CorEnergy Infrastructure Trust, Inc.

Greetings. Welcome to the Core Energy second quarter 2023 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. Please note this conference is being recorded. I will now turn the conference over to your host, Matt Kreps, Investor Relations for Core Energy. You may begin.

Thank you, Holly, and thank you everyone for joining today's Core Energy Infrastructure Trust conference call. With me today are Dave Schulte, CEO and Chairman, Robert Waldron, President and CFO, and Chris Huffman, our Chief Accounting Officer. Robert and Chris will provide updates on our business operations and results, and all three will be available for Q&A. Earlier this morning, we published a press release announcing the second quarter results for 2023. We expect to file our Form 10-Q later today. I'd like to remind everyone that the statements made during the course of this presentation that are not purely historical may be forward-looking statements and subject to the state public 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 in the investor relations section of our website. We do not update our forward-looking statements. During this call, we will make reference to certain non-GAAP metrics, which are reconciled in our filings as a part of our results reporting. We encourage all of you to review our complete disclosures, risk factors, GAAP financial reports, and those non-GAAP metrics with the related reconciliations. And with that, I would like to now turn the call over to Robert Waldron. Please go ahead.

Good morning, everyone. I started the last quarterly call noting that It has been an eventful couple of months, and the same is true again with this call. While I'm pleased with our continued progress in implementing favorable long-term solutions to the near-term challenges we have discussed, our sales process has been extended due to a second request from the FTC. We now expect to close the sale of our MoGas and Omega pipeline systems around the end of the calendar year. We still see that as an effective opportunity to reduce our leverage and, in combination with the cost reductions and tariff improvements we have already announced, put Core Energy on a better financial path. We have successfully implemented a number of our cost reduction efforts already, including streamlining our executive team and reducing our corporate cost structure. The benefits of these actions will become more visible in the second half of 2023 and beyond. Through the application of the proceeds from our asset divestiture program, we plan to leverage our balance sheet addressing our near-term debt maturities and setting us up for 2024 and beyond. The second quarter continued to demonstrate the steady performance of our predictable MoGas and Omega natural gas operations that serve the St. Louis and surrounding areas. These entities are included in the proposed $175 million sale to SPIRE as announced on May 25th. We expect the proceeds of the sale to pay off our bank debt of approximately $103 million with additional funds for further deleveraging actions to be determined once the sale is closed. Turning to our Crimson assets, volumes improved slightly quarter-over-quarter and seem to have stabilized we indicated in our last call, but at reduced levels from what was previously anticipated. However, we are watching volumes closely given the reduced permitting and drilling activity in California, even in spite of higher oil prices, high quality reserves, and what we believe is likely the most environmentally friendly oil-producing ecosystem in the world. We also continue to see expense pressure in the areas of labor, asset maintenance, and electricity costs, which are consistent with the rest of the industry. In short, we are navigating a challenging environment right now, characterized by lower volumes and higher costs, but have in process a number of remedies and opportunities to transition into new energy uses that bring new value to our assets. Starting from the revenue side, as a response to these changes in volumes and costs, as previously announced, Crimson filed for a 36% rate increase on its San Pablo pipeline and 107% rate increase on its KLM pipeline, both based on the regulated cost of service. Both filings are protested by the shippers and will proceed through the CPUC process with resolution expected in 2025. In the interim, we have begun collecting on the initial 10% rate increase and will begin collection of another 10% increase at the anniversary date of the rate increase filings while the rate cases are reviewed. We are always open to negotiating with our shippers to find a resolution acceptable to all parties and may lead to an earlier resolution. In July, we also filed for an additional 10% on our Crimson's Southern California system, in addition to the 10% tariff increase filed Q3 2022, which is currently being collected, resulting in a cumulative 21% increase since last year. We're also seeing an opportunity later this year to eventually add volumes on our San Pablo and our KLM pipelines as P66 converts its Rodeo refinery to renewable diesel. We are monitoring that closely and will update as more details emerge. However, capturing even a small percentage of those volumes is significant for us. For example, if we capture just 5,000 barrels a day, or approximately 10 percent of the available volume, that represents an approximately 3.8 million increase in annual revenue and an approximately 3 million increase in annual EBITDA. While the California energy market remains challenging in the near term, our crimson pipelines are a critical asset in the state's energy infrastructure, providing linkages and rights-of-way that would be difficult, if not impossible, to replicate. These assets currently operate under fixed tariffs for volumes transported with long-term investment grade customers. Our current challenges stem from the time required to change tariffs being longer than the time it takes for volumes and costs to change in this current economic climate. We believe that once the tariffs are properly aligned once more to volumes and costs, these assets will profitably fulfill critical energy needs in California for decades to come. This includes both the existing energy economy and the emerging new energy economy. We hold a strong belief that our Crimson assets and long operational history in California have a significant and critical role to play in the energy transition in California, especially with the new hydrogen and carbon capture and sequestration markets. Crimson systems and right-of-way provide critical linkage between large carbon emission sources and prospective storage reservoirs, an asset we believe would be difficult or even impossible to replicate today. We are working with multiple parties to determine the best path forward in this new market opportunity. A good example of our belief that we have a significant role to play in the new energy economy is our recent work supporting this Lone Cypress hydrogen project, a proposed blue hydrogen plant at CRC's Net Zero Industrial Park at Elk Hills Field in Kern County. The plan is expected to produce 60 tons per day of blue hydrogen and aims to be California's first blue hydrogen facility. We expect to create a long-term relationship with Lone Cypress and receive the rights to co-invest in the project alongside CRC's Carbon Terror Vault JV with Brookfield. This is an exciting project, and we believe it will be the first of many for us. With that, I'll turn it over to Chris to address the financials and other notable items.