Greetings and welcome to the CorEnergy Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. An interactive question-and-session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lesley Schorgl. Please, you may begin.

Thank you for joining CorEnergy Infrastructure Trust’s third quarter 2017 earnings call. Today, we have David Schulte, CEO and President; Rick Green, Executive Chairman; and Nate Poundstone, Chief Accounting Officer with us. As a reminder, the presentation materials for this call, as well as the information included in our press release issued Wednesday, and an audio replay of this conference call, will be available on CorEnergy’s website. 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, available 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 and reconciliations between GAAP and non-GAAP results, which we discussed on this call, can be found in our related earnings release and 10-Q filing. President and CEO, Dave Schulte will now speak to you about CorEnergy’s recent developments.

Thank you, Lesley, and good afternoon, everyone. For the third quarter, CorEnergy declared its 9th consecutive common dividend at $0.75 per share, demonstrating the consistency of our revenue model, where we received base rent plus potential participation in the economic activity of our tenants through variable rent features in our leases. And for the first time since achieving REIT status in 2013, CorEnergy received participating rent payments under the Pinedale LGS lease during the quarter. As a reminder, each of our leases contain variable rent features, so that CorEnergy can benefit from the increased production of our tenants and higher utilization of our assets. The Pinedale Anticline is one of the most abundant and low-cost natural gas fields in the United States. Ultra Petroleum has increased production in this core field, following its emergence from bankruptcy. Ultra has also commented recently on test results from the company’s horizontal drilling program, which could further extend the life of the field and potentially the utilization of our pipeline for liquids gathering. Also during the quarter, the tenant of our Portland Terminal, Arc Logistics, announced that it expects to be acquired by Zenith Partners with the transaction scheduled to close no later than the first quarter of 2018. And its preliminary proxy related to the transaction are signaled a few different scenarios for the future of the Portland Terminal lease, including continuing with the lease as is, as well as exercising either its buyout or its terminations options that are provided for under the lease. And we’ve not received notification from Arc or Zenith regarding exercising either the buyout or termination option. We still believe the Portland Terminal’s strategic location in the Pacific Northwest makes it a valuable asset, whether it is Arc or another tenant that in the event that they would elect to terminate the lease. And in conjunction with the acquisition of Arc Logistics, Zenith Partners has agreed to buy Lightfoot Capital LP and GP and CorEnergy owns approximately 6.5% of the LP and 1.5% of the GP. We expect to receive approximately $10.5 million in total consideration for our Lightfoot interest, a portion of which is contingent upon a positive outcome of the Gulf LNG litigation, which has been disclosed previously, and a portion of which is required to be reinvested into Arc Logistics Joliet Terminal. And now I’d like to turn the call over to Nate for a review of our financial results during the quarter.

Thanks, Dave. Moving to the metrics illustrated on Slide 4, you can see that our financial performance remains steady. Our adjusted funds from operation for both the second and third quarter of this year have been adversely impacted by the incremental preferred dividend requirements, resulting from the preferred equity issuance we did back in April. As we have stated, our target AFFO coverage ratio to dividends is 1.5 times for the current portfolio, which provides us with ample reserves. These reserves are necessary for debt repayment, funding our ARO liability and other capital reinvestment activities in order to allow us to sustain our business model and our dividend paying capacity over the long-term. While the coverage ratio for the past two quarters has been below the 1.5 times target, this was expected and is largely due to the financing activities undertaken this year in order to position the balance sheet for growth, which we highlight on the next slide. Turning to Slide 5, you can see this in the capitalization and liquidity tables. At the end of the third quarter, our liquidity was $146 million, following the preferred offering and amendment to our credit facility earlier this year. Our balance sheet remains conservative with total debt to total capitalization of 21%, which is below our target of 25% to 50%, and our preferred to total equity ratio was at 28%, which is below our 33% target. These ratios as well as our enhanced liquidity have us well positioned to be able to transact efficiently on acquisition opportunities as they materialize. We expect any such transactions would further benefit our AFFO, or AFFO coverage ratio and the stability and potential for growth of our dividend, particularly with our ability to add leverage in connection with transactions, given the current positioning of the balance sheet. With that, Dave will speak to you about our outlook.

Our team is in the process of reviewing a number of high-quality properties, which we believe could fit well into our current portfolio. We target getting one to two deals done each year in the size range of $50 to $250 million. With $146 million of liquidity available as well as the ability to leverage in connection with a transaction, we believe we can efficiently transact within our target size range without raising significant new common equity. Once we identify an asset, which meets our investment criteria and return profile, we expect to quickly put that capital to work. I’d now be happy to take any questions.

We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Barry Oxford with D.A. Davidson. Please proceed with your question.

Great. Hey, guys, thanks for taking my call – our question, should I say. A real quick, when we look at the rents that you’ve received from Pinedale, do you expect that there’s more to come from that? Can we expect more from that? And are there any other leases that may be on the verge of crossing over as far as variable rents?

We’re, just to reiterate, able to receive variable rents under all of our leases, and this is the first time that’s happened. Many of our assets have been put on shortly before. The downturn in oil and gas prices and production levels were curtailed. Really the emergence of bankruptcy and the reinvigoration of capital spending by Ultra has driven volumes, according to their own reports, and we’ve seen that show up now in our water handling volumes. We – the companies anticipates continuing to invest in that field. And so, I – we hope that we’re not plateaued here, and that there’s a continuing increase in the variable rent potential. Our policy there would be to consider that to be capital that would enhance our coverage, enable us to say pay down debt faster. And unless it was sustainable and therefore sustainably higher, we wouldn’t expect to have an immediate dividend impact from that. On the further question about the rest of our portfolio, the other assets are not operating at a level that’s approximate, that looks like it’s going to exceed their threshold. And so we don’t have any forecast of that for this year or for next.

All right. Okay, great. On the lease at Portland, can you handicap that of what you think is a likely outcome?

Well, there are several potential outcomes.

Right. But can you handicap it for us, most likely type of thing?

Yes, this terminal was developed by our tenant, and we help them through the capital phase of acquiring the asset and putting CapEx in. The commercial relationships up there are our tenants commercial relationships. And we believe that they continue to think that that’s a very valuable asset in their network, and that there will be continuity of operation by the tenant throughout this intermediate portion through the end of the lease term, that’s our expectation.

Okay. Then on the possible acquisitions, can you give us a little more color on maybe how far down the road you are with maybe a couple of people? And as far as anticipating timing as much as you possibly can with – without stepping over any boundaries?

Yes, and I appreciate that. It’s been a continuing question that…[Multiple Speakers]

Right. Well, we’re all very excited about it, as I’m sure you guys are, too.

We are, too. In fact, we use a quarter like the one we just experienced where there really isn’t a significant amount of activity inside our portfolio to dedicate our resources to the acquisition process, evaluation of projects and diligence. We’ve got projects at various stages of evaluation from very preliminary through non-binding negotiations of letters of intent. And frankly, even after a letter of intent, which are always non-binding in our case, that’s where heavy diligence oftentimes gets underway subject to then documentation. And at any point along the way, we feel like we’re better off walking away than trying to close something that we don’t have great conviction around. So we have projects at each of those phases and our expectation is still to close one to two a year. This calendar year is quickly coming to a close. But in fairness to us, we didn’t really have the ability to fund transactions until the emergence from bankruptcy of our two largest tenants in the spring and summer of this year. So we still hold to the fact that, we should be able to get one to two acquisitions in the size we believe across the finish line per year.

Okay, great. I’ll go ahead and read [ph] the report. Thanks so much.

Thank you.

Our next question is from Selman Akyol with Stifel. Please proceed with your question.

Thank you. Good afternoon. A couple quick one. So just going back to the Portland Terminal, do they have to give you an answer one way or another, does this option just stay with them and they can exercise that whenever?

Well, there – so there are two options. The option to purchase has become effective. We’ve talked about that in the past and they can exercise that whenever. The option to terminate is not effective yet, it would be effective in January, and then – and that’s in connection with their fifth anniversary of the lease. So you have to have a year of notice, and then again at the 10th year of the lease. So those are one-time options they either exercise them or they have to wait.

Gotcha. All right. And then in conjunction with ArcLight and your ownership with the LP and the GP, how much capital you said has to be retained for the Joliet, and then how much do you expect to get back?

According to the – it’s – so it’s ArcLight – it’s Lightfoot Capital, to be clear, not ArcLight. [Multiple speakers]

Lightfoot, okay.

Our fair value is around $10.5 million, that’s based on the proposed transaction economics. And of that, we would expect to be able to reinvest about $9 million into new investments to sustain the dividend for the $10.5 plus ownership interest in Joliet, which would be a new instrument for us, although we have own Joliet inside of our Lightfoot ownership interest. So we have yet to evaluate the expectations from that small remaining investment in Joliet and its materiality to the overall financial condition. We don’t think it’s material.

Okay. And then if you like this, could you actually increase your investment?

There – I mean, all – frankly, all owners of Lightfoot are going to receive Joliet interest as part of the transaction consideration. And right now, there’s no expectation of any change in ownership among that group nor have we been asked to change our ownership interest by anybody else in the group. So we expect to hold tight at the small residual amount we’ll receive in the transaction.

Gotcha, thank you for that. And then last one for me, transportation and distribution expense seem to increase in the quarter, any thoughts behind that?

Yes, I’m going to invite Nate to respond to that.

Yes. Hey, Selman. Yes, transportation and distribution expenses were up for the third quarter. The portion of that increase was at Omega for some projects that we did for Fort Leonard Wood, but then we also have higher costs at MoGas during the quarter for planned pipeline integrity maintenance work that we did on their system. And we’ll have a little bit of cost that will bleed over for the MoGas integrity work into Q4, but not nearly to the same degree that we had in Q3 as we go forward here.

Okay. Thank you very much.

Thank you.

Our next question is with Ron Ben with Wells Fargo. Please proceed with your question.

Yes. Hi, thank you. When you do the acquisitions, is the focus more on growth and diversification or our accretion? The distribution is pretty good. Are these going to be accretive transactions, or what is it the – what’s the main focus is?

We’ve developed a strategy of business development that includes diversification of assets across different parts of the energy value chain from upstream to midstream even including downstream like our Omega and our MoGas assets. We like to continue to diversify. We’re very concentrated right now in really four significant assets. We would like to have, at least, six to seven significant assets. And then see from there whether we continue to have sizable transactions thereafter or whether smaller transactions that are – fits with what we already own would be better. We think that investors in our platform and the ones we’ve had dialogue with are primarily concerned with dividend safety over dividend growth. Now we do intend that in any particular acquisition that it would benefit our stockholders not just from diversification, but from the opportunity to increase our coverage ratio of our dividend, which within announce to point to growth expectations over a longer period. So growth is a requirement that we’ve imposed on our acquisition strategy. And you would expect to see coverage ratio growth announced in connection with any acquisition that could then lead to distribution growth thereafter. But nonetheless, additional safety by diversification across more assets.

Thank you.

[Operator Instructions] There seems to be no further questions at this time. I would now like turn the conference back over to Dave Schulte for closing remarks.

CorEnergy spent much of this year preparing for growth, and we believe there’s a lot of opportunities that lie ahead. We thank you all for your continued support. Please don’t hesitate to reach out to our team if you have any further questions.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.