TIDMRSE
RNS Number : 4533N
Riverstone Energy Limited
09 August 2017
Interim Report and Unaudited Interim
Condensed Financial Statements for the
six months ended 30 June 2017 Riverstone
Energy
Limited
(LSE: RSE)
A focus on long-term capital growth
Financial and Operational Highlights
Net Committed Capital $1,718 million/ 119 per cent.
to Date of net capital available(1)
Commitments reduced Commitments reduced a total of
during the period $116 million:
ended 30 June 2017 (i) $59 million in CanEra Inc.
(ii) $57 million in Origo Exploration
Holding AS
Net Capital Invested $1,314 million/ 91 per cent.
to Date of net capital available(1)
Investments during Invested a total of $142 million(3)
the period ended :
30 June 2017(2) (i) $64 million in Canadian International
Oil Corp.
(ii) $26 million in ILX Holdings
III LLC
(iii) $16 million in Liberty
Resources II LLC
(iv) $10 million in Three Rivers
Natural Resources Holdings III
LLC
(v) $7 million in Canadian Non-Operated
Resources LP
(vi) $6 million in Eagle Energy
Exploration, LLC
(vii) $5 million in Carrier Energy
Partners II LLC
(viii) $4 million in Castex Energy
2014 LLC
(ix) $3 million in Meritage Midstream
Services III, L.P.
(x) $1 million in Origo Exploration
Holding AS
Realised Capital $323 million/ 21 per cent. of
to Date total capital invested
Realisations during Realised a total of $13 million:
the period ended (i) $11 million in Riverstone
30 June 2017 Credit Opportunities, L.P.
(ii) $2 million in aggregate
from CanEra Inc. and Fieldwood
Energy LLC
Key Financials
30 June 31 December 30 June 2016
2017 2016
---------------------- --------------- --------------- -------------------
NAV as at $1,668 million $1,699 million $1,372 million/
/ / GBP1,376 GBP1,035
GBP1,281 million(4) million(4)
million(4)
NAV per Share as $19.74 / $20.11 / $16.24/GBP12.25(4)
at GBP15.16(4) GBP16.29(4)
Market capitalisation $1,381 million $1,402 million $1,006 million/
at / GBP1,060 / GBP1,135 GBP756 million(4)
million(4) million(4)
Share price at $16.35 / $16.59 / $11.91/GBP8.95(4)
GBP12.55(4) GBP13.44(4)
30 June 30 June
2017 2016
----------------------- ---------- ---------------
Total comprehensive
(loss) profit for ($30.55)
the six months ended million $25.23 million
Basic (Loss) Earnings (36.17) 29.86 cents
per Share for the cents
six months ended
(1) Based on total capital raised of $1,320 million, bank loan,
realised profits and other income net of fees, expenses and
performance allocation. The Board does not expect to fully fund all
commitments in the normal course of business
(2) Art. 105 of the Delegated Regulation 213/2013
(3) Amounts may vary due to rounding
(4) Based on exchange rate of 1.303 $/GBP at 30 June 2017 (1.234
$/GBP at 31 December 2016 and 1.326 $/GBP at 30 June 2016)
Chairman's Statement
Low-Cost Positioning Provides Resilience and Growth
At the beginning of this year, we noted the rebalancing process
in the oil market as both North American producers and OPEC
restrained production, helping drive oil prices above $55 per
barrel. However, this proved only temporary as production growth in
North America resumed in response to higher prices, and shale
producers continued to reduce costs through innovation and
productivity enhancements. The resilience of shale producers has
surprised industry once again, resulting in lower prices as the
market continues to seek equilibrium.
This resilience is evident within the REL portfolio where
companies such as CIOC and Centennial continue to experience
improvements in well costs and productivity, with CIOC having
reduced drilling and completion costs by more than half since 2012,
and Centennial under the leadership of Mark Papa forecasting oil
production growth by a factor of ten through 2020. Elsewhere,
companies such as Liberty II and Eagle II are seeing the benefits
of early entry into plays such as the Powder River Basin and SCOOP,
where operators can drive productivity gains.
The portfolio is now largely invested, having deployed 91 per
cent. of net capital available. By establishing investment
platforms with best-in-class management teams and a strong capital
position, REL has been able to significantly expand its presence
throughout the cycle to establish meaningful investments in some of
North America's most attractive basins. For example, approximately
two-thirds of the portfolio is invested in the Permian, Eagle Ford
and Western Canada. This positioning, along with Riverstone's
emphasis on conservative capital structures, has resulted in a
portfolio which is well placed to withstand short term fluctuations
in commodity prices.
With REL approaching its fourth anniversary, several of the
investments are reaching the stage where they could become
attractive candidates for acquisition or a public market exit over
the next 12-18 months. For example, investments with vast and
contiguous acreage packages are likely to be valued by both
financial investors and trade buyers seeking to establish a
meaningful presence in an attractive basin. The North American
energy sector, characterised by low breakeven costs, short cycle
times and high asset liquidity remains an attractive investment
prospect, and we believe that well managed companies that are
exposed to these resources and have strong balance sheets will
continue to offer investors the best opportunities for capital
growth in the energy sector.
Performance
REL ended 30 June 2017 with an NAV of $19.74 per share. This
equates to a decrease of 36 cents (1.8 per cent.), when compared to
NAV per share at 31 December 2016. The NAV per share decrease was
larger on a Sterling basis, at 6.9 per cent., due to the
strengthening of Pound Sterling over the period.
The primary driver of the decline in NAV was REL's second
largest investment, Centennial, which is publicly traded and saw
its share price decline from $19.72 at the end of December to
$15.82 at 30 June 2017 as market sentiment for oil producers
weakened. Fieldwood and Carrier II also suffered valuation declines
as the lower oil price weighed on trading comparables and asset
valuations, and Fieldwood was impacted by a number of short term
production disruptions. However, these were largely offset by
strong performance at other portfolio companies, most notably Three
Rivers III, which grew from a Gross MOIC of 2.5x to 3.0x as acreage
prices continued to appreciate in the Delaware Basin. Liberty II
and Meritage III also experienced significant increases due to the
emerging Powder River Basin position and ongoing operational
successes, respectively.
This has meant that the NAV has held relatively steady against
the backdrop of a 14 per cent. decline in West Texas Intermediate
oil price benchmark during the first half of the year, and negative
sentiment impacting energy shares, with the S&P Oil & Gas
E&P Index and FTSE 350 Oil & Gas Producers Index declining
by 23 per cent. and 12 per cent., respectively. While REL shares
experienced a 6.6 per cent. decline, they outperformed the above
indices by 16 per cent. and 5 per cent., respectively. Shares
closed the quarter at a 17 per cent. discount to NAV. The Board
continues to consider options to narrow the discount, including
open market purchases as authorised by the Shareholders at the
AGM.
While REL did not make any new commitments during the period,
the Company invested $142 million in existing portfolio companies
for the exercise of warrants in CIOC as well as drilling and other
operational expenses elsewhere in the portfolio. CIOC received
total warrant proceeds of C$180 million (of which C$84 million came
from REL), which will allow the company to accelerate its drilling
programme and fund opportunistic land acquisitions. The second
largest investment during the period was made to ILX III for $26
million to fund the drilling of three prospects in the Gulf of
Mexico. Other investments were made to Liberty II and Three Rivers
III, both of which have been actively drilling in the first half of
this year. In total, REL has net invested capital of $1,314
million, equating to 91 per cent. of net capital available at the
end of June 2017.
We believe it is appropriate for the Company to maintain a level
of over-commitment, in order to optimise the level of invested
capital. Commitments are structured to maximise flexibility, and
portfolio companies are often fully or partially monetised prior to
drawing the full committed amounts. In addition, the Board
continually evaluates commitments given the evolving opportunity
set in the energy sector. In the first half of this year, we
withdrew $116 million of commitments to Origo and CanEra III. In
both instances, we no longer felt there were attractive
opportunities to deploy capital given the market for undeveloped
discoveries in the North Sea and conventional oil and gas
opportunities in Western Canada, respectively. While we are
disappointed these investments did not meet our expectations at the
time the commitments were made, we were able to limit capital
exposure to $11 million, highlighting the flexibility of
Riverstone's investment strategy and build-up approach. As of 30
June 2017, REL has commitments of $1,718 million to 14 current
investments, equating to 119 per cent. of net capital available(1)
. REL, including the Partnership, had a cash balance of over $124
million at this date.
Our investments continued to make strong operational progress in
the first half of the year. Meritage III, which provides a range of
midstream services in Western Canada, has signed additional offtake
agreements with CIOC and third parties, which will result in
additional volumes to support the construction of a second gas
gathering and processing facility. Elsewhere in the Montney, CNOR
continues to develop its Pipestone position, where it has
accumulated nearly 25,000 acres and completed four delineation
wells. In the Delaware Basin of the Permian, Three Rivers III has
now drilled five wells, which is helping prove out its 60,000 net
acre position. ILX III made two additional discoveries during the
period and has achieved a 73 per cent. success rate on exploration
drilling to date.
Subsequent to the period end, Sierra announced a historic oil
discovery in the shallow waters of the Gulf of Mexico. The Zama 1
well, located in Mexico's Block 7, confirmed the presence of a
light oil resource estimated to be in the range 1.4 billion and 2.0
billion barrels of oil in place. Ongoing studies will allow
estimation of likely recovery factors and other important
parameters, but it is already clear that Zama will rank as one of
the largest shallow water discoveries anywhere in the world over
the last five years. Although the discovery remains at an early
stage, the Board is pleased to see encouraging results from
Riverstone's strategy of being an early mover as the Mexican
government embarked on its historic energy market reform. We remain
excited about future opportunities for REL in Mexico through
Sierra's four additional upstream blocks it has secured, as well as
Fieldwood, which is awaiting results from two offshore wells which
it spud in the first half of the year.
Oil prices could continue to prove volatile over the next
several months as the market tests the ability of shale producers
to respond to price signals by moderating drilling activity and
capital expenditure budgets. In addition, the market will be
carefully observing any rhetoric from OPEC regarding future
production cuts, given that Libya, Nigeria and Iraq have increased
volumes in recent months. While future cohesion among OPEC remains
uncertain, oil demand growth continues to be robust, helping
normalise the inventories which have been built-up over the cycle.
Finally, geopolitical risks and sanctions against key producers
could always surprise the market.
Throughout a period of protracted commodity price volatility,
REL has benefited from Riverstone's strategy of deploying capital
towards basins with low costs of production, prudent balance sheet
management and an unwavering focus on operational excellence. While
the portfolio would be impacted by a sharp decline in weaker energy
prices, we are confident that the quality of the management teams
and their assets will continue to prove resilient throughout the
cycle. With 14 active investments across E&P and midstream in
North America, REL offers investors a unique opportunity to invest
in the most dynamic area of the energy market, and we believe those
with a long-term outlook will be handsomely rewarded.
Richard Hayden
Chairman
8 August 2017
(1) Based on total capital raised of $1,320 million, bank loan,
realised profits and other income net of fees, expenses and
performance allocation. The Board does not expect to fully fund all
commitments in the normal course of business
Investment Manager's Report
North American Energy Producers Prove their Resilience
The oil market rebalancing, which we saw earlier in the year,
has paused as drillers across North America responded to
temporarily higher oil prices. This, along with plentiful access to
equity and credit, has resulted in oil production once again
increasing in North America. Throughout the cycle, we remain
focussed on ensuring a resilient portfolio which is positioned in
the most competitive basins to withstand volatility and deliver
upside as the rebalancing process resumes.
Drilling activity in the United States, measured by oil rigs,
remains at less than half of its peak in late 2014. Nevertheless,
oil production continues to expand, approaching record levels, with
9.4 million barrels per day at the end of June. Several forces have
contributed to this growth. Producers continue to be selective in
where they choose to drill, focusing primarily on the most
productive locations which allow them to extract hydrocarbons at
the lowest cost. For this reason, areas such as the Permian Basin
of Texas with its multiple layers of oil-bearing shale are seeing
significantly increased rig activity and growing production, while
activity in higher-cost regions remains muted. Second, the
"revolution" of hydraulic fracturing continues to evolve as
engineers increase well productivity through longer laterals,
higher frac stages, tighter cluster spacing and more intense fracs.
This has resulted in higher well productivity and lower per barrel
well costs, and is further supported by cyclical declines in supply
chain service costs. Finally, strong capital availability,
particularly when oil traded above $50 per barrel earlier in the
year, has fueled drilling activity by allowing producers to access
capital markets on relatively advantageous terms.
Energy prices are likely to continue to be volatile as the
market, in search of equilibrium, parses through the abundance of
data generated by both North American producers and OPEC. We
continue to monitor a number of drivers, in addition to commodity
prices, which could impact production growth going forward. These
include cost inflation as producers pour into select geographies
thereby increasing demand for water, sand, frac crews and other
services and also the exploitation of core acreage within a basin,
forcing drillers into fringe acreage following several years of
"high-grading." As described above, credit conditions play a key
role in enabling or curbing capital expenditure plans. With many
producers free cashflow negative across the industry, a tightening
of capital availability would significantly rein-in drilling
activity. This could have a pronounced impact on supply due to
shale's larger share of North American production, which
experiences sharp decline rates relative to conventional wells, and
therefore requires continued expenditure to maintain production
levels.
In this dynamic environment, Riverstone is able to leverage our
extensive expertise across the energy value chain and capital
structure to identify profitable opportunities for REL and its
investors. There are several examples of this within the REL
portfolio, including the formation of RCO to take advantage of
energy credit markets and Sierra, which Riverstone formed as
Mexico's first private oil and gas company ahead of the country's
historic energy sector reform. Elsewhere, we have worked to
establish platforms in emerging, low-cost basins through Three
Rivers III, which was an early mover into the Delaware Basin of the
Permian, and our investment in CIOC, which controls a vast acreage
position in the Montney and Duvernay shale plays of Western Canada.
By establishing investment platforms early in the cycle, and
backing experienced and focussed management teams with significant
lines of equity commitments, REL has been well positioned to move
quickly as attractive assets became available.
The "build-up" approach remains a key component of Riverstone's
investment strategy. Riverstone and its investment professionals
have many years of experience successfully investing in, and
operating, energy businesses through multiple commodity price
cycles. The firm applies a disciplined approach to maintain maximum
operational and financial flexibility through any commodity price
environment. While energy prices have been particularly volatile
since REL's IPO in October 2013, when prices hovered around $100
per barrel, Riverstone's investment strategy has helped mitigate
the impact of commodity price volatility on portfolio valuation. As
a result, the REL portfolio has deployed capital at a weighted
average oil price of approximately $54 per barrel. Over the same
time period, NAV per share has increased by 23 per cent. on a USD
basis and the share price by 26 per cent. on a Pounds Sterling
basis, compared with a negative 52 per cent. total shareholder
return for the U.S. E&P Index.
While the energy market remains volatile, we remain confident in
our ability to deliver strong returns to shareholders given the
quality of REL's investments and Riverstone's focussed strategy. We
continue to manage risk through diversifying across basins and
energy segments, while consistently focusing on build-up
strategies, partnering with experienced, operationally-focussed
management teams, hedging cash flows from producing assets, using
moderate levels of debt with flexible covenant structures, and
maintaining sufficiently high levels of liquidity to take advantage
of attractive acquisition opportunities. With 14 active investments
across North America's most attractive basins, REL is well
positioned for continued value growth.
Investment Strategy
The Investment Manager's objective is to achieve superior risk
adjusted after tax returns by making privately negotiated control
investments primarily in the E&P and midstream energy sectors,
which is a significant component of virtually all major economies.
Long-term market drivers of economic expansion, population growth,
development of markets, deregulation, and privatisation allied to
near-term commodity price volatility are expected to continue to
create opportunities globally for Riverstone.
Key Drivers:
-- Capital constraints among companies with high levels of leverage;
-- Industry distress and pressures to rationalise assets;
-- Increases in ability to extract hydrocarbons from oil and gas-rich shale formations; and
-- Historical under-investment in energy infrastructure.
The Investment Manager, through its affiliates, has a strong
track record of building businesses with management teams and of
delivering consistently attractive returns and significant
outperformance against both crude oil and natural gas benchmarks.
The Company aims to capitalise on the opportunities presented by
Riverstone's pipeline of investments.
The Investment Manager, having made over 130 investments
globally in the energy sector since being founded in 2000, utilises
its extensive industry expertise and relationships to thoroughly
evaluate investment opportunities and uses its significant
experience in conducting due diligence, valuing assets and all
other aspects of deal execution, including financial and legal
structuring, accounting and compensation design. The Investment
Manager also draws upon its extensive network of relationships with
industry-focussed professional advisory firms to assist with due
diligence in other areas such as accounting, tax, legal, employee
benefits, environmental, engineering and insurance.
Current Portfolio
Gross
Committed Invested Realised Net Invested Gross Realised
Capital Capital Capital Capital & Unrealised Gross
Target Basin ($mm) ($mm) ($mm)(1) ($mm)(2) Value ($mm)(3) MOIC(3)
--------------- ------------------- ---------- --------- ---------- ------------ --------------- ---------
Deep Basin
CIOC (Canada) 307 295 23 275 533 1.8x
Centennial Permian (U.S.) 268 268 - 268 380 1.4x
Three Rivers
III Permian (U.S.) 167 86 - 86 259 3.0x
Liberty Bakken, PRB
II (U.S.) 142 137 - 137 171 1.3x
Carrier
II Permian (U.S.) 133 110 - 110 131 1.2x
Deepwater GoM
ILX III (U.S.) 200 94 - 94 122 1.3x
RCO(4) North America 125 87 81 24 109 1.3x
CNOR Western Canada 90 80 - 80 80 1.0x
Mid-Continent
Eagle II (U.S.) 67 62 - 62 68 1.1x
Meritage
III(5) Western Canada 67 32 - 32 45 1.4x
Castex Gulf Coast Region
2014 (U.S.) 67 40 - 40 40 1.0x
Fieldwood GoM Shelf (U.S.) 82 58 3 58 35 0.6x
Castex Gulf Coast Region
2005 (U.S.) 50 48 - 48 5 0.1x
Sierra Mexico 38 1 - 1 2 1.1x
Total Current Portfolio(6) 1,802 1,398 107 1,314 1,979 1.4x
---------
Percentage of REL net 91 per
capital available(7) cent.
---------
Realisations
Gross
Committed Invested Realised Unrealised Gross Realised
Capital Capital Capital Value & Unrealised Gross
Target Basin ($mm) ($mm) ($mm)(1) ($mm) Value ($mm)(3) MOIC(3)
--------------- ------------------- ---------- --------- ---------- ------------ --------------- ---------
Rock Oil(8) Permian (U.S.) - 114 216 24 240 2.1x
CanEra
III Western Canada - 1 1 - 1 0.4x
North Sea (Norway,
Origo U.K.) - 9 - - - 0.0x
---------------- ------------------ ---------- --------- ---------- ------------ --------------- ---------
Total Investments(6) 1,523 323 2,220 1.5x
------------------------------------- ---------- --------- ---------- ------------ --------------- ---------
([1]) Realised capital is total gross proceeds realised on
invested capital. Of the $323 million of capital realised to date,
$199 million is the return of the cost basis, and the remainder is
profit
(2) Net invested capital is total invested capital less cost
basis of the realised capital
((3) Gross MOIC is Multiple of Invested Capital. Gross
Unrealised Value and Gross MOIC are before transaction costs, taxes
(approximately 35 to 41.5 per cent. of U.S. sourced taxable income)
and 20 per cent. carried interest on gross profits (without a
hurdle rate). Since there is no netting of losses against gains,
the effective carried interest rate on the portfolio as a whole
will be greater than 20 per cent. In addition, there is a
management fee of 1.5 per cent. of net assets per annum and other
expenses. Given these costs, fees and expenses are in aggregate
expected to be considerable, Total Net Value and Net MOIC will be
materially less than Gross Unrealised Value and Gross MOIC. Local
taxes, primarily on US assets, may apply at the jurisdictional
level on profits arising in operating entity investments. Further
withholding taxes may apply on distributions from such operating
entity investments
((4) Credit investment
((5) Midstream investment
((6) Amounts may vary due to rounding
((7) Based on total capital raised of $1,320 million, bank loan,
realised profits and other income net of fees, expenses and
performance allocation. The Board does not expect to fully fund all
commitments in the normal course of business
((8) The unrealised value of the Rock Oil investment consists of
sale proceeds in escrow of $13 million and rights to mineral acres
of $11 million
Investment Portfolio Summary
As of 30 June 2017, REL's portfolio comprised fourteen active
investments including twelve E&P investments, one midstream
investment and one credit investment.
CIOC
As of 30 June 2017, REL, through the Partnership, has invested
$295 million of its $307 million commitment to CIOC. CIOC is a
private E&P company focussed on liquids-rich unconventional
resources in Western Canada. Since its establishment in 2010, CIOC
has aggregated one of the largest and most advantaged land
positions in the emerging Montney and Duvernay formations of
Western Canada's Deep Basin. The company controls and operates 100
per cent. of this asset base, which comprises over 400,000 net
acres in the Montney and Duvernay. CIOC has more than quadrupled
production to over 16,000 boepd since time of entry.
In the first half of 2017, REL and other investors exercised
warrants which resulted in C$180 million of proceeds to CIOC and
will be used to fund drilling for continued development and
delineation of its asset base.
As of 30 June 2017, REL's interest in CIOC, through the
Partnership, was valued at 1.8x Gross MOIC(1) or $533 million
(Realised $23 million, Unrealised $510 million). While the headline
multiple on REL's investment in CIOC decreased over the period due
to the $64 million warrant exercise investment being valued at
cost, the value of the company remains unchanged.
Centennial
As of 30 June 2017, REL, through the Partnership, has invested
in full its $268 million commitment to Centennial. Centennial is an
E&P company focussed on the acquisition and development of oil
and liquids-rich natural gas resources in the Permian Delaware
Basin, West Texas. The company, led by Mark Papa, former chief
executive of EOG Resources, Inc., has rapidly aggregated an 88,000
net acre position in the Delaware Basin of the Permian with no debt
on the balance sheet at the end of the first quarter. The company's
development plan envisages growing oil production from
approximately 5,700 boepd in 2016 to 60,000 boepd in 2020.
REL, through the Partnership, owns approximately 23.9 million
shares which are publicly traded (NASDAQ:CDEV), at a weighted
average share price of $11.21. REL, through the Partnership, has
financed $93 million of its investment through a bank loan secured
by REL's investment in Centennial. In addition, REL has interests
in approximately $2 million of sponsor warrants.
As of 30 June 2017, REL's interest in Centennial, through the
Partnership, was valued at 1.4x Gross MOIC(1) or $380 million. The
valuation for Centennial decreased over the period, reflecting the
mark-to-market value of REL's shareholding.
Three Rivers III
As of 30 June 2017, REL, through the Partnership, has invested
$86 million of its $167 million commitment to Three Rivers III.
Similar to Riverstone's two prior successful partnerships with this
management team, Three Rivers III focuses on oil and gas
acquisition and development opportunities in the Permian Basin.
Through a series of acquisitions, Three Rivers III has built a
position of 60,000 net acres in the Permian Delaware basin,
primarily in Culberson & Reeves counties. The company drilled
five wells in the first half of 2017 as the team continues to
delineate its position and is producing approximately 3,900
boepd.
As of 30 June 2017, REL's interest in Three Rivers III, through
the Partnership, was valued at 3.0x Gross MOIC(1) or $259 million.
The valuation for Three Rivers III increased over the period,
reflecting increased acreage multiples in the Permian.
Carrier II
As of 30 June 2017, REL, through the Partnership, has invested
$110 million of its $133 million commitment to Carrier II. Carrier
II is focussed on the acquisition and exploitation of upstream oil
and gas assets by partnering with select operators that are
developing both unconventional and conventional reservoirs in North
America. Shortly after its establishment in May 2015, Carrier II
entered into a joint venture agreement with a highly experienced
operator group made up of Henry Resources and PT Petroleum
targeting 19,131 net acres for development in the southern Midland
Basin. Subsequently through three separate acquisitions the company
has acquired 3,489 net acres in Karnes County in the Eagle Ford
basin, targeting the Sugarloaf Project and the Chisholm Project,
both operated by Marathon Oil Corp. As of end of the Period,
Carrier II was producing over 8,000 boepd net.
As of 30 June 2017, REL's interest in Carrier II, through the
Partnership, was valued at 1.2x Gross MOIC(1) or $131 million. The
valuation for Carrier II decreased over the period, reflecting a
lower net asset value largely driven by weaker commodity
prices.
Liberty II
As of 30 June 2017, REL, through the Partnership, has invested
$137 million of its $142 million commitment to Liberty II. As of
December 2016, Liberty II had established a c. 62,000 net acre
position in the Williston and Powder River Basins through a series
of acquisitions, which benefit from Liberty II's sophisticated and
proprietary well completion technology. In the first half of 2017,
Liberty II acquired an additional 34,000 net acres in Bakken,
bringing its total position to 96,000 net acres. Liberty has an
inventory of over 240 gross drilling locations, and is currently
producing approximately 8,000 boepd.
As of 30 June 2017, REL's interest in Liberty II, through the
Partnership, was valued at 1.3x Gross MOIC(1) or $171 million. The
valuation for Liberty II increased over the period, reflecting
production growth, an increase in the Bakken acreage position, and
an improvement in the valuation of the company's Powder River Basin
acreage.
RCO
As of 30 June 2017, REL, through the Partnership, has invested
$87 million of its $125 million commitment to RCO, of which $81
million has been realised to result in $6 million of remaining
unrealised invested capital. RCO was formed in January 2015 to take
advantage of the dislocation in the leveraged capital markets for
energy companies. Since its inception, RCO has made a total of 32
investments, 27 of which have already been fully exited.
As of 30 June 2017, REL's total interest in RCO, through the
Partnership, was valued at 1.3x Gross MOIC(1) or $109 million
(Realised $81 million, Unrealised $28 million). The valuation
decreased slightly over the period, reflecting the mark-to-market
value of RCO's remaining underlying securities.
ILX III
As of 30 June 2017, REL, through the Partnership, has invested
$94 million of its $200 million commitment to ILX III. ILX III,
based in Houston, Texas, is a repeat joint-venture with Ridgewood
Energy Corporation. The new entity maintains the same strategy of
acquiring non-operated working interests in oil-focussed
exploration projects in the shallow Gulf of Mexico. ILX III
acquired offshore leases with 15 defined deepwater prospects at
inception, but has since opportunistically farmed into two
additional prospects and added 12 additional prospects through the
2016 central Gulf of Mexico Lease Sale.
ILX III, in the first half of 2017, drilled three wells, of
which two were discoveries. The company has a 73 per cent. success
rate on its 11 wells drilled to date and is currently progressing
plans to develop its eight discoveries.
As of 30 June 2017, REL's interest in ILX III, through the
Partnership, was valued at 1.3x Gross MOIC(1) or $122 million. The
valuation multiple remained unchanged over the period.
CNOR
As of 30 June 2017, REL, through the Partnership, has invested
$80 million of its $90 million commitment to CNOR. CNOR is a
Calgary-based oil and gas company focussed on the Western Canadian
Sedimentary Basin. CNOR has invested in a joint venture with
Tourmaline Oil targeting the Peace River High area and is currently
also pursuing a delineation programme in the Pipestone Montney,
where it recently accumulated an approximately 25,000 net acre
position.
As of 30 June 2017, REL's interest in CNOR, through the
Partnership, was valued at 1.0x Gross MOIC(1) or $80 million. The
valuation remained unchanged over the period.
Fieldwood
As of 30 June 2017, REL, through the Partnership, has invested
$58 million of its $82 million commitment to Fieldwood. Riverstone
formed Fieldwood in partnership with CEO Matt McCarroll and his
team in December 2012 with a commitment from Fund V. Fieldwood has
made two material acquisitions (Apache and SandRidge), with three
further bolt-on acquisitions, and now has an interest in
approximately 500 leases covering over two million gross acres and
over 1,000 wells in the Gulf of Mexico, making it one of the
largest oil and gas producers in the shallow Gulf of Mexico.
Fieldwood continued to make strong operational progress during the
Period, with 42 recompletions, 32 workover projects and spudding
two appraisal wells for its Mexico offshore appraisal program.
As of 30 June 2017, REL's interest in Fieldwood, through the
Partnership, was valued at 0.6x Gross MOIC(1) or $35 million
(Realised $3 million, Unrealised $32 million). The valuation for
Fieldwood decreased over the period, reflecting lower trading
multiples and commodity prices, as well as temporary production
disruptions due to infrastructure availability and inclement
weather.
Eagle II
As of 30 June 2017, REL, through the Partnership, has invested
$62 million of its $67 million commitment to Eagle II. The company
owns approximately 16,100 net acres in the SCOOP and approximately
13,800 net acres in the Mississippi Lime, and is currently
producing approximately 2,700 boepd.
The company has continued to develop its core SCOOP and Merge
acreage in the first half of 2017, where it has spud six horizontal
wells to date.
As of 30 June 2017, REL's interest in Eagle II, through the
Partnership, was valued at 1.1x Gross MOIC(1) or $68 million. The
valuation for Eagle II increased over the period, reflecting an
increase in the value of the company's SCOOP assets.
Castex 2014
As of 30 June 2017, REL, through the Partnership, has invested
$40 million of its $67 million commitment to Castex 2014. Castex
2014 is a Houston-based oil and gas company focussed on gas
exploration opportunities in the U.S. Gulf Coast Region, in
partnership with Castex 2005. Castex 2014 has achieved a 100 per
cent. success rate on the six exploration prospects drilled since
inception.
Castex 2014 resumed drilling in the first half of 2017, focusing
on the first well within the Coastal Terrebone Seismic area. The
companies encountered commercial amounts consistent with pre-drill
estimates.
As of 30 June 2017, REL's interest in Castex 2014, through the
Partnership, was valued at 1.0x Gross MOIC(1) or $40 million. The
valuation remained unchanged over the period.
Meritage III
As of 30 June 2017, REL, through the Partnership, has invested
$32 million of its $67 million commitment to Meritage III. REL's
investment to date is related to construction of gas gathering, gas
processing, and oil gathering infrastructure in support of CIOC's
drilling program in Western Canada. In April 2016, Meritage's
Patterson Creek plant entered service.
Since completing its initial midstream infrastructure, the
company has successfully entered into additional gas gathering and
processing agreements with CIOC and third parties. The company will
begin construction of its second gas processing facility and
related infrastructure to accommodate higher volumes in the second
half of 2017.
As of 30 June 2017, REL's interest in Meritage III, through the
Partnership, was valued at 1.4x Gross MOIC(1) or $45 million. The
valuation for Meritage III increased over the period, reflecting
the company securing contracts for additional volumes.
Castex 2005
As of 30 June 2017, REL, through the Partnership, has invested
$48 million of its $50 million commitment to Castex 2005. Castex
2005 is a partnership focussed on a portfolio of properties in
Southern Louisiana and the Gulf of Mexico Shelf which produce
approximately 75 mmcfepd, as well as a seismic-driven exploration
program. Castex is managed by Castex Energy Inc., which has a 27
year operating history in exploration and development in the
region.
As of 30 June 2017, REL's interest in Castex 2005, through the
Partnership, was valued at 0.1x Gross MOIC(1) or $5 million,
reflecting its over-leveraged balance sheet and the challenging
environment for gas-focussed producers in the Gulf Coast and Gulf
of Mexico shelf. The valuation remained unchanged over the
period.
Sierra
As of 30 June 2017, REL, through the Partnership, has invested
$1 million of its $38 million commitment to Sierra. Sierra is an
independent Mexican energy company established to pursue select
upstream and midstream opportunities in Mexico. Sierra's
consortiums have won five offshore blocks to date, which make
Sierra the third-largest non-state owned E&P company in Mexico
by net acreage, with approximately 560,000 net acres.
Subsequent to the period end, a consortium consisting of Sierra,
Talos (a Riverstone portfolio company) and Premier Oil PLC
announced a historic oil discovery in the shallow waters of the
Gulf of Mexico. The Zama 1 well, located in Mexico's Block 7,
confirmed the presence of a light oil resource estimated to be in
the range 1.4 billion and 2 billion barrels of oil in place.
As of 30 June 2017, REL's interest in Sierra, through the
Partnership, was valued at 1.1x Gross MOIC(1) or $2 million. The
valuation remained unchanged over the period.
Realised Investments
Rock Oil
Rock Oil was formed in March 2014 with the strategy of applying
Rock Oil's land and technical expertise to the acquisition and
development of assets in top-tier North American plays. Since
formation, Rock Oil entered into a series of acquisitions to
establish a position of approximately 24,783 net acres in the
Midland Basin of the Permian, producing approximately 4,900
boepd.
In the third quarter of 2016, Rock Oil agreed to the sale of 100
per cent. of its membership interests to SM Energy Company (NYSE:
SM), a U.S. based E&P company. The transaction subsequently
closed on 4 October 2016, resulting in gross proceeds to REL of
approximately $230 million. This implies a gross multiple of
invested capital of 2.0x, a gross IRR of 78 per cent. and a gain of
$116 million on the Company's investment, through the Partnership,
of $114 million. The MOIC and IRR, net of performance allocation
and estimated taxes, are approximately 1.6x and 44 per cent.,
respectively. The Investment Manager, through RELCP, has
subsequently invested the net proceeds of its performance
allocation, resulting in the purchase of approximately 590,000
shares in REL.
Approximately $24 million of value is unrealised consisting of
escrow payments and mineral acre reserves not included in the sale.
As of 30 June 2017, REL's total interest in Rock Oil, through the
Partnership, was valued at 2.1x Gross MOIC(1) or $240 million
(Realised $216 million, Unrealised $24 million).
CanEra III
During Q1 2017, REL, through the Partnership, terminated its
commitment to CanEra III and realised $0.6 million of its $1.4
million investment, or 0.4x Gross MOIC(1) .
Origo
In June 2017, REL, through the Partnership, transferred its
interest in Origo to Norwegian oil and gas operator DNO ASA for no
proceeds.
Going Concern
The Company retained $11.5 million of cash in the IPO and
Placing and Open Offer, and received distributions of $5.5 million
and $1.1 million from the Partnership in Q1 2016 and Q1 2017,
respectively, of which $2.7 million remains at 30 June 2017 (31
December 2016: $3.2 million). This cash balance is sufficient to
cover the Company's liabilities as they fall due over the next six
months, but the Company will require a $1.0 million distribution in
Q1 2018 to cover its forecasted expenses for the initial six months
of 2018 of $1.7 million. In accordance with section 4.1(a) of the
Partnership Agreement, in the event of the Company requiring
additional funds for working capital, it is entitled to receive
another distribution from the Partnership.
As at 30 June 2017, the Partnership had $122 million of
uninvested funds held as cash and money market fixed deposits (31
December 2016: $268 million), and has no material going concern
risk. Although the Company's commitments, through the Partnership,
exceed its available liquid resources, it is not expected that all
commitments will be drawn due to a variety of factors, such as a
portfolio company being sold earlier than anticipated or a targeted
investment opportunity changing or disappearing. In addition, the
board of each underlying portfolio company, more often than not
controlled by Riverstone, has discretion over whether or not that
capital is ultimately invested. Moreover, REL's arrangements with
Riverstone allow excess commitments to be amended by the Investment
Manager with consideration from the Board.
In light of the above facts, the Directors are satisfied that it
is appropriate to adopt the going concern basis in preparing the
interim condensed financial statements.
Principal Risks and Uncertainties
The Company's assets consist of investments, through the
Partnership, within the global energy industry, with a particular
focus on opportunities in the global exploration and production and
midstream energy sub-sectors. Its principal risks are therefore
related to market conditions in the energy sector in general, but
also the particular circumstances of the businesses in which it is
invested through the Partnership. The Investment Manager to the
Partnership seeks to mitigate these risks through active asset
management initiatives and carrying out due diligence work on
potential targets before entering into any investments.
The key areas of risk faced by the Company are the following: 1)
concentration risk from investing only in the global energy sector,
2) Ordinary Shares trading at a discount to NAV per Share and 3)
inherent risks associated with the exploration and production and
midstream energy subsectors.
The principal risks and uncertainties of REL were identified in
further detail in the 2016 Annual Report and Financial Statements.
There have been no changes to REL's principal risks and
uncertainties in the six-month period to 30 June 2017 and no
changes are anticipated in the second half of the year.
Subsequent Events
There are no material events after the period end to the date on
which these Financial Statements were approved as disclosed in Note
11.
Riverstone International Limited
8 August 2017
(1) Gross MOIC is Gross Multiple of Invested Capital before
transaction costs, taxes, 20 per cent. carried interest on gross
profit, management fees of 1.5 per cent. of net assets per annum
and other expenses. Given these costs and expenses are in aggregate
expected to be considerable, Net MOIC will be materially less than
the Gross MOIC
Directors' Responsibilities Statement
The Directors are responsible for preparing this Interim
Financial Report in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
-- The unaudited interim condensed financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU; and
-- The Chairman's Statement and Investment Manager's Report
include a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the unaudited interim condensed financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the financial year and that have materially
affected the financial position and performance of the entity
during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
On behalf of the Board
Richard Hayden
Chairman
8 August 2017
Independent Review Report to Riverstone Energy Limited
We have been engaged by the Company to review the condensed set
of financial statements in the Interim Financial Report for the six
months ended 30 June 2017 which comprises the Condensed Statement
of Financial Position, the Condensed Statement of Comprehensive
Income, the Condensed Statement of Changes in Equity, the Condensed
Statement of Cash Flows and the related Notes 1 to 11. We have read
the other information contained in the Interim Financial Report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The Interim Financial Report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the Interim Financial Report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in Note 2, the Financial Statements of the Company
are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this
Interim Financial Report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Interim Financial
Report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Interim Financial Report for the six months ended 30 June
2017 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Guernsey
8 August 2017
(1) The maintenance and integrity of the Company's website is
the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website
(2) Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions
Condensed Statement of Financial Position
As at 30 June 2017
30 June 31 December
2017 2016
$'000 $'000
Notes (Unaudited) (Audited)
----------------------------- ------ ------------- ------------
Assets
Non-current assets
Investment at fair value
through profit or loss 6 1,665,417 1,695,406
----------------------------- ------ ------------- ------------
Total non-current assets 1,665,417 1,695,406
----------------------------- ------ ------------- ------------
Current assets
Trade and other receivables 308 545
Cash and cash equivalents 2,652 3,230
----------------------------- ------ ------------- ------------
Total current assets 2,960 3,775
----------------------------- ------ ------------- ------------
Total assets 1,668,377 1,699,181
----------------------------- ------ ------------- ------------
Current liabilities
Trade and other payables 373 623
----------------------------- ------ ------------- ------------
Total current liabilities 373 623
----------------------------- ------ ------------- ------------
Total liabilities 373 623
----------------------------- ------ ------------- ------------
Net assets 1,668,004 1,698,558
----------------------------- ------ ------------- ------------
Equity
Share capital 1,317,496 1,317,496
Retained earnings 350,508 381,062
----------------------------- ------ ------------- ------------
Total equity 1,668,004 1,698,558
----------------------------- ------ ------------- ------------
Number of Shares in issue
at period/year end 10 84,480,064 84,480,064
----------------------------- ------ ------------- ------------
Net Asset Value per Share
($) 10 19.74 20.11
----------------------------- ------ ------------- ------------
The interim condensed financial statements were approved and
authorised for issue by the Board of Directors on 8 August 2017 and
signed on their behalf by:
Richard Hayden Patrick Firth
Chairman Director
The accompanying notes form an integral part of these interim
condensed financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 June 2017 (Unaudited)
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
Notes $'000 $'000
------------------------------ ------ ---------- ----------
Investment (loss) gain
Change in fair value of
investment at fair value
through profit or loss 6 (28,889) 27,498
------------------------------ ------ ---------- ----------
Expenses
Directors' fees and expenses (445) (384)
Legal and professional fees (153) (252)
Other operating expenses (1,097) (1,376)
------------------------------ ------ ---------- ----------
Total expenses (1,695) (2,012)
------------------------------ ------ ---------- ----------
Operating (loss) profit
for the period (30,584) 25,486
Finance income and expenses
Foreign exchange gain (loss) 25 (259)
Interest income 5 -
Total finance income and
expenses 30 (259)
------------------------------ ------ ---------- ----------
(Loss) profit for the period (30,554) 25,227
Total comprehensive (loss)
income for the period (30,554) 25,227
------------------------------ ------ ---------- ----------
Basic (Loss) Earnings per
Share (cents) 10 (36.17) 29.86
------------------------------ ------ ---------- ----------
Diluted (Loss) Earnings
per Share (cents) 10 (36.17) 29.86
------------------------------ ------ ---------- ----------
All activities derive from continuing operations.
The accompanying notes form an integral part of these interim
condensed financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 June 2017 (Unaudited)
Share Retained Total
capital earnings Equity
$'000 $'000 $'000
---------------------- ---------- ---------- ----------
As at 1 January 2017 1,317,496 381,062 1,698,558
Loss for the period - (30,554) (30,554)
As at 30 June 2017 1,317,496 350,508 1,668,004
---------------------- ---------- ---------- ----------
For the six months ended 30 June 2016 (Unaudited)
Share Retained Total
capital earnings Equity
$'000 $'000 $'000
---------------------------- ---------- ---------- ----------
As at 1 January 2016 1,317,537 29,652 1,347,189
Profit for the period - 25,227 25,227
---------------------------- ---------- ---------- ----------
Total comprehensive income
for the period - 25,227 25,227
Transactions with owners
Share issue costs (42) - (42)
---------------------------- ---------- ---------- ----------
Total transactions with
owners (42) - (42)
As at 30 June 2016 1,317,495 54,879 1,372,374
---------------------------- ---------- ---------- ----------
The accompanying notes form an integral part of these interim
condensed financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 June 2017 (Unaudited)
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
$'000 $'000
---------------------------------------- ---------- ----------
Cash flow used in operating activities
Operating (loss) profit for the
financial period (30,584) 25,486
---------------------------------------- ---------- ----------
Adjustments for:
Net finance income 5 -
Change in fair value of investment
at fair value through profit
or loss 28,889 (27,498)
Movement in trade receivables 237 431
Movement in trade payables (250) (667)
Net cash used in operating activities (1,703) (2,248)
---------------------------------------- ---------- ----------
Cash flow generated from investing
activities
Distribution from the Partnership 1,100 5,500
---------------------------------------- ---------- ----------
Net cash generated from investing
activities 1,100 5,500
---------------------------------------- ---------- ----------
Cash flow used in financing activities
Share issue costs - (42)
---------------------------------------- ---------- ----------
Net cash used in financing activities - (42)
---------------------------------------- ---------- ----------
Net movement in cash and cash
equivalents during the period (603) 3,210
---------------------------------------- ---------- ----------
Cash and cash equivalents at
the beginning of the period 3,230 2,539
Effect of foreign exchange rate
changes 25 (259)
---------------------------------------- ---------- ----------
Cash and cash equivalents at
the end of the period 2,652 5,490
---------------------------------------- ---------- ----------
The accompanying notes form an integral part of these interim
condensed financial statements.
Notes to the UNAUDITED Interim Condensed Financial
Statements
For the six months ended 30 June 2017
1. General information
Riverstone Energy Limited is a company limited by shares, which
was incorporated on 23 May 2013 in Guernsey with an unlimited life
and registered with the GFSC as a Registered Closed-ended
Collective Investment Scheme pursuant to the POI Law. The Company's
ordinary shares were admitted to the premium segment of the UK
Listing Authority's Official List and to trading on the Main Market
of the London Stock Exchange as part of its IPO which completed on
29 October 2013. The registered office of the Company is Heritage
Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1
4HY, Channel Islands.
The Company makes its investments through the Partnership, a
Cayman Islands registered exempted limited partnership, in which
the Company is the sole limited partner. The principal place of
business of the Partnership is the Cayman Islands. Both the Company
and the Partnership are subject to the Investment Management
Agreement with the Investment Manager, a company registered in the
Cayman Islands.
The Partnership invests alongside Private Riverstone Funds in
all Qualifying Investments in which the Private Riverstone Funds
participate. These funds are managed and advised by affiliates of
the Investment Manager. Further detail of these investments is
provided in the Investment Manager's Report.
2. Accounting policies
Basis of preparation
The Financial Statements for the year ended 31 December 2016
were prepared in accordance with IFRS.
These interim condensed financial statements have been prepared
in accordance with International Accounting Standard 34 "Interim
Financial Reporting". They do not contain all the information and
disclosures presented in the Financial Statements and should be
read in conjunction with the Financial Statements for the year
ended 31 December 2016.
The same accounting policies and methods of computation have
been followed in the preparation of these interim condensed
financial statements as were followed in the Financial Statements
for the year ended 31 December 2016.
The Company has not early adopted IFRS 9 and IFRS 15 which are
effective from 1 January 2018. The impact of these standards is not
expected to be significant as disclosed below:
-- IFRS 9: Financial Instruments - The investment in the
Partnership is accounted for at fair value through profit or loss.
This treatment, and the related measurement methods, will not
change after implementing IFRS 9. Accordingly, the Company does not
expect that the implementation of IFRS 9 will have any material
impact on its Financial Statements.
-- IFRS 15: Revenue from Contracts with Customers - The Company
considers that it does not have any material revenue that falls
within the scope of IFRS 15 and hence that the implementation of
IFRS 15 will not have a material impact on its Financial
Statements.
These interim condensed financial statements are presented in
U.S. dollars and are rounded to the nearest $'000, unless otherwise
indicated.
The Company's results do not vary significantly during reporting
periods as a result of seasonal activity.
3. Critical accounting judgement and estimation uncertainty
The estimates and judgements made by management are consistent
with those made in the Financial Statements for the year ended 31
December 2016.
4. Taxation
The taxation basis of the Company remains consistent with that
disclosed in the Financial Statements for the year ended 31
December 2016.
The Company has made an election to, and currently expects to
conduct its activities so as to be treated as a partnership for
U.S. federal income tax purposes. Therefore, the Company expects
that it generally will not be liable for U.S. federal income taxes.
Instead, each of the Company's Shareholders who are liable to U.S.
taxes will take into account its respective share of the Company's
items of income, gain, loss and deduction in computing its U.S.
federal income tax liability as if such shareholder had earned such
income directly, even if no cash distributions are made to the
shareholder.
The Company is exempt from taxation in Guernsey under the
provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
2008 and is charged an annual exemption fee of GBP1,200.
The Cayman Islands at present impose no taxes on profit, income,
capital gains or appreciations in value of the Partnership. There
are also currently no taxes imposed in the Cayman Islands by
withholding or otherwise on the Company as a limited partner of the
Partnership on profit, income, capital gains or appreciations in
respect of its partnership interest nor any taxes on the Company as
a limited partner of the Partnership in the nature of estate duty,
inheritance or capital transfer tax.
Local taxes may apply at the jurisdictional level on profits
arising in operating entity investments. Further taxes may apply on
distributions from such operating entity investments. Based upon
the current commitments and investments in Liberty II, Eagle II,
Rock Oil, Fieldwood, Castex 2014, Castex 2005, Three Rivers III,
Carrier II and ILX III, and Centennial, the future U.S. tax
liability on profits is expected to be in the range of 35 to 41.5
per cent.
5. Fair value
IFRS 13 'Fair Value Measurement' requires disclosure of fair
value measurement by level. The level in the fair value hierarchy
within which the financial assets or financial liabilities are
categorised is determined on the basis of the lowest level input
that is significant to the fair value measurement, adjusted if
necessary.
Financial assets and financial liabilities are classified in
their entirety into only one of the three levels:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices);
-- Level 3 - inputs for the assets or liabilities that are not
based on observable market data (unobservable inputs).
The Company's only financial instrument carried at fair value is
its investment in the Partnership which has been classified within
Level 3 as it is derived using unobservable inputs. Amounts
classified under Level 3 for the period ended 30 June 2017 were
$1,665 million (31 December 2016: $1,695 million).
The fair value of all other financial instruments approximates
their carrying value.
Transfers during the period
There have been no transfers between levels during the period
ended 30 June 2017 and the year ended 31 December 2016. Any
transfers between the levels will be accounted for on the last day
of each financial period. Due to the nature of the investment, it
is always expected to be classified under Level 3.
Valuation methodology and process
The same valuation methodology and process was deployed in June
2017 and December 2016.
For the period ended 30 June 2017, the valuations of the
Company's investments, through the Partnership, are detailed in the
Investment Manager's Report.
Quantitative information about Level 3 fair value measurements
as at 30 June 2017
Industry: Energy
Fair
value
Sensitivity
(in thousands) Range of the # of
input to
Weighted total fair
Valuation Unobservable Low High Average value of investments
30/06/2017 technique(s) input(s) (1) (1) (1) investments (2)
--------------- ---------------- --------------- --------- -------- -------------- ---------------- ------------
10% weighted
average
change in
the input
would result
in 1% change
1P Reserve in the total
Public multiple fair value
$1,464,235 comparables ($/Boe) $12 $16 $14 of investments 5
10% weighted
average
change in
the input
would result
in 1% change
2P Reserve in the total
multiple fair value
($/Boe) $9 $9 $9 of investments 1
10% weighted
average
change in
the input
would result
EV / in 1% change
2017E in the total
EBITDA fair value
multiple 4.6x 10.4x 7.1x of investments 4
10% weighted
average
change in
the input
would result
EV / in 1% change
2018E in the total
EBITDA fair value
multiple 5.3x 8.6x 6.2x of investments 3
---------------- --------------- --------- -------- -------------- ---------------- ------------
10% weighted
average
change in
the input
would result
Acreage in 3% change
Multiple in the total
Transaction ($/Boepd fair value
comparables per Acre) $3,300 $13,100 $7,900 of investments 4
---------------- --------------- --------- -------- -------------- ---------------- ------------
10% weighted
average
change in
the input
would result
in 6% change
Oil Price in the total
NAV Curve fair value
analysis(3) ($/bbl) $44 $54 $52 of investments 5
10% weighted
average
change in
the input
would result
in 2% change
Gas Price in the total
Curve fair value
($/mcfe) $2 $3 $3 of investments 4
$52,384 Other
--------------- ---------------- ----------------- ------- ------------- ----------- -------------- ------------
$1,516,619 Total
Quantitative information about Level 3 fair value measurements
as at 31 December 2016
Industry: Energy
Fair
value
Sensitivity
(in thousands) Range of the # of
input to
Weighted total fair
Valuation Unobservable Low High Average value of investments
31/12/2016 technique(s) input(s) (1) (1) (1) investments (2)
--------------- ---------------- --------------- --------- -------- -------------- ---------------- ------------
10% weighted
average
change in
the input
would result
in 1% change
1P Reserve in the total
Public multiple fair value
$1,241,851 comparables ($/Boe) $3 $13 $12 of investments 7
10% weighted
average
change in
the input
would result
EV / in 1% change
2017E in the total
EBITDA fair value
multiple 6.6x 11.2x 7.7x of investments 4
---------------- --------------- --------- -------- -------------- ---------------- ------------
10% weighted
average
change in
the input
would result
Acreage in 2% change
Multiple in the total
Transaction ($/Boepd fair value
comparables per Acre) $2,200 $16,800 $6,300 of investments 4
---------------- --------------- --------- -------- -------------- ---------------- ------------
20% weighted
average
change in
the input
would result
in 10% change
Oil Price in the total
NAV Curve fair value
analysis(3) ($/bbl) $43 $54 $51 of investments 6
20% weighted
average
change in
the input
would result
in 4% change
Gas Price in the total
Curve fair value
($/mcfe) $3 $3 $3 of investments 4
Last
round
$1,389 of financing
--------------- ---------------- --------------- --------- ------------- --------- ---------------- ------------
$65,494 Other
--------------- ---------------- ----------------- ------- ------------- ----------- -------------- ------------
$1,308,734 Total
(1) Calculated based on fair values
(2) Each of the Partnership's investments are valued using one
or more of the techniques which utilise one or more of the
unobservable inputs, so the amounts in the "# of investments"
column will not aggregate to the total number of the Partnership's
investments
(3) Discounted cash flow technique which involves the use of a
discount factor of 10 per cent.
The Board reviews and considers the fair value of the
Partnership's investments arrived at by the Investment Manager
before incorporating such values into the fair value of the
Partnership. The variety of valuation bases adopted, quality of
management information provided by the underlying investee
companies and the lack of liquid markets for the investments mean
that there are inherent difficulties in determining the fair value
of these investments and such difficulties cannot be eliminated.
Therefore the amounts realised on the sale of investments may
differ from the fair values reflected in these interim condensed
financial statements and the differences may be significant.
The Board approves the valuations performed by the Investment
Manager and monitors the range of reasonably possible changes in
significant observable inputs on a regular basis.
The Directors have considered whether a discount or premium
should be applied to the net asset value of the Partnership. In
view of the investment in the Partnership and the nature of the
Partnership's assets, no adjustment to the net asset value of the
Partnership has been deemed to be necessary.
6. Investment at fair value through profit or loss
The movement in fair value is derived from the fair value
movements in the underlying investments held by the Partnership,
net of income and expenses of the Partnership and its related
Investment Undertakings, including any Performance Allocation and
applicable taxes.
REL US Centennial Holdings, LLC, a wholly owned subsidiary of
the Partnership, has borrowed $100 million under the terms of the
Margin Loan Agreement to finance the Company's additional
investment in Centennial, through the Partnership. The Margin Loan
Agreement is for a term of 18 months and has an annual interest
rate cost of 3 month LIBOR plus 3.25 per cent.. A security interest
has been granted by REL US Centennial Holdings, LLC over the shares
in Centennial, as collateral for any amounts which may become due
under the Margin Loan Agreement.
30 June 31 December
2017 2016
$'000 $'000
-------------------------------------------- ---------- ------------
Cost
Brought forward 1,303,435 1,308,935
Distribution from the Partnership (1,100) (5,500)
Carried forward 1,302,335 1,303,435
-------------------------------------------- ---------- ------------
Fair value movement through profit or loss
Brought forward 391,971 36,215
Fair value movement during period/year (28,889) 355,756
-------------------------------------------- ---------- ------------
Carried forward 363,082 391,971
-------------------------------------------- ---------- ------------
Fair value at period/year end 1,665,417 1,695,406
-------------------------------------------- ---------- ------------
Summary financial information for the Partnership
30 June 31 December
2017 2016
Summary Balance Sheet $'000 $'000
--------------------------------------------------- ---------- ------------
Investments at fair value (net) 1,554,023 1,461,145
Cash and cash equivalents 39,644 147,882
Money market fixed deposits 77,317 91,786
Management fee payable - see Note 8 (6,255) (6,370)
Other net assets 688 963
--------------------------------------------------- ---------- ------------
Fair value of REL's investment in the Partnership 1,665,417 1,695,406
--------------------------------------------------- ---------- ------------
30 June 31 December
2017 2016
Reconciliation of Partnership's investments at fair value $'000 $'000
------------------------------------------------------------- ---------- ------------
Investments at fair value - Level 1 (gross) 380,231 476,591
Investments at fair value - Level 3 (gross) - see Note 5 1,516,619 1,308,734
------------------------------------------------------------- ---------- ------------
Investments at fair value (gross) 1,896,850 1,785,325
Margin Loan Agreement - see above (100,000) (100,047)
Accrued General Partner performance allocation - see Note 8 (134,529) (132,164)
Provision for taxation - see Note 4 (113,217) (120,785)
Cash and cash equivalents 4,919 28,816
------------------------------------------------------------- ---------- ------------
Partnership's investments at fair value (net) 1,554,023 1,461,145
------------------------------------------------------------- ---------- ------------
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
Summary Income Statement $'000 $'000
------------------------------------------------------------------------------------------- ---------- ----------
Unrealised and realised (loss) gain on Partnership's investments (net) (12,848) 37,000
Interest and other income 790 1,075
Management fee expense - see Note 8 (12,712) (10,168)
Other operating expenses (4,119) (409)
------------------------------------------------------------------------------------------- ---------- ----------
Portion of the operating (loss) profit for the period attributable to REL's investment in
the Partnership (28,889) 27,498
------------------------------------------------------------------------------------------- ---------- ----------
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
Reconciliation of unrealised and realised (loss) gain on Partnership's investments $'000 $'000
------------------------------------------------------------------------------------ ---------- ----------
Unrealised (loss) gain on Partnership's investments (gross) (14,152) 45,914
Realised loss on Partnership's investments (gross) (8,917) -
Income from Partnership's investments (gross) 5,018 1,314
General Partner's performance allocation (2,365) (10,228)
Provision for taxation 7,568 -
------------------------------------------------------------------------------------ ---------- ----------
Unrealised and realised (loss) gain on Partnership's investments (net) (12,848) 37,000
------------------------------------------------------------------------------------ ---------- ----------
7. Contingent liabilities
Contingent liabilities are potential future cash outflows where
the likelihood of payment is considered more than remote but is not
considered probable or cannot be measured reliably.
Formation and initial expenses
The formation and initial expenses of the Company totalling
$22.5 million were paid in full by the Investment Manager. However,
if the Investment Management Agreement is terminated by the Company
on or before the seventh anniversary of Admission (other than for a
material breach by the Investment Manager attributable to its
fraud) the Company will be required to reimburse the Investment
Manager in respect of the formation and initial expenses of the
Company and the costs and the expenses of the Issue to the full
extent that such costs and expenses were borne by the Investment
Manager. At this time, the Directors consider the likelihood of the
Investment Management Agreement being terminated by the Company to
be remote.
8. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the party in making financial or operational
decisions.
Directors
The Company has eight non-executive Directors (31 December 2016:
eight).
Directors' fees and expenses for the period ended 30 June 2017
amounted to $444,645, (30 June 2016: $383,791), none of which was
outstanding at period end (31 December 2016: $4,137).
Partnership
In accordance with section 4.1(a) of the Partnership Agreement,
the Company received distributions from the Partnership of $5.5
million and $1.1 million in Q1 2016 and Q1 2017, respectively, to
meet the Company's forecasted liabilities over the course of the
next twelve months.
Investment Manager
For the provision of services under the Investment Management
Agreement, the Investment Manager is paid in cash out of the assets
of the Partnership an annual Management Fee equal to 1.5 per cent.
per annum of the Company's Net Asset Value. The fee is payable
quarterly in arrears and each payment is calculated using the
quarterly Net Asset Value as at the relevant quarter end as further
outlined on page 60 in the Financial Statements to 31 December
2016. During the period to 30 June 2017, the Partnership incurred
Management Fees of $12,712,420 (30 June 2016: $10,167,646) of which
$6,255,015 remained outstanding as at the period/year end (31
December 2016: $6,369,594). No management fee is paid by the
Company.
General Partner
The General Partner makes all management decisions, other than
investment management decisions, in relation to the Partnership and
controls all other actions by the Partnership and is entitled to
receive a Performance Allocation, calculated and payable at the
underlying investment undertaking level, equal to 20 per cent. of
the realised profits (if any) on the sale of any underlying asset
of the Company. During the period to 30 June 2017, the General
Partner was entitled to receive incremental Performance Allocation
of $2,364,973 (30 June 2016: $10,227,726) of which $134,529,381 (31
December 2016: $132,164,408) remained outstanding as at the
period/year end. No Performance Allocation is paid by the
Company.
The General Partner is entitled to receive its Performance
Allocation in cash, all of which, after tax, Riverstone, through
its affiliate RELCP, intends to reinvest in Ordinary Shares of the
Company on the terms summarised in Part I and Part VIII of the IPO
Prospectus.
Cornerstone Investors
Each of the Cornerstone Investors has acquired an indirect
economic interest in each of the General Partner and the Investment
Manager depending on the size of their commitment and the total
issue size, up to an aggregate maximum indirect economic interest
of 20 per cent. in each, for nominal consideration. These interests
entitle the Cornerstone Investors to participate in the economic
returns generated by the General Partner, including from the
Performance Allocation, and the Investment Manager, which receives
the Management Fee.
9. Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors, as a
whole. The key measure of performance used by the Board to assess
the Company's performance and to allocate resources is the total
return on the Company's Net Asset Value, as calculated under IFRS,
and therefore no reconciliation is required between the measure of
profit or loss used by the Board and that contained in the
Financial Statements and Interim Financial Report.
For management purposes, the Company is organised into one main
operating segment, which invests in one limited partnership.
All of the Company's income is derived from within Guernsey and
the Cayman Islands.
All of the Company's non-current assets are located in the
Cayman Islands.
Due to the Company's nature, it has no customers.
10. (Loss) Earnings per Share and Net Asset Value per Share
(Loss) Earnings per Share
1 January 2017 1 January 2016
to to
30 June 2017 30 June 2016
Basic Diluted Basic Diluted
-------------------------- ----------- ----------- ----------- -----------
(Loss) profit for
the period ($'000) (30,554) (30,554) 25,227 25,227
Weighted average numbers
of Shares in issue 84,480,064 84,480,064 84,480,064 84,480,064
(Loss) Earnings Per
Share (cents) (36.17) (36.17) 29.86 29.86
-------------------------- ----------- ----------- ----------- -----------
The (Loss) Earnings per Share is based on the profit or loss of
the Company for the period and on the weighted average number of
Shares the Company had in issue for the period.
There are no dilutive Shares in issue as at 30 June 2017 (30
June 2016: none).
Net Asset Value per Share
30 June 31 December 30 June
2017 2016 2016
--------------------- ----------- ------------ -----------
NAV ($'000) 1,668,004 1,698,558 1,372,374
Number of Shares in
issue 84,480,064 84,480,064 84,480,064
Net Asset Value per
Share ($) 19.74 20.11 16.24
Net Asset Value per
Share (GBP) 15.16 16.29 12.25
--------------------- ----------- ------------ -----------
The Net Asset Value per Share is arrived at by dividing the net
assets as at the date of the Statement of Financial Position by the
number of Ordinary Shares in issue at that date.
11. Subsequent events
There are no material events after the period end to the date on
which these Financial Statements were approved.
Glossary of Capitalised Defined Terms
"1P reserve" means proven reserves;
"2P reserve" means proven and probable reserves;
"Administrator" means Heritage International Fund Managers
Limited;
"Admission" means admission, on 29 October 2013, to the Official
List and/or admission to trading on the London Stock Exchange, as
the context may require, of the Ordinary Shares becoming effective
in accordance with the Listing Rules and/or the LSE Admission
Standards as the context may require;
"AEOI Rules" means Automatic Exchange of Information;
"AIC" means the Association of Investment Companies;
"AIC Code" means the AIC Code of Corporate Governance;
"AIC Guide" means the AIC Corporate Governance Guide for
Investment Companies;
"AIF" means Alternative Investment Funds;
"AIFM" means AIF Manager;
"AIFMD" means EU Alternative Investment Fund Managers Directive
(No. 2011/61EU);
"Annual General Meeting" or "AGM" means the general meeting of
the Company;
"Annual Report and Financial Statements" means the annual
publication of the Company provided to the Shareholders to describe
their operations and financial conditions, together with their
Financial Statements;
"AQRT" means Audit Quality Review Team of the Financial
Reporting Council;
"Articles of Incorporation" or "Articles" means the articles of
incorporation of the Company;
"Audit Committee" means a formal committee of the Board with
defined terms of reference;
"bbl" means barrel of crude oil;
"Board" or "Directors" means the directors of the Company;
"boepd" means barrels of equivalent oil per day;
"CAD" or "C$" means Canadian dollar;
"CanEra III" means CanEra Inc.;
"CAR" means Capital Adequacy Ratio;
"Carrier II" means Carrier Energy Partners II LLC;
"Castex 2005" means Castex Energy 2005 LLC;
"Castex 2014" means Castex Energy 2014 LLC;
"Centennial" means Centennial Resource Development, Inc.;
"CIOC" means Canadian International Oil Corp.;
"CNOR" means the Canadian Non-Operated Resources LP;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as
amended);
"Company" or "REL" means Riverstone Energy Limited;
"Company Secretary" means Heritage International Fund Managers
Limited;
"Cornerstone Investors" means those investors who have acquired
Ordinary Shares and acquired a minority economic interest in the
General Partner and in the Investment Manager, being AKRC
Investments LLC, Casita, L.P., KFI, Hunt and McNair;
"Corporate Brokers" means Goldman Sachs International and JP
Morgan Cazenove
"Corporate Governance Code" means The UK Corporate Governance
Code 2014 as published by the Financial Reporting Council;
"CRAR" means Capital to Risk (Weighted) Assets Ratio;
"CRS" means Common Reporting Standard;
"Depositary" means Heritage Depositary Company (UK) Limited;
"E&P" means exploration and production;
"Eagle II" means Eagle Energy Exploration, LLC;
"Earnings per Share" or "EPS" means the Earnings per Ordinary
Share and is expressed in U.S. dollars and "Loss per Share" means
the Loss per Ordinary Share and is expressed in U.S. dollars;
"EBITDA" means earnings before interest, taxes, depreciation and
amortisation;
"EBITDAX" means earnings before interest, taxes, depreciation,
amortisation and exploration expenses;
"ECI" means effectively connected income;
"EEA" means European Economic Area;
"EGM" means an Extraordinary General Meeting of the Company;
"EU" means the European Union;
"EV" means enterprise value;
"farm-in" means an arrangement whereby an operator buys in or
acquires an interest in a lease owned by another operator on which
oil or gas has been discovered or is being produced;
"FATCA" means Foreign Account Tax Compliance Act;
"FCA" means the UK Financial Conduct Authority (or its successor
bodies);
"Fieldwood" means Fieldwood Energy LLC;
"Financial Statements" means the audited financial statements of
the Company, including the Statement of Financial Position, the
Statement of Comprehensive Income, the Statement of Cash Flows, the
Statement of Changes in Equity and associated notes;
"FTSE 350" means Financial Times Stock Exchange 350 Index;
"Fund V" means Riverstone Global Energy & Power Fund V,
L.P.;
"Fund VI" means Riverstone Global Energy & Power Fund VI,
L.P.;
"General Partner" means REL IP General Partner LP (acting
through its general partner, REL IP General Partner Limited), the
general partner of the Partnership and a member of the Riverstone
group;
"GFSC" or "Commission" means the Guernsey Financial Services
Commission;
"GFSC Code" means the GFSC Finance Sector Code of Corporate
Governance;
"Gross IRR" means an aggregate, annual, compound, gross internal
rate of return on investments. Gross IRR does not reflect expenses
to be borne by the relevant investment vehicle or its investors
including, without limitation, carried interest, management fees,
taxes and organisational, partnership or transaction expenses;
"Gross MOIC" means gross multiple of invested capital;
"Hunt" means Hunt REL Holdings LLC together with various members
of Ray L. Hunt's family and their
related entities;
"IAS" means international accounting standards as issued by the
Board of the International Accounting Standards Committee;
"IFRS" means the International Financial Reporting Standards,
being the principles-based accounting standards, interpretations
and the framework by that name issued by the International
Accounting Standards Board, as adopted by the EU;
"ILX III" means ILX Holdings III LLC;
"Interim Financial Report" means the Company's half yearly
report and unaudited interim condensed financial statements for the
period ended 30 June;
"Investment Manager" or "RIL" means Riverstone International
Limited which is majority-owned and controlled by Riverstone;
"Investment Management Agreement" means the investment
management agreement dated 24 September 2013 between RIL, the
Company and the Partnership (acting through its General Partner)
under which RIL is appointed as the Investment Manager of both the
Company and the Partnership;
"Investment Undertaking" means the Partnership, any intermediate
holding or investing entities that the Company or the Partnership
may establish from time to time for the purposes of efficient
portfolio management and to assist with tax planning generally and
any subsidiary undertaking of the Company or the Partnership from
time to time;
"IPEV Valuation Guidelines" means the International Private
Equity and Venture Capital Valuation Guidelines;
"IPO" means the initial public offering of shares by a private
company to the public;
"ISAE 3402" means International Standard on Assurance
Engagements 3402, "Assurance Reports on Controls at a Service
Organisation";
"ISA" means International Standards on Auditing (UK and
Ireland);
"ISIN" means an International Securities Identification
Number;
"KFI" means Kendall Family Investments, LLC, a cornerstone
investor in the Company;
"Liberty II" means Liberty Resources II LLC;
"Listing Rules" means the listing rules made by the UK Listing
Authority under section 73A Financial Services and Markets Act
2000;
"London Stock Exchange" or "LSE" means London Stock Exchange
plc;
"LSE Admission Standards" means the rules issued by the London
Stock Exchange in relation to the admission to trading of, and
continuing requirements for, securities admitted to the Official
List;
"LTM" means last twelve months;
"Management Engagement Committee" means a formal committee of
the Board with defined terms of reference;
"Management Fee" means the management fee to which RIL is
entitled;
"Margin Loan Agreement" means the margin loan agreement dated 27
December 2016 entered into by REL US Centennial Holdings, LLC;
"McNair" means RCM Financial Services, L.P. for the purposes of
acquiring Ordinary Shares and Palmetto for the purposes of
acquiring a minority economic interest in the General Partner and
the Investment Manager;
"Meritage III" means Meritage Midstream Services III, L.P.;
"mmboe" means million barrels of oil equivalent;
"mcfe" means thousand cubic feet equivalent (natural gas);
"mmcfepd" means million cubic feet equivalent (natural gas) per
day;
"NASDAQ" means National Association of Securities Dealers
Automated Quotations
Stock Market;
"NAV per Share" means the Net Asset Value per Ordinary
Share;
"Net Asset Value" or "NAV" means the value of the assets of the
Company less its liabilities as calculated in accordance with the
Company's valuation policy and expressed in U.S. dollars;
"Net IRR" means an aggregate, annual, compound, gross internal
rate of return on investments, net of taxes and carried interest on
gross profit;
"Net MOIC" means gross multiple of invested capital net of taxes
and carried interest on gross profit;
"Nomination Committee" means a formal committee of the Board
with defined terms of reference;
"NURS" means non-UCITS retail schemes;
"NYSE" means The New York Stock Exchange;
"Official List" is the list maintained by the Financial Conduct
Authority (acting in its capacity as the UK Listing Authority) in
accordance with Section 74(1) of the Financial Services and Markets
Act 2000;
"OPEC" means Organisation of the Petroleum Exporting
Countries;
"Ordinary Shares" means redeemable ordinary shares of no par
value in the capital of the Company issued and designated as
"Ordinary Shares" and having the rights, restrictions and
entitlements set out in the Articles;
"Origo" means Origo Exploration Holding AS;
"Other Riverstone Funds" means other Riverstone-sponsored,
controlled or managed entities, including Fund V/VI, which are or
may in the future be managed or advised by the Investment Manager
or one or more of its affiliates, excluding the Partnership;
"Partnership" or "RELIP" means Riverstone Energy Investment
Partnership, LP, the Investment Undertaking in which the Company is
the sole limited partner;
"Partnership Agreement" means the partnership agreement in
respect of the Partnership between inter alios the Company as the
sole limited partner and the General Partner as the sole general
partner dated 23 September 2013;
"Performance Allocation" means the Performance Allocation to
which the General Partner is entitled;
"Placing and Open Offer" means the issuance of 8,448,006 new
Ordinary Shares at GBP8.00 per Ordinary Share on 11 December
2015
"POI Law" means the Protection of Investors (Bailiwick of
Guernsey) Law, 1987;
"Private Riverstone Funds" means Fund V and all other private
multi-investor, multi-investment funds that are launched after
Admission and are managed or advised by the Investment Manager (or
one or more of its affiliates) and excludes Riverstone employee
co-investment vehicles and any Riverstone managed or advised
private co-investment vehicles that invest alongside either Fund V
or any multi-investor multi-investment funds that the Investment
Manager (or one or more of its affiliates) launches after
Admission;
"Prospectuses" means the prospectus published on 24 September
2013 by the Company in connection with the IPO of Ordinary Shares
and further prospectus published on 23 November 2015;
"PV-10" means present value of estimated future oil and gas
revenues, net of estimated direct expenses, at an annual discount
rate of 10 per cent.;
"Qualifying Investments" means all investments in which Private
Riverstone Funds participate which are consistent with the
Company's investment objective where the aggregate equity
investment in each such investment (including equity committed for
future investment) available to the relevant Private Riverstone
Fund and the Company (and other co-investees, if any, procured by
the Investment Manager or its affiliates) is $100 million or
greater, but excluding any investments made by Private Riverstone
Funds where both (a) a majority of the Company's independent
directors and (b) the Investment Manager have agreed that the
Company should not participate;
"RCO" means Riverstone Credit Opportunities, L.P.;
"recompletions" means the action and techniques of re-entering a
well and redoing or repairing the original completion to restore a
well's productivity;
"RELCP" means Riverstone Energy Limited Capital Partners, LP
(acting by its general partner Riverstone Holdings II (Cayman)
Ltd.) a Cayman exempted limited partnership controlled by
affiliates of Riverstone;
"RIL" or "Investment Manager" means Riverstone International
Limited;
"Riverstone" means Riverstone Holdings LLC and its affiliated
entities (other than the Investment Manager and the General
Partner), as the context may require;
"Rock Oil" means Rock Oil Holdings, LLC;
"SCOOP" means South Central Oklahoma Oil Province;
"SEC" means the U.S. Securities and Exchange Commission;
"Sierra" means Sierra Oil and Gas Holdings, L.P.;
"SIFI" means Systemically Important Financial Institutions;
"Shareholder" means the holder of one or more Ordinary
Shares;
"Stewardship Code" means the UK Stewardship Code;
"Three Rivers III" means Three Rivers Natural Resources Holdings
III LLC;
"UCITS" means undertakings for collective investment in
transferable securities;
"UK" or "United Kingdom" means the United Kingdom of Great
Britain and Northern Ireland;
"UK Listing Authority" or "UKLA" means the Financial Conduct
Authority;
"U.S." or "United States" means the United States of America,
its territories and possessions, any state of the United States and
the District of Columbia;
"workover" means an oil well intervention involving invasive
techniques, such as wireline, coiled tubing or snubbing, to pull
and replace a completion;
"WTI" means West Texas Intermediate which is a grade of crude
oil used as a benchmark in oil pricing;
"GBP" or "Pounds Sterling" or "Sterling" means British pound
sterling and "pence" means British pence; and
"$" or "USD" means United States dollars and "cents" means
United States cents.
DIRECTORS AND GENERAL INFORMATION
Directors Investment Manager's Guernsey advocates
Richard Hayden Valuation Committee to the Company
(Chairman) Pierre Lapeyre Carey Olsen
Peter Barker David Leuschen Carey House
Patrick Firth Tom Walker PO Box 98
Pierre Lapeyre Administrator and Les Banques
David Leuschen Company Secretary St Peter Port
Ken Ryan Heritage International Guernsey
Jeremy Thompson Fund Managers Limited GY1 4BZ
Claire Whittet Heritage Hall Channel Islands
PO Box 225 U.S. legal advisors
Audit Committee Le Marchant Street to the Company
Patrick Firth (Chairman) St Peter Port Vinson & Elkins
Peter Barker Guernsey LLP
Richard Hayden GY1 4HY 1001 Fannin Street
Jeremy Thompson Channel Islands Suite 2500
Claire Whittet Registered office Houston, Texas
Heritage Hall TX 77002
Management Engagement PO Box 225 United States of
Committee Le Marchant Street America
Claire Whittet St Peter Port Independent auditor
(Chairman) Guernsey Ernst & Young LLP
Peter Barker GY1 4HY PO Box 9, Royal
Patrick Firth Channel Islands Chambers
Richard Hayden Registrar St Julian's Avenue
Jeremy Thompson Capita Registrars St Peter Port
Nomination Committee (Guernsey) Limited Guernsey
Richard Hayden Longue Hougue House GY1 4AF
(Chairman) St Sampson Channel Islands
Peter Barker Guernsey Public relations
Patrick Firth GY2 4JN advisers
Jeremy Thompson Channel Islands Scott Harris UK
Claire Whittet Principal banker Limited
ABN AMRO (Guernsey) Victoria House
Investment Manager Limited 1-3 College Hill
Riverstone International PO Box 253 London
Limited Martello Court EC4R 2RA
190 Elgin Avenue Admiral Park United Kingdom
George Town St. Peter Port Corporate Brokers
Grand Cayman Guernsey Goldman Sachs International
KY1-9005 GY1 3QJ Peterborough Court
Cayman Islands Channel Islands 133 Fleet Street
Website: www.RiverstoneREL.com English solicitors London
ISIN: GG00BBHXCL35 to the Company EC4A 2BB
Ticker: RSE Freshfields Bruckhaus United Kingdom
Deringer LLP JP Morgan Cazenove
65 Fleet Street 25 Bank Street
London Canary Wharf
EC4Y 1HS London
United Kingdom E15 5JP
United Kingdom
-------------------------------- ------------------------ -----------------------------
Cautionary Statement
The Chairman's Statement and Investment Manager's Report have
been prepared solely to provide additional information for
Shareholders to assess the Company's strategies and the potential
for those strategies to succeed. These should not be relied on by
any other party or for any other purpose.
The Chairman's Statement and Investment Manager's Report may
include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can
be identified by the use of forward-looking terminology, including
the terms "believes", "estimates", "anticipates", "expects",
"intends", "may", "will" or "should" or, in each case, their
negative or other variations or comparable terminology.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this document and include statements regarding the intentions,
beliefs or current expectations of the Directors and the Investment
Manager, concerning, amongst other things, the investment
objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity,
prospects, and distribution policy of the Company and the markets
in which it invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and
the development of its financing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the Directors
and the Investment Manager expressly disclaim any obligations to
update or revise any forward-looking statement contained herein to
reflect any change in expectations with regard thereto or any
change in events, conditions or circumstances on which any
statement is based.
Riverstone Energy Limited
Heritage Hall, PO Box 225,
Le Marchant Street, St Peter Port, Guernsey, GY1 4HY, Channel
Islands.
T 44 (0) 1481 716000
F 44 (0) 1481 730617
Further information available online:
www.RiverstoneREL.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZMGGRVRZGNZM
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