TIDMRSE
RNS Number : 4064N
Riverstone Energy Limited
20 May 2020
Riverstone Energy Limited - Interim Management Statement
London, UK (20 May 2020) - Riverstone Energy Limited ("REL" or
the "Company") is issuing this Interim Management Statement ("IMS")
for the period from 1 January 2020 to 31 March 2020 (the
"Period").
Highlights
-- Key Financials (unaudited)
o NAV as at 31 March 2020 $424 million (GBP344 million)
[1]
o NAV per share as at 31 March $5.31 / GBP4.30 (1)
2020
o Profit/(loss) during Period $(347.7) million
o Basic profit/(loss) per share $(435.19) cents
during Period
o Market capitalisation at 31 March $144 million (GBP117 million)
2020 (1)
o Share price at 31 March 2020 $1.80 / GBP1.46 (1)
-- Total invested capital during the Period of $7 million in Onyx Power
-- Total realisations during the Period of $39 million from
Aleph Midstream S.A. ($23 million), Ridgebury H3, LLC ($8 million),
and Castex Energy 2014 ($8 million)
-- Total gross committed capital at 31 March 2020 is $1,449 million
-- Total net committed capital at 31 March 2020 is $1,089
million or 92 per cent of net capital available 2
-- Total net capital invested at 31 March 2020 is $975 million
or 82 per cent. of net capital available (2)
-- On 1 May 2020, the Company announced a buyback programme with
the intention of returning GBP50 million to shareholders via on
market buybacks. Since the announcement, the Company has purchased
5,656,200 shares, in aggregate, for GBP13.6 million at an average
share price of GBP2.40. Pro forma for these share buybacks, REL's
aggregate cash balance is $194 million.
-- Potential unfunded commitments at 31 March 2020 are $114
million, of which $41 million is not expected to be funded.
Richard Hayden, Chairman of Riverstone Energy Limited,
commented:
"Energy markets saw historic declines at the end of the first
quarter, with commodity prices and equities dropping dramatically
as a result of the COVID-19 pandemic. Recognising the difficulties
that REL is facing, the Board and Investment Manager are actively
working together to support the portfolio's ability to navigate
these challenging times as well as evaluate other ways to maximise
value for shareholders."
David M. Leuschen and Pierre F. Lapeyre Jr., Co-Founders of
Riverstone, added:
"The first quarter of 2020 created unprecedented market
conditions that were extremely difficult. As COVID-19 led to
significant commodity demand contraction, the potential for a
Saudi-Russian price war also weighed on oil markets globally. These
dynamics severely impacted valuations in both the public and
private markets. As we anticipate a period of continued volatility
and uncertainty in the near-term, we are working real-time with
each of our portfolio companies to reduce costs and capital
expenditures as well as focus on liquidity until the macro
environment stabilises."
Portfolio Update
Below is a summary of material activity in the portfolio during
the Period.
Onyx Power ("Onyx")
REL, through the Partnership, invested $7 million in Onyx.
Aleph Midstream S.A. ("Aleph")
REL, through the Partnership, received return of capital
proceeds of $23 million from the unwinding of the commitment to
Aleph.
Ridgebury H3, LLC ("Ridgebury")
REL, through the Partnership, received proceeds of $7 million
from the sale of the Nalini D vessel and income distributions of $1
million.
Castex Energy 2014 ("Castex 2014")
REL, through the Partnership, received proceeds of $8 million
from the sale of Castex 2014 to Talos Energy.
1Q20 Quarterly Portfolio Valuations and GBP50 million Share
Buyback Programme
Previously, on 1 May 2020, REL announced its quarterly portfolio
summary as of 31 March 2020, inclusive of updated quarterly
unaudited fair market valuations:
Current Portfolio
Gross
Realised
Gross Capital 31 Dec
Gross Realised Gross & 2019 31 Mar
Investment Committed Invested Capital Unrealised Unrealised Gross 2020
(Initial Investment Capital Capital ($mm) Value Value MOIC Gross
Date) Target Basin ($mm) ($mm) 3 ($mm) ($mm) 4 MOIC(4)
Centennial
(6 Jul 2016) Permian (U.S.) $268 $268 $172 $4 $176 0.9x 0.7x
Deepwater
ILX III (8 GoM
Oct 2015) (U.S.) 200 155 5 104 109 1.2x 0.7x
Permian &
Carrier II Eagle Ford
(22 May 2015) (U.S.) 133 110 29 15 44 0.7x 0.4x
Onyx (30
Nov 2019) Europe 66 38 - 38 38 1.0x 1.0x
Liberty II Bakken, PRB
(30 Jan 2014) (U.S.) 142 142 - 28 28 0.4x 0.2x
Hammerhead
Resources Deep Basin
(27 Mar 2014) (Canada) 307 295 23 1 24 0.4x 0.1x
Ridgebury
(19 Feb 2019) Global 22 18 9 12 21 1.2x 1.2x
CNOR (29
Aug 2014) Western Canada 90 90 16 4 20 0.3x 0.2x
Fieldwood GoM Shelf
(17 Mar 2014) (U.S.) 89 88 8 6 14 0.5x 0.2x
Total Current Portfolio
5 $1,317 $1,203 $261 $213 $474 0.7x 0.4x
----------------------------------------- --------- --------- ---------- ---------- ---------- ------- --------
Realisations
Gross
Realised
Capital
Gross Gross Gross & 31 Dec 31 Mar
Investment Committed Invested Realised Unrealised Unrealised 2019 2020
(Initial Investment Capital Capital Capital Value Value Gross Gross
Date) Target Basin ($mm) ($mm) ($mm)(3) ($mm) ($mm) MOIC(4) MOIC(4)
Rock Oil
6 (12 Mar
2014) Permian (U.S.) 114 114 231 2 233 2.1x 2.0x
Three Rivers
III (7 Apr
2015) Permian (U.S.) 94 94 204 - 204 2.2x 2.2x
Meritage
III 7 (17 Western
Apr 2015) Canada 40 40 83 - 83 2.1x 2.1x
RCO 8 (2 North
Feb 2015) America 80 80 79 1 80 1.0x 1.0x
Sierra (24
Sept 2014) Mexico 18 18 39 - 39 2.1x 2.1x
Aleph (9 Vaca Muerta
Jul 2019) (Argentina) 23 23 23 - 23 1.0x 1.0x
Gulf Coast
Castex 2014 Region
(3 Sept 2014) (U.S.) 52 52 8 2 10 0.4x 0.2x
Total Realisations(5) $422 $422 $668 $5 $673 1.6x 1.6x
------------------------------------------ --------- --------- --------- ---------- ---------- -------- -------
Withdrawn Commitments
and Impairments 9 121 121 1 - 1 0.0x 0.0x
------------------------------------------ --------- --------- --------- ---------- ---------- -------- -------
Total Investments(5) $1,860 $1,746 $931 $218 $1,148 0.9x 0.7x
------------------------------------------ --------- --------- --------- ---------- ---------- -------- -------
Cash and Cash Equivalents $211
------------------------------------------ --------- --------- --------- ---------- ---------- -------- -------
Total Investments & Cash
and Cash Equivalents $429
------------------------------------------ --------- --------- --------- ---------- ---------- -------- -------
Quarterly Performance Commentary
During the first quarter, the West Texas Intermediate ("WTI")
spot prices and S&P Oil & Gas Exploration & Production
Index decreased by approximately 67 per cent. and 65 per cent.,
respectively, largely due to the macro backdrop becoming tumultuous
as the confluence of the coronavirus pandemic and geopolitical
instability with regards to OPEC+ have created unprecedented
challenges within energy markets. Further detail on REL's five
largest positions, which account for 70 per cent. of the
portfolio's gross unrealised value, is set forth below:
ILX III
The Gross MOIC for ILX III was reduced from 1.2x to 0.7x during
the first quarter due to the recent downturn in commodity prices
which adversely impacted NAV and public market comparables. During
the 1Q 2020, the company closed on the sale of its working interest
in 18 exploration prospects to Talos Energy (NYSE: TALO, "Talos").
To date, the company has participated in nine commercial
discoveries, of which four are currently producing oil. In 2020,
ILX III plans to bring one additional asset online, with three
others expected to come online in 2021 and 2022. As at 31 March
2020, ILX III had hedged approximately 40% of PDP oil production
from March 2020 through September 2023 at a weighted average price
of $56/bbl.
Hammerhead
The Gross MOIC for Hammerhead was reduced from 0.4x to 0.1x
during the first quarter to reflect the decline in commodity
prices, continued uncertainty regarding macro conditions in Western
Canada, and limited liquidity, which has forced the company to curb
development activities. The company's current focus is to preserve
liquidity and provide runway to a more favorable commodity price
environment, at which point Hammerhead will resume executing on its
development program. Hammerhead has a strong hedge book with
approximately 100 per cent. of forecasted 2020E oil production
hedged at a weighted average price of CAD$79/bbl.
Centennial
The Gross MOIC for Centennial decreased from 0.9x to 0.7x during
the first quarter, reflecting the ending share price as at 31 March
2020, which traded down significantly during the first quarter as
energy equities were severely impacted by the macro environment.
Notwithstanding the performance of the company's share price,
Centennial's daily equivalent and oil production volumes increased
during 4Q19, outperforming original 2019 FY production guidance. As
a result of the decrease in commodity prices, the company has
reduced its drilling program to 1 rig and capital expenditures by
approximately 50 per cent. for the 2020 fiscal year. Centennial
continues to focus on balance sheet strength and liquidity in the
current market environment. The company has also increased its
hedges to protect against additional near-term commodity price
declines, with approximately 25,500 barrels per day of oil hedged
through September 2020 at a weighted average price of $26.08 per
barrel.
Liberty II
The Gross MOIC for Liberty II was reduced from 0.4x to 0.2x
during the first quarter to reflect the ongoing decline in trading
multiples among its publicly traded peers, as a result of the
significant decline in oil prices during the quarter. The company
continues to evaluate third-party financing alternatives in order
to implement a longer-term solution to its existing RBL facility.
Absent access to additional liquidity, Liberty will continue to
curb its development activities in the near-term to remain within
cash flow. As at 31 March 2020, Liberty had hedged approximately 85
per cent. of forecasted PDP oil production at a weighted average
price of $55/bbl, for the 2020 and 2021 fiscal years.
Carrier II
The Gross MOIC for Carrier II was reduced from 0.7x to 0.4x
during the first quarter driven by the recent decline in commodity
prices. Carrier's Eagle Ford assets continue to perform strongly,
and the company expects to bring 13 additional wells online in
2020. As at 31 March 2020, the company's assets were producing
approximately 5,300 boepd and the company had hedged approximately
85 per cent. of forecasted PDP oil production at a weighted average
price of $60/bbl, for the 2020 fiscal year.
Other Investments
In other developments during the quarter, REL agreed to unwind
its investment in Aleph by selling its position in the company back
to Vista Oil & Gas S.A.B. de CV. REL received $23.4 million in
proceeds through a return of its invested capital at a 1.0x Gross
MOIC.
In addition, the Gross MOIC for Ridgebury remained flat at 1.2x.
Additionally, Ridgebury sold its spot vessel, the Nalini D, for
approximately $13 million. This sale substantially de-risked REL's
investment in the company. To-date, the company has distributed
approximately $10 million net to REL.
On 28 February 2020, Talos closed on the acquisition of Castex
2014 for $42 million in cash and 1.4 million shares of Talos stock.
After adjusting for REL's ownership in the company, and customary
purchase price adjustments, REL received approximately $2 million
in net proceeds. The Gross MOIC for Castex 2014 was reduced from
0.4x to 0.2x to reflect the decline in Talos' share price during
the first quarter due to the macro environment.
Return of Capital
As advised on 23 April, the Board and the Investment Manager
were in discussions around the desirability and method of returning
some of the Company's existing uninvested cash to Shareholders. The
Board announced on 1 May 2020 that they are initiating a buyback
programme with the intention of returning GBP50 million to
shareholders via on market buybacks using the current authority
obtained at the 2019 AGM and, on the basis that the authority is
renewed at the Company's forthcoming AGM in June, any further
authority required.
Riverstone Energy Limited announces, pursuant to the authority
granted at its annual general meeting in 2019, that it has
authority to repurchase a maximum of 11,976,520 of its ordinary
shares (being its outstanding shareholder authority). Such
authority lasts until the next shareholder authority granted, or
where expressly revoked by shareholders.
The Company has appointed and entered into separate engagements
with J.P. Morgan Securities plc and Numis Securities Limited to act
as its joint brokers in respect of market purchases of its own
shares pursuant to this authority (the "buy backs").
The buy backs will be funded from the Company's resources. No
maximum consideration payable has been determined by the Company
for any buy back, but the Company is unable to pay a price for any
shares pursuant to the buy backs which would equate to a premium on
the net asset value.
The buy-backs will be undertaken for the purpose of the Company
returning some of its excess uninvested cash to shareholders.
This arrangement is in accordance with Chapter 12 of the UKLA
Listing Rules and the Company's general authority to repurchase
shares.
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
+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 31
March 2020 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 1.234 as of 31 March 2020
2 Net capital available of $1,186 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 $931 million of capital realised to date,
$639 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 Amounts may vary due to rounding.
6 The unrealized value of the Rock Oil investment consists of
rights to mineral acres.
7 Midstream investment.
8 Credit 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).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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