Final results for the half year ended 30 June 2019

RNS Number : 9484I

Riverstone Energy Limited

14 August 2019

 

Riverstone Energy Limited

Final results for the half year ended 30 June 2019

London, UK (14 August 2019) - Riverstone Energy Limited ("REL" or the "Company") announces its Half Year Results for the 6-month period ("the "Period") from 1 January 2019 to 30 June 2019.

Summary Performance

30 June 2019

NAV	$1,058 million (£833 million)[1]
NAV per share	$13.24 / £10.431
Profit/(loss) during Period	$(373.12) million
Basic profit/(loss) per share during Period	(467.01) cents
Market capitalization	$874 million (£688 million)1
Share price	$10.93 / £8.611

Highlights

§ As of 30 June 2019, REL had a NAV per share of $13.24 (£10.43)¹, representing a decrease in USD and GBP of 26 per cent. compared to the 31 December 2018 NAV.

§ Hammerhead, Centennial and CNOR were the largest drivers of REL's NAV decline over the Period.

§ During the Period, REL, through the Partnership, received $133 million in gross proceeds from the realization of its investments in Meritage III ($83 million), Sierra ($39 million), and Three Rivers III ($3 million), as well as distributions from Carrier II ($6 million) and ILX III ($2 million).

§ The Company, through the Partnership, invested a total of $24 million during the period, bringing net capital invested as of 30 June 2019 to $991 million, or 82 per cent of net capital available^[2].

§ During the first half of 2019, REL committed up to $22 million to Ridgebury and withdrew commitments totaling $28 million to Sierra, Meritage III, and Eagle II, bringing net committed capital as of 30 June 2019 to $1,116 million, or 92 per cent of net capital available².

§ REL finished the Period with a cash balance of $219 million and remaining unfunded commitments of $125 million.

§ On 26 April 2019, Riverstone Holdings LLC ("Riverstone") announced the formation of Onyx Strategic Investment Management I BV ("Onyx"), a European independent power producer. The investment in Onyx will be funded with an initial equity commitment from REL, Riverstone Global Energy and Power Fund VI, L.P., and other Riverstone managed vehicles. Further details on REL's commitment of up to $66 million will be provided upon close of the transaction, which is expected to occur later this year following the receipt of regulatory and other approvals.

§ On 28 June 2019, Riverstone announced the signing of an agreement for REL to invest in Aleph Midstream S.A. ("Aleph"), an independent Argentine oil and gas gathering and processing-focused midstream company, in line with REL's previously-stated modified investment approach. Aleph has received a $103 million commitment from funds affiliated to Riverstone (comprising $100 million from REL and $3 million from other investors) alongside commitments of $54 million from Southern Cross Group, $45 million from Vista Oil & Gas ("Vista"), and approximately $3 million from the Aleph and Vista management teams, for a total commitment of approximately $205 million, expected to be deployed over the next 24 months. Upon closing of the transaction, which occurred in July 2019, Aleph began funding the construction of infrastructure necessary to provide gathering, processing, and evacuation midstream services to oil and gas producers in the Vaca Muerta.

Portfolio Update

Below is a summary of material activity in the portfolio during the Period.

Meritage Midstream Services III, L.P. ("Meritage III")

REL, through the Partnership, received sale proceeds of $83 million from Meritage III.

Sierra Oil and Gas Holdings, L.P. ("Sierra")

REL, through the Partnership, received sale proceeds of $39 million from Sierra.

Carrier Energy Partners II, LLC ("Carrier II")

REL, through the Partnership, received income distributions of $6 million from Carrier II.

Three Rivers Natural Resources Holdings III, LLC ("Three Rivers III")

REL, through the Partnership, received escrow proceeds of $3 million from Three Rivers III.

ILX Holdings III, LLC ("ILX III")

REL, through the Partnership, received income distributions of $2 million from ILX III.

Ridgebury H3 LLC ("Ridgebury")

REL, through the Partnership, invested $18 million in Ridgebury.

ILX Holdings III, LLC ("ILX III")

REL, through the Partnership, invested $4 million in ILX III.

Castex Energy 2014, LLC ("Castex 2014")

REL, through the Partnership, invested $3 million in Castex 2014.

Manager Outlook

§ REL's $219 million cash balance makes the Company well placed to make its new investments in Onyx and Aleph, as well as grow its existing Portfolio. Pro forma for these new commitments, the Company has remaining unfunded commitments of up to $291 million; however, the Board, in consultation with the Investment Manager, does not expect to fully fund all commitments in the normal course of business.

§ The Investment Manager believes the current market environment is generating attractive opportunities in midstream, energy services and power, and will continue to seek to invest in opportunities that span the entire energy value chain to diversify its portfolio.

§ To effect this change in portfolio construction, REL expects to make more investments independently of Riverstone's private funds going forward.

§ A continued focus on operational excellence will remain critical to driving value across the commodity price cycle.

§ The Company's Management Engagement Committee has been holding discussions with the Investment Manager regarding potential changes to the terms of the Investment Management Agreement.

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

"Since the end of last year, REL has announced three new transactions that reflect its focus on diversifying the portfolio and implementing its modified investment approach.  The most recent commitment to Aleph Midstream, which is representative of the modified investment approach, provides an opportunity for REL to capitalise on the need for infrastructure in one of the most prolific shale basins outside of North America. We look forward to continuing to evaluate new opportunities and deploying capital in a tactical manner across subsectors to actively manage our portfolio construction."

David M. Leuschen and Pierre F. Lapeyre Jr., Co-Founders of Riverstone, added:

"While spot prices for oil have improved modestly, the volatile nature of the geopolitical landscape has continued to negatively impact energy equities and valuations as investor sentiment remains weak. Despite the macro environment, we remain focussed on driving operational performance in order to maximise returns over the long-term as market conditions stabilise."

- Ends -

Riverstone Energy Limited's 2019 Interim Report is available to view at: www.RiverstoneREL.com.

 

2Q19 Quarterly Portfolio Valuation

Previously, on 31 July 2019, REL announced its quarterly portfolio summary as of 30 June 2019, inclusive of updated quarterly unaudited fair market valuations:

Current Portfolio

Investment   (Initial Investment Date)		Target Basin	Gross Committed Capital  ($mm)	Invested Capital ($mm)	Gross Realised Capital ($mm)[3]	Gross Unrealised Value ($mm)	Gross Realised Capital & Unrealised Value ($mm)	30 Jun 2019 Gross MOIC[4]	31 Mar 2019 Gross MOIC4
Centennial        (6 Jul 2016)		Permian (U.S.)	$268	$268	$172	$115	$287	1.1x	1.1x
Hammerhead Resources        (27 Mar 2014)		Deep Basin (Canada)	307	295	23	202	225	0.8x	1.0x
ILX III             (8 Oct 2015)		Deepwater GoM (U.S.)	200	155	2	200	202	1.3x	1.3x
Liberty II        (30 Jan 2014)		Bakken, PRB (U.S.)	142	142	-	128	128	0.9x	1.1x
Carrier II        (22 May 2015)		Permian & Eagle Ford (U.S.)	133	110	22	66	88	0.8x	1.0x
RCO[5]                            (2 Feb 2015)		North America	80	80	79	3	82	1.0x	1.1x
Fieldwood       (17 Mar 2014)		GoM Shelf (U.S.)	89	88	8	54	62	0.7x	0.6x
Castex 2014      (3 Sept 2014)		Gulf Coast Region (U.S.)	67	50	-	35	35	0.7x	0.7x
CNOR             (29 Aug 2014)		Western Canada	90	90	-	27	27	0.3x	0.5x
Ridgebury H3 (19 Feb 2019)		Global	22	18	-	20	20	1.1x	1.0x
Total Current Portfolio[6]			$1,398	$1,296	$305	$849	$1,154	0.9x	1.0x

Realisations

Investment   (Initial Investment Date)			Target Basin		Gross Committed Capital  ($mm)	Invested Capital ($mm)	Gross Realised Capital ($mm)3	Gross Unrealised Value ($mm)	Gross Realised Capital & Unrealised Value ($mm)	30 Jun 2019 Gross MOIC4	31 Mar 2019 Gross MOIC4
Rock Oil[7]           (12 Mar 2014)			Permian (U.S.)		114	114	231	8	239	2.1x	2.1x
Three Rivers III (7 Apr 2015)			Permian (U.S.)		94	94	203	-	203	2.2x	2.2x
Meritage III[8]     (17 Apr 2015)				Western Canada	62	40	83	-	83	2.1x	2.1x
Sierra              (24 Sept 2014)				Mexico	18	18	39	-	39	2.1x	2.1x
Total Realisations6					$290	$267	$557	$8	$565	2.1x	2.1x
Withdrawn Commitments and Impairments[9]					121	121	1	-	1	0.0x	0.0x
Total Investments6					$1,809	$1,683	$862	$857	$1,719	1.0x	1.1x
Cash and Cash Equivalents								$219
Total Investments & Cash and Cash Equivalents6								$1,076

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 is a member of the FTSE 250 and its ordinary shares are listed on the London Stock Exchange, trading under the symbol RSE.  REL has 11 active investments spanning oil and gas, midstream, and energy services in the Continental U.S., Western Canada, Gulf of Mexico, Latin America and credit.

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:

Natasha Fowlie

Brian Potskowski

[phone]

 

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 June 2019 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 Audit Committee reviews the valuations of the Company's investments held through the Partnership, and makes a recommendation to the Board for formal consideration and acceptance.

The unaudited fair market valuations as of 30 June 2019 formed part of REL's 2019 interim financial statements and were subject to an interim review under ISRE2410, which was undertaken by Ernst & Young LLP on behalf of the Directors.

 

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[1] GBP:USD FX rate of 1.270 as of 30 June 2019.

                   [2] Net capital available of $1,210 million is based on total capital raised of $1,320 million, capital utilised for Tender Offer of $72 million, realised profits and other income net of fees, expenses and performance                                    allocation. The Board, with consultation by the Investment Manager, does not expect to fully fund all commitments in the normal course of business.

[3] Gross realised capital is total gross proceeds realised on invested capital. Of the $862 million of capital realised to date, $573 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 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 (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] Credit investment.

[6] Amounts may vary due to rounding.

[7] The unrealised value of the Rock Oil investment consists of rights to mineral acres.

[8] Midstream investment.

[9] Withdrawn commitments consist of Origo ($9 million) and CanEra III ($1 million), and impairments consist of Eagle II ($62 million) and Castex 2005 ($48 million).

 

END

 

 

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