CorEnergy Infrastructure Trust, Inc. (“CorEnergy”) (NYSE: CORR) today announced that it has entered into a definitive agreement to acquire a Liquids Gathering System (“LGS”) from Ultra Petroleum Corp. (NYSE: UPL) for $225 million in cash. The LGS will continue to be operated by UPL under a long-term triple net lease. Located in the Pinedale field in Wyoming, the LGS is a vital component of natural gas production in one of the top five natural gas fields in the U.S.
Prudential Capital Group, through its Dallas-based Energy Finance Group, will contribute $30 million as a co-investor in the acquisition and CorEnergy will contribute $130 million. The remainder of the acquisition cost will be financed with $65 million of non-recourse debt.
The key characteristics of the LGS acquisition satisfy CorEnergy’s targeted strategy and investment criteria including:
- Stable, fixed asset that is vital to UPL’s operations.
- Located in the Greater Green River Basin, the Pinedale and Jonah fields were estimated to have had in excess of 48 Tcfe of recoverable natural gas and an estimated reserve life of over 30 years as of December 31, 2011.
- Less than 25% of the Pinedale field had been developed as of December 31, 2011 and UPL is focused on continued production and expansion in the field.
- Minimum annual rent of $20 million provides source of steady rental income over 15-year initial term.
- Additional participating rent based on volume of liquids provides upside potential.
- UPL has industry leading operating fundamentals, a conservative financial profile and is a recognized low-cost operator.
“The LGS acquisition represents a significant step in our transition to become a real estate investment trust (“REIT”) by acquiring high-quality energy infrastructure assets with reliable cash flows and executing leases with quality operators,” said David Schulte, Chief Executive Officer of CorEnergy. “This asset provides a foundation upon which we plan to build a diversified energy infrastructure REIT. We expect this acquisition to be accretive to our distributions and we intend to recommend to our Board of Directors an increase to our annual distribution from $0.44 to $0.50 upon completion of the transaction.”