CorEnergy Infrastructure Trust Announces Major Steps Toward Energy
Infrastructure REIT Qualification
Signs agreement to acquire $225 million pipeline asset from Ultra Petroleum
LEAWOOD, Kan. -- December 10, 2012
CorEnergy Infrastructure Trust, Inc. (“CorEnergy”) (NYSE: CORR) today
announced that it has entered into a definitive agreement to acquire a Liquids
Gathering System (“LGS”) from Ultra Petroleum Corp. (NYSE: UPL) for $225
million in cash. The LGS will continue to be operated by UPL under a long-term
triple net lease. Located in the Pinedale field in Wyoming, the LGS is a vital
component of natural gas production in one of the top five natural gas fields
in the U.S.
Prudential Capital Group, through its Dallas-based Energy Finance Group, will
contribute $30 million as a co-investor in the acquisition and CorEnergy will
contribute $130 million. The remainder of the acquisition cost will be
financed with $65 million of non-recourse debt.
The key characteristics of the LGS acquisition satisfy CorEnergy’s targeted
strategy and investment criteria including:
*Stable, fixed asset that is vital to UPL’s operations.
*Located in the Greater Green River Basin, the Pinedale and Jonah fields
were estimated to have had in excess of 48 Tcfe of recoverable natural gas
and an estimated reserve life of over 30 years as of December 31, 2011.
*Less than 25% of the Pinedale field had been developed as of December 31,
2011 and UPL is focused on continued production and expansion in the
*Minimum annual rent of $20 million provides source of steady rental income
over 15-year initial term.
*Additional participating rent based on volume of liquids provides upside
*UPL has industry leading operating fundamentals, a conservative financial
profile and is a recognized low-cost operator.
“The LGS acquisition represents a significant step in our transition to become
a real estate investment trust (“REIT”) by acquiring high-quality energy
infrastructure assets with reliable cash flows and executing leases with
quality operators,” said David Schulte, Chief Executive Officer of CorEnergy.
“This asset provides a foundation upon which we plan to build a diversified
energy infrastructure REIT. We expect this acquisition to be accretive to our
distributions and we intend to recommend to our Board of Directors an increase
to our annual distribution from $0.44 to $0.50 upon completion of the
“The CorEnergy solution satisfies strategic objectives for Ultra Petroleum,”
said UPL Senior Vice President and Chief Financial Officer, Mark Smith. “We
maintain operational control over the LGS, while freeing up internal capital
for growth which will in turn create additional value for our shareholders.”
The LGS was completed in 2010 and consists of more than 150 miles of
underground gathering pipelines with 107 receipt points and four above-ground
central gathering facilities that are utilized by UPL as a method of
separating water, condensate and associated natural gas from a unified stream
and subsequently selling or treating and disposing of the separated products.
UPL’s non-operating working interest partners in the Pinedale field where
UPL’s LGS is located pay UPL a fee for the use of UPL’s LGS. To date, no major
operational issues have been reported with respect to the LGS.
The LGS has a current capacity of approximately 45,000 barrels per day and
average throughput during the four quarters ended September 30, 2012 of
approximately 36,000 barrels per day. The underground pipes that make up the
majority of the LGS and certain other components, such as the separators, have
useful lives that extend beyond the initial term of the lease. CorEnergy
believes that the LGS can be expanded at a relatively low incremental cost by,
for example, adding additional separating equipment.
Most of UPL’s exploration and development in the Pinedale field takes place on
land under the jurisdiction of the Bureau of Land Management (BLM). The BLM
has the authority to approve or deny oil and gas leases or to impose
environmental restrictions on leases where appropriate. The BLM issued the
Pinedale Record of Decision (“ROD”) in September 2008. Under the ROD, UPL
gained year-round access to the Pinedale field for drilling and completion
activities in development areas, provided UPL conducts an environmental
mitigation effort, which includes the use of a liquids gathering system. This
additional access resulted in increased drilling efficiencies and allowed for
accelerated development of the field.
The 15-year triple net lease will provide a minimum annual base rent of $20
million, subject to an inflation adjustment. The lease also includes an
additional participating rent based on volume growth of liquids in the LGS.
The total rent (minimum plus participating) is capped at $27.5 million
annually for the initial 15-year term. At the conclusion of the initial term,
UPL’s subsidiary may renew the lease for additional, successive 5-year terms.
UPL’s subsidiary will operate the LGS and will retain responsibility for
maintenance and other capital expenditures required for its operation. UPL and
one of its wholly-owned subsidiaries will unconditionally guarantee the
UPL was incorporated in 1979 and is an independent oil and gas company engaged
in the development, production, operation, exploration and acquisition of oil
and natural gas properties. UPL leases approximately 93,000 gross (53,000 net)
acres in and around the Pinedale and Jonah natural gas fields of the Greater
Green River Basin in southwest Wyoming. The most recently available EIA data,
dated 2009, indicated that the Pinedale field was among the top five U.S.
natural gas plays based on proved reserves. As of December 31, 2011, UPL held
an approximately 50% working interest in approximately 1,700 producing wells
in these fields. The Pinedale and Jonah fields have estimated natural gas
reserves of over 48 Tcfe as of December 31, 2011.
As of December 31, 2011, UPL had an estimated 4.3 Tcfe of proved reserves and
10.2 Tcfe of proved, probable and possible (3P) reserves in the Pinedale and
Jonah fields. UPL’s third-party reservoir engineering firm, Netherland, Sewell
& Associates, Inc., has identified an inventory of over 5,000 economic, future
UPL derives its revenues principally from the sale of its natural gas and
associated condensate production from wells operated by UPL and others in the
Greater Green River Basin. UPL is recognized as a low-cost operator in the
industry in terms of both adding and producing oil and natural gas reserves.
UPL’s all-in cash costs, defined as all-in costs excluding DD&A expenses, have
consistently been lower than natural gas prices and for the twelve-month
period ended September 30, 2012 were $1.43 per Mcfe.
The $225 million acquisition will be completed through an indirect
wholly-owned subsidiary of CorEnergy, Pinedale Corridor, LP (“Pinedale LP”).
As co-investors, an indirect wholly-owned subsidiary of Prudential will
contribute $30 million to Pinedale LP. Pinedale LP will also incur $65 million
of non-recourse debt under a credit facility, for which KeyBank National
Association will act as lead arranger and administrative agent. The remainder
of the acquisition cost will be funded with cash that CorEnergy anticipates
having available at the time of closing.
The transaction is expected to close in mid-December 2012.
KeyBanc Capital Markets is acting as exclusive financial advisor to CorEnergy
in connection with the acquisition.
BofA Merrill Lynch is acting as exclusive structuring advisor in connection
with CorEnergy’s energy infrastructure real asset strategy.
About CorEnergy Infrastructure Trust, Inc.
CorEnergy Infrastructure Trust, Inc. (NYSE: CORR), seeks to acquire midstream
and downstream U.S. energy infrastructure assets and concurrently enter into
long-term triple net leases with energy companies. CorEnergy intends to
acquire infrastructure assets that qualify as real property for REIT purposes.
The Company’s principal objective is to provide stockholders with an
attractive risk-adjusted total return, with an emphasis on distributions and
distribution growth. Formerly Tortoise Capital Resources Corp., CorEnergy
previously traded under the ticker TTO. CorEnergy is managed by Corridor
InfraTrust Management, LLC. Corridor is an affiliate of Tortoise Capital
Advisors, L.L.C., a registered investment adviser with over $9.4 billion of
assets under management in the U.S. energy infrastructure sector as of
November 30, 2012. For more information, please visit www.corridortrust.com.
About Prudential Capital Group
Prudential Capital Group has been a leading provider of private debt,
mezzanine and equity securities to companies worldwide for more than 70 years.
Managing a portfolio of nearly $65 billion as of September 30, 2012,
Prudential Capital offers senior debt and mezzanine capital, leverage leases,
credit tenant leases, and equipment finance to companies worldwide. The global
regional office network has locations in Atlanta, Chicago, Dallas, Frankfurt,
London, Los Angeles, Minneapolis, Newark, N.J., New York, Paris and San
Francisco. For more information, please visit www.prudentialcapitalgroup.com.
About Ultra Petroleum Corp.
Ultra Petroleum Corp.is an independent exploration and production company
focused on developing its long-life natural gas reserves in theGreater Green
River BasinofWyoming—the PinedaleandJonah fields—and is in the ongoing
exploration and early development stages in theAppalachian
BasinofPennsylvania. Ultra is listed on theNew York Stock Exchangeand
trades under the ticker symbol "UPL".
This press release contains certain statements that may include
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements, other than statements of historical fact, included herein are
"forward-looking statements." Although CorEnergy believes that the
expectations reflected in these forward-looking statements are reasonable,
they do involve assumptions, risks and uncertainties, and these expectations
may prove to be incorrect. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of a variety of
factors, including those discussed in CorEnergy’s reports that are filed with
the Securities and Exchange Commission. You should not place undue reliance on
these forward-looking statements, which speak only as of the date of this
press release. Other than as required by law, CorEnergy does not assume a duty
to update any forward-looking statement. In particular, any distribution paid
in the future to our stockholders will depend on the actual performance of
CorEnergy, its costs of leverage and other operating expenses and will be
subject to the approval of CorEnergy’s Board of Directors and compliance with
Corridor InfraTrust Management, LLC
Rachel Stroer, 877-699-CORR (2677)
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