CORENERGY INFRASTRUCTURE TRUST, INC., 10-Q filed on 5/10/2021
Quarterly Report
v3.21.1
Cover Page - shares
3 Months Ended
Mar. 31, 2021
May 07, 2021
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2021  
Document Transition Report false  
Entity File Number 001-33292  
Entity Registrant Name CORENERGY INFRASTRUCTURE TRUST, INC.  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 20-3431375  
Entity Address, Address Line One 1100 Walnut, Ste. 3350  
Entity Address, City or Town Kansas City,  
Entity Address, State or Province MO  
Entity Address, Postal Zip Code 64106  
City Area Code (816)  
Local Phone Number 875-3705  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   13,651,521
Entity Central Index Key 0001347652  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Common Stock, par value $0.001 per share    
Entity Information [Line Items]    
Title of 12(b) Security Common Stock, par value $0.001 per share  
Trading Symbol CORR  
Security Exchange Name NYSE  
7.375% Series A Cumulative Redeemable Preferred Stock    
Entity Information [Line Items]    
Title of 12(b) Security 7.375% Series A Cumulative Redeemable Preferred Stock  
Trading Symbol CORRPrA  
Security Exchange Name NYSE  
v3.21.1
Consolidated Balance Sheets - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Assets    
Property and equipment, net of accumulated depreciation of $25,260,543 and $22,580,810 (Crimson VIE: $335,865,029, and $0, respectively) $ 441,213,095 $ 106,224,598
Leased property, net of accumulated depreciation of $227,265 and $6,832,167 1,298,763 64,938,010
Financing notes and related accrued interest receivable, net of reserve of $600,000 and $600,000 1,183,950 1,209,736
Cash and cash equivalents (Crimson VIE: $631,776 and $0, respectively) 18,839,994 99,596,907
Accounts and other receivables (Crimson VIE: $10,828,844 and $0, respectively) 15,275,036 3,675,977
Due from affiliated companies (Crimson VIE: $827,264 and $0, respectively) 827,264 0
Deferred costs, net of accumulated amortization of $60,142 and $2,130,334 1,082,205 1,077,883
Inventory (Crimson VIE: $1,690,158 and $0, respectively) 1,795,688 87,940
Prepaid expenses and other assets (Crimson VIE: $6,313,679 and $0, respectively) 8,424,488 2,054,804
Operating right-of-use assets (Crimson VIE: $6,097,344 and $0, respectively) 6,175,414 85,879
Deferred tax asset, net 4,308,976 4,282,576
Goodwill 1,718,868 1,718,868
Total Assets 502,143,741 284,953,178
Liabilities and Equity    
Secured credit facilities, net of debt issuance costs of $1,732,515 and $0 103,267,485 0
Unsecured convertible senior notes, net of discount and debt issuance costs of $2,877,445 and $3,041,870 115,172,555 115,008,130
Asset retirement obligation 0 8,762,579
Accounts payable and other accrued liabilities (Crimson VIE: $14,225,232 and $0, respectively) 17,910,708 4,628,847
Management fees payable 608,246 971,626
Due to affiliated companies (Crimson VIE: $1,637,540 and $0, respectively) 2,053,170 0
Operating lease liability (Crimson VIE: $5,752,045 and $0, respectively) 5,800,866 56,441
Unearned revenue (Crimson VIE $315,000 and $0, respectively) 6,294,359 6,125,728
Total Liabilities 251,107,389 135,553,351
Commitments and Contingencies (Note 10)
Equity    
Series A Cumulative Redeemable Preferred Stock 7.375%, $125,270,350 and $125,270,350 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000 authorized; 50,108 and 50,108 issued and outstanding at March 31, 2021 and December 31, 2020, respectively 125,270,350 125,270,350
Common stock, non-convertible, $0.001 par value; 13,651,521 and 13,651,521 shares issued and outstanding at March 31, 2021 and December 31, 2020 (100,000,000 shares authorized) 13,652 13,652
Additional paid-in capital 336,750,132 339,742,380
Retained deficit (327,926,126) (315,626,555)
Total CorEnergy Equity 134,108,008 149,399,827
Non-controlling interest (Crimson) 116,928,344 0
Total Equity 251,036,352 149,399,827
Total Liabilities and Equity 502,143,741 284,953,178
Variable Interest Entity, Primary Beneficiary    
Assets    
Property and equipment, net of accumulated depreciation of $25,260,543 and $22,580,810 (Crimson VIE: $335,865,029, and $0, respectively) 335,865,029 0
Cash and cash equivalents (Crimson VIE: $631,776 and $0, respectively) 631,776 0
Accounts and other receivables (Crimson VIE: $10,828,844 and $0, respectively) 10,828,844 0
Due from affiliated companies (Crimson VIE: $827,264 and $0, respectively) 827,264 0
Inventory (Crimson VIE: $1,690,158 and $0, respectively) 1,690,158 0
Prepaid expenses and other assets (Crimson VIE: $6,313,679 and $0, respectively) 6,313,679 0
Operating right-of-use assets (Crimson VIE: $6,097,344 and $0, respectively) 6,097,344 0
Liabilities and Equity    
Accounts payable and other accrued liabilities (Crimson VIE: $14,225,232 and $0, respectively) 14,225,232 0
Due to affiliated companies (Crimson VIE: $1,637,540 and $0, respectively) 1,637,540 0
Operating lease liability (Crimson VIE: $5,752,045 and $0, respectively) 5,752,045 0
Unearned revenue (Crimson VIE $315,000 and $0, respectively) $ 315,000 $ 0
v3.21.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2021
Dec. 31, 2020
Accumulated depreciation, property and equipment $ 25,260,543 $ 22,580,810
Property and equipment, net of accumulated depreciation of $25,260,543 and $22,580,810 (Crimson VIE: $335,865,029, and $0, respectively) 441,213,095 106,224,598
Reserve for financing notes 600,000 600,000
Cash and cash equivalents 18,839,994 99,596,907
Accounts and other receivables 15,275,036 3,675,977
Due from affiliated companies 827,264 0
Accumulated amortization, deferred costs 60,142 2,130,334
Inventory 1,795,688 87,940
Prepaid expenses and other assets 8,424,488 2,054,804
Operating right-of-use assets 6,175,414 85,879
Secured credit facilities, debt issuance costs 1,732,515 0
Accounts payable and other accrued liabilities 17,910,708 4,628,847
Due to affiliated companies 2,053,170 0
Operating lease liabilities 5,800,866 56,441
Unearned revenue $ 6,294,359 $ 6,125,728
Capital stock non-convertible, par value (in dollars per share) $ 0.001 $ 0.001
Capital stock non-convertible, shares issued (in shares) 13,651,521 13,651,521
Capital stock non-convertible, shares outstanding (in shares) 13,651,521 13,651,521
Capital stock non-convertible, shares authorized (in shares) 100,000,000 100,000,000
7.375% Series A Cumulative Redeemable Preferred Stock    
Preferred stock interest rate 7.375% 7.375%
Preferred stock, liquidation preference $ 125,270,350 $ 125,270,350
Preferred stock, liquidation preference (in dollars per share) $ 2,500 $ 2,500
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 50,108 50,108
Preferred stock, shares outstanding (in shares) 50,108 50,108
Convertible Debt    
Unsecured convertible senior notes, unamortized discount and debt issuance costs $ 2,877,445 $ 3,041,870
Property, Plant and Equipment, Other Types    
Accumulated depreciation, property and equipment 25,260,543 22,580,810
Assets Leased to Others    
Accumulated depreciation, leased property 227,265 6,832,167
Variable Interest Entity, Primary Beneficiary    
Property and equipment, net of accumulated depreciation of $25,260,543 and $22,580,810 (Crimson VIE: $335,865,029, and $0, respectively) 335,865,029 0
Cash and cash equivalents 631,776 0
Accounts and other receivables 10,828,844 0
Due from affiliated companies 827,264 0
Inventory 1,690,158 0
Prepaid expenses and other assets 6,313,679 0
Operating right-of-use assets 6,097,344 0
Accounts payable and other accrued liabilities 14,225,232 0
Due to affiliated companies 1,637,540 0
Operating lease liabilities 5,752,045 0
Unearned revenue $ 315,000 $ 0
v3.21.1
Consolidated Statements of Operations - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Revenue    
Lease revenue $ 474,475 $ 15,746,504
Deferred rent receivable write-off 0 (30,105,820)
Total Revenue (Loss) 23,040,498 (9,132,509)
Expenses    
General and administrative 9,836,793 3,076,143
Depreciation, amortization and ARO accretion expense 2,898,330 5,647,067
Loss on impairment of leased property 0 140,268,379
Loss on impairment and disposal of leased property 5,811,779 0
Loss on termination of lease 165,644 0
Total Expenses 30,003,999 150,366,818
Operating Loss (6,963,501) (159,499,327)
Other Income (Expense)    
Other income 63,526 317,820
Interest expense (2,931,007) (2,885,583)
Loss on extinguishment of debt (861,814) 0
Total Other Expense (3,729,295) (2,567,763)
Loss before income taxes (10,692,796) (162,067,090)
Taxes    
Current tax expense (benefit) 27,867 (394,643)
Deferred tax expense (benefit) (26,400) 369,921
Income tax expense (benefit), net 1,467 (24,722)
Net loss (10,694,263) (162,042,368)
Less: Net income attributable to non-controlling interest 1,605,308 0
Net loss attributable to CorEnergy Stockholders (12,299,571) (162,042,368)
Preferred dividend requirements 2,309,672 2,260,793
Net loss attributable to Common Stockholders $ (14,609,243) $ (164,303,161)
Loss Per Common Share:    
Basic (in dollars per share) $ (1.07) $ (12.04)
Diluted (in dollars per share) $ (1.07) $ (12.04)
Weighted Average Shares of Common Stock Outstanding:    
Basic (in shares) 13,651,521 13,648,293
Diluted (in shares) 13,651,521 13,648,293
Dividends declared per share (in dollars per share) $ 0.050 $ 0.750
Transportation and distribution revenue    
Revenue    
Revenue from contracts with customers $ 21,295,139 $ 5,200,500
Expenses    
Cost of revenue 10,342,597 1,375,229
Pipeline loss allowance subsequent sales    
Revenue    
Revenue from contracts with customers 1,075,722 0
Expenses    
Cost of revenue 948,856 0
Other revenue    
Revenue    
Revenue from contracts with customers $ 195,162 $ 26,307
v3.21.1
Consolidated Statements of Equity - USD ($)
Total
Capital Stock
Preferred Stock
Additional Paid-in Capital
Retained Deficit
Non-controlling Interest
Beginning balance (in shares) at Dec. 31, 2019   13,638,916        
Beginning balance at Dec. 31, 2019 $ 476,739,439 $ 13,639 $ 125,493,175 $ 360,844,497 $ (9,611,872)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income (loss) (162,042,368)       (162,042,368)  
Series A preferred stock dividends (2,313,780)     (2,313,780)    
Preferred stock repurchases [1] (161,997)   (222,825) 7,932 52,896  
Common stock dividends (10,238,640)     (10,238,640)    
Common stock issued upon exchange of convertible notes (in shares)   12,605        
Common stock issued upon exchange of convertible notes 419,129 $ 13   419,116    
Ending balance (in shares) at Mar. 31, 2020   13,651,521        
Ending balance at Mar. 31, 2020 $ 302,401,783 $ 13,652 125,270,350 348,719,125 (171,601,344)  
Beginning balance (in shares) at Dec. 31, 2020 13,651,521 13,651,521        
Beginning balance at Dec. 31, 2020 $ 149,399,827 $ 13,652 125,270,350 339,742,380 (315,626,555) $ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income (loss) (10,694,263)       (12,299,571) 1,605,308
Series A preferred stock dividends (2,309,672)     (2,309,672)    
Common stock dividends (682,576)     (682,576)    
Equity attributable to non-controlling interest (Note 3) $ 115,323,036          
Ending balance (in shares) at Mar. 31, 2021 13,651,521 13,651,521        
Ending balance at Mar. 31, 2021 $ 251,036,352 $ 13,652 $ 125,270,350 $ 336,750,132 $ (327,926,126) $ 116,928,344
[1] In connection with the repurchase of Series A Preferred Stock during 2020, the deduction from preferred dividends of $52,896 represents the discount in the repurchase price paid compared to the carrying amount derecognized..
v3.21.1
Consolidated Statements of Equity (Parenthetical)
3 Months Ended
Mar. 31, 2020
USD ($)
Statement of Stockholders' Equity [Abstract]  
Deduction from preferred dividends $ 52,896
v3.21.1
Consolidated Statements of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Operating Activities    
Net loss $ (10,694,263) $ (162,042,368)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Deferred income tax, net (26,400) 369,921
Depreciation, amortization and ARO accretion 3,267,034 5,975,316
Loss on impairment of leased property 0 140,268,379
Loss on impairment and disposal of leased property 5,811,779 0
Loss on termination of lease 165,644 0
Deferred rent receivable write-off, noncash 0 30,105,820
Loss on extinguishment of debt 861,814 0
Non-cash lease expense 178,542 0
Loss on sale of equipment 0 3,958
Changes in assets and liabilities:    
Deferred rent receivable 0 (247,718)
Accounts and other receivables (344,371) 649,868
Financing note accrued interest receivable (6,714) 0
Inventory (26,111) 0
Prepaid expenses and other assets (249,081) (108,007)
Due (from) to affiliated companies, net 1,225,906 0
Management fee payable (363,380) 3,953
Accounts payable and other accrued liabilities (1,611,539) (3,030,782)
Operating lease liability (523,652) 0
Unearned revenue (146,369) (180,628)
Net cash (used in) provided by operating activities (2,481,161) 11,767,712
Investing Activities    
Acquisition of Crimson Midstream Holdings, net of cash acquired (68,094,324) 0
Purchases of property and equipment, net (4,625,511) (13,031)
Proceeds from sale of property and equipment 79,600 0
Proceeds from insurance recovery 60,153 0
Principal payment on financing note receivable 32,500 32,500
Net cash (used in) provided by investing activities (72,547,582) 19,469
Financing Activities    
Debt financing costs (2,735,922) 0
Repurchases of Series A preferred stock 0 (161,997)
Dividends paid on Series A preferred stock (2,309,672) (2,313,780)
Dividends paid on common stock (682,576) (10,238,640)
Advances on revolving line of credit 3,000,000 0
Payments on revolving line of credit (3,000,000) 0
Principal payments on secured credit facilities 0 (882,000)
Net cash used in financing activities (5,728,170) (13,596,417)
Net change in Cash and Cash Equivalents (80,756,913) (1,809,236)
Cash and Cash Equivalents at beginning of period 99,596,907 120,863,643
Cash and Cash Equivalents at end of period 18,839,994 119,054,407
Supplemental Disclosure of Cash Flow Information    
Interest paid 4,254,050 4,334,215
Income taxes paid (net of refunds) 5,026 (467,407)
Non-Cash Investing Activities    
In-kind consideration for the Grand Isle Gathering System provided as partial consideration for the Crimson Midstream Holdings acquisition 48,873,169 0
Crimson Credit Facility assumed and refinanced in connection with the Crimson Midstream Holdings acquisition 105,000,000 0
Equity consideration attributable to non-controlling interest holder in connection with the Crimson Midstream Holdings acquisition 115,323,036 0
Purchases of property, plant and equipment in accounts payable and other accrued liabilities 868,190 0
Non-Cash Financing Activities    
Change in accounts payable and accrued expenses related to debt financing costs (235,198) 0
Common stock issued upon exchange and conversion of convertible notes $ 0 $ 419,129
v3.21.1
Introduction and Basis of Presentation
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
INTRODUCTION AND BASIS OF PRESENTATION INTRODUCTION AND BASIS OF PRESENTATION
Introduction
CorEnergy Infrastructure Trust, Inc. (referred to as "CorEnergy" or "the Company"), was organized as a Maryland corporation and commenced operations on December 8, 2005. The Company's common shares are listed on the New York Stock Exchange ("NYSE") under the symbol "CORR" and its depositary shares representing Series A Preferred Stock are listed on the NYSE under the symbol "CORR PrA".
The Company owns and operates or leases critical energy midstream infrastructure connecting the upstream and downstream sectors within the industry. The Company currently generates revenue from the transportation, via pipeline, of natural gas and crude oil for its customers in Missouri and California. The pipelines are located in areas where it would be difficult to replicate rights of way or transport natural gas or crude oil via non-pipeline alternatives resulting in the Company's assets providing utility-like criticality in the midstream supply chain for its customers. Prior to 2021, the Company focused primarily on entering into long-term triple-net participating leases with energy companies, and also has provided other types of capital, including loans secured by energy infrastructure assets. Over the last twelve months, the Company's asset portfolio has undergone significant changes. The Company divested all of its leased assets including the Grand Isle Gathering System ("GIGS") and Pinedale Liquids Gathering System ("Pinedale LGS"), which are described in this Report.
On February 4, 2021, the Company acquired a 49.50 percent interest in Crimson Midstream Holdings, LLC ("Crimson"), a California Public Utilities Commission ("CPUC") regulated crude oil pipeline owner and operator. The acquired assets include four critical infrastructure pipeline systems spanning approximately 2,000 miles (including 1,300 active miles) across northern, central and southern California, connecting desirable native California crude production to in-state refineries producing state-mandated specialized fuel blends, among other products. This interest was acquired effective February 1, 2021 and is referred to throughout this Report as the "Crimson Transaction." The repositioning of the Company's asset portfolio from a focus on non-operated leased assets to one of owned and operated assets is enabled by its U.S. Internal Revenue Service ("IRS") Private Letter Ruling ("PLR") related to qualifying income for operated assets. As a result, all of the Company's current assets are owned and operated which provides it with an opportunity to grow the business organically using its footprint in addition to making acquisitions. CorEnergy considers its investments in these energy infrastructure assets to be a single business segment and reports them accordingly in its financial statements.
Basis of Presentation and Consolidation

The accompanying consolidated financial statements include CorEnergy accounts and the accounts of its wholly-owned subsidiaries and variable interest entities ("VIEs") for which CorEnergy is the primary beneficiary. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") set forth in the Accounting Standards Codification ("ASC"), as published by the Financial Accounting Standards Board ("FASB"), and with the Securities and Exchange Commission ("SEC") instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented. There were no adjustments that, in the opinion of management, were not of a normal and recurring nature. All intercompany transactions and balances have been eliminated in consolidation, and the Company's net earnings have been reduced by the portion of net earnings attributable to non-controlling interests, when applicable.
The Company consolidates a VIE when it is the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether it owns a variable interest in a VIE, the Company performs a qualitative analysis of the entity's design, primary decision makers, key agreements governing the VIE, voting interests and significant activities impacting the VIE's economic performance. The Company continually monitors consolidated VIEs to determine if any events have occurred that could cause the primary beneficiary to change.
As described above, the Company acquired a 49.50 percent interest in Crimson, which is a legal entity that meets the VIE criteria. As a result of its consolidation analysis more fully described in Note 15 ("Variable Interest Entity"), the Company determined it is the primary beneficiary of Crimson due to its related party relationship with Crimson's 50.50 percent interest holder. Therefore, beginning February 1, 2021, Crimson is consolidated in the Company's consolidated financial statements and the non-controlling interest is presented as a component of equity. Refer to Note 13 ("Stockholders' Equity") for further discussion of the non-controlling interest in Crimson. The consolidated financial statements also include the accounts of any limited partnerships where the Company represents the general partner and, based on all facts and circumstances, controls such limited partnerships, unless the limited partner has substantive participating rights or substantive kick-out rights. Refer to Note 15 ("Variable Interest Entity"), for further discussion of the Company's consolidated VIEs. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other interim or annual period. These consolidated financial statements and Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with CorEnergy's Annual Report on Form 10-K, for the year ended December 31, 2020, filed with the SEC on March 4, 2021 (the "2020 CorEnergy 10-K").
v3.21.1
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2021
Accounting Standards Update and Change in Accounting Principle [Abstract]  
RECENT ACCOUNTING PRONOUNCEMENTS RECENT ACCOUNTING PRONOUNCEMENTS
In June of 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" ("ASU 2016-13"), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The new model, referred to as the current expected credit losses ("CECL model"), will apply to financial assets subject to credit losses and measured at amortized cost, and certain off-balance sheet credit exposures. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November of 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates of these standards for certain entities. Based on the guidance for smaller reporting companies, the effective date of ASU 2016-13 is deferred for the Company until fiscal year 2023 with early adoption permitted, and the Company has elected to defer adoption of this standard.
Although the Company has elected to defer adoption of ASU 2016-13, it will continue to evaluate the potential impact of the standard on its consolidated financial statements. As part of its ongoing assessment work, the Company has formed an implementation team, completed training on the CECL model and has begun developing policies, processes and internal controls.
In December of 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company adopted ASU 2019-12 as of January 1, 2021, and it did not have a material impact on its consolidated financial statements.
In March of 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)" ("ASU 2020-04"). In response to concerns about structural risks of interbank offered rates including the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable and less susceptible to manipulation. The provisions of ASU 2020-04 are elective and apply to all entities, subject to meeting certain criteria, that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04, among other things, provides optional expedients and exceptions for a limited period of time for applying U.S. GAAP to these contracts if certain criteria are met to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating its contracts that reference LIBOR and the optional expedients and exceptions provided by the FASB.
In August 2020, the FASB issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity" ("ASU 2020-06"). The new guidance (i) simplifies an issuer's accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models in ASC 470-20 that require separate accounting for embedded conversion features, (ii) simplifies the settlement assessment that issuers perform to determine whether a contract in its own equity qualifies for equity classification and (iii) requires entities to use the if-converted method for all convertible instruments and generally requires them to include the effect of share settlement for instruments that may be settled in cash or shares. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, but an entity must early adopt the guidance at the beginning of the fiscal year. The Company elected
to early adopt ASU 2020-6 on January 1, 2021 and noted that the standard does not have an impact on the Company's consolidated financial statements.
v3.21.1
Acquisition
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
ACQUISITION
3. ACQUISITION
Crimson Midstream Holdings, LLC
Effective February 1, 2021, the Company completed the acquisition of a 49.50 percent interest in Crimson (which includes a 49.50 percent voting interest and the right to 100.0 percent of the economic benefit of Crimson's business, after satisfying the distribution rights of the remaining equity holders) for total consideration with a fair value of $343.8 million, and with the right to acquire the remaining 50.50 percent, subject to CPUC approval. The consideration consisted of a combination of cash on hand of $74.6 million (after giving effect to initial working capital adjustments), commitments to issue new common and preferred equity valued at $115.3 million (also after giving effect to the initial working capital adjustments), contribution of the GIGS asset with a fair value of $48.9 million to the sellers and $105.0 million in new term loan and revolver borrowings, all as detailed further below. Crimson is a CPUC regulated crude oil pipeline owner and operator, and its assets include four critical infrastructure pipeline systems spanning approximately 2,000 miles (including 1,300 active miles) across northern, central and southern California, connecting California crude production to in-state refineries.
To effect the Crimson Transaction, on February 4, 2021, the Company entered into and consummated a Membership Interest Purchase Agreement (the "MIPA") with CGI Crimson Holdings, L.L.C. ("Carlyle"), Crimson, and John D. Grier ("Grier"). Pursuant to the terms of the MIPA, the Company acquired all of the Class C Units of Crimson owned by Carlyle, which represents 49.50 percent of all of the issued and outstanding membership interests of Crimson for approximately $66.0 million in cash (net of working capital adjustments) and the transfer to Carlyle of the Company's interest in GIGS (as further described in Note 5 ("Leased Properties And Leases")). Crimson Midstream Operating and Corridor MoGas also entered into a $105.0 million Amended and Restated Credit Agreement with Wells Fargo (as further described below and in Note 12 ("Debt")).
Simultaneously, Crimson, the Company, Grier and certain affiliated trusts of Grier (collectively with Grier, the "Grier Members") entered into the Third Amended and Restated Limited Liability Company Agreement ("Third LLC Agreement”) of Crimson. Pursuant to the terms of the Third LLC Agreement, the Grier Members' outstanding membership interests in Crimson were exchanged for 1,613,202 Class A-1 units of Crimson, 2,436,000 Class A-2 units of Crimson and 2,450,142 Class A- 3 units of Crimson, which, as described in Note 13 ("Stockholders' Equity"), may eventually be exchangeable for shares of the Company's common and preferred stock. The Company received 10,000 Class B-1 units, which represent the Company's economic interest in Crimson. Additionally, 495,000 Class C-1 units (representing 49.50 percent of the voting interests under the Third LLC Agreement) were issued to the Company in exchange for the former Class C units acquired from Carlyle and 505,000 Class C-1 units (representing 50.50 percent of the voting interests under the Third LLC Agreement) were issued to the Grier Members, in exchange for the Class C units held by Grier prior to the Crimson Transaction.
The acquisition is being treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The allocation of purchase price is based on management's judgment after evaluating several factors, including a preliminary valuation assessment. Because the values assigned to assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q, amounts may be adjusted during the measurement period of up to twelve months from the date of acquisition as further information becomes available. Any changes in the fair values of assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The allocation of purchase price is preliminary and subject to changes as an appraisal of tangible assets and liabilities including working capital are finalized and purchase price adjustments are completed. The following is a summary of a preliminary allocation of the purchase price:
Crimson Midstream Holdings, LLCAs of February 1, 2021
Assets Acquired
Cash and cash equivalents$6,554,921 
Accounts and other receivables11,394,441 
Inventory1,681,637 
Prepaid expenses and other assets6,144,932 
Property and equipment332,174,531 
Operating right-of-use asset6,268,077 
Total assets acquired:$364,218,539 
Liabilities Assumed
Accounts payable and other accrued liabilities$13,790,011 
Operating lease liability6,268,077 
Unearned revenue315,000 
Total liabilities assumed:$20,373,088 
Fair Value of Net Assets Acquired:
$343,845,451 
Non-controlling interest at fair value(1)
$115,323,036 
(1) Includes a non-controlling interest for Grier's equity consideration in the A-1, A-2 and A-3 units with a fair value of $115.3 million. Refer to "Fair Value of Non-controlling Interest" below and Note 13 ("Stockholders' Equity") for further details.


Fair Value of Assets and Liabilities Acquired

The fair value of property and equipment was determined from an external valuation performed by an unrelated third party specialist based on the cost methodology. The preliminary fair value measurement of tangible assets is based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. The significant unobservable input used includes a discount rate based on an estimated weighted average cost of capital of a theoretical market participant. The Company utilized a weighted average discount rate of 14.0 percent when deriving the fair value of the property and equipment acquired. The weighted average discount rate reflects management's best estimate of inputs a market participant would utilize. In addition, the Company utilized revenue, cost and growth projections in its discounted cash flows to value the assets and liabilities acquired as well as relevant third-party valuation data for the pipeline right of ways. The carrying value of cash and cash equivalents, accounts and other receivables, prepaid expenses and other assets, and accounts payable and other accrued liabilities, approximate fair value due to their short term, highly liquid nature. Inventory was valued based on average crude oil inventory prices, less an applicable discount to sell, at the acquisition date.

Fair Value of Non-controlling Interest

The fair value of the non-controlling interest for each of the A-1, A-2 and A-3 units was determined from an external valuation performed by an unrelated third party specialist. As described in Note 13 ("Stockholders' Equity"), the A-1, A-2 and A-3 units have the right to receive any distributions that the Company's Board of Directors determines would be payable as if they held the shares of Series C Preferred Stock, Series B Preferred Stock and Class B Common Stock, respectively. To determine the fair value of the units on February 1, 2021, the third-party valuation specialists developed a Monte Carlo model to simulate a distribution of future prices underlying the CorEnergy securities associated with the A-1, A-2 and A-3 units. The fair value measurement is based on observable inputs related to the Company's common stock and Series A Preferred Stock, including stock price, historical volatility and dividend yield. The fair value measurement is also based on significant inputs not observable in the market and thus represent Level 3 measurements. The significant unobservable inputs include a discount rate of 11.88 percent for the A-1 units and 11.75 percent for the A-3 units. The valuation for the A-2 units assumes stockholder approval will be received to exchange the A-2 units to Class B Common instead of Series B Preferred Stock. Therefore, the valuation mirrors the assumptions utilized for the A-3 units.

During the three months ended March 31, 2021, the Company incurred transaction costs and financing costs at closing of approximately $2.0 million and $2.8 million, respectively. The Company also incurred due diligence costs and other financing cost of $783 thousand and $235 thousand, respectively, for three months ended March 31, 2021. Total transaction, due diligence and financing costs, including $1.5 million incurred for the year ended December 31, 2020, for the Crimson Transaction were $7.3 million. Transaction and due diligence costs are recorded in general and administrative expenses in the
Consolidated Statements of Operation. Financing costs were capitalized as deferred debt issuance costs in the Consolidated Balance Sheet. For the period from February 1, 2021 (effective date of the acquisition) to March 31, 2021, revenues for Crimson were $17.3 million and net earnings were $3.2 million.

Pro Forma Results of Operations (Unaudited)

The following selected comparative unaudited pro forma revenue information for the quarter ended March 31, 2021 assumes that the Crimson acquisition occurred at the beginning of 2020, and reflects the full results for the period presented. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect on the dates indicated, or which may occur in the future. These amounts have been calculated after applying the Company's accounting policies. The Company has excluded pro forma information related to net earnings (loss) as it is impracticable to provide the information as Crimson was part of a larger entity that was separated via a common control transfer at the closing of the Crimson Transaction. As a result, quarterly financial information has not been carved-out for the Crimson entities acquired in prior quarterly periods.

Pro Forma Three Months Ended
March 31, 2021March 31, 2020
Revenues$31,828,521 $6,639,924 
v3.21.1
Transportation and Distribution Revenue
3 Months Ended
Mar. 31, 2021
Revenue from Contract with Customer [Abstract]  
TRANSPORTATION AND DISTRIBUTION REVENUE TRANSPORTATION AND DISTRIBUTION REVENUE
The Company's contracts related to transportation and distribution revenue are primarily comprised of a mix of natural gas supply, crude oil and natural gas transportation and distribution performance obligations, as well as limited performance obligations related to system maintenance and improvement.
Crude Oil and Natural Gas Transportation and Distribution
Under the Company's (i) natural gas supply, (ii) crude oil and natural gas transportation and (iii) natural gas distribution performance obligations, the customer simultaneously receives and consumes the benefit of the services as the commodity is delivered. Therefore, the transaction price is allocated proportionally over the series of identical performance obligations with each contract, and the Company satisfies performance obligations over time as midstream transportation and distribution services are performed. The transaction price is calculated based on (i) index price, plus a contractual markup in the case of natural gas supply agreements (considered variable due to fluctuations in the index), (ii) CPUC and FERC regulated rates or negotiated rates in the case of transportation agreements and (iii) contracted amounts (with annual CPI escalators) in the case of the Company's distribution agreement.
The Company's crude oil transportation revenue also includes amounts earned for pipeline loss allowance ("PLA"). PLA revenue, recorded within transportation revenue, represents the estimated realizable value of the earned loss allowance volumes received by the Company as applicable under the tariff or contract. As is common in the pipeline transportation industry, as crude oil is transported, the Company earns a small percentage of the crude oil volume transported to offset any measurement uncertainty or actual volumes lost in transit. The Company will settle the PLA with its shippers either in-kind or in cash. PLA received by the Company typically exceeds actual pipeline losses in transit and typically results in a benefit to the Company. For PLA volumes received in-kind, the Company records these in inventory.
When PLA is paid in-kind, the barrels are valued at current market price less standard deductions, recorded as inventory and recognized as non-cash consideration revenue, concurrent with related transportation services. PLA paid in cash is treated in the same way as in-kind, but no inventory is created. In accordance with ASC 606, when control of the PLA volumes have been transferred to the purchaser, the Company records this non-cash consideration as revenue at the contractual sales price within PLA revenue and PLA cost of revenues.
Based on the nature of the agreements, revenue for all but one of the Company's natural gas supply, transportation and distribution performance obligations is recognized on a right to invoice basis as the performance obligations are met, which represents what the Company expects to receive in consideration and is representative of value delivered to the customer. The Company has a contract with Spire that has fixed pricing which varies over the contract term. For this specific contract, the transaction price has been allocated ratably over the contractual performance obligation. Based on a downward revision of the rate during the Company's long-term natural gas transportation contract with Spire, ASC 606 requires the Company to record the contractual transaction price, and therefore aggregate revenue, from the contract ratably over the term of the contract.
During the fourth quarter of 2020, MoGas entered into a new long-term firm transportation services agreement with Spire, its largest customer. Upon completion of the STL interconnect project, the agreement increased Spire’s firm capacity from 62,800 dekatherms per day to 145,600 dekatherms per day through October 2030 and replaced the previous firm transportation agreement. In accordance with ASC 606, the Company accounted for the contract modification in the fourth quarter of 2020 as a termination of the existing transportation contract and a creation of a new transportation contract with Spire that was accounted for prospectively. The remaining contract liability will decline at a rate of approximately $146 thousand per quarter through the end of the contract in October 2030. As of March 31, 2021, the revenue allocated to the remaining performance obligation under this contract is approximately $67.0 million.
System Maintenance & Improvement
System maintenance and improvement contracts are specific and tailored to the customer's needs, have no alternative use and have an enforceable right to payment as the services are provided. Revenue is recognized on an input method, based on the actual cost of service as a measure of the performance obligation satisfaction. Differences between amounts invoiced and revenue recognized under the input method are reflected as an asset or liability on the Consolidated Balance Sheets. The costs of system improvement projects are recognized as a financing arrangement in accordance with guidance in the lease standard while the margin is recognized in accordance with the revenue standard as discussed above.
The table below summarizes the Company's contract liability balance related to its transportation and distribution revenue contracts as of March 31, 2021:
Contract Liability(1)
March 31, 2021December 31, 2020
Beginning Balance January 1$6,104,979 $6,850,790 
Unrecognized Performance Obligations 315,000 347,811 
Recognized Performance Obligations (146,369)(1,093,622)
Ending Balance$6,273,610 $6,104,979 
(1) The contract liability balance is included in unearned revenue in the Consolidated Balance Sheets.
The Company's contract asset balance was $330 thousand and $363 thousand as of March 31, 2021 and December 31, 2020, respectively. The Company also recognized deferred contract costs related to incremental costs to obtain a transportation performance obligation contract, which are amortized on a straight-line basis over the remaining term of the contract. As of March 31, 2021, the remaining unamortized deferred contract costs balance was approximately $1.0 million. The contract asset and deferred contract costs balances are included in prepaid expenses and other assets in the Consolidated Balance Sheets.
The following is a breakout of the Company's transportation and distribution revenue for the three months ended March 31, 2021 and 2020:
For the Three Months Ended
March 31, 2021March 31, 2020
Crude oil transportation revenue73.3 %— %
Natural gas transportation revenue17.9 %68.8 %
Natural gas distribution revenue5.6 %23.2 %
v3.21.1
Leased Properties and Leases
3 Months Ended
Mar. 31, 2021
Leases [Abstract]  
LEASED PROPERTIES AND LEASES LEASED PROPERTIES AND LEASES
LESSOR - LEASED PROPERTIES
Prior to 2021, the Company primarily acquired mid-stream and downstream assets in the U.S. energy sector such as pipelines, storage terminals, and gas and electric distribution systems and, historically, leased many of these assets to operators under triple-net leases. The Company's leased property was classified as an operating lease and was recorded as leased property in the Consolidated Balance Sheets. Base rent related to the Company's leased property was recognized on a straight-line basis over the term of the lease when collectability was probable. Participating rent was recognized when it was earned, based on the achievement of specified performance criteria. Base and participating rent were recorded as lease revenue in the Consolidated Statements of Operations. The Company regularly evaluated the collectability of any deferred rent receivable on a lease by lease basis. The evaluation primarily included assessing the financial condition and credit quality of the Company's tenants, changes in tenants' payment history and current economic factors. When the collectability of the deferred rent receivable or
future lease payments were no longer probable, the Company recognized a write-off of the deferred rent receivable as a reduction of revenue in the Consolidated Statements of Operations.
The Company divested all of its leased assets including (i) GIGS on February 4, 2021 as described further below and (ii) the Pinedale Liquids Gathering System ("Pinedale LGS") on June 30, 2020 in a sale to its tenant, Ultra Wyoming, LLC ("Ultra Wyoming") pursuant to the terms of the sale agreement approved by the U.S. Bankruptcy Court overseeing the bankruptcy proceedings of Ultra Wyoming and its parent company, Ultra Petroleum Corp ("UPL"). The sale of the Pinedale LGS was previously disclosed in the Company's 2020 SEC filings.
Sale and Impairment of the Grand Isle Gathering System
During 2020, the EGC Tenant's nonpayment of rent along with the significant decline in the global oil market triggered indicators of impairment for the GIGS asset. As a result, the Company recognized a $140.3 million loss on impairment of leased property related to the GIGS asset in the Consolidated Statements of Operations for the three months ended March 31, 2020. The Company also previously recognized a deferred rent receivable for the Grand Isle Gathering Lease, which primarily represented timing differences between the straight-line revenue recognition and contractual lease receipts over the lease term. Given the EGC's Tenant's nonpayment of rent and the Company's expectations surrounding the collectability of the contractual lease payments under the lease, the Company recognized a non-cash write-off of the deferred rent receivable of $30.1 million. The non-cash write-off was recognized as a reduction of revenue in the Consolidated Statements of Operations for the three months ended March 31, 2020.
As discussed in Note 3 ("Acquisition"), on February 4, 2021, the Company contributed the GIGS asset as partial consideration for the acquisition of its interest in Crimson resulting in its disposal, along with the asset retirement obligation (collectively, the "GIGS Disposal Group"), which was assumed by the sellers. Upon meeting the held for sale criteria in mid-January 2021, the Company ceased recording depreciation on the GIGS asset. The GIGS asset had a carrying value of $63.5 million and the asset retirement obligation had a carrying value of $8.8 million, or a net carrying value of $54.7 million for the GIGS Disposal Group. The GIGS asset had a fair value of approximately $48.9 million at the time of disposal, which was determined by a discounted cash flow model and utilized the forecast of a market participant and their expected operation of the asset. The fair value measurement is also based on significant inputs not observable in the market and thus represent Level 3 measurements. The significant unobservable inputs include a discount rate of 11.75 percent. The contribution of the GIGS Disposal Group resulted in a loss on impairment and disposal of leased property of $5.8 million in the Consolidated Statements of Operations in the first quarter of 2021.
Termination of the Grand Isle Lease Agreement
As described in Note 10 ("Commitments and Contingencies"), in connection with the GIGS disposition, the Company and Grand Isle Corridor entered into a Settlement and Mutual Release Agreement (the "Settlement Agreement") with the EGC Tenant, EGC, and CEXXI, LLC (the "EXXI Entities") related to the previously reported litigation between them and terminated the Grand Isle Lease Agreement. The termination of the Grand Isle Lease Agreement resulted in the write-off of deferred lease costs of $166 thousand, which is recorded as a loss on termination of lease in the Consolidated Statements of Operations for the three months ended March 31, 2021.
The following table reflects the depreciation and amortization included in the accompanying Consolidated Statements of Operations associated with the Company's leases and leased properties:
For the Three Months Ended
March 31, 2021March 31, 2020
Depreciation Expense
GIGS$140,860 $2,440,588 
Pinedale— 2,217,360 
United Property Systems10,314 9,831 
Total Depreciation Expense$151,174 $4,667,779 
Amortization Expense - Deferred Lease Costs
GIGS$2,547 $7,641 
Pinedale— 15,342 
Total Amortization Expense - Deferred Lease Costs$2,547 $22,983 
ARO Accretion Expense
GIGS$40,546 $112,171 
Total ARO Accretion Expense$40,546 $112,171 
The following table reflects the deferred costs that are included in the accompanying Consolidated Balance Sheets associated with the Company's leased properties:
March 31, 2021December 31, 2020
Net Deferred Lease Costs
GIGS$— $168,191 
Total Deferred Lease Costs, net$— $168,191 
LESSEE - LEASED PROPERTIES
The Company and its subsidiaries currently lease land, corporate office space and single-use office space. During the three months ended March 31, 2021, the Company acquired additional right-of-use assets and lease liabilities in connection with the Crimson Transaction. The Company's leases are classified as operating leases and presented as operating right-of-use asset and operating lease liability on the Consolidated Balance Sheet. The Company recognizes lease expense in the Consolidated Statements of Operations on a straight-line basis over the remaining lease term. The Company noted the following information regarding its operating leases for the three months ended March 31, 2021 and 2020:
For the Three Months Ended
March 31, 2021March 31, 2020
Lease cost:
Operating lease cost$241,182 $12,088 
Short term lease cost102,014 — 
Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases 586,481 12,088 
Weighted-average remaining lease term - operating leases (in years)10.52.4
Weighted average discount rate - operating leases 7.04 %7.20 %

The following table reflects the undiscounted cash flows for future minimum lease payments under noncancelable operating leases reconciled to the Company's lease liabilities on our Consolidated Balance Sheet as of March 31, 2021:
Operating
For the Years EndingLeases
2021$741,839 
20221,416,102 
2023830,216 
2024419,068 
2025419,068 
Thereafter4,902,398 
Total 8,728,691 
Less: Present Value Discount 2,927,825 
Operating Lease Liabilities $5,800,866 
LEASED PROPERTIES AND LEASES LEASED PROPERTIES AND LEASES
LESSOR - LEASED PROPERTIES
Prior to 2021, the Company primarily acquired mid-stream and downstream assets in the U.S. energy sector such as pipelines, storage terminals, and gas and electric distribution systems and, historically, leased many of these assets to operators under triple-net leases. The Company's leased property was classified as an operating lease and was recorded as leased property in the Consolidated Balance Sheets. Base rent related to the Company's leased property was recognized on a straight-line basis over the term of the lease when collectability was probable. Participating rent was recognized when it was earned, based on the achievement of specified performance criteria. Base and participating rent were recorded as lease revenue in the Consolidated Statements of Operations. The Company regularly evaluated the collectability of any deferred rent receivable on a lease by lease basis. The evaluation primarily included assessing the financial condition and credit quality of the Company's tenants, changes in tenants' payment history and current economic factors. When the collectability of the deferred rent receivable or
future lease payments were no longer probable, the Company recognized a write-off of the deferred rent receivable as a reduction of revenue in the Consolidated Statements of Operations.
The Company divested all of its leased assets including (i) GIGS on February 4, 2021 as described further below and (ii) the Pinedale Liquids Gathering System ("Pinedale LGS") on June 30, 2020 in a sale to its tenant, Ultra Wyoming, LLC ("Ultra Wyoming") pursuant to the terms of the sale agreement approved by the U.S. Bankruptcy Court overseeing the bankruptcy proceedings of Ultra Wyoming and its parent company, Ultra Petroleum Corp ("UPL"). The sale of the Pinedale LGS was previously disclosed in the Company's 2020 SEC filings.
Sale and Impairment of the Grand Isle Gathering System
During 2020, the EGC Tenant's nonpayment of rent along with the significant decline in the global oil market triggered indicators of impairment for the GIGS asset. As a result, the Company recognized a $140.3 million loss on impairment of leased property related to the GIGS asset in the Consolidated Statements of Operations for the three months ended March 31, 2020. The Company also previously recognized a deferred rent receivable for the Grand Isle Gathering Lease, which primarily represented timing differences between the straight-line revenue recognition and contractual lease receipts over the lease term. Given the EGC's Tenant's nonpayment of rent and the Company's expectations surrounding the collectability of the contractual lease payments under the lease, the Company recognized a non-cash write-off of the deferred rent receivable of $30.1 million. The non-cash write-off was recognized as a reduction of revenue in the Consolidated Statements of Operations for the three months ended March 31, 2020.
As discussed in Note 3 ("Acquisition"), on February 4, 2021, the Company contributed the GIGS asset as partial consideration for the acquisition of its interest in Crimson resulting in its disposal, along with the asset retirement obligation (collectively, the "GIGS Disposal Group"), which was assumed by the sellers. Upon meeting the held for sale criteria in mid-January 2021, the Company ceased recording depreciation on the GIGS asset. The GIGS asset had a carrying value of $63.5 million and the asset retirement obligation had a carrying value of $8.8 million, or a net carrying value of $54.7 million for the GIGS Disposal Group. The GIGS asset had a fair value of approximately $48.9 million at the time of disposal, which was determined by a discounted cash flow model and utilized the forecast of a market participant and their expected operation of the asset. The fair value measurement is also based on significant inputs not observable in the market and thus represent Level 3 measurements. The significant unobservable inputs include a discount rate of 11.75 percent. The contribution of the GIGS Disposal Group resulted in a loss on impairment and disposal of leased property of $5.8 million in the Consolidated Statements of Operations in the first quarter of 2021.
Termination of the Grand Isle Lease Agreement
As described in Note 10 ("Commitments and Contingencies"), in connection with the GIGS disposition, the Company and Grand Isle Corridor entered into a Settlement and Mutual Release Agreement (the "Settlement Agreement") with the EGC Tenant, EGC, and CEXXI, LLC (the "EXXI Entities") related to the previously reported litigation between them and terminated the Grand Isle Lease Agreement. The termination of the Grand Isle Lease Agreement resulted in the write-off of deferred lease costs of $166 thousand, which is recorded as a loss on termination of lease in the Consolidated Statements of Operations for the three months ended March 31, 2021.
The following table reflects the depreciation and amortization included in the accompanying Consolidated Statements of Operations associated with the Company's leases and leased properties:
For the Three Months Ended
March 31, 2021March 31, 2020
Depreciation Expense
GIGS$140,860 $2,440,588 
Pinedale— 2,217,360 
United Property Systems10,314 9,831 
Total Depreciation Expense$151,174 $4,667,779 
Amortization Expense - Deferred Lease Costs
GIGS$2,547 $7,641 
Pinedale— 15,342 
Total Amortization Expense - Deferred Lease Costs$2,547 $22,983 
ARO Accretion Expense
GIGS$40,546 $112,171 
Total ARO Accretion Expense$40,546 $112,171 
The following table reflects the deferred costs that are included in the accompanying Consolidated Balance Sheets associated with the Company's leased properties:
March 31, 2021December 31, 2020
Net Deferred Lease Costs
GIGS$— $168,191 
Total Deferred Lease Costs, net$— $168,191 
LESSEE - LEASED PROPERTIES
The Company and its subsidiaries currently lease land, corporate office space and single-use office space. During the three months ended March 31, 2021, the Company acquired additional right-of-use assets and lease liabilities in connection with the Crimson Transaction. The Company's leases are classified as operating leases and presented as operating right-of-use asset and operating lease liability on the Consolidated Balance Sheet. The Company recognizes lease expense in the Consolidated Statements of Operations on a straight-line basis over the remaining lease term. The Company noted the following information regarding its operating leases for the three months ended March 31, 2021 and 2020:
For the Three Months Ended
March 31, 2021March 31, 2020
Lease cost:
Operating lease cost$241,182 $12,088 
Short term lease cost102,014 — 
Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases 586,481 12,088 
Weighted-average remaining lease term - operating leases (in years)10.52.4
Weighted average discount rate - operating leases 7.04 %7.20 %

The following table reflects the undiscounted cash flows for future minimum lease payments under noncancelable operating leases reconciled to the Company's lease liabilities on our Consolidated Balance Sheet as of March 31, 2021:
Operating
For the Years EndingLeases
2021$741,839 
20221,416,102 
2023830,216 
2024419,068 
2025419,068 
Thereafter4,902,398 
Total 8,728,691 
Less: Present Value Discount 2,927,825 
Operating Lease Liabilities $5,800,866 
v3.21.1
Financing Notes Receivable
3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
FINANCING NOTES RECEIVABLE FINANCING NOTES RECEIVABLEFinancing notes receivable are presented at face value plus accrued interest receivable and deferred loan origination costs, and net of related direct loan origination income. Each quarter the Company reviews its financing notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Factors may include credit quality, timeliness of required periodic payments, past due status, and management discussions with obligors. The Company evaluates the collectability of both interest and principal of each of its loans to determine if an allowance is needed. An allowance will be
recorded when, based on current information and events, the Company determines it is probable that it will be unable to collect all amounts due according to the existing contractual terms.
Four Wood Financing Note Receivable
On December 12, 2018, Four Wood Corridor granted SWD Enterprises, LLC, the previous debtor, approval to sell the assets securing the SWD loans to Compass SWD, LLC ("Compass SWD") in exchange for Compass SWD executing a new loan agreement with Four Wood Corridor for $1.3 million (the "Compass REIT Loan"). On June 12, 2019, Four Wood Corridor entered into an amended and restated Compass REIT Loan. The amended note had a two-year term maturing on June 30, 2021 with monthly principal payments of approximately $11 thousand and interest accruing on the outstanding principal at an annual rate of 8.5 percent. The amended and restated Compass REIT Loan is secured by real and personal property that provides saltwater disposal services for the oil and natural gas industry and pledged ownership interests of Compass SWD members.
On May 22, 2020, the terms of the Compass REIT Loan were amended (i) to extend the maturity date from June 30, 2021 to November 30, 2024 and (ii) to reduce payments to interest only through December 31, 2020. Additionally, the amended Compass REIT Loan will continue to accrue interest at an annual rate of 8.5 percent through May 31, 2021. Subsequent to May 31, 2021 interest will accrue at an annual rate of 12.0 percent. Monthly principal payments of approximately $11 thousand resumed on January 1, 2021 and will increase annually beginning on June 30, 2021 through the maturity date. As of March 31, 2021 and December 31, 2020, the Compass REIT Loan was valued at $1.2 million.
v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company's deferred tax assets and liabilities as of March 31, 2021 and December 31, 2020, are as follows:
Deferred Tax Assets and Liabilities
March 31, 2021December 31, 2020
Deferred Tax Assets:
Deferred contract revenue$1,439,599 $1,474,962 
Net operating loss carryforwards6,656,964 6,438,628 
Capital loss carryforward92,418 92,418 
Other420 420 
Sub-total$8,189,401 $8,006,428 
Valuation allowance(92,418)(92,418)
Sub-total$8,096,983 $7,914,010 
Deferred Tax Liabilities:
Cost recovery of leased and fixed assets$(3,730,427)$(3,578,283)
Other(57,580)(53,151)
Sub-total$(3,788,007)$(3,631,434)
Total net deferred tax asset$4,308,976 $4,282,576 
As of March 31, 2021, the total deferred tax assets and liabilities presented above relate to the Company's TRSs. The Company recognizes the tax benefits of uncertain tax positions only when the position is "more likely than not" to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company's policy is to record interest and penalties on uncertain tax positions as part of tax expense. Tax years beginning with the year ended December 31, 2017 remain open to examination by federal and state tax authorities.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs originating in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Certain of the Company’s TRSs have NOLs totaling approximately $1.2 million that are eligible for carryback under the CARES Act. The benefit of these carrybacks has been recorded as an increase to income taxes receivable and a reduction to deferred tax assets as of December 31, 2020. Certain NOLs which were initially measured at the current corporate income tax rate of 21 percent are being carried back to offset taxable income that was taxed at a pre-Tax Cuts and Jobs Act of 2017 rate of 34 percent. The benefit received from the rate differential was reflected in the income tax provision for the year ended December 31, 2020.
For the year ended December 31, 2019, the Company generated a capital loss carryforward resulting from the liquidation of Lightfoot. The capital loss decreased upon receipt of the final 2019 K-1's in the first quarter of 2020. The amount of the carryforward for tax purposes was approximately $440 thousand as of both March 31, 2021 and December 31, 2020, respectively, and if not utilized, this carryforward will expire as of December 31, 2024. Management assessed the available evidence and determined that it is more likely than not that the capital loss carryforward will not be utilized prior to expiration. Due to the uncertainty of realizing this deferred tax asset, a valuation allowance of $92 thousand was recorded equal to the amount of the tax benefit of this carryforward at both March 31, 2021 and December 31, 2020, respectively. In the future, if the Company concludes, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, the valuation allowance will be adjusted accordingly in the period such conclusion is made.
Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 21 percent for the three months ended March 31, 2021 and 2020 to loss from operations and other income and expense for the periods presented, as follows:
Income Tax Expense (Benefit)
For the Three Months Ended
March 31, 2021March 31, 2020
Application of statutory income tax rate$(2,245,487)$(34,034,089)
State income taxes, net of federal tax expense810 34,509 
Federal Tax Attributable to Income of Real Estate Investment Trust2,245,959 34,134,344 
Other185 (159,486)
Total income tax expense (benefit)$1,467 $(24,722)
The components of income tax expense (benefit) include the following for the periods presented:
Components of Income Tax Expense (Benefit)
For the Three Months Ended
March 31, 2021March 31, 2020
Current tax expense (benefit)
Federal$22,740 $(409,643)
State (net of federal tax expense (benefit))5,127 15,000 
Total current tax expense (benefit)$27,867 $(394,643)
Deferred tax expense (benefit)
Federal$(22,083)$350,412 
State (net of federal tax expense (benefit))(4,317)19,509 
Total deferred tax expense (benefit)$(26,400)$369,921 
Total income tax expense (benefit), net$1,467 $(24,722)
v3.21.1
Property and Equipment
3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Property and Equipment
March 31, 2021December 31, 2020
Land$23,199,330 $686,330 
Crude oil pipelines156,001,983 — 
Natural gas pipeline104,845,781 104,869,418 
Right-of-way agreements104,466,374 22,041,047 
Tanks29,622,688 — 
Station and pumping equipment 24,617,680 — 
Other pipeline accessories and property12,242,069 — 
Construction work in progress6,051,938 220,157 
Vehicles, trailers and other equipment2,041,878 719,897 
Communication systems1,830,589 — 
Office equipment and computers1,000,838 268,559 
Leasehold improvements431,253 — 
Buildings121,237 — 
Gross property and equipment$466,473,638 $128,805,408 
Less: accumulated depreciation(25,260,543)(22,580,810)
Net property and equipment$441,213,095 $106,224,598 
Depreciation expense was $2.7 million and $844 thousand for the three months ended March 31, 2021 and 2020, respectively.
v3.21.1
Management Agreement
3 Months Ended
Mar. 31, 2021
Agreements [Abstract]  
MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT
On February 4, 2021, the Company entered into a Contribution Agreement with Richard C. Green, Rick Kreul, Rebecca M. Sandring, Sean DeGon, Jeff Teeven, Jeffrey E. Fulmer, David J. Schulte (as Trustee of the DJS Trust under Trust Agreement dated July 18, 2016), and Campbell Hamilton, Inc., which is an entity controlled by David J. Schulte (collectively, the "Contributors"), and Corridor InfraTrust Management, LLC ("Corridor" or the "Manager"), the Company's external manager. Consummation of the transactions contemplated in the Contribution Agreement will result in the internalization of the Manager (the "Internalization"), subject to stockholder approval. Following the Internalization, the Company will own all material assets of Corridor currently used in the conduct of its business and will be managed by officers and employees who currently work for the Manager and who are expected to become employees of the Company as a result of the Internalization.
In payment of the aggregate Internalization consideration (the "Internalization Consideration"), subject to approval by the Company's stockholders in compliance with NYSE rules, the Company will issue to the Contributors, on a pro rata basis (i) 1,153,846 shares of Common Stock, (ii) 683,761 shares of the newly created Class B Common Stock, and (iii) 170,213 depositary shares of Series A Preferred (collectively with the Common Stock and Class B Common Stock, the "REIT Stock").
Contemporaneously with execution of the Contribution Agreement, the Company and Corridor entered into the First Amendment (the "First Amendment") to the Management Agreement dated as of May 8, 2015 (as amended, the "Management Agreement") that has the effect, beginning February 1, 2021, of (i) eliminating the management fee, (ii) providing a one-time, $1.0 million advance to Corridor to fund bonus payments to its employees in connection with the Internalization and (iii) providing payments to Corridor for actual employee compensation and office related expenses. Further, the First Amendment provides that, beginning April 1, 2021, the Company will pay Corridor additional cash fees equivalent to the aggregate amount of all distributions that would accrue, if declared, on and after such date with respect to the securities to be issued as the Internalization Consideration pursuant to the Contribution Agreement (an amount, assuming payment on a cash basis equal to approximately $172 thousand per quarter). This agreement is in effect until the closing of the Internalization or termination of the Contribution Agreement.
Fees incurred under the Management Agreement for the three months ended March 31, 2021 were $1.9 million compared to $1.6 million for the three months ended March 31, 2020. For the three months ended March 31, 2021, the fees incurred include $1.0 million related to a transaction bonus outlined in the Contribution Agreement, $321 thousand for January 2021 management fees under the Management Agreement and $608 thousand for reimbursement of Corridor employee compensation and office related expenses under the First Amendment. The Company also reimbursed Corridor for approximately $50 thousand in legal fees incurred in connection with the Internalization and paid investment advisors $1.9 million in connection with the execution of the Contribution Agreement. Fees incurred under the Management Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
The Company pays its administrator, Corridor, pursuant to an Administrative Agreement. Fees incurred under the Administrative Agreement for the three months ended March 31, 2021 were $13 thousand compared to $64 thousand for the three months ended March 31, 2020. Fees incurred under the Administrative Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
CorEnergy Legal Proceedings
The Company initiated litigation on March 26, 2019 to enforce the terms of the Grand Isle Lease Agreement requiring that the Company be provided with copies of certain financial statement information that it was required to file pursuant to SEC Regulation S-X, as described in Section 2340 of the SEC Financial Reporting Manual, in the case CorEnergy Infrastructure Trust, Inc. and Grand Isle Corridor, LP v. Energy XXI Gulf Coast, Inc. and Energy XXI GIGS Services, LLC, Case No. 01-19-0228-CV in the 11th District Court of Harris County, Texas. The Company sought and obtained a temporary restraining order mandating that our tenant deliver the required financial statements. On April 1, 2019, that order was stayed pending an appeal by the tenant to the Texas First District Court of Appeals in Houston. On January 6, 2020, that appellate court rejected the tenant's appeal and remanded the case for further proceedings in the 11th District Court of Harris County, Texas. While the appeal was pending, the original temporary restraining order lapsed by its own terms. In May 2020, the trial court granted the Company's motion for partial summary judgment mandating the tenant deliver the required financial statements. The parties agreed to stay this case in order to facilitate settlement discussions (see below).
In addition to the foregoing lawsuit, the Company's subsidiary, Grand Isle Corridor, filed a separate lawsuit against EGC and EGC Tenant to recover unpaid rent due and owed under the Grand Isle Lease Agreement. The lawsuit was filed in the 129th District Court of Harris County, Texas and was styled as Grand Isle Corridor, LP v. Energy XXI Gulf Coast, Inc. and Energy XXI GIGS Services, LLC, Case No. 202027212. Grand Isle Corridor filed a motion for summary judgment against the EGC Tenant in this action. Grand Isle Corridor filed two identical lawsuits in Harris County seeking unpaid rent for June and July (Case Nos. 202036038 and 202039219, respectively). These cases were stayed pending negotiation of a business resolution with EGC and EGC Tenant (see below).
On April 20, 2020, EGC and its parent company, CEXXI, LLC, filed an adversary proceeding against the Company and Grand Isle Corridor, Energy XXI Gulf Coast, LLC and CEXXI, LLC v. Grand Isle Corridor, LP and CorEnergy Infrastructure Trust, Inc., Adv. No. 20-03084, in the United States Bankruptcy Court for the Southern District of Texas. In this suit, EGC was asking the bankruptcy court in which EGC filed for bankruptcy in 2016 to declare that the assignment and assumption of the guarantee of the Grand Isle Lease Agreement, which was a part of that earlier bankruptcy proceeding, is null and void. The Company believes this claim was meritless. The parties agreed to stay this case (see below).
During the third quarter of 2020, the Company and Grand Isle Corridor reached an agreement with EGC, EGC Tenant, and CEXXI, LLC to stay each of the above-referenced lawsuits indefinitely while seeking a business resolution for their various disputes. During the agreed stay, all deadlines in the pending actions were suspended, and the parties may not engage in discovery, file pleadings, or initiate any new lawsuits against each other. Any party may terminate the agreed stay and resume litigation upon five days' written notice.
On February 4, 2021, the Company contributed the GIGS asset as partial consideration for the acquisition of its interest in Crimson. In connection with the disposition, the Company and Grand Isle Corridor entered into Settlement Agreement with the EXXI Entities. The EGC Tenant is the tenant under the Grand Isle Lease Agreement, dated June 30, 2015 with Grand Isle Corridor. Grand Isle Corridor initially received a Guaranty dated June 22, 2015 from Energy XXI Ltd. in connection with the original purchase of the GIGS, which was assumed by EGC, as guarantor of the obligations of the EGC Tenant pursuant to the terms of the Assignment and Assumption of Guaranty and Release dated December 30, 2016 (as assigned and assumed, the "Tenant Guaranty").
Pursuant to the terms of the Settlement Agreement, the Company and Grand Isle Corridor released the EXXI Entities from any and all claims, except for the Environmental Indemnity under the Grand Isle Lease Agreement, which shall survive, and the EXXI Entities released the Company and Grand Isle Corridor from any and all claims. The parties have also agreed to jointly dismiss the litigation described above in connection with the Settlement Agreement. Additionally, the Grand Isle Lease Agreement and Tenant Guaranty were cancelled and terminated.
Crimson Legal Proceedings
On October 30, 2014, the owner of a property on which Crimson built a valve access vault filed an action against Crimson, claiming that Crimson's pre-existing pipeline easement did not authorize the construction of the vault. Crimson responded by filing a condemnation action on October 26, 2015 to acquire new easements for the vault and related pipeline, and the cases
were consolidated into one action, Crimson California Pipeline L.P. v. Noarus Properties, Inc.; and Does 1 through 99, Case No. BC598951, in the Los Angeles Superior Court-Central District. The property owner has claimed damages of $7,500,000. A legal issues trial relating to liability for damages is scheduled for July 12, 2021, and a jury trial to determine the amount of damages, if any, is scheduled for November 1, 2021. Crimson is vigorously defending itself against the claims asserted by the property owner in this matter and, while the outcome cannot be predicted, management believes the ultimate resolution of this matter will not have a material adverse impact on the Company’s results of operations, financial position or cash flows.
In June 2016, Crimson discovered a leak on its Ventura pipeline located in Ventura County, California, at which time Crimson began remediation of the observed release and concurrently took the pipeline out of service. The pipeline was properly repaired and returned to service in June 2016. The remediation efforts are complete, the affected area has been restored, and Crimson has implemented a monitoring program for the area. In November 2018, Crimson was notified by the California State Water Resources Board of a Forthcoming Assessment of Administrative Civil Liability concerning alleged violations of the California Water Code related to this incident. Through pre-enforcement settlement discussion, Crimson and the California State Water Board reached a settlement requiring Crimson to pay a penalty of $325,000, which is currently pending final approval from the State of California. Pursuant to that settlement, annually Crimson also must perform certain ongoing monitoring obligations related to the condition of the affected barranca. Additionally, in July 2020 Crimson entered into a Stipulation of Final Judgment related to the same incident with the Ventura County, California Department of Fish and Wildlife, Office of Oil Spill Response, pursuant to which Crimson agreed to pay penalties of $900,000 plus reimbursement of certain investigative costs. Half of this settlement was paid during 2020 prior to the Crimson Transaction, and the remainder will be paid in 2021.
As a transporter of crude oil, Crimson is subject to various environmental regulations that could subject the Company to future monetary obligations. Crimson has received notices of violations and potential fines under various federal, state and local provisions relating to the discharge of materials into the environment or protection of the environment. Management believes that even if any one or more of these environmental proceedings were decided against Crimson, it would not be material to the Company's financial position, results of operations or cash flows, and the Company maintains insurance coverage for environmental liabilities in amounts that management believes to be appropriate and customary for the Company's business.
The Company also is subject to various other claims and legal proceedings covering a wide range of matters that arose in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or by established reserves, and, if not so covered, are without merit or are of such kind, or involve such amounts, as would not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
California Bonds Indemnification
On March 31, 2021, the Company executed a General Agreement of Indemnity (the "Indemnity Agreement") for the benefit of Federal Insurance Company, Westchester Fire Insurance Company and each of their respective direct and indirect subsidiaries, parent companies and affiliates (individually and collectively, "the Surety") related to the surety bonds at Crimson. The Company, jointly and severally, agrees to pay the Surety the agreed premium for the bonds and upon written request of the Surety at any time, collateral security for its suretyship until such time evidence is provided of the termination of any past, present and future liability under any bonds. The Indemnity Agreement may be terminated by the Company upon twenty days written notice. The premium for the bonds currently outstanding is approximately $83 thousand.
v3.21.1
Fair Value
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE FAIR VALUE
The following section describes the valuation methodologies used by the Company for estimating fair value for financial instruments not recorded at fair value, but fair value is included for disclosure purposes only, as required under disclosure guidance related to the fair value of financial instruments.
Cash and Cash Equivalents — The carrying value of cash, amounts due from banks, federal funds sold and securities purchased under resale agreements approximates fair value.
Financing Notes Receivable — The financing notes receivable are valued on a non-recurring basis. The financing notes receivable are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Financing notes with carrying values that are not expected to be recovered through future cash flows are written-down to their estimated net realizable value. Estimates of realizable value are determined based on unobservable inputs, including estimates of future cash flow generation and value of collateral underlying the notes.
Inventory - Inventory primarily consists of crude oil earned as in-kind PLA payments and is valued using an average costing method at the lower of cost and net realizable value.
Secured Credit Facilities — The fair value of the Company's long-term variable-rate and fixed-rate debt under its secured credit facilities approximates carrying value.
Unsecured Convertible Senior Notes — The fair value of the unsecured convertible senior notes is estimated using quoted market prices from either active (Level 1) or generally active (Level 2) markets.
Carrying and Fair Value Amounts
 Level within fair value hierarchyMarch 31, 2021December 31, 2020
Carrying
    Amount (1)
Fair Value
Carrying
    Amount (1)
Fair Value
Financial Assets:
Cash and cash equivalentsLevel 1$18,839,994 $18,839,994 $99,596,907 $99,596,907 
Financing notes receivable (Note 6)Level 31,183,950 1,183,950 1,209,736 1,209,736 
InventoryLevel 11,795,688 1,795,688 87,940 87,940 
Financial Liabilities:
Crimson secured credit facility - Term LoanLevel 2$78,267,485 $78,267,485 $— $— 
Crimson secured credit facility - Revolver(2)
Level 223,917,795 23,917,795 — — 
5.875% Unsecured Convertible Senior Notes
Level 2115,172,555 108,516,282 115,008,130 84,409,292 
(1) The carrying value of debt balances are presented net of unamortized original issuance discount and debt issuance costs.
(2) The carrying value of the Crimson Revolver is presented net of unamortized debt issuance costs classified as an asset in deferred costs.
v3.21.1
Debt
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
DEBT DEBT
The following is a summary of the Company's debt facilities and balances as of March 31, 2021 and December 31, 2020:
Total Commitment
 or Original Principal
Quarterly Principal PaymentsMarch 31, 2021December 31, 2020
Maturity
Date
Amount OutstandingInterest
Rate
Amount OutstandingInterest
Rate
Crimson Secured Credit Facility:
Crimson Revolver$50,000,000 $— 2/4/2024$25,000,000 4.61 %$— — %
Crimson Term Loan80,000,000 2,000,000 2/4/202480,000,000 4.61 %— — %
Crimson Uncommitted Incremental Credit Facility25,000,000 — 2/4/2024— — %— — %
CorEnergy Secured Credit Facility (1):
CorEnergy Revolver160,000,000 — 7/28/2022— — %— 2.89 %
MoGas Revolver1,000,000 — 7/28/2022— — %— 2.89 %
Omega Line of Credit (2)
1,500,000 — 4/30/2021— — %— 4.14 %
5.875% Unsecured Convertible Senior Notes
120,000,000 — 8/15/2025118,050,000 5.875 %118,050,000 5.875 %
Total Debt$223,050,000 $118,050,000 
Less:
Unamortized deferred financing costs on 5.875% Convertible Senior Notes
$364,313 $385,131 
Unamortized discount on 5.875% Convertible Senior Notes
2,513,132 2,656,739 
Unamortized deferred financing costs on Crimson Secured Credit Facility (3)
1,732,515 — 
Total Debt, net of deferred financing costs$218,440,040 $115,008,130 
Debt due within one year$8,000,000 $— 
(1) The CorEnergy Secured Credit Facility was terminated on February 4, 2021 in connection with the Crimson Transaction described in Note 3 ("Acquisition").
(2) The Omega Line of Credit was terminated on February 4, 2021 in connection with the Crimson Transaction described in Note 3 ("Acquisition").
(3) Unamortized deferred financing costs related to the Company's revolving credit facilities are included in Deferred Costs in the Assets section of the Consolidated Balance Sheets. Refer to the "Deferred Financing Costs" paragraph below.
Crimson Credit Facility
On February 4, 2021, in connection with the Crimson Transaction, Crimson Midstream Operating and Corridor MoGas, (collectively, the "Borrowers"), together with Crimson, MoGas Debt Holdco LLC, MoGas, CorEnergy Pipeline Company, LLC, United Property Systems, Crimson Pipeline, LLC and Cardinal Pipeline, L.P. (collectively, the "Guarantors") entered into the Crimson Credit Facility with the lenders from time to time party thereto and Wells Fargo Bank, as administrative agent for other participating lenders. The Crimson Credit Facility provides borrowing capacity of up to $155.0 million, consisting of: a $50.0 million revolving credit facility ("Crimson Revolver"), an $80.0 million term loan ("Crimson Term Loan") and an uncommitted incremental credit facility of $25.0 million. Upon closing of the Crimson Transaction described in Note 3 ("Acquisition"), the Borrowers drew the $80.0 million Crimson Term Loan and $25.0 million on the Crimson Revolver. Subsequent to the initial closing, on March 25, 2021, Crimson contributed all of its equity interests in Crimson Midstream Services, LLC and Crimson Midstream I Corporation to Crimson Midstream Operating, and, effective as of May 4, 2021, such subsidiaries have become additional Guarantors pursuant to the Amended and Restated Guaranty Agreement and parties to the Amended and Restated Security Agreement and (in the case of Crimson Midstream I Corporation) the Amended and Restated Pledge Agreement.
The loans under the Crimson Credit Facility mature on February 4, 2024. The Crimson Term Loan requires quarterly payments of $2.0 million in arrears on the last business day of March, June, September and December, commencing on June 30, 2021. Subject to certain conditions, all loans made under the Crimson Credit Facility shall, at the option of the Borrowers, bear interest at either (a) LIBOR plus a spread of 325 to 450 basis points, or (b) a rate equal to the highest of (i) the prime rate established by the Administrative Agent, (ii) the federal funds rate plus 0.5%, or (iii) the one-month LIBOR rate plus 1.0%, plus a spread of 225 to 350 basis points. The applicable spread for each interest rate is based on the Total Leverage Ratio (as defined in the Crimson Credit Facility); however, the initial interest rate is set at the top level of the pricing grid until the first compliance reporting event for the period ending June 30, 2021.
Outstanding balances under the facility are guaranteed by the Guarantors pursuant to the Amended and Restated Guaranty Agreement and secured by all assets of the Borrowers and Guarantors (including the equity in such parties), other than any assets regulated by the CPUC and other customary excluded assets, pursuant to an Amended and Restated Pledge Agreement and an Amended and Restated Security Agreement. Under the terms of the Crimson Credit Facility, the Borrowers and their restricted subsidiaries will be subject to certain financial covenants commencing with the fiscal quarter ending June 30, 2021 as follows (i): the total leverage ratio shall not be greater than: (a) 3.00 to 1.00 commencing with the fiscal quarter ending June 30, 2021 through and including the fiscal quarter ending December 31, 2021; (b) 2.75 to 1.00 commencing with the fiscal quarter ending March 31, 2022 through and including the fiscal quarter ending December 31, 2022; and (c) 2.50 to 1.00 commencing with the fiscal quarter ending March 31, 2023 and for each fiscal quarter thereafter and (ii) the debt service coverage ratio, shall not be less than 2.00 to 1.00.
Cash distributions to the Company from the Borrowers are subject to certain restrictions, including without limitation, no default or event of default, compliance with financial covenants, minimum undrawn availability and available free cash flow. The Borrowers and their restricted subsidiaries are also subject to certain additional affirmative and negative covenants customary for credit transactions of this type. The Crimson Credit Facility contains default and cross-default provisions (with applicable customary grace or cure periods) customary for transactions of this type. Upon the occurrence of an event of default, payment of all amounts outstanding under the Crimson Credit Facility may become immediately due and payable at the election of the Required Lenders (as defined in the Crimson Credit Facility).
Contractual Payments
The remaining contractual principal payments as of March 31, 2021 under the Crimson Credit Facility are as follows:
YearCrimson Term LoanCrimson RevolverTotal
2021$6,000,000 $— $6,000,000 
20228,000,000 — 8,000,000 
20238,000,000 — 8,000,000 
202458,000,000 25,000,000 83,000,000 
2025— — — 
Thereafter — — — 
Total Remaining Contractual Payments$80,000,000 $25,000,000 $105,000,000 

Subsequent to March 31, 2021, Crimson Midstream Operating and Corridor MoGas, Inc. borrowed an additional $5.0 million under the Crimson Revolver bringing outstanding borrowings under the Crimson Revolver to $30.0 million.
CorEnergy Credit Facility
On July 28, 2017, the Company entered into an amendment and restatement of the CorEnergy Credit Facility with Regions Bank, as lender and administrative agent for other participating lenders (collectively, with the Agent, the "Lenders"). The amended facility provided for borrowing commitments of up to $161.0 million, consisting of (i) $160.0 million on the CorEnergy Revolver, subject to borrowing base limitations, and (ii) $1.0 million on the MoGas Revolver.
On February 4, 2021, in connection with the acquisition of Crimson, the Company terminated the CorEnergy Credit Facility. On the date of termination, there was no indebtedness outstanding under this facility, and the loan documents providing for the facility, and the security interests securing it, were terminated and released. The termination of the CorEnergy Credit Facility resulted in the write-off of the remaining deferred financing costs of $862 thousand, which is recorded as a loss on extinguishment of debt in the Consolidated Statement of Operations for the three months ended March 31, 2021.
Deferred Financing Costs
A summary of deferred financing cost amortization expenses for the three months ended March 31, 2021 and 2020 is as follows:
For the Three Months Ended
March 31, 2021March 31, 2020
Crimson Credit Facility$156,399 $— 
CorEnergy Credit Facility47,879 143,635 
Amended Pinedale Term Credit Facility— 13,205 
Total Deferred Debt Cost Amortization Expense (1)(2)
$204,278 $156,840 
(1) Amortization of deferred debt issuance costs is included in interest expense in the Consolidated Statements of Operations.
(2) For the amount of deferred debt cost amortization relating to the convertible notes included in the Consolidated Statements of Operations, refer to the Convertible Note Interest Expense table below.
Convertible Debt
5.875% Convertible Notes
On August 12, 2019, the Company completed a private placement offering of $120.0 million aggregate principal amount of 5.875% Convertible Senior Notes due 2025 (the "5.875% Convertible Notes") to the initial purchasers of such notes for cash in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act. The initial purchasers then resold the 5.875% Convertible Notes for cash equal to 100 percent of the aggregate principal amount thereof to qualified institutional buyers, as defined in Rule 144A under the Securities Act, in reliance on an exemption from registration provided by Rule 144A. The 5.875% Convertible Notes mature on August 15, 2025 and bear interest at a rate of 5.875 percent per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.
The 5.875% Convertible Notes were issued with an initial purchasers' discount of $3.5 million, which is being amortized over the life of the notes. The Company also incurred approximately $508 thousand of deferred debt costs in issuing the 5.875% Convertible Notes, which are also being amortized over the life of the notes.
Holders may convert all or any portion of their 5.875% Convertible Notes into shares of the Company's common stock at their option at any time prior to the close of business on the business day immediately preceding the maturity date. The initial conversion rate for the 5.875% Convertible Notes is 20.0 shares of common stock per $1,000 principal amount of the 5.875% Convertible Notes, equivalent to an initial conversion price of $50.00 per share of the Company's common stock. Such conversion rate will be subject to adjustment in certain events as specified in the Indenture.
The Indenture for the 5.875% Convertible Notes specifies events of default, including default by the Company or any of its subsidiaries with respect to any debt agreements under which there may be outstanding, or by which there may be secured or evidenced, any debt in excess of $25.0 million in the aggregate of the Company and/or any such subsidiary, resulting in such indebtedness becoming or being declared due and payable prior to its stated maturity.
On April 29, 2020, the Company repurchased approximately $2.0 million face amount of its 5.875% Convertible Notes. Subsequent to the transaction and as of March 31, 2021, the Company has $118.1 million aggregate principal amount of 5.875% Convertible Notes outstanding.
Convertible Note Interest Expense
The following is a summary of the impact of convertible notes on interest expense for the three months ended March 31, 2021 and 2020:
Convertible Note Interest Expense
For the Three Months Ended
March 31, 2021March 31, 2020
7.00% Convertible Notes:
Interest Expense$— $31,215 
Discount Amortization— 3,645 
Deferred Debt Issuance Amortization— 622 
Total 7.00% Convertible Notes
$— $35,482 
5.875% Convertible Notes:
Interest Expense$1,733,859 $1,762,500 
Discount Amortization143,607 145,980 
Deferred Debt Issuance Amortization20,818 21,162 
Total 5.875% Convertible Notes
$1,898,284 $1,929,642 
Total Convertible Note Interest Expense$1,898,284 $1,965,124 
Including the impact of the convertible debt discount and related deferred debt issuance costs, the effective interest rate on the 5.875% Convertible Notes is approximately 6.4 percent for each of the three months ended March 31, 2021 and 2020, respectively.
v3.21.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY
PREFERRED STOCK
As of March 31, 2021, the Company has a total of 5,010,814 depository shares outstanding, or approximately 50,108 whole shares of its 7.375% Series A Preferred Stock. See Note 17 ("Subsequent Events") for further information regarding the declaration of a dividend on the 7.375% Series A Preferred Stock.
COMMON STOCK
As of March 31, 2021, the Company has 13,651,521 of common shares issued and outstanding. See Note 17 ("Subsequent Events") for further information regarding the declaration of a dividend on the common stock.
NON-CONTROLLING INTEREST
As disclosed in Note 3 ("Acquisition") as part of the Crimson Transaction, the Company, Grier and the Grier Members entered into the Third LLC Agreement of Crimson. Pursuant to the terms of the Third LLC Agreement, the Grier Members' and the Company's interests in Crimson are summarized in the table below:
Grier MembersCorEnergy
Economic ownership interests in Crimson Midstream Holdings, LLC (in units, except as noted)
Class A-1 Units 1,613,202 — 
Class A-2 Units 2,436,000 — 
Class A-3 Units 2,450,142 — 
Class B-1 Units — 10,000 
Voting ownership interests in Crimson Midstream Holdings, LLC
Class C-1 Units 505,000 495,000 
Voting Interests of C-1 Units (%)50.50 %49.50 %
Upon closing of the Crimson Transaction, the fair value of Grier's noncontrolling interest, which is represented by the A-1, A-2 and A-3 units above, was $115.3 million. As described further below, the A-1, A-2 and A-3 units may eventually be exchangeable for shares of the Company's common and preferred stock subject to the approval of the CPUC ("CPUC Approval"), which is expected to occur in the third quarter of 2021. The A-1, A-2 and A-3 units held by Grier and the Grier members and the B-1 units held by the Company represent economic interests in Crimson while the Class C-1 units represent voting interests.
Upon CPUC Approval, the parties will enter into a Fourth Amended and Restated LLC Agreement of Crimson ("Fourth LLC Agreement"), which will, among other things, (i) give the Company control of Crimson and its assets, in connection with an anticipated further restructuring of the Company's asset ownership structure and (ii) provide the Grier Members and Management Members (as defined below) the right to exchange their entire interest in Crimson for securities of the Company as follows:
Class A-1 units will become exchangeable for up to 1,613,202 shares of a newly created 9.00% Series C Exchangeable Preferred Stock of the Company ("Series C Preferred"), which may be converted by the holder into up to 1,716,172 of the Company's depositary shares, each representing 1/100th of a share of the Company's 7.375% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred");
Class A-2 units will become exchangeable for up to 2,436,000 shares of a newly created 4.00% Series B Redeemable Convertible Preferred Stock of the Company ("Series B Preferred"), which will be convertible, following approval of the Company's existing stockholders in compliance with the rules of the New York Stock Exchange ("NYSE"), into up to 8,675,214 additional shares of a new non-listed Class B Common Stock of the Company ("Class B Common Stock"), with such conversion to occur automatically, assuming stockholder approval is received; and
Class A-3 units will become exchangeable for up to 2,450,142 shares of the newly created Class B Common Stock.
Class B Common Stock will eventually be converted into the common stock of the Company ("Common Stock") on the occurrence of the earlier of the following: (i) the occurrence of the third anniversary of the closing date of the Crimson Transaction or (ii) the satisfaction of certain conditions related to an increase in the relative dividend rate of the Common Stock.
Prior to conversion of the A-1, A-2 and A-3 units into corresponding CORR securities, the Grier Members only have the right to receive distributions to the extent that the Company's Board of Directors determines dividends would be payable if they held the shares of Series C Preferred, Series B Preferred and Class B Common Stock, respectively, regardless of whether the securities are outstanding. If the Series C Preferred, Series B Preferred and Class B Common Stock are not outstanding, the Company's Board of Directors must consider that they would be outstanding when declaring dividends on the Common Stock. Following CPUC Approval, the terms of the Fourth LLC Agreement provide that such rights will continue until the Grier Members elect to exchange the A-1, A-2 and A-3 units for the related securities of the Company. In addition, after CPUC Approval, certain Crimson units held by the Grier Members are expected to be transferred to other individuals currently managing Crimson (the "Management Members"). The following table summarizes the distributions payable under the A-1, A-2 and A-3 units as if the Grier Members held the Series C Preferred, Series B Preferred and Class B Common Stock, respectively. The A-1, A-2 and A-3 units are entitled to the distribution regardless of whether the corresponding Company security is outstanding.
UnitsDistribution Rights of CorEnergy Securities Liquidation Preference Annual Distribution per Share
A-1 Units
9.00% Series C Exchangeable Preferred Stock
$25.00 $2.25 
A-2 Units
4.00% Series B Redeemable Preferred Stock(1)
25.00 1.00 
A-3 Units
Class B Common(2) (3)
N/A
Varies(2)(3)
(1) If, by the first anniversary of the original issue date of the Series B Preferred, (i) the affirmative vote of the holders of the issued and outstanding common stock have not approved the convertibility of the Series B Preferred to Class B Common Stock or (ii) any other action or consent necessary for such convertibility has not occurred as of such date, then (i) the dividend rate for the Series B Preferred will increase from 4.00% per annum to 11.00% per annum as of such anniversary.
(2) (A) For the fiscal quarters of the Company ending June 30, 2021, September 30, 2021, December 31, 2021 and March 30, 2022, the Common Stock Base Dividend Per Share shall equal $0.05 per share per quarter; (B) for the fiscal quarters of the Company ending
June 30, 2022, September 30, 2022, December 31, 2022 and March 30, 2023, the Common Stock Base Dividend Per Share shall equal $0.055 per share per quarter; and (C) for the fiscal quarters of the Company ending June 30, 2023, September 30, 2023, December 31, 2023 and March 30, 2024, the Common Stock Base Dividend Per Share shall equal $0.06 per share per quarter. The Class B Common dividend is subordinated based on a distribution formula described in footnote (3) below.
(3) For the fiscal quarters of the Company ending June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022, each share of Class B Common Stock shall be entitled to receive dividends equal to the quotient of (i) difference of (A) First Year Cash Available for Distribution ("CAFD") multiplied by 0.25 and (B) 1.25 multiplied by the Common Stock Base Dividend, divided by (ii) shares of Class B Common Stock issued and outstanding multiplied by 1.25. However, under no circumstances can the Class B Common Stock dividend be greater than the Common Stock dividend.
For the three months ended March 31, 2021, no distributions were paid to the Grier Members for the Class A-1, A-2 and A-3 units as distributions for (i) the Series C Preferred and Series B Preferred began accruing dividends April 1, 2021, (ii) the Class B Common begins paying dividends with the quarter ending June 30, 2021. See Note 17 ("Subsequent Events") for further information regarding the declaration of distributions related to the Class A-1 and A-2 units.
SHELF REGISTRATION STATEMENTS
On October 30, 2018, the Company filed a shelf registration statement with the SEC, pursuant to which it registered 1,000,000 shares of common stock for issuance under its dividend reinvestment plan ("DRIP"). As of March 31, 2021, the Company has issued 22,003 shares of common stock under its DRIP pursuant to the shelf, resulting in remaining availability of approximately 977,997 shares of common stock.
On November 9, 2018, the Company had a new shelf registration statement declared effective by the SEC replacing the Company's previously filed shelf registration statement, pursuant to which it may publicly offer additional debt or equity securities with an aggregate offering price of up to $600.0 million. As previously disclosed in the Company's Annual Report on From 10-K filed on March 4, 2021, the Company did not expect to be able to use this shelf registration statement or the shelf registration statement filed for its DRIP, at least until it was able to file certain financial statement information as required by SEC Regulation S-X. On April 29, 2021, the Company announced that its Board of Directors has authorized the reinstatement of the operation of the Company's DRIP. The Board of Directors made this determination in light of the fact that the staff of the SEC has advised the Company that it can resume the use of its previously filed and effective shelf registration statements.
v3.21.1
Earnings (Loss) Per Share
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share EARNINGS (LOSS) PER SHAREBasic earnings (loss) per share data is computed based on the weighted-average number of shares of common stock outstanding during the periods. Diluted earnings (loss) per share data is computed based on the weighted-average number of shares of common stock outstanding, including all potentially issuable shares of common stock. Diluted loss per share for the three months ended March 31, 2021 and 2020 excludes the impact to income and the number of shares outstanding from the conversion of the 7.00% Convertible Notes and the 5.875% Convertible Notes, as applicable, because such impact is antidilutive. The 7.00% Convertible Notes matured on June 15, 2020.
Under the if converted method, the 5.875% Convertible Notes would result in an additional 2,361,000 common shares outstanding for the three months ended March 31, 2021. For the three months ended March 31, 2020, under the if-converted method, the 7.00% Convertible Notes and 5.875% Convertible Notes would have resulted in an additional 2,450,788 common shares outstanding.
For the Three Months Ended
March 31, 2021March 31, 2020
Net loss attributable to CorEnergy Stockholders$(12,299,571)$(162,042,368)
Less: preferred dividend requirements2,309,672 2,260,793 
Net loss attributable to Common Stockholders$(14,609,243)$(164,303,161)
Weighted average shares - basic13,651,521 13,648,293 
Basic loss per share$(1.07)$(12.04)
Net Loss attributable to Common Stockholders (from above)$(14,609,243)$(164,303,161)
Loss attributable for dilutive securities$(14,609,243)$(164,303,161)
Weighted average shares - diluted13,651,521 13,648,293 
Diluted loss per share$(1.07)$(12.04)
v3.21.1
Variable Interest Entity
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entity VARIABLE INTEREST ENTITY
Crimson Midstream Holdings
As of February 1, 2021, CorEnergy holds a 49.50 percent interest in Crimson and Grier holds the remaining 50.50 percent interest. Crimson is a VIE as the legal entity is structured with non-substantive voting rights resulting from (i) the disproportionality between the voting interests of its members and certain economics of the distribution waterfall in the Third LLC Agreement and (ii) the de facto agent relationship between CorEnergy and Grier, who was appointed to CorEnergy's Board of Directors upon closing of the Crimson Transaction. As a result of this related party relationship, substantially all of Crimson's activities either involve or are conducted on behalf of CorEnergy that has disproportionately few voting rights, including Grier as a de facto agent.
Crimson is managed by the Crimson Board, which is made up of four managers of which the Company and Grier members are each represented by two managers. The Crimson Board is responsible for governing the significant activities that impact Crimson's economic performance, including a number of activities which are managed by an approved budget that requires super-majority approval or joint approval. In assessing the primary beneficiary, the Company determined that power is shared; however, the Company and Grier as a related party group have characteristics of a primary beneficiary. The Company performed the "most closely associated" test and determined that CorEnergy is the entity in the related party group most closely associated with the VIE. In performing this assessment, the Company considered (i) its influence over the tax structure of Crimson so its operations could be included in the Company's REIT structure under its PLR, which allows fees received for the usage of storage and pipeline capacity to qualify as rents from real property; (ii) the activities of the Company are substantially similar in nature to the activities of Crimson as the Company owns existing transportation and distribution assets at MoGas and Omega; (iii) Crimson's assets represent a substantial portion of the Company's total assets; and (iv) Grier's interest in Crimson in Class A-1, Class A-2 and Class A-3 units will earn distributions if the CorEnergy Board of Directors declares a common or preferred dividend for Series C Preferred, Series B Preferred and Class B Common; among other factors. Therefore, CorEnergy is the primary beneficiary and consolidates the Crimson VIE and Grier's 50.50 percent interest is reflected as a non-controlling interest in the consolidated financial statements.
The Company noted that Crimson's assets cannot be used to settle CorEnergy's liabilities with the exception of quarterly distributions, if declared by the Crimson Board. The quarterly distributions are used to fund current obligations, projected working capital requirements, debt service payments and dividend payments. As discussed in Note 12 ("Debt"), cash distributions to the Company from the borrowers under the Crimson Credit Facility are subject to certain restrictions, including without limitation, no default or event of default, compliance with financial covenants, minimum undrawn availability and available free cash flow. Further, the Crimson Credit Facility is secured by assets at both Crimson Midstream Operating and Corridor MoGas, Inc. For the three months ended March 31, 2021, the Company received $6.7 million in cash distributions from Crimson, which were in accordance with the terms of the Crimson Credit Facility.
The Company's interest in Crimson is significant to its financial position, financial performance and cash flows. A significant decline in Crimson's ability to fund quarterly distributions to the Company could have a significant impact on the Company's financial performance, including its ability to fund the obligations described above.
Limited Partnerships
Under the consolidation guidance, limited partnerships and other similar entities are considered VIEs unless the limited partners hold substantive kick-out rights or participating rights. Management determined that Pinedale LP and Grand Isle Corridor LP are VIEs because the limited partners of both partnerships lack both substantive kick-out rights and participating rights. However, based on the general partners' roles and rights as afforded by the partnership agreements and its exposure to losses and benefits of each of the partnerships through its significant limited partner interests, management determined that CorEnergy is the primary beneficiary of both Pinedale LP and Grand Isle Corridor LP. Based upon this evaluation and the Company's 100 percent ownership of the limited partnership interest in both Pinedale LP and Grand Isle Corridor LP, the consolidated financial statements presented include full consolidation with respect to both partnerships.
v3.21.1
Related Party Transactions
3 Months Ended
Mar. 31, 2021
Related Party Transactions [Abstract]  
Related Party Tran