CorEnergy(CORR) - 2020 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2020, net income attributable to common stockholders was $(139,744,105), compared to $7,511,146 for the same period in 2019, representing a significant decline [189]. - Basic earnings per share for the three months ended June 30, 2020, were $(10.24), compared to $0.59 for the same period in 2019, indicating a substantial loss [189]. - Net income attributable to CorEnergy stockholders was $(137.4) million for the three months ended June 30, 2020, compared to $9.8 million in the same period of 2019, reflecting a significant loss [224]. - For the six months ended June 30, 2020, the Income (Loss) Attributable to Common Stockholders was $(304,047,266), down from $9,063,459 in the same period of 2019 [252]. - The company reported a net income (loss) attributable to common stockholders of $(139.7) million, compared to $7.5 million for the same period in 2019 [263]. Revenue and Lease Income - Consolidated revenues decreased to $10.0 million for the three months ended June 30, 2020, down from $21.5 million in the same period of 2019, representing a decline of approximately 54% [210]. - Lease revenue fell to $5.6 million for the three months ended June 30, 2020, compared to $16.6 million in the prior year, a decrease of about 67% driven by non-payment of rent for the GIGS asset [210]. - Lease revenue was $21.3 million for the six months ended June 30, 2020, down from $33.4 million in the prior year, primarily due to a non-cash write-off of deferred rent receivable of $30.1 million [225]. - The company experienced a reduction in lease revenue cash flows of $9.7 million due to the EGC Tenant's nonpayment of rent under the Grand Isle Lease Agreement in Q2 2020 [265]. - The anticipated reduction in lease revenue cash flows is projected to be $12.1 million for each of the third and fourth quarters of 2020 if the EGC Tenant continues to not pay rent [267]. Impairment and Losses - The company recognized a $140.3 million loss on impairment of leased property related to the GIGS asset due to the impacts of the COVID-19 pandemic [234]. - A loss of approximately $136.0 million was recognized from the Pinedale Transaction, net of a gain on extinguishment of related debt, for the three and six months ended June 30, 2020 [195]. - A loss on impairment and disposal of leased property of $146.5 million was recognized for the three months ended June 30, 2020, related to the Pinedale LGS asset [217]. - The company recognized a $140.3 million impairment for its GIGS asset due to economic disruptions caused by the COVID-19 pandemic [194]. - A $146.5 million loss on impairment and disposal of leased property was recorded for the Pinedale LGS asset, triggered by the tenant's bankruptcy [235]. Debt and Financing - The Company amended the Compass REIT Loan to extend the maturity date to November 30, 2024, and reduced payments to interest only through December 31, 2020 [129]. - The Amended Pinedale Term Credit Facility had an outstanding balance of approximately $32.0 million as of June 30, 2020, with a fixed interest rate of 6.5% [157]. - The Company reported a gain on extinguishment of debt of approximately $11.0 million for the three and six months ended June 30, 2020 [160]. - The Company recorded a gain on extinguishment of debt of $11.5 million for the six months ended June 30, 2020, compared to a loss of approximately $5.0 million in the prior year [240]. - The Company has approximately $55.0 million available under the CorEnergy Revolver and $1.0 million under the MoGas Revolver as of June 30, 2020 [155]. Cash Flow and Assets - As of June 30, 2020, the carrying amount of cash and cash equivalents was $113.71 million, down from $120.86 million as of December 31, 2019, indicating a decrease of approximately 5.25% [149]. - The company reported an adjusted funds from operations (AFFO) of $(291,172) for the period ended June 30, 2020, significantly below the target ratio of 1.5 times for AFFO to dividends [269]. - The company intends to maintain its REIT status by distributing at least 90% of its taxable income, but dividend payouts may be affected by cash flow requirements [271]. - The company has approximately $1.2 million in net operating loss carryforwards eligible for carryback under the CARES Act [131]. - The company’s total depreciation expense for the three months ended June 30, 2020, was approximately $2.68 million, compared to $4.67 million for the same period in 2019 [118]. Legal and Compliance Issues - The EGC Tenant ceased paying rent due on April 1, 2020, and failed to make required rent payments for subsequent months, leading to litigation for recovery of unpaid rent [103][104]. - The Grand Isle Lease Agreement requires the tenant to provide financial statements, but the tenant has refused to fulfill this obligation, leading to legal action [102]. - The company is engaged in legal matters with EGC regarding the Grand Isle Lease Agreement, including the nonpayment of rent and enforcement of lease obligations [279]. - UPL filed for Chapter 11 bankruptcy on May 14, 2020, affecting its ability to meet financial obligations and triggering defaults under its credit agreements [110]. - The company continues to monitor the credit quality of its tenants, which is highly dependent on the performance of the oil and natural gas industry [95]. Strategic Initiatives - The company has formed an implementation team and begun developing policies and processes to evaluate the potential impact of the CECL model on its financial statements [88]. - The company is actively evaluating opportunities to deploy cash into new dividend-generating assets to stabilize dividends and promote long-term growth [196]. - CorEnergy's business model focuses on generating long-term contracted revenue from utility-like assets, primarily under triple-net leases [197]. - The company expects its leases to provide contracted base rent plus participating rent based on asset-specific criteria, which is common in the energy industry [198]. - CorEnergy intends to distribute substantially all cash available for distribution on a quarterly basis, while targeting long-term revenue growth from acquisitions [204].