other significant damage to our business and properties, some of which may not be covered by insurance and all of which could adversely impact distributions to our stockholders.
Forward-looking statements speak only as of the date on which they are made. While we may update these statements from time to time, we are not required to do so other than pursuant to applicable laws. For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 27, 2020, and Part II, Item 1A, "Risk Factors", in this Report.

7


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
corenergylogo32.jpg
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED BALANCE SHEETS
 
March 31, 2020
 
December 31, 2019
Assets
(Unaudited)
 
 
Leased property, net of accumulated depreciation of $67,817,865 and $105,825,816
$
234,565,116

 
$
379,211,399

Property and equipment, net of accumulated depreciation of $20,148,744 and $19,304,610
106,025,792

 
106,855,677

Financing notes and related accrued interest receivable, net of reserve of $600,000 and $600,000
1,202,500

 
1,235,000

Cash and cash equivalents
119,054,407

 
120,863,643

Deferred rent receivable

 
29,858,102

Accounts and other receivables
3,493,366

 
4,143,234

Deferred costs, net of accumulated amortization of $2,123,328 and $1,956,710
2,005,351

 
2,171,969

Prepaid expenses and other assets
912,298

 
804,341

Deferred tax asset, net
4,223,640

 
4,593,561

Goodwill
1,718,868

 
1,718,868

Total Assets
$
473,201,338

 
$
651,455,794

Liabilities and Equity
 
 
 
Secured credit facilities, net of debt issuance costs of $144,865 and $158,070
$
32,917,135

 
$
33,785,930

Unsecured convertible senior notes, net of discount and debt issuance costs of $3,597,095 and $3,768,504
118,078,905

 
118,323,496

Asset retirement obligation
8,446,246

 
8,044,200

Accounts payable and other accrued liabilities
2,972,196

 
6,000,981

Management fees payable
1,673,903

 
1,669,950

Unearned revenue
6,711,170

 
6,891,798

Total Liabilities
$
170,799,555

 
$
174,716,355

Equity
 
 
 
Series A Cumulative Redeemable Preferred Stock 7.375%, $125,270,350 and $125,493,175 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000 authorized; 50,108 and 50,197 issued and outstanding at March 31, 2020 and December 31, 2019, respectively
$
125,270,350

 
$
125,493,175

Capital stock, non-convertible, $0.001 par value; 13,651,521 and 13,638,916 shares issued and outstanding at March 31, 2020 and December 31, 2019 (100,000,000 shares authorized)
13,652

 
13,639

Additional paid-in capital
348,719,125

 
360,844,497

Retained deficit
(171,601,344
)
 
(9,611,872
)
Total Equity
302,401,783

 
476,739,439

Total Liabilities and Equity
$
473,201,338

 
$
651,455,794

See accompanying Notes to Consolidated Financial Statements.

8


corenergylogo32.jpg
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Revenue
 
 
 
Lease revenue
$
15,746,504


$
16,717,710

Deferred rent receivable write-off
(30,105,820
)
 

Transportation and distribution revenue
5,200,500


4,871,582

Financing revenue
26,307


33,540

Total Revenue (Loss)
(9,132,509
)

21,622,832

Expenses
 
 
 
Transportation and distribution expenses
1,375,229


1,503,143

General and administrative
3,076,143

 
2,870,407

Depreciation, amortization and ARO accretion expense
5,647,067


5,645,096

Loss on impairment of leased property
140,268,379

 

Total Expenses
150,366,818


10,018,646

Operating Income (Loss)
$
(159,499,327
)

$
11,604,186

Other Income (Expense)
 
 
 
Net distributions and other income
$
317,820

 
$
256,615

Interest expense
(2,885,583
)
 
(2,507,294
)
Loss on extinguishment of debt

 
(5,039,731
)
Total Other Expense
(2,567,763
)
 
(7,290,410
)
Income (Loss) before income taxes
(162,067,090
)
 
4,313,776

Taxes
 
 
 
Current tax expense (benefit)
(394,643
)
 
353,744

Deferred tax expense
369,921

 
93,591

Income tax expense (benefit), net
(24,722
)
 
447,335

Net Income (Loss) attributable to CorEnergy Stockholders
(162,042,368
)
 
3,866,441

Preferred dividend requirements
2,260,793

 
2,314,128

Net Income (Loss) attributable to Common Stockholders
$
(164,303,161
)
 
$
1,552,313

 
 
 
 
Earnings (Loss) Per Common Share:
 
 
 
Basic
$
(12.04
)
 
$
0.12

Diluted
$
(12.04
)
 
$
0.12

Weighted Average Shares of Common Stock Outstanding:
 
 
 
Basic
13,648,293

 
12,604,943

Diluted
13,648,293

 
12,604,943

Dividends declared per share
$
0.750

 
$
0.750

See accompanying Notes to Consolidated Financial Statements.

9


corenergylogo32.jpg
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
 
Capital Stock
 
Preferred Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Total
 
Shares
 
Amount
 
Amount
 
 
 
Balance at December 31, 2018
11,960,225

 
$
11,960

 
$
125,555,675

 
$
320,295,969

 
$
9,147,701

 
$
455,011,305

Net income

 

 

 

 
3,866,441

 
3,866,441

Series A preferred stock dividends

 

 

 

 
(2,313,780
)
 
(2,313,780
)
Preferred stock repurchases(1)

 

 
(62,500
)
 
2,195

 
(245
)
 
(60,550
)
Common stock dividends

 

 

 

 
(9,597,948
)
 
(9,597,948
)
Common stock issued upon exchange of convertible notes
837,040

 
837

 

 
28,868,672

 

 
28,869,509

Reinvestment of dividends paid to common stockholders
11,076

 
11

 

 
403,820

 

 
403,831

Balance at March 31, 2019 (Unaudited)
12,808,341

 
$
12,808

 
$
125,493,175

 
$
349,570,656

 
$
1,102,169

 
$
476,178,808

(1) In connection with the repurchases of Series A Preferred Stock during 2019, the addition to preferred dividends of $245 represents the premium in the repurchase price paid compared to the carrying amount derecognized.

Capital Stock

Preferred Stock

Additional
Paid-in
Capital

Retained
Deficit

Total

Shares

Amount

Amount



Balance at December 31, 2019
13,638,916

 
$
13,639

 
$
125,493,175

 
$
360,844,497

 
$
(9,611,872
)
 
$
476,739,439

Net loss

 

 

 

 
(162,042,368
)
 
(162,042,368
)
Series A preferred stock dividends

 

 

 
(2,313,780
)
 

 
(2,313,780
)
Preferred stock repurchases(1)

 

 
(222,825
)
 
7,932

 
52,896

 
(161,997
)
Common stock dividends

 

 

 
(10,238,640
)
 


 
(10,238,640
)
Common stock issued upon exchange of convertible notes
12,605

 
13

 

 
419,116

 

 
419,129

Balance at March 31, 2020 (Unaudited)
13,651,521

 
$
13,652

 
$
125,270,350

 
$
348,719,125

 
$
(171,601,344
)
 
$
302,401,783

(1) In connection with the repurchase of Series A Preferred Stock during 2020, the deduction from preferred dividends of $52,896 represents the discount in the repurchase price paid compared to the carrying amount derecognized.
See accompanying Notes to Consolidated Financial Statements.

10


corenergylogo32.jpg
CorEnergy Infrastructure Trust, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Three Months Ended

March 31, 2020

March 31, 2019
Operating Activities



Net income (loss)
$
(162,042,368
)

$
3,866,441

Adjustments to reconcile net income (loss) to net cash provided by operating activities:



Deferred income tax, net
369,921


93,591

Depreciation, amortization and ARO accretion
5,975,316


5,943,528

Loss on impairment of leased property
140,268,379

 

Deferred rent receivable write-off, noncash
30,105,820

 

Loss on extinguishment of debt

 
5,039,731

Loss on disposal of equipment
3,958



Changes in assets and liabilities:



Increase in deferred rent receivable
(247,718
)
 
(1,449,025
)
Decrease in accounts and other receivables
649,868


1,123,636

Increase in financing note accrued interest receivable


(9,542
)
Increase in prepaid expenses and other assets
(108,007
)

(296,032
)
Increase (decrease) in management fee payable
3,953


(70,147
)
Increase (decrease) in accounts payable and other accrued liabilities
(3,030,782
)

2,891,410

Increase in current income tax liability


69,492

Decrease in unearned revenue
(180,628
)

(146,846
)
Net cash provided by operating activities
$
11,767,712


$
17,056,237

Investing Activities



Purchases of property and equipment, net
(13,031
)

(15,335
)
Principal payment on note receivable

 
5,000,000

Principal payment on financing note receivable
32,500



Net cash provided by investing activities
$
19,469


$
4,984,665

Financing Activities



Repurchases of preferred stock
(161,997
)
 
(60,550
)
Cash paid for extinguishment of convertible notes

 
(19,516,234
)
Dividends paid on Series A preferred stock
(2,313,780
)
 
(2,313,780
)
Dividends paid on common stock
(10,238,640
)

(9,194,117
)
Principal payments on secured credit facilities
(882,000
)

(882,000
)
Net cash used in financing activities
$
(13,596,417
)

$
(31,966,681
)
Net Change in Cash and Cash Equivalents
$
(1,809,236
)

$
(9,925,779
)
Cash and Cash Equivalents at beginning of period
120,863,643


69,287,177

Cash and Cash Equivalents at end of period
$
119,054,407


$
59,361,398

 
 
 
 
Supplemental Disclosure of Cash Flow Information



Interest paid
$
4,334,215

 
$
1,116,371

Income taxes paid (net of refunds)
(467,407
)
 
(220,701
)
 
 
 
 
Non-Cash Financing Activities
 
 
 
Reinvestment of distributions by common stockholders in additional common shares
$

 
$
403,831

Common stock issued upon exchange and conversion of convertible notes
419,129

 
28,869,509

See accompanying Notes to Consolidated Financial Statements.
 
 
 

11


corenergylogo32.jpg
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2020
1. INTRODUCTION AND BASIS OF PRESENTATION
Introduction
CorEnergy Infrastructure Trust, Inc. ("CorEnergy" or "the Company"), was organized as a Maryland corporation and commenced operations on December 8, 2005. The Company's common shares are listed on the New York Stock Exchange ("NYSE") under the symbol "CORR" and its depositary shares representing Series A Preferred Stock are listed on the NYSE under the symbol "CORR PrA".
The Company is primarily focused on acquiring and financing real estate assets within the U.S. energy infrastructure sector and entering into long-term triple-net participating leases with energy companies. The Company also may provide other types of capital, including loans secured by energy infrastructure assets. Targeted assets include pipelines, storage tanks, transmission lines, and gathering systems, among others. These sale-leaseback or real property mortgage transactions provide the energy company with a source of capital that is an alternative to other sources such as corporate borrowing, bond offerings, or equity offerings. Many of the Company's leases contain participation features in the financial performance or value of the underlying infrastructure real property asset. The triple-net lease structure requires that the tenant pay all operating expenses of the business conducted by the tenant, including real estate taxes, insurance, utilities, and expenses of maintaining the asset in good working order. CorEnergy considers its investments in these energy infrastructure assets to be a single business segment and reports them accordingly in its financial statements.
Basis of Presentation
The accompanying consolidated financial statements include CorEnergy accounts and the accounts of its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") set forth in the Accounting Standards Codification ("ASC"), as published by the Financial Accounting Standards Board ("FASB"), and with the Securities and Exchange Commission ("SEC") instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented. There were no adjustments that, in the opinion of management, were not of a normal and recurring nature. All intercompany transactions and balances have been eliminated in consolidation.
The FASB issued ASU 2015-02 "Consolidations (Topic 810) - Amendments to the Consolidation Analysis" ("ASU 2015-02"), which amended previous consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. Under this analysis, limited partnerships and other similar entities are considered a variable interest entity ("VIE") unless the limited partners hold substantive kick-out rights or participating rights. Management determined that Pinedale LP and Grand Isle Corridor LP are VIEs under the amended guidance because the limited partners of both partnerships lack both substantive kick-out rights and participating rights. However, based on the general partners' roles and rights as afforded by the partnership agreements and its exposure to losses and benefits of each of the partnerships through its significant limited partner interests, management determined that CorEnergy is the primary beneficiary of both Pinedale LP and Grand Isle Corridor LP. Based upon this evaluation and the Company's 100 percent ownership of the limited partnership interest in both Pinedale LP and Grand Isle Corridor LP, the consolidated financial statements presented include full consolidation with respect to both partnerships.
Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other interim or annual period. These consolidated financial statements and Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with CorEnergy's Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on February 27, 2020 (the "2019 CorEnergy 10-K").
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June of 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" ("ASU 2016-13"), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The new model, referred to as the current expected credit losses ("CECL model"), will apply to financial assets subject to credit losses and measured at

12


amortized cost, and certain off-balance sheet credit exposures. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November of 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates of these standards for certain entities. Based on the guidance for smaller reporting companies, the effective date of ASU 2016-13 is deferred for the Company until fiscal year 2023 with early adoption permitted, and the Company has elected to defer adoption of this standard.
Although the Company has elected to defer adoption of ASU 2016-13, it will continue to evaluate the potential impact of the standard on its consolidated financial statements. As part of its ongoing assessment work, the Company has formed an implementation team, completed training on the CECL model and has begun developing policies, processes and internal controls.
In March of 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)" ("ASU 2020-04"). In response to concerns about structural risks of interbank offered rates including the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable and less susceptible to manipulation. The provisions of ASU 2020-04 are elective and apply to all entities, subject to meeting certain criteria, that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04, among other things, provides optional expedients and exceptions for a limited period of time for applying U.S. GAAP to these contracts if certain criteria are met to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating its contracts that reference LIBOR and the optional expedients and exceptions provided by the FASB.
3. LEASED PROPERTIES AND LEASES
The Company primarily acquires mid-stream and downstream assets in the U.S. energy sector such as pipelines, storage terminals, and gas and electric distribution systems and leases these assets to operators under triple-net leases. These leases typically include a contracted base rent with escalation clauses and participating rents that are tied to contract-specific criteria. Base rents under the Company's leases are structured on an estimated fair market value rent structure over the initial term, which includes assumptions related to the terminal value of the assets and expectations of tenant renewals. At the conclusion of the initial lease term, the Company's leases may contain fair market value repurchase options or fair market rent renewal terms. These clauses also act as safeguards against the Company's tenants pursuing activities which would undermine or degrade the value of the assets faster than the underlying reserves are depleted. Participating rents are structured to provide exposure to the successful commercial activity of the tenant, and as such, also provide protection in the event that the economic life of the assets is reduced based on accelerated production by the Company's tenants. While the Company is primarily a lessor, certain of its operating subsidiaries are lessees and have entered into lease agreements as discussed further below.
LESSOR - LEASED PROPERTIES
The Company's current leased properties are classified as operating leases and are recorded as leased property in the Consolidated Balance Sheets. Base rent related to the Company's leased property is recognized on a straight-line basis over the term of the lease when collectibility is probable. Participating rent is recognized when it is earned, based on the achievement of specified performance criteria. Base and participating rent are recorded as lease revenue in the Consolidated Statements of Operations. The Company regularly evaluates the collectibility of its deferred rent receivable on a lease by lease basis. The evaluation primarily includes assessing the financial condition and credit quality of the Company's tenants, changes in tenant's payment history and current economic factors. When the collectibility of the deferred rent receivable or future lease payments are no longer probable, the Company will recognize a write-off of the deferred rent receivable as a reduction of revenue in the Consolidated Statements of Operations.
As of March 31, 2020, the Company had two significant properties located in Wyoming, Louisiana and the Gulf of Mexico, which are leased on a triple-net basis to major tenants, described in the table below. These major tenants are responsible for the payment of all taxes, maintenance, repairs, insurance, and other operating expenses relating to the leased properties. The long-term, triple-net leases generally have an initial term of 11 to 15 years with options for renewals. Lease payments are scheduled to increase at varying intervals during the initial term of the leases. The following table summarizes the significant leased properties, major tenants and lease terms:

13


Summary of Leased Properties, Major Tenants and Lease Terms
Property
Grand Isle Gathering System
Pinedale LGS
Location
Gulf of Mexico/Louisiana
Pinedale, WY
Tenant
Energy XXI GIGS Services, LLC
Ultra Wyoming LGS, LLC
Asset Description
Approximately 137 miles of offshore pipeline with total capacity of 120 thousand Bbls/d,
including a 16-acre onshore terminal and saltwater disposal system.
Approximately 150 miles of pipelines and
four central storage facilities.
Date Acquired
June 2015
December 2012
Initial Lease Term
11 years
15 years
Renewal Option
Equal to the lesser of 9-years or 75 percent
of the remaining useful life
5-year terms
Current Monthly Rent Payments
7/1/2019 - 6/30/2020: $3,223,917
7/1/2020 - 6/30/2021: $4,033,583
$1,844,748
Initial Estimated Useful Life(1)
27 years
26 years
(1) In conjunction with the impairment of the Grand Isle Gathering System discussed below, the remaining estimated useful life of the GIGS asset will be adjusted to approximately 15 years beginning in the second quarter of 2020. Additionally, the Company updated the useful life of its asset retirement obligation ("ARO") segments resulting in a change to the timing of the undiscounted cash flows. The timing change resulted in an increase to the ARO asset and liability of approximately $290 thousand.
LEASED PROPERITES AND TENANT INFORMATION
Substantially all of the lease tenants' financial results are driven by exploiting naturally occurring oil and natural gas hydrocarbon deposits beneath the Earth's surface. As a result, the tenants' financial results are highly dependent on the performance of the oil and natural gas industry, which is highly competitive and subject to volatility. During the terms of the leases, management monitors the credit quality of its tenants by reviewing their published credit ratings, if available, reviewing publicly available financial statements, or reviewing financial or other operating statements, monitoring news reports regarding the tenants and their respective businesses, and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.
The COVID-19 pandemic-related reduction in energy demand and the sharp decline in commodity prices related to the combined impact of falling demand and recent increases in production from OPEC members and other international suppliers caused significant disruptions and volatility in the global oil marketplace during the first quarter of 2020. In response to COVID-19, governments around the world have implemented increasingly stringent measures to help reduce the spread of the virus, including stay-at-home and shelter-in-place orders, travel restrictions and other measures. These measures have adversely affected the economies and financial markets of the U.S. and many other countries, resulting in an economic downturn that has negatively impacted global demand and prices for the products handled by the Company's pipelines, terminals and other facilities.
The events and conditions described above adversely impacted the Gulf of Mexico operations of the EGC Tenant, the tenant of the GIGS asset, under the Grand Isle Gathering Lease as discussed under "Energy Gulf Coast/Cox Oil" and "Grand Isle Gathering System" below. Further, UPL and Ultra Wyoming, the guarantor and tenant under the Pinedale Lease Agreement, respectively, continued to experience significant indebtedness and extremely challenging market conditions, which impacted its financial condition as discussed under "Ultra Petroleum" and "Pinedale Liquids Gathering System" below.
Energy Gulf Coast/Cox Oil
Prior to October 29, 2018, EGC was subject to the reporting requirements of the Exchange Act and was required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. So long as EGC remained a public reporting company, the Grand Isle Lease Agreement provided this requirement was fulfilled by EGC making its financial statements and reports publicly available through the SEC’s EDGAR system, in lieu of delivering such information directly to the Company. On October 18, 2018, EGC was acquired by an affiliate of privately-held Cox Oil. Upon the filing by EGC of a Form 15 with the SEC on October 29, 2018, EGC's SEC reporting obligations were suspended and it ceased to file such reports.
EGC's SEC filings prior to October 29, 2018 can be found at www.sec.gov. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of EGC but has no reason to doubt the accuracy or completeness of such information. In addition, EGC has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of EGC that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.

14


The Company believes the terms of the Grand Isle Lease Agreement require copies of certain financial statement information be provided that the Company is required to file pursuant to SEC Regulation S-X, as described in Section 2340 of the SEC Financial Reporting Manual. When EGC's financial information ceased to be publicly available, the Company encouraged officials of EGC and Cox Oil and, through Company counsel, the legal counsel to such entities, to satisfy their obligations under the Grand Isle Lease Agreement to provide the required information to the Company for inclusion in its SEC reports. To date, EGC and Cox Oil have refused to fulfill these obligations. The Company sought to enforce the obligations of EGC and Cox Oil and obtained a temporary restraining order ("TRO") from a Texas state court, mandating that they deliver the required EGC financial statements for the year ended December 31, 2018. The TRO was stayed pending an appeal by EGC and Cox Oil and, pursuant to its own terms, had lapsed by the time that appeal was denied on January 6, 2020. The case was remanded to the trial court for further proceedings. In May 2020, the trial court granted the Company's motion for summary judgment mandating the tenant deliver the required financial statements. The Company believes that it is entitled to such relief and will continue to pursue this litigation and all viable options to obtain and file the necessary financial statements. The Company expects to file the financial statement information that is required by Regulation S-X by amendment to its Annual Reports on Form 10-K for the year ended December 31, 2019, once such information is made available in accordance with the terms of the lease.
On April 1, 2020, the EGC Tenant, a wholly owned indirect subsidiary of Cox Oil, elected to cease paying rent due for April of 2020. EGC Tenant is contractually obligated to pay rent and rent continues to accrue whether or not oil is being shipped. EGC Tenant is a special purpose entity engaged solely in activities related to the lease, and it does not own or operate any wells. EGC, parent of the EGC Tenant, owns and operates wells, including those connected to GIGS, and is the guarantor of the EGC Tenant's obligations under the lease. Following EGC Tenant's failure to pay rent due for April of 2020, and following discussions with Cox Oil management concerning its various operations, the Company sent EGC Tenant and EGC a notice of non-payment. After the required two-day cure period, a default has now occurred under the lease.
The EGC Tenant also failed to make required rent payments for May and June of 2020. As a result, the Company has filed litigation for lien judgment in the State Court of Texas to recover the unpaid rent, plus interest, for April, May and June of 2020 from the EGC Tenant. Further, EGC filed an action to attempt to set aside the guarantee obligations of EGC under the lease. The Company intends to enforce its rights under the lease and expects to be able to enforce the guaranty.
Grand Isle Gathering System
The Company identified the EGC Tenant's nonpayment of rent discussed above along with the significant decline in the global oil market as indicators of impairment for the GIGS asset. As a result, the Company assessed the GIGS asset for impairment as of March 31, 2020. The Company performed a step 1 impairment assessment on the GIGS asset by estimating the undiscounted contractual cash flows relating to the lease using probability-weighted scenarios, which indicated that the GIGS asset's carrying value was not recoverable. As a result, the fair value of the GIGS asset was estimated through the use of probability-weighted discounted estimated cash flow scenarios to measure the impairment loss. The probability-weighted cash flows used to assess recoverability of the GIGS asset and measure its fair value were developed using assumptions related to the Grand Isle Lease Agreement and near-term crude oil and water price and volume projections reflective of the current environment and management's projections for long-term average prices and volumes. In addition to near and long-term price assumptions, other key assumptions include the timing and collectibility of lease payments, operating costs, timing of incurring such costs and the use of an appropriate discount rate. The Company believes our estimates and models used to determine fair value are similar to what a market participant would use.
The Company engaged specialists and other third-parties to assist with the valuation methodology and analysis of certain underlying assumptions. The fair value measurement of the GIGS asset was based, in part, on significant inputs not observable in the market (as discussed above) and thus represents a Level 3 measurement. The significant unobservable input used includes a discount rate based on an estimated weighted average cost of capital of a theoretical market participant. We utilized a weighted average discount rate of 10.0 percent when deriving the fair value of the GIGS asset impaired during the quarter. The weighted average discount rate reflects management's best estimate of inputs a market participant would utilize. For the three months ended March 31, 2020, the Company recognized a $140.3 million loss on impairment of leased property related to the GIGS asset in the Consolidated Statements of Operations. As of March 31, 2020, the carrying value of the GIGS asset is $67.2 million, which is included in leased properties on the Consolidated Balance Sheet.
The Company has previously recognized a deferred rent receivable for the Grand Isle Gathering Lease, which primarily represents timing differences between the straight-line revenue recognition and contractual lease receipts over the lease term. Given the EGC's Tenant's nonpayment of rent in the second quarter of 2020 and the Company's expectations surrounding the collectibility of the contractual lease payments under the lease, the Company does not currently expect the deferred rent receivable to be recoverable. Accordingly, the Company recognized a non-cash write-off of the deferred rent receivable of $30.1 million for the three months

15


ended March 31, 2020. The non-cash write-off was recognized as a reduction of revenue in the Consolidated Statements of Operations.
Ultra Petroleum
On April 14, 2020, UPL, the parent and guarantor of the lease obligations of the tenant and operator of the Company's Pinedale LGS, announced that its significant indebtedness and extremely challenging current market conditions raise a substantial doubt about its ability to continue as a going concern. The going concern qualification in UPL's financial statements filed in its 2019 10-K resulted in defaults under UPL's credit and term loan agreement. UPL also disclosed that it elected not to make interest payments on certain outstanding indebtedness, triggering a 30-day grace period. If such interest payments were not made by the end of the grace period, an event of default would occur, potentially causing its outstanding indebtedness to become immediately due and payable. UPL further disclosed that if it was unable to obtain sufficient additional capital to repay the outstanding indebtedness and sufficient liquidity to meet its operating needs, it may be necessary for UPL to seek protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
On May 14, 2020, UPL filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The filing includes Ultra Wyoming, the operator of the Pinedale LGS and tenant under the Pinedale Lease Agreement with the Company’s indirect wholly owned subsidiary Pinedale LP. The bankruptcy filing of both the guarantor, UPL, and the tenant constitute defaults under the terms of the Pinedale Lease Agreement. The bankruptcy filing imposes a stay of CorEnergy’s ability to exercise remedies for the foregoing defaults. Ultra Wyoming also filed a motion to reject the Pinedale Lease Agreement, with a request that such motion be effective June 30, 2020. Pending the effective date of the rejection, Section 365 of the Bankruptcy Code generally requires Ultra Wyoming to comply on a timely basis with the provisions of the Pinedale Lease Agreement, including the payment provisions. Accordingly, the Company received the rent payments due on the first day of April, May and June 2020.
Pinedale LP, along with Prudential, the lender under the Amended Pinedale Term Credit Facility discussed in Note 10 ("Debt"), commenced discussions with UPL, which resulted in UPL presenting an initial offer to purchase the Pinedale LGS. As of June 25, 2020, Pinedale LP, has $32.2 million outstanding under the Amended Pinedale Term Credit Facility, which is secured by the Pinedale LGS, the only asset at Pinedale LP. The Amended Pinedale Term Credit Facility is not secured by any assets of CorEnergy or its other subsidiaries. Refer to Note 10 ("Debt") for further discussion of the terms of the Amended Pinedale Term Credit Facility, including a discussion of "Debt Covenant Considerations."
On June 5, 2020, Pinedale LP filed a motion with the U.S. Bankruptcy Court objecting to Ultra Wyoming's motion to reject the Pinedale Lease Agreement while continuing its negotiations with UPL. Pinedale LP and the Company agreed in principle to terms with Ultra Wyoming to sell the Pinedale LGS for $18.0 million cash as set forth in a non-binding term sheet that was filed with the U.S. Bankruptcy Court in UPL’s Chapter 11 case along with a motion for approval of the transaction on June 22, 2020. A copy of the draft definitive purchase and sale agreement was also filed with the motion. The closing of the sale will be subject to the satisfaction of certain closing conditions, including but not limited to (i) a release of all liens under the Amended Pinedale Term Credit Facility, (ii) a release by Pinedale LP of all claims against UPL and Ultra Wyoming arising from the rejection or termination of the Pinedale Lease Agreement, (iii) the release by Ultra Wyoming of all claims against Pinedale LP and the Company and (iv) approval of the definitive purchase and sale agreement and the closing of the transaction by the bankruptcy court in UPL’s Chapter 11 case. The U.S. Bankruptcy Court scheduled a hearing on the motion for June 25, 2020. Assuming the definitive agreement is signed, the transaction is expected to close on or before June 30, 2020 and may be terminated by either party if not closed by July 30, 2020. If the transaction closes after June 30, 2020, the Company does not expect Ultra Wyoming to make any further rent payments under the Pinedale Lease Agreement.
In conjunction with the expected sale of the Pinedale LGS described above, Pinedale LP and the Company expect to enter into a compromise and release agreement with Prudential related to the Amended Pinedale Term Credit Facility. Pursuant to such agreement, it is anticipated that at closing of the Pinedale LGS sale transaction with Ultra Wyoming, the Company will provide all cash related to the sale of the Pinedale LGS along with cash available at Pinedale LP on the closing date, estimated to be approximately $3.0 million, to Prudential in exchange for the release of all liens on the Pinedale LGS, release of the Company and Pinedale LP from the obligations of the Amended Pinedale Term Credit Facility, and the note under the Amended Pinedale Term Credit Facility will be deemed satisfied.
UPL is currently subject to the reporting requirements under the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. Its SEC filings can be found at www.sec.gov. Its common stock is traded on the OTCQX marketplace under the symbol UPLC. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of UPL but has no reason to doubt the accuracy or completeness of such information. In addition, UPL has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the

16


significance or accuracy of such information. None of the information in the public reports of UPL that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.
Pinedale Liquids Gathering System
As a result of the events described above, including the anticipated sale of the Pinedale LGS to Ultra Wyoming on or before June 30, 2020, the Company expects to recognize an estimated charge in the Consolidated Statement of Operations of approximately $147.0 million in the second quarter of 2020. The estimated charge could be partially offset by any reduction of the debt owed under the Amended Pinedale Term Credit Facility.
The table below displays the Company's individually significant leases as a percentage of total leased properties and total lease revenues for the periods presented:
 
As a Percentage of (1)
 
Leased Properties
 
Lease Revenues
 
As of
 
For the Three Months Ended
 
March 31, 2020
 
December 31, 2019
 
March 31, 2020
 
March 31, 2019
Pinedale LGS(2)
70.8
%
 
44.4
%
 
35.3
%
 
39.1
%
Grand Isle Gathering System(3) 
28.7
%
 
55.3
%
 
64.6
%
 
60.8
%
(1) Insignificant leases are not presented; thus, percentages may not sum to 100%.
(2) Pinedale LGS lease revenues include variable rent of $28 thousand and $1.1 million for the three months ended March 31, 2020 and 2019, respectively.
(3) As of March 31, 2020, the Grand Isle Gathering System's percentage of leased properties decreased as a result of the long-lived asset impairment discussed above. The Company expects the leased properties percentage to increase in subsequent quarters as a result of the expected sale of the Pinedale LGS on June 30, 2020 or shortly thereafter. For the three months ended March 31, 2020, the Grand Isle Gathering System's percentage of lease revenues is exclusive of the deferred rent receivable write-off discussed above.
The following table reflects the depreciation and amortization included in the accompanying Consolidated Statements of Operations associated with the Company's leases and leased properties:
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Depreciation Expense
 
 
 
GIGS
$
2,440,588

 
$
2,440,791

Pinedale
2,217,360

 
2,217,360

United Property Systems
9,831

 
9,624

Total Depreciation Expense
$
4,667,779

 
$
4,667,775

Amortization Expense - Deferred Lease Costs
 
 
 
GIGS
$
7,641

 
$
7,641

Pinedale
15,342

 
15,342

Total Amortization Expense - Deferred Lease Costs
$
22,983

 
$
22,983

ARO Accretion Expense
 
 
 
GIGS
$
112,171

 
$
110,992

Total ARO Accretion Expense
$
112,171

 
$
110,992

The following table reflects the deferred costs that are included in the accompanying Consolidated Balance Sheets associated with the Company's leased properties:
 
March 31, 2020
 
December 31, 2019
Net Deferred Lease Costs
 
 
 
GIGS
$
191,114

 
$
198,755

Pinedale
473,639

 
488,981

Total Deferred Lease Costs, net
$
664,753

 
$
687,736

LESSEE - LEASED PROPERTIES
The Company's operating subsidiaries currently lease single-use office space and equipment with remaining lease terms of approximately two years, some of which may include renewal options. These leases are classified as operating leases and immaterial

17


to the consolidated financial statements. The Company recognizes lease expense in the Consolidated Statements of Operations on a straight-line basis over the remaining lease term.
4. TRANSPORTATION AND DISTRIBUTION REVENUE
The Company's contracts related to transportation and distribution revenue are primarily comprised of a mix of natural gas supply, transportation and distribution performance obligations, as well as limited performance obligations related to system maintenance and improvement. Based on the nature of the agreements, revenue for all but one of the Company's natural gas supply, transportation and distribution performance obligations is recognized on a right to invoice basis as the performance obligations are met, which represents what the Company expects to receive in consideration and is representative of value delivered to the customer. System maintenance and improvement contracts are specific and tailored to the customer's needs, have no alternative use and have an enforceable right to payment as the services are provided. Revenue is recognized on an input method, based on the actual cost of service as a measure of the performance obligation satisfaction. Differences between amounts invoiced and revenue recognized under the input method are reflected as an asset or liability on the Consolidated Balance Sheets. The costs of system improvement projects are recognized as a financing arrangement in accordance with guidance in the lease standard while the margin is recognized in accordance with the revenue standard as discussed above.
The Company has a contract with Spire that has fixed pricing which varies over the contract term. For this specific contract, the transaction price has been allocated ratably over the contractual performance obligation. Based on a downward revision of the rate during the Company's long-term natural gas transportation contract with Spire, ASC 606 requires the Company to record the contractual transaction price, and therefore aggregate revenue, from the contract ratably over the term of the contract. Following the November 2018 rate decline, recognized performance obligations exceeded amounts invoiced and the contract liability began to decline at a rate of approximately $138 thousand per quarter and will continue to decline at the same rate through the end of the contract in October 2030. As of March 31, 2020, the revenue allocated to the remaining performance obligation under this contract is approximately $56.8 million.
The table below summarizes the Company's contract liability balance related to its transportation and distribution revenue contracts as of March 31, 2020:
 
Contract Liability(1)
 
March 31, 2020
 
December 31, 2019
Beginning Balance January 1
$
6,850,790

 
$
6,522,354

Unrecognized Performance Obligations

 
887,916

Recognized Performance Obligations
(160,368
)
 
(559,480
)
Ending Balance
$
6,690,422

 
$
6,850,790

(1) The contract liability balance is included in unearned revenue in the Consolidated Balance Sheets.
The Company's contract asset balance was $45 thousand and $206 thousand as of March 31, 2020 and December 31, 2019, respectively. The contract asset balance is included in prepaid expenses and other assets in the Consolidated Balance Sheets.
The following is a breakout of the Company's transportation and distribution revenue for the three months ended March 31, 2020 and 2019:
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Natural gas transportation contracts
68.8
%
 
61.4
%
Natural gas distribution contracts
23.2
%
 
34.8
%
5. FINANCING NOTES RECEIVABLE
Financing notes receivable are presented at face value plus accrued interest receivable and deferred loan origination costs, and net of related direct loan origination income. Each quarter the Company reviews its financing notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Factors may include credit quality, timeliness of required periodic payments, past due status, and management discussions with obligors. The Company evaluates the collectability of both interest and principal of each of its loans to determine if an allowance is needed. An allowance will be recorded when, based on current information and events, the Company determines it is probable that it will be unable to collect all amounts due according to the existing contractual terms.

18


Four Wood Financing Note Receivable
On December 12, 2018, Four Wood Corridor granted SWD Enterprises, LLC, the previous debtor, approval to sell the assets securing the SWD loans to Compass SWD, LLC ("Compass SWD") in exchange for Compass SWD executing a new loan agreement with Four Wood Corridor for $1.3 million (the "Compass REIT Loan"). On June 12, 2019, Four Wood Corridor entered into an amended and restated Compass REIT Loan. The amended note had a two-year term maturing on June 30, 2021 with monthly principal payments of approximately $11 thousand and interest accruing on the outstanding principal at an annual rate of 8.5 percent. The amended and restated Compass REIT Loan is secured by real and personal property that provides saltwater disposal services for the oil and natural gas industry and pledged ownership interests of Compass SWD members. As of March 31, 2020 and December 31, 2019, the Compass REIT Loan was valued at $1.2 million.
On May 22, 2020, the terms of the Compass REIT Loan were amended (i) to extend the maturity date from June 30, 2021 to November 31, 2024 and (ii) to reduce payments to interest only through December 31, 2020. Additionally, the amended Compass REIT Loan will continue to accrue interest at an annual rate of 8.5 percent through May 31, 2021. Subsequent to May 31, 2021 interest will accrue at an annual rate of 12.0 percent. Monthly principal payments of approximately $11 thousand will resume on January 1, 2021 and increase annually beginning on June 30, 2021 through the maturity date.
6. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company's deferred tax assets and liabilities as of March 31, 2020 and December 31, 2019, are as follows:
Deferred Tax Assets and Liabilities
 
March 31, 2020
 
December 31, 2019
Deferred Tax Assets:
 
 
 
Deferred contract revenue
$
1,494,179

 
$
1,529,473

Net operating loss carryforwards
5,850,717

 
5,622,052

Accrued liabilities
20,645

 
424,604

Capital loss carryforward
92,418

 
104,595

Other
6,184

 
6,184

Sub-total
$
7,464,143

 
$
7,686,908

Valuation allowance
(92,418
)
 
(104,595
)
Sub-total
$
7,371,725

 
$
7,582,313

Deferred Tax Liabilities:
 
 
 
Cost recovery of leased and fixed assets
$
(3,108,220
)
 
$
(2,953,319
)
Other
(39,865
)
 
(35,433
)
Sub-total
$
(3,148,085
)
 
$
(2,988,752
)
Total net deferred tax asset
$
4,223,640

 
$
4,593,561

As of March 31, 2020, the total deferred tax assets and liabilities presented above relate to the Company's TRSs. The Company recognizes the tax benefits of uncertain tax positions only when the position is "more likely than not" to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company's policy is to record interest and penalties on uncertain tax positions as part of tax expense. Tax years subsequent to the year ended December 31, 2015 remain open to examination by federal and state tax authorities.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs originating in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Certain of the Company’s TRSs have NOLs totaling approximately $1.2 million that are eligible for carryback under the CARES Act. The benefit of these carrybacks has been recorded as an increase to income taxes receivable and a reduction to deferred tax assets. Certain NOLs which were initially measured at the current corporate income tax rate of 21 percent are being carried back to offset taxable income that was taxed at a pre-Tax Cuts and Jobs Act of 2017 rate of 34 percent. The benefit received from the rate differential is reflected in the income tax provision for the three months ended March 31, 2020.
For the year ended December 31, 2019, the Company generated a capital loss carryforward resulting from the liquidation of Lightfoot. The capital loss decreased upon receipt of the final 2019 K-1's in the first quarter of 2020. The amount of the carryforward for tax purposes was approximately $440 thousand and $500 thousand as of March 31, 2020 and December 31, 2019, respectively,

19


and if not utilized, this carryforward will expire as of December 31, 2024. Management assessed the available evidence and determined that it is more likely than not that the capital loss carryforward will not be utilized prior to expiration. Due to the uncertainty of realizing this deferred tax asset, a valuation allowance of $92 thousand and $105 thousand was recorded equal to the amount of the tax benefit of this carryforward at March 31, 2020 and December 31, 2019, respectively. In the future, if the Company concludes, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, the valuation allowance will be adjusted accordingly in the period such conclusion is made.
Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 21 percent for the three months ended March 31, 2020 and 2019 to income from operations and other income and expense for the periods presented, as follows:
Income Tax Expense (Benefit)
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Application of statutory income tax rate
$
1,744,493

 
$
905,893

State income taxes, net of federal tax expense
34,509

 
516,026

Federal Tax Attributable to Income of Real Estate Investment Trust
(1,644,238
)
 
(915,985
)
Other
(159,486
)
 
(58,599
)
Total income tax expense (benefit)
$
(24,722
)
 
$
447,335

The components of income tax expense (benefit) include the following for the periods presented:
Components of Income Tax Expense (Benefit)
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Current tax expense (benefit)
 
 
 
Federal
$
(409,643
)
 
$
216,093

State (net of federal tax expense (benefit))
15,000

 
137,651

Total current tax expense (benefit)
$
(394,643
)
 
$
353,744

Deferred tax expense (benefit)
 
 
 
Federal
$
350,412

 
$
(284,784
)
State (net of federal tax expense (benefit))
19,509

 
378,375

Total deferred tax expense
$
369,921

 
$
93,591

Total income tax expense (benefit), net
$
(24,722
)
 
$
447,335

7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Property and Equipment
 
March 31, 2020
 
December 31, 2019
Land
$
605,070

 
$
605,070

Natural gas pipeline
124,628,945

 
124,614,696

Vehicles and trailers
671,962

 
671,962

Office equipment and computers
268,559

 
268,559

Gross property and equipment
$
126,174,536

 
$
126,160,287

Less: accumulated depreciation
(20,148,744
)
 
(19,304,610
)
Net property and equipment
$
106,025,792

 
$
106,855,677

Depreciation expense was $844 thousand for the three months ended March 31, 2020, and $843 thousand for the three months ended March 31, 2019.
8. MANAGEMENT AGREEMENT
The Company pays its manager, Corridor, pursuant to a Management Agreement as described in the 2019 CorEnergy 10-K. During the three months ended March 31, 2020, the Manager voluntarily recommended, and the Company agreed, that the Manager would waive all of the $171 thousand incentive fee that would otherwise be payable under the provisions of the Management Agreement with respect to dividends paid on the Company's common stock.

20


In reviewing the application of the quarterly management fee provisions of the Management Agreement to the net proceeds received from the offering of 5.875% Convertible Notes, which closed on August 12, 2019, the Manager waived any incremental management fee due as of the end of the first quarter of 2020 based on such proceeds (other than the cash portion of such proceeds that was utilized in connection with the exchange of the Company’s 7.00% Convertible Notes).
Fees incurred under the Management Agreement for the three months ended March 31, 2020 were $1.6 million compared to $1.8 million for the three months ended March 31, 2019. Fees incurred under the Management Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
The Company pays its administrator, Corridor, pursuant to an Administrative Agreement. Fees incurred under the Administrative Agreement for the three months ended March 31, 2020 were $64 thousand compared to $68 thousand for the three months ended March 31, 2019. Fees incurred under the Administrative Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
9. FAIR VALUE
Valuation Techniques and Unobservable Inputs
The following section describes the valuation methodologies used by the Company for estimating fair value for financial instruments not recorded at fair value, but fair value is included for disclosure purposes only, as required under disclosure guidance related to the fair value of financial instruments.
Cash and Cash Equivalents — The carrying value of cash, amounts due from banks, federal funds sold and securities purchased under resale agreements approximates fair value.
Financing Notes Receivable — The financing notes receivable are valued on a non-recurring basis. The financing notes receivable are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Financing notes with carrying values that are not expected to be recovered through future cash flows are written-down to their estimated net realizable value. Estimates of realizable value are determined based on unobservable inputs, including estimates of future cash flow generation and value of collateral underlying the notes.
Secured Credit Facilities — The fair value of the Company's long-term variable-rate and fixed-rate debt under its secured credit facilities approximates carrying value.
Unsecured Convertible Senior Notes — The fair value of the unsecured convertible senior notes is estimated using quoted market prices from either active (Level 1) or generally active (Level 2) markets.
Carrying and Fair Value Amounts
 
Level within fair value hierarchy
 
March 31, 2020
 
December 31, 2019
 
 
Carrying
    Amount (1)
 
Fair Value
 
Carrying
    Amount (1)
 
Fair Value
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
Level 1
 
$
119,054,407

 
$
119,054,407

 
$
120,863,643

 
$
120,863,643

Financing notes receivable (Note 5)
Level 3
 
1,202,500

 
1,202,500

 
1,235,000

 
1,235,000

Financial Liabilities:
 
 
 
 
 
 
 
 
Secured credit facilities
Level 2
 
$
32,917,135

 
$
32,917,135

 
$
33,785,930

 
$
33,785,930

7.00% Unsecured Convertible Senior Notes
Level 1
 
1,672,445

 
1,193,228

 
2,084,178

 
2,820,832

5.875% Unsecured Convertible Senior Notes
Level 2
 
116,406,460

 
96,336,000

 
116,239,318

 
122,508,000

(1) The carrying value of debt balances are presented net of unamortized original issuance discount and debt issuance costs.

21


10. DEBT
The following is a summary of the Company's debt facilities and balances as of March 31, 2020 and December 31, 2019:
 
Total Commitment
 or Original Principal
 
Quarterly Principal Payments
 
 
 
March 31, 2020
 
December 31, 2019
 
 
 
Maturity
Date
 
Amount Outstanding
 
Interest
Rate
 
Amount Outstanding
 
Interest
Rate
CorEnergy Secured Credit Facility:
 
 
 
 
 
 
 
 
 
 
 
 
 
CorEnergy Revolver
$
160,000,000

 
$

 
7/28/2022
 
$

 
3.74
%
 
$

 
4.51
%
MoGas Revolver
1,000,000

 

 
7/28/2022
 

 
3.74
%
 

 
4.51
%
Omega Line of Credit
1,500,000

 

 
7/31/2020
 

 
4.99
%
 

 
5.76
%
Pinedale Secured Credit Facility:
 
 
 
 
 
 
 
 
 
 
 
 
 
Amended Pinedale Term Credit Facility(1)
41,000,000

 
882,000

 
12/29/2022
 
33,062,000

 
6.50
%
 
33,944,000

 
6.50
%
7.00% Unsecured Convertible Senior Notes
115,000,000

 

 
6/15/2020
 
1,676,000

 
7.00
%
 
2,092,000

 
7.00
%
5.875% Unsecured Convertible Senior Notes
120,000,000

 

 
8/15/2025
 
120,000,000

 
5.875
%
 
120,000,000

 
5.875
%
Total Debt
 
$
154,738,000

 
 
 
$
156,036,000

 
 
Less:
 
 
 
 
 
 
 
 
Unamortized deferred financing costs(2)
 
$
600,362

 
 
 
$
635,351

 
 
Unamortized discount on 7.00% Convertible Senior Notes
 
3,036

 
 
 
6,681

 
 
Unamortized discount on 5.875% Convertible Senior Notes
 
3,138,562

 
 
 
3,284,542

 
 
Total Debt, net of deferred financing costs
 
$
150,996,040

 
 
 
$
152,109,426

 
 
Debt due within one year
 
$
5,200,445

 
 
 
$
5,612,178

 
 
(1) Effective May 8, 2020 and in conjunction with the Standstill Agreement discussed below, the interest rate on the Amended Pinedale Term Credit Facility increased to the Default Rate of 8.50%
(2) Unamortized deferred financing costs related to the Company's revolving credit facilities are included in Deferred Costs in the Assets section of the Consolidated Balance Sheets. Refer to the "Deferred Financing Costs" paragraph below.
CorEnergy Credit Facility
On July 28, 2017, the Company entered into an amendment and restatement of the CorEnergy Credit Facility with Regions Bank, as lender and administrative agent for other participating lenders (collectively, with the Agent, the "Lenders"). The amended facility provides for borrowing commitments of up to $161.0 million, consisting of (i) $160.0 million on the CorEnergy Revolver, subject to borrowing base limitations, and (ii) $1.0 million on the MoGas Revolver.
The amended facility has a 5-year term maturing on July 28, 2022. Borrowings under the credit facility will generally bear interest on the outstanding principal amount using a LIBOR pricing grid that is expected to equal a LIBOR rate plus an applicable margin of 2.75 percent to 3.75 percent, based on the Company's senior secured recourse leverage ratio. Total availability is subject to a borrowing base. The CorEnergy Credit Facility contains, among other restrictions, certain financial covenants including the maintenance of certain financial ratios, as well as default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods).
It is an event of default under the CorEnergy Credit Facility if any unrestricted subsidiary (which would include Pinedale LP) fails to pay at maturity or otherwise when due, or within any applicable grace period, any indebtedness with an outstanding balance of at least $5.0 million (which would include the Amended Pinedale Term Credit Facility) or fails to comply with any financial covenant with respect thereto, or any bankruptcy or insolvency default occurs with respect to such debt of an unrestricted subsidiary and remains uncured for such period of time as would permit the holders of such debt to accelerate its maturity, then such event would allow the lenders under the CorEnergy Credit Facility to accelerate the maturity of that facility. Pursuant to the Standstill Agreement between Pinedale LP and Prudential discussed below under “Amended Pinedale Term Credit Facility,” Prudential has agreed that during the Standstill Period (as defined below) it will not accelerate the debt under the Amended Pinedale Term Credit Facility as a result of UPL’s bankruptcy filing. As a result of the Standstill Agreement, since no acceleration is permitted on account of UPL’s bankruptcy filing during the Standstill Period, UPL’s bankruptcy filing does not trigger the cross-default provision described above and does not cause an event of default under the CorEnergy Credit Facility.
Effective May 14, 2020, the Company entered into a Limited Consent with the Lenders under the CorEnergy Revolver that is part of the CorEnergy Credit Facility. The Lenders agreed to extend the date by which the Company will be required to deliver to the Lenders its financial statements for the fiscal quarter ended March 31, 2020 and certain required quarterly certifications until June 30, 2020, pursuant to the Form 10‑Q filing extension previously disclosed in the Company’s Current Report on Form 8-K filed April 23, 2020.

22


The Limited Consent also documents notice previously provided by the Company to the Agent that certain events of default have occurred under the Company’s lease for its GIGS asset, as a result of the tenant under the Grand Isle Lease Agreement having failed to pay the rent due for April and May 2020. The Limited Consent is subject to the Company’s continued compliance with all of the other terms of the CorEnergy Revolver, and includes the Company’s agreement with the Lenders that the borrowing base value of the GIGS asset for purposes of the CorEnergy Revolver shall be zero, effective as of the Company’s March 31, 2020 balance sheet date.
As of March 31, 2020, the Company was in compliance with all covenants of the CorEnergy Credit Facility, and the Company had no borrowings outstanding. The the Company had approximately $50.0 million and $1.0 million of availability under the CorEnergy Revolver and MoGas Revolver, respectively.
Amended Pinedale Term Credit Facility
On December 29, 2017, Pinedale LP entered into the Amended Pinedale Term Credit Facility with Prudential and a group of lenders affiliated with Prudential as the sole lenders and Prudential serving as administrative agent. Under the terms of the Amended Pinedale Term Credit Facility, Pinedale LP was provided with a 5-year $41.0 million term loan facility, bearing interest at a fixed rate of 6.5 percent, which matures on December 29, 2022. Principal payments of $294 thousand, plus accrued interest, are payable monthly.
Outstanding balances under the facility are secured by the Pinedale LGS assets. The Amended Pinedale Term Credit Facility contains, among other restrictions, specific financial covenants including the maintenance of certain financial coverage ratios and a minimum net worth requirement which, along with other provisions of the credit facility, limit cash dividends and loans by Pinedale LP to the Company. At March 31, 2020, the net assets of Pinedale LP were $129.9 million and Pinedale LP was in compliance with all of the financial covenants of the Amended Pinedale Term Credit Facility.
As previously discussed in Note 3 ("Leased Properties And Leases"), UPL's bankruptcy filing constitutes a default under the terms of the Pinedale Lease Agreement with Pinedale LP. Such default under the Pinedale Lease Agreement is an event of default under the Amended Pinedale Term Credit Facility, which is secured by the Pinedale LGS. Among other things, an event of default could give rise to a Cash Control Period (as defined in the Amended Pinedale Term Credit Facility), which impacts Pinedale LP's ability to make distributions to the Company. During such a Cash Control Period, which was triggered May 14, 2020, by the bankruptcy filing of Ultra Wyoming and its parent guarantor, UPL, distributions by Pinedale LP to the Company are permitted to the extent required for the Company to maintain its REIT qualification, so long as Pinedale LP's obligations under the Amended Pinedale Term Credit Facility have not been accelerated following an Event of Default (as defined in the Amended Pinedale Term Credit Facility).
Effective May 8, 2020, Pinedale LP entered into a Standstill Agreement with Prudential. The Standstill Agreement anticipated Pinedale LP’s notification to Prudential of two Events of Default under the Amended Pinedale Term Credit Facility (the “Specified Events of Default”) as a result of the occurrence of either (i) any bankruptcy filing by UPL or Ultra Wyoming and (ii) any resulting impact on Pinedale LP’s net worth covenant under the Amended Pinedale Term Credit Facility due to any accounting charge of assets of Pinedale LP triggered by any such bankruptcy filing of Ultra Wyoming. Under the Standstill Agreement, Prudential has agreed to forbear through September 1, 2020, or the earlier occurrence of a separate Event of Default under the Amended Pinedale Term Credit Facility (the “Standstill Period”) from exercising any rights they may have to accelerate and declare the outstanding balance under the credit facility immediately due and payable as a result of the occurrence of either of the Specified Events of Default, provided that there are no other Events of Default and Pinedale LP continues to meet its obligations under all of the other terms of the Amended Pinedale Term Credit Facility. The Standstill Agreement also requires that Pinedale LP not make any distributions to the Company during the Standstill Period and that interest will accrue and be payable from the effective date of such agreement at the Default Rate of interest provided for in the Amended Pinedale Term Credit Facility, increasing the effective interest rate to 8.50%.
As previously discussed in Note 3 ("Leased Properties And Leases"), Pinedale LP and the Company expect to enter into a compromise and release agreement with Prudential related to the Amended Pinedale Term Credit Facility. Pursuant to such agreement, it is anticipated that at closing of the Pinedale LGS sale transaction with Ultra Wyoming on or before June 30, 2020, the Company will provide all cash related to the sale of the Pinedale LGS along with cash available at Pinedale LP on the closing date, estimated to be approximately $3.0 million, to Prudential in exchange for the release of all liens on the Pinedale LGS, release of the Company and Pinedale LP from the obligations of the Amended Pinedale Term Credit Facility, and the note under the Amended Pinedale Term Credit Facility will be deemed satisfied.

23


Deferred Financing Costs
A summary of deferred financing cost amortization expenses for the three months ended March 31, 2020 and 2019 is as follows:
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
CorEnergy Credit Facility
$
143,635

 
$
143,636

Amended Pinedale Term Credit Facility
13,205

 
13,205

Total Deferred Debt Cost Amortization Expense (1)(2)
$
156,840

 
$
156,841

(1) Amortization of deferred debt issuance costs is included in interest expense in the Consolidated Statements of Operations.
(2) For the amount of deferred debt cost amortization relating to the convertible notes included in the Consolidated Statements of Operations, refer to the Convertible Note Interest Expense table below.
CorEnergy Credit Facilities
Prior to the July 28, 2017 credit facility amendment and restatement, previously existing deferred financing costs related to the CorEnergy Credit Facility were approximately $1.8 million, of which approximately $1.6 million continue to be deferred and amortized under the amended and restated facility. Additionally, the Company incurred approximately $1.3 million in new debt issuance costs which have been deferred and are being amortized over the term of the new facility. Total deferred financing costs of $2.9 million are being amortized on a straight-line basis over the 5-year term of the amended and restated CorEnergy Credit Facility.
Amended Pinedale Term Credit Facility
In connection with entering into the Amended Pinedale Term Credit Facility, Pinedale LP incurred approximately $367 thousand in new debt issuance costs, of which $264 thousand were deferred and are being amortized on a straight-line basis over the 5-year term of the Amended Pinedale Term Credit Facility.
Contractual Payments
The remaining contractual principal payments as of March 31, 2020 under the Amended Pinedale Term Credit Facility are as follows:
Year
 
Amended Pinedale Term Credit Facility
2020
 
$
2,646,000

2021
 
3,528,000

2022
 
26,888,000

2023
 

2024
 

Thereafter
 

Total Remaining Contractual Payments
 
$
33,062,000

Convertible Debt
7.00% Convertible Notes
On June 29, 2015, the Company completed a public offering of $115.0 million aggregate principal amount of 7.00% Convertible Senior Notes Due 2020 (the "7.00% Convertible Notes"). The 7.00% Convertible Notes had a maturity date of June 15, 2020 and bore interest at a rate of 7.00 percent per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015. The 7.00% Convertible Notes were convertible into common stock at a rate of 30.3030 shares of common stock per $1,000 principal amount of 7.00% Convertible Notes, equivalent to a conversion price of $33.00 per share of common stock.
On January 16, 2019, the Company agreed with three holders of its 7.00% Convertible Notes, pursuant to privately negotiated agreements, to exchange $43.8 million face amount of such notes for an aggregate of 837,040 shares of the Company's common stock, par value $0.001 per share, plus aggregate cash consideration of $19.8 million, including $315 thousand of interest expense. The Company's agent and lenders under the CorEnergy Credit Facility provided a consent for the convertible note exchange. The Company recorded a loss on extinguishment of debt of approximately $5.0 million in the Consolidated Statements of Operations

24


for the first quarter of 2019. The loss on extinguishment of debt included the write-off of a portion of the underwriter's discount and deferred debt costs of $409 thousand and $27 thousand, respectively.
On August 15, 2019, the Company used a portion of the net proceeds from the offering of the 5.875% Convertible Notes discussed further below, together with shares of its common stock, to exchange $63.9 million face amount of its 7.00% Convertible Notes pursuant to privately negotiated agreements with three holders. The total cash and stock consideration for the exchange was valued at approximately $93.2 million. This included an aggregate of 703,432 shares of common stock plus cash consideration of approximately $60.2 million, including $733 thousand of interest expense. The Company recorded a loss on extinguishment of debt of approximately $28.9 million in the Consolidated Statements of Operations for the third quarter of 2019. The loss on extinguishment of debt included the write-off of a portion of the underwriter's discount and deferred debt costs of $360 thousand and $24 thousand, respectively. Collectively, for the two exchange transactions described above, the Company recorded a loss on extinguishment of debt of $34.0 million for the year ended December 31, 2019.
Additionally, during the three months ended March 31, 2020, certain holders elected to convert (i) $416 thousand of 7.00% Convertible Notes for approximately 12,605 shares of common stock. As of March 31, 2020, the Company has $1.7 million aggregate principal amount of 7.00% Convertible Notes outstanding.
On June 12, 2020, the Company paid $1.7 million in aggregate principal and $59 thousand in interest expense upon maturity of the 7.00% Convertible Notes to extinguish the remaining debt outstanding.
5.875% Convertible Notes
On August 12, 2019, the Company completed a private placement offering of $120.0 million aggregate principal amount of 5.875% Convertible Senior Notes due 2025 (the "5.875% Convertible Notes") to the initial purchasers of such notes for cash in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act. The initial purchasers then resold the 5.875% Convertible Notes for cash equal to 100 percent of the aggregate principal amount thereof to qualified institutional buyers, as defined in Rule 144A under the Securities Act, in reliance on an exemption from registration provided by Rule 144A. The 5.875% Convertible Notes mature on August 15, 2025 and bear interest at a rate of 5.875 percent per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.
The 5.875% Convertible Notes were issued with an initial purchasers' discount of $3.5 million, which is being amortized over the life of the notes. The Company also incurred approximately $508 thousand of deferred debt costs in issuing the 5.875% Convertible Notes, which are also being amortized over the life of the notes.
Holders may convert all or any portion of their 5.875% Convertible Notes into shares of the Company's common stock at their option at any time prior to the close of business on the business day immediately preceding the maturity date. The initial conversion rate for the 5.875% Convertible Notes is 20.0 shares of common stock per $1,000 principal amount of the 5.875% Convertible Notes, equivalent to an initial conversion price of $50.00 per share of the Company's common stock. Such conversion rate will be subject to adjustment in certain events as specified in the Indenture.
The Indenture for the 5.875% Convertible Notes specifies events of default, including default by the Company or any of its subsidiaries with respect to any debt agreements under which there may be outstanding, or by which there may be secured or evidenced, any debt in excess of $25.0 million in the aggregate of the Company and/or any such subsidiary, resulting in such indebtedness becoming or being declared due and payable prior to its stated maturity.
On April 29, 2020, the Company repurchased approximately $2.0 million face amount of its 5.875% Convertible Notes for approximately $1.3 million, including $24 thousand of interest expense. The repurchase will result in a gain on extinguishment of debt of $576 thousand for the second quarter of 2020. Subsequent to the transaction, the Company has $118.1 million aggregate principal amount of 5.875% Convertible Notes outstanding.

25


Convertible Note Interest Expense
The following is a summary of the impact of convertible notes on interest expense for the three months ended March 31, 2020 and 2019:
Convertible Note Interest Expense
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
7.00% Convertible Notes:
 
 
 
Interest Expense
$
31,215

 
$
1,406,857

Discount Amortization
3,645

 
132,910

Deferred Debt Issuance Amortization
622

 
8,681

Total 7.00% Convertible Notes
$
35,482

 
$
1,548,448

 
 
 
 
5.875% Convertible Notes:
 
 
 
Interest Expense
$
1,762,500

 
$

Discount Amortization
145,980

 

Deferred Debt Issuance Amortization
21,162

 

Total 5.875% Convertible Notes
$
1,929,642

 
$

Total Convertible Note Interest Expense
$
1,965,124

 
$
1,548,448

Including the impact of the convertible debt discount and related deferred debt issuance costs, (i) the effective interest rate on the 7.00% Convertible Notes is approximately 8.0 percent and 7.7 percent for the three months ended March 31, 2020 and 2019, respectively and (ii) the effective interest rate on the 5.875% Convertible Notes is approximately 6.4 percent for the three months ended March 31, 2020.
Debt Covenant Considerations
In accordance with GAAP, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and conditional and unconditional obligations due over the next twelve months. As discussed in this footnote, the Company was in compliance with its debt covenants under the CorEnergy Credit Facility and the Amended Pinedale Term Credit Facility as of March 31, 2020.
The Company has considered the projected impact of COVID-19 and the significant disruptions and volatility in the global energy markets on the ability of it tenants to pay rent, which represent a significant portion of the Company's lease revenues and operating cash flows. Additionally, the Company has considered UPL's bankruptcy and Ultra Wyoming's related motion to reject the lease effective June 30, 2020, including the expected sale of the Pinedale LGS to Ultra Wyoming on or before June 30, 2020. Further, the Company considered Pinedale LP's ability to service its debt under the Amended Pinedale Term Credit Facility. Based on its analysis of future compliance with its financial covenants, management has determined that the Company may violate certain financial covenants under its debt agreements within the next twelve months if covenant waivers are not obtained. If the Company were to violate one or more financial covenants, the lenders could declare the Company in default and could accelerate the amounts due under a portion or all of the Company’s outstanding debt. Further, a default under one debt agreement could trigger cross-default provisions within certain of the Company's other debt agreements. While these conditions raise substantial doubt about our ability to continue as a going concern within one year after the financial statements are issued, management has concluded that such doubt is mitigated by the considerations discussed below, which lead to a conclusion that the Company will continue to be able to fund current obligations as they become due one year from the date of issuance of these financial statements.
The Company is in the process of working with its lenders and believes it will receive waivers with respect to the affected financial covenants before any covenants are violated. However, any waivers would be granted at the sole discretion of the lenders, and there can be no assurance that the Company will be able to obtain such waivers. Additionally, the Company currently has no borrowings or expected future borrowings on its CorEnergy Credit Facility, which mitigates the cross-default provision described above under the Company's 5.875% Convertible Notes. As discussed in Note 3 ("Leased Properties And Leases"), Pinedale LP and the Company expect to sell the Pinedale LGS to Ultra Wyoming on or before June 30, 2020 and by no later than July 30, 2020, and the Company expects to provide all cash related to the sale, along with cash available at Pinedale LP on the closing date, estimated to be approximately $3.0 million, to Prudential to satisfy the Amended Pinedale Term Credit Facility. Management believes these measures, as the Company continues to implement them, may enable it to comply with the financial covenants under

26


its debt agreements. In any event, should negotiations with the Company’s lenders concerning additional waivers prove unsuccessful or should the sale of the Pinedale LGS not occur, based on management’s current projections, the Company would have sufficient liquidity to extinguish the outstanding balance due under the Amended Pinedale Term Credit Facility, and to pay fees that would be due in connection with any termination of the CorEnergy Credit Facility, while also continuing to fund current obligations as they become due one year from the date of issuance of these financial statements. As a result, the accompanying unaudited consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern.
11. STOCKHOLDERS' EQUITY
The Company's Board of Directors authorized a securities repurchase program for the Company to buy up to the remaining amount of its 7.00% Convertible Notes and up to $5.0 million of its common stock and 7.375% Series A Preferred Stock, which commenced March 21, 2020. Purchases may be made through the program through August 20, 2020.
PREFERRED STOCK
As of March 31, 2020, the Company has a total of 5,010,814 depository shares outstanding, or approximately 50,108 whole shares of its 7.375% Series A Preferred Stock. On March 30, 2020, the Company repurchased 8,913 depository shares of Series A Preferred Stock for approximately $162 thousand in cash.
See Note 13 ("Subsequent Events") for further information regarding the declaration of a dividend on the 7.375% Series A Preferred Stock.
COMMON STOCK
As of March 31, 2020, the Company has 13,651,521 of common shares issued and outstanding. See Note 13 ("Subsequent Events") for further information regarding the declaration of a dividend on the common stock.
SHELF REGISTRATION STATEMENTS
On October 30, 2018, the Company filed a shelf registration statement with the SEC, pursuant to which it registered 1,000,000 shares of common stock for issuance under its dividend reinvestment plan. As of March 31, 2020, the Company has issued 22,003 shares of common stock under its dividend reinvestment plan pursuant to the shelf, resulting in remaining availability (subject to the current limitation discussed below) of approximately 977,997 shares of common stock.
On November 9, 2018, the Company had a new shelf registration statement declared effective by the SEC replacing the Company's previously filed shelf registration statement, pursuant to which it may publicly offer additional debt or equity securities with an aggregate offering price of up to $600.0 million. As described elsewhere in this Report, EGC and Cox Oil have refused to provide the financial statement information concerning EGC required to be filed by the Company pursuant to SEC Regulation S-X. At least until it is able to file these EGC financial statements, the Company does not expect to be able to use this shelf registration statement, or the shelf registration statement filed for its dividend reinvestment plan, to sell its securities. As previously disclosed in the Company's Current Report on Form 8-K filed on April 24, 2019, the Company has suspended its dividend reinvestment plan.
The Company has engaged in dialogue with the staff of the SEC in an effort to shorten the period during which it does not use its registration statements. The Company does not expect this period to be shortened until the EGC financial statement information has been received and filed.
12. EARNINGS PER SHARE
Basic earnings (loss) per share data is computed based on the weighted-average number of shares of common stock outstanding during the periods. Diluted earnings (loss) per share data is computed based on the weighted-average number of shares of common stock outstanding, including all potentially issuable shares of common stock. Diluted earnings (loss) per share for the three months ended March 31, 2020 and 2019 excludes the impact to income and the number of shares outstanding from the conversion of the 7.00% Convertible Notes and the 5.875% Convertible Notes, as applicable, because such impact is antidilutive.

27


Under the if converted method, and after consideration of the common shares issued in the Convertible Notes exchanges and conversions discussed in Note 10 ("Debt"), the 7.00% Convertible Notes and 5.875% Convertible Notes would result in an additional 2,450,788 common shares outstanding for the three months ended March 31, 2020. For the three months ended March 31, 2019, under the if-converted method, the 7.00% Convertible Notes would have resulted in an additional 2,126,545 common shares outstanding.
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Net Income (Loss) attributable to CorEnergy Stockholders
$
(162,042,368
)
 
$
3,866,441

Less: preferred dividend requirements
2,260,793

 
2,314,128

Net Income (Loss) attributable to Common Stockholders
$
(164,303,161
)
 
$
1,552,313

Weighted average shares - basic
13,648,293

 
12,604,943

Basic earnings (loss) per share
$
(12.04
)
 
$
0.12

 
 
 
 
Net Income (loss) attributable to Common Stockholders (from above)
$
(164,303,161
)
 
$
1,552,313

Add: After tax effect of convertible interest

 

Income (loss) attributable for dilutive securities
$
(164,303,161
)
 
$
1,552,313

Weighted average shares - diluted
13,648,293

 
12,604,943

Diluted earnings (loss) per share
$
(12.04
)
 
$
0.12

13. SUBSEQUENT EVENTS
The Company performed an evaluation of subsequent events through the date of the issuance of these financial statements and determined that no additional items require recognition or disclosure, except for the following:
Common Stock Dividend Declaration
On April 27, 2020 the Company's Board of Directors declared a 2020 first quarter dividend of $0.05 per share for CorEnergy common stock. The dividend was paid on May 29, 2020 to stockholders of record on May 15, 2020. As previously disclosed in the Company's Current Report on Form 8-K filed on April 28, 2020, the Company paid this quarter's common stock dividend entirely in cash.
Preferred Stock Dividend Declaration
On April 27, 2020, the Company's Board of Directors also declared a dividend of $0.4609375 per depositary share for its 7.375% Series A Preferred Stock. The preferred stock dividend was paid on May 29, 2020 to stockholders of record on May 15, 2020.
Pinedale LGS Accounting Charge
As a result of events that occurred in the second quarter of 2020 related to UPL and Ultra Wyoming, the guarantor and tenant under the Pinedale Lease Agreement, respectively, which are more fully described in Note 3 ("Leased Properties And Leases"), the Company expects to recognize a charge in the Consolidated Statement of Operations for the Pinedale LGS in the second quarter of 2020. The estimated charge could be partially offset by any reduction of the debt owed under the Amended Pinedale Term Credit Facility.

28


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto in this Report on Form 10-Q ("Report") of CorEnergy Infrastructure, Inc. ("the Company," "CorEnergy," "we" or "us"). The forward-looking statements included in this discussion and elsewhere in this Report involve risks and uncertainties, including anticipated financial performance, business prospects, industry trends, stockholder returns, performance under leases by tenants, performance on loans to customers, and other matters, which reflect management's best judgment based on factors currently known. See "Cautionary Statement Concerning Forward-Looking Statements" which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 27, 2020, as supplemented by the disclosures contained in Part II, Item 1A, "Risk Factors", in this Report.
RECENT DEVELOPMENTS
The COVID-19 pandemic-related reduction in energy demand and the sharp decline in commodity prices related to the combined impact of falling demand and recent increases in production from OPEC members and other international suppliers has caused significant disruptions and volatility in the global oil marketplace during the first and second quarters of 2020, which have adversely affected our tenants. In response to COVID-19, governments around the world have implemented increasingly stringent measures to help reduce the spread of the virus, including stay-at-home and shelter-in-place orders, travel restrictions and other measures. These measures have adversely affected the economies and financial markets of the U.S. and many other countries, resulting in an economic downturn that has negatively impacted global demand and prices for the products handled by our pipelines, terminals and other facilities. There is significant uncertainty regarding how long these conditions will persist and the impact of the virus on the energy industry and potential impacts to our business. For further discussion, see Part II, Item 1A, "Risk Factors."
Events as described above resulted in decreases of current and expected long-term crude oil prices along with significant reductions to the market capitalization of many oil and gas producing companies. Our tenant under the Grand Isle Lease Agreement was impacted by these economic events and elected to cease paying rent starting on April 1 and continuing to date through the second quarter of 2020. These events triggered us to review the carrying value of our long-lived GIGS asset as of March 31, 2020. Our evaluation resulted in the recognition of a $140.3 million impairment for our GIGS asset and a $30.1 million non-cash write-off of the deferred rent receivable for the Grand Isle Lease Agreement.
Further, as a result of the bankruptcy filing of UPL and Ultra Wyoming, the guarantor and tenant of the Pinedale Lease Agreement, the tenant's motion to reject the lease effective June 30, 2020 and the expected sale of the Pinedale LGS to Ultra Wyoming for $18.0 million on or before June 30, 2020, we expect to recognize an estimated charge to the Consolidated Statement of Operations of approximately $147.0 million in the second quarter of 2020, which could be partially offset by any reduction of the debt owed on the Amended Pinedale Term Credit Facility. For a further discussion of these matters, see Part I, Item 1, Note 3 ("Leased Properties And Leases"). The events and conditions surrounding COVID-19, volatility in the global energy markets, UPL's bankruptcy filing and pending rejection of the Pinedale Lease Agreement and the expected sale of the Pinedale LGS to Ultra Wyoming have impacted and are expected to continue to adversely impact our lease revenue and operating cash flows. Refer to "Dividends" and "Liquidity and Capital Resources" for further discussion.
BUSINESS OBJECTIVE
The Recent Developments affecting our assets have adversely impacted CorEnergy’s objective of providing a stable dividend with potential for long term growth. Our recent dividend announcements, including our decision to only pay cash dividends based upon rents received, will continue to be reviewed quarterly. We believe that the tax efficient business model described in this Report is valid; these extreme events demonstrate that while tenant-specific risks can be mitigated, they are not eliminated by our lease revenue model. We expect to manage our liquidity carefully in light of our balance sheet obligations, while expanding our business development efforts to include other REIT qualifying revenue sources, in the wake of the recent events discussed above.
CorEnergy primarily owns and seeks to own assets in the U.S. energy sector that perform utility-like functions, such as pipelines, storage terminals, rail terminals and gas and electric transmission and distribution assets. Our objective has been to generate long-term contracted revenue from operators of our assets, primarily under triple-net participating leases without direct commodity price exposure. We believe our leadership team's energy and utility expertise provides CorEnergy with a competitive advantage to acquire, own and lease U.S. energy infrastructure assets in a tax-efficient, transparent and investor-friendly REIT. Our leadership team also utilizes a disciplined investment philosophy developed through an average of over 25 years of relevant industry experience.
We expect our leases to provide us with contracted base rent, plus participating rent based upon asset-specific criteria. The energy industry commonly employs contracts with participating features, and we provide exposure to both the risk and opportunity of

29


utilization of our assets, which we believe is a hallmark of infrastructure assets of all types. Our participating triple-net leases require the operator to pay all expenses of the business including maintaining our assets in good working order.
The majority of our assets leased to tenants under triple-net leases are dependent upon the tenants' exploitation of hydrocarbon reserves in the fields where our assets are located. These reserves are depleted over time, and therefore, may economically diminish the value of our assets over the period that the underlying reserves are exploited. Accordingly, we expect the contracted base rents under these leases, including fair market renewal rent expectations, to provide for a return-on-capital, as well as a return of our invested capital, over the life of the asset. The portion of rents we believe to constitute a return of our invested capital are utilized for debt repayment and/or are reserved for capital reinvestment activities in order to maintain our long-term earnings and dividend paying capacity. The return-on-capital is that portion of rents which are available for distribution to our stockholders through dividend payouts.
Base rents under our leases are structured on an estimated fair market value rent structure over the initial term, which includes assumptions related to the terminal value of our assets and expectations of tenant renewals. At the conclusion of the initial lease term, our leases may contain fair market value repurchase options or fair market rent renewal terms. These clauses also act as safeguards against our tenants pursuing activities which would undermine or degrade the value of our assets faster than the underlying reserves are depleted. Our participating rents are structured to provide exposure to the successful commercial activity of the tenant, and as such, also provide protection in the event that the economic life of our assets is reduced based on accelerated production by our tenants.
Our assets are predominately mission-critical to our customers, in that utilization of our assets is necessary for the business they seek to conduct and their rental payments are an essential operating expense. For example, our crude oil gathering system assets are necessary to the exploitation of upstream crude oil reserves, so the operators' lease of those assets is economically critical to their operations. Some of our assets are subject to rate regulation by FERC or state public utility commissions. Further, energy infrastructure assets are an essential and growing component of the U.S. economy that give us the opportunity to assist the capital expansion plans and meet the capital needs of various midstream and upstream participants.
On November 16, 2018, the IRS issued the PLR to CorEnergy. The PLR provides to us assurance that fees we may receive for the usage of storage and pipeline capacity on assets we may own, including oil platforms, will qualify as rents from real property for purposes of our qualification as a REIT. As a result, the PLR grants us the opportunity to own and operate certain infrastructure assets under conditions set forth in the PLR. We can consider, and are considering, a broader set of investment opportunities than was available to us prior to issuance of the PLR. For example, prior to the PLR, we could own the Portland Terminal Facility, a petroleum products terminal that we previously leased to Zenith Terminals, but we were not then assured that we could operate such an asset and treat the revenues as rents from real property for purposes of the REIT income test. As a result of the PLR, we can now acquire and operate a storage terminal facility such as the Portland Terminal Facility.
We intend to distribute substantially all of our cash available for distribution, less prudent reserves, on a quarterly basis. We regularly assess our ability to pay and to grow our dividend to common stockholders, including the impact of events described under "Recent Developments" above. We are targeting long-term revenue growth from acquisitions. There can be no assurance that any potential acquisition opportunities will result in consummated transactions. Our management contract includes incentive provisions, aligning our leadership team with our stockholders' interests.
We believe these characteristics align CorEnergy with the attractive attributes of other globally listed infrastructure companies, including high barriers to entry and contracts with predictable revenue streams, while mitigating risks and volatility experienced by other companies engaged in the midstream energy sector.
Basis of Presentation
The consolidated financial statements include CorEnergy Infrastructure Trust, Inc., as of March 31, 2020, and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

30


RESULTS OF OPERATIONS
The following table summarizes the financial data and key operating statistics for CorEnergy for the three months ended March 31, 2020 and 2019. We believe the Operating Results detail presented below provides investors with information that will assist them in analyzing our operating performance. The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Part I, Item 1 of this Report. All information in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," except for balance sheet data as of December 31, 2019, is unaudited.
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Revenue
 
 
 
Lease revenue
$
15,746,504

 
$
16,717,710

Deferred rent receivable write-off
(30,105,820
)
 

Transportation and distribution revenue
5,200,500

 
4,871,582

Financing revenue
26,307

 
33,540

Total Revenue (Loss)
(9,132,509
)
 
21,622,832

Expenses
 
 
 
Transportation and distribution expenses
1,375,229

 
1,503,143

General and administrative
3,076,143

 
2,870,407

Depreciation, amortization and ARO accretion expense
5,647,067

 
5,645,096

Loss on impairment of leased property
140,268,379

 

Total Expenses
150,366,818

 
10,018,646

Operating Income (Loss)
$
(159,499,327
)
 
$
11,604,186

Other Income (Expense)
 
 
 
Net distributions and other income
$
317,820

 
$
256,615

Interest expense
(2,885,583
)
 
(2,507,294
)
Loss on extinguishment of debt

 
(5,039,731
)
Total Other Expense
(2,567,763
)
 
(7,290,410
)
Income (Loss) before income taxes
(162,067,090
)
 
4,313,776

Income tax expense (benefit), net
(24,722
)
 
447,335

Net Income (Loss) attributable to CorEnergy Stockholders
(162,042,368
)
 
3,866,441

Preferred dividend requirements
2,260,793

 
2,314,128

Net Income (Loss) attributable to Common Stockholders
$
(164,303,161
)
 
$
1,552,313

 
 
 
 
Other Financial Data (1)
 
 
 
Adjusted EBITDAre
$
16,839,759

 
$
17,505,897

NAREIT FFO
(18,522,869
)
 
7,063,434

FFO
(18,672,454
)
 
7,215,227

AFFO 
12,128,329

 
13,036,877

(1) Refer to the "Non-GAAP Financial Measures" section that follows for additional details.
Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019
Revenue (Loss). Consolidated revenues were a loss of $9.1 million for the three months ended March 31, 2020 compared to revenue of $21.6 million for the three months ended March 31, 2019, representing a decrease of $30.8 million. Lease revenue was $15.7 million and was 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 $14.4 million for the three months ended March 31, 2020. Lease revenue was $16.7 million for the three months ended March 31, 2019, resulting in a decrease of approximately $31.1 million from the prior-year period. The decrease in lease revenue was primarily driven by (i) the non-cash write-off of the deferred rent receivable, which is no longer probable of collection, and (ii) the decrease in participating rent at Pinedale. Refer to Part I, Item 1, Note 3 ("Leased Properties And Leases") for further discussion of the impairment of the deferred rent receivable.
Transportation and distribution revenue from our subsidiaries MoGas and Omega was $5.2 million and $4.9 million for the three months ended March 31, 2020 and 2019, respectively, representing an increase of $329 thousand. The increase was primarily driven by short-term winter firm transportation contracts at MoGas.

31


Transportation and Distribution Expenses. Transportation and distribution expenses were $1.4 million and $1.5 million for the three months ended March 31, 2020 and 2019, respectively, representing a decrease of approximately $128 thousand. The decrease primarily relates to lower legal and maintenance costs at MoGas.
General and Administrative Expenses. General and administrative expenses were $3.1 million for the three months ended March 31, 2020 compared to $2.9 million for the three months ended March 31, 2019. The most significant components of the variance from the prior-year period are outlined in the following table and explained below:
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
Management fees
$
1,609,522

 
$
1,808,501

Acquisition and professional fees
1,151,935

 
691,272

Other expenses
314,686

 
370,634

Total
$
3,076,143

 
$
2,870,407

Management fees are directly proportional to our asset base. For the three months ended March 31, 2020, management fees decreased $199 thousand compared to the prior-year period due to (i) a full waiver of the incentive fee at March 31, 2020 (ii) a management fee waiver in the current period to exclude the net proceeds from the 5.875% Convertible Notes offering in August of 2019 (other than the cash portion of such proceeds utilized in connection with the exchange of the Company’s 7.00% Convertible Notes). See Part I, Item 1, Note 8 ("Management Agreement") for additional information.
Acquisition and professional fees for the three months ended March 31, 2020 increased $461 thousand from the prior-year period, primarily t