REG - Riverstone Energy Ld - 2Q23 Quarterly Portfolio Valuations & NAV
27/07/2023 07:15
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RNS Number : 3270H Riverstone Energy Limited 27 July 2023
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 2Q23 Quarterly Portfolio Valuations &
NAV
London, UK (27 July 2023) - Riverstone Energy Limited ("REL" or the "Company")
announces its quarterly portfolio summary as of 30 June 2023, inclusive of
updated quarterly unaudited fair market valuations.
Current Portfolio - Conventional
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 31 Mar 2023 30 Jun 2023
Capital ($mm) Capital ($mm) 1 (#_edn1) ($mm) 2 (#_edn2) Gross MOIC(2) Gross MOIC(2)
Permian Resources 3 (#_edn3) (Public) 268 268 223 110 333 1.22x 1.24x
Onyx (Private) 66 60 81 98 179 3.00x 3.00x
Hammerhead Resources(3) (Public) 308 296 24 111 135 0.48x 0.46x
Total Current Portfolio - Conventional - Public 4 (#_edn4) $576 $564 $246 $222 $468 0.83x 0.83x
Total Current Portfolio - Conventional - Private(4) $66 $60 $81 $98 $179 3.00x 3.00x
Total Current Portfolio - Conventional - Public & Private(4) $642 $624 $328 $320 $647 1.04x 1.04x
Current Portfolio - Decarbonisation
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 31 Mar 2023 Gross MOIC(2) 30 Jun 2023 Gross MOIC(2)
Capital ($mm) Capital ($mm)(1) ($mm)(2)
GoodLeap (formerly Loanpal) (Private) 25 25 2 36 38 1.80x 1.50x
FreeWire (Private) 10 10 - 20 20 2.00x 2.00x
Infinitum 18 18 - 18 18 1.30x 1.05x
(Private)
Solid Power(3) (Public) 48 48 - 18 18 0.64x 0.39x
T-REX Group (Private) 18 18 - 18 18 1.00x 1.00x
Tritium DCFC(3) 25 25 1 13 14 0.75x 0.56x
(Public)
Our Next Energy (Private) 13 13 - 13 13 1.00x 1.00x
Enviva(3) (Public) 22 22 0 8 9 1.04x 0.41x
Group14 (Private) 4 4 - 4 4 1.00x 1.00x
Ionic I & II (Samsung Ventures) (Private) 3 3 - 3 3 1.00x 1.00x
Hyzon Motors(3) (Public) 10 10 - 1 1 0.08x 0.10x
Total Current Portfolio - Decarbonisation - Public(4) $105 $105 $1 $41 $43 0.57x 0.41x
Total Current Portfolio - Decarbonisation - Private(4) $89 $89 $2 $111 $113 1.40x 1.26x
Total Current Portfolio - Decarbonisation - Public & Private(4) $194 $194 $3 $152 $155 0.95x 0.80x
Total Current Portfolio - Conventional & Decarbonisation - Public & $836 $817 $330 $472 $803 1.02x 0.98x
Private(4)
Cash and Cash Equivalents $133
Total Liquidity (Cash and Cash Equivalents & Public Portfolio) $396
Total Market Capitalisation $334
Realisations
Investment (Initial Investment Date) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 31 Mar 2023 Gross MOIC(2) 30 Jun 2023
Capital ($mm) Capital ($mm)(1) ($mm)(2) Gross MOIC(2)
Rock Oil 5 (#_edn5) (12 Mar 2014) 114 114 233 3 236 2.06x 2.06x
Three Rivers III (7 Apr 2015) 94 94 204 - 204 2.17x 2.17x
ILX III (8 Oct 2015) 179 179 172 - 172 0.96x 0.96x
Meritage III 6 (#_edn6) (17 Apr 2015) 40 40 88 - 88 2.20x 2.20x
RCO 7 (#_edn7) (2 Feb 2015) 80 80 80 - 80 0.99x 0.99x
Carrier II (22 May 2015) 110 110 67 - 67 0.60x 0.61x
Pipestone Energy (formerly CNOR) (29 Aug 2014) 90 90 58 - 58 0.64x 0.64x
Sierra (24 Sept 2014) 18 18 38 - 38 2.06x 2.06x
Aleph (9 Jul 2019) 23 23 23 - 23 1.00x 1.00x
Ridgebury 18 18 22 - 22 1.22x 1.22x
(19 Feb 2019)
Castex 2014 52 52 14 - 14 0.27x 0.27x
(3 Sep 2014)
Total Realisations(4) $819 $819 $1,000 $3 $1,002 1.22x 1.22x
Withdrawn Commitments and Impairments 8 (#_edn8) 370 370 9 - 9 0.02x 0.02x
Total Investments(4) $2,024 $2,006 $1,339 $475 $1,813 0.91x 0.90x
Total Investments & Cash and Cash Equivalents $607
Draft Unaudited Net Asset Value 9 (#_edn9) $605
Total Shares Repurchased to-date 33,096,218 at average price per share of £4.12 ($5.28)
Current Shares Outstanding 46,800,513
Rates, Inflation and Growth
While global public equity markets have posted healthy gains in the first half
of the year and the outlook for a recession in the U.S. is diminished, these
gains have been unevenly distributed among sectors and companies. Most of the
S&P500 index's gains have been overwhelmingly driven by its seven largest
constituents, namely Apple, Microsoft, Amazon, Nvidia, Alphabet, Tesla and
Meta, with the remaining 493 members of the index essentially flat on the
year. While the headline price gains from indices across developed markets
look good, investor sentiment remains cautious. The S&P 500, driven in
large part by big tech performance, was up 8.3 per cent quarter-over-quarter
and 15.9 per cent year to date. Concerns about rising rates, inflation and the
potential for recession continue to negatively impact small-cap and
growth-oriented stocks which has impacted the valuation of our publicly-traded
decarbonization-themed portfolio companies such as Hyzon Motors, Solid Power
and Tritium DCFC, positions which have all seen mark-downs in their quarterly
valuations.
Despite WTI crude oil prices being down 11.9 per cent and U.S. natural gas
prices down 29.5 per cent year to date through the second quarter, we are glad
to report that our conventional energy portfolio companies have held steady.
Being substantially debt free and highly cash generative they have remained
mostly inoculated from underlying commodity price volatility. While demand
for energy has surpassed pre-pandemic levels, supply remains largely flat -
slight increase in U.S. production has been offset by decreases from OPEC
producers and Russia. This bodes well for continued strong operating
performances from these businesses.
Over the past eighteen months, geopolitical turmoil has caused Europe to
prioritize energy security over energy transition and while this has been a
positive for companies like Onyx, we believe that the need for energy security
will accelerate Europe's transition as it pursues energy independence. In
early July, strong winds and the output from record solar installation in 2022
pushed power prices negative in Europe as renewable energy caused power supply
to exceed demand. The flip side to this equation is unprecedented weather
patterns that saw the hottest global temperature on record in early July, New
York City blanketed in smoke from Canadian forest fires and Europe under heat
threat from the Charon and Cerberus anticyclones. These extreme weather events
are providing additional impetus for energy transition to manage harmful
impact of global warming while nations simultaneously grapple with their
energy security.
Quarterly Performance Commentary
REL's conventional portfolio-representing 47 per cent of unrealised
value-maintained its mark quarter over quarter. Hammerhead experience a minor
decrease in valuation, attributable to the performance of the company's
publicly held stock, as opposed to underlying operational performance. Onyx
remained flat at 3.00x MOIC despite decreasing power prices in Europe, and
Permian Resources increased slightly in value in the wake of several
acquisitions and consistent performance.
Counter to depressed quarter-end valuations, several of REL's decarbonisation
investments made significant milestones in the second quarter. Tritium became
the first fast charger manufacturer in the US to receive an order funded by
the National Electric Vehicle Infrastructure Program. Group14 began
construction of the world's largest commercial factory for advanced silicon
battery materials. Hyzon Motors announced the completion and factory
acceptance testing of the first single-stack 200kW fuel cell system B samples
at its production center in Illinois, marking an important milestone for
toward an on-time commercial launch of its fuel cell systems. The investment
manager was required to write down its value in Anuvia for reasons enumerated
below.
Further information on REL's five largest positions, which account for 79 per
cent. of the portfolio's gross unrealised value is set forth below:
Permian Resources
The valuation for Permian Resources (NYSE: PR) increased from 1.22x to 1.24x
Gross MOIC in the first quarter of 2023. In Q2 2023, Permian Resources
announced a quarterly variable cash dividend of $0.05 / share in addition to
the base dividend of $0.05 / share. The company also closed a series of
portfolio management transactions, which consisted of a bolt-on acquisition in
New Mexico for $98 million, a sizable acreage swap in New Mexico, and a
divestiture of a portion of its saltwater disposal wells and associated
produced water infrastructure in Texas for $125 million, with another $60
million subject to an earnout. The company has hedged approximately 31 per
cent. of forecasted 2023 crude oil production at a weighted average price of
$84.83 per barrel and 31 per cent. of forecasted 2023 natural gas production
at a weighted average price of $5.54 per mcf.
Onyx
The valuation multiple for Onyx remained flat in the second quarter at 3.00x
Gross MOIC. Power prices in Europe have softened since the highs of late 2022.
However, the prospect of ongoing volatility remains due to gas demand
recovery, global LNG pricing, nuclear availability and hydro levels. During
the quarter a new COO was recruited and joined Onyx (following predecessor
retirement), his focus will be on ensuring safe and reliable operations. In
addition to prioritising plant availability, the management team continues to
work on several organic growth initiatives, including the implementation of
operational performance improvements and the development of potential capital
projects related to the energy transition.
Hammerhead
Hammerhead's valuation remained essentially constant from 0.48x to 0.46x Gross
MOIC during the second quarter. This decrease in value reflects the
performance of its publicly-traded stock and is not reflective of underlying
operating performance which remains strong and on plan. Given the supportive
macro environment, Hammerhead plans to continue ramping development in 2023.
Hammerhead has hedged approximately 39 per cent. of forecasted 2023 crude oil
production at a weighted average price of $74.31 per barrel and 44 per cent.
of forecasted 2023 natural gas production at a weighted average price of $3.34
per MMBtu. In the Q1 2023, the Company reported a realised record production
rate of over 39,992 boe/d (47 per cent. liquids), in line with guidance for
2023. The recent nine-well pad at North Karr continues to materially exceed
performance expectations and averaged 14,733 boe/d (58 per cent. liquids) in
Q1 2023.
On 23 February 2023, Hammerhead Resources Inc. announced the completion of its
previously announced business combination with Decarbonization Plus
Acquisition Corporation IV (Nasdaq: DCRD). The combined company is named
Hammerhead Energy, Inc. On 27 February 2023, the combined company's Class A
common shares began trading on the Nasdaq Capital Market ("Nasdaq") under the
ticker symbols "HHRS" and "HHRSW," respectively, and on the TSX under the
ticker symbols "HHRS" and "HHRS.WT."
GoodLeap (formerly Loanpal)
The valuation multiple for GoodLeap decreased from 1.80x to 1.50x Gross MOIC
during the second quarter, which is largely driven by the impact of rising
rates and financing market volatility to the downside of the business.
Freewire
The valuation multiple for Freewire remained flat at 2.0x Gross MOIC, driven
by the Series D valuation which closed its extension in Q4 2022. The company
is currently in the market raising its Series E aiming to close in 2H 2023.
Other Investments
Anuvia
Anuvia Plant Nutrients, Inc. has ceased operations and is undergoing
liquidation. Anuvia is in the process of realizing its assets and it is not
yet certain if or when equity holders will recover any of their investment.
Whilst Series D equity holders are first in line to receive proceeds from
Anuvia, the Investment Manager has informed the Board on 10 July that no such
proceeds can now be reasonably expected given the debt burden on the business.
Enviva
Enviva's valuation decreased from 1.04x to 0.41x Gross MOIC during the second
quarter. This decrease in value reflects the performance of its
publicly-traded stock. Enviva's decline in stock price was driven primarily by
challenging performance in first-quarter 2023, which was approximately $50
million below management's expectations for adjusted EBITDA. Given the impact
of Q1 performance, Enviva revised its full year 2023 EBITDA guidance downward
from a range of $305-335 million to a range of $200-250 million. On May 5th,
Enviva changed capital allocation priorities, eliminating its dividend to
manage liquidity, improve operating and cost productivity of existing assets,
repurchase shares, and accelerate investments in new pellet production assets.
Share Buyback Programme
Since the Company's announcement on 23 May 2023 of the authorised increase of
£30 million for the share buyback programme through 30 June 2023, 1,703,495
ordinary shares have been bought back at a total cost of approximately £10
million ($12 million) at an average share price of approximately £5.70
($7.30). As of 30 June 2023, £29 million was available for repurchasing.
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 net gains on dispositions. No
further carried interest will be payable until the $193 million of realised
and unrealised losses to date at 30 June 2023 are made whole with future
gains. REL continues to seek
opportunities to purchase shares in the market at prices at or below the
prevailing NAV per share REL will
continue to build value by monetising its conventional assets and applying the
proceeds to the decarbonisation of
its portfolio.
LEI: 213800HAZOW1AWRSZR47
About Riverstone Energy Limited:
REL is a closed-ended investment company which invests in the energy industry
that has since 2020 been exclusively focussed on pursuing and has
committed $193 million to a global strategy across decarbonisation sectors
presented by Riverstone's investment platform. REL's ordinary shares are
listed on the London Stock Exchange, trading under the symbol RSE. REL has
15 active investments spanning decarbonisation, oil and gas, renewable energy
and power in the Continental U.S., Western Canada, Europe and Australia.
For further details, see www.RiverstoneREL.com (http://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 June 2023 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 (#_ednref1) Gross realised capital is total gross proceeds realised on
invested capital. Of the $1,339 million of capital realised to date, $1,016
million is the return of the cost basis, and the remainder is profit.
2 (#_ednref2) 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 $192.6
million of realised and unrealised losses to date at 31 June 2023 are made
whole with future gains, so the earned carried interest of $0.8 million at 30
June 2023 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 June 2023, $29.6 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.
3 (#_ednref3) Represents closing price per share in USD for publicly traded
shares Permian Resources Corporation (formerly Centennial Resource
Development, Inc.) (NASDAQ:PR - 30-06-2023: $10.96 per share / 31-03-2023:
$10.50 price per share); Enviva, Inc. (NYSE:EVA - 30-06-2023: $10.85 per share
/ 31-03-2023: $28.88 price per share); Solid Power, Inc. (NASDAQ:SLDP -
30-06-2023: $2.54 per share / 31-03-2023: $3.01 price per share); Hyzon
Motors, Inc. (NASDAQ:HYZN - 30-06-2023: $0.96 per share / 31-03-2023: $0.82
price per share); Tritium DCFC Limited (NASDAQ:DCFC - 30-06-2023: $1.09 price
per share / 31-03-2023 $1.28 price per share); and Hammerhead (NASDAQ: HHRS -
30-06-2023: $7.25 per share / 31-03-2023: $7.75 per share).
4 (#_ednref4) Amounts vary due to rounding
5 (#_ednref5) The unrealised value of Rock Oil investment consists of rights
to mineral acres.
6 (#_ednref6) Midstream investment
7 (#_ednref7) Credit investment
8 (#_ednref8) 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), Castex 2005 ($48 million) and
Anuvia Plant Nutrients ($20 million)
9 (#_ednref9) Since REL has not yet met the appropriate Cost Benchmark at 30
June 2023, $29.6 million in Performance Allocation fees that would have been
due under the prior agreement were not accrued and thereby would have reduced
the NAV on a pro forma basis to $575 million or $12.29 per share
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