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CorEnergy Infrastructure Trust Inc (CORR)
Q2 2020 Earnings Call
Aug 4, 2020, 2:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello and welcome to CorEnergy's Second Quarter Results Call.

[Operator Instructions]

I would now like to turn the call over to Matt Kreps, Investor Relations for CorEnergy. Please go ahead, sir.

Matt Kreps -- Investor Relations

Thank you. And thank you, everyone, for joining CorEnergy Infrastructure Trust's second quarter 2020 results call.

I'm joined today by Dave Schulte, Chairman, President and CEO. Materials related to this call, such as our press release issued yesterday afternoon, and an audio replay of this conference call will be available on CorEnergy's website, corenergy.reit. Our second quarter 10-Q shall also be available later today in the SEC filings site and in the Investors section of corenergy.reit.

The press release and 10-Q include additional non-GAAP metrics and a reconciliation to our GAAP results. We encourage all of you to review our complete disclosures and those metrics. Additionally, due to ongoing work to deploy our liquidity and resolve the rent issues with our GIGS tenant, we will not host our typical question-and-answer session at the end of this call. We recognize that many of you may have questions. We are presently at a point that limits our ability to make further disclosures at this time.

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

With that, I'd like to now turn the call over to Dave Schulte. Please go ahead.

David Schulte -- Chairman, Chief Executive Officer and President

Good afternoon, everyone, and thank you for joining us on the call today.

I'll mention in advance that today's call will again be brief, and we will only provide management's remarks. We've been doing our best to keep all of you apprised of our results through regular press releases and SEC filing updates, including the difficult resolution to our Pinedale LGS system and ongoing efforts on GIGS. Most importantly, we're now shifting our focus to rebuilding our dividend generating asset base and making progress on acquisition efforts.

And the first half of 2020 was the most challenging period in our company's history. The impact of the global health crisis on the energy markets resulted in severely diminished revenue and asset values for our tenants. While our leases have provided revenue protection in difficult times in the past, they could not ensure payment during the unprecedented times we faced beginning in March of this year.

As you know, we sold the Pinedale Liquids Gathering System in Wyoming to UPL at the end of June after they rejected our lease and bankruptcy. In rejecting the lease, their stated intention was to start construction from their well pads to another system, bypassing our system entirely. This construction would have severely diminished the value of our Pinedale Liquids Gathering System and would have been disallowed under our lease creating an indemnification claim for us under normal times, or even in distressed times. However, while we believe we had a valid damages claim for these actions under our lease, the UPL bankruptcy estate was so severely diminished that no value recovery was going to exceed their second lien position, including the value of our unsecured claim for damages.

Unlike the 2016 bankruptcy, where UPL had an estate value of more than $6 billion and could pay all claims, just four years later, the estate was valued at only $1 billion. In consultation with the lender partnered with us on the LGS system, we had deep familiarity with UPL's estate from that prior bankruptcy. We believed the sale was in the best available course of action. The proceeds were approximately equal to UPL's cost of their proposed construction project, and they were turned over to the lender in exchange for fully discharging the associated subsidiary secured debt of approximately $32 million. We are extremely disappointed in the Pinedale outcome as an example of the worst aspects of a bankruptcy process amplified by market and economic conditions. In short, the low gas price environment and pandemic created a perfect storm that swamped that asset and the protections we would have normally been able to deploy to protect our interest.

We've also been challenged by the refusal to pay rent from our tenant at the Grand Isle Gathering System. However, with oil prices recovering into the $40s, the tenant recently resumed transporting oil on the system. And while they have not paid rent since April, the lease is clear, their rent is due whether or not oil is flowing. I cannot provide further details today around our GIGS conversations. We are working to resolve these issues directly and to move forward.

In contrast, our MoGas and Omega assets have performed well despite all the challenges in 2020, illustrating the resiliency of other types of assets that we have in our portfolio. MoGas and Omega are natural gas, transportation and delivery systems with long-term capacity contracts and therefore, less sensitivity to commodity price fluctuations. In fact, MoGas entered into an agreement with a subsidiary of Spire to construct an interconnect with their pipeline, expected to be completed in the fourth quarter, as well as entered an additional 10-year firm transportation services agreement with Ameren Energy, starting at about the same time.

And the final asset we're managing is our liquidity. Our balance sheet is strong with more than $110 million in cash at quarter-end. We are mindful of our bondholders' and preferred stockholders' priorities, and will be prudent in our use of this resource for the benefit of all of our stakeholders. With this cash and our bank lines of more than $55 million, plus potential asset level financing, we believe CORR can execute a new acquisition in excess of $200 million just with our resources on hand, enough to make significant headway in rebuilding our dividend-paying capabilities for our common stockholders. And we believe there is support for even larger transactions, should we find the right opportunity.

I can share with you today that we're actively pursuing new opportunities with conservative risk profiles, including diligence activities, and our goal is to complete a transaction before year-end. Now these opportunities may include assets where we can leverage our Private Letter Ruling to both own and operate infrastructure assets. We intend to emerge from these challenging times with greater insight, better position to capitalize on our pioneering business model.

Our progress to date on these efforts gave management the confidence to recommend to our Board the payment of both our preferred dividends and a common dividend for the second quarter. We will continue to review the dividend each quarter as our portfolio progresses ahead.

In closing, I'd like to thank the CORR team for its hard work through this difficult time, and thank our stockholders and bondholders who have continued to support our work during these challenges and have expressed confidence in our business model and in our ability to rebuild our business.

I hope all of you are staying safely in these unusual times, and thank you for joining us today.


[Operator Closing Remarks]

Questions and Answers:

Duration: 7 minutes

Call participants:

Matt Kreps -- Investor Relations

David Schulte -- Chairman, Chief Executive Officer and President

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