CorEnergy Infrastructure Trust Inc. announced Feb. 4 the acquisition of Crimson Midstream Holdings LLC for approximately $350 million.
Crimson is a California Public Utilities Commission (CPUC) regulated crude oil pipeline owner and operator. The acquired assets include four critical infrastructure pipeline systems spanning approximately 1,800 miles across northern, central and southern California, connecting desirable native California crude production to in-state refineries producing state-mandated specialized fuel blends, among other products.
The acquisition was funded with a combination of cash on hand, commitments to issue, as described below, approximately $119.4 million of new common and preferred equity, contribution of the Grand Isle Gathering System (GIGS) to the sellers, and $105 million in new term and revolver borrowings.
Crimson Transaction Highlights and Outlook
- Results in ownership of six pipeline systems in three markets serving diversified, creditworthy shippers.
- Enhances CorEnergy’s reliance on regulated contractual revenue sources.
- Crimson’s asset base and operating expertise facilitate greater potential for strategic acquisitions in the future.
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. Additional members of Crimson’s executive and operating teams joining CorEnergy, include Robert Waldron, chief financial officer at Crimson Midstream, who will become CFO of CorEnergy; and Larry Alexander, president of Crimson California’s operations.
“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,” Schulte said. “John and his team operate safely and reliably in a highly regulated market, and we plan to leverage their expertise to continue to grow our newly combined company. Additionally, we are exchanging CorEnergy’s single-tenant GIGS asset for long-lived critical infrastructure pipeline systems used by a diverse group of investment-grade rated customers.”
“Our combined ability to pursue additional opportunities leveraging Crimson’s oil market relationships, together with CorEnergy’s natural gas transmission assets, establishes a diversified foundation for future acquisition consideration,” said John Grier. “The Crimson pipeline networks connect multi-billion dollar refining complexes to low declining fields, producing desirable native grades of California crude oil, which is required for blended energy products satisfying state environmental standards. We are confident that Crimson’s total system volumes will increase from current levels as both consumers and producers return to pre-COVID-19 activity levels. In addition, we believe that there are commercial growth opportunities in California that could provide additional contributions to cash flow, including opportunities to leverage Crimson’s leading position in the market and extensive real property ownership for renewable fuel storage and distribution, carbon capture potential, and the shift to lower carbon power sourcing.”Tags: California Public Utilities Commission, CorEnergy, Crimson Midstream Holdings, crude oil, mergers and acquisitions