TIDMRSE
RNS Number : 3549Q
Riverstone Energy Limited
27 October 2021
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 3Q21 Quarterly Portfolio
Valuations & NAV
London, UK (27 October 2021) - Riverstone Energy Limited ("REL"
or the "Company") is issuing this Interim Management Statement
("IMS") for the period from 1 July 2021 to 30 September 2021 (the
"Period").
Highlights
-- Key Financials (unaudited)
o NAV as at 30 September 2021 $659 million (GBP490 million)[1]
o NAV per share as at 30 September 2021 $10.93 / GBP8.13(1)
o Basic profit/(loss) per share during 138.75 cents
Period
o Market capitalisation at 30 September $391 million (GBP291 million)(1)
2021
o Share price at 30 September 2021 $6.48 / GBP4.82(1)
-- As of 30 September 2021, REL had a NAV per share of $10.93
(GBP8.13) an increase in USD and GBP of 16 & 19 per cent.,
respectively, compared to 30 June 2021. The quarter end closing
share price was $6.48 (GBP4.82), an increase of 35 & 40 per
cent., respectively, compared to 30 June 2021.
-- Hammerhead, GoodLeap (formerly Loanpal) , Carrier II and
FreeWire were the largest drivers of REL's NAV improvement over the
Period.
-- During the Period, under the Company's modified investment
programme, REL invested an aggregate amount of $40.6 million in
three new energy transition and decarbonisation investments,
bringing the total invested in this area to $95 million across
eight investments, which in aggregate were valued at $158 million,
or 1.7x Gross MOIC, at 30 September 2021.
-- Total invested capital during the Period of $40.6 million:
Samsung Ventures ($30.0 million), Hyzon Motors, Inc. ($10.0
million) and Decarbonization Plus Acquisition Corp IV ($0.6
million) . The investment in Decarbonization Plus Acquisition Corp
IV was sponsor equity and warrants, which were purchased at US$1.00
per warrant.
-- Total net realisations and distributions during the Period of
$169.0 million: ILX Holdings III, LLC ($168.2 million) Rock Oil
Holdings, LLC ($0.3 million), GoodLeap, LLC (formerly Loanpal, LLC)
($0.3 million) and Sierra Oil & Gas ($0.2 million) .
-- REL finished the Period with a cash balance of $169 million
and remaining potential unfunded commitments of $69 million[2].
-- Since the initial announcement of the Share Buyback Programme
on 1 May 2020, the Company has bought back a total of 19,605,057
ordinary shares at an average price of approximately GBP3.05 per
ordinary share , which has contributed to the share price increase
of 119 per cent. from GBP2.20 to GBP4.82 over the period to 30
September 2021.
Share Buyback Programme
As previously announced on 4 October 2021, with today's
publication of the Company's IMS for the period ended 30 September
2021, the Board will recommence its open market share buyback
programme with Numis Securities Limited and J.P. Morgan Securities
plc, for which the Board had previously approved an increase in the
total authorised amount from GBP20.0 million to GBP40.0 million.
Since the Company's announcement on 11 May 2021, 2,390,860 ordinary
shares have been bought back at a total cost of approximately
GBP9.8 million ($13.6 million) at an average share price of
approximately GBP4.08 ($5.69), such that there is GBP30.2 million
remaining of the total authorised amount.
In addition, pursuant to changes to the Investment Management
Agreement announced on 3 January 2020, the Investment Manager
agreed for the Company to be required to repurchase shares or pay
dividends equal to 20 per cent. of gains on dispositions. No
further carried interest will be payable until the $272 million of
realised and unrealised losses to date at 30 September 2021 are
made whole with future gains.
Richard Hayden, Chairman of Riverstone Energy Limited,
commented:
" Recovery from the pandemic and related affects in business
activity has bolstered energy markets and our portfolio. As a
consequence of this macroeconomic recovery, and the Board and
Investment Manager's focus on portfolio resilience, REL's NAV per
share and share price as of 30 September 2021 are up 79 and 62 per
cent., respectively, since the beginning of the year. We will
continue to bring discipline to our investment activity and to
capitalise on macroeconomic improvements to maximise shareholder
value."
David M. Leuschen and Pierre F. Lapeyre Jr., Co-Founders of
Riverstone, added:
" Since the beginning of the year, we have focussed on promoting
portfolio resilience and operational efficiency. Disciplined
management amidst highly uncertain and volatile energy markets
positioned the portfolio to benefit from recent post-pandemic
economic improvements. These favorable conditions gave REL the
opportunity to exit from one of its legacy upstream positions in
ILX III and redeploy this liquidity to meet growing investment
needs in decarbonisation and the energy transition. Third-quarter
investments in Hyzon Motors, Samsung Ventures, and Decarbonization
Plus Acquisition Corp. IV) underscored our commitment to investing
in long-term value creation for our shareholders and in solutions
to address climate change."
Current Portfolio - Private
Gross
Investment Gross Gross Realised
(Initial Gross Invested Realised Unrealised Capital & 30 Jun 2021
Investment Committed Capital Capital Value Unrealised Gross 30 Sep 2021
Date) Capital ($mm) ($mm) ($mm)[3] ($mm)(4) Value ($mm) MOIC[4] Gross MOIC(4)
Hammerhead
Resources
(27 Mar 2014) 307 295 23 97 120 0.3x 0.4x
Carrier
II (22 May
2015) 133 110 29 48 77 0.6x 0.7x
GoodLeap
(formerly
Loanpal)
(13 Jan 2021) 25 25 1 62 63 1.0x 2.5x
Onyx (30
Nov 2019) 66 60 - 60 60 1.0x 1.0x
Enviva (22
Jul 2020) 25 18 - 31 31 1.7x 1.7x
Samsung
Ventures
(16 Aug
2021) 30 30 - 30 30 n/a 1.0x
FreeWire
(20 Jan 2021) 10 10 - 20 20 1.0x 2.0x
Total Current
Portfolio
- Private[5] $597 $548 $53 $347 $400 0.5x 0.7x
---------------- ------------- --------- ------------- ------------- ------------- ------------- --------------
Current Portfolio - Public
30 Jun 2021 30 Sep 2021
Gross
Realised
Gross Gross Gross Capital & Closing Closing
Investment Committed Invested Realised Unrealised Unrealised Price Price
(Initial Investment Capital Capital Capital Value Value Gross per Gross per
Date) ($mm) ($mm) ($mm)(3) ($mm)(4) ($mm) MOIC(4) Share[6] MOIC(4) Share(6)
Centennial
(6 Jul 2016) 268 268 172 102 274 1.0x $6.78 1.0x $6.70
Pipestone
Energy (formerly
CNOR) (29
Aug 2014) 90 90 16 25 41 0.4x $1.86 0.5x $2.09
Hyzon Motors
(16 Jul 2021) 10 10 - 7 7 n/a n/a 0.7x $6.94
DCRN[7] (3
Feb 2021) 1 1 - 4 4 7.3x $9.87 7.1x $9.87
DCRC(7) (22
Mar 2021) 1 1 - 4 4 8.2x $10.37 7.6x $10.05
DCRD(7) (11
Aug 2021) 1 1 - 1 1 n/a n/a 1.0x n/a
---------------------- --------- --------- --------- ---------- ---------- ------- --------- ------- --------
Total Current
Portfolio
- Public(5) $370 $370 $188 $141 $329 0.9x 0.9x
---------------------- --------- --------- --------- ---------- ---------- ------- --------- ------- --------
Cash and Cash
Equivalents $169
---------------------- --------- --------- --------- ---------- ---------- ------- --------- ------- --------
Total Liquidity (Cash and Cash
Equivalents & Public Portfolio) $310
------------------------------------------------------- ---------- ---------- ------- --------- ------- --------
Total Market
Capitalisation $391
---------------------- --------- --------- --------- ---------- ---------- ------- --------- ------- --------
Realisations
Gross
Gross Gross Gross Realised
Investment Committed Invested Realised Unrealised Capital & 30 Jun 2021
(Initial Investment Capital Capital Capital Value Unrealised Gross 30 Sep 2021
Date) ($mm) ($mm) ($mm)(3) ($mm)(4) Value ($mm) MOIC(4) Gross MOIC(4)
Rock Oil[8]
(12 Mar 2014) 114 114 232 3 235 2.1x 2.1x
Three Rivers
III (7 Apr
2015) 94 94 204 - 204 2.2x 2.2x
ILX III[9]
(8 Oct 2015) 179 179 172 1 173 1.0x 1.0x
Meritage
III[10]
(17 Apr 2015) 40 40 86 - 86 2.2x 2.2x
RCO[11]
(2 Feb 2015) 80 80 80 - 80 1.0x 1.0x
Sierra (24
Sept 2014) 18 18 38 - 38 2.1x 2.1x
Aleph (9
Jul 2019) 23 23 23 - 23 1.0x 1.0x
Ridgebury
(19 Feb 2019) 18 18 22 - 22 1.2x 1.2x
Castex 2014 52 52 14 - 14 0.3x 0.3x
(3 Sep 2014)
---------------------- ------------ --------- ------------ ------------ ------------ ------------ -------------
Total
Realisations(5) $619 $619 $872 $4 $876 1.4x 1.4x
---------------------- ------------ --------- ------------ ------------ ------------ ------------ -------------
Withdrawn
Commitments
and Impairments[12] 350 350 9 - 9 0.0x 0.0x
---------------------- ------------ --------- ------------ ------------ ------------ ------------ -------------
Total
Investments(5,[13]) $1,935 $1,886 $1,121 $493 $1,614 0.8x 0.9x
---------------------- ------------ --------- ------------ ------------ ------------ ------------ -------------
Total Investments & Cash and Cash Equivalents(5) $662
------------------------------------------------------------- ------------ ------------ ------------ -------------
Quarterly Performance Commentary
An improved macro environment since the beginning of 2021 has
assisted energy markets recover nearly to their pre-pandemic
levels. In the third quarter of 2021, global oil demand improved
while supply was constrained, resulting in the highest prices for
crude oil and natural gas in 7 and 12 years, respectively. This
meant an increase in WTI prices of approximately 4 per cent. in the
third quarter and 64 per cent. since the beginning of the year.
Consequently, the S&P Oil and Gas Index and S&P Energy
Select Index increased by approximately 64 per cent. and 48 per
cent., respectively, over the same period. While REL remains
committed to its existing investments, it will continue to
capitalise on the growing decarbonisation and energy transition
themes that continue to drive growth for its portfolio. Riverstone
has experience in >$5 billion in decarbonisation and renewable
investments since 2009 with 34 per cent. per annum growth in
invested capital.
In pursuit of this modified investment programme, REL took
advantage of a favorable environment to exit its investment in ILX
III in the third quarter, an upstream company which acquired
working interests in oil-focused exploration projects in the Gulf
of Mexico. This divestment created additional liquidity for REL to
deploy toward several new decarbonisation opportunities which
include investments in Hyzon Motors, Decarbonization Plus
Acquisition Corp. IV (the fourth decarbonisation-focused special
purpose acquisition vehicle sponsored by Riverstone), and an
interest in Samsung Ventures' battery technology portfolio.
Further detail on REL's five largest positions, which account
for approximately 75 per cent. of the portfolio's gross unrealised
value, is set forth below:
GoodLeap (formerly Loanpal)
The Gross MOIC for GoodLeap increased from 1.0x to 2.5x during
the third quarter, after having been held at cost for the first two
quarters following investment. In September 2021, GoodLeap achieved
an S&P rating on "GoodLeap Sustainable Home Solutions Trust-4",
an ABS backed by $369mm in loans, which was the first ever
residential solar transaction rated by one of the three major
ratings agencies. Management continues to execute on its growth
plans.
On 13 October 2021, GoodLeap announced a new investment round of
over $800 million, which will support the company's operational
improvements, technology innovation efforts, and expansion. This
funding round gives the company an implied post-money valuation of
$12 billion.
Centennial Resource Development
The Gross MOIC for Centennial stayed flat at 1.0x during the
third quarter. Supported by a highly constructive commodity price
environment, Centennial has raised their FCF guidance for the year
to $140-$170 million. As of 30 June 2021, Centennial has hedged
approximately 28 per cent. of forecasted oil production in Q4 2021
with WTI swaps at a weighted average price of $48.46/bbl, Brent
swaps at a weighted average price of $56.60/bbl and WTI collars at
a weighted average price of $47.17/bbl / $55.71/bbl, and has hedged
approximately 36 per cent. of forecasted Q4 2021 gas production at
a weighted average price of $2.92/mmbtu.
Hammerhead
The Gross MOIC for Hammerhead increased during the third quarter
from 0.3x to 0.4x. While Hammerhead remains focussed on the pay
down of outstanding indebtedness, the company does have a modest
drilling program planned for 2H 2021. Hammerhead has hedged
approximately 89 per cent. of forecasted 4Q 2021 oil production at
a weighted average price of CAD$56 per barrel and has hedged
approximately 60 per cent. of forecasted 4Q 2021 gas production at
a weighted average price of CAD$2.31 per mcf. As of 3Q 2021,
Hammerhead was producing approximately 25,000 boepd.
Onyx
The Gross MOIC for Onyx remained flat during the third quarter
at 1.0x. The company's Rotterdam plant recommenced operations in
July 2021 following an unplanned outage after damage to the boiler.
The plant has since remained in baseload generation with generation
in line with budget. In July, Onyx cleared its Farge plant in the
third German tender auction; the plant will cease coal generation
by October 2022. The management team continues to work on several
key value creation opportunities and improving operational
performance.
Carrier II
The Gross MOIC for Carrier II increased to 0.7x from 0.6x during
the third quarter. The company continues to operate prudently and
remains focused on continuing to pay down outstanding indebtedness
on the company's term loan. Carrier II has hedged approximately 68
percent of forecasted oil production in 2021 at a weighted average
price of $61.72 per barrel WTI. As of 30 September 2021, the
company was producing approximately 3,923 boepd.
Other Investments
On 15 October 2021, Enviva announced its intent to convert from
a master limited partnership organization structure to that of a
c-corporation. This simplification transaction, in which Enviva
acquired all ownership interests in its holding company, Enviva
Holdings, LP, also entails the cancellation of the holding
company's incentive distribution rights in exchange for 16 million
shares of Enviva common stock for a total transaction value of $870
million.
On 17 August 2021, REL announced the purchase of an interest in
one of Samsung Ventures' battery technology focused venture capital
portfolios (the "Samsung Portfolio") for $30.0 million. The
majority of the Samsung Portfolio consists of 1.66 million shares
of Solid Power, Inc., which is currently in a pending merger with
DCRC. REL's investment in the Samsung Portfolio is marked at 1.0x
at 30 September 2021.
During the quarter, CNOR's shares of Pipestone Energy Corp. were
distributed to underlying owners, including Riverstone GEP Fund V
and REL. CNOR LP was subsequently dissolved.
LEI: 213800HAZOW1AWRSZR47
About Riverstone Energy Limited:
REL is a closed-ended investment company that invests
exclusively in the global energy industry across all sectors. REL
aims to capitalise on the opportunities presented by Riverstone's
energy investment platform. REL's ordinary shares are listed on the
London Stock Exchange, trading under the symbol RSE. REL has 13
active investments spanning decarbonisation, oil and gas, renewable
energy and power in the Continental U.S., Western Canada, Gulf of
Mexico and Europe.
For further details, see www.RiverstoneREL.com
Neither the contents of Riverstone Energy Limited's website nor
the contents of any website accessible from hyperlinks on the
websites (or any other website) is incorporated into, or forms part
of, this announcement.
Media Contacts
For Riverstone Energy Limited:
Josh Prentice
+44 20 3206 6300
Note:
The Investment Manager is charged with proposing the valuation
of the assets held by REL through the Partnership. The Partnership
has directed that securities and instruments be valued at their
fair value. REL's valuation policy follows IFRS and IPEV Valuation
Guidelines. The Investment Manager values each underlying
investment in accordance with the Riverstone valuation policy, the
IFRS accounting standards and IPEV Valuation Guidelines. The
Investment Manager has applied Riverstone's valuation policy
consistently quarter to quarter since inception. The value of REL's
portion of that investment is derived by multiplying its ownership
percentage by the value of the underlying investment. If there is
any divergence between the Riverstone valuation policy and REL's
valuation policy, the Partnership's proportion of the total holding
will follow REL's valuation policy. There were no valuation
adjustments recorded by REL as a result of differences in IFRS and
U.S. Generally Accepted Accounting Policies for the period ended 30
September 2021 or in any period to date. Valuations of REL's
investments through the Partnership are determined by the
Investment Manager and disclosed quarterly to investors, subject to
Board approval.
Riverstone values its investments using common industry
valuation techniques, including comparable public market valuation,
comparable merger and acquisition transaction valuation, and
discounted cash flow valuation.
For development-type investments, Riverstone also considers the
recognition of appreciation or depreciation of subsequent financing
rounds, if any. For those early stage privately held companies
where there are other indicators of a decline in the value of the
investment, Riverstone will value the investment accordingly even
in the absence of a subsequent financing round.
Riverstone reviews the valuations on a quarterly basis with the
assistance of the Riverstone Performance Review Team ("PRT") as
part of the valuation process. The PRT was formed to serve as a
single structure overseeing the existing Riverstone portfolio with
the goal of improving operational and financial performance.
The Board reviews and considers the valuations of the Company's
investments held through the Partnership.
[1] GBP:USD FX rate of 1.344 as of 30 September 2021
[2] Excludes the remaining unfunded commitments for Carrier II
and Hammerhead $36 million, in aggregate, which are not expected to
be funded. The expected funding of the remaining unfunded
commitments at 30 September 2021 are $20 million in Q4 2021 and
$nil in 2022. The residual amounts are to be funded in 2023 and
later years.
[3] Gross realised capital is total gross proceeds realised on
invested capital. Of the $1,121 million of capital realised to
date, $824 million is the return of the cost basis, and the
remainder is profit.
[4] Gross Unrealised Value and Gross MOIC (Gross Multiple of
Invested Capital) are before transaction costs, taxes
(approximately 21 to 27.5 per cent. of U.S. sourced taxable income)
and 20 per cent. carried interest on applicable gross profits in
accordance with the revised terms announced on 3 January 2020, but
effective 30 June 2019. Since there was no netting of losses
against gains before the aforementioned revised terms, the
effective carried interest rate on the portfolio as a whole will be
greater than 20 per cent. No further carried interest will be
payable until the $272 million of realised and unrealised losses to
date at 30 September 2021 are made whole with future gains, so the
earned carried interest of $0.8 million at 30 September 2021 has
been deferred and will expire in October 2023 if the aforementioned
losses are not made whole. Since REL has not yet met the
appropriate Cost Benchmark at 30 September 2021, $15.4 million in
Performance Allocation fees that would have been due under the
prior agreement were not accrued. In addition, there is a
management fee of 1.5 per cent. of net assets (including cash) 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 U.S. 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. In the normal course of
business, REL may form wholly-owned subsidiaries, to be treated as
C Corporations for US tax purposes. The C Corporations serve to
protect REL's public investors from incurring U.S. effectively
connected income. The C Corporations file U.S. corporate tax
returns with the U.S. Internal Revenue Service and pay U.S.
corporate taxes on its taxable income.
[5] Amounts may vary due to rounding.
[6] Represents closing price per share in USD for publicly
traded shares of Centennial Resource Development, Inc. (NASDAQ:CDEV
- 30 September 2021: $6.70 price per share) for Centennial
investment, as well as USD-equivalent closing price per share for
Pipestone Energy Corp. (TSX-V:PIPE - 30 September 2021: $2.09 price
per share) for Pipestone Energy (formerly CNOR) investment.
[7] SPAC Sponsor investment for Decarbonization Plus Acquisition
Corporation II (NASDAQ:DCRN), Decarbonization Plus Acquisition
Corporation III (NASDAQ:DCRC) and Decarbonization Plus Acquisition
Corporation IV (NASDAQ:DCRD) (see note 13 below for further
information regarding the SPAC PIPE commitment for DCRC).
[8] The unrealised value of the Rock Oil investment consists of
rights to mineral acres.
[9] The unrealised value of the ILX III investment consists of
43,333 shares of Talos Energy Inc stock (NYSE:TALO) in connection
with its former investment in ILX III.
[10] Midstream investment.
[11] Credit investment.
[12] Withdrawn commitments consist of Origo ($9 million) and
CanEra III ($1 million), and impairments consist of Liberty II
($142 million), Fieldwood ($80 million), Eagle II ($62 million) and
Castex 2005 ($48 million).
[13] As the funding of the DCRC PIPE commitment of $20 million
will occur in conjunction with the respective business combination
during Q4 2021, it has not been included in this table of the
Company's investments at 30 September 2021.
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