CorEnergy Infrastructure Trust, Inc.

Thank you. Hello, and welcome to Core Energy's third quarter results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Matt Kreps, Investor Relations for Core Energy. Please go ahead.

Thank you, Doug, and thank you, everyone, for joining Core Energy Infrastructure Trust's third quarter 2020 results call. I'm joined today by David Schulte, Chairman, President, and CEO, Jeff Fulmer, our Executive Vice President, Rick Crow, our President of MoWood and MoGas Pipeline, and Crystal Knightley, our Chief Accounting Officer. 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 Core Energy's website, coreenergy.reit. Our third quarter 10-Q will also be available on the SEC filing site and on the investor relations section of coreenergy.reit. The press release and 10-Q include additional non-GAAP metrics and our reconciliation to our GAAP results. We encourage all of you to review our complete disclosures, including both our GAAP numbers and those non-GAAP metrics with the related reconciliations. We recognize that many of you have questions, and while we are presently at a point that limits our ability to make further disclosures at this time, we will take a few analyst questions at the end of today's call. However, we will not be able to take questions about any potential acquisition activity details, nor about our efforts to resolve rent due for our gig's assets. 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 available under the securities laws. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our balance with the SEC. These documents are available on the investor relations section of our website. We do not update our forward-looking statements. And with that, I would now like to turn the call over to Dave Schulte. Please go ahead.

Good afternoon, everyone. Thank you for joining us on the call today. You know, Election Day is a good moment to talk about where our company is headed. We believe that we have an opportunity to exit this challenging year by deploying our balance sheet liquidity into new dividend generating assets, resetting our platform in a position for growth. Those efforts are well along in the process, and we believe that we're on track to meet our goal of announcing a transaction that will bear fruit for our stockholders in 2021 and beyond. And before I cover more information about our future, let's start with a few comments about our current asset portfolio. Our MOGAS and OMEGA assets continue to perform in a steady, predictable manner as we expect regulated assets of this nature to do. For OMEGA, we continue to enjoy a strong working relationship with the Department of Defense at Fort Leonard Wood in South Central Missouri. We've been on post since 1991 and are currently in our third 10-year contract period with more than five years remaining on the current contract. This is a large Army post with 30,000-plus soldiers and civilians on site at any given day. The DOD continues to invest in the fort with projects that will need increased support from our system. Examples include a new large VA regional hospital currently under construction, gas-fired cogeneration facilities, and other new buildings and facilities that need natural gas. We also just installed and commissioned a new propane air plant to provide energy redundancy. For MoGas, population growth in the areas MoGas serves is driving the need for additional capacity and facilities with Ameren and Spire, Missouri. We recently signed an additional 10-year, 6,000 MCF per day agreement with Ameren, and we completed an additional delivery point with Spire, Missouri in the suburbs of Western St. Louis, our 12th such delivery point with that customer. We are presently engaged in the construction of a new interconnect with the St. Louis pipeline, the STL pipeline, with completion expected in a few weeks. We are pleased to announce that this interconnect enabled us to sign a new 10-year transportation agreement with Spire Missouri that will more than double Spire's capacity on MoGas. We continue to operate safely with no effects from COVID-19 virus and well within DOT and Missouri PUC requirements. Turning to the Grand Isle Gathering System, The refusal to pay rent by our tenant there earlier this year pertained in large part to the unprecedented disruption in oil pricing brought on by the global COVID-19 pandemic. Our efforts to achieve resolution in the third quarter were hampered by a difficult series of events affecting Gulf of Mexico production, including continued price volatility, business events related to other shippers on the system, and multiple tropical storms and hurricane events resulting in temporary production shut-ins. Most recently, Hurricane Zeta crossed our assets on October 28th, and we are awaiting more details on the degree of damage. However, our triple net lease specifically addresses all of these scenarios and states clearly that the tenant is obligated to maintain the asset and to pay contracted rents. While we work toward resolution, the rent is due each month and continues to accrue. Now turning to the future, and with reference to our forward-looking statements qualifier, Our balance sheet is strong with approximately $100 million in cash at quarter end. With this cash and our bank line plus potential target asset financing, we believe CORE can execute new acquisitions in excess of $200 million in size with our resources on hand, enough to make significant headway in rebuilding our dividend-paying capabilities for all of our stockholders. We believe there is support for even larger transactions from equity sources if it is beneficial for existing stockholders. I shared on our last call that we were engaged in diligence on new opportunities for acquisition, and our P&L this quarter shows nearly a million dollars in diligence-related cost as we continue to advance our work on this important goal. While there's no assurance that a specific transaction will come to fruition, it has been our goal since the summer to complete an acquisition by the end of the year. Our progress to date again gave the Board confidence to approve the issuance of both the preferred and common dividends for the third quarter. While I cannot share details of a particular transaction today, I can give you additional insight into the framework we're applying in the acquisition work we have undertaken. Our primary goal is to acquire additional operating assets analogous to Omega and MoGas with the benefit of our private letter ruling, thereby establishing Core Energy as the lowest cost midstream platform in the United States. We expect to acquire assets that generate access and UCs from customers of pipelines, storage facilities, and related infrastructure, and provide the highest level of resulting dividends to our shareholders in the tax-advantaged structure. And the REIT structure provides a very real advantage over MLPs and C-Corps. Like an MLP, there is no entity-level tax, but like a C-Corp, institutional investors can get a Form 1099, the best of both worlds for qualifying assets and for access to capital. But since REITs are not limited to oil and gas, I should be clear that our company can also consider opportunities to expand into different asset categories we've not previously owned, such as renewable energy distribution or similar functioning assets. Regarding the momentum to transition to renewable energy, some of you have asked questions about this given the news coverage, so let me share a few thoughts from industry experts. We believe that no matter which party controls the White House or Congress, there's a vital continuing role for hydrocarbons to support the economy and daily life. More importantly, we believe this role will last many decades, even with a transition to alternative fuel sources. As a reference point, the IEA forecast oil and gas demand continuing to make up half the global energy mix in 2040. In that scenario, they've modeled requiring sustained government subsidies for alternative energy sources. Putting this into a practical example, electric vehicle mandates have gained a lot of attention lately as a way to reduce dependency on hydrocarbons. However, electric generating and distribution grids lacked capacity to meet the required increase in demand that would accompany this transition. We've already seen many stories and news about these deficiencies and their negative consequences. With decades of government subsidized investment in construction necessary to make the grid and generating capacity suitable for a transition to electric vehicles, hydrocarbons will continue to be required during and even well beyond a possible transition, even in the best-case scenario. We believe this practical reality generates a rich opportunity set for core energy that we believe can result in favorable shareholder outcomes for the next 20-plus years. Now, our acquisition framework will continue to consider assets which provide critical, hard-to-duplicate services to numerous counterparties. And we have a long-term goal for our platform to diversify our our portfolio into assets across energy commodities and geographies and across the value chain from producers to consumers. While 2020 has been a difficult year, we're striving to reset our foundation with dividend stability as our primary shareholder objective while pursuing asset growth to add diversification and scale to our platform. In summary, our diligence and negotiation work over the past quarter has reinforced our conviction in the competitive advantage of our platform We believe this will set the stage to rebuild our dividend generating capacities in 2021 for all of our stakeholders. In closing, I'd like to thank the core team for its hard work through this difficult time and thank our stockholders and bondholders who have patiently continued to support our work during these challenging periods and have expressed confidence in our business model and in our ability to rebuild. At this time, we'll open the call for questions for analysts. But anybody is free to call into our investor relations line at any time. Operator?