KANSAS CITY: CorEnergy Infrastructure Trust announced the acquisition of Crimson Midstream Holdings, a California Public Utilities Commission (CPUC) regulated crude oil pipeline owner and operator, for consideration valued at approximately $350 million.
The acquired assets include four critical infrastructure pipeline systems spanning approximately 1,800 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.
The acquisition was funded with a combination of cash on hand, commitments to issue, as described below, approximately $119.4 million of new common and preferred equity, contribution of the Grand Isle Gathering System (GIGS) to the sellers, and $105.0 million in new term and revolver borrowings.
The acquired assets qualify for REIT treatment under established IRS regulations and CorEnergy’s Private Letter Ruling (PLR).
Following the transaction, Dave Schulte will remain Chairman, CEO and President of CorEnergy. John Grier, founder and Board Chairman of Crimson Midstream, LLC, will become Chief Operating Officer and join the Board of Directors of CorEnergy.
Additional members of Crimson’s executive and operating teams joining CorEnergy, include Robert Waldron, Chief Financial Officer at Crimson Midstream, who will become CFO of CorEnergy and Larry Alexander, President of Crimson California’s operations.
Commented Dave Schulte, “The acquisition of Crimson diversifies CORR’s critical infrastructure portfolio with four new pipeline networks and positions CorEnergy as an owner/operator of utility-like assets in line with expectations for our industry leading REIT qualifying platform. John and his team operate safely and reliably in a highly regulated market, and we plan to leverage their expertise to continue to grow our newly combined company.
Additionally, we are exchanging CorEnergy’s single-tenant GIGS asset for long-lived critical infrastructure pipeline systems used by a diverse group of investment-grade rated customers.”
“Our combined ability to pursue additional opportunities leveraging Crimson’s oil market relationships, together with CorEnergy’s natural gas transmission assets, establishes a diversified foundation for future acquisition consideration,” said John Grier.
“The Crimson pipeline networks connect multi-billion dollar refining complexes to low declining fields, producing desirable native grades of California crude oil, which is required for blended energy products satisfying state environmental standards.
We are confident that Crimson’s total system volumes will increase from current levels as both consumers and producers return to pre-COVID-19 activity levels. In addition, we believe that there are commercial growth opportunities in California that could provide additional contributions to cash flow, including opportunities to leverage Crimson’s leading position in the market and extensive real property ownership for renewable fuel storage and distribution, carbon capture potential, and the shift to lower carbon power sourcing.”
CorEnergy has also agreed to internalize its REIT manager, Corridor InfraTrust Management, LLC, for consideration of $16.9 million. As a result of the Internalization, CorEnergy anticipates that the pro forma management fees of approximately $5.5 million will be replaced with an estimated $3.4 million annualized SG&A expenses in 2021.
The Transaction is valued at $350.0 million, with CorEnergy’s consideration comprised of $75.6 million of cash on hand, $105.0 million in new term loan and revolver borrowings, contribution of the Grand Isle Gathering System (GIGS) to the sellers, $119.4 million of commitments to issue common and preferred equity.
CorEnergy Infrastructure Trust, Inc. (NYSE: CORR, CORRPrA) is a real estate investment trust that owns and operates or leases regulated natural gas transmission and distribution and crude oil gathering, storage and transmission pipelines and associated rights-of-way. www.corenergy.reit