CORENERGY INFRASTRUCTURE TRUST, INC., 10-Q filed on 5/10/2016
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2016
Apr. 29, 2016
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
CorEnergy Infrastructure Trust, Inc. 
 
Entity Central Index Key
0001347652 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2016 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q1 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
11,929,869 
Consolidated Balance Sheets (Unaudited) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Assets
 
 
Leased property, net of accumulated depreciation of $38,124,111 and $33,869,263
$ 504,971,367 
$ 509,226,215 
Assets held for sale, less costs to sell
1,839,007 
Property and equipment, net of accumulated depreciation of $6,840,717 and $5,948,988
118,971,300 
119,629,978 
Financing notes and related accrued interest receivable, net of reserve of $4,100,000 and $13,784,137
1,500,000 
7,675,626 
Other equity securities, at fair value
6,837,442 
8,393,683 
Cash and cash equivalents
12,849,652 
14,618,740 
Accounts and other receivables
13,714,978 
10,431,240 
Deferred costs, net of accumulated amortization of $1,435,213 and $2,717,609
3,957,987 
4,187,271 
Prepaid expenses and other assets
825,369 
491,024 
Deferred tax asset
2,184,371 
1,606,976 
Goodwill
1,718,868 
1,718,868 
Total Assets
669,370,341 
677,979,621 
Liabilities and Equity
 
 
Current maturities of long-term debt
3,600,000 
66,132,000 
Current maturities of long-term debt - related party
668,556 
Long-term debt, net of deferred debt costs
150,052,573 
150,732,752 
Long-term debt - related party
10,417,194 
Asset retirement obligation
13,023,124 
12,839,042 
Accounts payable and other accrued liabilities
4,673,640 
2,317,774 
Management fees payable
1,894,112 
1,763,747 
Liabilities held for sale
439,007 
Line of credit
44,000,000 
Unearned revenue
2,761,202 
Total Liabilities
231,529,408 
233,785,315 
Equity
 
 
Series A Cumulative Redeemable Preferred Stock 7.375%, $56,250,000 liquidation preference ($2,500 per share, $0.001 par value), 10,000,000 authorized; 22,500 issued and outstanding as of March 31, 2016, and December 31, 2015
56,250,000 
56,250,000 
Capital stock, non-convertible, $0.001 par value; 11,951,757 and 11,939,697 shares issued and outstanding at March 31, 2016, and December 31, 2015 (100,000,000 shares authorized)
11,952 
11,940 
Additional paid-in capital
355,140,047 
361,581,507 
Accumulated other comprehensive income
(20,279)
190,797 
Total CorEnergy Equity
411,381,720 
418,034,244 
Non-controlling Interest
26,459,213 
26,160,062 
Total Equity
437,840,933 
444,194,306 
Total Liabilities and Equity
$ 669,370,341 
$ 677,979,621 
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Accumulated depreciation, leased property
$ 38,124,111 
$ 33,869,263 
Accumulated depreciation, property and equipment
6,840,717 
5,948,988 
Accumulated amortization, Deferred costs
1,435,213 
2,717,609 
Reserve for financing notes and related accrued interest receivable
4,100,000 
13,784,137 
Preferred stock, par value (in dollars per share)
$ 0.001 
 
Preferred stock, authorized
10,000,000 
 
Capital stock non-convertible, par value (in dollars per share)
$ 0.001 
$ 0.001 
Capital stock non-convertible, shares issued
11,951,757 
11,939,697 
Capital stock non-convertible, shares outstanding
11,951,757 
11,939,697 
Capital stock non-convertible, shares authorized
100,000,000 
100,000,000 
Series A Cumulative Redeemable Preferred Stock [Member]
 
 
Preferred Stock, Liquidation Preference
$ 56,250,000 
$ 56,250,000 
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, authorized
10,000,000 
10,000,000 
Preferred stock, issued
22,500 
22,500 
Preferred stock, outstanding
22,500 
22,500 
Consolidated Statements of Income and Comprehensive Income (Unaudited) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue
 
 
Lease revenue
$ 16,996,072 
$ 7,336,101 
Transportation and distribution revenue
5,099,451 
3,649,735 
Financing revenue
162,344 
660,392 
Sales revenue
2,341,655 
Total Revenue
22,257,867 
13,987,883 
Expenses
 
 
Transportation and distribution expenses
1,362,325 
1,197,968 
Cost of Sales
1,248,330 
General and administrative
3,289,852 
2,568,519 
Depreciation, amortization and accretion expense
5,296,818 
4,048,832 
Provision for loan losses
4,645,188 
Total Expenses
14,594,183 
9,063,649 
Operating Income
7,663,684 
4,924,234 
Other Income (Expense)
 
 
Net distributions and dividend income
375,573 
590,408 
Net realized and unrealized gain (loss) on other equity securities
(1,628,752)
449,798 
Interest expense
(3,926,009)
(1,147,272)
Total Other Income (Expense)
(5,179,188)
(107,066)
Income before income taxes
2,484,496 
4,817,168 
Taxes
 
 
Current tax expense
(677,731)
435,756 
Deferred tax expense (benefit)
(577,395)
(115,391)
Income tax expense (benefit), net
(1,255,126)
320,365 
Net Income
3,739,622 
4,496,803 
Less: Net Income attributable to non-controlling interest
348,501 
410,175 
Net Income attributable to CorEnergy Stockholders
3,391,121 
4,086,628 
Preferred dividend requirements
1,037,109 
737,500 
Net Income attributable to Common Stockholders
2,354,012 
3,349,128 
Other comprehensive income (loss):
 
 
Changes in fair value of qualifying hedges attributable to CorEnergy stockholders
(211,076)
(276,107)
Changes in fair value of qualifying hedges attributable to non-controlling interest
(49,350)
(64,555)
Net Change in Other Comprehensive Income (Loss)
(260,426)
(340,662)
Total Comprehensive Income
3,479,196 
4,156,141 
Less: Comprehensive income attributable to non-controlling interest
299,151 
345,620 
Comprehensive Income attributable to CorEnergy Stockholders
$ 3,180,045 
$ 3,810,521 
Earnings Per Common Share:
 
 
Basic (in dollars per share)
$ 0.20 
$ 0.36 
Diluted (in dollars per share)
$ 0.20 
$ 0.36 
Weighted Average Shares of Common Stock Outstanding:
 
 
Basic (in shares)
11,943,938 
9,322,652 
Diluted (in shares)
11,943,938 
9,322,652 
Dividends declared per share (in dollars per share)
$ 0.75 
$ 0.65 
Consolidated Statements of Equity (USD $)
Total
Series A Cumulative Redeemable Preferred Stock [Member]
Capital Stock [Member]
Preferred Stock [Member]
Preferred Stock [Member]
Series A Cumulative Redeemable Preferred Stock [Member]
Additional Paid-in Capital [Member]
Additional Paid-in Capital [Member]
Series A Cumulative Redeemable Preferred Stock [Member]
Accumulated Other Comprehensive Income [Member]
Retained Earnings [Member]
Non-Controlling Interest [Member]
Beginning balance at Dec. 31, 2014
$ 337,541,042 
 
$ 9,321 
$ 0 
 
$ 309,987,724 
 
$ 453,302 
$ 0 
$ 27,090,695 
Beginning balance, shares at Dec. 31, 2014
 
 
9,321,010 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Net income
13,937,117 
 
 
 
 
 
 
 
12,319,911 
1,617,206 
Net change in cash flow hedges
(323,880)
 
 
 
 
 
 
(262,505)
 
(61,375)
Total comprehensive income
13,613,237 
 
 
 
 
 
 
(262,505)
12,319,911 
1,555,831 
Issuance of shares, in shares
 
 
2,587,500 
 
 
 
 
 
 
 
Issuance of shares
73,257,364 
54,210,476 
2,587 
 
56,250,000 
73,254,777 
(2,039,524)
 
 
 
Series A preferred stock dividends
(3,503,125)
 
 
 
 
 
 
 
(3,503,125)
 
Common stock dividends
(29,346,139)
 
 
 
 
(20,529,353)
 
 
(8,816,786)
 
Common stock issued under director's compensation plan (in shares)
 
 
2,677 
 
 
 
 
 
 
 
Common stock issued under director's compensation plan
90,000 
 
 
 
89,997 
 
 
 
 
Distributions to Non-controlling interest
(2,486,464)
 
 
 
 
 
 
 
 
(2,486,464)
Reinvestment of dividends paid to common stockholders, in shares
 
 
28,510 
 
 
 
 
 
 
 
Reinvestment of dividends paid to common stockholders
817,915 
 
29 
 
 
817,886 
 
 
 
 
Ending balance at Dec. 31, 2015
444,194,306 
 
11,940 
56,250,000 
 
361,581,507 
 
190,797 
26,160,062 
Ending balance, shares at Dec. 31, 2015
11,939,697 
 
11,939,697 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Net income
3,739,622 
 
 
 
 
 
 
 
3,391,121 
348,501 
Net change in cash flow hedges
(260,426)
 
 
 
 
 
 
(211,076)
 
(49,350)
Total comprehensive income
3,479,196 
 
 
 
 
 
 
(211,076)
3,391,121 
299,151 
Series A preferred stock dividends
(1,037,109)
 
 
 
 
 
 
 
(1,037,109)
 
Common stock dividends
(8,954,773)
 
 
 
 
(6,600,761)
 
 
(2,354,012)
 
Reinvestment of dividends paid to common stockholders, in shares
 
 
12,060 
 
 
 
 
 
 
 
Reinvestment of dividends paid to common stockholders
159,313 
 
12 
 
 
159,301 
 
 
 
 
Ending balance at Mar. 31, 2016
$ 437,840,933 
 
$ 11,952 
$ 56,250,000 
 
$ 355,140,047 
 
$ (20,279)
$ 0 
$ 26,459,213 
Ending balance, shares at Mar. 31, 2016
11,951,757 
 
11,951,757 
 
 
 
 
 
 
 
Consolidated Statements of Equity (Parenthetical) (Series A Cumulative Redeemable Preferred Stock [Member])
12 Months Ended
Dec. 31, 2015
Series A Cumulative Redeemable Preferred Stock [Member]
 
Preferred stock interest rate
7.375% 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Operating Activities
 
 
Net Income
$ 3,739,622 
$ 4,496,803 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Deferred income tax, net
(577,395)
(115,391)
Depreciation, amortization and ARO accretion
5,945,501 
4,426,559 
Provision for loan loss
4,645,188 
Net distributions and dividend income, including recharacterization of income
(117,004)
(371,323)
Net realized and unrealized (gain) loss on other equity securities
1,628,751 
(449,798)
Unrealized gain on derivative contract
(71,363)
(16,880)
Common stock issued under directors compensation plan
30,000 
Changes in assets and liabilities:
 
 
Increase in accounts and other receivables
(3,240,409)
(352,029)
(Increase) decrease in financing note accrued interest receivable
95,114 
(200,167)
Increase in prepaid expenses and other assets
(161,354)
(295,441)
Increase in management fee payable
130,365 
61,756 
Increase (decrease) in accounts payable and other accrued liabilities
1,935,402 
(821,951)
Increase (decrease) in current income tax liability
480,637 
Increase (decrease) in unearned revenue
2,761,202 
(711,230)
Net cash provided by operating activities
16,713,620 
6,161,545 
Investing Activities
 
 
Acquisition expenditures
(2,041,642)
Purchases of property and equipment, net
(101,919)
(16,464)
Proceeds from asset foreclosure
223,451 
Increase in financing notes receivable
(202,000)
(31,442)
Return of capital on distributions received
1,165 
29,864 
Net cash used by investing activities
(79,303)
(2,059,684)
Financing Activities
 
 
Debt financing costs
(224,586)
(53,705)
Net offering proceeds on Series A preferred stock
54,137,791 
Dividends paid on Series A preferred stock
(1,037,109)
Dividends paid on common stock
(8,795,460)
(5,991,083)
Distributions to non-controlling interest
(680,748)
Advances on revolving line of credit
44,000,000 
1,945,361 
Payments on revolving line of credit
(33,521,055)
Principal payments on term debt
(900,000)
Principal payments on credit facility
(51,446,250)
(882,000)
Net cash (used) provided by financing activities
(18,403,405)
14,954,561 
Net Change in Cash and Cash Equivalents
(1,769,088)
19,056,422 
Cash and Cash Equivalents at beginning of period
14,618,740 
7,578,164 
Cash and Cash Equivalents at end of period
12,849,652 
26,634,586 
Supplemental Disclosure of Cash Flow Information
 
 
Interest paid
1,398,422 
943,101 
Income taxes paid (net of refunds)
10,683 
295,901 
Non-Cash Operating Activities
 
 
Change in accounts payable and accrued expenses related to prepaid assets and other expense
19,096 
Non-Cash Investing Activities
 
 
Change in accounts payable and accrued expenses related to acquisition expenditures
(13,597)
Change in accounts payable and accrued expenses related to issuance of financing and other notes receivable
(39,248)
Net change in Assets Held for Sale, Property and equipment, Prepaid expenses and other assets, Accounts payable and other accrued liabilities and Liabilities held for sale
(1,776,549)
Non-Cash Financing Activities
 
 
Change in accounts payable and accrued expenses related to the issuance of common equity
(72,685)
Change in accounts payable and accrued expenses related to debt financing costs
8,509 
Reinvestment of distributions by common stockholders in additional common shares
$ 159,313 
$ 68,154 
Introduction and Basis of Presentation
INTRODUCTION AND BASIS OF PRESENTATION
INTRODUCTION AND BASIS OF PRESENTATION
Introduction
CorEnergy Infrastructure Trust, Inc. ("CorEnergy"), 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 under the symbol “CORR.” As used in this report, the terms "we", "us", "our" and the "Company" refer to CorEnergy and its subsidiaries.
We are primarily focused on acquiring and financing midstream and downstream real estate assets within the U.S. energy infrastructure sector and concurrently entering into long-term triple-net participating leases with energy companies. We also may provide other types of capital, including loans secured by energy infrastructure assets. Targeted assets include pipelines, storage tanks, transmission lines and gathering systems, among others. These sale-leaseback or real property mortgage transactions provide the energy company with a source of capital that is an alternative to sources such as corporate borrowing, bond offerings, or equity offerings. Many of our leases contain participation features in the financial performance or value of the underlying infrastructure real property asset. The triple-net lease structure requires that the tenant pay all operating expenses of the business conducted by the tenant, including real estate taxes, insurance, utilities, and expenses of maintaining the asset in good working order. We consider our investments in these energy infrastructure assets to be a single business segment and report them accordingly in our financial statements.
Taxable REIT subsidiaries hold our securities portfolio, operating businesses and certain financing notes receivable as follows:
Corridor Public Holdings, Inc. and its wholly-owned subsidiary Corridor Private Holdings, Inc, hold our securities portfolio.
Mowood Corridor, Inc. and its wholly-owned subsidiary, Mowood, LLC, which is the holding company for one of our operating companies, Omega Pipeline Company, LLC.
Corridor MoGas, Inc. holds two other operating companies, MoGas Pipeline, LLC ("MoGas") and United Property Systems, LLC.
CorEnergy BBWS, Inc., Corridor Private and Corridor Leeds Path West, Inc. hold financing notes receivable.
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries and 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 our net earnings are reduced by the portion of net earnings attributable to non-controlling interests.
Operating results for the three months ended March 31, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These consolidated financial statements and Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K, for the year ended December 31, 2015, filed with the SEC on March 14, 2016.
The financial statements included in this report are based on the selection and application of critical accounting policies, which require management to make significant estimates and assumptions. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex or subjective judgments. Note 2 to the Consolidated Financial Statements, included in this report, further details information related to our significant accounting policies.
Significant Accounting Policies
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
A. Use of Estimates – The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, recognition of distribution income and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.
B. Earnings Per Share – Basic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period except for periods of net loss for which no common share equivalents are included because their effect would be anti-dilutive. Dilutive common equivalent shares consist of shares issuable upon conversion of the convertible notes calculated using the if-converted method.
C. Investment Securities – The Company’s investments in securities are classified as other equity securities and represent interests in private companies which the Company has elected to report at fair value under the fair value option.
These investments generally are subject to restrictions on resale, have no established trading market and are valued on a quarterly basis. Because of the inherent uncertainty of valuation, the fair values of such investments, which are determined in accordance with procedures approved by the Company’s Board of Directors, may differ materially from the values that would have been used had a ready market existed for the investments.
The Company determines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has determined the principal market, or the market in which the Company exits its private portfolio investments with the greatest volume and level of activity, to be the private secondary market. Typically, private companies are bought and sold based on multiples of EBITDA, cash flows, net income, revenues, or in limited cases, book value.
For private company investments, value is often realized through a liquidity event. Therefore, the value of the Company as a whole (enterprise value) at the reporting date often provides the best evidence of the value of the investment and is the initial step for valuing the Company’s privately issued securities. For any one company, enterprise value may best be expressed as a range of fair values, from which a single estimate of fair value will be derived. In determining the enterprise value of a portfolio company, an analysis is prepared consisting of traditional valuation methodologies including market and income approaches. The Company considers some or all of the traditional valuation methods based on the individual circumstances of the portfolio company in order to derive its estimate of enterprise value.
The fair value of investments in private portfolio companies is determined based on various factors, including enterprise value, observable market transactions, such as recent offers to purchase a company, recent transactions involving the purchase or sale of the equity securities of the company, or other liquidation events. The determined equity values may be discounted when the Company has a minority position, or is subject to restrictions on resale, has specific concerns about the receptivity of the capital markets to a specific company at a certain time, or other comparable factors exist.
The Company undertakes a multi-step valuation process each quarter in connection with determining the fair value of private investments. We have retained an independent valuation firm to provide third party valuation consulting services based on procedures that the Company has identified and may ask them to perform from time to time on all or a selection of private investments as determined by the Company. The multi-step valuation process is specific to the level of assurance that the Company requests from the independent valuation firm. For positive assurance, the process is as follows:
The independent valuation firm prepares the valuations and the supporting analysis.
The valuation report is reviewed and approved by senior management.
The Audit Committee of the Board of Directors reviews the supporting analysis and accepts the valuations.
D. Financing Notes Receivable - Financing 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. If the Company does determine an allowance is necessary, the amount deemed uncollectable is expensed in the period of determination. An insignificant delay or shortfall in the amount of payments does not necessarily result in the recording of an allowance. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing financing revenue on that loan until all principal and interest have been brought current. Interest income recognition is resumed if and when the previously reserved-for financing notes become contractually current and performance has been demonstrated. Payments received subsequent to the recording of an allowance will be recorded as a reduction to principal. During the three months ended March 31, 2016 and 2015, the Company recorded $4.6 million and $0, respectively, in provision for loan losses. The Company's financing notes receivable are discussed more fully in Note 5.
E. Revenue Recognition – Specific recognition policies for the Company’s revenue items are as follows:
Lease revenue – Base rent related to the Company’s leased property is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Contingent rent is recognized when it is earned, based on the achievement of specified performance criteria. Rental payments received in advance are classified as unearned revenue and included as a liability within the Consolidated Balance Sheets. Unearned revenue is amortized ratably over the lease period as revenue recognition criteria are met. Rental payments received in arrears are accrued and classified as Lease Receivable and included in assets within the Consolidated Balance Sheets.
Transportation and distribution revenue – This represents revenue recognized related to natural gas transportation, distribution and supply. Transportation revenues are recognized on firm contracted capacity over the contract period regardless of whether the contracted capacity is used. For interruptible or volumetric based transportation, revenue is recognized when physical deliveries of natural gas are made at the delivery point agreed upon by both parties. Distribution revenue is recognized based on agreed upon contractual terms over each annual period during the terms of the contract. Beginning February 1, 2016, under a new contract with the Department of Defense ("DOD"), gas sales and cost of (gas) sales are presented on a net basis.
Omega is also paid fees for the operation and maintenance of its natural gas distribution system, including any necessary expansion of the distribution system. Omega is responsible for the coordination, supervision and quality of the expansions while actual construction is generally performed by third party contractors. Revenues from expansion efforts are recognized using either a completed contract, percentage of completion or cost-plus method based on the level and volume of estimates utilized, as well as the certainty or uncertainty of our ability to collect those revenues.
Sales revenue - Revenues related to natural gas and propane are recognized upon delivery of natural gas and propane. Omega, acting as a principal, provides natural gas and propane supply for its customers. Beginning February 1, 2016, under a new contract with the Department of Defense ("DOD"), Omega is no longer the primary obligor of product sales and as such net presentation has been determined to be appropriate, therefore gas sales and cost of (gas) sales are presented on a net basis. Prior to the new contract, Sales revenue represented amounts earned by Omega for gas and propane product sales to customers and the costs of the gas and propane were presented as cost of sales.
Financing revenue – Our financing notes receivable are considered a core product offering and therefore the related income is presented as a component of operating income. For increasing rate loans, base interest income is recorded ratably over the life of the loan, using the effective interest rate. The net amount of deferred loan origination income and costs are amortized on a straight-line basis over the life of the loan and reported as an adjustment to yield in financing revenue. Participating financing revenues are recorded when specific performance criteria have been met.
F. Transportation and distribution expense Included here, for both MoGas and Omega, are the costs of operating and maintaining the natural gas distribution system, including any necessary expansion of the distribution system. These costs are incurred both internally and externally. The internal costs relate to system control, pipeline operations, maintenance, insurance and taxes. Other internal costs include payroll for employees associated with gas control, field employees, the office manager and the vice president of operations and finance. The external costs consist of professional services such as audit and accounting, legal and regulatory and engineering.
Historically, Omega's amounts paid for gas and propane delivered to customers were presented as cost of sales. Beginning February 1, 2016, under a new contract with the Department of Defense, amounts paid by Omega for gas and propane are netted against sales and are presented in the transportation and distribution revenue line. See paragraph (E) above.
G. Debt Issuance Costs – Costs incurred for the issuance of new debt are capitalized and reported as a direct deduction to the carrying value of the related debt except for capitalized costs related to our revolving line of credit which are presented as an asset within Deferred costs, net of accumulated amortization. Amortization of these costs is reported as interest expense over the debt term. See Note 12 for further discussion.
H. Other Income Recognition Specific policies for the Company’s other income items are as follows:
Net distributions and dividend income from investments – Distributions and dividends from investments are recorded on their ex-dates and are reflected as other income within the accompanying Consolidated Statements of Income. Distributions received from the Company’s investments are generally characterized as ordinary income, capital gains and distributions received from investment securities. The portion characterized as return of capital is paid by our investees from their cash flow from operations. The Company records investment income, capital gains and distributions received from investment securities based on estimates made at the time such distributions are received. Such estimates are based on information available from each company and other industry sources. These estimates may subsequently be revised based on information received from the entities after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Company.
Net realized and unrealized gain (loss) from investments – Securities transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses are reported on an identified cost basis. The Company records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on information available from the portfolio company and other industry sources. These estimates may subsequently be revised based on information received from the portfolio company after their tax reporting periods are concluded, as the actual character of these distributions are not known until after our fiscal year end.
I. Federal and State Income Taxation – In 2013 we qualified, and in March 2014 elected (effective as of January 1, 2013), to be treated as a REIT for federal income tax purposes. Because certain of our assets may not produce REIT-qualifying income or be treated as interests in real property, those assets are held in wholly-owned Taxable REIT Subsidiaries ("TRSs") in order to limit the potential that such assets and income could prevent us from qualifying as a REIT.
As a REIT, the Company holds and operates certain of our assets through one or more wholly-owned TRSs. Our use of TRSs enables us to continue to engage in certain businesses while complying with REIT qualification requirements and also allows us to retain income generated by these businesses for reinvestment without the requirement of distributing those earnings. In the future, we may elect to reorganize and transfer certain assets or operations from our TRSs to the Company or other subsidiaries, including qualified REIT subsidiaries.
The Company's other equity securities are limited partnerships or limited liability companies which are treated as partnerships for federal and state income tax purposes. As a limited partner, the Company reports its allocable share of taxable income in computing its own taxable income. To the extent held by a TRS, the TRS's tax expense or benefit is included in the Consolidated Statements of Income based on the component of income or gains and losses to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. It is expected that for the three months ended March 31, 2016, and future periods, any deferred tax liability or asset generated will be related entirely to the assets and activities of the Company's TRSs.
If we cease to qualify as a REIT, the Company, as a C corporation, would be obligated to pay federal and state income tax on its taxable income. Currently, the highest regular marginal federal income tax rate for a corporation is 35 percent. The Company may be subject to a 20 percent federal alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.
J. Recent Accounting Pronouncements – In August 2015, the FASB issued ASU No. 2015-14 "Revenue from Contracts with Customers - Deferral of the Effective Date." The amendments in this update defer the effective date of ASU No. 2014-09 "Revenue from Contracts with Customers", for all entities by one year. ASU No. 2014-09 adds to the FASB ASC by requiring entities to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. Additionally, in March 2016, the FASB issued ASU No. 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. As amended, the effective date for public entities is annual reporting periods beginning after December 15, 2017 and interim periods therein. As such, we will be required to adopt the standard in the first quarter of fiscal year 2018. Early adoption is not permitted before the first quarter of fiscal year 2017. ASC 606 may be adopted using either the "full retrospective" approach, in which the standard is applied to all of the periods presented, or a "modified retrospective" approach. The Company is currently evaluating which transition method to use and the potential future impact, if any, the standard will have on the Company's consolidated financial statements and related disclosures. However, we do not expect its adoption to have a significant impact on our consolidated financial statements, as a substantial portion of our revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09.
In April 2015, the FASB issued ASU No. 2015-03 "Interest-Imputation of Interest" to simplify presentation of debt issuance costs. The amendments in this update require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Then in June 2015, the FASB issued ASU No. 2015-15 "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements" to clarify that ASU No. 2015-03 does not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. As a result, an entity may present debt issuance costs related to line-of-credit arrangements as an asset instead of a direct deduction from the carrying amount of the debt. We adopted the accounting standards update as of January 1, 2016 with retrospective application to our December 31, 2015 Consolidated Balance Sheets. The effect of the adoption was to reclassify $510 thousand of debt issuance costs at December 31, 2015 from intangibles and deferred costs, net of accumulated amortization, to long-term debt.
In August 2014, the FASB issued ASU No. 2014-15 "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern", that will require management to evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statements are issued on both an interim and annual basis. Management will be required to provide certain footnote disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. ASU No. 2014-15 becomes effective for annual periods beginning in 2016 and for interim reporting periods starting in the first quarter of 2017. The Company does not expect the adoption of this amendment to have a material impact on its consolidated financial statements.

In January 2016, the Company adopted ASU No. 2015-02 "Consolidation (Topic 810), Amendments to the Consolidation Analysis." Among other changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. While adoption of this standard did not result in any changes to conclusions about consolidated or unconsolidated entities, the Company has determined that Pinedale LP now qualifies as a variable interest entity and therefore requires additional disclosures.
In February 2016, the FASB issued ASU No. 2016-02 "Leases" which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for fiscal years and interim periods beginning after December 31, 2018. Early adoption is permitted. The new leases standard requires adoption using a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. Management is still in the process of evaluating this amendment.

In March 2016, the FASB issued ASU 2016-05 "Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships." This ASU clarifies that a change in the counterparty of a derivative contract (i.e., a novation) in a hedge accounting relationship does not, in and of itself, require de-designation of the hedge accounting relationship. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The Company is evaluating the impact of this ASU on its financial statements and disclosures.
Leased Properties
LEASED PROPERTIES
LEASED PROPERTIES
Grand Isle Gathering System
Our subsidiary, Grand Isle Corridor, LP ("Grand Isle Corridor"), owns a sub-sea system of gathering, storage and pipeline facilities in the Gulf of Mexico (the "GIGS"), with associated real property rights in an on-shore terminal and saltwater disposal system in Louisiana.
The asset is being depreciated for book purposes over an estimated useful life of 30 years. The amount of depreciation recognized for the leased property for the three months ended March 31, 2016 and 2015, was $2.1 million and $0, respectively.
See Note 4 for further information regarding the Grand Isle Lease Agreement (as defined therein).
Pinedale LGS
Our subsidiary, Pinedale Corridor, LP ("Pinedale LP"), owns a system of gathering, storage, and pipeline facilities (the "Pinedale LGS"), with associated real property rights in the Pinedale Anticline in Wyoming.
The asset is depreciated for book purposes over an estimated useful life of 26 years. The amount of depreciation recognized for the leased property for the three months ended March 31, 2016 and 2015, was $2.2 million.
See Note 4 for further information regarding the Pinedale Lease Agreement (as defined therein)
Non-Controlling Interest Partner
The Prudential Insurance Company of America ("Prudential") funded a portion of the Pinedale LGS acquisition and, as a limited partner, holds 18.95 percent of the economic interest in Pinedale LP. The general partner, Pinedale GP, holds the remaining 81.05 percent of the economic interest.
Debt
In connection with the acquisition of the Pinedale LGS, Pinedale LP borrowed $70 million pursuant to a secured term credit facility. The credit facility was amended on December 31, 2015, to extend its term through March 30, 2016. On March 30, 2016, the Company and Prudential took an assignment of that portion of the remaining $58.5 million principal balance equal to their respective equity interests in Pinedale (of which the Company’s 81.05 percent share was equal to approximately $47.4 million) and extended the maturity date of the credit facility to March 30, 2021. The Company's portion of the debt and interest is eliminated in consolidation and Prudential's portion of the debt is shown as a related-party liability. The credit facility is secured by the Pinedale LGS. See Note 12 for further information regarding the credit facility.
Portland Terminal Facility
The Portland Terminal Facility is a rail and marine facility adjacent to the Willamette River in Portland, Oregon which is triple-net leased to Arc Terminals Holdings LLC ("Arc Terminals"), an indirect, wholly-owned subsidiary of Arc Logistics Partners LP ("Arc Logistics"). As of December 31, 2015, we completed the funding of an additional $10 million of terminal-related improvement projects in support of Arc Terminals’ commercial strategy to optimize the Portland Terminal Facility and generate stable cash flows, including: i) upgrading a portion of the existing storage assets; ii) enhancing existing terminal infrastructure; and iii) completing the development, design, engineering and construction of throughput expansion opportunities.
The asset is depreciated for book purposes over an estimated useful life of 30 years. Depreciation for the three months ended March 31, 2016 and 2015, was $319 thousand and $407 thousand, respectively.
See Note 4 for further information regarding the Portland Lease Agreement related to the Portland Terminal Facility assets.
Leases
LEASES
LEASES
As of March 31, 2016, the Company had three significant leases. The table below displays the impact of the Company's most significant leases on total leased properties and total lease revenues for the periods presented.


As a Percentage of (1)


Leased Properties

Lease Revenues


As of
 
As of

For the Three Months Ended


March 31, 2016

December 31, 2015

March 31, 2016
 
March 31, 2015
Pinedale LGS

39.9%

40.0%

30.4%
 
70.4%
Grand Isle Gathering System

50.1%

50.1%

59.8%
 
Portland Terminal Facility

9.7%

9.6%

9.7%
 
20.7%
Public Service of New Mexico (2)



 
8.7%
(1) Insignificant leases are not presented; thus percentages may not sum to 100%.
(2) The Public Service of New Mexico lease terminated on April 1, 2015.

Grand Isle Gathering System
Grand Isle Corridor, LP entered into a long-term triple-net lease agreement on June 30, 2015, relating to the use of the GIGS (the “Grand Isle Lease Agreement”) with Energy XXI GIGS Services, LLC (the "EXXI Tenant"). The Grand Isle Lease Agreement has an initial eleven-year term and may be extended for one additional term equal to the lesser of nine years or 75 percent of the expected remaining useful life of the GIGS. The EXXI Tenant’s obligations under the lease agreement are guaranteed by EXXI. During the initial term, the EXXI Tenant will make minimum monthly rental payments that are initially $2.6 million in year one, increase to a maximum of $4.2 million in year seven and decline to $3.5 million in year eleven. In addition, the EXXI Tenant will pay variable rent payments based on a 10 percent participation above a pre-defined threshold, which will be calculated monthly on the volumes of EXXI oil that flow through the GIGS, multiplied by the average daily closing price of crude oil for the applicable calendar month. Variable rent will be capped at 39 percent of the total rent for each month. Tangible assets, excluding land, are depreciated over the 30-year depreciable life of the leased property with associated depreciation expense of approximately $8.6 million annually beginning July 1, 2015.
As of March 31, 2016, and December 31, 2015, approximately $313 thousand and $321 thousand, respectively, of net deferred lease costs related to the GIGS are included in the accompanying Consolidated Balance Sheets. The deferred costs are amortized over the 11-year life of the Grand Isle Lease Agreement. For the three months ended March 31, 2016 and 2015, $8 thousand and $0, respectively, was included in amortization expense within the Consolidated Statement of Income.
In view of the fact that EXXI leases a substantial portion of the Company's net leased property, which is a significant source of revenues and operating income, its financial condition and ability and willingness to satisfy its obligations under its lease with the Company are expected to have a considerable impact on the Company's results of operations going forward. EXXI and substantially all of its direct and indirectly wholly-owned subsidiaries, but not including the EXXI Tenant, (the “EXXI Debtor Group”) filed for protection under Chapter 11 of the Bankruptcy Code on April 14, 2016. See Note 16, Subsequent Events, for further information regarding EXXI's bankruptcy filing.
EXXI is currently subject to the reporting requirements of the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. The audited financial statements and unaudited financial statements of EXXI can be found on the SEC's website at www.sec.gov (OTC Pink: EXXIQ). The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of EXXI, but has no reason to doubt the accuracy or completeness of such information. In addition, EXXI has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information.
Pinedale LGS
Pinedale LP entered into a long-term triple-net lease agreement on December 20, 2012, relating to the use of the Pinedale LGS (the “Pinedale Lease Agreement”) with Ultra Wyoming LGS, LLC (“Ultra Wyoming”), an indirect wholly-owned subsidiary of Ultra Petroleum. The Pinedale Lease Agreement has a fifteen-year initial term and may be extended for additional five-year terms at the sole discretion of Ultra Wyoming. Ultra Wyoming utilizes the Pinedale LGS to gather and transport a commingled stream of oil, natural gas and water, then further utilizes the Pinedale LGS to separate this stream into its separate components. Ultra Wyoming's obligations under the Pinedale Lease Agreement are guaranteed by Ultra Petroleum and Ultra Petroleum's operating subsidiary, Ultra Resources, Inc. (“Ultra Resources”), pursuant to the terms of a related parent guaranty. Annual rent for the initial term under the Pinedale Lease Agreement is a minimum of $20 million (as adjusted annually for changes based on the Consumer Price Index (“CPI”), subject to annual maximum adjustments of 2 percent). Additionally, the Pinedale Lease Agreement has a variable rent component based on the volume of liquid hydrocarbons and water that flowed through the Pinedale LGS in a prior month, subject to Pinedale LP not being in default under the Pinedale Lease Agreement. For 2016, the quarterly rent increased by $10 thousand to $5.2 million based on the CPI adjustment as specified in the lease terms. Total annual rent may not exceed $27.5 million during the initial fifteen-year term.
As of March 31, 2016 and December 31, 2015, approximately $719 thousand and $734 thousand, respectively, of net deferred lease costs are included in the accompanying Consolidated Balance Sheets. The deferred costs are amortized over the 15-year life of the Pinedale Lease Agreement. For each of the three months ended March 31, 2016 and 2015, $15 thousand is included in amortization expense within the Consolidated Statements of Income.
In view of the fact that Ultra Petroleum leases a substantial portion of the Company's net leased property, which is a significant source of revenues and operating income, its financial condition and ability and willingness to satisfy its obligations under its lease with the Company are expected to have a considerable impact on the Company's results of operation going forward. On April 29, 2016, UPL filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code. See Note 16, Subsequent Events, for further information regarding UPL's bankruptcy filing.
Ultra Petroleum is currently subject to the reporting requirements Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. The audited financial statements and unaudited financial statements of Ultra Petroleum can be found on the SEC's website at www.sec.gov (OTC Pink: UPLMQ). The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of Ultra Petroleum, but has no reason to doubt the accuracy or completeness of such information. In addition, Ultra Petroleum has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information.
Portland Terminal Facility
LCP Oregon entered into the Portland Lease Agreement on January 21, 2014. Arc Logistics has guaranteed the obligations of Arc Terminals under the Portland Lease Agreement. The Portland Lease Agreement grants Arc Terminals substantially all authority to operate the Portland Terminal Facility. During the initial fifteen-year term, Arc Terminals will make base monthly rental payments as well as variable rent payments based on the volume of liquid hydrocarbons that flowed through the Portland Terminal Facility in the prior month in excess of a designated threshold of 12,500 barrels per day of oil equivalent (unaudited). Variable rent is capped at 30 percent of total rent each month, which would be the equivalent of the Portland Terminal Facility’s expected throughput capacity.
With the 2015 completion of $10.0 million in construction projects, annual base rent beginning in 2016, is approximately $6.2 million. Base rent for the three months ended March 31, 2016 and 2015, was $1.5 million and $1.4 million, respectively.
Arc Logistics is currently subject to the reporting requirements of the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. The audited financial statements and unaudited financial statements of Arc Logistics can be found on the SEC's web site at www.sec.gov (NYSE: ARCX). The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of Arc Logistics but has no reason to doubt the accuracy or completeness of such information. In addition, Arc Logistics has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of Arc Logistics that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.
The future contracted minimum rental receipts for all net leases as of March 31, 2016, are as follows:
Future Minimum Lease Receipts
Years Ending December 31,
 
Amount
2016
 
$
45,000,738

2017
 
60,931,762

2018
 
61,139,762

2019
 
63,468,195

2020
 
70,629,654

Thereafter
 
451,794,133

Total
 
$
752,964,244

Financing Notes Receivable
FINANCING NOTES RECEIVABLE
FINANCING NOTES RECEIVABLE
Black Bison Financing Notes Receivable
On March 13, 2014, our wholly-owned subsidiary, Corridor Bison, entered into a Loan Agreement with Black Bison Water Services, LLC ("Black Bison WS"). Black Bison WS's initial loan draw in the amount of $4.3 million was used to acquire real property in Wyoming and to pay loan transaction expenses. Corridor Bison agreed to loan Black Bison WS up to $11.5 million (the "Black Bison WS Loan") to finance the acquisition and development of real property to provide water sourcing, water disposal, or water treating and recycling services for the oil and natural gas industry.
On July 23, 2014, the Company increased its secured financing to Black Bison WS from $11.5 million to $15.3 million. The Company executed an amendment to the Black Bison WS Loan Agreement to increase the loan to $12 million, and entered into an additional loan for $3.3 million from a taxable REIT subsidiary of the Company, CorEnergy BBWS, on substantially the same terms (the "TRS Loan" and, together with the Black Bison WS Loan, as amended, the "Black Bison Loans"). The purpose of the increase in the secured financing was to fund the acquisition and development of real property and related equipment to provide water sourcing, water disposal, or water treating and recycling services for the oil and natural gas industry. There were no other material changes to the terms of the loan agreement. In connection with the Amendment and the TRS Loan, the Company fully funded the remainder of the $15.3 million capacity of the combined Black Bison Loans.
Interest initially accrued on the outstanding principal amount of both Black Bison Loans at an annual base rate of 12 percent, which base rate was to increase by 2 percent of the current base rate per year. In addition, starting in April 2015 and continuing for each month thereafter, the outstanding principal of the Black Bison Loans was set to bear variable interest calculated as a function of the increase in volume of water treated by Black Bison WS during the particular month. The base interest plus variable interest, was payable monthly, and capped at 19 percent per annum. The Black Bison Loans were set to mature on March 31, 2024, and were set to amortize by quarterly payments beginning on March 31, 2015. The Loans were secured by the real property and equipment held by Black Bison WS and the outstanding equity in Black Bison WS and its affiliates. The Black Bison Loans were also guarantied by all affiliates of Black Bison WS and further secured by all assets of those guarantors.
Due to reduced drilling activity in the Black Bison area of operations, Black Bison WS requested, and the Company granted, certain temporary forbearance waivers in June 2015 and August 2015 that had the effect of excusing the borrower from full performance under the terms of the Black Bison Loans while such waivers were in effect. None of the granted forbearance agreements were deemed to be concessions. As a result of the continued inability of the borrower to perform under the terms of these loans, even as temporarily modified by the waivers, effective December 31, 2015 the Company recorded a provision for loan loss with respect to the Black Bison Loans of $13.8 million, which included $14 thousand in deferred origination income, net of deferred origination costs, and $355 thousand of accrued interest.
Financing Revenue as presented in the Q1 2016 financial statements does not reflect any financing revenue from the notes for the Black Bison Loans. These notes were considered by the Company to be on non-accrual status and have been reflected as such in the financial statements. Effective February 29, 2016, the Company foreclosed on 100 percent of the equity of BB Intermediate, the holding company of Black Bison Water Services, LLC, the borrower of the Black Bison financing notes, as well as all of the other collateral securing the Black Bison Loans as described above. The foreclosure was accepted in satisfaction of outstanding loan balance of $2.0 million. As of March 31, 2016, the net note receivable from Black Bison WS is valued at $0. The assets and liabilities acquired as a result of the foreclosure are presented in appropriate categories within the Company's consolidated financial statements.
Four Wood Financing Note Receivable
On December 31, 2014, our wholly-owned subsidiary, Four Wood Corridor, LLC (“Four Wood Corridor”), entered into a Loan Agreement with SWD Enterprises, LLC (“SWD Enterprises”), a wholly-owned subsidiary of Four Wood Energy, pursuant to which Four Wood Corridor made a loan to SWD Enterprises for $4.0 million (the "REIT Loan"). Concurrently, our TRS, Corridor Private entered into a TRS Loan Agreement with SWD Enterprises, pursuant to which Corridor Private made a loan to SWD Enterprises for $1.0 million (the "TRS Loan"). The proceeds of the REIT Loan and the TRS Loan were used by SWD Enterprises and its affiliates to finance the acquisition of real and personal property that provides saltwater disposal services for the oil and natural gas industry, and to pay related expenses.
For the REIT Loan from Four Wood Corridor, interest initially accrued on the outstanding principal at an annual base rate of 12 percent. For the TRS Loan from Corridor Private, interest initially accrued on the outstanding principal at an annual base rate of 13 percent. The base rates of both loans were to increase by 2 percent of the current base rate per year. The Loans are secured by the real property and equipment held by SWD Enterprises and the outstanding equity in SWD Enterprises and its affiliates. The Loans are also guaranteed by all affiliates of SWD Enterprises.
As a result of the decreased economic activity by SWD Enterprises, the Company has recorded a provision for loan loss with respect to the SWD Enterprise loans. The first quarter 2016 income statement reflects a Provision for Loan Loss of $3.5 million, which includes $71 thousand of deferred origination income and $98 thousand of interest accrued under the original loan agreements. The balance of the note, net of the reserve for loan loss, represents the amount expected to be received as of March 31, 2016. Our note with SWD Enterprises is secured by physical assets owned by SWD Enterprises. We have valued the enterprise value of SWD Enterprises, and thus the value of the collateral supporting the Four Wood Note, at $1.5 million as of March 31, 2016.
Variable Interest Entities
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES
The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE and is therefore required to consolidate the investments. Factors considered in determining whether the Company is the primary beneficiary include risk-and-reward sharing, experience and financial condition of the other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE's executive committee or Board of Directors, whether or not the Company has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, existence of unilateral kick-out rights or voting rights, and the level of economic disproportionality between the Company and the other partner(s).
Consolidated VIEs
The Company adopted ASU 2015-02, Amendments to the Consolidation Analysis. This standard amends certain guidance applicable to the consolidation of various legal entities, including variable interest entities (“VIE”). Among the changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. While adoption of this standard did not result in any changes to conclusions about consolidated or unconsolidated entities, the Company has determined that Pinedale LP now qualifies as a variable interest entity as of March 31, 2016.
Income Taxes
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, 2016, and December 31, 2015, are as follows:
Deferred Tax Assets and Liabilities
 
 
March 31, 2016
 
December 31, 2015
Deferred Tax Assets:
 
 
 
 
Net operating loss carryforwards
 
$
998,724

 
$
543,116

Net unrealized loss on investment securities
 
867,555

 
251,539

Loan Loss Provision
 
605,107

 
1,257,436

Other loss carryforwards
 
2,215,428

 
1,833,240

Sub-total
 
$
4,686,814

 
$
3,885,331

Deferred Tax Liabilities:
 
 
 
 
Basis reduction of investment in partnerships
 
$
(2,094,642
)
 
$
(2,159,058
)
Cost recovery of leased and fixed assets
 
(407,801
)
 
(119,297
)
Sub-total
 
(2,502,443
)
 
(2,278,355
)
Total net deferred tax asset (liability)
 
$
2,184,371

 
$
1,606,976


For the three months ended March 31, 2016, the total deferred tax asset/(liability) presented above relates 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 subsequent to the year ending November 30, 2007, remain open to examination by federal and state tax authorities.
Total income tax expense/(benefit) differs from the amount computed by applying the federal statutory income tax rate of 35 percent for the three months ended March 31, 2016 and 2015, to income or loss from operations and other income and expense for the years presented, as follows:
Income Tax Expense (Benefit)
 
 
For the Three Months Ended March 31,
 
 
2016
 
2015
Application of statutory income tax rate
 
$
747,599

 
$
1,553,434

State income taxes, net of federal tax (benefit)
 
(83,260
)
 
37,051

Federal Tax Attributable to Income of Real Estate Investment Trust
 
(1,919,465
)
 
(1,270,120
)
Total income tax expense (benefit)
 
$
(1,255,126
)
 
$
320,365


Total income taxes are computed by applying the federal statutory rate of 35 percent plus a blended state income tax rate. Corridor Public Inc. and Corridor Private Inc. had a blended state rate of approximately 2.82 percent for the three months ended March 31, 2016 and 3.92 percent for the three months ended March 31, 2015. CorEnergy BBWS Inc. does not record a provision for state income taxes because it operates only in Wyoming, which does not have state income tax. Because Mowood Corridor Inc. and Corridor MoGas Inc. primarily only operate in the state of Missouri, a blended state income tax rate of 5 percent was used for the operations of both TRSs for the three months ended March 31, 2016 and 2015. For the three months ended March 31, 2016, all of the income tax benefit presented above relates to the assets and activities held in the Company's TRSs. 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,
 
 
2016
 
2015
Current tax expense
 
 
 
 
Federal
 
$
(627,197
)
 
$
391,946

State (net of federal tax benefit)
 
(50,534
)
 
43,810

Total current tax expense
 
(677,731
)
 
435,756

Deferred tax expense (benefit)
 
 
 
 
Federal
 
(544,669
)
 
(108,632
)
State (net of federal tax benefit)
 
(32,726
)
 
(6,759
)
Total deferred tax expense (benefit)
 
(577,395
)
 
(115,391
)
Total income tax expense (benefit), net
 
$
(1,255,126
)
 
$
320,365


As of December 31, 2015 the TRSs incurred an aggregate net operating loss of $1.4 million. The net operating loss may be carried forward for 20 years. If not utilized, this net operating loss will expire as follows: $90 thousand, $804 thousand and $478 thousand in the years ending December 31, 2033, 2034, and 2035 respectively. The amount of deferred tax asset for net operating losses as of March 31, 2016, includes amounts for the three months ended March 31, 2016. The aggregate cost of securities for federal income tax purposes and securities with unrealized appreciation and depreciation, were as follows:
Aggregate Cost of Securities for Income Tax Purposes (Unaudited)
 
 
March 31, 2016
 
December 31, 2015
Aggregate cost for federal income tax purposes
 
$
5,036,413

 
$
4,750,252

Gross unrealized appreciation
 
3,334,775

 
5,133,908

Gross unrealized depreciation
 
(97,500
)
 
(97,500
)
Net unrealized appreciation
 
$
3,237,275

 
$
5,036,408

Property and Equipment
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Property and Equipment
 
 
March 31, 2016
 
December 31, 2015
Land
 
$
580,000

 
$
580,000

Natural gas pipeline
 
124,446,821

 
124,386,349

Vehicles and trailers
 
687,526

 
524,921

Office equipment and computers
 
97,670

 
87,696

Gross property and equipment
 
125,812,017

 
125,578,966

Less: accumulated depreciation
 
(6,840,717
)
 
(5,948,988
)
Net property and equipment
 
$
118,971,300

 
$
119,629,978



The amounts of depreciation of property and equipment recognized for the three months ended March 31, 2016 and 2015, were $835 thousand and $832 thousand, respectively.
Assets and Liabilities Held for Sale
Effective February 29, 2016, the Company foreclosed on 100 percent of the equity of BB Intermediate, the holding company of Black Bison Water Services, LLC, the borrower of the Black Bison financing notes. The Company expects to dispose of these assets within the next year. As a result of the foreclosure, the following assets are included in our Consolidated Balance Sheet, less estimated costs to sell, as Assets Held for Sale at March 31, 2016:
Assets Held for Sale
 
 
March 31, 2016
Disposal wells and related equipment
 
$
1,839,007

Assets held for sale
 
$
1,839,007

 
 
 
Note payable
 
$
439,007

Liabilities held for sale
 
$
439,007


There were no assets or liabilities held for sale at December 31, 2015. See Note 5, Financing Notes Receivable, for further information regarding the Black Bison financing notes.
Concentrations
CONCENTRATIONS
CONCENTRATIONS
Mowood, Omega
Omega had a 10-year agreement (the "DOD Agreement") with the Department of Defense (“DOD”) to provide natural gas and gas distribution services to Fort Leonard Wood. The DOD Agreement as previously extended, was set to expire January 31, 2016. On January 28, 2016, the DOD awarded Omega a new 10-year agreement to continue providing natural gas and gas distribution services through March 31, 2026.
In 2016, Omega's revenue and gas cost of sales is presented in the Transportation and distribution revenue line item on the income statement. Also in 2016, distribution and maintenance costs are presented in the Transportation and distribution expense line item on the income statement. For the three months ended March 31, 2015, Omega's revenue is presented in the Sales revenue line item on the income statement. Omega's total cost of sales, including gas, distribution, and maintenance projects are presented in the Cost of sales line item in the income statement for three months ended March 31, 2015.
Revenue related to the DOD contract accounted for 91 percent of Omega's revenue for the three months ended March 31, 2016. Revenue related to the DOD contract accounted for 91 percent of Sales revenue for the three months ended March 31, 2015. Omega performs management and operational services related to the operation and expansion of the natural gas distribution system used by the DOD. The amount due from the DOD accounts for 9 percent and 26 percent of the consolidated accounts and other receivables balances as of March 31, 2016 and 2015, respectively.
Omega’s contracts for its supply of natural gas are concentrated with a single supplier. If the business relationship with Omega's current supplier were to terminate, Omega could purchase natural gas from a different supplier of the commodity. Beginning in February 2016, Omega's sales and cost of sales related to natural gas and propane are being presented on a net basis. The effect of this change in the current year significantly reduces the impact of the seasonality generally experienced by Omega in gas sales. For prior years, Omega's overall sales and operating income were generally higher in the first and fourth quarters and lower during the second and third quarters.
Management Agreement
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
The Company pays Corridor as the Company's Manager pursuant to a Management Agreement described in detail in Note 11, Management Agreement, in the Notes to Consolidated Financial Statements in the Company's annual report on Form 10-K for the year ended December 31, 2015, as previously filed with the SEC. In light of the provisions for loan losses recognized by the Company on certain of its energy infrastructure financing investments (collectively, the "Underperforming Loans") during 2015 and the first quarter of 2016, the Manager voluntarily recommended, and the Company agreed, that effective on and after the Company's March 31, 2016 balance sheet date, solely for the purpose of computing the value of the Company’s Managed Assets in calculating the quarterly management fee under the terms of the Management Agreement, that portion of the Management Fee attributable to the Company’s investment in the Underperforming Loans shall be based on the estimated net realizable value of such loans, which shall not exceed the amount invested in the Underperforming Loans as of the end of the quarter for which the Management Fee is to be calculated. This agreement superseded a prior agreement between the Company and the Manager, which was effective as of September 30, 2015, concerning valuation of the Black Bison Loans for purposes of calculating the Management Fee.
Fees incurred under the Management Agreement for the three months ended March 31, 2016 and 2015 were $1.7 million and $1.1 million, respectively, and are reported in the General and Administrative line item on the income statement.
The Company pays Corridor, as the Company's Administrator pursuant to an Administrative Agreement. Fees incurred under the Administrative Agreement for the three months ended March 31, 2016 and 2015 were $67 thousand and $46 thousand, respectively, and are reported in the General and Administrative line item on the income statement.
Fair Value
FAIR VALUE
FAIR VALUE
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables provide the fair value measurements of applicable Company assets and liabilities by level within the fair value hierarchy as of March 31, 2016, and December 31, 2015. These assets and liabilities are measured on a recurring basis.
March 31, 2016
 
 
March 31, 2016
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Other equity securities
 
$
6,837,442

 
$

 
$

 
$
6,837,442

Total Assets
 
$
6,837,442

 
$

 
$

 
$
6,837,442

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest Rate Swap Derivative
 
$
90,804

 
$

 
$
90,804

 
$

Total Liabilities
 
$
90,804

 
$

 
$
90,804

 
$

December 31, 2015
 
 
December 31, 2015
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Other equity securities
 
$
8,393,683

 
$

 
$

 
$
8,393,683

Interest Rate Swap Derivative
 
98,259

 

 
98,259

 

Total Assets
 
$
8,491,942

 
$

 
$
98,259

 
$
8,393,683

On March 30, 2016, the Company terminated one of the $26.3 million cash flow hedges concurrent with the assignment of the $70 million secured term credit facility. The remaining cash flow hedge was de-designated as of March 30, 2016, and continues to be valued using a consistent methodology and therefore is classified as a Level 2 investment. Subsequent to de-designation, changes in the fair value will be recognized in earnings in the period in which the changes occur.
The net assets and liabilities received as a result of foreclosing on the the equity of Black Bison on February 29, 2016, were determined to have a fair value of $2.0 million, which approximated the fair value of the collateral securing the notes as of December 31, 2015. A portion of the assets and liabilities acquired have been classified as held for sale and have been marked to a fair value of $1.8 million and $439 thousand, respectively as of March 31, 2016. The foreclosure and held-for-sale date fair values of the assets and liabilities, were determined using Level 1, Level 2, and Level 3 inputs. The company uses data on its existing portfolio of investments as well as similar market data from third party sources, when available, in determining these Level 3 inputs.
The changes for all Level 3 securities measured at fair value on a recurring basis using significant unobservable inputs for the three months ended March 31, 2016 and 2015, are as follows:
Level 3 Rollforward
For the Three Months Ended March 31, 2016
 
Fair Value Beginning Balance
 
Acquisitions
 
Disposals
 
Total Realized and Unrealized Gains/(Losses) Included in Net Income
 
Return of Capital Adjustments Impacting Cost Basis of Securities
 
Fair Value Ending Balance
 
Changes in Unrealized Losses, Included In Net Income, Relating to Securities Still Held (1)
Other equity securities
 
$
8,393,683

 
$

 
$

 
$
(1,672,081
)
 
$
115,840

 
$
6,837,442

 
$
(1,672,081
)
Total
 
$
8,393,683

 
$

 
$

 
$
(1,672,081
)
 
$
115,840

 
$
6,837,442

 
$
(1,672,081
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other equity securities
 
$
9,217,181

 
$

 
$

 
$
679,798

 
$
341,459

 
$
10,238,438

 
$
679,798

Warrant Investment
 
355,000

 

 

 
(230,000
)
 

 
125,000

 
(230,000
)
Total
 
$
9,572,181

 
$

 
$

 
$
449,798

 
$
341,459

 
$
10,363,438

 
$
449,798

(1) Located in Net realized and unrealized gain on other equity securities in the Consolidated Statements of Income

The Company utilizes the beginning of reporting period method for determining transfers between levels. There were no transfers between levels 1, 2 or 3 for the three months ended March 31, 2016 and 2015.
In connection with the October 2014 sale of the Company's shares in VantaCore, a portion of the proceeds were placed in escrow and a receivable was recorded. Changes in the fair value of the escrow receivable are recorded as a net realized or unrealized gain or loss on other equity securities included within the Consolidated Statements of Income and Comprehensive Income. For the three months ended March 31, 2016 and 2015, approximately $43 thousand and $0, was included as an unrealized gain, respectively.
Valuation Techniques and Unobservable Inputs
The Company’s other equity securities, which represent securities issued by private companies, are classified as Level 3 assets. Significant judgment is required in selecting the assumptions used to determine the fair values of these investments. See Note 2, Significant Accounting Policies, for additional discussion.
For the three months ended March 31, 2015, the Company’s Warrant Investment was valued using a binomial option pricing model. The key assumptions used in the binomial model were the fair value of equity of the underlying business; the Warrant's strike price; the expected volatility of equity; the time to the Warrant's expiry; the risk-free rate, and the expected dividend yields. Due to the inherent uncertainty of determining the fair value of the Warrant Investment, which did not have a readily available market, the assumptions used the binomial model to value the Company’s Warrant Investment were based on Level 2 and Level 3 inputs. The Company’s Warrant Investment was valued at $0 at March 31, 2016 due to the foreclosure on Black Bison, discussed in further detail in Note 5.
As of March 31, 2016 and 2015, the Company’s investment in Lightfoot Capital Partners, LP and Lightfoot Capital Partners GP LLC, collectively, ("Lightfoot") is its only remaining significant private company investment. Lightfoot in turn owns a combination of public and private investments. Therefore, Lightfoot was valued using a combination of the following valuation techniques: (i) public share price of private companies' investments discounted for a lack of marketability, with the discount estimated at 12.5 percent to 13.9 percent and 16.6 percent to 21.3 percent as of March 31, 2016 and 2015, respectively, and (ii) discounted cash flow analysis using an estimated discount rate of 15.0 percent to 17.0 percent and 12.0 percent to 14.0 percent as of March 31, 2016 and 2015, respectively. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investment may fluctuate from period to period. Additionally, the fair value of the Company’s investment may differ from the values that would have been used had a ready market existed for such investment and may differ materially from the values that the Company may ultimately realize.
As of both March 31, 2016 and 2015, the Company held a 6.6 percent and 1.5 percent equity interest in Lightfoot LP and Lightfoot GP, respectively. Lightfoot’s assets include an ownership interest in Gulf LNG, a 1.5 billion cubic feet per day (“bcf/d”) receiving, storage, and regasification terminal in Pascagoula, Mississippi, and common units and subordinated units representing an approximately 40 percent aggregate limited partner interest, and a noneconomic general partner interest, in Arc Logistics Partners LP (NYSE: ARCX). We hold observation rights on Lightfoot's Board of Directors.
Certain condensed combined unaudited financial information of the unconsolidated affiliate, Lightfoot, is presented in the following tables (in thousands).
 
 
March 31, 2016
(Unaudited)
 
December 31, 2015
(Unaudited)
Assets
 
 
 
 
Current assets
 
$
22,303

 
$
24,276

Noncurrent assets
 
701,805

 
696,461

Total Assets
 
$
724,108

 
$
720,737

Liabilities
 
 
 
 
Current liabilities
 
$
15,995

 
$
19,993

Noncurrent liabilities
 
261,723

 
246,808

Total Liabilities
 
$
277,718

 
$
266,801

 
 
 
 
 
Partner's equity
 
446,390

 
453,936

Total liabilities and partner's equity
 
$
724,108

 
$
720,737


 
 
For the Three Months Ending March 31,
(Unaudited)
 
 
2016
 
2015
Revenues
 
$
26,067

 
$
13,557

Operating expenses
 
22,072

 
15,128

Income (Loss) from Operations
 
$
3,995

 
$
(1,571
)
Other income
 
2,374

 
3,834

Net Income
 
$
6,369

 
$
2,263

Less: Net Income attributable to non-controlling interests
 
(6,293
)
 
(2,226
)
Net Income attributable to Partner's Capital
 
$
76

 
$
37


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.
Escrow Receivable — The escrow receivable due to the Company as of March 31, 2016, which relates to the sale of VantaCore, is to be released upon satisfaction of certain post-closing obligations and the expiration of certain time periods (50 percent was released 12 months after the October 1, 2014 closing date (i.e. October 1, 2015), and the other 50 percent to be released 18 months after close (i.e. April 1, 2016)). At December 31, 2015, the fair value of the escrow receivable was reflected net of a discount for the potential that the full amount due to the Company would not be realized. At March 31, 2016, the fair value of the escrow receivable was based on the actual cash received in settlement of the escrow on April 1, 2016. See Note 16. Subsequent Events for additional information regarding the remaining funds held in escrow at March 31, 2016.
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.
Long-term Debt — The fair value of the Company’s long-term debt is calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the expected market rate for an equivalent transaction.
Line of Credit — The carrying value of the line of credit approximates the fair value due to its short-term nature.
Carrying and Fair Value Amounts
 
 
 
 
 
 
 
 
 
 
 
 
Level within fair value hierarchy
 
March 31, 2016
 
December 31, 2015
 
 
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Financial Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
Level 1
 
$
12,849,652

 
$
12,849,652

 
$
14,618,740

 
$
14,618,740

Escrow receivable
 
Level 2
 
$
1,436,246

 
$
1,436,246

 
$
1,392,917

 
$
1,392,917

Financing notes receivable (Note 5)
 
Level 2
 
$
1,500,000

 
$
1,500,000

 
$
7,675,626

 
$
7,675,626

Hedged Derivative Asset
 
Level 2
 
$

 
$

 
$
98,259

 
$
98,259

Financial Liabilities:
 
 
 
 
 
 
 
 
Long-term debt
 
Level 2
 
$
164,738,323

 
$
141,456,935

 
$
217,375,153

 
$
193,573,834

Line of credit
 
Level 2
 
$
44,000,000

 
$
44,000,000

 
$

 
$

Hedged Derivative Liability
 
Level 2
 
$
90,804

 
$
90,804

 
$

 
$

Credit Facilities
CREDIT FACILITIES
CREDIT FACILITIES
Credit Facilities of the REIT
In conjunction with the MoGas Transaction on November 24, 2014, the Company increased their credit facility to $90 million at the REIT level, and $3.0 million at the subsidiary entity level (the "Regions Revolver"). For the first six months, subsequent to the increase, the facility bore interest on the outstanding balance at a rate of LIBOR plus 3.50 percent. Beginning on May 24, 2015 and through July 7, 2015, the interest rate was determined by a pricing grid where the applicable interest rate was LIBOR plus 2.75 percent to 3.50 percent, depending on the Company's leverage ratio at such time. On June 29, 2015, the Company borrowed against the Regions Revolver in the amount of $42 million in conjunction with the GIGS transaction.
On July 8, 2015, the Company amended and upsized its existing $93 million credit facility with Regions Bank (as lender and administrative agent for the other participating lenders) to provide borrowing commitments of $153 million, consisting of (i) an increase in the Regions Revolver at the CorEnergy parent entity level to $105 million, (ii) a $45 million term loan at the CorEnergy parent entity level (the "Regions Term Loan") and (iii) a $3 million revolving credit facility at the subsidiary entity level (the "MoGas Revolver" as detailed below and, collectively with the upsized Regions Revolver and the Regions Term Loan, the "Regions Credit Facility"). Upon closing the Regions Credit Facility, CorEnergy drew $45 million on the Regions Term Loan to pay off the balance on the Regions Revolver that had been used in funding the GIGS acquisition in June 2015. On March 30, 2016 the Company drew $44 million on the Regions Revolver in conjunction with the refinancing of the Pinedale Facility. See below for further details. The Company now has approximately $54.2 million of available borrowing capacity on the Regions Revolver.
The Regions Credit Facility has a maturity date of December 15, 2019 for both the Regions Revolver and the Regions Term Loan. Borrowings under the Regions Credit Facility will generally bear interest on the outstanding principal amount using a LIBOR pricing grid that is expected to equal a LIBOR rate plus an applicable margin of 2.75 percent - 3.75 percent (3.19 percent on the revolver and 3.38 percent on the term loan as of March 31, 2016), based on the Company's senior secured recourse leverage ratio. Total availability is subject to a borrowing base. The Term Note requires quarterly principal payments of $900 thousand which began on September 30, 2015. The Regions Credit Facility contains, among other restrictions, certain financial covenants including the maintenance of certain financial ratios, as well as default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods). Upon the occurrence of an event of default, payment of all amounts outstanding under the Regions Credit Facility shall become immediately due and payable.
The Regions Credit Facility is secured by substantially all of the assets owned by the Company and its subsidiaries other than (i) the assets held by Mowood, LLC, Omega Pipeline Company, Pinedale Corridor, LP and Pinedale, GP Inc. (the "Unrestricted
Subs") and (ii) the equity investments in the Unrestricted Subs.
As of March 31, 2016, and December 31, 2015, approximately $3.1 million and $3.3 million, respectively, in net deferred debt issuance costs related to the Regions Credit Facility are included in the accompanying Consolidated Balance Sheets. For the three months ended March 31, 2016 and 2015, $257 thousand and $190 thousand, respectively, of deferred debt cost amortization is included in interest expense within the accompanying Consolidated Statements of Income. As of March 31, 2016, the Company was in compliance with all covenants of the Regions Credit Facility.
The remaining contractual principal payments as of March 31, 2016 under our Regions Credit Facilities are as follows:
Year
Total Payments
2016
$
2,700,000

2017
3,600,000

2018
3,600,000

2019
32,400,000

2020

Thereafter

Total
$
42,300,000


Pinedale Facility
On December 20, 2012, Pinedale LP closed on a $70 million secured term credit facility. Outstanding balances under the original facility generally accrued interest at a variable annual rate equal to LIBOR plus 3.25 percent. This credit facility was secured by the Pinedale LGS asset. Under the original agreement, Pinedale LP was obligated to pay all accrued interest monthly and was further obligated to make monthly principal payments, which began on March 7, 2014, in the amount of $294 thousand or 0.42 percent of the principal balance as of March 1, 2014.
The credit facility remained in effect until December 31, 2015, with an option to extend through December 31, 2016. Although the Company elected not to extend the facility for an additional one-year period we did amend the facility to extend the maturity date to March 30, 2016. During the extension period, the company made principal payments of $3.2 million and the credit facility bore interest on the outstanding principal amount at LIBOR plus 4.25 percent.
On March 4, 2016, the Company obtained a Consent from its lenders under the Regions Credit Facility, which permitted the Company to utilize the Regions revolving credit facility to refinance the $70 million secured term credit facility. On March 30, 2016, the Company and Prudential ("the Refinancing Lenders"), refinanced the remaining $58.5 million principal balance of the $70 million credit facility (on a pro rata basis equal to their respective equity interests in Pinedale LP, with the Company’s 81.05 percent share being approximately $47.4 million) and executed a series of agreements assigning the credit facility to CorEnergy Infrastructure Trust, Inc. as Agent for the Refinancing Lenders. The facility was further modified to extend the maturity date to March 30, 2021; to increase the LIBOR Rate to the greater of (i) 1.00 percent and (ii) the one-month LIBOR rate; and to increase the LIBOR Rate Spread to seven percent (7.00 percent) per annum. The Company's portion of the debt and interest is eliminated in consolidation and Prudential's portion of the debt is shown as a related-party liability. The Company also terminated the related $26.3 million derivative contract.
The Company has provided to Prudential a guarantee against certain inappropriate conduct by or on behalf of Pinedale LP or us. The credit agreement contains, among other restrictions, specific financial covenants including the maintenance of certain financial coverage ratios and a minimum net worth requirement. Pinedale LP was in compliance with all covenants under the Pinedale Credit Facility as of March 31, 2016.
Pinedale LP's credit facility with the Refinancing Lenders limits distributions by Pinedale LP to the Company. Distributions by Pinedale LP to the Company are permitted to the extent required for the Company to maintain its REIT qualification, so long as Pinedale LP's obligations under the credit facility have not been accelerated following an Event of Default (as defined in the credit facility). The credit facility also requires that Pinedale LP maintain minimum net worth levels and certain leverage ratios, which along with other provisions of the credit facility limit cash dividends and loans to the Company. At March 31, 2016, the net assets of Pinedale LP were $139.1 million and Pinedale LP was in compliance with all of the financial covenants of the secured term credit facility.
As of March 31, 2016, and December 31, 2015, approximately $0 thousand and $156 thousand, respectively, in net deferred debt issuance costs are included in the accompanying Consolidated Balance Sheets. These deferred costs were amortized over the remaining term of the facility extension. For the three months ended March 31, 2016 and 2015, $156 thousand and $129 thousand, respectively, of deferred debt cost amortization is included in interest expense within the accompanying Consolidated Statements of Income.
The remaining contractual principal payments to Prudential as of March 31, 2016, under our Pinedale Credit Facility are as follows:
Year
Total Payments
2016
$
501,417

2017
668,556

2018
668,556

2019
668,556

2020
668,556

Thereafter
7,910,109

Total
$
11,085,750


MoGas Revolver
In conjunction with the MoGas Transaction, MoGas and UPS, as co-borrowers, entered into a revolving credit agreement dated November 24, 2014 (the “MoGas Revolver”), with certain lenders, including Regions Bank as agent for such lenders. Pursuant to the MoGas Revolver, the co-borrowers may borrow, prepay and re-borrow loans up to $3.0 million outstanding at any time. The MoGas Revolver is secured by the assets held at MoGas and has a maturity date of November 24, 2018. Interest accrues under the MoGas Revolver at the same rate and pursuant to the same terms as it accrues under the Regions Revolver. As of March 31, 2016, there were no outstanding borrowings against the MoGas Revolver. As of March 31, 2016, the co-borrowers are in compliance with all covenants of the MoGas Revolver.
Mowood/Omega Credit Facility
On October 15, 2014, Mowood and Omega renewed the 2013 Note Payable Agreement by entering into a $1.5 million Revolving Note Payable Agreement ("2014 Note Payable Agreement"), under which interest accrued at the Prime Lending Rate as published in the Wall Street Journal, plus 0.5 percent, and was payable monthly, and in full, with accrued interest on the initial termination date of January 31, 2015. Borrowings on the 2014 Note Payable Agreement were secured by Mowood's and Omega's assets. On January 30, 2015, Mowood and Omega modified the 2014 Note Payable Agreement to extend the maturity date to July 31, 2015. On July 31, 2015, the 2014 Note Payable Agreement was allowed to expire and a new $1.5 million revolving line of credit ("Mowood/Omega Revolver") was established with Regions Bank. The new Mowood/Omega Revolver will be used for working capital and general business purposes, is guaranteed and secured by the assets of Omega and has a maturity of July 31, 2016. Interest accrues at LIBOR plus 4 percent and is payable monthly in arrears with no unused fee. There was no outstanding balance at March 31, 2016.
Convertible Debt (Notes)
CONVERTIBLE DEBT
CONVERTIBLE DEBT
On June 29, 2015, the Company completed a public offering of $115 million aggregate principal amount of 7.00% Convertible Senior Notes Due 2020 (the "Convertible Notes"). The Convertible Notes mature on June 15, 2020 and bear interest at a rate of 7.0 percent per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015. For the three months ended March 31, 2016 and 2015, there is $2.0 million and $0, respectively, of interest expense resulting from the Convertible Notes. The Convertible Notes were issued with an underwriters' discount of $3.7 million which is being amortized over the life of the Convertible Notes. The amount of discount amortization included in interest expense for the three months ended March 31, 2016 and 2015, is $188 thousand and $0, respectively.
As of March 31, 2016 and 2015, approximately $207 thousand and $0, respectively, in net deferred debt issuance costs related to the Convertible Notes are included in the accompanying Consolidated Balance Sheets. For the three months ended March 31, 2016 and 2015 there is $12 thousand and $0, respectively, of deferred debt cost amortization included in interest expense within the accompanying Consolidated Statements of Income. Including the impact of the convertible debt discount and related deferred debt issuance costs, the effective interest rate on the Convertible Notes is approximately 7.7 percent for the three months ended March 31, 2016.
The Company may not redeem the Convertible Notes prior to the maturity date. Holders may convert their Convertible Notes into shares of the Company’s common stock at their option until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate for the Convertible Notes will be 30.3030 shares of Common Stock per $1,000 principal amount of the Convertible Notes, equivalent to an initial conversion price of $33.0 per share of Common Stock. Such conversion rate will be subject to adjustment in certain events as specified in the Indenture.
Upon the occurrence of a fundamental change (as defined in the Indenture), holders may require the Company to repurchase all or a portion of the Convertible Notes for cash at a price equal to 100 percent of the principal amount of the Convertible Notes to be purchased plus any accrued and unpaid interest, if any, to, but excluding, the applicable fundamental change repurchase date as prescribed in the Indenture. In addition, in certain circumstances the Company will increase the conversion rate for a holder that converts the Convertible Notes in connection with any of a specified set of corporate events, each of which is deemed to constitute a make whole adjustment event pursuant to the terms of the Indenture.
The Convertible Notes rank equal in right of payment to any other current and future unsecured obligations of the Company and senior in right of payment to any other current and future indebtedness of the Company that is contractually subordinated to the Convertible Notes. The Convertible Notes are structurally subordinated to all liabilities (including trade payables) of the Company’s subsidiaries. The Convertible Notes are effectively junior to all of the Company’s existing or future secured debt, to the extent of the value of the collateral securing such debt.
Stockholder's Equity
STOCKHOLDER'S EQUITY
STOCKHOLDER'S EQUITY
REDEEMABLE PREFERRED STOCK
The Company's authorized preferred stock consists of 10 million shares having a par value of $0.001 per share. On January 27, 2015, the Company sold, in an underwritten public offering, 2,250,000 depositary shares, each representing 1/100th of a share of 7.375% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred"). Pursuant to this offering, the Company issued 22,500 whole shares of Series A Preferred and received net cash proceeds of approximately $54.2 million. The depositary shares pay an annual dividend of $1.84375 per share, equivalent to 7.375 percent of the $25.00 liquidation preference. The depositary shares may be redeemed on or after January 27, 2020, at the Company’s option, in whole or in part, at the $25.00 liquidation preference plus all accrued and unpaid dividends to, but not including, the date of redemption. The depositary shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and are not convertible into any other securities of the Company except in connection with certain changes of control. Holders of the depositary shares generally have no voting rights, except for limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not consecutive) and in certain other circumstances. The depositary shares representing the Series A Preferred trade on the NYSE under the ticker “CORRPrA." The aggregate par value of the preferred shares at March 31, 2016, is $23. See Note 16, Subsequent Events, for further information regarding the declaration of a dividend on the 7.375% Series A Cumulative Redeemable Preferred Stock.
COMMON STOCK
As of March 31, 2016, the Company had 11,951,757 of common shares issued and outstanding. Effective December 1, 2015, the Company completed a one-for-five reverse common stock split. As a result, every five issued and outstanding shares of common stock of the Company converted into one share of common stock. The par value of each share of common stock and the number of authorized shares remained unchanged. On December 31, 2015, the Company's board of director's authorized a share repurchase program for the Company to buy up to $10.0 million of its common stock. The Company plans to repurchase shares from time to time through open market transactions, including through block purchases, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any repurchases are to be determined by senior management, depending on market prices and other conditions. We are not obligated to repurchase any shares of stock under the program and may terminate the program at any time. See Note 16, Subsequent Events, for further information regarding the declaration of a dividend on the common stock.
SHELF REGISTRATION
On February 18, 2016 we had a new shelf registration statement, with an aggregate offering price of up to $600 million, declared effective by the SEC, pursuant to which we may publicly offer additional securities consisting of (i) common stock, (ii) preferred stock, (iii) fractional interests in shares of our preferred stock represented by depositary shares, (iv) senior and/or subordinated debt securities, (v) subscription rights to purchase shares of our common stock, preferred stock (or depositary shares representing a fractional interest therein) and/or debt securities, (vi) warrants representing rights to purchase shares of our common stock, preferred stock (or depositary shares representing a fractional interest therein) and/or debt securities, or (vii) units consisting of a combination of any of the foregoing. We refer to the foregoing collectively as our securities. We may offer our securities in one or more offerings and in one or more classes or series, separately or together.
As of March 31, 2016, we have issued 12,060 shares of common stock under the Company's dividend reinvestment plan pursuant to the February 18, 2016 shelf, reducing availability by approximately $159 thousand to approximately $599.8 million.
Earnings Per Share
EARNINGS PER SHARE
EARNINGS PER SHARE
Basic earnings per share data is computed based on the weighted average number of shares of common stock outstanding during the periods. Diluted EPS data is computed based on the weighted average number of shares of common stock outstanding, including all potentially issuable shares of common stock. Diluted EPS for the three months ended March 31, 2016 excludes the impact to income and the number of shares outstanding from the conversion of the 7.00% Convertible Senior Notes, because such impact would be antidilutive.
Earnings Per Share
 
 
 
 
For the Three Months Ended March 31,
 
2016
 
2015
Net income attributable to CorEnergy stockholders
$
3,391,121

 
$
4,086,628

Less: preferred dividend requirements
1,037,109

 
737,500

Net income attributable to common stockholders
$
2,354,012

 
$
3,349,128

Weighted average shares - basic
11,943,938

 
9,322,652

Basic earnings per share
$
0.20

 
$
0.36

 
 
 
 
Net income attributable to common stockholders (from above)
$
2,354,012

 
$
3,349,128

Add: After tax effect of convertible interest

 

Income attributable for dilutive securities
$
2,354,012

 
$
3,349,128

Weighted average shares - diluted
11,943,938

 
9,322,652

Diluted earnings per share
$
0.20

 
$
0.36

Subsequent Events
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
The Company performed an evaluation of subsequent events through the date of the issuance of these financial statements and determined that no additional items require recognition or disclosure, except for the following:
Common Stock Dividend Declaration
On April 27, 2016, our Board of Directors declared the 2016 first quarter dividend of $0.750 per share for CorEnergy common stock. The dividend is payable on May 31, 2016, to shareholders of record on May 13, 2016.
Preferred Stock Dividend Declaration
On April 27, 2016, our Board of Directors also declared a cash dividend of $0.4609375 per depositary share for the Company’s 7.375% Series A Cumulative Redeemable Preferred Stock for the quarter ending March 31, 2016. The preferred stock dividend is payable on May 31, 2016 to shareholders of record on May 13, 2016.
Ultra Petroleum
On April 29, 2016 Ultra Petroleum, filed a voluntary petition to reorganize under Chapter 11. The filing includes Ultra Wyoming LGS, LLC, the operator of the Pinedale LGS and tenant of the Pinedale Lease Agreement. The bankruptcy filing of both the guarantor, Ultra Petroleum, and the tenant and circumstances prompting the filing constitute defaults under the terms of the Pinedale Lease Agreement. The bankruptcy filing serves as a stay of the Company's ability to exercise remedies for certain of those defaults. However, Section 365 of the Bankruptcy Code requires Ultra Wyoming to comply on a timely basis with many provisions of the Pinedale Lease Agreement, including the payment provisions. The only exception to that requirement is if Ultra Wyoming takes specific action to reject the Pinedale Lease Agreement. Ultra Wyoming has not filed a motion to reject the Pinedale Lease. All scheduled lease payments are current.
EXXI
On April 14, 2016, Energy XXI and substantially all of its directly and indirectly owned subsidiaries filed a voluntary petition to reorganize under Chapter 11, after reaching an agreement with certain creditors to provide support for a restructuring of its debt. The bankruptcy filing of Energy XXI, the guarantor of the Grand Isle Lease Agreement, and its failure to make interest payments to its creditors within the applicable cure period, would have constituted defaults under the terms of the Grand Isle Lease Agreement. However, to facilitate post-filing financing arrangements between the EXXI Debtor Group and its lenders, the Company provided a conditional waiver to certain remedies available to it as a result of these non-monetary defaults. EXXI Tenant, has not filed for bankruptcy. Therefore, its obligations under the Grand Isle Lease Agreement are currently not subject to the proceedings affecting the EXXI Debtor Group. The Company has not compromised any remedies available to it for any default by EXXI Tenant under the Grand Isle Lease Agreement. All scheduled lease payments are current. For additional information, please refer to the Company's Current Report on Form 8-K filed with the SEC on April 14, 2016.
VantaCore
On April 1, 2016, the Company received its final $1.4 million distribution from escrow, related to the November 2014 sale of Vantacore.
Stock Repurchases
During April 2016, pursuant to the common stock repurchase program, the Company repurchased 23,400 shares of its common stock at an average price of $20.26 per share.
Significant Accounting Policies (Policies)
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries and 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 our net earnings are reduced by the portion of net earnings attributable to non-controlling interests.
Operating results for the three months ended March 31, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These consolidated financial statements and Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K, for the year ended December 31, 2015, filed with the SEC on March 14, 2016.
The financial statements included in this report are based on the selection and application of critical accounting policies, which require management to make significant estimates and assumptions. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex or subjective judgments. Note 2 to the Consolidated Financial Statements, included in this report, further details information related to our significant accounting policies.
Use of Estimates – The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, recognition of distribution income and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.
Earnings Per Share – Basic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period except for periods of net loss for which no common share equivalents are included because their effect would be anti-dilutive. Dilutive common equivalent shares consist of shares issuable upon conversion of the convertible notes calculated using the if-converted method.
Investment Securities – The Company’s investments in securities are classified as other equity securities and represent interests in private companies which the Company has elected to report at fair value under the fair value option.
These investments generally are subject to restrictions on resale, have no established trading market and are valued on a quarterly basis. Because of the inherent uncertainty of valuation, the fair values of such investments, which are determined in accordance with procedures approved by the Company’s Board of Directors, may differ materially from the values that would have been used had a ready market existed for the investments.
The Company determines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has determined the principal market, or the market in which the Company exits its private portfolio investments with the greatest volume and level of activity, to be the private secondary market. Typically, private companies are bought and sold based on multiples of EBITDA, cash flows, net income, revenues, or in limited cases, book value.
For private company investments, value is often realized through a liquidity event. Therefore, the value of the Company as a whole (enterprise value) at the reporting date often provides the best evidence of the value of the investment and is the initial step for valuing the Company’s privately issued securities. For any one company, enterprise value may best be expressed as a range of fair values, from which a single estimate of fair value will be derived. In determining the enterprise value of a portfolio company, an analysis is prepared consisting of traditional valuation methodologies including market and income approaches. The Company considers some or all of the traditional valuation methods based on the individual circumstances of the portfolio company in order to derive its estimate of enterprise value.
The fair value of investments in private portfolio companies is determined based on various factors, including enterprise value, observable market transactions, such as recent offers to purchase a company, recent transactions involving the purchase or sale of the equity securities of the company, or other liquidation events. The determined equity values may be discounted when the Company has a minority position, or is subject to restrictions on resale, has specific concerns about the receptivity of the capital markets to a specific company at a certain time, or other comparable factors exist.
The Company undertakes a multi-step valuation process each quarter in connection with determining the fair value of private investments. We have retained an independent valuation firm to provide third party valuation consulting services based on procedures that the Company has identified and may ask them to perform from time to time on all or a selection of private investments as determined by the Company. The multi-step valuation process is specific to the level of assurance that the Company requests from the independent valuation firm. For positive assurance, the process is as follows:
The independent valuation firm prepares the valuations and the supporting analysis.
The valuation report is reviewed and approved by senior management.
The Audit Committee of the Board of Directors reviews the supporting analysis and accepts the valuations.
Financing Notes Receivable - Financing 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. If the Company does determine an allowance is necessary, the amount deemed uncollectable is expensed in the period of determination. An insignificant delay or shortfall in the amount of payments does not necessarily result in the recording of an allowance. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing financing revenue on that loan until all principal and interest have been brought current. Interest income recognition is resumed if and when the previously reserved-for financing notes become contractually current and performance has been demonstrated. Payments received subsequent to the recording of an allowance will be recorded as a reduction to principal. During the three months ended March 31, 2016 and 2015, the Company recorded $4.6 million and $0, respectively, in provision for loan losses. The Company's financing notes receivable are discussed more fully in Note 5.
Revenue Recognition – Specific recognition policies for the Company’s revenue items are as follows:
Lease revenue – Base rent related to the Company’s leased property is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Contingent rent is recognized when it is earned, based on the achievement of specified performance criteria. Rental payments received in advance are classified as unearned revenue and included as a liability within the Consolidated Balance Sheets. Unearned revenue is amortized ratably over the lease period as revenue recognition criteria are met. Rental payments received in arrears are accrued and classified as Lease Receivable and included in assets within the Consolidated Balance Sheets.
Transportation and distribution revenue – This represents revenue recognized related to natural gas transportation, distribution and supply. Transportation revenues are recognized on firm contracted capacity over the contract period regardless of whether the contracted capacity is used. For interruptible or volumetric based transportation, revenue is recognized when physical deliveries of natural gas are made at the delivery point agreed upon by both parties. Distribution revenue is recognized based on agreed upon contractual terms over each annual period during the terms of the contract. Beginning February 1, 2016, under a new contract with the Department of Defense ("DOD"), gas sales and cost of (gas) sales are presented on a net basis.
Omega is also paid fees for the operation and maintenance of its natural gas distribution system, including any necessary expansion of the distribution system. Omega is responsible for the coordination, supervision and quality of the expansions while actual construction is generally performed by third party contractors. Revenues from expansion efforts are recognized using either a completed contract, percentage of completion or cost-plus method based on the level and volume of estimates utilized, as well as the certainty or uncertainty of our ability to collect those revenues.
Sales revenue - Revenues related to natural gas and propane are recognized upon delivery of natural gas and propane. Omega, acting as a principal, provides natural gas and propane supply for its customers. Beginning February 1, 2016, under a new contract with the Department of Defense ("DOD"), Omega is no longer the primary obligor of product sales and as such net presentation has been determined to be appropriate, therefore gas sales and cost of (gas) sales are presented on a net basis. Prior to the new contract, Sales revenue represented amounts earned by Omega for gas and propane product sales to customers and the costs of the gas and propane were presented as cost of sales.
Financing revenue – Our financing notes receivable are considered a core product offering and therefore the related income is presented as a component of operating income. For increasing rate loans, base interest income is recorded ratably over the life of the loan, using the effective interest rate. The net amount of deferred loan origination income and costs are amortized on a straight-line basis over the life of the loan and reported as an adjustment to yield in financing revenue. Participating financing revenues are recorded when specific performance criteria have been met.
Transportation and distribution expense Included here, for both MoGas and Omega, are the costs of operating and maintaining the natural gas distribution system, including any necessary expansion of the distribution system. These costs are incurred both internally and externally. The internal costs relate to system control, pipeline operations, maintenance, insurance and taxes. Other internal costs include payroll for employees associated with gas control, field employees, the office manager and the vice president of operations and finance. The external costs consist of professional services such as audit and accounting, legal and regulatory and engineering.
Debt Issuance Costs – Costs incurred for the issuance of new debt are capitalized and reported as a direct deduction to the carrying value of the related debt except for capitalized costs related to our revolving line of credit which are presented as an asset within Deferred costs, net of accumulated amortization. Amortization of these costs is reported as interest expense over the debt term. See Note 12 for further discussion.
Other Income Recognition Specific policies for the Company’s other income items are as follows:
Net distributions and dividend income from investments – Distributions and dividends from investments are recorded on their ex-dates and are reflected as other income within the accompanying Consolidated Statements of Income. Distributions received from the Company’s investments are generally characterized as ordinary income, capital gains and distributions received from investment securities. The portion characterized as return of capital is paid by our investees from their cash flow from operations. The Company records investment income, capital gains and distributions received from investment securities based on estimates made at the time such distributions are received. Such estimates are based on information available from each company and other industry sources. These estimates may subsequently be revised based on information received from the entities after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Company.
Net realized and unrealized gain (loss) from investments – Securities transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses are reported on an identified cost basis. The Company records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on information available from the portfolio company and other industry sources. These estimates may subsequently be revised based on information received from the portfolio company after their tax reporting periods are concluded, as the actual character of these distributions are not known until after our fiscal year end.
Federal and State Income Taxation – In 2013 we qualified, and in March 2014 elected (effective as of January 1, 2013), to be treated as a REIT for federal income tax purposes. Because certain of our assets may not produce REIT-qualifying income or be treated as interests in real property, those assets are held in wholly-owned Taxable REIT Subsidiaries ("TRSs") in order to limit the potential that such assets and income could prevent us from qualifying as a REIT.
As a REIT, the Company holds and operates certain of our assets through one or more wholly-owned TRSs. Our use of TRSs enables us to continue to engage in certain businesses while complying with REIT qualification requirements and also allows us to retain income generated by these businesses for reinvestment without the requirement of distributing those earnings. In the future, we may elect to reorganize and transfer certain assets or operations from our TRSs to the Company or other subsidiaries, including qualified REIT subsidiaries.
The Company's other equity securities are limited partnerships or limited liability companies which are treated as partnerships for federal and state income tax purposes. As a limited partner, the Company reports its allocable share of taxable income in computing its own taxable income. To the extent held by a TRS, the TRS's tax expense or benefit is included in the Consolidated Statements of Income based on the component of income or gains and losses to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. It is expected that for the three months ended March 31, 2016, and future periods, any deferred tax liability or asset generated will be related entirely to the assets and activities of the Company's TRSs.
If we cease to qualify as a REIT, the Company, as a C corporation, would be obligated to pay federal and state income tax on its taxable income. Currently, the highest regular marginal federal income tax rate for a corporation is 35 percent. The Company may be subject to a 20 percent federal alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.
Recent Accounting Pronouncements – In August 2015, the FASB issued ASU No. 2015-14 "Revenue from Contracts with Customers - Deferral of the Effective Date." The amendments in this update defer the effective date of ASU No. 2014-09 "Revenue from Contracts with Customers", for all entities by one year. ASU No. 2014-09 adds to the FASB ASC by requiring entities to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. Additionally, in March 2016, the FASB issued ASU No. 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. As amended, the effective date for public entities is annual reporting periods beginning after December 15, 2017 and interim periods therein. As such, we will be required to adopt the standard in the first quarter of fiscal year 2018. Early adoption is not permitted before the first quarter of fiscal year 2017. ASC 606 may be adopted using either the "full retrospective" approach, in which the standard is applied to all of the periods presented, or a "modified retrospective" approach. The Company is currently evaluating which transition method to use and the potential future impact, if any, the standard will have on the Company's consolidated financial statements and related disclosures. However, we do not expect its adoption to have a significant impact on our consolidated financial statements, as a substantial portion of our revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09.
In April 2015, the FASB issued ASU No. 2015-03 "Interest-Imputation of Interest" to simplify presentation of debt issuance costs. The amendments in this update require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Then in June 2015, the FASB issued ASU No. 2015-15 "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements" to clarify that ASU No. 2015-03 does not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. As a result, an entity may present debt issuance costs related to line-of-credit arrangements as an asset instead of a direct deduction from the carrying amount of the debt. We adopted the accounting standards update as of January 1, 2016 with retrospective application to our December 31, 2015 Consolidated Balance Sheets. The effect of the adoption was to reclassify $510 thousand of debt issuance costs at December 31, 2015 from intangibles and deferred costs, net of accumulated amortization, to long-term debt.
In August 2014, the FASB issued ASU No. 2014-15 "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern", that will require management to evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statements are issued on both an interim and annual basis. Management will be required to provide certain footnote disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. ASU No. 2014-15 becomes effective for annual periods beginning in 2016 and for interim reporting periods starting in the first quarter of 2017. The Company does not expect the adoption of this amendment to have a material impact on its consolidated financial statements.

In January 2016, the Company adopted ASU No. 2015-02 "Consolidation (Topic 810), Amendments to the Consolidation Analysis." Among other changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. While adoption of this standard did not result in any changes to conclusions about consolidated or unconsolidated entities, the Company has determined that Pinedale LP now qualifies as a variable interest entity and therefore requires additional disclosures.
In February 2016, the FASB issued ASU No. 2016-02 "Leases" which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for fiscal years and interim periods beginning after December 31, 2018. Early adoption is permitted. The new leases standard requires adoption using a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. Management is still in the process of evaluating this amendment.

In March 2016, the FASB issued ASU 2016-05 "Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships." This ASU clarifies that a change in the counterparty of a derivative contract (i.e., a novation) in a hedge accounting relationship does not, in and of itself, require de-designation of the hedge accounting relationship. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The Company is evaluating the impact of this ASU on its financial statements and disclosures.
Leases (Tables)
As of March 31, 2016, the Company had three significant leases. The table below displays the impact of the Company's most significant leases on total leased properties and total lease revenues for the periods presented.


As a Percentage of (1)


Leased Properties

Lease Revenues


As of
 
As of

For the Three Months Ended


March 31, 2016

December 31, 2015

March 31, 2016
 
March 31, 2015
Pinedale LGS

39.9%

40.0%

30.4%
 
70.4%
Grand Isle Gathering System

50.1%

50.1%

59.8%
 
Portland Terminal Facility

9.7%

9.6%

9.7%
 
20.7%
Public Service of New Mexico (2)



 
8.7%
(1) Insignificant leases are not presented; thus percentages may not sum to 100%.
(2) The Public Service of New Mexico lease terminated on April 1, 2015.

The future contracted minimum rental receipts for all net leases as of March 31, 2016, are as follows:
Future Minimum Lease Receipts
Years Ending December 31,
 
Amount
2016
 
$
45,000,738

2017
 
60,931,762

2018
 
61,139,762

2019
 
63,468,195

2020
 
70,629,654

Thereafter
 
451,794,133

Total
 
$
752,964,244

Income Taxes (Tables)
Components of the Company’s deferred tax assets and liabilities as of March 31, 2016, and December 31, 2015, are as follows:
Deferred Tax Assets and Liabilities
 
 
March 31, 2016
 
December 31, 2015
Deferred Tax Assets:
 
 
 
 
Net operating loss carryforwards
 
$
998,724

 
$
543,116

Net unrealized loss on investment securities
 
867,555

 
251,539

Loan Loss Provision
 
605,107

 
1,257,436

Other loss carryforwards
 
2,215,428

 
1,833,240

Sub-total
 
$
4,686,814

 
$
3,885,331

Deferred Tax Liabilities:
 
 
 
 
Basis reduction of investment in partnerships
 
$
(2,094,642
)
 
$
(2,159,058
)
Cost recovery of leased and fixed assets
 
(407,801
)
 
(119,297
)
Sub-total
 
(2,502,443
)
 
(2,278,355
)
Total net deferred tax asset (liability)
 
$
2,184,371

 
$
1,606,976

Total income tax expense/(benefit) differs from the amount computed by applying the federal statutory income tax rate of 35 percent for the three months ended March 31, 2016 and 2015, to income or loss from operations and other income and expense for the years presented, as follows:
Income Tax Expense (Benefit)
 
 
For the Three Months Ended March 31,
 
 
2016
 
2015
Application of statutory income tax rate
 
$
747,599

 
$
1,553,434

State income taxes, net of federal tax (benefit)
 
(83,260
)
 
37,051

Federal Tax Attributable to Income of Real Estate Investment Trust
 
(1,919,465
)
 
(1,270,120
)
Total income tax expense (benefit)
 
$
(1,255,126
)
 
$
320,365

For the three months ended March 31, 2016, all of the income tax benefit presented above relates to the assets and activities held in the Company's TRSs. 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,
 
 
2016
 
2015
Current tax expense
 
 
 
 
Federal
 
$
(627,197
)
 
$
391,946

State (net of federal tax benefit)
 
(50,534
)
 
43,810

Total current tax expense
 
(677,731
)
 
435,756

Deferred tax expense (benefit)
 
 
 
 
Federal
 
(544,669
)
 
(108,632
)
State (net of federal tax benefit)
 
(32,726
)
 
(6,759
)
Total deferred tax expense (benefit)
 
(577,395
)
 
(115,391
)
Total income tax expense (benefit), net
 
$
(1,255,126
)
 
$
320,365

The aggregate cost of securities for federal income tax purposes and securities with unrealized appreciation and depreciation, were as follows:
Aggregate Cost of Securities for Income Tax Purposes (Unaudited)
 
 
March 31, 2016
 
December 31, 2015
Aggregate cost for federal income tax purposes
 
$
5,036,413

 
$
4,750,252

Gross unrealized appreciation
 
3,334,775

 
5,133,908

Gross unrealized depreciation
 
(97,500
)
 
(97,500
)
Net unrealized appreciation
 
$
3,237,275

 
$
5,036,408

Property and Equipment (Tables)
Property and equipment consists of the following:
Property and Equipment
 
 
March 31, 2016
 
December 31, 2015
Land
 
$
580,000

 
$
580,000

Natural gas pipeline
 
124,446,821

 
124,386,349

Vehicles and trailers
 
687,526

 
524,921

Office equipment and computers
 
97,670

 
87,696

Gross property and equipment
 
125,812,017

 
125,578,966

Less: accumulated depreciation
 
(6,840,717
)
 
(5,948,988
)
Net property and equipment
 
$
118,971,300

 
$
119,629,978

As a result of the foreclosure, the following assets are included in our Consolidated Balance Sheet, less estimated costs to sell, as Assets Held for Sale at March 31, 2016:
Assets Held for Sale
 
 
March 31, 2016
Disposal wells and related equipment
 
$
1,839,007

Assets held for sale
 
$
1,839,007

 
 
 
Note payable
 
$
439,007

Liabilities held for sale
 
$
439,007

Fair Value (Tables)
The following tables provide the fair value measurements of applicable Company assets and liabilities by level within the fair value hierarchy as of March 31, 2016, and December 31, 2015. These assets and liabilities are measured on a recurring basis.
March 31, 2016
 
 
March 31, 2016
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Other equity securities
 
$
6,837,442

 
$

 
$

 
$
6,837,442

Total Assets
 
$
6,837,442

 
$

 
$

 
$
6,837,442

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest Rate Swap Derivative
 
$
90,804

 
$

 
$
90,804

 
$

Total Liabilities
 
$
90,804

 
$

 
$
90,804

 
$

December 31, 2015
 
 
December 31, 2015
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Other equity securities
 
$
8,393,683

 
$

 
$

 
$
8,393,683

Interest Rate Swap Derivative
 
98,259

 

 
98,259

 

Total Assets
 
$
8,491,942

 
$

 
$
98,259

 
$
8,393,683

he changes for all Level 3 securities measured at fair value on a recurring basis using significant unobservable inputs for the three months ended March 31, 2016 and 2015, are as follows:
Level 3 Rollforward
For the Three Months Ended March 31, 2016
 
Fair Value Beginning Balance
 
Acquisitions
 
Disposals
 
Total Realized and Unrealized Gains/(Losses) Included in Net Income
 
Return of Capital Adjustments Impacting Cost Basis of Securities
 
Fair Value Ending Balance
 
Changes in Unrealized Losses, Included In Net Income, Relating to Securities Still Held (1)
Other equity securities
 
$
8,393,683

 
$

 
$

 
$
(1,672,081
)
 
$
115,840

 
$
6,837,442

 
$
(1,672,081
)
Total
 
$
8,393,683

 
$

 
$

 
$
(1,672,081
)
 
$
115,840

 
$
6,837,442

 
$
(1,672,081
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other equity securities
 
$
9,217,181

 
$

 
$

 
$
679,798

 
$
341,459

 
$
10,238,438

 
$
679,798

Warrant Investment
 
355,000

 

 

 
(230,000
)
 

 
125,000

 
(230,000
)
Total
 
$
9,572,181

 
$

 
$

 
$
449,798

 
$
341,459

 
$
10,363,438

 
$
449,798

(1) Located in Net realized and unrealized gain on other equity securities in the Consolidated Statements of Income

Certain condensed combined unaudited financial information of the unconsolidated affiliate, Lightfoot, is presented in the following tables (in thousands).
 
 
March 31, 2016
(Unaudited)
 
December 31, 2015
(Unaudited)
Assets
 
 
 
 
Current assets
 
$
22,303

 
$
24,276

Noncurrent assets
 
701,805

 
696,461

Total Assets
 
$
724,108

 
$
720,737

Liabilities
 
 
 
 
Current liabilities
 
$
15,995

 
$
19,993

Noncurrent liabilities
 
261,723

 
246,808

Total Liabilities
 
$
277,718

 
$
266,801

 
 
 
 
 
Partner's equity
 
446,390

 
453,936

Total liabilities and partner's equity
 
$
724,108

 
$
720,737

 
 
For the Three Months Ending March 31,
(Unaudited)
 
 
2016
 
2015
Revenues
 
$
26,067

 
$
13,557

Operating expenses
 
22,072

 
15,128

Income (Loss) from Operations
 
$
3,995

 
$
(1,571
)
Other income
 
2,374

 
3,834

Net Income
 
$
6,369

 
$
2,263

Less: Net Income attributable to non-controlling interests
 
(6,293
)
 
(2,226
)
Net Income attributable to Partner's Capital
 
$
76

 
$
37

Carrying and Fair Value Amounts
 
 
 
 
 
 
 
 
 
 
 
 
Level within fair value hierarchy
 
March 31, 2016
 
December 31, 2015
 
 
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Financial Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
Level 1
 
$
12,849,652

 
$
12,849,652

 
$
14,618,740

 
$
14,618,740

Escrow receivable
 
Level 2
 
$
1,436,246

 
$
1,436,246

 
$
1,392,917

 
$
1,392,917

Financing notes receivable (Note 5)
 
Level 2
 
$
1,500,000

 
$
1,500,000

 
$
7,675,626

 
$
7,675,626

Hedged Derivative Asset
 
Level 2
 
$

 
$

 
$
98,259

 
$
98,259

Financial Liabilities:
 
 
 
 
 
 
 
 
Long-term debt
 
Level 2
 
$
164,738,323

 
$
141,456,935

 
$
217,375,153

 
$
193,573,834

Line of credit
 
Level 2
 
$
44,000,000

 
$
44,000,000

 
$

 
$

Hedged Derivative Liability
 
Level 2
 
$
90,804

 
$
90,804

 
$

 
$

Credit Facilities (Tables)
Schedule of Maturities of Long-term Debt
The remaining contractual principal payments as of March 31, 2016 under our Regions Credit Facilities are as follows:
Year
Total Payments
2016
$
2,700,000

2017
3,600,000

2018
3,600,000

2019
32,400,000

2020

Thereafter

Total
$
42,300,000

The remaining contractual principal payments to Prudential as of March 31, 2016, under our Pinedale Credit Facility are as follows:
Year
Total Payments
2016
$
501,417

2017
668,556

2018
668,556

2019
668,556

2020
668,556

Thereafter
7,910,109

Total
$
11,085,750

Earnings Per Share (Tables)
Computation of basic and diluted earnings per share
Basic earnings per share data is computed based on the weighted average number of shares of common stock outstanding during the periods. Diluted EPS data is computed based on the weighted average number of shares of common stock outstanding, including all potentially issuable shares of common stock. Diluted EPS for the three months ended March 31, 2016 excludes the impact to income and the number of shares outstanding from the conversion of the 7.00% Convertible Senior Notes, because such impact would be antidilutive.
Earnings Per Share
 
 
 
 
For the Three Months Ended March 31,
 
2016
 
2015
Net income attributable to CorEnergy stockholders
$
3,391,121

 
$
4,086,628

Less: preferred dividend requirements
1,037,109

 
737,500

Net income attributable to common stockholders
$
2,354,012

 
$
3,349,128

Weighted average shares - basic
11,943,938

 
9,322,652

Basic earnings per share
$
0.20

 
$
0.36

 
 
 
 
Net income attributable to common stockholders (from above)
$
2,354,012

 
$
3,349,128

Add: After tax effect of convertible interest

 

Income attributable for dilutive securities
$
2,354,012

 
$
3,349,128

Weighted average shares - diluted
11,943,938

 
9,322,652

Diluted earnings per share
$
0.20

 
$
0.36

Significant Accounting Policies (Details Textual) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Provision for loan losses
$ 4,645,188 
$ 0 
 
Reserve for financing notes and related accrued interest receivable
4,100,000 
 
13,784,137 
Federal statutory income tax rate
35.00% 
35.00% 
 
Federal minimum alternative minimum tax rate
2,000.00% 
 
 
Increase(decrease) in debt issuance costs, net
3,957,987 
 
4,187,271 
Intangibles and Deferred Costs, Net of Accumulated Amortization [Member] |
ASU No. 2015-15 [Member]
 
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Increase(decrease) in debt issuance costs, net
 
 
510,000 
Long-term Debt [Member] |
ASU No. 2015-15 [Member]
 
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Increase(decrease) in debt issuance costs, net
 
 
$ 510,000 
Leased Properties - Grand Isle Gathering System (Details) (Grand Isle Gathering System [Member], USD $)
In Thousands, unless otherwise specified
0 Months Ended 3 Months Ended
Jun. 23, 2015
Mar. 31, 2016
Assets Leased to Others [Member]
Mar. 31, 2015
Assets Leased to Others [Member]
Sale Leaseback Transaction [Line Items]
 
 
 
Estimated useful lives of assets
30 years 
 
 
Depreciation
 
$ 2,100 
$ 0 
Leased Properties - Pinedale LGS (Details) (USD $)
3 Months Ended 3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Mar. 31, 2016
Pinedale Liquids Gathering System [Member]
Mar. 30, 2016
Key Bank [Member]
Secured Debt [Member]
Pinedale Liquids Gathering System [Member]
Dec. 20, 2012
Key Bank [Member]
Secured Debt [Member]
Pinedale Liquids Gathering System [Member]
Mar. 31, 2016
Assets Leased to Others [Member]
Pinedale Liquids Gathering System [Member]
Mar. 31, 2015
Assets Leased to Others [Member]
Pinedale Liquids Gathering System [Member]
Sale Leaseback Transaction [Line Items]
 
 
 
 
 
 
 
Estimated useful lives of assets
 
 
26 years 
 
 
 
 
Depreciation
 
 
 
 
 
$ 2,200,000 
$ 2,200,000 
Ownership percentage by noncontrolling owners
 
 
18.95% 
 
 
 
 
Non controlling economic interest pinedale GP
 
 
81.05% 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
70,000,000 
 
 
Principal balance
150,052,573 
150,732,752 
 
58,500,000 
 
 
 
Value of economic interest
 
 
$ 47,400,000 
 
 
 
 
Leased Properties - Portland Terminal Facility (Details) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Portland Terminal Facility [Member]
 
 
Sale Leaseback Transaction [Line Items]
 
 
Estimated useful lives of assets
30 years 
 
Depreciation
$ 319,000 
$ 407,000 
Portland Terminal Facility [Member]
 
 
Sale Leaseback Transaction [Line Items]
 
 
Construction and Development Costs
$ 10,000,000 
 
Leases - Significant Leases (Details)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Pinedale Liquids Gathering System [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percentage of total leased properties
39.90% 
 
40.00% 
Percentage of leased property revenue
30.40% 
70.40% 
 
Grand Isle Gathering System [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percentage of total leased properties
50.10% 
 
50.10% 
Percentage of leased property revenue
59.80% 
0.00% 
 
Portland Terminal Facility [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percentage of total leased properties
9.70% 
 
9.60% 
Percentage of leased property revenue
9.70% 
20.70% 
 
Public Service Company of New Mexico [Member]
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Percentage of total leased properties
0.00% 
 
0.00% 
Percentage of leased property revenue
0.00% 
8.70% 
 
Leases - Narrative (Details) (USD $)
1 Months Ended 3 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended
Mar. 31, 2016
lease
Dec. 31, 2012
Pinedale Liquids Gathering System [Member]
Mar. 31, 2016
Pinedale Liquids Gathering System [Member]
Mar. 31, 2015
Pinedale Liquids Gathering System [Member]
Dec. 31, 2015
Pinedale Liquids Gathering System [Member]
Dec. 20, 2012
Minimum [Member]
Pinedale Liquids Gathering System [Member]
Dec. 20, 2012
Maximum [Member]
Pinedale Liquids Gathering System [Member]
Mar. 31, 2016
Portland Terminal Facility [Member]
bbl
Mar. 31, 2015
Portland Terminal Facility [Member]
Mar. 31, 2014
Portland Terminal Facility [Member]
Jan. 1, 2016
Portland Terminal Facility [Member]
Jun. 30, 2015
Property Subject to Operating Lease [Member]
Grand Isle Gathering System [Member]
term
Mar. 31, 2016
Property Subject to Operating Lease [Member]
Grand Isle Gathering System [Member]
Mar. 31, 2015
Property Subject to Operating Lease [Member]
Grand Isle Gathering System [Member]
Dec. 31, 2015
Property Subject to Operating Lease [Member]
Grand Isle Gathering System [Member]
Jun. 30, 2015
Energy XXI GIGS Services, LLC [Member]
Property Subject to Operating Lease [Member]
Grand Isle Gathering System [Member]
Operating Leased Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Significant Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Settlement date
 
Dec. 20, 2012 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term of contract
 
15 years 
 
 
 
 
 
15 years 
 
 
 
11 years 
 
 
 
 
Number of additional renewal terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rent payment, daily volume threshold
 
 
 
 
 
 
 
12,500 
 
 
 
 
 
 
 
 
Variable rent payment, maximum percent of total rent
 
 
 
 
 
 
 
30.00% 
 
 
 
39.00% 
 
 
 
 
Additional Expected Project Costs
 
 
 
 
 
 
 
$ 10,000,000 
 
 
 
 
 
 
 
 
Renewal term
 
5 years 
 
 
 
 
 
 
 
 
 
9 years 
 
 
 
 
Expected remaining useful life of asset
 
 
 
 
 
 
 
 
 
 
 
75.00% 
 
 
 
 
Minimum monthly rental payments during year one
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,600,000 
Minimum monthly rental payments during year seven
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,200,000 
Minimum monthly rental payments during year eleven
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,500,000 
Operating Lease, Annual Rent Payment
 
 
 
 
 
20,000,000 
27,500,000 
 
 
 
6,200,000 
 
 
 
 
 
Annual Rent Escalator
 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rent, Quarterly Increase, Based on CPI
 
 
5,200,000 
10,000 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred lease costs, net of accumulated amortization of $139,983 and $124,641
 
 
719,000 
 
734,000 
 
 
 
 
 
 
 
313,000 
 
321,000 
 
Deferred Costs Amortization Period
 
 
15 years 
 
 
 
 
 
 
 
 
 
11 years 
 
 
 
Amortization expense
 
 
15,000 
15,000 
 
 
 
 
 
 
 
 
8,000 
 
 
Estimated useful lives of assets
 
 
26 years 
 
 
 
 
 
 
 
 
30 years 
 
 
 
 
Depreciation
 
 
 
 
 
 
 
 
 
 
 
8,600,000 
 
 
 
 
Base rent
 
 
 
 
 
 
 
 
$ 1,500,000 
$ 1,400,000 
 
 
 
 
 
 
Leases - Future Miniumum Rental Receipts (Details) (USD $)
Mar. 31, 2016
Leases [Abstract]
 
2016
$ 45,000,738 
2017
60,931,762 
2018
61,139,762 
2019
63,468,195 
2020
70,629,654 
Thereafter
451,794,133 
Total
$ 752,964,244 
Financing Notes Receivable (Details) (USD $)
3 Months Ended 0 Months Ended 12 Months Ended 3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Jul. 23, 2014
Long-term Debt [Member]
Black Bison Water Services LLC [Member]
Dec. 31, 2014
Line of Credit [Member]
Mar. 13, 2014
Line of Credit [Member]
Black Bison Water Services LLC [Member]
Jul. 23, 2014
Line of Credit [Member]
Black Bison Water Services LLC [Member]
Dec. 31, 2014
Line of Credit [Member]
REIT Loan [Member]
Dec. 31, 2014
Line of Credit [Member]
TRS Loan [Member]
Mar. 31, 2016
SWD Enterprises [Member]
Dec. 31, 2014
Subsidiaries [Member]
Long-term Debt [Member]
Jul. 23, 2014
Subsidiaries [Member]
Long-term Debt [Member]
Black Bison Water Services LLC [Member]
Dec. 31, 2015
Loans Agreement [Member]
Subsidiaries [Member]
Mar. 31, 2016
Loans Agreement [Member]
Subsidiaries [Member]
Jun. 30, 2015
Loans Agreement [Member]
Subsidiaries [Member]
Mar. 31, 2016
SWD Enterprises [Member]
Mar. 31, 2016
Black Bison and Intermediate Holdings [Member]
Feb. 29, 2016
BB Intermediate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advances on revolving line of credit
$ 44,000,000 
$ 1,945,361 
 
$ 4,000,000 
$ 4,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
12,000,000 
 
11,500,000 
15,300,000 
 
 
 
1,000,000 
3,300,000 
 
 
 
 
 
 
Debt Instrument, Interest Rate, Stated Percentage
 
 
 
 
12.00% 
 
12.00% 
13.00% 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate
 
 
 
2.00% 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rent Cap, Percentage
 
 
 
 
19.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan loss
4,645,188 
 
 
 
 
 
 
 
 
 
13,800,000 
 
 
3,500,000 
 
 
Deferred origination costs
 
 
 
 
 
 
 
 
 
 
 
 
14,000 
 
71,000 
 
 
Interest accrued
 
 
 
 
 
 
 
 
 
 
 
 
 
355,000 
98,000 
 
 
Equity interest percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
Outstanding loan balance
 
 
 
 
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
 
Net investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity value
 
 
 
 
 
 
 
 
$ 1,500,000 
 
 
 
 
 
 
 
 
Income Taxes (Details) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Deferred Tax Assets:
 
 
Net operating loss carryforwards
$ 998,724 
$ 543,116 
Net unrealized loss on investment securities
867,555 
251,539 
Loan Loss Provision
605,107 
1,257,436 
Other loss carryforwards
2,215,428 
1,833,240 
Sub-total
4,686,814 
3,885,331 
Deferred Tax Liabilities:
 
 
Basis reduction of investment in partnerships
(2,094,642)
(2,159,058)
Cost recovery of leased and fixed assets
(407,801)
(119,297)
Sub-total
(2,502,443)
(2,278,355)
Total net deferred tax asset (liability)
$ 2,184,371 
$ 1,606,976 
Income Taxes (Details 1) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rates net investment income and net realized and unrealized gains on investments
 
 
Application of statutory income tax rate
$ 747,599 
$ 1,553,434 
State income taxes, net of federal tax (benefit)
(83,260)
37,051 
Federal Tax Attributable to Income of Real Estate Investment Trust
(1,919,465)
(1,270,120)
Income tax expense (benefit), net
$ (1,255,126)
$ 320,365 
Income Taxes (Details 2) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Current tax expense
 
 
Federal
$ (627,197)
$ 391,946 
State (net of federal tax benefit)
(50,534)
43,810 
Total current tax expense
(677,731)
435,756 
Deferred tax expense (benefit)
 
 
Federal
(544,669)
(108,632)
State (net of federal tax benefit)
(32,726)
(6,759)
Total deferred tax expense (benefit)
(577,395)
(115,391)
Income tax expense (benefit), net
$ (1,255,126)
$ 320,365 
Income Taxes (Details 3) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Aggregate cost of securities for federal income tax purposes and securities with unrealized appreciation and depreciation
 
 
Aggregate cost for federal income tax purposes
$ 5,036,413 
$ 4,750,252 
Gross unrealized appreciation
3,334,775 
5,133,908 
Gross unrealized depreciation
(97,500)
(97,500)
Net unrealized appreciation
$ 3,237,275 
$ 5,036,408 
Income Taxes (Details Textual) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Income Taxes (Textual) [Abstract]
 
 
 
Federal statutory income tax rate
35.00% 
35.00% 
 
Net Operating Loss Carry Forward Period
 
 
20 years 
NOL expiring in 2033 if not utilized
 
 
$ 90,000 
NOL expiring in 2034 if not utilized
 
 
804,000 
NOL expiring in 2035 if not utilized
 
 
478,000 
Subsidiaries [Member]
 
 
 
Income Taxes (Textual) [Abstract]
 
 
 
Net operating loss for federal income tax purposes
 
 
$ 1,400,000 
State [Member] |
Subsidiaries [Member]
 
 
 
Income Taxes (Textual) [Abstract]
 
 
 
Blended state tax rate
2.82% 
3.92% 
 
State [Member] |
MISSOURI |
Mowood LLC [Member]
 
 
 
Income Taxes (Textual) [Abstract]
 
 
 
Blended state tax rate
5.00% 
5.00% 
 
Property and Equipment (Details) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Component of property and equipment
 
 
Gross property and equipment
$ 125,812,017 
$ 125,578,966 
Less accumulated depreciation
(6,840,717)
(5,948,988)
Net property and equipment
118,971,300 
119,629,978 
Land and Land Improvements [Member]
 
 
Component of property and equipment
 
 
Gross property and equipment
580,000 
580,000 
Natural gas pipeline [Member]
 
 
Component of property and equipment
 
 
Gross property and equipment
124,446,821 
124,386,349 
Vehicles and trailers [Member]
 
 
Component of property and equipment
 
 
Gross property and equipment
687,526 
524,921 
Computers [Member]
 
 
Component of property and equipment
 
 
Gross property and equipment
$ 97,670 
$ 87,696 
Property and Equipment (Details Textual) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Feb. 29, 2016
BB Intermediate [Member]
Property, Plant and Equipment [Line Items]
 
 
 
Amount of depreciation of property and equipment recognized
$ 835 
$ 832 
 
Equity interest percentage
 
 
100.00% 
Property and Equipment - Assets Held for Sale (Details) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Long Lived Assets Held-for-sale [Line Items]
 
 
Assets held for sale, less costs to sell
$ 1,839,007 
$ 0 
Liabilities held for sale
$ 439,007 
$ 0 
Concentrations (Details)
3 Months Ended 0 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Jan. 28, 2016
Department of Defense [Member]
Omega [Member]
Jan. 31, 2015
Department of Defense [Member]
Omega [Member]
Natural gas distribution agreement
 
 
10 years 
10 years 
Revenue related to the DOD contract
91.00% 
91.00% 
 
 
Percentage of amounts due from the department of defense in relation to consolidated accounts receivable
9.00% 
26.00% 
 
 
Management Agreement (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
New Management Agreement [Member]
 
 
Management Agreement [Line Items]
 
 
Management fees
$ 1,700 
$ 1,100 
Administrative Agreement [Member] |
Corridor Infra Trust Management [Member]
 
 
Management Agreement [Line Items]
 
 
Management fees
$ 67 
$ 46 
Fair Value (Details 1) (Fair Value, Measurements, Recurring [Member], USD $)
Mar. 31, 2016
Dec. 31, 2015
Assets:
 
 
Other equity securities
$ 6,837,442 
$ 8,393,683 
Total Assets
6,837,442 
8,491,942 
Liabilities:
 
 
Total Liabilities
90,804 
 
Interest Rate Swap [Member]
 
 
Assets:
 
 
Derivative asset
 
98,259 
Liabilities:
 
 
Derivative liability
90,804 
 
Fair Value, Inputs, Level 1 [Member]
 
 
Assets:
 
 
Other equity securities
Total Assets
Liabilities:
 
 
Total Liabilities
 
Fair Value, Inputs, Level 1 [Member] |
Interest Rate Swap [Member]
 
 
Assets:
 
 
Derivative asset
 
Liabilities:
 
 
Derivative liability
 
Level 2 [Member]
 
 
Assets:
 
 
Other equity securities
Total Assets
98,259 
Liabilities:
 
 
Total Liabilities
90,804 
 
Level 2 [Member] |
Interest Rate Swap [Member]
 
 
Assets:
 
 
Derivative asset
 
98,259 
Liabilities:
 
 
Derivative liability
90,804 
 
Fair Value, Inputs, Level 3 [Member]
 
 
Assets:
 
 
Other equity securities
6,837,442 
8,393,683 
Total Assets
6,837,442 
8,393,683 
Liabilities:
 
 
Total Liabilities
 
Fair Value, Inputs, Level 3 [Member] |
Interest Rate Swap [Member]
 
 
Assets:
 
 
Derivative asset
 
Liabilities:
 
 
Derivative liability
$ 0 
 
Fair Value (Details 2) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Warrant [Member]
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Disposals
$ 0 
$ 0 
Fair Value, Inputs, Level 3 [Member]
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Fair Value Beginning Balance
8,393,683 
9,572,181 
Acquisitions
Total Realized and Unrealized Gains/(Losses) Included in Net Income
(1,672,081)
449,798 
Return of Capital Adjustments Impacting Cost Basis of Securities
(115,840)
(341,459)
Fair Value Ending Balance
6,837,442 
10,363,438 
Changes in Unrealized Losses, Included In Net Income, Relating to Securities Still Held (1)
(1,672,081)
449,798 
Fair Value, Inputs, Level 3 [Member] |
Other Equity Investments [Member]
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Fair Value Beginning Balance
8,393,683 
9,217,181 
Acquisitions
Disposals
Total Realized and Unrealized Gains/(Losses) Included in Net Income
(1,672,081)
679,798 
Return of Capital Adjustments Impacting Cost Basis of Securities
(115,840)
(341,459)
Fair Value Ending Balance
6,837,442 
10,238,438 
Changes in Unrealized Losses, Included In Net Income, Relating to Securities Still Held (1)
(1,672,081)
679,798 
Fair Value, Inputs, Level 3 [Member] |
Warrant Investment [Member]
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Fair Value Beginning Balance
 
355,000 
Acquisitions
 
Total Realized and Unrealized Gains/(Losses) Included in Net Income
 
(230,000)
Return of Capital Adjustments Impacting Cost Basis of Securities
 
Fair Value Ending Balance
 
125,000 
Changes in Unrealized Losses, Included In Net Income, Relating to Securities Still Held (1)
 
(230,000)
Fair Value, Inputs, Level 3 [Member] |
Warrant [Member]
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Disposals
 
$ 0 
Fair Value (Details 3) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Assets
$ 669,370,341 
$ 677,979,621 
Total Liabilities
231,529,408 
233,785,315 
Unconsolidated Affiliates [Member] |
Reported Value Measurement [Member]
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Current assets
22,303 
24,276 
Noncurrent assets
701,805 
696,461 
Assets
724,108 
720,737 
Current liabilities
15,995 
19,993 
Noncurrent liabilities
261,723 
246,808 
Total Liabilities
277,718 
266,801 
Members' Equity
446,390 
453,936 
Total liabilities and partner's equity
$ 724,108 
$ 720,737 
Fair Value (Details 4) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
 
 
 
Revenues
$ 22,257,867 
$ 13,987,883 
 
Other income
(5,179,188)
(107,066)
 
Net Income
3,739,622 
4,496,803 
13,937,117 
Less: Net Income attributable to non-controlling interest
(348,501)
(410,175)
 
Reported Value Measurement [Member] |
Unconsolidated Affiliates [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Revenues
26,067 
13,557 
 
Operating expenses
22,072 
15,128 
 
Income (Loss) from Operations
3,995 
(1,571)
 
Other income
2,374 
3,834 
 
Net Income
6,369 
2,263 
 
Less: Net Income attributable to non-controlling interest
(6,293)
(2,226)
 
Net Income attributable to Partner's Capital
$ 76 
$ 37 
 
Fair Value (Details 5) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Carrying Amount [Member]
 
 
Financial instruments financial assets and financial liabilities at fair value
 
 
Financing Notes Receivable Fair Value Disclosure
 
$ 7,675,626 
Carrying Amount [Member] |
Level 1 [Member]
 
 
Financial instruments financial assets and financial liabilities at fair value
 
 
Cash and cash equivalents
12,849,652 
14,618,740 
Carrying Amount [Member] |
Level 2 [Member]
 
 
Financial instruments financial assets and financial liabilities at fair value
 
 
Escrow receivable
1,436,246 
1,392,917 
Hedged Derivative Asset
 
Financing Notes Receivable Fair Value Disclosure
1,500,000 
 
Long-term debt
164,738,323 
217,375,153 
Line of credit
44,000,000 
Hedged derivative liability
90,804 
Fair Value [Member] |
Level 1 [Member]
 
 
Financial instruments financial assets and financial liabilities at fair value
 
 
Cash and cash equivalents
12,849,652 
14,618,740 
Fair Value [Member] |
Level 2 [Member]
 
 
Financial instruments financial assets and financial liabilities at fair value
 
 
Escrow receivable
1,436,246 
1,392,917 
Hedged Derivative Asset
98,259 
Financing Notes Receivable Fair Value Disclosure
1,500,000 
7,675,626 
Long-term debt
141,456,935 
193,573,834 
Line of credit
44,000,000 
Hedged derivative liability
$ 90,804 
$ 0 
Fair Value (Details Textual) (USD $)
3 Months Ended 3 Months Ended 3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Foreclosure of Black Bison [Member]
Feb. 29, 2016
Foreclosure of Black Bison [Member]
Mar. 31, 2016
Lightfoot Capital Partners LP [Member]
Dec. 31, 2015
Lightfoot Capital Partners LP [Member]
Mar. 31, 2016
Minimum [Member]
Lightfoot Capital Partners LP [Member]
Mar. 31, 2015
Minimum [Member]
Lightfoot Capital Partners LP [Member]
Mar. 31, 2016
Maximum [Member]
Lightfoot Capital Partners LP [Member]
Mar. 31, 2015
Maximum [Member]
Lightfoot Capital Partners LP [Member]
Mar. 30, 2016
Cash Flow Hedging [Member]
Dec. 20, 2012
Secured Debt [Member]
Key Bank [Member]
Mar. 31, 2016
Lightfoot Capital Partners LP [Member]
Mar. 31, 2016
Lightfoot Capital Partners LP [Member]
Arc Logistics Partners LP [Member]
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedge terminated
 
 
 
 
 
 
 
 
 
 
$ 26,300,000 
 
 
 
Transfers between levels
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain on other equity securities
43,000 
 
 
 
 
 
 
 
 
 
 
 
 
Investment warrants
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Inputs, Discount for Lack of Marketability
 
 
 
 
 
 
12.50% 
16.60% 
13.90% 
21.30% 
 
 
 
 
Fair Value Inputs, Discount Rate
 
 
 
 
 
 
15.00% 
12.00% 
17.00% 
14.00% 
 
 
 
 
Equity interest percentage
 
 
 
 
6.60% 
1.50% 
 
 
 
 
 
 
 
 
Receiving, Storage and Regasification Terminal, In Volume Per Day
 
 
 
 
 
 
 
 
 
 
 
 
1,500,000,000 
 
Escrow Receivable Release Percentage after Time Expiration
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
70,000,000 
 
 
Net assets and liabilities
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
 
 
Fair value of assets held-for-sale
 
 
1,800,000 
 
 
 
 
 
 
 
 
 
 
 
Fair value of liabilities held-for-sale
 
 
$ 439,000 
 
 
 
 
 
 
 
 
 
 
 
Limited partner interest
 
 
 
 
 
 
 
 
 
 
 
 
 
40.00% 
Credit Facilities (Details) (USD $)
3 Months Ended 0 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Mar. 31, 2016
Pinedale Liquids Gathering System [Member]
Dec. 31, 2014
Line of Credit [Member]
Dec. 20, 2012
Key Bank [Member]
Secured Debt [Member]
Mar. 31, 2016
Key Bank [Member]
Secured Debt [Member]
Dec. 20, 2012
Key Bank [Member]
Secured Debt [Member]
Mar. 31, 2016
Key Bank [Member]
Term Loan [Member]
Mar. 31, 2015
Key Bank [Member]
Term Loan [Member]
Dec. 31, 2015
Key Bank [Member]
Term Loan [Member]
Mar. 31, 2016
Regions [Member]
Revolving Credit Facility [Member]
Mar. 31, 2015
Regions [Member]
Revolving Credit Facility [Member]
Dec. 31, 2015
Regions [Member]
Revolving Credit Facility [Member]
Nov. 24, 2014
Regions [Member]
Revolving Credit Facility [Member]
Nov. 24, 2014
Regions [Member]
Revolving Credit Facility [Member]
Subsidiaries [Member]
Nov. 24, 2014
London Interbank Offered Rate (LIBOR) [Member]
Mar. 31, 2016
London Interbank Offered Rate (LIBOR) [Member]
Key Bank [Member]
Secured Debt [Member]
Nov. 24, 2014
Minimum [Member]
London Interbank Offered Rate (LIBOR) [Member]
Nov. 24, 2014
Maximum [Member]
London Interbank Offered Rate (LIBOR) [Member]
Mar. 31, 2016
Maximum [Member]
London Interbank Offered Rate (LIBOR) [Member]
Key Bank [Member]
Secured Debt [Member]
Nov. 24, 2014
Mogas [Member]
Regions [Member]
Revolving Credit Facility [Member]
Jul. 8, 2015
Line of Credit [Member]
Jun. 29, 2015
Line of Credit [Member]
Revolving Credit Facility [Member]
Mar. 31, 2016
Line of Credit [Member]
Revolving Credit Facility [Member]
Jul. 8, 2015
Line of Credit [Member]
Revolving Credit Facility [Member]
Jul. 31, 2015
Line of Credit [Member]
Revolving Credit Facility [Member]
Mowood/Omega Revolver [Member]
Oct. 15, 2014
Line of Credit [Member]
Revolving Credit Facility [Member]
Mowood/Omega Revolver [Member]
Jul. 8, 2015
Line of Credit [Member]
Revolving Credit Facility [Member]
Parent Company [Member]
Mar. 31, 2016
Line of Credit [Member]
Term Loan [Member]
Jul. 8, 2015
Line of Credit [Member]
Term Loan [Member]
Parent Company [Member]
Jul. 8, 2015
Line of Credit [Member]
Term Loan [Member]
Subsidiaries [Member]
Jul. 31, 2015
Line of Credit [Member]
London Interbank Offered Rate (LIBOR) [Member]
Revolving Credit Facility [Member]
Mowood/Omega Revolver [Member]
Oct. 15, 2014
Line of Credit [Member]
Prime Rate [Member]
Revolving Credit Facility [Member]
Mowood/Omega Revolver [Member]
Jul. 8, 2015
Line of Credit [Member]
Minimum [Member]
London Interbank Offered Rate (LIBOR) [Member]
Revolving Credit Facility [Member]
Jul. 8, 2015
Line of Credit [Member]
Maximum [Member]
London Interbank Offered Rate (LIBOR) [Member]
Revolving Credit Facility [Member]
Mar. 31, 2016
Pinedale Liquids Gathering System [Member]
Mar. 30, 2016
Pinedale Liquids Gathering System [Member]
Key Bank [Member]
Secured Debt [Member]
Dec. 20, 2012
Pinedale Liquids Gathering System [Member]
Key Bank [Member]
Secured Debt [Member]
Mar. 30, 2016
Cash Flow Hedging [Member]
Line of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non controlling economic interest pinedale GP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
81.05% 
 
 
 
Value of economic interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 47,400,000 
 
 
 
Principal balance
150,052,573 
 
150,732,752 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58,500,000 
 
 
Available borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description of variable rate basis
 
 
 
 
 
 
LIBOR 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate
 
 
 
 
2.00% 
3.25% 
1.00% 
 
 
 
 
 
 
 
 
 
3.50% 
4.25% 
2.75% 
3.50% 
7.00% 
 
 
 
 
 
 
 
 
 
 
 
4.00% 
0.50% 
2.75% 
3.75% 
 
 
 
 
Cash flow hedge terminated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26,300,000 
Effective percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.19% 
 
 
 
 
3.38% 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Periodic Payment, Principal
 
 
 
 
 
 
294,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Required principle payment as percentage of outstanding amount, beginning in year two
 
 
 
 
 
 
0.42% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Periodic Payment Through Extension Period, Principal
 
 
 
 
 
 
3,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
669,370,341 
 
677,979,621 
139,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
3,926,009 
1,147,272 
 
 
 
 
 
 
156,000 
129,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
70,000,000 
 
 
 
 
 
 
90,000,000 
3,000,000 
 
 
 
 
 
3,000,000 
153,000,000 
 
 
93,000,000 
1,500,000 
1,500,000 
105,000,000 
 
45,000,000 
3,000,000 
 
 
 
 
 
 
70,000,000 
 
Loan facility secured by assets
 
 
 
 
 
 
 
70,000,000 
 
 
 
 
 
 
90,000,000 
3,000,000 
 
 
 
 
 
3,000,000 
153,000,000 
 
 
93,000,000 
1,500,000 
1,500,000 
105,000,000 
 
45,000,000 
3,000,000 
 
 
 
 
 
 
70,000,000 
 
Amortization of Financing Costs and Discounts
 
 
 
 
 
 
 
 
 
 
 
257,000 
190,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred costs, net of accumulated amortization of $1,435,213 and $2,717,609
3,957,987 
 
4,187,271 
 
 
 
 
 
 
156,000 
3,100,000 
 
3,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowed against the revolver
$ 44,000,000 
$ 1,945,361 
 
 
$ 4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 42,000,000 
$ 44,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facilities - Long Term Debt Maturities (Details) (USD $)
Mar. 31, 2016
Regions Credit Facility [Member]
 
Debt Instrument [Line Items]
 
2016
$ 2,700,000 
2017
3,600,000 
2018
3,600,000 
2019
32,400,000 
2020
Thereafter
Total
42,300,000 
Pinedale Credit Facilities [Member]
 
Debt Instrument [Line Items]
 
2016
501,417 
2017
668,556 
2018
668,556 
2019
668,556 
2020
668,556 
Thereafter
7,910,109 
Total
$ 11,085,750 
Convertible Debt (Details) (USD $)
0 Months Ended 3 Months Ended 0 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Jun. 29, 2015
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Mar. 31, 2016
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Mar. 31, 2015
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Jun. 29, 2015
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Jun. 29, 2015
Common Stock [Member]
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Jun. 29, 2015
Common Stock [Member]
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
Aggregate principal amount
 
 
 
 
 
$ 115,000,000 
 
 
Coupon rate
 
 
 
 
 
7.00% 
 
 
Amount of underwriter's discount
 
 
 
 
 
3,700,000 
 
 
Amortization of discount
 
 
 
188,000 
 
 
 
Deferred debt issuance costs, net
3,957,987 
4,187,271 
 
207,000 
 
 
 
Deferred debt cost amortization
1,435,213 
2,717,609 
 
12,000 
 
 
 
Effective percentage
 
 
 
7.70% 
 
 
 
 
Interest expense
 
 
 
2,000,000 
 
 
 
Conversion rate, number of common stock (in shares)
 
 
 
 
 
 
30.303 
 
Conversion rate, principal amount of convertible note
 
 
$ 1,000 
 
 
 
 
 
Conversion price per share of common stock
 
 
 
 
 
 
 
$ 33 
Percentage of principal amount redeemed
 
 
100.00% 
 
 
 
 
 
Stockholder's Equity (Details) (USD $)
0 Months Ended 3 Months Ended 12 Months Ended
Dec. 1, 2015
Jan. 27, 2015
Mar. 31, 2016
Dec. 31, 2015
Feb. 18, 2016
Class of Stock [Line Items]
 
 
 
 
 
Preferred stock, authorized
 
 
10,000,000 
 
 
Preferred stock, par value
 
 
$ 0.001 
 
 
Net offering proceeds
 
$ 54,200,000 
 
 
 
Series A Cumulative Redeemable Preferred Stock, value of stock issed
 
 
56,250,000 
56,250,000 
 
Shares of common stock offered
 
 
11,951,757 
11,939,697 
 
Shelf Registration Statement Aggregate Offering Price
 
 
 
 
600,000,000 
Reinvestment of dividends paid to common stockholders
 
 
159,313 
817,915 
 
Reverse stock split ratio
0.2 
 
 
 
 
Series A Cumulative Redeemable Preferred Stock [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Preferred stock, authorized
 
 
10,000,000 
10,000,000 
 
Preferred stock, par value
 
 
$ 0.001 
$ 0.001 
 
Preferred stock, issued
 
22,500 
22,500 
22,500 
 
Preferred Stock, Liquidation Preference (in dollars per share)
 
 
$ 2,500 
$ 2,500 
 
Depositary Shares [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Annual dividend, per share
 
$ 1.84375 
 
 
 
Preferred Stock [Member] |
Series A Cumulative Redeemable Preferred Stock [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Coupon rate
 
7.375% 
7.375% 
 
 
Common Stock [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Shares sold in offering
 
 
 
2,587,500 
 
Authorized amount of shares to be repurchased
 
 
 
10,000,000 
 
Reinvestment of distributions to stockholders, shares
 
 
12,060 
28,510 
 
Reinvestment of dividends paid to common stockholders
 
 
12 
29 
 
Underwritten Public Offering [Member] |
Depositary Shares [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Shares sold in offering
 
2,250,000 
 
 
 
Dividend Reinvestment Plan [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Reinvestment of distributions to stockholders, shares
 
 
12,060 
 
 
Reinvestment of dividends paid to common stockholders
 
 
159,000 
 
 
Shelf registration after dividend reinvestment plan reduction
 
 
599,800,000 
 
 
CORRPrA [Member]
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
Series A Cumulative Redeemable Preferred Stock, value of stock issed
 
 
$ 23 
 
 
Earnings Per Share (Details) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Jun. 29, 2015
Convertible Debt [Member]
Convertible Senior Notes Due 2020 [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
 
 
 
Debt Instrument, Interest Rate, Stated Percentage
 
 
7.00% 
Net income attributable to CorEnergy stockholders
$ 3,391,121 
$ 4,086,628 
 
Less: preferred dividend requirements
1,037,109 
737,500 
 
Net income attributable to common stockholders
2,354,012 
3,349,128 
 
Weighted average shares - basic
11,943,938 
9,322,652 
 
Basic earnings per share (in dollars per share)
$ 0.20 
$ 0.36 
 
Add: After tax effect of convertible interest
 
Income attributable for dilutive securities
$ 2,354,012 
$ 3,349,128 
 
Weighted average shares - diluted
11,943,938 
9,322,652 
 
Diluted earnings per share (in dollars per share)
$ 0.20 
$ 0.36 
 
Subsequent Events (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Apr. 27, 2016
Common Stock [Member]
Subsequent Event [Member]
Apr. 30, 2016
Common Stock [Member]
Subsequent Event [Member]
Apr. 27, 2016
Series A Cumulative Redeemable Preferred Stock [Member]
Depositary Shares [Member]
Subsequent Event [Member]
Mar. 31, 2016
Series A Cumulative Redeemable Preferred Stock [Member]
Preferred Stock [Member]
Jan. 27, 2015
Series A Cumulative Redeemable Preferred Stock [Member]
Preferred Stock [Member]
Apr. 1, 2016
Vantacore Partners LP [Member]
Subsequent Event [Member]
Subsequent Event [Line Items]
 
 
 
 
 
 
 
 
Dividends declared per share (in dollars per share)
$ 0.75 
$ 0.65 
$ 0.750 
 
 
 
 
 
Depositary stock, dividends declared per share (in dollars per share)
 
 
 
 
$ 0.4609375 
 
 
 
Coupon rate
 
 
 
 
 
7.375% 
7.375% 
 
Final distribution from escrow
 
 
 
 
 
 
 
$ 1.4 
Number of shares repurchased
 
 
 
23,400 
 
 
 
 
Average cost per share repurchased (in dollars per share)
 
 
 
$ 20.26