CorEnergy acquires Crimson’s California pipeline assets

CorEnergy Infrastructure Trust has announced the acquisition of Crimson Midstream Holdings, a California Public Utilities Commission (CPUC) regulated crude oil pipeline owner and operator, for around $350m.

The assets acquired include four critical infrastructure pipeline systems covering around 1,800 miles in California, linking crude production in California to in-state refineries producing specialised fuel blends, along with other products.

This deal was funded with $75.6m of cash, $105m in new term and revolver borrowings, contribution of the Grand Isle Gathering System (GIGS) to the sellers, and around $119.4m of new common and preferred equity.

Through this deal, CorEnergy gains ownership of six pipeline systems in three markets and bolsters its reliance on regulated contractual revenue sources.

Following the transaction, Dave Schulte will remain chairman, CEO and president of CorEnergy.

John Grier, founder and board chairman of Crimson Midstream will become chief operating officer and join the board of directors of CorEnergy.

Dave Schulte said: “The acquisition of Crimson diversifies CORR’s critical infrastructure portfolio with four new pipeline networks and positions CorEnergy as an owner/operator of utility-like assets in line with expectations for our industry leading REIT qualifying platform. John and his team operate safely and reliably in a highly regulated market, and we plan to leverage their expertise to continue to grow our newly combined company. Additionally, we are exchanging CorEnergy’s single-tenant GIGS asset for long-lived critical infrastructure pipeline systems used by a diverse group of investment-grade rated customers.”

John Grier said: “Our combined ability to pursue additional opportunities leveraging Crimson’s oil market relationships, together with CorEnergy’s natural gas transmission assets, establishes a diversified foundation for future acquisition consideration.

“The Crimson pipeline networks connect multi-billion dollar refining complexes to low declining fields, producing desirable native grades of California crude oil, which is required for blended energy products satisfying state environmental standards.

“We are confident that Crimson’s total system volumes will increase from current levels as both consumers and producers return to pre-Covid-19 activity levels. In addition, we believe that there are commercial growth opportunities in California that could provide additional contributions to cash flow, including opportunities to leverage Crimson’s leading position in the market and extensive real property ownership for renewable fuel storage and distribution, carbon capture potential, and the shift to lower carbon power sourcing.”

CorEnergy has also agreed to internalise its REIT manager, Corridor InfraTrust Management for $16.9m.

Following the Internalisation, CorEnergy expects that the pro forma management fees of around $5.5m will be replaced with an estimated $3.4m annualised SG&A expenses this year.