Debbie Hagen - IR David Schulte - President and CEO Becky Sandring - Treasurer, Secretary and Chief Accounting Officer

Tim Howard - Stifel

Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the CorEnergy Infrastructure Trust First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. At this time, I'd like to turn the conference over to your host, Debbie Hagen for CorEnergy. Ms. Hagen, you may begin.

Thank you and welcome to CorEnergy Infrastructure Trust first quarter 2015 earnings call. I'm joined today by Rick Green, CorEnergy's Executive Chairman; David Schulte, CEO and President; and Becky Sandring, Treasurer, Secretary and Chief Accounting Officer. The presentation materials for this call, as well as information included in our press release issued Monday and an audio replay of this conference call are available on CorEnergy's website at corenergy.corridortrust.com. We would like to remind you that statements made during the course of this presentation that are not purely historical may be forward-looking statements regarding CorEnergy's or management's intentions, estimates, projections, assumptions, beliefs, expectations and strategies for the future. All such forward-looking statements are intended to be subject to the Safe Harbor protection available under applicable securities law. Because such statements deal with future events, they are subject to various risks and uncertainties and actual outcomes and results might differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our filings with the SEC. These documents can be accessed through the Investor Relations section of our website. We do not update our forward-looking statements. At this time, I will turn the call over to President and CEO, Dave Schulte.

Thanks and welcome to CorEnergy's first quarter 2015 earnings call. On slide three for those of you following, as an infrastructure company with assets that perform utility like functions and generate long-term contracted cash flows, CorEnergy delivered predictable results in the first quarter, indicative of our steady durable business model. Our accomplishments in the quarter amount to exactly what you'd expect, based on the progress we made building our portfolio in 2014. We declared a first quarter increase in the dividend to $0.54 annualized for 2015, tracking the guidance we gave in our year-end call and 10-K and as a result of the accretive acquisition of MoGas pipeline. During the first quarter, we announced a long-term target of 3% to 5% annual growth in dividends and believe this target is achievable from platform growth and from contract terms. In our 10-K and year-end call, we presented pro forma data for 2014, showing the results from all of our assets, including the ones we acquired in 2014 as if we had held them for the full year. Using that as a baseline in the first quarter, our portfolio produced AFFO of $0.15 per share, right in line with the 2014 pro forma. Our contribution margin of $11.8 million for the quarter also was consistent with our pro forma as these assets produced predictable revenues. During the quarter, we strengthened our liquidity and our balance sheet with a $55 million offering of Series A preferred stock using proceeds to pay off our $32 million balance on revolver and to add to our cash. As of March 31, we had approximately $116 million available for future investment. While we do not have any new acquisitions in the quarter after a busy 2014, we believe the opportunity set for CorEnergy is expanding in 2015. As E&Ps respond to the lower energy price environment, the economics of the upstream business have changed significantly and as a result, we are seeing more assets in play that represent the central midstream infrastructure in our potential investments for CORR. On slide 4, as an infrastructure REIT, CorEnergy holds assets with operating fundamentals that provide utility like predictability as well as long-term growth. These characteristics are listed on the top of the slide. We own long-lived assets that are critical to our customers operations; they generate recurring utility like revenue with stable cost structures. Demand for the access to the assets is relatively unaffected by commodity prices and the assets are strategically located with very high barriers to entry. And for the most part, the first quarter showed little change in our assets, and here is a quick update on the individual properties. The Pinedale Liquids Gathering System, our largest asset had a small rental increase starting in the first quarter of this year based on the CPI escalator. Now, Ultra has publically disclosed operating cost reductions which are mitigating the impact of lower gas prices, they've lowered both drilling and completion costs, and operating costs and they are profitable. And the rent we received under our triple-net lease isn't above the line or operating expense for Ultra Petroleum with a small impact on our overall operating costs. Like a pipeline capacity payment, our minimum rent is not based on usage or commodity prices. Our newest asset MoGas Pipeline, produced its first full quarter of revenue. MoGas has annual contracts with LDCs or utilities, which contract for capacity on the pipeline, we received base payments again regardless of usage. We continue to invest in planned construction projects at our Portland Terminal Facility on the Willamette River, and by the end of the first quarter, had put in $7.8 million of our expected $10 million investment. Our contract with the operator, our base rent has increased with progress on these projects. Omega Pipeline is a non-regulated LDC utility, which has a fixed charge to the U.S. Department of Defense for access to the pipeline, we're in the process of re-negotiating the contract with the DOD with an expected ten-year period. Our financing agreements for saltwater disposal wells representing less than 5% of assets are the most sensitive to energy price movements. Water disposal volumes and therefore our revenue streams of these operators will vary with drilling and production activity in their regions of Wyoming and North Dakota. Our flexible financing structure for these assets even without the cash flows, with the reliable level of base interest payments. In the first quarter, due to reduced drilling activity in Black Bison's area of operations, we granted a waiver of certain financial covenants, including their scheduled amortization payment on March 31. The Company continues to make interest payments in a timely way and we have no reason to believe that the loan will not be fully collectible. One asset not listed on the slide is a power transmission line which was leased to Public Service of New Mexico. The final payment was received on April 1, 2015, and EIP is no longer in our portfolio. Our Chief Accounting Officer, Becky Sandring will next provide an overview of our financial results for the first quarter. Becky?

Thank you Dave. This week we filed our 10-Q and issued a press release highlighting CorEnergy's financial results for the quarter ended March 31, 2015. The financial information in the 10-Q should be considered in its entirety. For purposes of this call, we have provided a few key financial metrics that we think will be helpful to you in evaluating CorEnergy's performance and expectations. Because CorEnergy is a REIT and a majority of our assets are REIT qualifying, management believes that non-GAAP performance measures utilized by REIT, including funds from operations, FFO and adjusted funds from operations, AFFO also provide useful insights into our operational performance. On slide five, we show FFO as calculated by NAREIT, our FFO adjusted to take out the effects of legacy assets from our BDC days and adjusted FFO. A reconciliation of these measures to net income is provided as slide 12 of these materials. The first quarter AFFO of $0.15 per share was consistent with our 2014 pro forma AFFO of $0.61 per share for the full year. We show that pro forma in the right hand column on this slide for ease of comparison. The 2014 pro forma was filed in our 10-K and reflects adjustments showing our baseline of performance as if CorEnergy had held all of the assets it acquired during 2014 for the full year. As a reminder, the largest pro forma adjustments was from MoGas which we acquired in November last year. Moving to slide six, our strategy is to grow common stock dividends grounded in long-term contracted revenues supported by diversification of our asset and revenue sources. Our contacted revenues support dividend stability and long-term growth has come from acquisitions as we have built our platform of assets. These graphs show our progress. Total assets have grown from $111 million at the end of fiscal 2012 to $461 million as of March 31, 2015. Our contribution margin is a measure of the earnings from our assets and operations conducted in taxable subsidiaries. We reconcile this amount to financial GAAP information in our 10-Q. Our first quarter contribution was in line with the 2014 full-year pro forma. The contribution margin has grown in absolute terms with the growth in our total assets. We believe the contribution margin reflected in our MD&A provide transparency to the cash flow generating nature of our assets On slide seven, we offer further insight into the confidence we have in the dividend, both for CorEnergy common stock and for the preferred we issued in January. This table gives a summary of the coverage related to the parts of our capital structure as taken from Exhibit 12.1 that we filed with the 10-Q. As we look at this table, we can see, the first lines shows fixed charges on debt which were $1.1 million in the quarter. Next our preferred stock dividends of $737,500 and the combined amount of those fixed charges is approximately $1.9 million for the quarter. Net income applicable to common shareholders was $3.3 million in the quarter, therefore total earnings available to cover fixed charges, preferred dividends and the common stock dividend came to approximately $5.2 million. That's a coverage ratio of earnings to fixed charges and preferred dividend of nearly 3 to 1, which should give some degree of comfort to preferred shareholders. The cash flows attributable to common stockholders adequately cover the common stock dividend as well. With that overview, I will turn it back over to Dave to conclude the presentation and lead us into the Q&A.

Let's now turn to slide eight. Our company was formed 10 years ago and many of the original investors remain equity holders of CORR. Slide eight illustrates the securities portfolio in 2010 when we were named Tortoise Capital Resources and which was our last year structured as a 1940 Act registered business development company. Our company was taxable so that it could hold pass through entities. We had total assets of $95 million, we had no line of credit at the time and a $0.44 dividend with some non-performing assets following the financial crisis. CorEnergy today is completely repositioned and we believe relevant to today's energy capital market opportunity. We have $462 million in assets and we can fund projects for public and private companies in transaction sizes typically from $15 million to $250 million. We directly own assets rather than securities, and believe our leases provide predictable cash flows from economically critical assets. Our repositioning is due to the dedication of our commercial team of Jeff Fulmer, Mike Jonagan, Rick Kreul and Wes Brown. Our accounting and tax teams led by Becky Sandring have kept pace by creating and tracking meaningful asset performance measures which are reported in our MD&A and re-compliance measures for the variety of structures that we can utilize. The support of our board of directors since our inception in 2005 has enabled CORR to remain a relevant and differentiated capital provider to the energy sector which we will discuss on our next slide. Slide nine is our overheard in the corridor conversation where we look beyond the quarterly results and offer our perspective on topics of interest to our stockholders. Today we focus on how the energy price environment affects our opportunity set. We've all seen the dramatic drop-off in crude oil and natural gas prices with a partial recovery recently, but still a relatively low price environment. We know the impact this has had on stock prices in the sector and on borrowing basis due to reserve value reductions. The environment in the oil and gas sector is one of capital constraints today, hit by both the price volatility and the lack of visibility for production growth due to reduced CapEx budgets. In response to this environment, upstream companies are moving decisively to optimize their operations taking out non-essential costs and reallocating capital, steps these companies just didn’t have to take with the $100 crude oil and growing opportunity sets. Across the upstream energy industry in 2015, attention to return on invested capital or ROIC has perhaps never been more important to energy companies. In this environment, CorEnergy helps E&P operators to bolster their ROIC by reallocating their capital. Among our advantages as a partner, when an E&P company sells an asset and leases it back from CorEnergy, nothing changes for them operationally. The seller keeps control and continues to operate the asset while owning the associated commodities and making all commercial decisions regarding utilization of the asset. By taking midstream assets off their balance sheet, E&P operators can turn that piece of infrastructure from stranded capital into a predictable operating expense on the income statement. We represent a potential way for energy producers to improve the return on invested capital in this example. If the monetize the natural gas gathering system, which may have commanded a 10% to 15% return in our hands, they can use that cash to drill more wells with associated returns of say 30%. The E&P company’s net income would increase while debt and equity would stay the same, augmenting return on invested capital. We’re seeking opportunities in this environment, but we believe the downturn is a very good time for us to put money to work. To sum up on slide ten, CorEnergy represents a very effective way for investors to gain access to the desirable investment characteristics of energy infrastructure. As an investor-friendly REIT, we offer access to the steady utility-like cash flows generated by infrastructure assets that buoyant that [ph] essential support systems for the energy distribution that powers the entire US economy. We’ve announced a long-term target of 3% to 5% dividend growth per year and we’re on track with that target. Initially that will be met by asset acquisitions, but in later years, we expect contracts to provide revenue participation, driving further growth. [00:03:02], CorEnergy has very limited direct exposure to the impact of commodity prices. Our assets provide critical infrastructure and our partners pay us as an operating cost in their business like they would for utility services. The opportunity set has always been large but because of the downturn in prices, we’re getting more looks at assets that might make sense for CorEnergy, still in the range of $50 million to $250 million. We have ample liquidity in the form of cash and borrowing capacity to execute our strategy. We believe CorEnergy provides investors with direct access to infrastructure assets, where quarterly cash flows are a high component of total return and thus we believe CORR offers investors a real yield opportunity. I like to open the line to questions operator.

At this time we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Selman Akyol with Stifel. Please proceed with your question.

Hi, this is Tim Howard on for Selman. Thanks for taking my question. I was wondering if you could expand on the Black Bison outstanding amortization payment and the way covenants -- how you see that progressing.

Sure. We’re disappointed to have to report that, but I would say it’s evidence of how -- what we believe to be our flexible financing structure around those kinds of assets is working, you’re looking until things go alright whether or not your structure has a way of accommodating that. So I am going to start by saying our dividend level is set with reference to our base interest only, not participating interest and not amortization, so there is no implication to our coverage ratio and we do believe that the reduced drilling activity referred to that when it comes back will have the full ability to collect our principal amounts on that loan. The company has implemented relevant cost cutting measures in the field and we’ve been monitoring the situation on a very close basis to confirm that the interest expense we receive will still be collectible and they are current in their interest. As far as the principal, back to the amortization, with two measures of ways to be repaid, one was the scheduled amortization payments and the other was the sweep provision of excess volume sweeps to repay our loan. So we didn’t have a defined term of expectation around when that loan will be repaid. The amortization only got us a tender of approximately 10 years with sweeps able to pay that down to closer to seven. So in this period of lower activity, deferring that principal to us doesn’t mean we had to defer the ultimate collectability or even tenure of the loan, we’ll just have to see when activity levels return to more normal levels, which they were leading up to the end of last year. We are in fine shape at that point of the company was to make all scheduled payments. So we’d hope and expect this is temporary.

Okay, great. And then I guess kind of thinking about risk and more utility looking, how does that compare with kind of your long-term focus being more utility based? And just with this asset in your portfolio, it seems a little more risky, obviously you guys have options, but just kind of if you could speak to that a little bit for us?

This particular asset and assets of this type would be very limited in total in our portfolio so that we would achieve some diversification in upside. Our structure, I don’t think you can rely completely on structure if you have a volatile underlying cash flow stream, but our structure does tend to mitigate the impact of that volatility. So for example, our revenues don’t go up and down with volumes. Unlike some other public companies that have exposure to salt water disposal businesses, where their revenues go up and down, ours do not. So the predictability of our revenue stream, even in a low volume environment as we are today is high. And I see that as being more utility like than if we owned the distribution business itself. We have a senior position in the asset, we are fully secured by the collateral, we have no real blue sky “in the asset purchase” which we can’t have as a REIT. So we are very close to the assets in terms of our monitoring, and although this is not technically as utility like as most of our investments, it does at the margin provide us a good return opportunity if we return to more normal levels of activity in the field.

Okay, great. Thank you. And then moving to the Portland Terminal, could you just kind of give an update on those assets and how that buildout is going compared to your expectations? And then beyond the $10 million, is there any incremental opportunities that you see?

The company in their conference call recently reported that the investment that they are making and that we are making on their behalf in the facility is on pace and on plan and that they are integrating that asset into their overall commercial activity in accordance with expectations. We don’t expect that we would have additional investment opportunity beyond the $10 million, but that would get our total investment there to $50 million, which is right in-line with our sweet spot. So we are very pleased with that relationship. The company is doing well by adding terminals elsewhere, so their national footprint is growing that helps them be relevant to their customers throughout the United States including in this location. So we’re very pleased with the Portland asset and it’s performing as we expected and as the company has expected.

And then last one for me. So it sounds like you guys’ pipeline is pretty robust. So since last quarter, since your last call, have any conversations progressed, are they further along or could you just talk about where you were in discussions compared to last quarter call?

Yeah. We have many of the same companies that we were in discussions with in the last quarter, remain at various stages of our investigation and that includes from a process standpoint, us describing, them describing the asset to us, talking about the opportunities for that asset to provide capital back to the company and the associated revenue streams that we would need for that activity as we described here, and then the companies tend to need -- tend to have a period where they need to evaluate that option out of all their options. And so we tend to have activity in bunches, initial enquiries, a lot of response time on our part and then the company is digesting that information in responding to us, at which time we wind up with another flurry of activity, and try to get to a closing. We've got projects at all levels of that activity chart today and there are -- mostly the same companies we were speaking with and referring to at the beginning of this year. So we do believe our pipeline is robust, it's more so than it was in 2014, we attribute that directly to the commodity price environment as we said and are pleased with the types of assets and their economic necessity to the upstream company's operations as a measure of our comfort.

Okay. Thanks. And then is there any concentration of assets in your pipeline or is it just kind of broad based?

Very broad based and would add to our diversification, so we have -- and we have currently natural gas exposure in central upper plains with the Portland facility we've described, we've got Northern Plains oil exposure, we have natural gas distribution assets in the St. Louis area with that project. So we're diversified by geographies, we're diversified by commodities, we're diversified by management teams that operate these assets and we fully expect that our pipeline to continue that diversification, further mitigating risk of our portfolio.

Great. Thanks for your time today. I appreciate it.

[Operator Instructions] There are no further questions at this time. At this point, I'd like to turn the call back to Dave Schulte for closing comments.

Thanks everyone for your attention and we look forward to speaking with you again next quarter. Thanks, operator.

You're welcome. This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.