Final results for the year ended 31 December 2019

RNS Number : 5741K

Riverstone Energy Limited

23 April 2020

 

Riverstone Energy Limited

Final results for the year ended 31 December 2019

London, 23 April 2020: Riverstone Energy Limited ("REL" or the "Company") announces its Year End Results from 1 January 2019 to 31 December 2019.

Summary Performance

31 December 2019

NAV	$772 million (£588 million) [1]
NAV per share	$9.66 / £7.36 1
Profit/(loss) for year ended	$(659.57) million
Basic profit/(loss) per share for year ended	(825.53) cents
Market capitalization	$434 million (£331 million) 1
Share price	$5.43 / £4.14 1

Highlights

§ As of 31 December 2019, REL had a NAV per share of $9.66 (£7.36), representing a decrease in USD and GBP of over 46 and 48 per cent., respectively, compared to the 31 December 2018 NAV.

§ Hammerhead, Centennial and Liberty II were the largest drivers of REL's NAV decline over the year.

§ During 2019, REL, through the Partnership, received $162 million in gross proceeds from the realisation of its investments in Meritage III ($83 million), Sierra ($39 million), CNOR ($16 million) and Three Rivers III ($4 million), as well as distributions from Carrier II ($13 million), ILX III ($5 million), Ridgebury ($2 million) and Rock Oil ($1 million).

§ The Company, through the Partnership, invested a total of $81 million during the year, bringing net capital invested as of 31 December 2019 to $1,007 million, or 85 per cent. of net capital available.

§ During 2019, REL, through the Partnership, committed up to $188 million to Aleph Midstream ($100 million), Onyx ($66 million) and Ridgebury ($22 million) and withdrew commitments totaling $51 million to Sierra, Meritage III, and Eagle II, bringing net committed capital as of 31 December 2019 to $1,219 million, or 103 per cent. of net capital available2.

§ REL finished the year with a cash balance of $183 million and remaining potential unfunded commitments of $212 million.

Portfolio Update

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

Meritage III

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

Sierra

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

Onyx Power

REL, through the Partnership, invested $31 million in Onyx Power.

Aleph Midstream

REL, through the Partnership, invested $23 million in Aleph Midstream. Subsequently, the investment was unwound and REL was reimbursed for the full invested amount of $23 million in March 2020.

Ridgebury

REL, through the Partnership, invested $18 million and received income distributions of $2 million from Ridgebury.

CNOR

REL, through the Partnership, received proceeds of $16 million from partial realisation of CNOR.

Carrier II

REL, through the Partnership, received income distributions of $13 million from Carrier II.

Other

REL, through the Partnership, invested $8 million in ILX III and Castex 2014, and received proceeds of $10 million from ILX III, Three Rivers III and Rock Oil.

Subsequent Events

§ In January 2020, Ridgebury H3 decided to sell the Nalini D, one of the three Handy vessels purchased in April 2019, to Tufton Oceanic, at a premium to its original purchase price. Ridgebury H3 decided to take advantage of a recent market spike to reduce risk and lock in returns. REL's realised Gross MOIC in this investment is 0.5x (total Gross MOIC of 1.2x), including prior distributions.

§ In February 2020, REL decided to unwind its commitment to Aleph Midstream due to the macroeconomic conditions in Argentina as well as certain condition precedents that have not been met with its anchor customer. In March 2020, REL was reimbursed for its fund invested capital in Aleph Midstream.

§ At 31 March 2020, REL's uninvested cash balance had increased to $211 million and potential unfunded commitments had decreased to $135 million.

Manager Outlook

§ REL's $211 million cash balance at 31 March 2020 makes the Company well placed to fund the capital needs of the portfolio. The Company has remaining potential unfunded commitments of up to $135 million at 31 March 2020; however, the Board, in consultation with the Investment Manager, does not expect to fully fund all commitments in the normal course of business.

§ The current market environment is facing unprecedented challenges due to the coronavirus pandemic which has significantly impacted the demand for commodities as well as shifting geopolitical dynamics from OPEC+.

§ The Investment Manager is currently focused on working with the management teams of REL's portfolio companies to plan for continued uncertainty with a high priority on defensive measures to maximise liquidity including reducing spending and capital expenditures.

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

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

"We are currently facing extraordinarily difficult market conditions due to historic events including the coronavirus pandemic which has created significant headwinds for all economies globally.  The Board and Investment Manager have been keenly focused on protecting the portfolio through this period as well as determining other ways to create shareholder value and narrow the discount to NAV. In January, the Board and Investment Manager agreed upon changes to REL's performance allocation provisions. With these changes, $8.5 million of performance allocation that would have been accrued at 31 December 2019 have been terminated, thereby increasing REL's NAV. The Board and the Investment Manager are currently in discussions about the desirability and method of returning some of the Company's existing uninvested cash to Shareholders and expect to make an announcement in the near future."

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

"The recent developments in the broader macro environment have exacerbated an already challenging backdrop for energy companies, and valuations across energy and equity markets continue to be materially impacted across the board. We have been working hard with our management teams real-time to plan for continued volatility in the markets with a focus on strengthening balance sheets and capital preservation to weather through this time of uncertainty."

- Ends -

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

 

4Q19 Quarterly Portfolio Valuation

Previously, on 30 January 2020, REL announced its quarterly portfolio summary as of 31 December 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 Sep 2019 Gross MOIC4	31 Dec 2019 Gross MOIC4
Centennial  (6 Jul 2016)		Permian (U.S.)	$268	$268	$172	$70	$242	0.9x	0.9x
ILX III  (8 Oct 2015)		Deepwater GoM (U.S.)	200	155	5	181	186	1.2x	1.2x
Hammerhead Resources  (27 Mar 2014)		Deep Basin (Canada)	307	295	23	81	104	0.4x	0.4x
RCO5    (2 Feb 2015)		North America	80	80	79	2	81	1.0x	1.0x
Carrier II  (22 May 2015)		Permian & Eagle Ford (U.S.)	133	110	29	48	77	0.7x	0.7x
Liberty II  (30 Jan 2014)		Bakken, PRB (U.S.)	142	142	-	57	57	0.5x	0.4x
Fieldwood  (17 Mar 2014)		GoM Shelf (U.S.)	89	88	8	39	47	0.6x	0.5x
Onyx  (30 Nov 2019)		Europe	66	31	-	31	31	n/a	1.0x
CNOR  (29 Aug 2014)		Western Canada	90	90	16	15	31	0.3x	0.3x
Aleph    (9 Jul 2019)		Vaca Muerta (Argentina)	100	23	-	23	23	1.0x	1.0x
Ridgebury (19 Feb 2019)		Global	22	18	2	20	22	1.2x	1.2x
Castex 2014  (3 Sept 2014)		Gulf Coast Region (U.S.)	67	52	-	19	19	0.3x	0.4x
Total Current Portfolio6			$1,564	$1,352	$332	$587	$919	0.7x	0.7x

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 Sep 2019 Gross MOIC4	31 Dec 2019 Gross MOIC4
Rock Oil7  (12 Mar 2014)		Permian (U.S.)			114	114	231	6		237	2.1x	2.1x
Three Rivers III (7 Apr 2015)		Permian (U.S.)			94	94	204	-		204	2.2x	2.2x
Meritage III8  (17 Apr 2015)			Western Canada	40		40	83		-	83	2.1x	2.1x
Sierra  (24 Sept 2014)			Mexico	18		18	39		-	39	2.1x	2.1x
Total Realisations6					$267	$267	$558	$6		$565	2.1x	2.1x
Withdrawn Commitments and Impairments9					121	121	1	-		1	0.0x	0.0x
Total Investments6					$1,952	$1,739	$892	$593		$1,485	0.9x	0.9x
Cash and Cash Equivalents								$183
Total Investments & Cash and Cash Equivalents6								$776

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 9 active investments spanning oil and gas, midstream, and energy services 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:

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 31 December 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.

 

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1 GBP:USD FX rate of 1.312 as of 31 December 2019

2 Net capital available of $1,190 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 $892 million of capital realised to date, $600 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. 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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