REG - Riverstone Energy Ld - 4Q22 Quarterly Portfolio Valuations & NAV
01/02/2023 07:00
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RNS Number : 4976O Riverstone Energy Limited 01 February 2023
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 4Q22 Quarterly Portfolio Valuations &
NAV
London, UK (1 February 2023) - Riverstone Energy Limited ("REL" or the
"Company") announces its quarterly portfolio summary as of 31 December 2022,
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) 30 Sep 2022 31 Dec 2022
Capital ($mm) Capital ($mm) 1 ($mm) 2 Gross MOIC(2) Gross MOIC(2)
Permian Resources 3 (Public) 268 268 194 118 312 1.04x 1.17x
Onyx (Private) 66 60 61 118 179 3.00x 3.00x
Hammerhead Resources (Private) 307 295 23 154 177 0.59x 0.60x
Total Current Portfolio - Conventional - Public 4 $268 $268 $194 $118 $312 1.04x 1.17x
Total Current Portfolio - Conventional - Private(4) $373 $355 $84 $272 $356 0.93x 1.00x
Total Current Portfolio - Conventional - Public & Private(4) $641 $623 $278 $390 $668 1.02x 1.07x
Current Portfolio - Decarbonisation
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2022 Gross MOIC(2) 31 Dec 2022 Gross MOIC(2)
Capital ($mm) Capital ($mm)(1) ($mm)(2)
GoodLeap (formerly Loanpal) (Private) 25 25 2 53 55 2.50x 2.20x
Enviva(3) (Public) 22 18 - 35 35 2.16x 1.93x
Infinitum 18 18 - 23 23 1.00x 1.30x
(Private)
FreeWire (Private) 10 10 - 20 20 2.00x 2.00x
Anuvia Plant Nutrients 20 20 - 20 20 1.05x 1.00x
(Private)
Solid Power(3) (Public) 48 48 - 19 19 0.80x 0.39x
T-REX Group (Private) 18 18 - 18 18 1.00x 1.00x
Tritium DCFC(3) 25 25 0 15 15 0.75x 0.60x
(Public)
Energy Storage Company (Private) 13 11 - 11 11 n/a 1.00x
Group14 (Private) 4 4 - 4 4 1.00x 1.00x
DCRD (Public) 1 1 - 3 3 5.13x 4.99x
Ionic I & II (Samsung Ventures) (Private) 3 3 - 3 3 1.00x 1.00x
Hyzon Motors(3) (Public) 10 10 - 2 2 0.17x 0.16x
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2022 Gross MOIC(2) 31 Dec 2022 Gross MOIC(2)
Capital ($mm) Capital ($mm)(1) ($mm)(2)
Total Current Portfolio - Decarbonisation - Public(4) $105 $102 0 $73 $73 1.00x 0.72x
Total Current Portfolio - Decarbonisation - Private(4) $109 $108 $2 $152 $154 1.50x 1.42x
Total Current Portfolio - Decarbonisation - Public & Private(4) $214 $210 $2 $225 $227 1.24x 1.08x
Total Current Portfolio - Conventional & Decarbonisation - Public & $855 $833 $280 $615 $895 1.07x 1.07x
Private(4)
Cash and Cash Equivalents $120
Total Liquidity (Cash and Cash Equivalents & Public Portfolio) $311
Total Market Capitalisation $418
Realisations
Investment (Initial Investment Date) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2022 Gross MOIC(2) 31 Dec 2022
Capital ($mm) Capital ($mm)(1) ($mm)(2) Gross MOIC(2)
Rock Oil 5 (12 Mar 2014) 114 114 233 4 237 2.07x 2.07x
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 (17 Apr 2015) 40 40 88 - 88 2.20x 2.20x
RCO 7 (2 Feb 2015) 80 80 80 - 80 0.99x 0.99x
Carrier II (22 May 2015) 110 110 63 3 66 0.70x 0.60x
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 $995 $7 $1,002 1.24x 1.22x
Withdrawn Commitments and Impairments 8 350 350 9 - 9 0.02x 0.02x
Total Investments(4) $2,024 $2,001 $1,285 $622 $1,906 0.96x 0.95x
Total Investments & Cash and Cash Equivalents $741
Draft Unaudited Net Asset Value 9 $739
Total Shares Repurchased to-date 29,005,073 at average price per share of £3.89 ($5.00)
Current Shares Outstanding 50,891,658
Equity Market Volatility and Small Cap Performance
At the close of the fourth quarter, energy commodity prices returned to their
pre-Ukraine conflict levels, giving investors a reprieve from the year's
extreme volatility. Brent was down ~7 per cent over the quarter, but up 5 per
cent on the year, and West Texas Intermediate was up 0.3 per cent and 5.5 per
cent on the quarter and year, respectively. Despite the conflict raging on,
oil prices moderated due to the concern about the length and depth of an
expected global recession caused by inflation and quickly rising rates. While
commodity prices leveled out at year end, the S&P 500 ended the year down
20 per cent from the beginning of 2022. Commodity assets performed best among
all asset classes in 2022 returning 16 per cent., while small caps returns
(often associated with growth companies) performed near the bottom of all
asset classes, losing 20 per cent. These opposing forces (rising commodities
and deflating growth factor) carried implication for REL's portfolio as the
majority of investments are characterised as either commodity-linked-nearly 64
per cent. of the portfolio's gross unrealised value-or growth stage companies,
which characterise the majority of REL's decarbonisation holdings.
Economic uncertainty and concern over inflation predominated fourth quarter
headlines, but European consumers found some respite from crippling energy
prices thanks to a warmer than expected winter and record levels of stored
natural gas. This has not only provided regional relief from the burden of
skyrocketing energy prices but has also undermined Russia's efforts to
leverage energy as a tool of war. As the conflict approaches its second year,
the EU has better secured its energy system, leaning heavily on conventional
power assets to compensate for conflict-era supply deficits. An unseasonably
warm winter (and reduced heating demand), and a strong supply outlook drove EU
gas prices to a 16-month low. While this may seem like a step backward from
the energy transition, energy reliability provided by legacy assets and an
unseasonably warm winter across the continent may provide European officials
the reprieve they need to thoughtfully address systemic weaknesses in legacy
energy supply chain and opportunities to integrate additional renewable
generation. On 14 January, Germany broke the wind generation record it had set
just 10 days prior, generating 50,802 MW. Investments in grid and
intermittency management systems, among other decarbonisation technologies,
will allow the continent to take full advantage of existing assets in efforts
to advance a just and equitable energy transition.
Quarterly Performance Commentary
REL's conventional investments held or improved their valuations in the fourth
quarter of 2022. Despite a considerable reduction in anticipated
weather-related natural gas demand, Permian Resources, REL's sole publicly
traded conventional energy investment, saw its stock price rise by 12.5 per
cent over the same period. Onyx, the second-largest investment in REL's
portfolio made 3 distributions to the fund totaling $61 million and has now
fully returned its cost basis to REL.
REL's publicly listed decarbonization investments were marked down during the
quarter by 28.0 per cent at the hands of market sentiment that
indiscriminately punished any growth stage company, both those with large and
small market capitalizations. The growth factor sell-off was wide reaching
and spared no company from mega caps to smaller caps, on the basis of
valuations or on concerns of a global recession caused by higher interest
rates and inflation. REL's portfolio of publicly listed growth companies was
no exception. While publicly traded value destruction impacted small cap
companies (often thinly traded) and growth factors in 2022, it did so
regardless of underlying company-level performance. For instance, in the
fourth quarter, Tritium continued to execute on its growth plans, announcing a
backlog of $159 million, and anticipates $200 million in 2023 revenue as of 31
December 2022 while still being down 39 per cent. over the quarter.
On the other hand, REL's privately held decarbonisation companies were spared
the vagaries of the public markets and continue to deliver on their growth
plans and execute on their strategies. For example, Group14 was the recipient
of a $100 million non-dilutive grant from the U.S. Department of Energy to
accelerate the build-out of its domestic supply chain. This grant was made
possible by the recently-passed Inflation Reduction Act (August 2022).
Further information on REL's five largest positions, which account for 77 per
cent. of the portfolio's gross unrealised value is set forth below:
Permian Resources
The valuation for Permian Resources (NASDAQ: PR) increased from 1.04x to 1.17x
Gross MOIC in the fourth quarter. In Q4, PR announced an inaugural quarterly
base dividend of $0.05 / share and a robust capital program, returning at
least 50 per cent. of free cash flow after base dividend starting in 2023. The
company also closed on a new $2.5 billion borrowing base RCF with an elected
commitment amount of $1.5 billion.
Onyx
The valuation multiple for Onyx remained flat from the third quarter at 3.00x
Gross MOIC. Power prices in Europe remain volatile due to the Russian invasion
of Ukraine and associated concerns over gas supply. Management continues to
monitor government and regulatory intervention in response to high energy
prices, including the recently announced revenue cap in the Netherlands. 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 0.59x to 0.60x Gross
MOIC during the fourth quarter. Given the strong macro environment, Hammerhead
plans to continue ramping development in 2023. Hammerhead has hedged
approximately 12 per cent. of forecasted 2023 crude oil production at a
weighted average price of $71.84 per barrel and 44 per cent. of forecasted
2023 natural gas production at a weighted average price of $3.34 per MMBtu. As
of 4Q 2022, Hammerhead was producing approximately 30,164 Boepd.
On 26 September 2022, Hammerhead and Decarbonization Plus Acquisition
Corporation IV (Nasdaq:DCRD) announced that they have entered into a
definitive agreement for a business combination that values Hammerhead at
C$1.39 billion. Upon closing of the transaction, the combined company is
expected to be listed on the Nasdaq Capital Market ("Nasdaq") and trade under
the ticker symbol "HHRS". Closing of the transaction is expected to occur in
Q1 2023.
GoodLeap (formerly Loanpal)
The valuation multiple for GoodLeap decreased from 2.5x to 2.2x Gross MOIC
during the fourth quarter, which is largely driven by the impact of rising
rates and financing market volatility to the downside of the business.
Enviva
The valuation multiple for Enviva decreased from 2.16x to 1.92x Gross MOIC
during the fourth quarter based on its stock price going from $60.06 to $52.97
at quarter's end. The company capitalised on the industry's growth
opportunities, announcing new contracts with terms and conditions reflecting
the current strong pricing environment for biomass. Current development
efforts support a six-plant development and construction pipeline over the
next 5+ years to more than double production capacity.
Other Investments
Tritium DCFC
On 17 January 2023, Tritium announced its largest single customer order from
bp (NYSE: BP) for deployment across the U.S., UK, Europe, and Australia. bp
will install the chargers for fleets and the general public across three
continents as part of a multi-year contract with Tritium to expand its EV
charging business, bp pulse. In December 2022, Tritium achieved the largest
monthly production output in company history, with 50 per cent. more output
than any previous month as its Tennessee factory continues to ramp up.
The company opened the 2023 calendar year with a record order backlog of ~$159
million as of 31 December 2022. The company is projecting 2023 revenue in
excess of $200 million, corresponding to a 100+ per cent. YoY increase with
expected gross margins of 10 per cent. to 12 per cent. as the company benefits
from manufacturing scale up, improved product pricing, and planned produce
suite streamlining.
The company also received a primary capital investment of $30 million in
December 2022 through a new, $20 million standalone working capital facility
with a $10 million accordion from Sunset Power, a trustee of the St. Baker
Family Trust, to grow the business through increasing manufacturing capacity,
securing long lead-time parts, and bolstering the company's cash balance.
Carrier II
Carrier II was created to invest in non-operating working interests in North
American oil and gas properties. Riverstone and Carrier II Management
previously formed Carrier Energy Partners, LLC ("Carrier") in August 2013 to
pursue the same strategy of assembling, through acquisition and development,
an oil and liquids-rich portfolio positioned for production and reserve growth
and asset value accretion.
On 27 December 2022, Carrier II was sold to the operator of its wells,
Marathon Oil Corporation. REL received proceeds of approximately $34 million.
REL is also expected to receive approximately $3 million of residual proceeds
to be released from escrow in Q1 2023. In total, REL will have received
cumulative proceeds of approximately $66 million, representing a 0.6x Gross
MOIC on $110 million of invested capital.
The proceeds from this sale will enable REL to continue its transition to
becoming a pure-play decarbonization investment vehicle focused on energy
transition, low-carbon industry and the electrification of the global
economy. After the sale of Carrier II, REL will only have three conventional
energy and power portfolio companies remaining in a portfolio of sixteen
investments.
Share Buyback Programme
Since the Company's announcement on 14 February 2022 of the authorised
increase of £46 million for the share buyback programme, 4,045,941 ordinary
shares have been bought back at a total cost of approximately £27 million
($32 million) at an average share price of approximately £6.63 ($7.95). As of
31 December 2022, £23 million was available for repurchasing and this amount
remains unchanged as of the release of this report, which triggers the
recommencement of the share buyback programme.
The Investment Manager will continue to be required to apply each Performance
Allocation (net of taxes) to acquire ordinary shares of the Company. In
accordance with the Performance Allocation terms announced on 3 January 2020,
effective from 30 June 2019, no further Performance Allocation will be payable
until there is an increase of $95 million (largest deficit of $605.5 million
at 30 June 2020) of realised and unrealised value to date at 31 December 2022.
As such, the earned carried interest of $0.8 million at 31 December 2022 has
been deferred and will expire in October 2023 if the aforementioned losses are
not made whole. Further, since REL has not yet met the appropriate Cost
Benchmark at 31 December2022, $38.0 million in unearned Performance Allocation
fees that would have been due under the prior agreement were not accrued.
Based on the aforementioned Performance Allocation, net of estimated
applicable taxes, the potential increase arising from the Investment Manager's
share purchases would be $19 million as of 31 December 2022.
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
16 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 31 December 2022
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 Gross realised capital is total gross proceeds realised on invested
capital. Of the $1,285 million of capital realised to date, $983 million is
the return of the cost basis, and the remainder is profit.
2 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 $95.2 million of realised and
unrealised losses to date at 31 December 2022 are made whole with future
gains, so the earned carried interest of $0.8 million at 31 December 2022 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 31
December 2022, $38.0 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 Represents closing price per share in USD for publicly traded shares
Permian Resources Corporation (formerly Centennial Resource Development, Inc.)
(NASDAQ:PR - 31-12-2022: $9.40 per share / 30-09-2022: $6.80 price per share);
Enviva, Inc. (NYSE:EVA - 31-12-2022: $52.97 per share / 30-09-2022: $60.06
price per share); Solid Power, Inc. (NASDAQ:SLDP - 31-12-2022: $2.54 per share
/ 30-09-2022: $5.26 price per share); Hyzon Motors, Inc. (NASDAQ:HYZN -
31-12-2022: $1.55 per share / 30-09-2022: $1.70 price per share); and Tritium
DCFC Limited (NASDAQ:DCFC - 31-12-2022: $1.68 price per share / 30-09-2022
$3.19 price per share.)
4 Amounts vary due to rounding
5 The unrealised value of Rock Oil investment consists of rights to mineral
acres.
6 Midstream investment
7 Credit investment
8 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)
9 Since REL has not yet met the appropriate Cost Benchmark at 31 December
2022, $38.0 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 $701 million or $13.77 per share
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