Greetings and welcome to the CorEnergy's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer 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, Manager Investor Relations.

Thank you for joining CorEnergy Infrastructure Trust's first quarter 2019 earnings call. I am joined today by David Schulte, Chairman, President and CEO. As a reminder, the presentation materials for this call, as well as information included in our press release, issued Wednesday, and an audio replay of this conference call will be available on CorEnergy's Web site. 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 Web site. We do not update our forward-looking statements. Reconciliations between GAAP and the non-GAAP results, which we discuss on this call, can be found in our related earnings release and 10-K filing. Dave Schulte would now like to speak to you about CorEnergy's first quarter.

Thank you, Lesley. Today's comments will be relatively brief as it was a quite quarter since our year-end update just a few weeks ago. We recently declared our 15th $0.75 quarterly dividend, which was again supported by our consistent adjusted funds from operations, which can be seen on slide four where you dive into our financial performance a bit more. Quarter-over-quarter the adverse impact of decreased revenue resulting from the Portland Terminal sale were partially offset by the receipt of participating rents in the Pinedale LGS in the quarter. AFFO also reflected a tax provision associated the change in Cor's state tax effective rate, which was a noncash item. Net income to common stockholders was further affected by one-time items in each of the last two quarters. In the fourth quarter, we had a gain on the sale from the Portland Terminal, and the first quarter of 2019 includes a $5 million loss on extinguishment of debt associated with the January convertible debt exchange offer. However, you can see from our adjusted funds from operations that they remain consistent over the past four quarters. As we've noted before, we not rely on the participating rents to be consistent in the future, therefore reserve such funds for reinvestment and debt payments. We used funds, including the insurance [ph] to support a consistent dividend for stockholders as our assets' terminal values are driven by the long-lived, but nonetheless depleting reserves that they serve. Due to this concept, we set our long-term target AFFO to dividend coverage ratio at 1.5 times. For the first quarter, Cor's AFFO per basic share suggest a dividend coverage ratio of approximately 1.4, slightly below our target. Slide five provides an overview of our capital structure, which looks very similar to the adjusted we showed you in your last earnings call which gave effect to the January 2019 convertible debt exchange. In that transaction we retired nearly $44 million of debt in exchange for cash, and approximately 837,000 new common shares. CorEnergy remains well below our total debt to total capitalization target levels, at only 18%, and below our preferred to total equity target level, at 26%. At quarter end, we had nearly $60 million in cash, and over $120 million in revolver availability. This $182 million of liquidity along with the capacity we would have to leverage our balance sheet overall provides Cor with confidence that we're able to move quickly and efficiently on an acquisition as the right opportunity presents itself. And finally, on slide six, I'd like to discuss our 2019 initiatives, where they stand today. At our Grand Isle Gathering System, the tenant has continued to make timely rent payments, however the parent company of our tenant has chosen not to comply with certain terms of our lease, including providing us with specific financial statement information, which we are then required to file with the SEC. Until the required financial information is provided and filed, we're limited in our ability to issue registered securities, including those under our dividend reinvestment plan or DRIP. Secondly, we believe we are nearing the conclusion of the FERC rate case for the Missouri Gas Pipeline. We hope to have an update for you on our next call. From a transaction standpoint, we still believe we're positioned to complete one to two acquisitions this year in our targeted size range of $50 million to $250 million given the liquidity we have on hand as well as our ability to use other financing sources such as asset level or incremental corporate debt, joint ventures and private placements with institutional investors. Should a transaction not materialize, we would utilize our cash on hand to opportunistically repurchase preferred equity and convertible debt if prices attractive. In order to make up for the shortfall in revenue from the Portland sale and therefore continue to provide a stable dividend to our investors. As you can see, we have a busy year ahead of us. And I'd now like to open the line up for questions.

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Barry Oxford with D.A. Davidson. Please proceed with your question.

Great, thanks guys. Dave, when you talk about not being able to use the DRIP, does that affect your capital plan or -- it wasn't all that much that we were issuing in shares anyway; it doesn't really affect the big picture capital structure.

It's the latter, Barry. It's not a material number of shares [indiscernible] in the DRIP, yes.

Yes, okay, I just wanted to make sure wasn't having a material impact on what you guys are trying to do from a capital structure. And then of course, no conference call a day will be complete without somebody [indiscernible] asked the acquisition pipeline, how that's looking in, what are the prospects out there?

Yes, we've mentioned on our last call that we felt like trends in the market generally were favorable for us and that energy companies would still have to be able to monetize dedicated assets, and MLPs by and large have been not participating in those kinds of transactions very robustly unless it's a sponsor-related transaction. That opens an opportunity for us as well as private equity funds to set up, to create an opportunity to be acquiring assets. And in that regard, as we mentioned before, we're not exactly like a private equity fund. We have long duration capital that is hopefully competitively priced and at least operators are in control of their assets. We've got several proposals that are out, nothing signed yet but we have a robust opportunity set that we're very pleased with at this point in the year.

Dave, I know you hold a very strict underwriting standard when you look at your acquisitions and never ever want to discourage you or any other company from doing that. But when you do lose a deal out, what are some of the reasons? Is it pricing or is it just you guys thought it was too much risk for the return that you were getting and somebody else just came in and was willing to accept that risk?

Yes, it's more the latter. And in that case I would say that those properties aren't necessarily changing hands. They may wind up not changing hands. So, we're not very often in direct competition. Although last year I mentioned we did participate in a handful of auctions. None of them were successfully completed on our behalf. So, we did lose on a price basis in those cases. We believe that it's because competing private capital funds have the ability to put more leverage on and have more flexibility in that regard to not have to service their common equity portion of their purchase price unlike our position which is a relatively conservative capital structure and have clear ability to continue to pay dividends to our common stockholders. Sure, we'll always have a more modest leverage profile, but, in the long run, assets accumulating in the hands of private equity could eventually return to the market and be suitable acquisition targets for us at that time.

Right, right. And one last question. Dave, when you look at the opportunity versus now versus say, a year ago, do you feel you're looking at more stuff coming across your desk, less stuff or about the same?

We feel like we're looking at more stuff coming across our desk right now. But it's more stuff that is -- we're shying away more from direct option participation. So, it's more stuff that is negotiated and bespoke solutions for our lessees and that gives us some encouragement over where we were a year ago.

Great. Thanks so much, guys, I'll yield the floor.

Thanks, Barry.

[Operator Instructions] Our next question comes from the line of Selman Akyol with Stifel. Please proceed with your question.

Thank you. Good afternoon. A couple of quick ones, on the MoGas rate increase, that's reflected in this quarter's revenue but is that subject to refund?

It is subject to refund.

Okay. And then anything on settlement talks?

Other than the regulatory process has a schedule and we have, as we've reflected in the past, been on the schedule for active participation by us and by all the affected parties and that schedule should be resolved some time by the middle of this year. And that's all we can really say about it.

Okay, all right. And then, the financing revenue that was on -- the income statement rather small but what was that being driven by?

We had a salt water disposal well in North Dakota, that was sold to a new entity. And that new entity we provided some seller financing for, and they're making timely payments on the loan. So we've actually reinstated a portion of the loan on the books that we had previously reserved from the prior operator who wasn't making payments. And the new operator is doing a fine job and we're -- we expect the note to be good and the interest payments to be good. So we've made a partial recovery on those assets.

Got you. And then, so should we look for that to continue each quarters, are there any guidance you can give around that?

That note is due later this year and we will either be repaid and then it will be reinvested or alternatively, we may choose to continue to work with that operator and extend the note. We haven't been asked to extend the note, but we're very pleased with the operator and our relationship with them at this point.

Awesome. Okay. Your key that came in well below our expectations, I mean we had a coming down from Q4, obviously for the -- for sort of more one timers in there. Is this a good run rate on a go forward basis? Or should we look to that elevators, maybe you start doing more due diligence on some of these prospects?

Yes, I think the comparison there was against a higher consultant's expenses on some projects whether we did not get closed on. So with a favorable prior benchmark and your comparison period and the current run rate would be expected to be consistent other than projects that we do active work on that we need to hire third parties on that then did not close. And I'm not foreseeing it that a tremendous amount of that this year. But it's safer probably to include some additional expenses on an average basis quarterly than what we had in the quarter.

Okay. And then, I guess, on Grand Isle in review levels here on the financials, but I mean, I guess we're hearing things or maybe beginning to pick up offshore. We've seen a couple, I guess, encouraging data points, if you will. Are you seeing any uptick in volumes and should that then ultimately result to an uptick in revenues from those assets?

Well, first of all, the tenant is continuing to use the system as expected. We get those volume reports. Second of all, our base rents are not really affected by volume unless they get over a threshold and then we'd have participating rents just like we do an ultra-petroleum. They're not at that threshold yet. But finally, as, the prices that we're seeing today in the market for oil that's certainly constructive for a lot of offshore production potential and our companies tended to be hedged. So there's a limited short-term benefit from that. But in the long run, if prices stay at these levels, that should be constructed.

Very good. Okay, I appreciate the comments. Thank you.

Thanks, Selman.

Our next question comes from a line of Michael Zuk with Oppenheimer. Please proceed with your question.

Good afternoon, Dave. Two questions, first of all, with regard to assets that you are potentially looking at to acquire, is there any geography involved? That is are you limited to continental U.S.? Or would you look at projects offshore?

We are not limited to continental U.S. And we have been asked to look at offshore projects and those cases we would need to be prepared to pay tax in a foreign jurisdiction. And but that at times, that doesn't mean we're not competitive because anybody in the U.S. that would own those assets would have a similar tax circumstance. So where we've had an operator that had clear competency in their local jurisdiction, and relationships, we've been prepared to evaluate non-U.S. assets that includes North American continent, Canada, Mexico, but also elsewhere. We don't seek it out, but we're prepared to look at it if presented, provided the taxes don't become a barrier to us being competitive.

And then there is a follow-up, the types of projects that we're looking at, and we expanded beyond just traditional hydrocarbon type projects to maybe electric transmission or battery type facilities or solar facilities?

Mike, the renewable side of that question is challenging for us. We could own the land leases underlying those projects, but the primary value or cost component of those projects is not qualifying asset for us. And so, those are hard for a real-estate investment trust to own or finance. On transmissions, we have on transmission in the past. Regulated assets are difficult for REITs to own hunt and for REIT recently announced that they're going to go private because owning transmission lines in a REIT was a challenging exercise for them. So I wouldn't look for us to own transmission lines necessarily. Now field production assets that are not regulated, we could own those. So the power lines that are serving oil and gas fields that are dedicated to the producers are assets that are good assets for real-estate investment trust, and we could own those. We have bid on them in the past. We haven't been able to separate them from the other production assets in an easy manner. So far, so we haven't bought any yet. But the nature of your question is more around power production and power production assets and related regulated transmission are very difficult for a real-estate investment trust to own.

And then there's one follow-up. Are there opportunities with regard to LNG export facilities, I mean, is that the type of project that we could acquire?

There are components of those facilities that are clearly qualifying. But there are also components that are involved with temperature change that also change the phase of the product that the IRS has not confirmed would be passive activities. We're not aware of anybody that's in front of the IRS at the moment on that question, but that's one that would limit us from being able to be a meaningful participant until such time as that was clarified.

And then as a final comment. I want to commend you that you've been very diligent in maintaining your standards for investments. I know it's been frustrating not to put projects on, but I'm glad to know that management has the discipline to pass on a project if it doesn't enhance shareholder value, and you're to be commended for that?

Thanks, Michael. We've got a team of very dedicated folks here that are conservative by nature, they are engineers and accountants by enlarge and attorneys I guess I count myself a long ago. But the nature of our undertaking is to try to mitigate risk. And that has kept us on the safer side of the line in our opinion.

Well, thanks for all you do.

Thanks, Mike.

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Dave Schulte for closing remarks.

Thanks, everybody, for your continued interest in our company and we are proud of the fact that we have a sustainable dividend and intend to work very diligently to maintain that and look forward to visiting later this year about our progress.

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